EX-99.3 5 tv525208_ex99-3.htm EXHIBIT 99.3

 

Exhibit 99.3

 

UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION

 

The following is the unaudited pro forma combined condensed consolidated financial information for BayCom Corp (“BayCom”) and Uniti Financial Corporation (“Uniti”), giving effect to the merger of Uniti with and into BayCom. The unaudited pro forma combined condensed consolidated statement of financial condition as of March 31, 2019 gives effect to the merger as if it occurred on that date. The unaudited pro forma combined condensed consolidated statements of operations for the three months ended March 31, 2019 and the year ended December 31, 2018 give effect to the merger as if it occurred on January 1, 2018. The actual completion date of the merger was May 24, 2019.

 

The unaudited pro forma combined condensed consolidated financial statements have been prepared using the acquisition method of accounting for business combinations under accounting principles generally accepted in the United States of America (“GAAP”). BayCom is the acquirer for accounting purposes. Certain immaterial reclassifications have been made to the historical financial statements of Uniti to conform to the presentation in BayCom’s financial statements. The historical consolidated financial information has been adjusted to reflect factually supportable items that are directly attributable to the merger and, with respect to the income statements only, expected to have a continuing impact on consolidated results of operations.

 

The total number of BayCom shares issued was 1,115,006 and the aggregate cash consideration paid by BayCom was approximately $37.8 million. The value of the total merger consideration at closing was $62.7 million.

 

The unaudited 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 periods presented. The adjustments included in these unaudited pro forma combined financial statements are preliminary and may be revised. The unaudited pro forma condensed combined financial information also does not consider any potential impacts of current market conditions on revenues, potential revenue enhancements, anticipated cost savings and expense efficiencies, or asset dispositions, among other factors. In addition, the purchase price reflected in the unaudited pro forma condensed combined financial information is subject to adjustment. The unaudited pro forma condensed combined balance sheet has also been adjusted to reflect the preliminary allocation of the estimated purchase price to net assets acquired.

 

The final allocation of the purchase price will be determined after completion of thorough analyses to determine the fair value of Uniti’s tangible and identifiable intangible assets and liabilities as of the May 24, 2019 acquisition date. Increases or decreases in the estimated fair values of the net assets of Uniti as compared with the information shown in the unaudited pro forma condensed combined financial information may change the amount of the purchase price allocated to goodwill and may impact the statement of income due to adjustments in yield and/or amortization of the adjusted assets or liabilities. Any changes to Uniti’s shareholder’s equity including results of operations through the date the merger is completed will also change the purchase price allocation, which may include the recording of goodwill. The final adjustments may be materially different from the unaudited pro forma adjustments presented herein.

 

The unaudited pro forma combined condensed consolidated financial statements should be read together with:

 

•         The accompanying notes to the unaudited pro forma combined condensed consolidated financial statements;

 

•         BayCom’s unaudited historical consolidated financial statements and accompanying notes as of and for the three months ended March 31, 2019 and 2018, included in BayCom’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019;

 

•         BayCom’s audited historical consolidated financial statements and accompanying notes as of and for the years ended December 31, 2018 and 2017, included in the proxy statement/prospectus filed with the Securities and Exchange Commission ("SEC") on April 11, 2019 pursuant to Rule 424(b)(3);

 

•         Uniti’s unaudited historical consolidated financial statements and accompanying notes as of and for the three months ended March 31, 2019 and 2018, included in this Current Report on Form 8-K/A;

 

•         Uniti’s audited historical consolidated financial statements and accompanying notes as of and for the years ended December 31, 2018 and 2017, included in this Current Report on Form 8-K/A and included in the proxy statement/prospectus filed with the SEC on April 11, 2019 pursuant to Rule 424(b)(3);

 

•         Other information pertaining to BayCom and Uniti contained in or incorporated by reference into the proxy statement/prospectus filed by BayCom pursuant to Rule 424(b)(3) on April 11, 2019. See “Selected Consolidated Historical Financial Data of BayCom” and “Selected Consolidated Historical Financial Data of Uniti” included in the proxy statement/prospectus.

 

THIS PRO FORMA DATA IS PRESENTED FOR ILLUSTRATIVE PURPOSES ONLY AND DOES NOT INDICATE THE FINANCIAL AND OPERATING RESULTS THAT BAYCOM CORP 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 OR THE FUTURE FINANCIAL POSITION OF THE COMBINED ENTITIES.

