EX-99.3 5 catc-ex993_6.htm EX-99.3 catc-ex993_6.htm

 

Ex: 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

On April 17, 2019, Cambridge Bancorp (NASDAQ: CATC) (“Cambridge”), completed its previously announced acquisition of Optima Bank & Trust Company (“Optima”), pursuant to an Agreement and Plan of Merger, dated as of December 5, 2018 (the “Merger Agreement”), by and between Cambridge, Cambridge Trust Company and Optima. Under the terms of the Merger Agreement, Optima merged with and into Cambridge Trust Company (the “Merger”), with Cambridge Trust Company being the surviving entity.    As a result of the Merger, each share of Optima common stock was exchanged for either (i) 0.3468 shares of Cambridge common stock, (ii) $32.00 in cash, or (iii) a combination of the two, subject to customary pro ration procedures, which resulted in an aggregated stock / cash consideration mix of 95 percent / 5 percent.

 

The following unaudited pro forma combined consolidated financial statements have been prepared in accordance with Article 11 of Regulation S-X and combines the historical consolidated financial position and results of operations of Cambridge and its subsidiaries and Optima as an acquisition by Cambridge of Optima using the acquisition method of accounting and giving effect to the related pro forma adjustments described in the accompanying notes. Under the acquisition method of accounting, the assets and liabilities of Optima were recorded by Cambridge at their respective fair values as of the date the Merger was completed. Certain reclassifications were made to Optima’s historical financial information to conform to Cambridge’s presentation of financial information. All significant pro forma adjustments and underlying assumptions are described in the accompanying notes. The unaudited pro forma combined consolidated financial statements give effect to the Merger as if it occurred on January 1, 2018.  The unaudited pro forma combined financial statements should be read in conjunction with: Cambridge’s audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2018, which were included in Cambridge’s Annual Report on Form 10-K for the year ended December 31, 2018, and Cambridge’s unaudited financial statements and the related notes thereto as of and for the six months ended June 30, 2019, which were included in Cambridge’s Quarterly Report on Form 10-Q for the six months ended June 30, 2019, which were filed with the U.S. Securities and Exchange Commission on March 18, 2019, and August 8, 2019, respectively and Optima’s audited financial statements as of and for the year ended December 31, 2018 and 2017 and Optima’s unaudited condensed financial statements as of and for the three months ended March 31, 2019, which are being filed as Exhibit 99.1 and Exhibit 99.2 to this Current Report on Form 8-K, respectively.

 

The unaudited pro forma combined condensed financial statements are presented for illustrative purposes only, do not indicate the actual financial results of the combined company had the Merger occurred on January 1, 2018 at the beginning of each period presented, nor are they indicative of Cambridge’s future financial position or financial results.

 

The unaudited pro forma shareholders’ 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 Cambridge common stock or the actual or future results of operations of Cambridge for any period. Actual results may be materially different than the pro forma information presented.


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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME

 

For the Six Months Ended June 30, 2019

 

 

Cambridge Bancorp

 

 

Optima Bank

 

 

 

 

 

 

 

 

 

 

Historical

 

 

Historical (through April 17, 2019)

 

 

Adjustments

 

 

Pro Forma

 

 

(dollars in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and dividend income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on taxable loans

$

37,639

 

 

$

6,050

 

 

$

591

 

(1)

$

44,280

 

Interest on tax-exempt loans

 

213

 

 

 

30

 

 

 

 

 

 

243

 

Interest on taxable investment securities

 

4,096

 

 

 

155

 

 

 

 

 

 

4,251

 

Interest on tax-exempt investment securities

 

1,146

 

 

 

 

 

 

 

 

 

1,146

 

Dividends on FHLB of Boston stock

 

157

 

 

 

18

 

 

 

 

 

 

175

 

Interest on overnight investments

 

337

 

 

 

196

 

 

 

 

 

 

533

 

Total interest and dividend income

 

