EX-99.3 3 a18-16098_1ex99d3.htm EX-99.3

Exhibit 99.3

 

UNAUDITED PRO FORMA COMBINED CONDENSED
CONSOLIDATED FINANCIAL DATA

 

The following Unaudited Pro Forma Combined Condensed Consolidated Statements of Financial Condition as of March 31, 2018 combines the historical Consolidated Statements of Financial Condition of Pacific Premier Bancorp, Inc. (“Pacific Premier”) and the historical Consolidated Balance Sheet of Grandpoint Capital, Inc. (“Grandpoint”) as of such date (i) on an actual historical basis and (ii) assuming the completion of the merger at such date using the acquisition method of accounting and giving effect to the related pro forma adjustments described in the accompanying Notes to the Unaudited Pro Forma Combined Condensed Consolidated Financial Statements. The unaudited Pro Forma Combined Condensed Consolidated Statements of Financial Condition as of March 31, 2018 gives effect to the completion of Pacific Premier’s acquisition of Grandpoint.

 

The following Unaudited Pro Forma Combined Condensed Consolidated Statements of Operations for the three months ended March 31, 2018 combine the historical Consolidated Statements of Operations of Pacific Premier and the historical Consolidated Statements of Income of Grandpoint for such period, giving effect to the merger as if the merger had become effective at the beginning of the period presented, using the acquisition method of accounting and giving effect to the pro forma adjustments described in the accompanying Notes to the Unaudited Pro Forma Combined Condensed Consolidated Financial Statements. Although pro forma financial information is not a measurement of performance calculated in accordance with GAAP, Pacific Premier and Grandpoint believe that pro forma financial information is important because it gives effect to the merger and the transactions referenced above. The manner in which Pacific Premier and Grandpoint calculate pro forma financial information may differ from similarly titled measures reported by other companies.

 

The unaudited pro forma combined condensed consolidated financial information included is presented for informational purposes only. This information includes various estimates and may not necessarily be indicative of the financial condition or results of operations that would have occurred if the merger had been completed on the dates or at the beginning of the periods indicated or which may be obtained in the future. The unaudited pro forma combined condensed consolidated financial information has been derived from and should be read in conjunction with the respective period’s historical consolidated financial statements and the related notes of Pacific Premier and Grandpoint. The historical consolidated financial statements of Pacific Premier are included in Pacific Premier’s Quarterly Report on Form 10-Q for the three months ended March 31, 2018. The historical consolidated financial statements of Grandpoint are attached as Exhibit 99.2 in Amendment No. 1 to Current Report on Form 8-K/A filed along with this Exhibit 99.3 on July 9, 2018.

 

The pro forma information, while helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not reflect the opportunities to earn additional revenue and does not include certain assumptions as to cost savings and, accordingly, does not attempt to predict or suggest future results. It also does not necessarily reflect what the historical results of the combined company would have been had the companies been combined during the periods presented.

 

The unaudited pro forma combined condensed consolidated stockholders’ equity and net income are qualified by the statements set forth under this caption and should not be considered indicative of the market value of Pacific Premier’s common stock or the actual or future results of operations of Pacific Premier for any period. Actual results may be materially different than the pro forma information presented.

 


 

 

 

At March 31, 2018

 

 

 

Historical
Pacific
Premier

 

Historical
Grandpoint

 

Pro Forma
Adjustments
for
Grandpoint
Acquisition

 

Footnote
Reference

 

Pro Forma
Combined
with
Grandpoint(1)

 

 

 

(Dollars in thousands)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

128,996

 

$

248,163

 

$

(46,135

)

(2)

 

$

331,024

 

Interest-bearing time deposits with financial institutions

 

3,693

 

1,001

 

—

 

 

 

4,694

 

Investment securities (including held to maturity)

 

887,802

 

499,098

 

(2,513

)

(3)

 

1,384,387

 

Loans held for sale, at lower of cost or fair value

 

29,034

 

—

 

—

 

 

 

29,034

 

Loans held for investment

 

6,241,841

 

2,365,089

 

(33,327

)

(4)

 

8,573,603

 

Allowance for loan losses

 

(30,502

)

(18,710

)

18,710

 

(5)

 

(30,502

)

Loans held for investment, net

 

6,211,339

 

2,346,379

 

(14,617

)

 

 

8,543,101

 

Premises and equipment

 

53,146

 

6,274

 

1,430

 

(6)

 

60,850

 

Goodwill

 

493,785

 

53,323

 

265,753

 

(7)

 

812,861

 

Intangible assets

 

40,740

 

5,480

 

39,761

 

(8)

 

85,981

 

Other assets

 

238,281

 

98,456

 

