8-K
ENTERPRISE FINANCIAL SERVICES CORP (EFSC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
November 9, 2021
ENTERPRISE FINANCIAL SERVICES CORP
(Exact name of registrant as specified in itscharter)
| Delaware | 001-15373 | 43-1706259 |
|---|---|---|
| (State or Other Jurisdiction <br><br>of Incorporation) | (Commission <br><br>File Number) | (IRS Employer <br><br>Identification No.) |
| 150 N. Meramec Avenue St. Louis, Missouri | 63105 | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code
(314) 725-5500
Not applicable
(Former name or former address, if changed sincelast report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, par value $0.01 per share | EFSC | Nasdaq Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
| Item 5.03 | Amendments to Articles of Incorporation or Bylaws; Changein Fiscal Year |
|---|
On November 9, 2021, Enterprise Financial Services Corp, a Delaware corporation, or Enterprise, filed a Certificate of Elimination of Certificate of Designation, Preferences and Rights, referred to as the Certificate of Elimination, with the Secretary of State of the State of Delaware. The Certificate of Elimination eliminates Enterprise’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A, from Enterprise’s Certificate of Incorporation, as amended. Prior to filing the Certificate of Elimination, no shares of Enterprise’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A were outstanding. A copy of the Certificate of Elimination is included as Exhibit 3.1 to this Current Report on Form 8-K and is incorporated herein by reference.
| Item 9.01 | Financial Statements and Exhibits |
|---|
Enterprise is filing in this Current Report on Form 8-K certain financial statements and pro forma financial information related to the merger of First Choice Bancorp, or First Choice, with and into Enterprise, or the merger, that was previously included in, or otherwise incorporated by reference into, the Registration Statement on Form S-4 (Registration No. 333-256265) filed by Enterprise with the Securities and Exchange Commission, or SEC, on May 18, 2021, as amended on June 2, 2021 and declared effective on June 4, 2021, in connection with the merger. Additional information regarding the consideration exchanged, First Choice assets acquired and liabilities assumed as a result of the merger, as well as certain other pro forma information related to the merger, are included in Note 2 to Enterprise's unaudited condensed consolidated financial statements included in its Quarterly Report on Form 10-Q for the period ended September 30, 2021, which was filed with the SEC on November 4, 2021.
| (a) | Financial Statements of Business Acquired |
|---|
The audited consolidated financial statements of First Choice as of and for the year ended December 31, 2020, as well as the accompanying notes thereto and the related Report of Independent Registered Public Accounting Firm, are filed as Exhibit 99.1 and incorporated herein by reference.
The unaudited consolidated financial statements of First Choice as of and for the three months ended March 31, 2021, as well as the accompanying notes thereto, are filed as Exhibit 99.2 and incorporated herein by reference.
| (b) | Pro Forma Financial Information |
|---|
The following unaudited pro forma condensed combined consolidated financial statements giving effect to the merger is filed as Exhibit 99.3 attached hereto:
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ENTERPRISE FINANCIAL SERVICES CORP | |
|---|---|
| Date: November 9, 2021 | |
| /s/ Troy R. Dumlao | |
| Troy R. Dumlao | |
| Senior Vice President and Chief Accounting Officer |
Exhibit 3.1
CERTIFICATEOF ELIMINATION OF THE CERTIFICATE OF DESIGNATION,
PREFERENCES,AND RIGHTS OF THE
FixedRate Cumulative Perpetual Preferred Stock, Series A
of
ENTERPRISEFINANCIAL SERVICES CORP
The undersigned, on behalf of Enterprise Financial Services Corp, a Delaware corporation (the “Corporation”), does hereby certify that, pursuant to the provisions of Section 151(g) of the General Corporation Law of the State of Delaware (the “General Corporation Law”), the Corporation’s Board of Directors (the “Board”), in accordance with Section 141 of the General Corporation Law and the Corporation’s Certificate of Incorporation, as amended (the “Certificate of Incorporation”), adopted resolutions by unanimous written consent eliminating the designation and the relative powers, preferences, rights, qualifications, limitations and restrictions of the Corporation’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A. These composite resolutions eliminating the designation and relative powers, preferences, rights, qualifications, limitations and restrictions of such Fixed Rate Cumulative Perpetual Preferred Stock, Series A are as follows:
WHEREAS, the Board, at a meeting of its members held on December 17, 2008, adopted a resolution providing for the designation, preferences and relative, participating and optional or other rights, and qualifications, limitations or restrictions thereof, of thirty-five thousand (35,000) shares of the Corporation’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A, par value $.01 per share (the “Series A Cumulative Preferred Stock”) (such certificate of designation, the “Series A Cumulative Preferred Certificate”);
WHEREAS, no shares of Series A Cumulative Preferred Stock currently remain outstanding and no such shares of Series A Cumulative Preferred Stock shall be issued in the future; and
WHEREAS, the Board deems it to be advisable and in the best interests of the Corporation and its stockholders to withdrawal the Series A Cumulative Preferred Certificate and return all of the shares of preferred stock of the Corporation (“Preferred Stock”) previously designated as Series A Cumulative Preferred Stock to authorized Preferred Stock available for issuance in accordance with the Corporation’s Certificate of Incorporation and Bylaws pursuant to a Certificate of Elimination of the Certificate of Designation, Preferences and Rights of the Fixed Rate Cumulative Perpetual Preferred Stock, Series A, to be filed with the Secretary of State for the State of Delaware.
NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority granted to and vested in the Board in accordance with the provisions of the Certificate of Incorporation, the Board hereby withdraws the Series A Cumulative Preferred Stock and returns all previously designated shares of Series A Cumulative Preferred Stock to their status as authorized Preferred Stock available for issuance as determined by the Board, and that the Authorized Officers be, and each of them individually hereby is, authorized, empowered and directed to file with the Secretary of State of the State of Delaware a Certificate of Elimination of the Certificate of Designation, Preferences and Rights of the Fixed Rate Cumulative Perpetual Preferred Stock, Series A (the “Certificate of Elimination”), as such Authorized Officer shall deem necessary or advisable to carry out the purposes of this resolution; and
RESOLVED FURTHER, that when such Certificate of Elimination becomes effective upon acceptance of the Secretary of State of the State of Delaware, it shall have the effect of eliminating from the Corporation’s current Certificate of Incorporation all matters set forth in the Series A Cumulative Preferred Certificate with respect to the Series A Cumulative Preferred Stock.
[Signature Page Follows]
2
IN WITNESS WHEREOF, this Certificate of Elimination of Certificate of Designation, Preferences, and Rights of the Fixed Rate Cumulative Perpetual Preferred Stock, Series A of Enterprise Financial Services Corp has been executed by a duly authorized officer of the Corporation on this 9th day of November, 2021.
| ENTERPRISE FINANCIAL SERVICES CORP |
|---|
| By: /s/ Keene S. Turner |
| Name: Keene S. Turner |
| Title: Executive Vice President and Chief Financial Officer |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLICACCOUNTING FIRM
We consent to the incorporation by reference in this Current Report on Form 8-K and the incorporation by reference in the automatic shelf registration statement (No. 333-237612) and related prospectus of Enterprise Financial Services Corp of our report, dated March 15, 2021, relating to our audit of the consolidated financial statements, appearing in the Annual Report on Form 10-K of First Choice Bancorp and Subsidiary for the years ended December 31, 2020 and 2019, and to the reference to us under the heading “Experts” in the Prospectus Supplement.
/s/ Eide Bailly LLP
Laguna Hills, California
November 9, 2021
Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIALSTATEMENTS
(As previously included in, or otherwise incorporatedby reference into, the Registration Statement on Form S-4 (Registration No. 333-256265) filed by Enterprise Financial Services Corp. withthe Securities and Exchange Commission on May 18, 2021, as amended on June 2, 2021 and declared effective on June 4, 2021.)
The following Unaudited Pro Forma Condensed Combined Financial Statements are based on the separate historical financial statements of Enterprise Financial Services Corp, or Enterprise, and First Choice Bancorp, or First Choice, and give effect to the merger of Enterprise and First Choice, with Enterprise as the surviving institution (which is referred to as the merger), including pro forma assumptions and adjustments related to the merger, as described in the accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Statements.