43,588

 

 

 

6,449

 

 

 

591

 

 

 

50,628

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on deposits

 

6,880

 

 

 

1,941

 

 

 

63

 

(2)

 

8,884

 

Interest on borrowed funds

 

671

 

 

 

195

 

 

 

 

 

 

866

 

Total interest expense

 

7,551

 

 

 

2,136

 

 

 

63

 

 

 

9,750

 

Net interest and dividend income

 

36,037

 

 

 

4,313

 

 

 

528

 

 

 

40,878

 

Provision for Loan Losses

 

503

 

 

 

70

 

 

 

 

 

 

573

 

Net interest and dividend income after provision for

   loan losses

 

35,534

 

 

 

4,243

 

 

 

528

 

 

 

40,305

 

Noninterest income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wealth management revenue

 

12,543

 

 

 

 

 

 

 

 

 

12,543

 

Deposit account fees

 

1,581

 

 

 

69

 

 

 

 

 

 

1,650

 

ATM/Debit card income

 

655

 

 

 

99

 

 

 

 

 

 

754

 

Bank owned life insurance income

 

289

 

 

 

36

 

 

 

 

 

 

325

 

Gain (loss) on disposition of investment securities

 

(81

)

 

 

 

 

 

 

 

 

(81

)

Gain on loans held for sale

 

31

 

 

 

47

 

 

 

 

 

 

78

 

Loan related derivative income

 

441

 

 

 

 

 

 

 

 

 

441

 

Other income

 

643

 

 

 

53

 

 

 

 

 

 

696

 

Total noninterest income

 

16,102

 

 

 

304

 

 

 

 

 

 

16,406

 

Noninterest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

22,286

 

 

 

2,238

 

 

 

 

 

 

24,524

 

Occupancy and equipment

 

5,021

 

 

 

678

 

 

 

18

 

(3)

 

5,717

 

Data processing

 

2,880

 

 

 

216

 

 

 

 

 

 

3,096

 

Professional services

 

1,567

 

 

 

414

 

 

 

 

 

 

1,981

 

Marketing

 

912

 

 

 

94

 

 

 

 

 

 

1,006

 

FDIC Insurance

 

278

 

 

 

4

 

 

 

 

 

 

282

 

Merger expenses

 

3,541

 

 

 

3,381

 

 

 

(6,922

)

(4)

 

 

Other expenses

 

1,401

 

 

 

195

 

 

 

120

 

(5)

 

1,716

 

Total noninterest expense

 

37,886

 

 

 

7,220

 

 

 

(6,784

)

 

 

38,322

 

Income before income taxes

 

13,750

 

 

 

(2,673

)

 

 

7,312

 

 

 

18,389

 

Income tax expense (benefit)

 

3,280

 

 

 

(570

)

 

 

1,755

 

(6)

 

4,465

 

Net income

$

10,470

 

 

 

(2,103

)

 

 

5,557

 

 

$

13,924

 

Share data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding, basic

 

4,379,141

 

 

 

2,192,588

 

 

 

 

(7)

 

4,802,407

 

Weighted average number of shares outstanding, diluted

 

4,412,239

 

 

 

2,325,417

 

 

 

 

(7)

 

4,835,505

 

Basic earnings per share

$

2.37

 

 

$

(0.96

)

 

 

 

 

 

$

2.90

 

Diluted earnings per share

$

2.35

 

 

$

(0.90

)

 

 

 

 

 

$

2.88

 


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Footnotes to Unaudited Pro Forma Condensed Consolidated Statements of Income for the Six Months Ended June 30, 2019:

 

 

(1)

Accretion of fair value adjustment of $6.3 million on acquired loans for the period presented.     

 

(2)

Accretion of fair value adjustment of $472,000 on certificates of deposit for the period presented.     

 

(3)

Depreciation of positive fair value adjustment of $980,000 on acquired fixed assets for the period presented.

