EX-99.3 5 ex993proforma010715.htm EX-99.3 Exhibit 99.3 Pro Forma Financial Information


Exhibit 99.3
UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION

The following unaudited pro forma combined consolidated financial information is based upon the assumption that the total number of shares of Valley Green Bank ("Valley Green") common stock outstanding immediately prior to the completion of the merger will be 2,797,453 and utilizes the exchange ratio of 1.3541 for 100% of Valley Green’s outstanding shares, which will result in 3,788,031 Univest Corporation of Pennsylvania ("Univest") common shares being issued in the transaction.
The following unaudited pro forma combined consolidated financial statements as of and for the period ended September 30, 2014 combine the historical consolidated financial statements of Univest and Valley Green. The unaudited pro forma combined consolidated financial statements give effect to the merger as if the merger occurred on September 30, 2014 with respect to the consolidated balance sheet, and at the beginning of the period, for the nine months ended September 30, 2014 and year ended December 31, 2013, with respect to the consolidated income statement.
The notes to the unaudited pro forma combined consolidated financial statements describe the pro forma amounts and adjustments presented below. THIS PRO FORMA DATA IS NOT NECESSARILY INDICATIVE OF THE OPERATING RESULTS THAT UNIVEST WOULD HAVE ACHIEVED HAD IT COMPLETED THE MERGER AS OF THE BEGINNING OF THE PERIOD PRESENTED AND SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF FUTURE OPERATIONS
The unaudited pro forma combined consolidated financial information presented below is based on, and should be read together with, the historical financial information that Univest and Valley Green have included in or incorporated by reference in this Form 8-K/A as of and for the indicated periods.


1


Pro Forma Combined Consolidated Balance Sheets as of September 30, 2014
Unaudited (in thousands, except share and per share data)
 
 
 
 
 
 
 
 
 
 
 
Univest
 
Valley Green
 
Combined
 
Pro Forma Adjustments
 
Pro Forma Combined
Assets
 
 
 
 
 
 
 
 
 
Cash
$
68,408

 
$
3,938

 
$
72,346

 
$
(4,604
)
(6)
$
67,742

Securities
360,778

 
12,678

 
373,456

 
—

 
373,456

Federal funds sold
—

 
34,116

 
34,116

 
—

 
34,116

Loans held for sale
2,156

 
—

 
2,156

 
—

 
2,156

Loans
1,597,736

 
366,850

 
1,964,586

 
(3,934
)
(2)(3)
1,960,652

Allowance for loan losses
(21,762
)
 
(2,561
)
 
(24,323
)
 
2,561

(4)
(21,762
)
Loans, net
1,575,974

 
364,289

 
1,940,263

 
(1,373
)
 
1,938,890

Premises and equipment, net
35,532

 
3,057

 
38,589

 
—


38,589

Bank-owned life insurance
61,804

 
—

 
61,804

 
—

 
61,804

Goodwill
67,717

 
—

 
67,717

 
45,349

(1)
113,066

Intangibles
12,625

 
28

 
12,653

 
2,092

(7)
14,745

Accrued interest receivable and other assets
37,202

 
3,528

 
40,730

 
2,678

(8)(6)
43,408

Total assets
$
2,222,196

 
$
421,634

 
$
2,643,830

 
$
44,142

 
$
2,687,972

Liabilities and Shareholders' Equity
 
 
 
 
 
 
 
 
 
Deposits - noninterest bearing
$
436,189

 
$
43,953

 
$
480,142

 
$
—

 
$
480,142

Deposits - interest bearing
1,423,954

 
339,650

 
1,763,604

 
1,607

(5)
1,765,211

Short term borrowings
38,005

 
—

 
38,005

 
—

 
38,005

Long term borrowings
—

 
—

 
—

 
—

 
—

Accrued interest payable and other liabilities
34,234

 
1,804

 
36,038

 
2,092

(9)
38,130

Total liabilities
1,932,382

 
385,407

 
2,317,789

 
3,699

 
2,321,488

Common stock
91,332

 
2,799

 
94,131

 
16,141

(10)
110,272

Additional paid-in capital
62,634

 
24,712

 
87,346

 
33,018

(10)
120,364

Retained earnings
179,903

 
8,927

 
188,830

 
(8,927
)
 
179,903

Accumulated other comprehensive (loss)/income
(6,901
)
 
(210
)
 
(7,111
)
 
210

 
(6,901
)
Treasury stock
(37,154
)
 
(1
)
 
