Independent Bank Corp.
01/26/2022 | Press release | Distributed by Public on 01/26/2022 15:16
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS - Form 8-K/A
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On November 12, 2021, Independent Bank Corp. ("Independent") completed acquisition of Meridian Bancorp, Inc. ("Meridian") pursuant to an Agreement and Plan of Merger, dated as of April 22, 2021, by and among Independent, Rockland Trust Company ("Rockland Trust"), Bradford Merger Sub Inc. ("Merger Sub"), Meridian and East Boston Savings Bank ("East Boston"). Pursuant to the Merger Agreement, upon the terms and subject to the conditions set forth in the Merger Agreement, among other things, (i) Merger Sub merged with and into Meridian, with Meridian continuing as the surviving entity (the "Merger"), (ii) immediately after the Merger, Meridian merged with and into Independent, with Independent continuing as the surviving entity (the "HoldCo Merger") and (iii) immediately following the HoldCo Merger, East Boston merged with and into Rockland Trust, with Rockland Trust continuing as the surviving entity (the "Bank Merger" and, together with the Merger and the HoldCo Merger, the "Transaction"). Each share of Meridian common stock outstanding was converted into the right to receive 0.275 shares of Independent's common stock. Total merger consideration payable to equityholders consisted of approximately 14,299,720 shares of Independent common stock and an aggregate of $12.1 million in cash, which included approximately $12.0 million in cash paid for stock option cancellations and $71,000 cash in lieu to fractional shares. The transaction is accounted for as an acquisition and accordingly, Meridian assets and liabilities are recorded by Independent at their fair market value as of November 12, 2021.
The following unaudited pro forma condensed combined financial information and notes present how the combined financial statements of Independent and Meridian may have appeared had the Merger been completed at the beginning of the periods presented. The unaudited pro forma condensed combined financial information reflects the impact of the Merger on the combined balance sheets and combined statements of income under the acquisition method of accounting with Independent as the acquirer. Under the acquisition method of accounting, Meridian assets and liabilities are recorded by Independent at their fair market value as of the date that the Merger is completed. The unaudited pro forma condensed combined balance sheet as of September 30, 2021 assumes the Merger was completed on that date. The unaudited condensed combined statement of income for the period ending December 31, 2020 assumes the Merger was completed on January 1, 2020 and the unaudited combined statement of income for the period ending September 30, 2021 assumes the Merger was completed on January 1, 2021.
The unaudited pro forma condensed combined financial information is derived from and should be read in conjunction with the historical consolidated financial statements and related notes of Independent, which are available on the Company's 2020 Annual Report on Form 10-K and the financial statements and related notes of Meridian, which are incorporated into this document by reference and included.
The unaudited pro forma condensed combined financial information is presented for illustrative and informative purposes only and is not necessarily indicative or representative of the financial position or results of operations presented as of the date or for the periods indicated, or the results of operations or financial position that may be achieved in the future. In addition, the unaudited pro forma condensed combined financial information does not reflect any cost savings, operating synergies or revenue enhancements that Independent may achieve as a result of its acquisition of Meridian, the costs to integrate the operations of Independent and Meridian or the costs necessary to achieve these cost savings, operating synergies and revenue enhancements.