(5,656

)

(9)

 

331,081

 

Total assets

 

$

8,086,816

 

$

3,258,174

 

$

238,023

 

 

 

$

11,583,013

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

$

6,192,273

 

$

2,414,561

 

$

227

 

(10)

 

$

8,607,061

 

Short term borrowings

 

426,876

 

475,000

 

—

 

 

 

901,876

 

Long term debt

 

161,837

 

5,155

 

(737

)

(11)

 

166,255

 

Other liabilities

 

43,922

 

11,614

 

—

 

 

 

55,536

 

Total liabilities

 

6,824,908

 

2,906,330

 

(510

)

 

 

9,730,728

 

Stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

Preferred stock

 

—

 

—

 

—

 

 

 

—

 

Common stock

 

472

 

332

 

(174

)

(12)

 

630

 

Additional paid in capital

 

1,065,218

 

320,949

 

269,270

 

(12)

 

1,655,437

 

Retained earnings

 

205,069

 

32,652

 

(32,652

)

(12)

 

205,069

 

Accumulated other comprehensive income

 

(8,851

)

(2,089

)

2,089

 

(12)

 

(8,851

)

Total stockholders’ equity

 

1,261,908

 

351,844

 

238,533

 

 

 

1,852,285

 

Total liabilities and stockholders’ equity

 

$

8,086,816

 

$

3,258,174

 

$

238,023

 

 

 

$

11,583,013

 

 

The accompanying Notes are an integral part of the Unaudited Pro Forma Combined Condensed Consolidated Financial Information.

 

 

 

Three months ended March 31, 2018

 

 

 

Historical
Pacific
Premier

 

Historical
Grandpoint

 

Pro Forma
Adjustments for
Grandpoint
Acquisition

 

Footnote
Reference

 

Pro Forma
Combined with
Grandpoint (1)

 

 

 

(Dollars in thousands, except per share data)

 

Interest income

 

$

90,827

 

$

32,865

 

$

2,083

 

(13)

 

$

125,775

 

Interest expense

 

9,546

 

3,861

 

23

 

(14)

 

13,340

 

Net interest income

 

81,281

 

29,004

 

2,060

 

 

 

112,345

 

Provision for loan losses

 

2,253

 

(5

)

—

 

 

 

2,248

 

Net interest income after provision for loan losses

 

79,028

 

29,009

 

2,060

 

 

 

110,097

 

Noninterest income

 

7,666

 

915

 

—

 

 

 

8,581

 

Noninterest expense

 

49,808

 

17,900

 

1,822

 

(15)

 

69,530

 

Income before income tax expense

 

36,866

 

12,024

 

238

 

 

 

49,148

 

Income tax

 

8,884

 

3,331

 

63

 

 

 

12,278

 

Net income

 

$

28,002

 

$

8,693

 

$

175

 

 

 

$

36,870

 

Per common share

 

 

 

 

 

 

 

 

 

 

 

Net income—basic

 

$

0.61

 

 

 

 

 

 

 

$

0.60

 

Net income—diluted

 

0.60

 

 

 

 

 

 

 

0.59

 

Weighted average common shares

 

 

 

 

 

 

 

 

 

 

 

Basic

 

45,893,496

 

 

 

15,758,089

 

(16)

 

61,651,585

 

Diluted

 

46,652,059

 

 

 

15,758,089

 

(16)

 

62,410,148

 

 

The accompanying Notes are an integral part of the Unaudited Pro Forma Combined Condensed Consolidated Financial Information.

 


 

Notes to Unaudited Pro Forma Combined Condensed Consolidated Financial Statements

 

Note A—Basis of Presentation

 

The Unaudited Pro Forma Combined Condensed Consolidated Statements of Financial Condition and explanatory notes as of March 31, 2018 combines the historical Consolidated Statement of Financial Condition of Pacific Premier and the historical Consolidated Balance Sheet of Grandpoint as of such date (i) on an actual historical basis and (ii) assuming the completion of the merger at such date, using the acquisition method of accounting and giving effect to the related pro forma adjustments described in the accompanying Notes to the Unaudited Pro Forma Combined Condensed Consolidated Financial Statements. The Unaudited Pro Forma Combined Condensed Consolidated Statements of Financial Condition as of March 31, 2018 gives effect to the completion of Pacific Premier’s acquisition of Grandpoint.

 

The Unaudited Pro Forma Combined Condensed Consolidated Statements of Operations and explanatory notes for the three months ended March 31, 2018 combine the historical Consolidated Statements of Operations of Pacific Premier and the historical Consolidated Statements of Income of Grandpoint for such period, giving effect to the merger as if the merger had become effective at the beginning of the period presented, using the acquisition method of accounting and giving effect to the pro forma adjustments described in the accompanying Notes to the Unaudited Pro Forma Combined Condensed Consolidated Financial Statements.

