2. MERGER

On July 8, 2013, our predecessor, PMC Commercial, entered into a merger agreement (the "Merger Agreement") with CIM Urban REIT, LLC ("CIM Urban REIT") and subsidiaries of the respective parties. CIM Urban REIT was a private commercial REIT and was the owner of CIM Urban Partners, LP ("CIM Urban"). The transaction (the "Merger") was completed on March 11, 2014 (the "Acquisition Date").

The Merger Agreement provided for a business combination between PMC Commercial and CIM Urban. Pursuant to the Merger Agreement, PMC Commercial issued 22,000,003 common shares of beneficial interest and 65,028,571 preferred shares. Each preferred share converted into seven common shares of beneficial interest in April 2014, resulting in the issuance of approximately 477,200,000 common shares of beneficial interest. This represented approximately 97.8% of PMC Commercial's outstanding shares on the Acquisition Date.

All common shares of beneficial interest that were outstanding immediately prior to the closing of the Merger continue to remain outstanding following the Acquisition Date. In addition, shareholders of record at the close of the business day prior to the Acquisition Date received a special cash dividend of $5.50 per common share of beneficial interest, which was paid on March 25, 2014.

The Merger was accounted for as a reverse acquisition under the acquisition method of accounting with CIM Urban considered to be the accounting acquirer based upon the terms of the Merger Agreement. Based on the determination that CIM Urban was the accounting acquirer in the transaction, CIM Urban allocated the purchase price to the fair value of PMC Commercial's assets and liabilities as of the Acquisition Date.

Accordingly, the accompanying financial statements (1) include the historical financial information for CIM Urban for all periods presented, (2) include the assets and liabilities of PMC Commercial acquired on March 11, 2014 in the consolidated balance sheet as of March 31, 2014 and (3) include the results of PMC Commercial's operations and cash flows in the consolidated statements of operations and comprehensive income and cash flows for the period from the Acquisition Date through March 31, 2014. The equity of CIM Commercial is the historical equity of CIM Urban retroactively restated to reflect the number of shares issued by PMC Commercial pursuant to the Merger Agreement. In connection with the reverse acquisition, for purposes of presenting equity for CIM Commercial, the historical shareholders of PMC Commercial were deemed to have been issued 10,596,220 common shares (11,132,549 common shares, less 536,329 treasury shares) on the Acquisition Date.

Consideration Transferred—The fair value of the consideration transferred in the reverse acquisition is determined based on the number of shares the accounting acquirer would have to issue to the shareholders of the accounting acquiree in order to provide the same ratio of ownership in the combined entity following the completion of the Merger, and was determined to be the outstanding shares of PMC Commercial as of the Acquisition Date. The fair value of the consideration transferred was based on the most reliable measure, which was determined to be the market price of PMC Commercial shares as of the Acquisition Date. The computation of the fair value of the consideration transferred, based on the market price of PMC Commercial shares on the Acquisition Date, is as follows:

	(in thousands, except per share data)

PMC Commercial shares outstanding		10,596
Equity consideration price per common share	$	4.21


Fair value of the equity consideration		44,610
Payment in cash—special dividend		58,279


Total purchase price	$	102,889

Purchase Price Allocation—As CIM Urban was the accounting acquirer in the business combination, it has allocated the purchase price to PMC Commercial's individually identifiable assets acquired and liabilities assumed based on their estimated fair values on the Acquisition Date. A bargain purchase gain was recorded as of the Acquisition Date in the amount equal to the excess of the fair value of the identifiable net assets acquired over the total purchase price.

The following table summarizes the allocation of the purchase price:

	(in thousands)

Assets
Cash and cash equivalents	$	3,185
Loans receivable		207,140
Accounts receivable and interest receivable		755
Other assets		5,396
Intangible assets		2,957


Total assets acquired		219,433


Liabilities
Debt		99,849
Accounts payable and accrued expenses		7,396
Special dividend liability and dividend payable		59,286
Other liabilities		3,374


Total liabilities assumed		169,905


Net identifiable assets acquired		49,528
Bargain purchase gain		(4,918	)


Net purchase price	$	44,610

Pro Forma Financial Information—The following pro forma consolidated results of net income for the three months ended March 31, 2014 and 2013 assume the business combination was completed as of January 1, 2013:

	Three Months Ended March 31,

	2014		2013
	(In thousands, except per share amounts)
Pro forma revenues	$	67,458	$	63,525
Pro forma net income	$	7,090	$	7,211
Pro forma basic earnings per share	$	0.01	$	0.01
Pro forma diluted earnings per share	$	0.01	$	0.01

The pro forma amounts include the historical operating results of CIM Urban and PMC Commercial prior to the business combination, with adjustments directly attributable to the business combination.