SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: October 8, 2001
(Date of Earliest Event Reported)
FIRST COMMUNITY BANCORP
(Exact Name of Registrant As Specified In Its Charter)
CALIFORNIA
(State or Other Jurisdiction of Incorporation)
00-30747 (Commission File Number) |
33-0885320 (IRS Employer Identification No.) |
2310 Camino Vida Roble, Suite B
Carlsbad, California 92009
(Address of Principal Executive Offices)(Zip Code)
(760) 476-5400
(Registrant's Telephone Number, including Area Code)
Item 2. Acquisition or Disposition of Assets.
On October 8, 2001, First Charter Bank, N.A. ("First Charter") merged (the "Merger") with and into First Professional Bank, N.A. ("First Professional"), a wholly owned subsidiary of First Community Bancorp ("First Community"), with First Professional as the surviving entity. The Merger was consummated pursuant to the terms of the Agreement and Plan of Merger, dated May 22, 2001, by and among First Community, First Charter and First Professional, as amended July 19, 2001 (the "Merger Agreement").
Pursuant to the Merger Agreement, each issued and outstanding share of common stock of First Charter prior to the Merger (other than as provided in the Merger Agreement) was converted into the right to receive 0.008635 shares of First Community common stock. Upon consummation of the Merger, First Community issued approximately 710,000 shares of common stock to former holders of First Charter common stock, and as a result, the former shareholders of First Charter common stock own shares of First Community common stock representing approximately 13.3% of the outstanding shares of First Community common stock.
The description of the Merger Agreement contained herein is qualified in its entirety by reference to the Merger Agreement which is incorporated herein as Exhibit 2.1. After giving effect to the Merger, the total assets of First Community and its subsidiaries increased to approximately $752.2 million, total deposits increased to approximately $666.9 million and total shareholder equity increased to approximately $53.0 million at June 30, 2001, on a pro forma basis.
As a part of the Merger, Timothy Ewing, principal managing partner of Value Partners, Ltd., formerly First Charter's largest shareholder, has designated Timothy B. Matz for appointment to the Board of Directors of First Community. Election of Timothy Matz as a director of First Community is expected to take place at the meeting of the Board of Directors on October 25, 2001.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial statements for First Charter required by this item are incorporated herein in their entirety by this reference to Exhibit 99.2 and Exhibit 99.3 hereto.
(b) The pro forma financial information required to be filed by this item is incorporated herein in its entirety by this reference to Exhibit 99.4 hereto.
2
(c) Exhibits
The following exhibits are filed with this Current Report on Form 8-K or incorporated by reference:
Exhibit Number |
Description |
|
---|---|---|
2.1 | Agreement and Plan of Merger, dated as of May 22, 2001, by and among First Community Bancorp, First Charter Bank, N.A. and First Professional Bank, N.A., as amended July 19, 2001 (Exhibit 2.1 to First Community Bancorp's filing on Amendment No. 1 to Form S-4 (registration No. 333-65582) dated August 30, 2001, incorporated herein by reference). | |
99.1 |
Press Release. |
|
99.2 |
Audited consolidated balance sheets for the years ended December 31, 2000 and 1999 and audited consolidated statements of operations and stockholders' equity and comprehensive income (loss) and cash flows for the years ended December 31, 2000, 1999 and 1998 of First Charter Bank, N.A. (pages F-44 through F-68 of First Community Bancorp's filing on Amendment No. 1 to Form S-4 (registration No. 333-65582), dated August 30, 2001, incorporated herein by reference). |
|
99.3 |
Unaudited consolidated balance sheet as of June 30, 2001 and unaudited consolidated statements of operations and comprehensive income (loss) and cash flows for the six months ended June 30, 2001 and June 30, 2000 of First Charter Bank, N.A. (pages F-69 through F-76 of First Community Bancorp's filing on Amendment No. 1 to Form S-4 (registration No. 333-65582), dated August 30, 2001, incorporated herein by reference). |
|
99.4 |
Pro Forma combined condensed balance sheets at June 30, 2001 and December 31, 2000 and pro forma combined condensed income statements for the six months ended June 30, 2001 and the year ended December 31, 2000. |
3
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunder duly authorized.
Dated: October 19, 2001 | ||||
FIRST COMMUNITY BANCORP | ||||
By: |
/s/ ARNOLD C. HAHN Name: Arnold C. Hahn Title: Chief Financial Officer |
|||
4
First Community Bancorp (the "Company") (Nasdaq: FCBP) today announced the completion of the acquisition of all of the outstanding common and preferred stock of First Charter Bank, N.A. ("First Charter"). First Charter has been merged into First Professional Bank, N.A. with First Professional being the surviving entity. This acquisition is being accounted for using purchase accounting.
The Company also has a pending merger based upon an agreement (the "Agreement") to acquire all of the outstanding common stock of Pacific Western National Bank ("Pacific Western").