 

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BAYCOM AND UNITI 

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

As of March 31, 2019

(In thousands)

 

           Proforma         
ASSETS  BayCom   Uniti   Adjustments   Notes   Proforma 
                     
Cash and due from banks  $20,370   $3,202             $23,572 
Interest earning deposits in financial institutions   315,583    39,559    (43,479)    A     311,663 
Cash and cash equivalents   335,953    42,761    (43,479)        335,235 
                          
Investment securities available-for-sale   97,299    5,346              102,645 
Federal Home Loan Bank ("FHLB") stock, at par   5,096    1,321              6,417 
Federal Reserve Bank ("FRB") stock, at par   4,166    -              4,166 
Loans held for sale   4,208    2,376              6,584 
Loans   965,324    274,591    1,080     B     1,240,995 
Less: Deferred fees/(costs), net   (358)   1,259    (1,259)    C     (358)
Less: Allowance for loan losses   (5,405)   (3,412)   3,412     D     (5,405)
Premises and equipment, net   6,479    692              7,171 
Core deposit intangible   6,816         566     E     7,382 
Cash surrender value of bank owned life insurance policies, net   19,766                   19,766 
Right-of-use assets   7,502    1,297              8,799 
Goodwill   14,594         11,758     F     26,352 
Other real estate owned   801    114    (32)    G     883 
Interest receivable and other assets   20,229    4,289    134     H     24,652 
Total Assets  $1,482,470   $330,634   $(27,820)       $1,785,284 
                          
LIABILITIES AND SHAREHOLDERS' EQUITY                         
                          
Deposits                         
Noninterest bearing deposits  $416,804   $119,424             $536,228 
Interest bearing deposits   833,763    159,208    250     I     993,221 
Total deposits   1,250,567    278,632    250         1,529,449 
Lease liabilities   7,818    1,397              9,215 
Salary continuation plan   3,400    -              3,400 
Interest payable and other liabilities   6,093    2,016    (113)    J     7,996 
Junior subordinated deferrable interest debentures, net   8,181    -              8,181 
Total liabilities   1,276,059    282,045    137         1,558,241 
                          
Shareholders' equity                         
Common stock   149,368    44,902    (20,015)    K     174,255 
Additional paid in capital   287    -    -         287 
Accumulated other comprehensive income (loss), net of tax   494    (27)   27     L     494 
Retained earnings   56,262    3,714    (7,969)    M     52,007 
Total shareholders' equity   206,411    48,589    (27,957)        227,043 
Total Liabilities and Shareholders' Equity  $1,482,470   $330,634   $(27,820)       $1,785,284 
                          

  

See accompanying Notes to Unaudited Pro Forma Condensed combined Financial Information.

 

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BAYCOM AND UNITI

UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT

For the Three Months Ended March 31, 2019

(In thousands, except per share data)

 

                     
           Proforma         
   BayCom   Uniti   Adjustments   Notes   Proforma 
Interest and dividend income:                    
Loans, including fees  $13,550   $4,091   $-        $17,641 
Investment securities and interest bearing deposits in financial institutions   2,654    290    (237)    N     2,707 
FHLB dividends   92    23              115 
FRB dividends   61    -    -         61 
Total interest and dividend income   16,357    4,404    (237)        20,524 
                          
Interest expense:                         
Deposits   1,346    796    (31)   O    2,111 
Other borrowings   146    -              146 
Total interest expense   1,492    796    (31)        2,257 
Net interest income   14,865    3,608    (205)        18,268 
                          
Provision for loan losses   277    -    -         277 
Net interest income after provision for loan losses   14,588    3,608    (205)        17,991 
                          
Noninterest income:                         
Gain on sale of loans   190    254    -         444 
Service charges and other fees   733    135    -         868 
Loan servicing fees and other income   410    174    -         584 
Other income   787    17    -         804 
Total noninterest income   2,120    580    -         2,700 
                          
Noninterest expense:                         
Salaries and employee benefits   5,963    2,003    -         7,966 
Occupancy and equipment   1,110    188    -         1,298 
Data processing   924    200    -         1,124 
Other   1,362    594    -         1,956 
Core deposit intangible amortization   389    -    20    P    409 
Total noninterest expense   9,748    2,985    20         12,753 
Income before provision for income taxes   6,960    1,203    (226)        7,937 
Provision for income taxes   2,019    364    (66)   Q    2,317 
Net income  $4,941   $839   $(160)       $5,620 
                          
Earnings per common share:                  R,S      
Basic  $0.45   $0.05             $0.47 
Diluted    0.45    0.05              0.47 
                          
Average common shares outstanding:                         
Basic  $10,891,564   $15,415,587    1,115,006        $12,052,266 
Diluted   10,891,564    15,937,295    1,115,006         12,052,266 

 

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Information.

