PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial information is based on the historical financial statements of Valley National Bancorp (“Valley”) and Oritani Financial Corp. (“Oritani”) and has been prepared to illustrate the financial effect of the merger of Oritani with and into Valley. The following unaudited pro forma condensed combined financial information combines the historical consolidated financial position and results of operations of Valley and its subsidiaries and Oritani and its subsidiaries, as an acquisition by Valley of Oritani 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 Oritani are recorded by Valley at their respective fair values as of the date the merger is completed. The unaudited pro forma condensed combined balance sheet gives effect to the transaction as if the transaction had occurred on September 30, 2019. The unaudited pro forma condensed combined income statements for the nine months ended September 30, 2019 and year ended December 31, 2018 give effect to the transaction as if the transaction had become effective at the beginning of the periods presented.
These unaudited pro forma condensed combined financial statements reflect the merger of Oritani with and into Valley based upon estimated preliminary acquisition accounting adjustments. Actual adjustments will be made as of the effective date of the merger and, therefore, may differ from those reflected in the unaudited pro forma condensed combined financial information. The fair values are estimates as of the date hereof and actual amounts are still in the process of being finalized. Fair values are subject to refinement for up to one year after the closing date as additional information regarding the closing date fair values becomes available.
The unaudited pro forma condensed combined financial statements included herein are presented for informational purposes only and do not necessarily reflect the financial results of the combined company had the companies actually been combined at the beginning of the period presented. The adjustments included in these unaudited pro forma condensed financial statements are preliminary and may be revised. Estimated merger costs, exclusive of estimated fair value adjustments are excluded from the pro forma financial statements. This information also does not reflect the benefits of the expected cost savings and expense efficiencies, opportunities to earn additional revenue, potential impacts of current market conditions on revenues, or asset dispositions, among other factors, including adoption of the Financial Accounting Standards Board’s current expected credit loss standard, and contains various preliminary estimates and may not necessarily be indicative of the financial position or results of operations that would have occurred if the merger had been consummated on the date or at the beginning of the period indicated or which may be attained in the future.
VALLEY NATIONAL BANCORP | |||||||||||||||
CONSOLIDATED PRO FORMA STATEMENTS OF FINANCIAL CONDITION (Unaudited) | |||||||||||||||
(in thousands) | |||||||||||||||
September 30, 2019 | |||||||||||||||
Valley | Oritani | ||||||||||||||
Historical | Historical | Adjustments1 | Pro Forma | ||||||||||||
Assets | |||||||||||||||
Cash and Interest bearing deposits with banks | $ | 498,237 | $ | 20,312 | $ | — | $ | 518,549 | |||||||
Investment securities | 3,721,819 | 353,793 | 2,820 | 2 | 4,078,432 | ||||||||||
Loans held for sale | 41,621 | — | — | 41,621 | |||||||||||
Loans | 26,567,159 | 3,449,876 | (28,010) | 3 | 29,989,025 | ||||||||||
