UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): March 9, 2017
Pinnacle Financial Partners, Inc.
(Exact name of registrant as specified in its charter)
Tennessee | 000-31225 | 62-1812853 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
150 3rd Avenue South, Suite 900
Nashville, TN 37201
(Address of principal executive offices)
(615) 744-3700
(Registrants telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☒ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 8.01 | Other Events. |
As previously announced, on January 22, 2017, Pinnacle Financial Partners, Inc. (Pinnacle) entered into an Agreement and Plan of Merger (the Merger Agreement), with BNC Bancorp, a North Carolina corporation (BNC), and Blue Merger Sub, Inc., a North Carolina corporation and a direct, wholly owned subsidiary of Pinnacle (Merger Sub), pursuant to which, on the terms and subject to the conditions set forth therein, Merger Sub will merge with and into BNC (the Merger), with BNC surviving the Merger (the Surviving Company). As soon as reasonably practicable following the Merger and as a part of a single integrated transaction, Pinnacle will cause the Surviving Company to be merged with and into Pinnacle (the Second Step Merger and together with the Merger, the Mergers), with Pinnacle as the surviving entity, on the terms and subject to the conditions set forth in the Merger Agreement. Immediately following the Second Step Merger, Bank of North Carolina, a North Carolina state bank and a wholly owned subsidiary of BNC, will merge with and into Pinnacle Bank, a Tennessee state bank and a wholly owned subsidiary of Pinnacle. In connection with the proposed Mergers, the following financial statements are provided:
| Audited financial statements of BNC as of December 31, 2016 and December 31, 2015 and for each of the years in the three-year period ended December 31, 2016, the notes related thereto and the report of Cherry Bekaert LLP, independent registered public accounting firm, dated February 27, 2017. |
| Unaudited pro forma condensed combined financial statements of Pinnacle for the year ended December 31, 2016 and as of December 31, 2016 and the notes related thereto. |
The pro forma financial statements give pro forma effect to the Mergers and the related transactions that have occurred or will occur in connection with the Mergers, including the sale by Pinnacle of 3,220,000 shares of its common stock in a public offering completed on January 27, 2017 that resulted in net proceeds to Pinnacle of approximately $191.2 million after deducting underwriting discounts and commissions and estimated offering expenses payable by Pinnacle. The pro forma financial statements are derived from the historical financial statements of Pinnacle and BNC. The pro forma financial statements are preliminary and reflect a number of assumptions, including, among others, that the Mergers and the related transactions will be consummated. There can be no assurance that any of such transactions will be consummated or that the actual terms of such transactions will not differ materially from Pinnacles current expectations.
Item 9.01 | Financial Statements and Exhibits. |
(a) | Financial Statements of Business to be Acquired. |
Audited financial statements of BNC as of December 31, 2016 and December 31, 2015 and for each of the years in the three-year period ended December 31, 2016, the notes related thereto and the report of Cherry Bekaert LLP, independent registered public accounting firm, dated February 27, 2017, are incorporated herein by reference to BNCs Annual Report on Form 10-K for the fiscal year ended December 31, 2016, as filed with the Securities and Exchange Commission (the SEC) on February 27, 2017.
(b) | Pro Forma Financial Information. |
Unaudited pro forma condensed combined financial statements of Pinnacle for the year ended December 31, 2016 and as of December 31, 2016 and the notes related thereto are filed as Exhibit 99.1 hereto.
