EX-99.3 5 tm205599d1_ex99-3.htm EXHIBIT 99.3

 

Exhibit 99.3

 

DELMAR BANCORP

Unaudited Pro Forma Combined Balance Sheet

 

As of September 30, 2019 (dollars in thousands)            

 

    Delmar     Partners     Pro Forma
Adjustments		     Pro Forma
Combined		  
Assets                        
Cash/Interest Bearing Balances   $ 76,084     $ 8,083     $ (3,600 )   $ 80,567  
Securities     55,854       70,489       -       126,343  
Total Loans held for investment     633,661       346,692       (7,282 )(2)     973,071  
Allowance for Loan Losses     (7,054 )     (4,282 )     4,282 (3)     (7,054 )
Loans held for sale     -       2,986       -       2,986  
Loans, net     626,607       345,396       (3,000 )     969,003  
Premises & Fixed Assets     10,134       3,742       -       13,876  
OREO     3,641       -       -       3,641  
Goodwill     5,237       -       7,814 (4)     13,051  
Core Deposit Intangible     843       -       3,186 (5)     4,029  
Other Assets     14,444       14,095       93 (6)     28,632  
Total Assets   $ 792,844     $ 441,805     $ 4,493     $ 1,239,142  
                                 
Liabilities and Shareholders' Equity                                
Liabilities                                
Deposits   $ 660,401     $ 339,463     $ -     $ 999,864  
FHLB Advances/Other Borrowings     55,495       47,900       -       103,395  
Other Liabilities     5,388       6,276       -       11,664  
Total Liabilities     721,284       393,639       -       1,114,923  
Shareholders' Equity                                
Common Stock     100       20,426       (20,356 )(7)     170  
Capital Surplus     29,486       19,231       35,439 (8)     84,156  
AOCI     638       158       (158 )(9)     638  
Retained Earnings     41,336       7,632       (10,432 )(10)     38,536  
Common Equity   $ 71,560     $ 47,447     $ 4,493     $ 123,500  
Minority Interest     -       719       -       719  
Total Shareholders' Equity     71,560       48,166       4,493       124,219 (11)
Total Liabilities and Shareholders' Equity   $ 792,844     $ 441,805     $ 4,493     $ 1,239,142  

 

 

 

 

Footnotes to Unaudited Pro Forma Combined Balance Sheet (dollars in thousands, except per share data):    

 

(1) Share exchange related expenses, consisting of :          
Deal charges for Delmar  $(2,800)     
Deal charges for Partners   (800)     
Total  $(3,600)     
(2) Estimated fair value adjustments to the acquired loan portfolio as follows:          
Total loans  $(7,282)     
(3) Elimination of Partners allowance in accordance with acquistion accounting rules  $4,282      
(4) Goodwill is an intangible asset that is not subject to amortization, and will be tested annually for impairment.          
Goodwill is calculated as:          
Purchase price per share ($) Stock Consideration - Partners stock issued and outstanding at September 30, 2019 of 4,085,181 at Delmar trading price of $7.80 as of December 12, 2018 at fixed exchange ratio of 1.7179       $54,740 
Acquired equity at September 30, 2019  $47,447      
Less: Partners deal charges   (800)     
Taxable fair value accounting adjustments:          
Fair value adjustments on loan portfolio   (7,282)     
 Elimination of existing loan ALLL   4,282      
Core deposit intangible   3,186      
Total taxable fair value accounting adjustments   186      
Deferred tax asset from fair value adjustments (at 25% effective tax rate)   (47)     
Partners deferred tax asset adjustment related to deal charges - see Note 6   140      
Net assets acquired       $46,926 
Pro Forma goodwill       $7,814 
(5) Core deposit intangible adjustment, calculated at 1.50% of Partners core deposits.  $3,186      
(6) Deferred tax liability and deferred tax asset adjustment created in the share exchange.          
These adjustments are based on a 25% effective tax rate and consist of:          
Deferred tax assets from loan related fair value adjustments  $750      
Deferred tax liability of core deposit intangible   (797)     
Deferred tax asset from deductible transaction expense (70% deductible) - Partners   140      
Total  $93      
(7) Consists of:          
Elimination of Partners common stock  $(20,426)     
Issuance of 7,017,716 shares of Delmar common stock, $0.01 par - Partners common shareholders   70      
Total  $(20,356)     
(8) Consists of:          
Elimination of Partners capital surplus  $(19,231)     
Value paid in excess of par - Partners common shareholders   54,670      
Total  $35,439      
(9) Elimination of Partners AOCI          
(10) Consists of:          
Elimination of Partners retained earnings  $(7,632)     
Delmar share exchange related expenses   (2,800)     
Total  $(10,432)     