Independent and Meridian
Unaudited Pro Forma Condensed Combined Consolidated Balance Sheet
As of September 30, 2021
| Unaudited | ||||||||||||||||||
| Independent | Meridian | Adjustments | (1) (2) | Pro Forma | ||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||
|
Cash and short term investments |
$ | 2,007,831 | $ | 1,052,553 | $ | (12,048 | ) | (3) | $ | 3,048,336 | ||||||||
|
Securities |
2,318,757 | 9,180 | - | 2,327,937 | ||||||||||||||
|
Loans, net of deferred fees and costs |
8,808,013 | 4,911,100 | 674 | (4) | 13,719,787 | |||||||||||||
|
Allowance for credit losses |
(92,246 | ) | (60,849 | ) | (6,397 | ) | (5) | (159,492 | ) | |||||||||
|
Bank premises and equipment |
123,528 | 63,321 | 19,927 | (6) | 206,776 | |||||||||||||
|
Goodwill |
506,206 | 20,378 | 469,273 | (7) | 995,857 | |||||||||||||
|
Identifiable intangible assets |
19,055 | 1,341 | 12,099 | (8) | 32,495 | |||||||||||||
|
Other assets |
842,167 | 131,350 | 290 | (9) | 973,807 | |||||||||||||
|
Total assets |
$ | 14,533,311 | $ | 6,128,374 | $ | 483,818 | $ | 21,145,503 | ||||||||||
|
Deposits |
$ | 12,260,140 | $ | 4,693,179 | $ | 1,517 | (10) | $ | 16,954,836 | |||||||||
|
Borrowings |
157,045 | 560,625 | 15,463 | (11) | 733,133 | |||||||||||||
|
Other liabilities |
360,172 | 60,872 | 634 | (12) | 421,678 | |||||||||||||
|
Stockholders' equity |
1,755,954 | 813,698 | 466,204 | (13) | 3,035,856 | |||||||||||||
|
Total liabilities and stockholders' equity |
$ | 14,533,311 | $ | 6,128,374 | $ | 483,818 | $ | 21,145,503 | ||||||||||
|
Common shares |
33,043,812 | 52,711,409 | (38,215,772 | ) | (14) | 47,539,449 |
Independent and Meridian
Unaudited Pro Forma Condensed Combined Consolidated Income Statement
Nine Months Ended September 30, 2021
| Independent | Meridian | Adjustments | (1) (2) |
Unaudited Pro Forma |
||||||||||||||
| (Dollars in Thousands, Except Per Share Data) | ||||||||||||||||||
|
INTEREST INCOME |
||||||||||||||||||
|
Interest on Fed Funds Sold and Short Term Investments |
$ | 1,654 | $ | 1,286 | $ | - | $ | 2,940 | ||||||||||
|
Interest and Dividends on Securities |
21,617 | 437 | - | 22,054 | ||||||||||||||
|
Interest on Loans |
266,084 | 164,044 | 101 | (15) | 430,229 | |||||||||||||
|
Total Interest Income |
289,355 | 165,767 | 101 | 455,223 | ||||||||||||||
|
INTEREST EXPENSE |
||||||||||||||||||
|
Interest on Deposits |
6,361 | 13,019 | (1,559 | ) | (16) | 17,821 | ||||||||||||
|
Interest on Borrowed Funds |
3,965 | 10,535 | 3,866 | (17) | 18,366 | |||||||||||||
|
Total Interest Expense |
10,326 | 23,554 | 2,307 | 36,187 | ||||||||||||||
|
Net Interest Income |
279,029 | 142,213 | (2,206 | ) | 419,036 | |||||||||||||
|
Less-Provision (credit) for Loan Losses |
(17,500 | ) | (4,270 | ) | 50,687 | 28,917 | ||||||||||||
|
Net Interest Income after Provision for Loan Losses |
296,529 | 146,483 | (52,893 | ) | 390,119 | |||||||||||||
|
NONINTEREST INCOME |
||||||||||||||||||
|
Deposit account fees |
11,704 | 7,214 | - | 18,918 | ||||||||||||||
|
Interchange and ATM Fees |
9,229 | - | - | 9,229 | ||||||||||||||
|
Investment Management |
26,350 | - | - | 26,350 | ||||||||||||||
|
Mortgage Banking Income |
11,270 | 845 | - | 12,115 | ||||||||||||||
|
Increase in Cash Surrender Value of Life Insurance Policies |
4,508 | - | - | 4,508 | ||||||||||||||
|
Other Noninterest Income |
13,609 | 2,985 | - | 16,594 | ||||||||||||||
|
Total Noninterest Income |
76,670 | 11,044 | - | 87,714 | ||||||||||||||
|
NONINTEREST EXPENSE |
||||||||||||||||||
|
Salaries and Employee Benefits |
124,759 | 43,396 | - | 168,155 | ||||||||||||||
|
Occupancy and Equipment Expenses |
26,543 | 11,775 | 383 | (19) | 38,701 | |||||||||||||
|
Data Processing and Facilities Management |
5,024 | 6,868 | - | 11,892 | ||||||||||||||
|
FDIC Assessment |
2,805 | 1,264 | - | 4,069 | ||||||||||||||
|
Other Noninterest Expense |
56,272 | 14,820 | (1,342 | ) | (20) | 69,750 | ||||||||||||
|
Total Noninterest Expense |