The Agreement provides that the shareholders of the outstanding common shares and options to purchase common shares of Pacific Western will be paid $37.15 per share. The merger is subject to standard conditions, including the approval of the shareholders of Pacific Western and bank regulatory agencies. Upon receipt of the approvals and satisfaction or waiver of other conditions, the transaction is expected to close in the first quarter of 2002 and will be accounted for using purchase accounting.
As of June 30, 2001, on pro forma basis with First Charter, the Company is approximately a $750 million bank holding company operating in the markets of northern San Diego County through Rancho Santa Fe National Bank, the desert communities of the Coachella Valley and the Morongo Basin through First Community Bank of the Desert and in west Los Angeles, the San Fernando Valley, Pasadena and Riverside County through First Professional Bank. Each bank operates under its own name with Rancho Santa Fe National Bank having branches in Rancho Santa Fe, San Diego's Golden Triangle, Escondido and Carlsbad. First Community Bank of the Desert has branches in Palm Springs, Indian Wells, Cathedral City, Yucca Valley and Twentynine Palms. First Professional has branches in Santa Monica, Beverly Hills, Pasadena, Tarzana and Redlands.
This press release includes forward-looking statements that involve inherent risks and uncertainties. First Community Bancorp and First Charter Bank, N.A. caution readers that a number of important factors could cause actual results to differ materially from those in the forward-looking statements. These factors include economic conditions and competition in the geographic and business areas in which First Community Bancorp and First Charter Bank, N.A. operate, inflation, fluctuations in interest rates, legislation and governmental regulation and the progress of integrating the operations of First Community Bancorp, Rancho Santa Fe National Bank, First Community Bank of the Desert, First Professional Bank, N.A. and First Charter Bank, N.A.
Unaudited Pro Forma Condensed Combined Financial Data
of First Community and First Charter
The following tables present financial data for First Community and First Charter after giving effect to the merger, which we refer to as "pro forma" information. The pro forma financial data give effect to the merger under the purchase accounting method in accordance with accounting principles generally accepted in the United States of America ("GAAP"). In presenting the pro forma information for certain time periods, First Community assumed that First Community and First Charter had been merged throughout those periods. The following unaudited pro forma combined financial data combines the historical consolidated condensed financial statements of First Community and the historical consolidated condensed financial statements of First Charter, giving effect of the merger as if it had been effective on June 30, 2001 and December 31, 2000, with respect to the Pro Forma Combined Condensed Balance Sheet, and as of the beginning of the periods indicated, with respect to the Pro Forma Combined Condensed Statements of Income. This information should be read in conjunction with the historical financial statements of the companies, including their respective notes thereto, which are incorporated by reference in this current report on Form 8-K.
First Community expects that it will incur reorganization and restructuring expenses as a result of combining First Community and First Charter. The effect of the estimated merger and reorganization costs expected to be incurred in connection with the merger have been reflected in the pro forma combined balance sheets; however, since the estimated costs are nonrecurring, they have not been reflected in the pro forma combined statements of income. First Community also anticipates that the merger will provide the combined company with certain financial benefits that include reduced operating expenses and opportunities to earn more revenue. However, First Community does not reflect any of these anticipated cost savings or benefits in the pro forma information. Finally, the pro forma financial information does not reflect any divestitures of branches or deposits that may be required in connection with the merger. Therefore, the pro forma information, while helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not attempt to predict or suggest future results. The pro forma information also does not attempt to show how the combined company would actually have performed had the companies been combined throughout these periods. All adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of results of the unaudited historical interim periods have been included.
As described in Note 6, on January 16, 2001, Professional Bancorp merged with and into First Community. The Professional Merger was accounted for using purchase accounting. Due to the materiality of this acquisition, the Unaudited Pro Forma Combined Condensed Statements of Income for the six-month period ended June 30, 2001, and for the year ended December 31, 2000, and the Unaudited Pro Forma Combined Condensed Balance Sheet as of December 31, 2000 are additionally presented as if the Professional Merger occurred at the beginning of the periods presented for the unaudited Pro Forma Combined Condensed Statements of Income or as of December 31, 2000 for the Unaudited Pro Forma Combined Condensed Balance Sheet. Such information presented is not intended to reflect the actual results that would have been achieved had the Professional Merger actually occurred on those dates, and it should be read in conjunction with the historical financial information presented elsewhere herein.