(d) | Exhibits |
Exhibit No. |
Description | |
23.1 | Consent of Cherry Bekaert LLP, independent registered public accounting firm of BNC Bancorp. | |
99.1 | Unaudited pro forma condensed combined financial statements of Pinnacle Financial Partners, Inc. for the year ended December 31, 2016 and as of December 31, 2016, and the notes related thereto. |
Forward-Looking Statements
All statements, other than statements of historical fact, included in this filing, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act and Section 21E of the Exchange Act. The words expect, anticipate, intend, plan, believe, seek, estimate and similar expressions are intended to identify such forward-looking statements, but other statements not based on historical information may also be considered forward-looking including statements about the benefits to Pinnacle and BNC of the proposed Mergers, Pinnacles and BNCs future financial and operating results (including the anticipated impact of the Mergers on Pinnacles and BNCs earnings and tangible book value) and Pinnacles and BNCs plans, objectives and intentions. All forward-looking statements are subject to risks, uncertainties and other facts that may cause the actual results, performance or achievements of Pinnacle and BNC to differ materially from any results expressed or implied by such forward-looking statements. Such factors include, among others, (1) the risk that the cost savings and any revenue synergies from the Mergers may not be realized or take longer than anticipated to be realized, (2) disruption from the Mergers with customers, suppliers, employee or other business partners relationships, (3) the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement, (4) the risk of successful integration of the two companies businesses, (5) the failure to obtain the necessary approvals by Pinnacle and BNC shareholders, (6) the amount of the costs, fees, expenses and charges related to the Mergers, (7) the ability to obtain required governmental approvals of the proposed Mergers, (8) reputational risk and the reaction of the parties customers, suppliers, employees or other business partners to the Mergers, (9) the failure of the closing conditions to be satisfied, or any unexpected delay in closing the Mergers, (10) the risk that the integration of Pinnacles and BNCs operations will be materially delayed or will be more costly or difficult than expected, (11) the possibility that the Mergers may be more expensive to complete than anticipated, including as a result of unexpected factors or events, (12) the dilution caused by Pinnacles issuance of additional shares of its common stock in the Mergers and (13) general competitive, economic, political and market conditions. Additional factors which could affect the forward looking statements can be found in Pinnacles Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, or BNCs Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, in each case filed with the SEC and available on the SECs website at http://www.sec.gov. Pinnacle and BNC disclaim any obligation to update or revise any forward-looking statements contained in this filing, which speak only as of the date hereof, whether as a result of new information, future events or otherwise.
Additional Information About the Proposed Transaction and Where to Find It
Investors and security holders are urged to carefully review and consider each of Pinnacles and BNCs public filings with the SEC, including but not limited to their Annual Reports on Form 10-K, their proxy statements, their Current Reports on Form 8-K and their Quarterly Reports on Form 10-Q.
The documents filed by Pinnacle with the SEC may be obtained free of charge at Pinnacles website at www.pnfp.com, under the heading About Pinnacle and the subheading Investor Relations, or at the SECs website at www.sec.gov. These documents may also be obtained free of charge from Pinnacle by requesting them in writing to Pinnacle Financial Partners, Inc., 150 Third Avenue South, Suite 900, Nashville, Tennessee 37201, Attention: Investor Relations, or by telephone at (615) 744-3700.
The documents filed by BNC with the SEC may be obtained free of charge at the BNCs website at www.bncbanking.com under the Investor Relations section, or at the SECs website at www.sec.gov. These documents may also be obtained free of charge from BNC by requesting them in writing to BNC Bancorp, 3980 Premier Drive, Suite 210, High Point, North Carolina 27265, Attention: Investor Relations, or by telephone at (336) 869-9200.
In connection with the proposed transaction, Pinnacle has filed a registration statement on Form S-4 with the SEC which includes a preliminary joint proxy statement of Pinnacle and BNC and a preliminary prospectus of Pinnacle, and each party will file other documents regarding the proposed transaction with the SEC. Before making any voting or investment decision, investors and security holders of Pinnacle and BNC are urged to carefully read the entire registration statement and the definitive joint proxy statement/prospectus, when they become available, as well as any amendments or supplements to these documents and any other relevant documents filed with the SEC, because they will contain important information about the proposed transaction. A definitive joint proxy statement/prospectus will be sent to the shareholders of each institution seeking the required shareholder approvals. Investors and security holders will be able to obtain the registration statement and the joint proxy statement/prospectus free of charge from the SECs website or from Pinnacle or BNC as described in the paragraphs above.
This filing shall not constitute an offer to sell or the solicitation of an offer to buy securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.