215,403 | 78,123 | (959 | ) | 292,567 | |||||||||||||
|
INCOME BEFORE INCOME TAXES |
157,796 | 79,404 | (51,934 | ) | 185,266 | |||||||||||||
|
PROVISION FOR INCOME TAXES |
38,506 | 20,202 | (14,604 | ) | (21) | 44,104 | ||||||||||||
|
NET INCOME |
$ | 119,290 | $ | 59,202 | $ | (37,330 | ) | $ | 141,162 | |||||||||
|
BASIC EARNINGS PER SHARE |
$ | 3.61 | $ | 1.18 | $ | - | $ | 3.01 | ||||||||||
|
DILUTED EARNINGS PER SHARE |
$ | 3.61 | $ | 1.17 | $ | - | $ | 3.00 | ||||||||||
|
BASIC AVERAGE SHARES |
33,024,386 | 50,362,807 | (36,513,035 | ) | 46,874,158 | |||||||||||||
|
DILUTED AVERAGE SHARES |
33,042,624 | 50,792,228 | (36,824,365 | ) | 47,010,487 |
Independent and Meridian
Unaudited Pro Forma Condensed Combined Consolidated Income Statement
Twelve Months Ended December 31, 2020
| Independent | Meridian | Adjustments | (1) (2) |
Unaudited Pro Forma |
||||||||||||||
| (Dollars in Thousands, Except Per Share Data) | ||||||||||||||||||
|
INTEREST INCOME |
||||||||||||||||||
|
Interest on Fed Funds Sold and Short Term Investments |
$ | 847 | $ | 3,268 | $ | - | $ | 4,115 | ||||||||||
|
Interest and Dividends on Securities |
30,168 | 846 | - | 31,014 | ||||||||||||||
|
Interest on Loans |
371,054 | 247,999 | 135 | (15) | 619,188 | |||||||||||||
|
Total Interest Income |
402,069 | 252,113 | 135 | 654,317 | ||||||||||||||
|
INTEREST EXPENSE |
||||||||||||||||||
|
Interest on Deposits |
27,333 | 42,989 | (1,579 | ) | (16) | 68,743 | ||||||||||||
|
Interest on Borrowed Funds |
7,008 | 16,391 | 5,154 | (17) | 28,553 | |||||||||||||
|
Total Interest Expense |
34,341 | 59,380 | 3,575 | 97,296 | ||||||||||||||
|
Net Interest Income |
367,728 | 192,733 | (3,440 | ) | 557,021 | |||||||||||||
|
Less-Provision (credit) for Loan Losses |
52,500 | 26,456 | 50,687 | (18) | 129,643 | |||||||||||||
|
Net Interest Income after Provision for Loan Losses |
315,228 | 166,277 | (54,127 | ) | 427,378 | |||||||||||||
|
NONINTEREST INCOME |
||||||||||||||||||
|
Deposit account fees |
15,121 | 8,593 | - | 23,714 | ||||||||||||||
|
Interchange and ATM Fees |
15,834 | - | - | 15,834 | ||||||||||||||
|
Investment Management |
29,432 | - | - | 29,432 | ||||||||||||||
|
Mortgage Banking Income |
18,948 | 1,961 | - | 20,909 | ||||||||||||||
|
Increase in Cash Surrender Value of Life Insurance Policies |
5,362 | - | - | 5,362 | ||||||||||||||
|
Other Noninterest Income |
26,743 | 6,712 | - | 33,455 | ||||||||||||||
|
Total Noninterest Income |
111,440 | 17,266 | - | 128,706 | ||||||||||||||
|
NONINTEREST EXPENSE |
||||||||||||||||||
|
Salaries and Employee Benefits |
152,460 | 57,902 | - | 210,362 | ||||||||||||||
|
Occupancy and Equipment Expenses |
37,050 | 15,230 | 511 | (19) | 52,791 | |||||||||||||
|
Data Processing and Facilities Management |
6,265 | 8,671 | - | 14,936 | ||||||||||||||
|
FDIC Assessment |
2,522 | 2,371 | - | 4,893 | ||||||||||||||
|
Other Noninterest Expense |
75,535 | 12,371 | (1,810 | ) | (20) | 86,096 | ||||||||||||
|
Total Noninterest Expense |
273,832 | 96,545 | (1,299 | ) | 369,078 | |||||||||||||
|
INCOME BEFORE INCOME TAXES |
152,836 | 86,998 | (52,828 | ) | 187,006 | |||||||||||||
|
PROVISION FOR INCOME TAXES |
31,669 | 21,947 | (14,855 | ) | (21) | 38,761 | ||||||||||||
|
NET INCOME |
$ | 121,167 | $ | 65,051 | $ | (37,973 | ) | $ | 148,245 | |||||||||
|
BASIC EARNINGS PER SHARE |
$ | 3.64 | $ | 1.29 | $ | - | $ | 3.15 | ||||||||||
|
DILUTED EARNINGS PER SHARE |
$ | 3.64 | $ | 1.29 | $ | - | $ | 3.14 | ||||||||||
|
BASIC AVERAGE SHARES |
33,259,643 | 50,283,704 | (36,455,685 | ) | 47,087,662 | |||||||||||||
|
DILUTED AVERAGE SHARES |
33,285,289 | 50,418,169 | (36,553,173 | ) | 47,150,285 |
Notes to Pro Forma Combined Condensed Consolidated Financial Statements (Unaudited)
| (1) |