Unaudited Pro Forma Combined Condensed Balance Sheets
At June 30, 2001
|
First Community |
First Charter |
Pro Forma Adjustments |
First Community Pro Forma |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(In thousands, except per share data) |
|||||||||||||
Assets: | ||||||||||||||
Cash and due from banks | $ | 56,624 | $ | 10,611 | $ | | $ | 67,235 | ||||||
Federal funds sold | 73,327 | 18,302 | | 91,629 | ||||||||||
Total cash and cash equivalents | 129,951 | 28,913 | | 158,864 | ||||||||||
Interest-bearing deposits in financial institutions |
285 |
3,038 |
|
3,323 |
||||||||||
Federal Reserve Bank and Federal Home Loan Bank stock, at cost |
1,536 |
659 |
|
2,195 |
||||||||||
Securities held to maturity | 13,020 | | | 13,020 | ||||||||||
Securities available-for-sale | 85,717 | 20,136 | | 105,853 | ||||||||||
Total securities | 100,273 | 20,795 | | 121,068 | ||||||||||
Net loans |
366,078 |
66,951 |
|
433,029 |
||||||||||
Premises and equipment | 5,573 | 628 | | 6,201 | ||||||||||
Other real estate owned | 654 | 1,292 | | 1,946 | ||||||||||
Goodwill | 4,227 | | 7,867 | (aa) | 12,094 | |||||||||
Other assets | 12,629 | 2,652 | 427 | (bb) | 15,708 | |||||||||
Total Assets | $ | 619,670 | $ | 124,269 | $ | 8,294 | $ | 752,233 | ||||||
Liabilities and Shareholders' Equity: | ||||||||||||||
Liabilities: | ||||||||||||||
Non-interest bearing deposits | $ | 214,148 | $ | 32,803 | $ | | $ | 246,951 | ||||||
Interest bearing deposits | 344,149 | 75,807 | | 419,956 | ||||||||||
Total deposits | 558,297 | 108,610 | | 666,907 | ||||||||||
Borrowed funds | 15,682 | 6,000 | | 21,682 | ||||||||||
Accrued interest payable & other liabilities | 6,960 | 1,007 | 2,721 | (cc) | 10,688 | |||||||||
Total Liabilities | 580,939 | 115,617 | 2,721 | 699,277 | ||||||||||
Shareholders' Equity: |
||||||||||||||
Convertible preferred stock | | 5,045 | (5,045 | )(dd) | | |||||||||
Common stock | 28,690 | 174 | 25,432 | (ee) | 54,296 | |||||||||
Additional paid-in-capital | | 12,439 | (12,439 | )(ff) | | |||||||||
Retained earnings (accumulated deficit) | 9,682 | (9,087 | ) | (2,294 | )(gg) | (1,699 | ) | |||||||
Accumulated other comprehensive income: unrealized net gains on securities available-for-sale, net | 359 | 81 | (81 | )(hh) | 359 | |||||||||
Total Shareholders' Equity | 38,731 | 8,652 | 5,573 | 52,956 | ||||||||||
Total Liabilities & Shareholders' Equity | $ | 619,670 | $ | 124,269 | $ | 8,294 | $ | 752,233 | ||||||
Number of common shares outstanding(1) | 4,577.1 | 2,289.8 | 5,238.7 | |||||||||||
Common shareholders' equity per share | $ | 8.46 | $ | 1.58 | $ | 10.11 |
2
Unaudited Pro Forma Combined Condensed Balance Sheets
At December 31, 2000
|
First Community |
First Charter |
Pro Forma Adjustments |
First Community Pro Forma |
Professional Bancorp |
Professional Bancorp Pro Forma Adjustments |
Pro Forma with Professional Bancorp |
||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(In thousands, except per share data) |
||||||||||||||||||||||
Assets: | |||||||||||||||||||||||
Cash and due from banks | $ | 35,752 | $ | 12,369 | $ | | $ | 48,121 | $ | 17,727 | | $ | 65,848 | ||||||||||
Federal funds sold | 16,903 | | | 16,903 | 77,275 | (8,431 | )(a) | 85,747 | |||||||||||||||
Total cash and cash equivalents | 52,655 | 12,369 | | 65,024 | 95,002 | (8,431 | ) | 151,595 | |||||||||||||||
Interest-bearing deposits in financial institutions |
495 |
16 |
|
511 |
447 |
|
958 |
||||||||||||||||
Federal Reserve Bank and Federal Home Loan Bank stock, at cost |
913 |
779 |
|
1,692 |
415 |
|
2,107 |
||||||||||||||||
Securities held to maturity | 40,428 | | | 40,428 | 14,263 | | 54,691 | ||||||||||||||||
Securities available-for-sale | 4,972 | 41,520 | | 46,492 | 46,692 | (425 | )(a) | 92,759 | |||||||||||||||
Total securities | 46,313 | 42,299 | | 88,612 | 61,370 | (425 | ) | 149,557 | |||||||||||||||
Net loans |
246,622 |
72,698 |
|
319,320 |
102,376 |
|
421,696 |
||||||||||||||||
Premises and equipment | 5,027 | 734 | | 5,761 | 817 | | 6,578 | ||||||||||||||||
Other real estate owned | 1,031 | 1,296 | | 2,327 | | | 2,327 | ||||||||||||||||