Participants in the Solicitation
Pinnacle, BNC and certain of their directors and executive officers may be deemed participants in the solicitation of proxies from Pinnacles and BNCs shareholders in connection with the proposed transaction. Information about the directors and executive officers of Pinnacle and their ownership of Pinnacle Common Stock is set forth in the definitive proxy statement for Pinnacles 2017 annual meeting of shareholders, as previously filed with the SEC on March 9, 2017, and other documents subsequently filed by Pinnacle with the SEC. Information about the directors and executive officers of BNC and their ownership of BNCs Common Stock is set forth in the definitive proxy statement for BNCs 2016 annual meeting of shareholders, as previously filed with the SEC on April 6, 2016, and other documents subsequently filed by BNC with the SEC. Shareholders may obtain additional information regarding the interests of such participants by reading the registration statement and the definitive joint proxy statement/prospectus when they become available. Free copies of these documents may be obtained as described in the paragraphs above.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
PINNACLE FINANCIAL PARTNERS, INC. | ||
By: | /s/ Harold R. Carpenter | |
Name: | Harold R. Carpenter | |
Title: | Executive Vice President and Chief Financial Officer |
Date: March 9, 2017
EXHIBIT INDEX
Exhibit No. |
Description | |
23.1 | Consent of Cherry Bekaert LLP, independent registered public accounting firm of BNC Bancorp. | |
99.1 | Unaudited pro forma condensed combined financial statements of Pinnacle Financial Partners, Inc. for the year ended December 31, 2016 and as of December 31, 2016, and the notes related thereto. |
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in Registration Statement Nos. 333-209925 and 333-215654 of Pinnacle Financial Partners, Inc. on Form S-3 and Registration Statement Nos. 333-49564, 333-68756, 333-114799, 333-124199, 333-132816, 333-135411, 333-147804, 333-148251, 333-158825, 333-180865, 333-195712 and 333-206092 of Pinnacle Financial Partners, Inc. on Form S-8 of our report dated February 27, 2017, related to the consolidated financial statements of BNC Bancorp and subsidiaries as of December 31, 2016 and 2015, and for each of the years in the three-year period ended December 31, 2016, which appear in the Annual Report on Form 10-K of BNC Bancorp for the year ended December 31, 2016.
/s/ Cherry Bekaert LLP
Raleigh, North Carolina
March 8, 2017
Exhibit 99.1
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined statement of operations and other data give effect to:
| the merger of Blue Merger Sub, Inc., a North Carolina corporation (Merger Sub) and a wholly owned subsidiary of Pinnacle Financial Partners, Inc., a Tennessee corporation (Pinnacle), with and into BNC Bancorp, a North Carolina corporation (BNC), with BNC remaining as the surviving entity and becoming a wholly owned subsidiary of Pinnacle (the merger), which will be followed as soon as reasonably practicable by the merger of BNC with and into Pinnacle, with Pinnacle remaining as the surviving entity, in each case pursuant to the terms of the Agreement and Plan of Merger (the merger agreement) entered into on January 22, 2017 by and among Pinnacle, BNC and Merger Sub; |
| the sale by Pinnacle on January 27, 2017 of 3,220,000 shares of its common stock in a registered public offering and Pinnacles receipt of $191.2 million in estimated net proceeds, after deducting underwriting discounts and commissions and the estimated offering expenses payable by Pinnacle; and |
| the issuance of an estimated approximately 27.6 million shares of Pinnacle common stock to the shareholders of BNC in connection with the merger, |
as if, in the case of the balance sheet data, the merger and the issuance of the shares of Pinnacle common stock in the offering occurred as of December 31, 2016 and, in the case of the statement of operations data, those transactions occurred as of January 1, 2016.
The unaudited pro forma condensed combined statement of earnings and other data for 2016 combines the historical consolidated results of operations of Pinnacle with the historical consolidated results of operations of BNC for such period giving effect to the transactions described above as if those transactions had been completed as of January 1, 2016. The unaudited pro forma condensed combined balance sheet data as of December 31, 2016 combines the historical consolidated balance sheet of Pinnacle as of that date with the historical consolidated balance sheet of BNC as of that date and gives effect to the transactions described above as if those transactions had been completed as of that date. Pinnacle will account for the merger under the purchase method of accounting.
The pro forma financial data appearing below is presented for illustrative purposes only, is based upon a number of assumptions and estimates and is subject to uncertainties, and that data does not purport to be indicative of the actual results of operations or financial condition that would have occurred had the transactions described above in fact occurred on the dates indicated, nor does it purport to be indicative of the results of operations or financial condition that the combined company may achieve in the future.
The pro forma condensed combined financial data appearing below also does not consider any potential effects of changes in market conditions on revenues or expense efficiencies, among other factors. In addition, as explained in more detail in the accompanying notes, the preliminary allocation of the pro forma purchase price reflected in the pro forma condensed combined financial data is subject to adjustment and may vary significantly from the actual purchase price allocation that will be recorded upon completion of the merger.