The Unaudited Pro Forma Condensed Combined Consolidated Statement of Financial Condition as of March 31, 2021 is presented as if the merger occurred on December 31, 2020. The Unaudited Pro Forma Condensed Combined Consolidated Statements of Income for the year ended December 31, 2020 and the quarter ended March 31, 2021 are presented as if the merger occurred on January 1, 2020.
A final determination of the fair value of First Choice’s assets and liabilities will be based First Choice’s actual assets and liabilities as of the closing date of the merger and, therefore, cannot be made prior to the consummation of the merger. In addition, the value of the stock consideration will be based on the closing price of Enterprise common stock on the date the merger becomes effective. The closing price of Enterprise common stock on May 3, 2021 was used for purposes of presenting the Unaudited Pro Forma Condensed Combined Financial Statements.
The Unaudited Pro Forma Condensed Combined Financial Statements have been prepared to give effect to the following:
| · | the acquisition of First Choice by Enterprise under the provision of the Financial Accounting Standards<br>Board (FASB) Accounting Standards Codification, ASC 805, Business Combinations where the assets and liabilities of First Choice will be<br>recorded by Enterprise at their respective fair values as of the date the merger is completed; |
|---|---|
| · | the distribution of shares of Enterprise common stock to First Choice shareholders in exchange for shares<br>of First Choice common stock at an exchange ratio of 0.6603; |
| --- | --- |
| · | certain reclassifications to conform historical financial presentation of First Choice to Enterprise;<br>and |
| --- | --- |
| · | transaction costs in connection with the merger. |
| --- | --- |
The actual amounts recorded as of the completion of the merger may differ materially from the information presented in these Unaudited Pro Forma Condensed Combined Financial Statements as a result of:
| · | changes in the trading price for Enterprise common stock; |
|---|---|
| · | net cash used or generated in Enterprise’s or First Choice’s operations between the signing of the merger agreement and<br>completion of the merger; |
| --- | --- |
| · | changes in the fair values of Enterprise’s or First Choice’s assets and liabilities; |
| --- | --- |
| · | other changes in Enterprise’s or First Choice’s net assets that occur prior to the completion of the merger, which could<br>cause material changes in the information presented below; and |
| --- | --- |
| · | the actual financial results of the combined company. |
| --- | --- |
The Unaudited Pro Forma Condensed Combined Financial Statements are presented for illustrative purposes only. The Unaudited Pro Forma Condensed Combined Financial Statements are not necessarily, and should not be assumed to be, an indication of the results that would have been achieved had the merger been completed as of the dates indicated or that may be achieved in the future. The Unaudited Pro Forma Condensed Combined Financial Statements also do not consider any potential impacts of current market conditions on revenues, potential revenue enhancements, anticipated cost savings and expense efficiencies, or asset dispositions, among other factors.
The preparation of the Unaudited Pro Forma Condensed Combined Financial Statements and related adjustments required management to make certain assumptions and estimates. The Unaudited Pro Forma Condensed Combined Financial Statements should be read together with:
| · | the accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Statements; |
|---|---|