Goodwill | | 882 | 6,555 | (aa) | 7,437 | | 4,634 | (b) | 12,071 | ||||||||||||||
Other assets | 6,144 | 3,038 | 427 | (bb) | 9,609 | 4,796 | 2,923 | (c) | 17,328 | ||||||||||||||
Total Assets | $ | 358,287 | $ | 133,332 | $ | 6,982 | $ | 498,601 | $ | 264,808 | $ | (1,299 | ) | $ | 762,110 | ||||||||
Liabilities and Shareholders' Equity | |||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||
Non-interest bearing deposits | $ | 114,042 | $ | 34,909 | $ | | $ | 148,951 | $ | 135,797 | | $ | 284,748 | ||||||||||
Interest bearing deposits | 202,896 | 76,322 | | 279,218 | 113,338 | | 392,556 | ||||||||||||||||
Total deposits | 316,938 | 111,231 | | 428,169 | 249,135 | | 677,304 | ||||||||||||||||
Borrowed funds | 9,689 | 11,000 | | 20,689 | 679 | 21,368 | |||||||||||||||||
Accrued interest payable & other liabilities | 3,888 | 1,137 | 2,721 | (cc) | 7,746 | 3,074 | 3,144 | (d) | 13,964 | ||||||||||||||
Total Liabilities | 330,515 | 123,368 | 2,721 | 456,604 | 252,888 | 3,144 | 712,636 | ||||||||||||||||
Shareholders' Equity: |
|||||||||||||||||||||||
Convertible preferred stock | | 5,045 | (5,045 | )(dd) | | | | | |||||||||||||||
Common stock | 20,402 | 174 | 14,051 | (ee) | 34,627 | 17 | 7,460 | (e) | 42,104 | ||||||||||||||
Additional paid-in-capital | | 12,439 | (12,439 | )(ff) | | 21,271 | (21,271 | )(f) | | ||||||||||||||
Treasury stock | | | | | (537 | ) | 537 | (g) | | ||||||||||||||
Retained earnings (accumulated deficit) | 7,432 | (7,486 | ) | (2,294 | )(gg) | 7,432 | (8,264 | ) | 8,264 | (h) | 7,432 | ||||||||||||
Accumulated other comprehensive loss: unrealized net losses on securities available-for-sale, net | (62 | ) | (208 | ) | 208 | (hh) | (621 | ) | (567 | ) | 567 | (i) | (62 | ) | |||||||||
Total Shareholders' Equity | 27,772 | 9,964 | 4,261 | 41,997 | 11,920 | (4,443 | ) | 49,474 | |||||||||||||||
Total Liabilities & Shareholders' Equity | $ | 358,287 | $ | 133,332 | $ | 6,982 | $ | 498,601 | $ | 264,808 | $ | (1,299 | ) | $ | 762,110 | ||||||||
Number of common shares outstanding(1) | 3,971.4 | 2,289.8 | 4,633.0 | 2,030.8 | 5,137.7 | ||||||||||||||||||
Common shareholders' equity per share | $ | 6.99 | $ | 2.15 | $ | 9.06 | $ | 5.87 | $ | 9.63 |
3
Unaudited Pro Forma Combined Condensed Income Statements
for the Six Months Ended June 30, 2001
|
First Community |
First Charter |
Pro Forma Adjustments |
First Community Pro Forma |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(In thousands, except per share data) |
||||||||||||||
Interest income: | |||||||||||||||
Interest and fees on loans | $ | 16,648 | $ | 3,109 | $ | | $ | 19,757 | |||||||
Interest on interest-bearing deposits in financial institutions | 17 | 22 | | 39 | |||||||||||
Interest on investment securities | 2,974 | 821 | | 3,795 | |||||||||||
Interest on federal funds sold | 2,393 | 278 | | 2,671 | |||||||||||
Total interest income | 22,032 | 4,230 | | 26,262 | |||||||||||
Interest expense: |
|||||||||||||||
Interest expense on deposits | 5,212 | 2,000 | | 7,212 | |||||||||||
Interest expense on borrowed funds | 658 | 203 | | 861 | |||||||||||
Total interest expense | 5,870 | 2,203 | | 8,073 | |||||||||||
Net interest income | 16,162 | 2,027 | | 18,189 | |||||||||||
Less: provision for loan losses | 639 | | | 639 | |||||||||||
Net interest income after provision for loan losses | 15,523 | 2,027 | | 17,550 | |||||||||||
Non-interest income: |
|||||||||||||||
Service charges, commissions and fees | 1,850 | 86 | | 1,936 | |||||||||||
Other income | 368 | 254 | | 622 | |||||||||||
Total non-interest income | 2,218 | 340 | | 2,558 | |||||||||||
Non-interest expense: |
|||||||||||||||
Salaries and employee benefits | 6,509 | 1,011 | | 7,520 | |||||||||||
Occupancy, furniture and equipment | 2,139 | 501 | | 2,640 | |||||||||||
Professional services | 1,555 | 709 | | 2,264 | |||||||||||
Stationery, supplies and printing | 297 | 106 | | 403 | |||||||||||
FDIC assessment | 284 | 11 | | 295 | |||||||||||
Cost of other real estate owned | 32 | 10 | | 42 | |||||||||||
Advertising | 237 | 2 | | 239 | |||||||||||