Estimated merger costs of $42.2 million (net of $13.4 million of taxes) are excluded from the pro forma financial statements. It is expected that these costs will be recognized over time. These cost estimates for both Independent and Meridian are forward-looking. The type and amount of actual costs incurred could vary materially from these estimates if future developments differ from the underlying assumptions used by management in determining the current estimate of these costs. The current estimates of the merger costs, primarily comprised of anticipated cash charges, are as follows: |
| Change in control contract and severance contracts | $ | 18,818 | ||
| Vendor and system contracts Terminations | 3,853 | |||
| Facilities conversion and termination costs | 10,497 | |||
| Professional and legal fees | 20,501 | |||
| Other acquisition related expenses | 1,898 | |||
| Pre-tax merger costs | 55,567 | |||
| Taxes | 13,365 | |||
| Total merger costs | $ | 42,202 |
| (2) |
Estimated expenses of approximately $34.1 million associated with the termination and final allocation of Meridian's employee stock ownership plan ("ESOP") are excluded from the pro forma financial statements. The estimated expenses will be recognized, with an equal offsetting benefit to unearned compensation and additional paid in capital within equity. |
| (3) |
Represents Cash paid for stock options. |
| (4) |
Adjustment to reflect acquired loans at their estimated fair value, including current interest rates and liquidity, as well as the allowance for credit losses gross-up for estimate of lifetime credit losses for purchased credit-deteriorated ("PCD") loans and leases. |
| (5) |
Adjustments to the allowance for credit losses include the following: |
|
Reversal of historical Meridian's allowance for credit losses |
$ | 60,849 | ||
|
Increase in allowance for credit losses for gross-up of estimated lifetime credit losses for purchased credit-deteriorated ("PCD") loans and leases |
$ | (16,541 | ) | |
|
Provision for estimate of lifetime credit losses on non-PCD loans and leases |
$ | (50,705 | ) | |
| $ | (6,397 | ) |
| (6) |
Adjustment to reflect bank premises and equipment values to their estimated fair value. |
| (7) |
Adjustment to eliminate Meridian's stockholder's equity and the issuance of Independent common stock in the merger. |
| (8) |
Adjustment to reflect approximately $10.3 million of core deposit intangibles at the preliminary estimated fair value and eliminate Meridian's intangible assets. |
| (9) |
Adjustment to net deferred tax assets due to the business combination. |
| (10) |
Adjustment to reflect the preliminary estimate of fair value on time deposits. |
| (11) |
Calculated to reflect the fair value adjustment of borrowings at current market rates. |
| (12) |
Adjustment to reflect fair value of the acquired split-dollar bank-owned-life insurance policy obligations. |
| (13) |
Adjustments to stockholders' equity: |
|
To eliminate Meridian's stockholders' equity |
$ | (813,698 | ) | |
|
To reflect issuance of Independent common stock in the merger |
1,316,349 | |||
|
Adjustment to record provision for credit losses on non-PCD acquired loans and leases, net of tax |
(36,447 | ) | ||
| $ | 466,204 |
| (14) |
Adjustment to eliminate shares of Meridian common stock outstanding, and to record shares of Independent common stock outstanding using an exchange ratio of 0.275. |
| (15) |
Adjustment reflects the yield adjustment for interest income on loans. |
| (16) |
Adjustment reflects the yield adjustment for interest expense on deposits. |
| (17) |
Adjustment reflects the yield adjustment for interest expense on borrowings. |
| (18) |
Adjustment to record provision for credit losses on non-PCD acquired loans and leases. |
| (19) |
Adjustment reflects the estimated net increase associated with the fair value adjustment for the acquired bank premises and equipment. |
| (20) |
Adjustment reflects the net increase in amortization of other intangible assets for the acquired other intangible assets. |
| (21) |
Adjustment represents income tax expense on the pro-forma adjustments at an estimated rate of 28.12%. |