 

(4)

Elimination of expenses related to the Merger.

 

(5)

Amortization of total core deposit intangible asset of $3.6 million for the period presented.

 

(6)

Income tax effect on pro forma adjustments at estimated tax rate of 24 percent.

 

(7)

Pro forma weighted average shares include effect of 722,746 shares issued to former Optima shareholders for period through April 17, 2019.  

 


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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME

 

 

For the Year Ended December 31, 2018

 

 

 

Cambridge Bancorp

 

 

Optima Bank

 

 

 

 

 

 

 

 

 

 

 

Historical

 

 

Historical

 

 

Adjustments

 

 

Pro Forma

 

 

(dollars in thousands, except share data)

 

Interest and dividend income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on taxable loans

 

$

57,941

 

 

$

19,604

 

 

$

2,038

 

(1)

$

79,583

 

Interest on tax-exempt loans

 

 

371

 

 

 

30

 

 

 

 

 

 

401

 

Interest on taxable investment securities

 

 

7,457

 

 

 

580

 

 

 

 

 

 

8,037

 

Interest on tax-exempt investment securities

 

 

2,404

 

 

 

15

 

 

 

 

 

 

2,419

 

Dividends on FHLB of Boston stock

 

 

287

 

 

 

56

 

 

 

 

 

 

343

 

Interest on overnight investments

 

 

595

 

 

 

263

 

 

 

 

 

 

858

 

Total interest and dividend income

 

 

69,055

 

 

 

20,548

 

 

 

2,038

 

 

 

91,641

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on deposits

 

 

5,023

 

 

 

5,949

 

 

$

253

 

(2)

 

11,225

 

Interest on borrowed funds

 

 

444

 

 

 

3

 

 

 

 

 

 

447

 

Total interest expense

 

 

5,467

 

 

 

5,952

 

 

 

253

 

 

 

11,672

 

Net interest and dividend income

 

 

63,588

 

 

 

14,596

 

 

 

1,785

 

 

 

79,969

 

Provision for Loan Losses

 

 

1,502

 

 

 

246

 

 

 

 

 

 

1,748

 

Net interest and dividend income after provision for

   loan losses

 

 

62,086

 

 

 

14,350

 

 

 

1,785

 

 

 

78,221

 

Noninterest income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wealth management revenue

 

 

25,191

 

 

 

 

 

 

 

 

 

25,191

 

Deposit account fees

 

 

3,071

 

 

 

245

 

 

 

 

 

 

3,316

 

ATM/Debit card income

 

 

1,180

 

 

 

344

 

 

 

 

 

 

1,524

 

Bank owned life insurance income

 

 

526

 

 

 

153

 

 

 

 

 

 

679

 

Gain (loss) on disposition of investment securities

 

 

2

 

 

 

22

 

 

 

 

 

 

24

 

Gain on loans held for sale

 

 

99

 

 

 

206

 

 

 

 

 

 

305

 

Loan related derivative income

 

 

1,651

 

 

 

 

 

 

 

 

 

1,651

 

Other income

 

 

1,269

 

 

 

335

 

 

 

 

 

 

1,604

 

Total noninterest income

 

 

32,989

 

 

 

1,305

 

 

 

 

 

 

34,294

 

Noninterest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

41,212

 

 

 

7,104

 

 

 

 

 

 

48,316

 

Occupancy and equipment

 

 

9,072

 

 

 

2,185

 

 

 

54

 

(3)

 

11,311

 

Data processing

 

 

5,177

 

 

 

552

 

 

 

 

 

 

5,729

 

Professional services

 

 

3,258

 

 

 

959

 

 

 

 

 

 

4,217

 

Marketing

 

 

2,229

 

 

 

305

 

 

 

 

 

 

2,534

 

FDIC Insurance

 

 

574

 

 

 

495

 

 

 

 

 

 

1,069

 

Merger expenses

 

 