Insurance | 142 | 57 | | 199 | |||||||||||
Goodwill amortization | 134 | | | 134 | |||||||||||
Other | 1,194 | 459 | | 1,653 | |||||||||||
Total non-interest expense | 12,523 | 2,866 | | 15,389 | |||||||||||
Income before income taxes | 5,218 | (499 | ) | | 4,719 | ||||||||||
Income taxes | 2,154 | 1 | | 2,155 | |||||||||||
Income (loss) from continuing operations | 3,064 | (500 | ) | | 2,564 | ||||||||||
Discontinued operations | |||||||||||||||
Loss from operations of discontinued merchant card processing (net of income taxes) | | (481 | ) | | (481 | ) | |||||||||
Loss on disposal of merchant card processing, including provision of $478 for operating losses during phase-out period (net of income taxes) | | (620 | ) | | (620 | ) | |||||||||
Loss from discontinued operations | | (1,101 | ) | | (1,101 | ) | |||||||||
Net income (loss) | 3,064 | (1,601 | ) | | 1,463 | ||||||||||
Preferred dividends | | | | | |||||||||||
Net income (loss) available to common shareholders | $ | 3,064 | $ | (1,601 | ) | $ | | $ | 1,463 | ||||||
Per share information: | |||||||||||||||
Number of shares (weighted average) | |||||||||||||||
Basic | 4,474.1 | 2,289.8 | 5,118.8 | ||||||||||||
Diluted(1) | 4,705.6 | 2,289.8 | 5,350.3 | ||||||||||||
Income (loss) per share: | |||||||||||||||
Basic | |||||||||||||||
From continuing operations | $ | 0.68 | $ | (0.22 | ) | $ | 0.50 | ||||||||
From discontinued operations | | (0.48 | ) | (0.22 | ) | ||||||||||
Basic income (loss) per common share | $ | 0.68 | $ | (0.70 | ) | $ | 0.29 | ||||||||
Diluted(2) | |||||||||||||||
From continuing operations | $ | 0.65 | $ | (0.22 | ) | $ | 0.48 | ||||||||
From discontinued operations | | (0.48 | ) | (0.21 | ) | ||||||||||
Diluted income (loss) per common share | $ | 0.65 | $ | (0.70 | ) | $ | 0.27 | ||||||||
4
Unaudited Pro Forma Combined Condensed Income Statements
for the Year Ended December 31, 2000
|
First Community |
First Charter |
Pro Forma Adjustments |
First Community Pro Forma |
Professional Bancorp |
Professional Bancorp Pro Forma Adjustments |
Pro Forma with Professional Bancorp |
|||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(In thousands, except per share data) |
|||||||||||||||||||||||
Interest income: | ||||||||||||||||||||||||
Interest and fees on loans | $ | 23,980 | $ | 5,750 | $ | | $ | 29,730 | $ | 11,901 | | $ | 41,631 | |||||||||||
Interest on interest-bearing deposits in financial institutions | 257 | 15 | | 272 | 35 | | 307 | |||||||||||||||||
Interest on investment securities | 2,957 | 1,723 | | 4,680 | 4,030 | | 8,710 | |||||||||||||||||
Interest on federal funds sold | 1,637 | 458 | | 2,095 | 3,356 | | 5,451 | |||||||||||||||||
Total interest income | 28,831 | 7,946 | | 36,777 | 19,322 | | 56,099 | |||||||||||||||||
Interest expense: | ||||||||||||||||||||||||
Interest expense on deposits | 7,551 | 3,522 | | 11,073 | 3,431 | | 14,504 | |||||||||||||||||
Interest expense on borrowed funds | 373 | 55 | | 428 | 51 | 582 | (j) | 1,061 | ||||||||||||||||
Total interest expense | 7,924 | 3,577 | | 11,501 | 3,482 | 582 | 15,565 | |||||||||||||||||
Net interest income | 20,907 | 4,369 | | 25,276 | 15,840 | (582 | ) | 40,534 | ||||||||||||||||
Less: provision for loan losses | 520 | (205 | ) | | 315 | 11,732 | | 12,047 | ||||||||||||||||
Net interest income after provision for loan losses | 20,387 | 4,574 | | 24,961 | 4,108 | (582 | ) | 28,487 | ||||||||||||||||
Non-interest income: | ||||||||||||||||||||||||
Service charges, commissions and fees | 1,637 | 165 | | 1,802 | 1,314 | | 3,116 | |||||||||||||||||
Gain on sale of securities | | 10 | | 10 | | | 10 | |||||||||||||||||
Other income | 828 | 1,194 | | 2,022 | 4,646 | | 6,668 | |||||||||||||||||
Total non-interest income | 2,465 | 1,369 | | 3,834 | 5,960 | | 9,794 | |||||||||||||||||
Non-interest expense: | ||||||||||||||||||||||||
Salaries and employee benefits | 6,673 | 2,203 | | 8,876 | 7,868 | | 16,744 | |||||||||||||||||
Occupancy, furniture and equipment | 2,455 | 1,063 | | 3,518 | 2,040 | | 5,558 | |||||||||||||||||
Professional services | 1,914 | 1,189 | | 3,103 | 2,790 | | 5,893 | |||||||||||||||||