 

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BAYCOM AND UNITI

UNAUDITED PRO FORMA CONDENSED COMBINED INCOME STATEMENT

For the Year Ended December 31, 2018

(In thousands, except per share data)

 

           Proforma         
   BayCom(1)   Uniti(1)   Adjustments   Notes   Proforma 
Interest and dividend income:                         
Loans, including fees  $49,120   $14,690   $-       $63,810 
Investment securities and interest earning deposits in banks   7,071    1,243    (1,205)   N    7,109 
FHLB dividends   446    -    -         446 
FRB dividends   223    -    -         223 
Total interest and dividend income   56,860    15,933    (1,205)        71,588 
Interest expense:                         
Deposits   4,462    2,099    -         6,561 
Other borrowings   480    -    -         480 
Total interest expense   4,942    2,099    -         7,041 
Net interest income   51,918    13,834    (1,205)        64,547 
Provision for loan losses   1,842    -    -         1,842 
Net interest income after provision for loan losses   50,076    13,834    (1,205)        62,705 
Noninterest income:                         
Gain on sale of loans   2,061    1,565    -         3,626 
Service charges and other fees   2,010    1,748    -         3,758 
Loan servicing fees and other net loan fees   1,203    -    -         1,243 
Gain on sale of OREO   70    -    -         70 
Other income   1,698    -    -         1,698 
Total noninterest income   7,082    3,313    -         10,395 
Noninterest expense:                         
Salaries and employee benefits   21,444    7,401    -         28,845 
Occupancy and equipment   4,259    1,073    -         5,332 
Data processing   3,806    844    -         4,650 
Other expenses   5,989    2,314    -         8,303 
Core deposit intangible amortization   1,171    -    288    P    1,459 
Total noninterest expense   36,669    11,632    288         48,589 
Income before provision for income taxes   20,489    5,515    (1,493)        24,511 
Provision for income taxes   5,996    1,675    (430)   Q    7,241 
Net income  $14,493   $3,840   $(1,063)        $17,270 
                          
Earnings per common share:                  R,S      
Basic:  $1.50   $0.25             $1.60 
Diluted:  $1.50   $0.24             $1.60 
                          
Average common shares outstanding:                         
Basic   9,692,009    15,382,601    1,115,164         10,807,173 
Diluted   9,692,009    15,904,309    1,115,164         10,807,173 

 

 

 

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Information.

 

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Notes to Unaudited Pro Forma Condensed Combined Financial Information

 

Note 1 – Basis of Presentation

 

The unaudited pro forma condensed combined financial information and explanatory notes have been prepared using the acquisition method of accounting giving effect to the merger involving BayCom and Uniti, with BayCom treated as the acquirer for accounting purposes. The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and is not necessarily indicative of the financial position had the merger been consummated at March 31, 2019 or the results of operations had the merger been consummated at January 1, 2018, nor is it necessarily indicative of the results of operation in future periods or the future financial position of the combined entities. The pro forma adjustments are provisional, based on estimates, and are subject to change as more information becomes available and after final analysis of the fair values of both tangible and intangible assets acquired and liabilities assumed are completed. Accordingly, the final fair value adjustments may be materially different from those presented in this document. The merger was completed on May 24, 2019. The consideration included the issuance of approximately $24.9 million in equity consideration as well as cash consideration of approximately $37.8 million.

 

Under the acquisition method of accounting, the assets and liabilities of Uniti were recorded at the respective fair values on the merger date. The fair value on the merger date represents management’s best estimates based on available information and facts and circumstances in existence on the merger date. The pro forma allocation of purchase price reflected in the unaudited pro forma condensed combined financial information is subject to adjustment under the measurement period not to exceed one year from the acquisition date.

 

Certain historical data of Uniti has been reclassified on a pro forma basis to conform to BayCom’s classifications.