 

Since the merger is recorded using the acquisition method of accounting, all loans are recorded at fair value, including adjustments for credit quality, and no allowance for credit losses is carried over to Pacific Premier’s balance sheet. In addition, certain anticipated costs associated with the merger such as professional fees, legal fees and conversion-related expenditures are not reflected in the pro forma statements of operations.

 

While the recording of the acquired loans at their fair value will impact the prospective determination of the provision for credit losses and the allowance for credit losses, for purposes of the Unaudited Pro Forma Combined Condensed Consolidated Statements of Operations for the three months ended March 31, 2018, Pacific Premier assumed no adjustments to the historical amounts of Grandpoint’s provisions for credit losses. If such adjustments were estimated, there could be an increase or a reduction to the historical amounts of Grandpoint’s provisions for credit losses presented. In addition, the fair value of the loan portfolio is not necessarily reflective of the allowance for loan losses calculated under the probable incurred loss model, as the fair value also takes into account an interest and liquidity component.

 

Note B—Accounting Policies and Financial Statement Classifications

 

The accounting policies of Grandpoint are in the process of being reviewed in detail by Pacific Premier. Upon completion of such review, conforming adjustments or financial statement reclassifications may be determined.

 

Note C—Merger and Acquisition Integration Costs

 

In connection with the merger, the plan to integrate Pacific Premier’s and Grandpoint’s operations has yet to be fully executed. The actual actions of this plan will continue to be refined and implemented over the next several months, and will include assessing personnel, benefit plans, premises, equipment, and service contracts to determine where they may take advantage of redundancies. Certain decisions arising from these assessments may involve involuntary termination of employees, vacating leased premises, changing information systems, canceling contracts with certain service providers, and selling or otherwise disposing of certain furniture and equipment. Pacific Premier also expects to incur merger-related costs including professional fees, legal fees, system conversion costs and costs related to communications with customers and others. There are costs associated with these actions, and upon execution, the costs will be recorded based on the nature of the actual cost and in the period incurred.

 


 

Note D—Estimated Annual Cost Savings

 

Pacific Premier expects to realize cost savings following the merger. These cost savings are not reflected in the pro forma financial information and there can be no assurance they will be achieved in the amount or manner currently contemplated.

 

Note E—Pro Forma Adjustments

 

The following pro forma adjustments have been reflected in the unaudited pro forma combined condensed consolidated financial information. All adjustments are based on current assumptions and valuations, which are subject to change.

 

(1)                                 The pro forma data in this column presents the unaudited financial data for Pacific Premier on a pro forma combined basis reflecting the consummation of the merger with Grandpoint, as applicable, if the merger had taken place as of the date indicated, or at the beginning of the period indicated, after giving effect to the pro forma adjustments described in the other footnotes to this table.

 

(2)                                 Adjustment includes: (a) $10.8 million for estimated seller transactions costs and (b) $28.0 million to holders of Grandpoint options, (c) $6.6 million of tax benefits related to the cash out of Grandpoint options and RSUs and (d) $13.9 million for estimated buyer transaction expenses.

 

(3)                                 Estimated fair market value adjustment for investment securities.

 

(4)                                 Adjustment made to reflect the preliminary, estimated market value of loans, which includes an estimate of lifetime credit losses, as well as an interest rate and liquidity component. Loans include net deferred costs and unearned discounts.

 

(5)                                 Purchase accounting reversal of allowance for loan losses, which is not carried over under ASC 805, Business Combinations.

 

(6)                                 Estimated fair market value adjustment for property and leases.

 

(7)                                 Represents the recognition of goodwill resulting from the difference between the consideration paid to Grandpoint shareholders less the net fair value of the acquired assets and assumed liabilities. Goodwill can be summarized as follows (dollars in thousands, except share and per share data):

 

 

 

Grandpoint

 

 

 

March 31, 2018

 

Pacific Premier shares issued to shareholders, net of fractional shares

 

15,758,089

 

Pacific Premier issue price per share

 

$

        38.15

 

Value of stock consideration paid to shareholders

 

$

     601,171

 

Value in-the-money from options

 

28,046

 

Total pro forma aggregate merger consideration paid

 

$

      629,217

 

Carrying value of net assets

 

351,844

 

Fair value adjustment to assets and liabilities:

 

 

 

Securities

 

(2,513

)

Loans held for investment

 

(33,327

)

Allowance for loan loss

 

18,710

 

Loans, net

 

(14,617

)

Premises and equipment

 

1,430

 