Stationery, supplies and printing | 418 | 65 | | 483 | 669 | | 1,152 | |||||||||||||||||
Cost of other real estate owned | 356 | 93 | | 449 | | | 449 | |||||||||||||||||
Advertising | 435 | 24 | | 459 | 311 | 770 | ||||||||||||||||||
Insurance | 128 | 109 | | 237 | 125 | 362 | ||||||||||||||||||
Goodwill amortization | | | | | | 309 | (k) | 309 | ||||||||||||||||
Merger costs | 3,561 | | | 3,561 | | 3,561 | ||||||||||||||||||
Loss on sale of securities | 11 | 5 | | 16 | | 16 | ||||||||||||||||||
Other | 2,194 | 296 | | 2,490 | 1,306 | | 3,796 | |||||||||||||||||
Total non-interest expense | 18,145 | 5,047 | | 23,192 | 15,109 | 309 | 38,610 | |||||||||||||||||
Income before income taxes | 4,707 | 896 | | 5,603 | (5,041 | ) | (891 | ) | (329 | ) | ||||||||||||||
Income taxes | 2,803 | 1 | | 2,804 | 2 | (244 | )(1) | 2,562 | ||||||||||||||||
Income (loss) from continuing operations | 1,904 | 895 | | 2,799 | (5,043 | ) | (647 | ) | (2,891 | ) | ||||||||||||||
Discontinued operations | ||||||||||||||||||||||||
Loss from operations of discontinued merchant card processing operations (net of income taxes) | | (44 | ) | | (44 | ) | | | (44 | ) | ||||||||||||||
Net income (loss) | 1,904 | 851 | | 2,755 | (5,043 | ) | (647 | ) | (2,935 | ) | ||||||||||||||
Preferred dividends | | 660 | (660 | ) | | | | | ||||||||||||||||
Net income (loss) available to common shareholders | $ | 1,904 | $ | 191 | $ | 660 | $ | 2,755 | $ | (5,043 | ) | $ | (647 | ) | $ | (2,935 | ) | |||||||
Per share information: | ||||||||||||||||||||||||
Number of shares (weighted average) | ||||||||||||||||||||||||
Basic | 3,908.3 | 2,289.8 | 4,553.0 | 2,030.8 | 5,057.7 | |||||||||||||||||||
Diluted(1) | 4,090.4 | 74,658.2 | 4,735.1 | 2,030.8 | 5,239.8 | |||||||||||||||||||
Income (loss) per share: | ||||||||||||||||||||||||
Basic | ||||||||||||||||||||||||
From continuing operations | $ | 0.49 | $ | 0.10 | $ | 0.62 | $ | (2.48 | ) | $ | (0.57 | ) | ||||||||||||
From discontinued operations | | (0.02 | ) | (0.01 | ) | | (0.01 | ) | ||||||||||||||||
Basic income (loss) per common share | $ | 0.49 | $ | 0.08 | $ | 0.61 | $ | (2.48 | ) | $ | (0.58 | ) | ||||||||||||
Diluted(1) | ||||||||||||||||||||||||
From continuing operations | $ | 0.47 | $ | 0.01 | $ | 0.59 | $ | (2.48) | * | $ | (0.57) | * | ||||||||||||
From discontinued operations | | (0.00 | ) | (0.01 | ) | | (0.01) | * | ||||||||||||||||
Diluted income (loss) per common share | $ | 0.47 | $ | 0.01 | $ | 0.58 | $ | (2.48) | * | $ | (0.58) | * | ||||||||||||
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Notes to Unaudited Pro Forma Condensed Combined Financial Data
of First Community and First Charter
NOTE 1: BASIS OF PRESENTATION OF FIRST CHARTER
Certain historical data of First Charter have been reclassified on a pro forma basis to conform to First Community's classifications. Transactions between First Community and First Charter are not material in relation to the unaudited pro forma combined financial statements, and have not been eliminated from the pro forma combined amounts. The unaudited pro forma numbers of common shares outstanding, common shareholders' equity per share, weighted average number of shares (basic and diluted) and income (loss) per share (basic and diluted) are based on the share amounts for First Community plus the share amounts for First Charter multiplied by the First Charter exchange ratio of 0.008635 and includes the conversion of First Charter convertible preferred stock into First Community common stock as provided by the merger agreement. Prior to the merger and the conversion of 7,000 shares of preferred stock into common stock immediately prior to the record date, First Charter has 2,289,779 common shares and 110,000 convertible preferred shares outstanding. The convertible preferred shares are equivalent to 72,368,421 First Charter common shares. As a result of the conversion of First Charter convertible preferred stock into First Community common stock, preferred dividends are eliminated in the pro forma combined condensed income statements.