The unaudited pro forma condensed combined statement of operations data appearing below does not give pro forma effect to the following for any period prior to the applicable date the transaction was consummated:
| Pinnacle and Pinnacle Banks subsequent investment in Bankers Healthcare Group, LLC which was consummated on March 1, 2016; |
| Pinnacles acquisition of Avenue Financial Holdings, Inc., which was consummated on July 1, 2016; |
| BNCs acquisition of Southcoast Financial Corporation, which was consummated on June 17, 2016; |
| BNCs acquisition of High Point Bank Corporation, which was consummated on November 1, 2016; or |
| Pinnacles issuance in a private placement of $120.0 million of subordinated notes due 2026 on November 16, 2016 and the use of approximately $57.0 million of the net proceeds from that offering to repay borrowings outstanding at that date under Pinnacles line of credit. |
The pro forma financial data should be read in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations and Pinnacles audited consolidated financial statements and the notes thereto, in each case as included in Pinnacles Annual Report on Form 10-K for the fiscal year ended
1
December 31, 2016, which was filed with the Securities and Exchange Commission on February 27, 2017, and Managements Discussion and Analysis of Financial Condition and Results of Operations and the historical financial statements of BNC and the notes thereto included in BNCs Annual Report on Form 10-K for the fiscal year ended December 31, 2016, which was filed with the Securities and Exchange Commission on February 27, 2017.
As noted above, the merger will be accounted for using the purchase method of accounting. The total purchase price will be allocated to the tangible and intangible assets and liabilities acquired based on their respective fair values. The allocation of the purchase price reflected in the following pro forma financial statements is preliminary and is subject to adjustment upon receipt of, among other things, appraisals of some of the assets and liabilities of BNC.
2
Pinnacle 12/31/2016 |
BNC 12/31/2016 |
Stock Issuance |
Notes | BNC Pro Forma Adjustments |
Notes | Total Pro Forma Adjustments |
Notes | Pro Forma 12/31/2016 |
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Assets: |
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Cash and cash equivalents |
$ | 183,645 | $ | 260,182 | $ | 191,194 | AA | $ | (43,611 | ) | A | $ | 147,583 | AA, A | $ | 591,410 | ||||||||||||||||||||
Investment securities |
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Held to maturity |
25,251 | 317,662 | (2,757 | ) | B | (2,757 | ) | B | 340,156 | |||||||||||||||||||||||||||
Available for sale |
1,298,546 | 579,124 | 1,877,670 | |||||||||||||||||||||||||||||||||
Loans, net of unearned income |
8,449,925 | 5,455,710 | (81,967 | ) | C | (81,967 | ) | C | 13,823,668 | |||||||||||||||||||||||||||
Allowance for loan losses |
(58,980 | ) | (37,501 | ) | 37,501 | D | 37,501 | D | (58,980 | ) | ||||||||||||||||||||||||||
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Loans, net |
8,390,945 | 5,418,209 | (44,466 | ) | (44,466 | ) | 13,764,688 | |||||||||||||||||||||||||||||
Premises and equipment |
88,904 | 166,496 | 255,400 | |||||||||||||||||||||||||||||||||
Goodwill |
551,594 | 234,769 | 889,845 | E | 889,845 | E | 1,676,208 | |||||||||||||||||||||||||||||
Core Deposit and Other Intangibles |
15,104 | 25,911 | 36,083 | F | 36,083 | F | 77,098 | |||||||||||||||||||||||||||||
Other assets |
640,634 | 399,338 | 22,269 | G | 22,269 | G | 1,062,241 | |||||||||||||||||||||||||||||
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Total assets |
$ | 11,194,623 | $ | 7,401,691 | $ | 191,194 | 857,363 | $ | 1,048,557 | $ | 19,644,871 | |||||||||||||||||||||||||
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Liabilities and Shareholders Equity: |
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Deposits and securities sold under agreements to repurchase |
$ | 8,845,014 | $ | 6,153,681 | $ | 14,998,695 | ||||||||||||||||||||||||||||||
Advances from Federal Home Loan Bank |
406,304 | 164,226 | (858 | ) | H | (858 | ) | H | 569,672 | |||||||||||||||||||||||||||
Subordinated debt and other borrowings |
350,768 | 135,022 | (8,549 | ) | I | (8,549 | ) | I | 477,241 | |||||||||||||||||||||||||||
Accrued expenses and other liabilities |
95,840 | 46,880 | 30,126 | J | 30,126 | J | 172,846 | |||||||||||||||||||||||||||||
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Total liabilities |
9,697,926 | 6,499,809 | 20,719 | 20,719 | 16,218,454 | |||||||||||||||||||||||||||||||
Shareholders equity |
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Common stock and additional paid in capital |