(37,155
)
 
1

 
(37,154
)
Total equity
289,814

 
36,227

 
326,041

 
40,443

 
366,484

Total liabilities and shareholders' equity
$
2,222,196

 
$
421,634

 
$
2,643,830

 
$
44,142

 
$
2,687,972

Per Share Data
 
 
 
 
 
 
 
 
 
Common shares outstanding
16,220,249

 
2,797,453

 
 
 
3,788,031

 
20,008,280

Book value per common share
$
17.87

 
$
12.95

 
 
 
 
 
$
18.32

Tangible book value per common share
12.91

 
12.94

 
 
 
 
 
11.93



2


Pro Forma Consolidated Statements of Income
For the Nine Months Ended September 30, 2014
Unaudited (in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
Univest
 
Valley Green
 
Combined
 
Pro Forma Adjustments
 
Pro Forma Combined
Interest and dividend income
 
 
 
 
 
 
 
 
 
Loans, including fees
$
51,093

 
$
15,245

 
$
66,338

 
$
(98
)
(2)
$
66,240

Investment securities
5,748

 
175

 
$
5,923

 
—

 
5,923

Other dividend and interest income
49

 
29

 
$
78

 
—

 
78

Total interest and dividend income
56,890

 
15,449

 
$
72,339

 
(98
)
 
72,241

Interest expense
 
 
 
 
 
 
 
 
 
Deposits
2,932

 
1,552

 
4,484

 
(603
)
(5)
3,881

Borrowings
25

 
—

 
25

 
—

 
25

Total interest expense
2,957

 
1,552

 
4,509

 
(603
)
 
3,906

Net interest income
53,933

 
13,897

 
67,830

 
505

 
68,335

Provision for loan losses
2,959

 
601

 
3,560

 
—

 
3,560

Net interest income after provision for loan losses
50,974

 
13,296

 
64,270

 
505

 
64,775

Noninterest income
 
 
 
 
 
 
 
 
 
Service charges
8,605

 
306

 
8,911

 
—

 
8,911

Securities gains, net
557

 
—

 
557

 
—

 
557

Earnings on bank-owned life insurance
1,167

 
—

 
1,167

 
—

 
1,167

Gain on sale of loans
2,295

 
16

 
2,311

 
—

 
2,311

Trust commissions
5,692

 
—

 
5,692

 
—

 
5,692

Insurance commissions
8,647

 
—

 
8,647

 
—

 
8,647

Investment advisory commissions
9,144

 
—

 
9,144

 
—

 
9,144

Other
468

 
122

 
590

 
—

 
590

Total noninterest income
36,575

 
444

 
37,019

 
—

 
37,019

Noninterest expense
 
 
 
 
 
 
 
 
 
Salaries and employee benefits
37,533

 
4,493

 
42,026

 
—

 
42,026

Net occupancy
5,130

 
748

 
5,878

 
—

 
5,878

Furniture and equipment
4,170

 
114

 
4,284

 
—

 
4,284

PA shares tax
993

 
216

 
1,209

 
—

 
1,209

FDIC deposit insurance
1,162

 
55

 
1,217

 
—

 
1,217

Acquisition-related costs
739

 
477

 
1,216

 
—

 
1,216

Other
14,965

 
1,538

 
16,503

 
286

(7)
16,789

Total noninterest expense
64,692

 
7,641

 
72,333

 
286

 
72,619

Income before taxes
22,857

 
6,099

 
28,956

 
219

 
29,175

Income tax expense
5,816

 
2,255

 
8,071

 
77

(8)
8,148

Net income
$
17,041

 
$
3,844

 
$
20,885

 
$
142

 
$
21,027

Earnings per share:
 
 
 
 
 
 
 
 
 
Basic
$
1.05

 
$
1.39

 
 
 
 
 
$
1.05

Diluted
1.04

 
1.39

 
 
 
 
 
1.05





3


Pro Forma Consolidated Statements of Income
For the Year Ended December 31, 2013
Unaudited (in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
 
Univest
 
Valley Green
 
Combined
 
Pro Forma Adjustments
 
Pro Forma Combined
Interest and dividend income
 
 
 
 
 
 
 
 
 
Loans, including fees
$
67,950

 
$
17,503

 
$
85,453

 
$
(130
)
(2)
$
85,323

Investment securities
9,503

 
220

 
$
9,723

 
—

 
9,723

Other dividend and interest income
126

 
30

 
$
156

 
—

 
156

Total interest and dividend income
77,579

 
17,753

 
$
95,332

 
(130
)
 