NOTE 2: PURHCASE PRICE OF FIRST CHARTER ACQUISITION
The purchase price is based on issuing approximately 661,609 common shares of First Community common stock. The price of First Community common stock on the acquisition date was $21.50 resulting in a total purchase price of approximately $14,225,000.
NOTE 3: ALLOCATION OF PURCHASE PRICE OF FIRST CHARTER ACQUISITION
The purchase price of First Charter has been allocated as follows (in thousands):
Cash and cash equivalents | $ | 28,913 | |||
Time deposits in financial institutions | 3,038 | ||||
Securities | 20,795 | ||||
Net loans | 66,951 | ||||
Goodwill | 7,867 | ||||
Premises and equipment | 628 | ||||
Other real estate owned | 1,292 | ||||
Other assets | 3,079 | ||||
Deposits | (108,610 | ) | |||
Borrowed funds | (6,000 | ) | |||
Other liabilities | (3,728 | ) | |||
Total purchase price | $ | 14,225 | |||
In allocating the purchase price, the following adjustments were made to First Charter's historical amounts. Other liabilities were increased by $2,721,000, representing the estimated merger costs. Other assets were increased by $427,000, representing the tax effects of the estimated merger costs. Substantially all of other assets and liabilities are either variable rate or short-term in nature and fair market value adjustments were considered to be immaterial to the financial presentation. These preliminary purchase price adjustments are subject to further refinement.
6
In accordance with Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," beginning on January 1, 2002, amortization of goodwill and intangibles with indefinite lives will cease.
NOTE 4: MERGER COSTS
The unaudited pro forma combined condensed financial data reflect First Community's and First Charter's respective management's current estimate, for purposes of pro forma presentation, of the aggregate estimated merger costs of $2,721,000 ($2,294,000 net of taxes, computed using the combined federal and state tax rate of 42.0%) expected to be incurred in connection with the First Charter merger. In accordance with pooling of interests accounting, these costs will be recognized upon the closing of the transaction. While a portion of these costs may be required to be recognized over time, the current estimate of these costs has been recorded in the pro forma combined balance sheets in order to disclose the aggregate effect of these activities on First Community's pro forma combined financial position. The estimated aggregate costs include the following:
Employee costs | $ | 446,000 | |
Conversion costs | 400,000 | ||
Other costs | 170,000 | ||
1,016,000 | |||
Tax benefits | 427,000 | ||
589,000 | |||
Investment banking and other professional fees | 1,705,000 | ||
$ | 2,294,000 | ||
These cost estimates are forward-looking. While the costs represent management's current estimate of merger costs that will be incurred, the ultimate level and timing of recognition of such costs will be based on the final merger and integration plan to be completed prior to consummation of the merger of First Charter with First Community, which will be developed by various of First Community's and First Charter's task forces and integration committees. Readers are cautioned that the completion of the merger and integration plan and the resulting management plans detailing actions to be undertaken to effect the merger and resultant integration of operations will impact these estimates; the type and amount of 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.
NOTE 5: KEY TO PRO FORMA ADJUSTMENTS OF FIRST CHARTER ACQUISITION
Summarized below are the pro forma adjustments necessary to reflect the acquisition of First Charter based on the purchase method of accounting:
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NOTE 6: BASIS OF PRESENTATION OF PROFESSIONAL ACQUISITION
On January 16, 2001, Professional Bancorp, Inc. merged (the "Professional Merger") with and into First Community, with First Community as the surviving entity. The merger was consummated pursuant to the terms of an Agreement and Plan of Merger, dated as of August 7, 2000, by and between First Community and Professional Bancorp (the "Professional Merger Agreement").
Pursuant to the Professional Merger Agreement, each issued and outstanding share of common stock of Professional Bancorp prior to the Professional Merger (other than as provided in the Professional Merger Agreement) was converted into the right to receive either 0.55 shares of First Community Common Stock or $8.00 in cash. Upon consummation of the Professional Merger, First Community issued approximately 504,747 shares of common stock to former holders of Professional Bancorp common stock, and as a result, the former shareholders of Professional Bancorp common stock own shares of First Community common stock representing approximately 11.3% of the outstanding shares of First Community common stock.
The Professional Merger was accounted for using the purchase method. Therefore, operating results of First Community for the year ended December 31, 2000 do not include the operations of Professional Bancorp. Also, the balance sheet of First Community as of December 31, 2000 does not include the balance sheet of Professional Bancorp. Due to the materiality of this acquisition, the Unaudited Pro Forma Combined Condensed Statement of Income for the one year period ended December 31, 2000 includes the operations of Professional Bancorp, Inc. as if the Professional Merger occurred at the beginning of the period and the Unaudited Pro Forma Combined Condensed Balance Sheet as of December 31, 2000 includes Professional Bancorp, Inc. as if the Professional Merger had occurred on that date.
The information for Professional Bancorp, Inc. for the year ended December 31, 2000 is derived from the audited consolidated financial statements of Professional Bancorp. This information should be read in conjunction with the historical consolidated financial statements of Professional Bancorp, Inc. including the respective notes thereto, which are included in this proxy statement prospectus. The unaudited pro forma combined condensed financial data does not give effect to any operating efficiencies anticipated in conjunction with the Professional Merger.