1,129,850 | 743,442 | 191,194 | BB | 995,084 | K | 1,186,278 | BB,K | 3,059,570 | |||||||||||||||||||||||||||
Retained earnings |
381,073 | 156,602 | (156,602 | ) | L | (156,602 | ) | L | 381,073 | |||||||||||||||||||||||||||
Accumulated other comprehensive income |
(14,226 | ) | 1,838 | (1,838 | ) | M | (1,838 | ) | M | (14,226 | ) | |||||||||||||||||||||||||
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Total shareholders equity |
$ | 1,496,697 | 901,882 | 191,194 | 836,644 | 1,027,837 | 3,426,417 | |||||||||||||||||||||||||||||
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Total liabilities and shareholders equity |
$ | 11,194,623 | $ | 7,401,691 | $ | 191,194 | $ | 857,363 | $ | 1,048,557 | $ | 19,644,871 | ||||||||||||||||||||||||
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3
Pinnacle 12/31/2016 |
BNC 12/31/2016 |
Stock Issuance |
Notes | BNC Pro Forma Adjustments 12/31/2016 |
Notes | Pro forma 12/31/2016 |
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Statement of Operations Data: |
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Interest Income |
363,609 | $ | 249,185 | $ | 12,918 | N | $ | 625,712 | ||||||||||||||||||||
Interest Expense |
38,615 | 36,021 | 238 | O | 74,874 | |||||||||||||||||||||||
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Net interest income |
324,994 | 213,164 | 12,680 | 550,838 | ||||||||||||||||||||||||
Provision for loan losses |
18,328 | 4,665 | 22,993 | |||||||||||||||||||||||||
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Net interest income after provision for loan losses |
306,666 | 208,499 | 12,680 | 527,845 | ||||||||||||||||||||||||
Noninterest income |
121,003 | 38,484 | 159,487 | |||||||||||||||||||||||||
Noninterest expense |
232,004 | 152,211 | 384,215 | |||||||||||||||||||||||||
Amortization on intangible assets |
4,281 | 4,915 | 5,942 | P | 15,138 | |||||||||||||||||||||||
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Income before income taxes |
191,384 | 89,857 | 6,738 | 287,979 | ||||||||||||||||||||||||
Income taxes |
64,159 | 26,944 | 2,643 | Q | 93,746 | |||||||||||||||||||||||
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Net income |
$ | 127,225 | $ | 62,913 | $ | 4,095 | $ | 194,233 | ||||||||||||||||||||
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Per Share Data: |
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Earnings per share of common stock |
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Basic |
$ | 2.96 | $ | 1.40 | $ | 2.63 | ||||||||||||||||||||||
Diluted |
$ | 2.91 | $ | 1.39 | $ | 2.61 | ||||||||||||||||||||||
Weighted average common shares outstanding |
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Basic |
43,037,083 | 45,095,976 | 3,220,000 | CC | 27,607,040 | R | 73,864,123 | |||||||||||||||||||||
Diluted |
43,731,992 | 45,184,911 | 3,220,000 | CC | 27,607,040 | R | 74,559,032 |
Note 1Basis of presentation
The pro forma condensed combined financial information and explanatory notes have been prepared to illustrate the effects of the merger under the acquisition method of accounting with Pinnacle treated as the acquirer. The pro forma condensed combined financial information is presented for illustrative purposes only and does not necessarily indicate the financial results of the combined companies had the companies actually been combined at the beginning of the period presented, nor does it necessarily indicate the results of operations in future periods or the future financial position of the combined entities. Under the acquisition method of accounting, the assets and liabilities of BNC, as of the effective date of the merger, will be recorded by Pinnacle at their respective fair values and the excess of the merger consideration over the fair value of BNCs net assets will be allocated to goodwill.
The merger, which is currently expected to be completed in the third quarter of 2017, provides for BNC common shareholders to receive 0.5235 shares of Pinnacle common stock (the merger consideration) for each share of BNC common stock they hold immediately prior to the effective time of the merger. Based on the closing sale price of shares of Pinnacle common stock on the Nasdaq Global Select Market (the NASDAQ) on January 20, 2017 of $63.30, the last trading day before the public announcement of the signing of the merger agreement, the value of the merger consideration per share of BNC common stock was $33.14. Based on the average closing trading price of shares of Pinnacle common stock on the NASDAQ over the twenty trading days ended January 20, 2017, the value of the merger consideration per share of BNC common stock was $35.70.