Less: Allowance for loan losses | (161,853) | (28,608) | 28,608 | 3 | (161,853) | ||||||||||
26,405,306 | 3,421,268 | 598 | 29,827,172 | ||||||||||||
Goodwill | 1,084,665 | — | 225,308 | 4 | 1,309,973 | ||||||||||
Other intangible assets, net | 68,150 | — | 20,690 | 5 | 88,840 | ||||||||||
Other assets | 1,945,741 | 194,285 | 9,044 | 6 | 2,149,070 | ||||||||||
Total Assets | $ | 33,765,539 | $ | 3,989,658 | $ | 258,460 | $ | 38,013,657 | |||||||
Liabilities | |||||||||||||||
Deposits: | |||||||||||||||
Non-interest bearing | $ | 6,379,271 | $ | 150,707 | $ | — | $ | 6,529,978 | |||||||
Interest bearing | 19,166,851 | 2,785,840 | 9,473 | 7 | 21,962,164 | ||||||||||
Total deposits | 25,546,122 | 2,936,547 | 9,473 | 28,492,142 | |||||||||||
Borrowings | 4,137,681 | 426,563 | 3,686 | 8 | 4,506,300 | ||||||||||
Other liabilities | 529,661 | 97,248 | 2,056 | 9 | 684,595 | ||||||||||
Total Liabilities | 30,207,464 | 3,460,358 | 15,215 | 33,683,037 | |||||||||||
Shareholders’ Equity | |||||||||||||||
Preferred equity | 209,691 | — | — | 209,691 | |||||||||||
Common equity | 3,348,384 | 529,300 | 243,245 | 10 | 4,120,929 | ||||||||||
Total Shareholders’ Equity | 3,558,075 | 529,300 | 243,245 | 4,330,620 | |||||||||||
Total Liabilities and Shareholders’ Equity | $ | 33,765,539 | $ | 3,989,658 | $ | 258,460 | $ | 38,013,657 |
VALLEY NATIONAL BANCORP | |||||||||||||||
CONSOLIDATED PRO FORMA STATEMENTS OF INCOME (Unaudited) | |||||||||||||||
(in thousands, except for share data) | |||||||||||||||
For the Nine Months Ended September 30, 2019 | |||||||||||||||
Valley | Oritani | ||||||||||||||
Historical | Historical | Adjustments1 | Pro Forma | ||||||||||||
Interest Income | |||||||||||||||
Interest and fees on loans | $ | 883,595 | $ | 109,677 | $ | 1,050 | 11 | $ | 994,322 | ||||||
Interest and dividends on investment securities | 89,685 | 8,292 | (344) | 12 | 97,633 | ||||||||||
Other interest income | 3,947 | 128 | — | 4,075 | |||||||||||
Total interest income | 977,227 | 118,097 | 706 | 1,096,030 | |||||||||||
Interest Expense | |||||||||||||||
Interest on deposits | 231,597 | 34,951 | (541) | 13 | 266,007 | ||||||||||
Interest on borrowings | 86,123 | 9,789 | (2,005) | 14 | 93,907 | ||||||||||
Total interest expense | 317,720 | 44,740 | (2,546) | 359,914 | |||||||||||
Net Interest Income | 659,507 | 73,357 | 3,252 | 736,116 | |||||||||||
Provision for credit losses | 18,800 | — | — | 18,800 | |||||||||||
Net Interest Income After Provision for Credit Losses | 640,707 | 73,357 | 3,252 | 717,316 | |||||||||||
Non-Interest Income | |||||||||||||||
Trust and investment services | 9,296 | — | — | 9,296 | |||||||||||
Insurance commissions | 7,922 | — | — | 7,922 | |||||||||||
Service charges on deposit accounts | 17,634 | 1,383 | — | 19,017 | |||||||||||
Gains on sales of loans, net | 13,700 | — | — | 13,700 | |||||||||||
Other | 127,874 | 1,914 | — | 129,788 | |||||||||||
Total non-interest income | 176,426 | 3,297 | — | 179,723 | |||||||||||
Non-Interest Expense | |||||||||||||||
Salary and employee benefits expense | 236,559 | 18,399 | — | 254,958 | |||||||||||
Net occupancy and equipment expense | 86,789 | 2,277 | — | 89,066 | |||||||||||
FDIC insurance assessment | 16,150 | 540 | — | 16,690 | |||||||||||
Amortization of other intangible assets | 13,175 | — | 1,606 | 15 | 14,781 | ||||||||||
Amortization of tax credit investments | 16,421 | — | — | 16,421 | |||||||||||
Other | 66,315 | 6,041 | — | 72,356 | |||||||||||
Total non-interest expense | 435,409 | 27,257 | 1,606 | 464,272 | |||||||||||