Certain historical data of Professional Bancorp, Inc. have been reclassified on a pro forma basis to conform to First Community's classifications.
NOTE 7: PURCHASE PRICE AND FUNDING OF PROFESSIONAL MERGER
The purchase price is based on $8 per share for Professional Bancorp, Inc. shareholders receiving the cash consideration and an exchange ratio of 0.55 First Community shares for Professional Bancorp shareholders receiving the stock consideration. Based on the $14.81 closing price of First Community on the day prior to the completion of the Professional Merger, those Professional Bancorp, Inc. shareholders choosing the stock consideration received a value of $8.15 per share.
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The total consideration paid in connection with the Professional Merger is calculated as:
|
Stock Consideration |
Cash Consideration |
Total |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Professional Bancorp common shares outstanding | 917,722 | 1,113,032 | 2,030,754 | |||||||
Exchange ratio | 0.55 | |||||||||
504,747 | 1,113,032 | |||||||||
Value received | $ | 14.81 | $ | 7.96 | * | |||||
Total purchase price | $ | 7,475,000 | $ | 8,858,000 | $ | 16,333,000 | ||||
The cash portion of the purchase price was financed through a combination of the issuance of $8 million of trust preferred securities which occurred in September 2000, a revolving line of credit and dividends from First Community's subsidiary banks. (Note: Trust preferred securities count as Tier 1 capital for regulatory purposes.)
Professional Bancorp, Inc. shareholders had the option to elect cash of $8 or 0.55 shares of First Community common stock for each share of Professional Bancorp, Inc. common stock owned. Based upon the elections, 917,722 shares of Professional Bancorp Common Stock were exchanged for approximately 504,747 shares of First Community Common Stock and 1,113,032 shares of Professional Bancorp Common Stock were exchanged for approximately $8,904,000.
As a result of the issuance of trust preferred, historical interest expense on the accompanying pro forma combined condensed income statements for the year ended December 31, 2000, has been increased by $582,000 representing the interest expense on the trust preferred.
NOTE 8: ALLOCATION OF PURCHASE PRICE OF PROFESSIONAL MERGER
The purchase price of Professional Bancorp, Inc. has been allocated as follows:
Cash and cash equivalents | $ | 95,002,000 | |||
Time deposits in financial institutions | 447,000 | ||||
Securities | 61,370,000 | ||||
Net loans | 102,376,000 | ||||
Goodwill | 4,634,000 | ||||
Premises and equipment | 817,000 | ||||
Other assets | 7,763,000 | ||||
Deposits | (249,135,000 | ) | |||
Borrowed funds | (679,000 | ) | |||
Other liabilities | (6,262,000 | ) | |||
Total purchase price | $ | 16,333,000 | |||
In allocating the purchase price, the following adjustments were made to Professional Bancorp, Inc.'s historical amounts. Other liabilities were increased by $3,144,000, representing the estimated merger costs. Other assets were increased by $2,923,000, representing the tax effects of the estimated merger costs and the reduction of the valuation reserve against the deferred tax asset. Substantially all of other assets and liabilities are either variable rate or short-term in nature and fair value adjustments were considered to be immaterial to the financial presentation. Goodwill is amortized on a straight line basis over fifteen years.
9
In accordance with Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets", beginning on January 1, 2002, amortization of goodwill and intangibles with indefinite lives will cease.
NOTE 9: MERGER COSTS OF PROFESSIONAL MERGER
The table below reflects First Community's current estimate, for purposes of pro forma presentation, of the aggregate estimated merger costs of $3,144,000 ($221,000 net of taxes, computed using the combined federal and state tax rate of 42.0%) expected to be incurred in connection with the merger. While a portion of these costs may be required to be recognized over time, the current estimate of these costs has been recorded in the pro forma combined balance sheet in order to disclose the aggregate effect of these activities on First Community's pro forma combined financial position. The estimated aggregate costs, primarily comprised of anticipated cash charges, include the following:
Employee costs (severance and retention costs) | $ | 2,220,000 | ||
Professional services | 169,000 | |||
Conversion and other costs | 755,000 | |||
Total | 3,144,000 | |||
Tax benefits of above costs | 1,003,000 | |||
Reversal of tax valuation allowance | 1,920,000 | |||
Net merger costs | $ | 221,000 | ||
First Community management's cost estimates are forward-looking. While the costs represent First Community management's current estimate of merger costs associated with the merger that will be incurred, the ultimate level and timing of recognition of such costs will be based on the final integration in connection with consummation of the merger. Readers are cautioned that the completion of this integration and other actions that may be taken in connection with the merger will impact these estimates. 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.
NOTE 10: KEY TO PRO FORMA ADJUSTMENTS OF PROFESSIONAL MERGER
Summarized below are the pro forma adjustments necessary to reflect the acquisition of Professional Bancorp, Inc. based on the purchase method of accounting:
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