 

(11)The Unaudited Pro Forma Combined Balance Sheet does not give effect to the exercise of the Series B Warrant to purchase 450,000 shares of Partners common stock, which will be converted into a warrant to purchase 773,055 shares of Delmar common stock and exercised on the first business day immediately following effectiveness of the share exchange, for an aggregate exercise price of $5,743,799 before payment of $402,088 of investment banking fees related to the exercise. Set forth below is Delmar's unaudited pro forma combined shareholders' equity as of the first business day following effectiveness of the share exchange, assuming the exercise of the Series B Warrant.

 

(dollars in thousands)  Delmar (After
Share Exchange)		   Warrant
Exercise
Adjustments		   Pro Forma 
Shareholders' Equity               
Common Stock  $170   $8   $178 
Capital Surplus   84,156    5,334    89,490 
AOCI   638    —    638 
Retained Earnings   38,536    —    38,536 
Common Equity  $123,500   $5,342   $128,842 
Minority Interest   719    —    719 
Total Shareholders' Equity  $124,219   $5,342   $129,561 

 

 

 

 

 

 

DELMAR BANCORP

Unaudited Pro Forma Combined Statement of Income

 

For the Nine Months Ended September 30, 2019 (dollars in thousands, except per share data) 

 

   Delmar   Partners   Pro Forma
Adjustments		    Pro Forma
Combined		 
Interest Income:                     
Loans  $25,916   $12,838   $783 (1)  $39,537 
Investments   963    1,457    -     2,420 
Other Interest-Earning Assets   608    71    -     679 
Total Interest Income   27,487    14,366    783     42,636 
                      
Interest Expense:                     
Deposits   4,387    2,823    -     7,210 
Borrowings   1,274    1,015    -     2,289 
Total Interest Expense   5,661    3,838    -     9,499 
                      
Net Interest Income:   21,826    10,528    783     33,137 
Provision for Loan Losses   900    270    -     1,170 
Net Interest Income After Provision   20,926    10,258    783     31,967 
                      
Noninterest Income:                     
Total Noninterest Income   2,729    2,057    -     4,786 
                      
Noninterest Expense:                     
Salaries and Benefits   8,459    4,914    66 (2)   13,439 
Premises and Equipment   2,732    782    -     3,514 
Other Expenses   5,362    3,612    239 (3)   9,213 
Total Noninterest Expense   16,553    9,308    305     26,166 
                      
Income Before Income Taxes   7,102    3,007    478     10,587 
Income Tax Provision   2,167    721    120 (4)   3,008 
Net Income Before Noncontrolling Interest   4,935    2,286    358     7,579 
Net (Income) Attributable to Noncontrolling Interest   -    (116)   -     (116)
Net Income  $4,935   $2,170   $358   $7,463 
                      
Comprehensive Income:                     
Net Income Before Noncontrolling Interest  $4,935   $2,286   $358    $7,579 
Total Other Comprehensive Income   1,369    1,590    -     2,959 
Total Comprehensive Income   6,304    3,876    358     10,538 
Comprehensive (Income) Attributable to Noncontrolling Interest   -    (116)   -     (116)
Total Comprehensive Income After Noncontrolling Interest  $6,304   $3,760   $358   $10,422
                      
Average shares outstanding, basic   9,985    4,085    3,706     17,776(5) 
Average shares outstanding, diluted   10,000    4,174    3,654     17,828(5) 
Earnings per share, basic  $0.49   $0.53         $0.42 
Earnings per share, diluted  $0.49   $0.52         $0.42 

 

Footnotes to Unaudited Pro Forma Combined Statement of Income for the Nine Months Ended September  30, 2019:

 

(1)  Accretion of loan discount.

(2)  Increase in salaries related to new employment agreements.

(3)  Amortization of 1.50% core deposit intangible created in the transaction - amortized over 10 years using the straight line method.

(4)  Based on 25% effective tax rate.