Core deposit intangible

 

39,761

 

 


 

 

 

Grandpoint

 

 

 

March 31, 2018

 

Deferred tax effect of adjustments, excluding transactions costs

 

(4,906

)

Other assets

 

(750

)

Deposits

 

(227

)

Short term borrowings

 

—

 

Long term debt

 

737

 

Other liabilities

 

—

 

Total fair value adjustments

 

18,915

 

Fair value of net assets acquired

 

370,759

 

Add: Capitalized merger-related expense

 

13,928

 

Less: Cash out of options/RSUs tax benefit

 

6,633

 

Pro forma goodwill

 

$

265,753

 

 

(8)                                 Purchase accounting adjustment in recognition of the fair value of core deposit intangible assets, which is assumed to be 2.15% of core deposits for Grandpoint.

 

(9)                                 Deferred tax asset created from transaction expenses and fair market value adjustments.

 

(10)                          Fair market value adjustment for time deposits.

 

(11)                          Estimated fair market value adjustment for borrowings.

 

(12)                          Purchase accounting reversal of common equity accounts, and adjustments to additional paid in capital includes consideration paid, transaction costs, fair market value adjustments, tax adjustments and goodwill created.

 

(13)                          The amortization/accretion of fair value adjustments related to loans over the estimated lives of the related asset, which approximates 48 months.

 

(14)                          The amortization/accretion of fair value adjustments related to deposits and long term debt are recognized over 48 months, based on sum of year digits accelerated method, and 60 months straight lined, respectively.

 

(15)                          Adjustment includes amortization of core deposit intangibles over a ten-year life, based on sum of year digits accelerated method, and fixed asset accretion straight lined over 24 months.

 

(16)                          Adjustment reflects the elimination of the acquired entity’s weighted average shares outstanding, offset by the issuance of common stock by acquirer for each outstanding share of acquired entity’s common stock to be issued in connection with the merger.

 

UNAUDITED COMPARATIVE PER SHARE DATA

 

The following table sets forth certain historical, pro forma and pro forma equivalent per share financial information for the Pacific Premier common stock and the Grandpoint common stock. The pro forma and pro forma equivalent per share information for the three months ended March 31, 2018 gives effect to the merger as if the transaction had been effective on the last date of the period, in the case of book value data, and as if the transaction had been effective on the first day of the period, in the case of income and dividend data. The pro forma information in the below table assumes that the merger is accounted for under the acquisition method of accounting. The information in the following table is based on, and should be read together with, (i) the historical consolidated financial statements of Pacific Premier are included in Pacific Premier’s Quarterly Report on Form 10-Q for the

 


 

three months ended March 31, 2018. The historical consolidated financial statements of Grandpoint are attached as Exhibit 99.2 in Amendment No. 1 to Current Report on Form 8-K/A filed along with this Exhibit 99.3 on July 9, 2018.

 

 

 

At or For the
Three Months
Ended
March 31, 2018

 

Net Income Per Common Share(1):

 

 

 

Historical Pacific Premier

 

 

 

Basic

 

$

0.61

 

Diluted

 

0.60

 

Historical Grandpoint

 

 

 

Basic

 

0.26

 

Diluted

 

0.25

 

Pro Forma for Grandpoint Acquisition(1)

 

 

 

Basic

 

0.60

 

Diluted

 

0.59

 

Equivalent pro forma for Grandpoint Acquisition(1)(2)

 

 

 

Basic

 

0.28

 

Diluted

 

0.28

 

Dividends Declared Per Common Share(3):

 

 

 

Historical Pacific Premier

 

—

 

Historical Grandpoint

 

0.15

 

Equivalent pro forma for Grandpoint Acquisition

 

—

 

Book Value Per Common Share (at period end):

 

 

 

Historical Pacific Premier

 

27.12

 

Historical Grandpoint

 

10.61

 

Pro Forma for Grandpoint Acquisition

 

29.82

 

Equivalent pro forma for Grandpoint Acquisition(2)

 

14.17

 

 

(1)                                 Pro forma shares are calculated by adding together the historical shares reported by Pacific Premier and historical shares reported by Grandpoint, adjusted for the estimated purchase accounting adjustments to be recorded in connection with the Grandpoint acquisition to equate to an estimated 15,758,089 of Pacific Premier shares to be issued in connection with the Grandpoint acquisition based on the terms of the merger agreement.

 

(2)                                 The equivalent pro forma per share data combined for Grandpoint is computed by multiplying the pro forma combined amounts by the exchange ratio of 0.4750.

 

(3)                                 Pacific Premier has not paid dividends on its common stock, therefore the equivalent pro forma cash dividends per common share is zero.