The pro forma allocation of the purchase price reflected in the pro forma condensed combined financial information is subject to adjustment and may vary from the actual purchase price allocation that will be recorded at the time the merger is completed. Adjustments may include, but not be limited to, changes in (i) BNCs balance sheet through the effective time of the merger; (ii) the aggregate value of merger consideration paid if the price of shares of Pinnacle common stock varies from the assumed $63.30 per share, which represents the closing share price of Pinnacle common stock on January 20, 2017; (iii) total merger-related expenses if consummation and/or implementation costs vary from currently estimated amounts; and (iv) the underlying values of assets and liabilities if market conditions differ from current assumptions.
The accounting policies of both Pinnacle and BNC are in the process of being reviewed in detail. Upon completion of such review, conforming adjustments or financial statement reclassification may be determined.
4
Note 2Preliminary Purchase Price Allocation
The pro forma adjustments include the estimated purchase accounting entries to record the merger. The excess of the purchase price over the fair value of net assets acquired, net of deferred taxes, is allocated to goodwill. The fair values are estimated as of December 31, 2016. Estimated fair value adjustments included in the pro forma financial statements are based upon available information and certain assumptions considered reasonable, and may be revised as additional information becomes available.
Core deposit intangible assets of $62.0 million are included in the pro forma adjustments separate from goodwill and amortized using the sum-of-the-years-digits method over ten years. Actual amortization will be recorded on an accelerated basis which reflects the anticipated life of the underlying assets. Goodwill totaling $1.1 billion is included in the pro forma adjustments and is not subject to amortization. The purchase price is contingent on Pinnacles price per common share at the closing date of the merger, which has not yet occurred. A 10% increase or decrease in Pinnacles closing sale price per share of common stock on January 20, 2017 of $63.30 would result in a corresponding goodwill adjustment of approximately $248.6 million.
The preliminary purchase price allocation is as follows:
in thousands except per share amounts |
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Pro Forma Purchase Price (1) |
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Estimated BNC shares outstanding (includes restricted stock awards and any restricted stock units that will vest upon change in control) |
52,736 | |||||||
Exchange ratio to Pinnacle shares |
0.5235 | |||||||
Pinnacle shares to issue |
27,607 | |||||||
Issuance price |
$ | 63.30 | ||||||
Value of Pinnacle common stock issued |
1,747,525 | |||||||
Number of BNC stock options outstanding as of February 15, 2017 |
56 | |||||||
Weighted average exercise price |
$ | 9.75 | ||||||
Fair value of each option |
$ | 34.82 | ||||||
Fair value of acquired options |
$ | 1,412 | ||||||
Total estimated consideration to be paid |
$ | 1,747,937 | ||||||
BNC Net Assets Estimated at Fair Value |
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Assets acquired: |
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Cash and short-term investments |
226,982 | |||||||
Securities investments |
894,029 | |||||||
Loans and leases |
5,373,743 | |||||||
Other intangible assets |
61,994 | |||||||
Other assets |
421,607 | |||||||
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Total assets acquired |
7,144,851 | |||||||
Liabilities assumed: |
||||||||
Deposits |
6,153,681 | |||||||
Advances from the FHLB |
163,368 | |||||||
Subordinated debt and other borrowings |
126,473 | |||||||
Accrued expenses and other liabilities |
77,006 | |||||||
|
|
|||||||
Total liabilities assumed |
6,520,528 | |||||||
|
|
|||||||
Net assets acquired |
624,323 | |||||||
|
|
|||||||
Preliminary pro forma goodwill |
$ | 1,124,614 | ||||||
|
|
(1) | Totals may not add up due to rounding. |
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Note 3Pro forma adjustments
The following pro forma adjustments have been reflected in the pro forma condensed combined financial information. All taxable adjustments were calculated using a blended statutory effective tax rate of 39.23% to account for both federal and state tax obligations to arrive at deferred tax asset or liability adjustments. All adjustments are based on current assumptions and valuations, which are subject to change.