Income Before Income Taxes | 381,724 | 49,397 | 1,646 | 432,767 | |||||||||||
Income tax expense | 110,035 | 11,736 | 478 | 16 | 122,249 | ||||||||||
Net Income | $ | 271,689 | $ | 37,661 | $ | 1,168 | $ | 310,518 | |||||||
Dividends on preferred stock | 9,516 | — | — | 9,516 | |||||||||||
Net Income Available to Common Shareholders | $ | 262,173 | $ | 37,661 | $ | 1,168 | $ | 300,002 | |||||||
Earnings Per Common Share: | |||||||||||||||
Basic | $ | 0.79 | $ | 0.87 | $ | (0.04 | ) | $ | 0.75 | ||||||
Diluted | $ | 0.79 | $ | 0.86 | $ | (0.04 | ) | $ | 0.75 | ||||||
Weighted Average Number of Common Shares Outstanding: | |||||||||||||||
Basic | 331,716,652 | 43,205,552 | 17 | 23,853,864 | 18 | 398,776,067 | |||||||||
Diluted | 333,039,436 | 43,849,292 | 17 | 24,240,108 | 18 | 401,128,836 |
VALLEY NATIONAL BANCORP | |||||||||||||||
CONSOLIDATED PRO FORMA STATEMENTS OF INCOME (Unaudited) | |||||||||||||||
(in thousands, except for share data) | |||||||||||||||
For the Year Ended December 31, 2018 | |||||||||||||||
Valley | Oritani | ||||||||||||||
Historical | Historical | Adjustments1 | Pro Forma | ||||||||||||
Interest Income | |||||||||||||||
Interest and fees on loans | $ | 1,033,993 | $ | 144,360 | $ | 469 | 11 | $ | 1,178,822 | ||||||
Interest and dividends on investment securities | 122,019 | 10,177 | (185) | 12 | 132,011 | ||||||||||
Other interest income | 3,236 | — | — | 3,236 | |||||||||||
Total interest income | 1,159,248 | 154,537 | 284 | 1,314,069 | |||||||||||
Interest Expense | |||||||||||||||
Interest on deposits | 190,353 | 35,459 | (721) | 13 | 225,091 | ||||||||||
Interest on borrowings | 111,692 | 12,082 | (2,297) | 14 | 121,477 | ||||||||||
Total interest expense | 302,045 | 47,541 | (3,018) | 346,568 | |||||||||||
Net Interest Income | 857,203 | 106,996 | 3,302 | 967,501 | |||||||||||
Provision for credit losses | 32,501 | (2,000) | 2,000 | 32,501 | |||||||||||
Net Interest Income After Provision for Credit Losses | 824,702 | 108,996 | 1,302 | 935,000 | |||||||||||
Non-Interest Income | |||||||||||||||
Trust and investment services | 12,633 | — | — | 12,633 | |||||||||||
Insurance commissions | 15,213 | — | — | 15,213 | |||||||||||
Service charges on deposit accounts | 26,817 | 1,410 | — | 28,227 | |||||||||||
Gains on sales of loans, net | 20,515 | — | — | 20,515 | |||||||||||
Other | 58,874 | 3,049 | — | 61,923 | |||||||||||
Total non-interest income | 134,052 | 4,459 | — | 138,511 | |||||||||||
Non-Interest Expense | |||||||||||||||
Salary and employee benefits expense | 333,816 | 23,252 | — | 357,068 | |||||||||||
Net occupancy and equipment expense | 108,763 | 3,161 | — | 111,924 | |||||||||||
FDIC insurance assessment | 28,266 | 1,185 | — | 29,451 | |||||||||||
Amortization of other intangible assets | 18,416 | — | 2,985 | 15 | 21,401 | ||||||||||
Amortization of tax credit investments | 24,200 | — | — | 24,200 | |||||||||||
Other | 115,600 | 12,558 | — | 128,158 | |||||||||||
Total non-interest expense | 629,061 | 40,156 | 2,985 | 672,202 | |||||||||||
Income Before Income Taxes | 329,693 | 73,299 | (1,683) | 401,309 | |||||||||||
Income tax expense | 68,265 | 19,545 | (478) | 16 | 87,332 | ||||||||||
Net Income | 261,428 | 53,754 | (1,205) | $ | 313,977 | ||||||||||
Dividends on preferred stock | 12,688 | — | — | 12,688 | |||||||||||
Net Income Available to Common Shareholders | $ | 248,740 | $ | 53,754 | $ | (1,205 | ) | $ | 301,289 | ||||||
Earnings Per Common Share: | |||||||||||||||
Basic | $ | 0.75 | $ | 1.21 | $ | 0.00 | $ | 0.75 | |||||||
Diluted | $ | 0.75 | $ | 1.20 | $ | 0.00 | $ | 0.75 | |||||||