201

 

 

 

 

 

 

(201

)

(4)

 

 

Other expenses

 

 

2,264

 

 

 

477

 

 

 

360

 

(5)

 

3,101

 

Total noninterest expense

 

 

63,987

 

 

 

12,077

 

 

 

213

 

 

 

76,277

 

Income before income taxes

 

 

31,088

 

 

 

3,578

 

 

 

1,572

 

 

 

36,238

 

Income tax expense

 

 

7,207

 

 

 

1,002

 

 

 

377

 

(6)

 

8,586

 

Net income

 

$

23,881

 

 

 

2,576

 

 

 

1,195

 

 

$

27,652

 

Share data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding, basic

 

 

4,061,529

 

 

 

2,069,880

 

 

 

 

 

(7)

 

4,784,275

 

Weighted average number of shares outstanding, diluted

 

 

4,098,633

 

 

 

2,331,569

 

 

 

 

 

(7)

 

4,821,379

 

Basic earnings per share

 

$

5.82

 

 

$

1.24

 

 

 

 

 

 

$

5.78

 

Diluted earnings per share

 

$

5.77

 

 

$

1.10

 

 

 

 

 

 

$

5.74

 

 


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Footnotes to Unaudited Pro Forma Condensed Consolidated Statements of Income for the Year Ended December 31, 2018:

 

 

(1)

Accretion of fair value adjustment of $6.3 million on acquired loans for the period presented.     

 

(2)

Accretion of fair value adjustment of $472,000 on certificates of deposit for the period presented.     

 

(3)

Depreciation of positive fair value adjustment of $980,000 on acquired fixed assets for the period presented.

 

(4)

Elimination of expenses related to the Merger.

 

(5)

Amortization of total core deposit intangible asset of $3.6 million for the period presented.

 

(6)

Income tax effect on pro forma adjustments at estimated tax rate of 24 percent.

 

(7)

Pro forma weighted average shares include effect of 722,746 shares issued to former Optima shareholders for period through April 17, 2019.  

 

Note 1—Basis of Presentation

 

The unaudited pro forma combined condensed consolidated financial information and notes have been prepared to illustrate the effects of the Merger involving Cambridge and Optima using the acquisition method of accounting, with Cambridge treated as the acquirer, as if the Merger had been consummated January 1, 2018. The unaudited pro forma combined condensed consolidated 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 each period presented, nor does it necessarily indicate the results of operations in future periods of the combined entity. Under the acquisition method of accounting, the assets and liabilities of Optima, as of the effective date of the Merger, were recorded by Cambridge at their respective fair values and the excess of the Merger consideration over the fair value of the net assets was allocated to goodwill and other intangible assets.

 

Forward-looking Statements

 

Certain statements herein may constitute “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements about Cambridge and its industry involve substantial risks and uncertainties. Statements other than statements of current or historical fact, including statements regarding Cambridge’s future financial condition, results of operations, business plans, liquidity, cash flows, projected costs, and the impact of any laws or regulations applicable to Cambridge, are forward-looking statements. Words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “plans,” “projects,” “may,” “will,” “should,” and other similar expressions are intended to identify these forward-looking statements. Such statements are subject to factors that could cause actual results to differ materially from anticipated results. Such factors include, but are not limited to, the following: economic conditions being less favorable than expected, disruptions to the credit and financial markets, weakness in the real estate market, legislative, regulatory or accounting changes that adversely affect Cambridge’s business and/or competitive position, the Dodd-Frank Act’s consumer protection regulations, disruptions in Cambridge’s ability to access the capital markets, changes to accounting standards and other factors that are described in Cambridge’s filings with the U.S. Securities and Exchange Commission, including Cambridge’s Annual Report on Form 10-K for the year end December 31, 2018, which Cambridge filed on March 18, 2019. Cambridge does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. You are cautioned not to place undue reliance on these forward-looking statements.

 

 

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