AA | Adjustments to cash and cash equivalents to reflect net proceeds of $191.2 million from Pinnacles common stock offering closed on January 27, 2017, after deducting underwriting discounts and commissions and the estimated expenses payable by Pinnacle in connection with the offering. |
BB | Adjustments to Pinnacle common stock and additional paid in capital to record 3,220,000 shares of Pinnacle common stock issued on January 27, 2017. |
CC | Adjustments to weighted-average shares of Pinnacle common stock outstanding to record 3,220,000 shares of Pinnacle common stock issued on January 27, 2017. |
A | Adjustments to cash and short-term investments to reflect assumed estimated pre-tax merger- and integration-related costs of $33.2 million, cash paid to redeem outstanding BNC common stock options of $1.4 million, and estimated fees paid to Pinnacles financial advisors related to the merger. See Note 4. |
B | Adjustment to securities classified as held-to-maturity to reflect estimated fair value of acquired investment securities as of December 31, 2016. |
C | Adjustment to loans to reflect incremental net estimated fair value adjustments, which include lifetime credit loss expectations, current interest rates and liquidity, to acquired loans. |
D | Elimination of BNCs existing allowance for loan losses. Purchased loans in a business combination are recorded at estimated fair value on the purchase date and the carryover of the related allowance for loan losses is prohibited. |
E | Adjustments to goodwill to eliminate BNC goodwill of $234.8 million at merger date and record estimated goodwill associated with the merger of $1.1 billion. |
F | Adjustments to other intangible assets to eliminate BNCs other intangible assets of $25.9 million and record an estimated core deposit intangible asset associated with the merger of $62.0 million. |
G | Adjustment to deferred tax assets to reflect the effects of the fair value acquisition accounting adjustments and contractually obligated merger costs. |
H. | Adjustment to debt to reflect estimated fair value of $858,000 of FHLB advances of BNC outstanding as of December 31, 2016. |
I | Adjustment to debt to reflect estimated fair value of $8.5 million of long term debt of BNC outstanding as of December 31, 2016. |
J | Adjustment to accrued expenses and other liabilities to reflect the effects of the fair value acquisition accounting adjustments and estimated merger- and integration-related costs of $30.1 million. See Note 4. |
K | Adjustment to remove BNC common stock and additional paid in capital and to record the issuance in connection with the merger of 27,607,040 shares of Pinnacle common stock to BNC common shareholders of $27.6 million par value and additional paid in capital of $1.7 billion. |
L | Adjustment to eliminate BNC retained earnings. |
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M | Adjustments to eliminate remaining BNC accumulated other comprehensive income balances of $1.8 million. |
N | Net adjustments to interest income of $12.9 million for the year ended December 31, 2016 to eliminate BNC amortization of premiums and accretion of discounts on previously acquired loans and securities and record estimated amortization of premiums and accretion of discounts on acquired loans and held-to-maturity securities. |
O | Reflects incremental interest expense of $238,000 for the year ended December 31, 2016, related to the fair value adjustments on the FHLB advances, trust preferred securities and subordinated debt issuances of BNC acquired by Pinnacle. |
P | Net adjustments to noninterest expense of $5.9 million for the year ended December 31, 2016 to eliminate BNC amortization expense on other intangible assets and record estimated amortization of acquired other intangible assets. See Note 2 for additional information regarding Pinnacles amortization of acquired other intangible assets. |
Q | Adjustment to income tax expense to record the income tax effects of pro forma adjustments at the estimated combined statutory federal and state tax rate of 39.23%. |
R | Adjustments to weighted-average shares of BNC common stock outstanding to eliminate weighted-average shares of BNC common stock outstanding and record 27,607,040 shares of Pinnacle common stock issued in connection with the merger calculated using the 0.5235 exchange ratio. |
Note 4Merger integration costs
Merger- and integration-related costs are not included in the pro forma condensed combined statements of income since they will be recorded in the combined results of income as they are incurred prior to, or after completion of, the merger and are not indicative of what the historical results of the combined company would have been had the companies been actually combined during the periods presented. Merger- and integration-related costs expected to be incurred resulting from the merger include financial, legal and advisory fees, software termination expenses and lease termination expenses, and are estimated to be $100.1 million pretax; $63.3 million of which is estimated to be incurred at the closing of the merger by BNC. The $63.3 million of merger- and integration-related charges are reflected in the pro forma adjustments to the pro forma condensed combined balance sheet as a $33.2 million reduction to cash and a $30.1 million increase to accrued expenses and other liabilities. The balance of $36.8 million of merger- and integration-related charges are expected to be incurred after completion of the merger. None of these estimated merger- and integration-related charges had been incurred as of December 31, 2016.
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