 

The accounting policies of both BayCom and Uniti are in the process of being reviewed in detail. Upon completion of such review, conforming adjustments or financial statement reclassification may be determined

 

Note 2 – Purchase Price

 

Each share of Uniti common stock has been converted into the right to receive, (1) 0.07234 shares of BayCom common stock and (2) $2.30 in cash, representing an aggregate consideration mix of approximately 42.5% BayCom stock and 57.5% cash. BayCom did not issue any fractional shares of stock in the merger as the value of calculated fractional shares has been paid in cash.

 

In total, BayCom issued 1,115,006 shares of common stock in the merger, resulting in approximately 12,052,266 shares of common stock outstanding after the merger, and paid aggregate cash consideration in the merger of approximately $37.8 million. The total consideration transferred approximates $62.7 million.

 

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Note 3 –Purchase Price Allocation of Uniti

 

At the merger effective time, Uniti’s assets and liabilities are required to be recorded at their estimated fair values. The assumptions used to determine the relevant fair value adjustments below are discussed in detail in Note 4 – Pro Forma Condensed Combined Financial Information Adjustments. The excess of the purchase price over the fair value of the net assets acquired is recorded as goodwill.

 

The preliminarily estimates of the consideration transferred to the assets acquired and liabilities assumed are summarized in the following table:

 

     
   At March 31, 2019 
   (In thousands) 
Proforma purchase price of Uniti    
Fair value of Baycom common stock at $22.32(1) per share for 1,115,006 number of shares  $24,887 
Cash paid to option holders   2,354 
Cash paid to shareholders   35,460 
Total proforma purchase price   62,701 
      
Fair value of Assets:     
Cash  $42,761 
Investment securities available for sale   5,346 
FHLB stock   1,321 
Loans held for sale   2,376 
Loans   275,671 
Other real estate owned   82 
Core deposit intangible   566 
Other assets   5,002 
Total assets acquired   333,125 
      
Liabilities:     
Deposits   278,882 
Other liabilities   3,300 
Total liabilities assumed   282,182 
Fair value of net assets and identifiable intangible assets acquired   50,943 
Excess of consideration to be paid over the net assets and identifiable intangible assets acquired - goodwill  $11,758 
      

(1)Closing price of BCML common stock on May 24, 2019.

  

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Note 4 – Pro Forma Condensed combined Financial Information Adjustments.

 

The following pro forma adjustments have been included in the unaudited pro forma condensed combined financial information. Estimated fair value adjustments are based upon available information, and certain assumptions considered reasonable, and may be revised as additional information becomes available. The following are the pro forma adjustments made to record the transaction and to adjust Uniti’s assets and liabilities to their estimated fair values at March 31, 2019.

 

Balance Sheet

At March 31, 2019

(In thousands)

 

A. Adjustments to Cash and cash equivalents  $(43,478)
To reflect cash used to purchase Uniti (15,415,587 Uniti common shares outstanding at March 31, 2019 at $2.30 cash consideration per share and the cash payment for all “in-the-money” Uniti stock options).     
      
To reflect projected cash used for merger costs equal to $1.5 million incurred by Uniti and $4.1 million incurred by BayCom. See Note 5 – Merger Costs.     
      
B. Adjustments to Loans receivable, excluding allowance for loan losses and fees not yet recognized   1,080 
To reflect the discount on loans at merger date. Estimated the fair value using portfolio performance and yield compared to market.     
      
C. Adjustments to deferred costs in excess of fees   (1,259)
      
D. Adjustments to Allowance for loan losses   3,412 
To remove the Uniti allowance for loan losses at period end date as the credit risk is accounted for in the fair value adjustment for the loans receivable in Adjustment B above.     
      
E. Adjustments to Intangible asset, net   566 
To record the estimated fair value of the core deposit intangible asset (“CDI”) identified in the merger as estimated prior to close date.     
      
F. Adjustment to Goodwill   11,758 
To record the difference between the consideration transferred and the estimated fair value of net assets acquired and net liabilities assumed in the merger. See Note 3 – Allocation of Purchase Price of Uniti Bank, above.     
      