| · | Enterprise’s separate audited historical consolidated financial statements and accompanying notes as of and for the year<br> ended December 31, 2020, included in Enterprise’s Annual<br> Report on Form 10-K for the year ended December 31, 2020, and Enterprise’s separate unaudited historical<br> consolidated financial statements and accompanying notes as of and for the quarter ended March 31, 2021, included in<br> Enterprise’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021; |
| --- | --- |
| · | First Choice’s separate audited historical consolidated financial statements and accompanying notes as of and for the year<br> ended December 31, 2020, included in First Choice’s Annual Report on Form 10-K for the year ended December 31, 2020,<br> incorporated by reference in this Current Report on Form 8-K, incorporated by reference herein; |
| --- | --- |
| · | First Choice’s separate unaudited historical consolidated financial statements and accompanying notes as of and for the<br> quarter ended March 31, 2021, included in First Choice’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, incorporated by reference in this Current Report on Form 8-K, incorporated by reference herein; and |
| --- | --- |
| · | other information pertaining to Enterprise and First Choice contained in or incorporated by reference into this document. |
| --- | --- |
2
Unaudited Pro Forma Condensed Combined Consolidated
Statement of Financial Condition
| March 31, 2021 | Pro Forma Adjustments | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Enterprise | First Choice | |||||||||
| (In thousands, except share and per share data) | (as reported) | (as reported) | Purchase Accounting Adjustments | Notes | Pro Forma Combined | |||||
| Assets | ||||||||||
| Cash and cash equivalents | 883,815 | 309,446 | (26,062 | ) | [A] | 1,167,199 | ||||
| Investment securities | 1,412,719 | 38,724 | — | 1,451,443 | ||||||
| Net loans and leases | 7,165,785 | 2,021,997 | (13,827 | ) | [B] | 9,173,955 | ||||
| Goodwill | 260,567 | 73,425 | 97,745 | [C] | 431,737 | |||||
| Intangible assets, net | 21,670 | 4,768 | (119 | ) | [D] | 26,319 | ||||
| Other assets | 446,143 | 52,384 | 8,307 | [E] | 506,834 | |||||
| Total assets | $ | 10,190,699 | $ | 2,500,744 | $ | 66,044 | $ | 12,757,487 | ||
| Liabilities and Shareholders' Equity | ||||||||||
| Deposits | 8,515,444 | 1,895,550 | 326 | [F] | 10,411,320 | |||||
| Borrowings | 483,167 | 304,998 | 458 | [G] | 788,623 | |||||
| Other liabilities | 99,591 | 12,784 | — | 112,375 | ||||||
| Total liabilities | 9,098,202 | 2,213,332 | 784 | 11,312,318 | ||||||
| Total shareholders' equity | 1,092,497 | 287,412 | 65,260 | 1,445,169 | ||||||
| Total liabilities and shareholders' equity | $ | 10,190,699 | $ | 2,500,744 | $ | 66,044 | $ | 12,757,487 |
Unaudited Pro Forma Condensed Combined Consolidated
Statement of Income
| Year Ended <br><br>December<br> 31, 2020 | Pro Forma Adjustments | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Enterprise | First Choice | |||||||||
| (In thousands, except share and per share data) | (as reported) | (as reported) | Purchase Accounting Adjustments | Notes | Pro Forma Combined | |||||
| Interest income: | ||||||||||
| Interest and fees on loans | 270,238 | 89,210 | (1,332 | ) | [H] | 358,116 | ||||
| Interest on debt securities | 33,026 | 777 | - | 33,803 | ||||||
| Interest on interest-earning deposits | 620 | 825 | - | 1,445 | ||||||
| Dividends on equity securities | 895 | 803 | - | 1,698 | ||||||
| Total interest income | 304,779 | 91,615 | (1,332 | ) | 395,062 | |||||
| Interest expense: | ||||||||||
| Deposits | 21,049 | 5,147 | (132 | ) | [I] | 26,064 | ||||
| Borrowings | 13,729 | 1,732 | (153 | ) | [J] | 15,308 | ||||
| Total interest expense | 34,778 | 6,879 | (285 | ) | 41,372 | |||||
| Net interest income | 270,001 | 84,736 | (1,047 | ) | 353,690 | |||||
| Provision for credit losses | 65,398 | 5,900 | 22,674 | [K] | 93,972 | |||||
| Net interest income after provision for credit losses | 204,603 | 78,836 | (23,721 | ) | 259,718 | |||||
| Noninterest income: | ||||||||||