95,202

Interest expense
 
 
 
 
 
 
 
 
 
Deposits
4,586

 
1,826

 
6,412

 
(804
)
(5)
5,608

Borrowings
48

 
3

 
51

 
—

 
51

Other
483

 
—

 
483

 
—

 
483

Total interest expense
5,117

 
1,829

 
6,946

 
(804
)
 
6,142

Net interest income
72,462

 
15,924

 
88,386

 
674

 
89,060

Provision for loan losses
11,228

 
701

 
11,929

 
—

 
11,929

Net interest income after provision for loan losses
61,234

 
15,223

 
76,457

 
674

 
77,131

Noninterest income
 
 
 
 
 
 
 
 
 
Service charges
11,841

 
337

 
12,178

 
—

 
12,178

Securities gains, net
3,389

 
9

 
3,398

 
—

 
3,398

Earnings on bank-owned life insurance
2,968

 
—

 
2,968

 
—

 
2,968

Gain on sale of loans
5,135

 
199

 
5,334

 
—

 
5,334

Loss on termination of swap
(1,866
)
 
—

 
(1,866
)
 
—

 
(1,866
)
Trust commissions
7,303

 
—

 
7,303

 
—

 
7,303

Insurance commissions
9,395

 
—

 
9,395

 
—

 
9,395

Investment advisory commissions
7,642

 
—

 
7,642

 
—

 
7,642

Other
977

 
216

 
1,193

 
—

 
1,193

Total noninterest income
46,784

 
761

 
47,545

 
—

 
47,545

Noninterest expense
 
 
 
 
 
 
 
 
 
Salaries and employee benefits
48,034

 
4,961

 
52,995

 
—

 
52,995

Net occupancy
5,869

 
867

 
6,736

 
—

 
6,736

Furniture and equipment
4,865

 
132

 
4,997

 
—

 
4,997

PA shares tax
1,953

 
156

 
2,109

 
—

 
2,109

FDIC deposit insurance
1,553

 
220

 
1,773

 
—

 
1,773

Restructuring charge
534

 
—

 
534

 
—

 
534

Acquisition-related costs
87

 
—

 
87

 
—

 
87

Other
18,238

 
2,617

 
20,855

 
381

(7)
21,236

Total noninterest expense
81,133

 
8,953

 
90,086

 
381

 
90,467

Income before taxes
26,885

 
7,031

 
33,916

 
293

 
34,209

Income tax expense
5,696

 
2,405

 
8,101

 
103

(8)
8,204

Net income
$
21,189

 
$
4,626

 
$
25,815

 
$
190

 
$
26,005

Earnings per share:
 
 
 
 
 
 
 
 
 
Basic
$
1.28

 
$
1.92

 
 
 
 
 
$
1.31

Diluted
1.27

 
1.92

 
 
 
 
 
1.31



4


(1)
The acquisition will be effected by the distributions of cash and issuance of shares of Univest common stock to Valley Green's common shareholders. The following unaudited pro forma combined consolidated financial information assumes that 100% of the outstanding shares of Valley Green common stock will be exchanged for Univest common stock at an exchange ratio of 1.3541 shares of Univest common stock for each share of Valley Green common stock. Additionally, Univest will pay approximately $2.2 million to Valley Green for outstanding stock options and related taxes.
 
 
 
The unaudited pro forma combined consolidated financial information is based upon the assumption that the total number of shares of Valley Green common stock outstanding immediately prior to the completion of the merger will be 2,797,453 and utilizes the exchange ratio of 1.3541 for 100% of Valley Green’s outstanding shares and cash of $2.2 million for Valley Green stock options and related taxes. This will result in the issuance of 3,788,031 shares of Univest common stock with a fair value of $76.7 million, for a total purchase price of $78.9 million. The final purchase price was determined based upon the fair value of Univest shares of common stock as of the merger closing, the final exchange ratio as established in accordance with the merger agreement, the number of Valley Green shares outstanding as of closing, and the number and strike price of Valley Green Options as of the merger closing. The final allocation of the purchase price will be determined after the merger is completed and additional analyses are performed to determine the fair values of Valley Green’s tangible and identifiable intangible assets and liabilities as of the date the merger is completed. The final adjustments may be materially different from the unaudited pro forma adjustments presented herein. The unaudited pro forma combined consolidated financial information has been prepared to include the estimated adjustments necessary to record the assets and liabilities of Valley Green at their respective fair values and represents management’s best estimate based upon the information available at this time. The pro forma adjustments included herein are subject to change as additional information becomes available and as additional analyses are performed. Such adjustments, when compared to the information shown in this document, may change the amount of the purchase price allocation to goodwill while changes to other assets and liabilities may impact the statement of income due to adjustments in the yield and/or amortization/accretion of the adjusted assets and liabilities.
 