Weighted Average Number of Common Shares Outstanding: | |||||||||||||||
Basic | 331,258,964 | 44,251,796 | 17 | 24,388,859 | 18 | 399,899,619 | |||||||||
Diluted | 332,693,718 | 44,881,417 | 17�� | 24,766,632 | 18 | 402,341,766 |
Notes to Pro Forma Combined Condensed Consolidated Financial Statements (Unaudited)
1. | Estimated merger costs, exclusive of estimated fair value adjustments, of $29.3 million (net of $12.0 million of taxes) are excluded from the pro forma financial statements. It is expected that these costs will be recognized over time. Valley’s cost estimates are forward-looking. The type and amount of actual costs incurred could change, possibly materially, from these estimates if future developments differ from the underlying assumptions used by management in determining the current estimate of these costs. The current estimates of the merger costs, exclusive of estimated fair value adjustments, primarily comprised of anticipated cash charges, are as follows: |
(in thousands)
Change in control, severance and retention plan payments | $ | 22,400 | |
Professional fees* | 9,717 | ||
Data processing, termination and conversion | 9,185 | ||
Pre-tax merger costs | 41,302 | ||
Taxes | 11,994 | ||
Total merger costs | $ | 29,308 |
______
* A portion of professional fees are not tax deductible.
2. | Adjustment to reflect the estimated fair value of acquired investment securities. |
3. | Adjustment to reflect acquired loans at their estimated fair value; the allowance for credit losses is therefore reversed. |
4. | Adjustment to reflect preliminary estimated goodwill from this business transaction. |
5. | Adjustment to reflect core deposit intangibles. |
6. | Adjustment to reflect, among other items, approximately $2.8 million to net deferred tax assets due to the business combination, $2.1 million to the right of use asset related to acquired operating lease assets and $5.1 million to reflect acquired property, plant and equipment at their estimated fair value. |
7. | Adjustment to reflect the preliminary estimate of fair value on interest-bearing deposits. |
8. | Adjustment to reflect the preliminary estimate of fair value on borrowings. |
9. | Adjustment to reflect the lease liability related to acquired operating leases. |
10. | Adjustment primarily reflects the elimination of Oritani Financial Corp. shareholders’ equity. |
Nine Months Ended | Year Ended | |||||||||
September 30, 2019 (in thousands) | December 31, 2018 (in thousands) | |||||||||
11. | Yield adjustment for interest income on loans | $ | 1,050 | $ | 469 | |||||
12. | Yield adjustment for interest income on investment securities | (344) | (185) | |||||||
13. | Yield adjustment for interest expense on interest bearing deposits | (541) | (721) | |||||||
14. | Yield adjustment for interest expense on borrowings | (2,005) | (2,297) |
15. | Adjustment reflects the net increase in amortization of other intangible assets from the acquired other intangible assets. |
16. | Represents income tax expense on the pro-forma adjustments at the estimated rate of 29.04 percent for the nine months ended September 30, 2019 and 28.38 percent for the year ended December 31, 2018. |
17. | Number of basic and diluted common shares outstanding for Oritani is the weighted average share count aligned with Valley’s reporting period. |
18. | Adjustment reflects the additional number of basic and diluted common shares issued by Valley which is reduced by the number of common shares related to the termination of Oritani’s Employee Stock Ownership Plan loan balance. |