G. Adjustment to Other real estate owned  (32)
To reflect the fair value of other real estate owned     
      
(Table continued on following page)

 

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H. Adjustments to Interest receivable and other assets    
To record the fair value of the interest receivable and other assets follows:    
Fair value of servicing assets to reflect an increase in estimated CPR speeds.  $134 
      
Estimated tax effect of market value adjustments     
      
Total tax effect at 24.89% of merger related expenses adjusted for non-deductible expenses     
      
I. Adjustment to Deposits   
To reflect estimated fair market value of deposits based on current interest rates   250 
      
J. Reversal of the reserve for undisbursed commitments   (113)
      
K. Adjustments to Common stock     
To record the issuance of BayCom common stock as purchase price consideration and to eliminate the common stock of Uniti
     
      
Issuance of BayCom common stock to Uniti shareholders (1,115,006 shares at no par value at $22.32)   24,887 
      
Elimination of the historical Uniti common stock   (44,902)
      
L. Adjustment to Accumulated other comprehensive loss    
To eliminate the historical Uniti accumulated other comprehensive loss.   27 
      
M. Adjustment to Retained earnings   
To eliminate the historical Uniti retained earnings   (3,714)
      
To record adjustment to retained earnings for BayCom’s estimated merger costs, net of tax   (4,255)

$4.3 million in estimated merger expenses net of the tax effective assuming 29.16% (effective rate of 24.89% after adjustment for estimated non-deductible expenses of $1.0 million). 

     

 

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For purposes of determining the pro forma effect of the merger on the Income Statements, the following pro forma adjustments have been made as if the acquisition occurred as of January 1, 2018:

 

Income Statements

(In thousands)

 

   For the Three
Months
Ended March
31, 2019		   For the
Year
Ended
December
31, 2018		 
         
N. Adjustments to Interest income: Other  $(237)  $(1,205)
To recognize the reduction in cash reflected for the merger at an estimated yield of 2.25% and 2.75%, annualized, for the three months ended March 31, 2019 and for the year ended December 31, 2018, respectively.          
           
O. Adjustment to interest expense for market time deposit interest rates   (31)     
           
P. Adjustments to Noninterest expense: core deposit intangible amortization over ten years   20    288 
           
Q. Adjustments to provision for income tax:   (66)   (430)
Adjusted the tax rate for additional income earned from the combined company of 29.16% and 28.78% for income for the three months ended March 31, 2019 and for the year ended December 31, 2018, respectively.
          
           
R. Earnings per share:          

Earnings per common share, basic and diluted, were calculated using the calculated pro forma net income less dividends and undistributed earnings allocated to participating securities divided by the calculated pro forma basic and dilutive average shares outstanding.

          
           
S. Basic and diluted average common shares outstanding:          

Basic and diluted average common shares outstanding were calculated by adding the shares assumed to be issued by BayCom in the merger (average basic shares multiplied by the exchange ratio) to the historical average BayCom shares outstanding for the three months ended March 31, 2019 and for the year ended December 31, 2018.

          

 

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Note 5 – Merger Costs

 

In connection with the merger, BayCom integrated Uniti’s operations effective July 12, 2019. The estimated costs associated with the integration were expensed in the second quarter of 2019. BayCom recorded integration related expenses totaling $4.2 million. Uniti recorded acquisition related expenses totaling $1.5 million prior to the closing of the merger.

 

The table below reflects BayCom’s current estimate of the aggregate estimated merger costs of $6.0 million, or $4.7 million net of $1.3 million of income tax benefit, computed using the statutory federal tax rate of 21.0% and blended state tax rate of 10.0%, expected to be incurred in connection with the merger, which are included in the pro forma financial information. While a portion of these costs may be required to be recognized over time, the current estimate of these costs, primarily comprised of anticipated cash charges, include the following:

 

   At
March 31,
2019		 
   (In thousands) 
Professional fees  $1,350 
Change of control payments   402 
Severance and retention expenses   778 
Data processing, termination and conversion   2,930 
Other expenses   205 
Pre-tax merger expenses   5,665 
Income tax benefit effective tax rate of 24.89% (after adjustment for non-deductible expenses)   (1,410)
Merger expenses, net of taxes  $4,255 

 

BayCom’s cost estimates are forward-looking. While the costs represent BayCom’s current estimate of merger costs associated with the merger that will be incurred, the ultimate level and timing of recognition of these 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. These costs are not expected to materially impact the combined company’s ability to maintain an adequate level of liquidity necessary to fund loan originations and deposit withdrawals, satisfy other financial commitments and fund operations.

 

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