 
 
The total estimated purchase price for the purpose of this unaudited pro forma combined consolidated financial information is $78.9 million. Goodwill is created when the purchase price consideration exceeds the fair value of the assets acquired or a bargain purchase gain results when the current fair value of the assets acquired exceeds the purchase price consideration. For purposes of this analysis as of September 30, 2014, goodwill of $45.3 million results from the transaction; however, the final purchase accounting analysis will be performed as of the merger date and these amounts are subject to change based on operations subsequent to September 30, 2014, as additional information becomes available and as additional analyses are performed. The following table provides the calculation and allocation of the purchase price used in the pro forma financial statements and a reconcilement of pro forma shares to be outstanding.
Summary of Purchase Price Calculation and Goodwill Resulting From Merger
 
 
(in thousands, except share data)
 
 
 
 
 
Purchase price consideration in common stock:
 
 
Valley Green shares outstanding
2,797,453

 
Exchange ratio
1.3541

 
Univest shares to be issued
3,788,031

 
Univest closing price
$
20.24

 
Purchase price assigned to Valley Green shares exchanged for Univest stock
 
$
76,670

Purchase price assigned to Valley Green stock options exchanged for cash
 
2,237

Total purchase price
 
$
78,907

Net assets acquired:
 
 
Valley Green common shareholders' equity
$
36,227

 
Core deposit intangible
2,092

 
Adjustments to reflect assets acquired at fair value:
 
 
Loans
(3,934
)
 
Allowance for loan losses
2,561

 
Deferred tax assets
311

 
Adjustments to reflect liabilities acquired at fair value:
 
 
Interest bearing deposits
(1,607
)
 
Change in control accrued payments
(2,092
)
33,558

Goodwill resulting from merger
 
$
45,349


5


(2)
A fair value premium of $1.304 million to reflect fair values of loans based on current interest rates of similar loans. The adjustment will be substantially recognized over approximately 10 years using an amortization method based upon the expected life of the loans and is expected to decrease pro forma pre-tax interest income by $130 thousand in the first year following consummation of the merger.
(3)
A fair value discount of $5.238 million to reflect the credit risk of the loan portfolio. No pro forma earnings impact was assumed from the loan credit adjustment. The estimated fair value of the covered loans approximates their carrying value.
(4)
Reversal of the Valley Green allowance for loan losses of $2.561 million in accordance with acquisition method of accounting for the merger.
(5)
A fair value premium of $1.607 million to reflect the fair values of certain interest-bearing deposit liabilities based on current interest rates for similar instruments. The adjustment will be recognized using an amortization method based upon the estimated maturities of the deposit liabilities. This adjustment is expected to decrease pro forma pre-tax interest expense by $804 thousand in the first year following consummation of the merger.
(6)
Cash on hand of $2.237 million is utilized in conjunction with extinguishing Valley Green stock options and cash on hand of $2.367 million is utilized for the purchase of additional Federal Reserve Bank Capital Stock.
(7)
Adjustment of $2.092 million for core deposit intangible to reflect the fair value of this asset and the related amortization using an expected life of 10 years. The amortization of the core deposit intangible is expected to increase pro forma pre-tax noninterest expense by $381 thousand in the first year following consummation of the merger.
(8)
Adjustment assumes a tax rate of 35% related to deferred taxes on fair value adjustments and on pre-tax amortization and accretion amounts in the unaudited pro forma combined consolidated statement of income.
(9)
Accrual for change in control payments of $2.092 million.
(10)
The table below sets forth an adjustment to reflect the issuance of shares of Univest common stock with a $5.00 par value in connection with the acquisition and the adjustments to shareholders’ equity for the elimination of Valley Green historical equity accounts.
Adjustment to common stock, par value $5.00
$
18,940

Less: historical value of Valley Green common stock
2,799

Adjustment to common stock in the pro forma unaudited combined consolidated balance sheet
$
16,141

Adjustment to additional paid-in capital
$
57,730

Less: historical value of Valley Green common stock
24,712

Adjustment to additional paid-in capital in the pro forma unaudited combined consolidated balance sheet
$
33,018







6