(5)  Pro Forma combined average shares outstanding at September 30, 2019 are calculated as set forth below (shares in thousands):  

 

   Basic   Diluted 
       Delmar actual average shares outstanding at September 30, 2019 (i)   9,985    10,000 
Partners actual average shares outstanding at September 30, 2019 less 67 shares representing the dilutive effect of warrants (ii)   4,085    4,107 
       Partners actual average shares outstanding above (ii) adjusted for 1.7179 exchange ratio (iii)   7,018    7,055 
           
       Series B Warrant exercised for shares of Delmar common stock (450 at 1.7179 exchange ratio) (iiii)   773    773 
Total Pro Forma combined average shares outstanding (i+iii+iiii)   17,776    17,828 

 

 

 

 

DELMAR BANCORP

Unaudited Pro Forma Combined Statement of Income

 

For the Twelve Months Ended December 31, 2018 (dollars in thousands, except for per share data) 

 

   Delmar (1)   Partners (1)   Pro Forma
Adjustments		    Pro Forma
Combined		 
Interest Income:                     
Loans  $31,361   $15,587   $1,042 (2)  $47,990 
Investments   1,202    1,810    -     3,012 
Other Interest-Earning Assets   610    248    -     858 
Total Interest Income   33,173    17,645    1,042     51,860 
                      
Interest Expense:                     
Deposits   3,790    3,242    -     7,032 
Borrowings   1,569    679    -     2,248 
Total Interest Expense   5,359    3,921    -     9,280 
                      
Net Interest Income   27,814    13,724    1,042     42,580 
Provision for Loan Losses   1,175    409    -     1,584 
Net Interest Income After Provision   26,639    13,315    1,042     40,996 
                      
Noninterest Income:                     
Total Noninterest Income   3,136    1,767    -     4,903 
                      
Noninterest Expense:                     
Salaries and Benefits   10,649    6,426    87 (3)   17,162 
Premises and Equipment   3,258    1,001    -     4,259 
Other Expenses   8,027    4,438    319 (4)   12,784 
Total Noninterest Expense   21,934    11,865    406     34,205 
                      
Income Before Income Taxes   7,841    3,217    636     11,694 
Income Tax Provision   2,359    599    159 (5)   3,117 
Net Income Before Noncontrolling Interest   5,482    2,618    477     8,577 
Net Loss Attributable to Noncontrolling Interest   -    34    -     34 
Net Income  $5,482   $2,652   $477    $8,611 
                      
Comprehensive Income:                     
Net Income Before Noncontrolling Interest  $5,482   $2,618   $477    $8,577 
Total Other Comprehensive (Loss)   (478)   (668)   -     (1,146)
Total Comprehensive Income   5,004    1,950    477     7,431 
Comprehensive Loss Attributable to Noncontrolling Interest   -    34    -     34 
Total Comprehensive Income After Noncontrolling Interest  $5,004   $1,984   $477    $7,465 
                      
Average shares outstanding, basic (‘000s)   9,691    3,903    3,575     17,169(6) 
Average shares outstanding, diluted (‘000s)   9,707    4,032    3,493     17,232(6) 
Earnings per share, basic  $0.57   $0.68         $0.50 
Earnings per share, diluted  $0.57   $0.66         $0.50 

 

Footnotes to Unaudited Pro Forma Combined Statement of Income for the Twelve Months Ended December 31, 2018:  

 

(1) Based on audited financial statements.

(2)  Accretion of loan discount.

(3)  Increase in salaries related to new employment agreements.

(4)  Amortization of 1.50% core deposit intangible created in the transaction - amortized over 10 years using the straight line method.

(5)  Based on 25% effective tax rate.

(6) Pro Forma Combined Average Shares Outstanding at December 31, 2018 are calculated as set forth below:

 

  (Shares in thousands)  Basic   Diluted 
(a)  Delmar actual average shares outstanding at December 31, 2018   9,691    9,707 
(b)  Partners actual average shares outstanding at December 31, 2018 less 102 shares representing the dilutive effect of warrants   3,903    3,930 
(c)  Partners actual average shares outstanding converted at exchange ratio ((b)*1.7179)   6,705    6,752 
(d)  Series B Warrant exercised for shares of Delmar common stock (450* 1.7179)   773    773 
   Total Pro Forma Combined Average Shares Outstanding (a+c+d)   17,169    17,232