| Service charges on deposit accounts | 11,717 | 1,965 | - | 13,682 | ||||||
| Wealth Management revenue | 9,732 | - | - | 9,732 | ||||||
| Card services revenue | 9,481 | - | - | 9,481 | ||||||
| Tax credit income | 6,611 | - | - | 6,611 | ||||||
| Gain on sale of loans | - | 4,653 | - | 4,653 | ||||||
| Miscellaneous income | 16,962 | 1,989 | - | 18,951 | ||||||
| Total noninterest income | 54,503 | 8,607 | - | 63,110 | ||||||
| Noninterest expense: | ||||||||||
| Employee compensation and benefits | 92,288 | 28,626 | - | 120,914 | ||||||
| Occupancy | 13,457 | 4,476 | - | 17,933 | ||||||
| Data processing | 9,050 | 3,653 | - | 12,703 | ||||||
| Professional fees | 3,940 | 1,875 | - | 5,815 | ||||||
| Merger related expenses | 4,174 | - | - | 4,174 | ||||||
| Other | 44,250 | 7,838 | 23,374 | [L] | 75,462 | |||||
| Total noninterest expense | 167,159 | 46,468 | 23,374 | 237,001 | ||||||
| Income before income tax expense | 91,947 | 40,975 | (47,095 | ) | 85,827 | |||||
| Income tax expense | 17,563 | 12,024 | (10,571 | ) | [M] | 19,016 | ||||
| Net income | $ | 74,384 | $ | 28,951 | $ | (36,524 | ) | $ | 66,811 | |
| Earnings per common share | ||||||||||
| Basic | $ | 2.76 | $ | 2.48 | $ | 1.92 | ||||
| Diluted | $ | 2.76 | $ | 2.47 | $ | 1.92 | ||||
| Weighted average basic shares | 26,953,826 | 11,569,128 | (3,761,419 | ) | [N] | 34,761,535 | ||||
| Weighted average diluted shares | 26,988,710 | 11,617,780 | (3,810,071 | ) | [N] | 34,796,419 | ||||
| Shares outstanding | 31,210,213 | 11,705,684 | (3,897,975 | ) | [N] | 39,017,922 |
Unaudited Pro Forma Condensed Combined Consolidated
Statement of Income
| Three months endedMarch 31, 2021 | Pro Forma Adjustments | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Inthousands, except share and per share data) | Enterprise (as reported) | First Choice (asreported) | PurchaseAccounting Adjustments | Notes | ProForma Combined | |||||||
| Interest income: | ||||||||||||
| Interest<br>and fees on loans | 76,973 | 24,267 | (279 | ) | [H] | 100,961 | ||||||
| Interest<br>on debt securities | 7,619 | 152 | - | 7,771 | ||||||||
| Interest<br>on interest-earning deposits | 189 | 160 | - | 349 | ||||||||
| Dividends<br>on equity securities | 179 | 213 | - | 392 | ||||||||
| Total<br>interest income | 84,960 | 24,792 | (279 | ) | 109,473 | |||||||
| Interest<br>expense: | ||||||||||||
| Deposits | 2,663 | 588 | (33 | ) | [I] | 3,218 | ||||||
| Borrowings | 3,174 | 373 | (38 | ) | [J] | 3,509 | ||||||
| Total<br>interest expense | 5,837 | 961 | (71 | ) | 6,727 | |||||||
| Net<br>interest income | 79,123 | 23,831 | (208 | ) | 102,746 | |||||||
| Provision<br>for credit losses | 46 | - | - | 46 | ||||||||
| Net<br>interest income after provision for credit losses | 79,077 | 23,831 | (208 | ) | 102,700 | |||||||
| Noninterest<br>income: | ||||||||||||
| Service<br>charges on deposit accounts | 3,084 | 441 | - | 3,525 | ||||||||
| Wealth<br>Management revenue | 2,483 | - | - | 2,483 | ||||||||
| Card<br>services revenue | 2,496 | - | - | 2,496 | ||||||||
| Tax credit<br>income | (1,041 | ) | - | - | (1,041 | ) | ||||||
| Gain<br>on sale of loans | - | 706 | - | 706 | ||||||||
| Miscellaneous<br>income | 4,268 | 1,107 | - | 5,375 | ||||||||
| Total<br>noninterest income | 11,290 | 2,254 | - | 13,544 | ||||||||
| Noninterest<br>expense: | ||||||||||||
| Employee<br>compensation and benefits | 29,562 | 7,578 | - | 37,140 | ||||||||
| Occupancy | 3,751 | 1,083 | - | 4,834 | ||||||||
| Data<br>processing | 2,890 | 1,022 | - | 3,912 | ||||||||
| Professional<br>fees | 988 | 437 | - | 1,425 | ||||||||
| Merger<br>related expenses | 3,142 | - | - | 3,142 | ||||||||
| Other | 12,551 | 1,977 | 2 | [L] | 14,530 | |||||||
| Total<br>noninterest expense | 52,884 | 12,097 | 2 | 64,983 | ||||||||
| Income<br>before income tax expense | 37,483 | 13,988 | (210 | ) | 51,261 | |||||||
| Income<br>tax expense | 7,557 | 4,230 | (53 | ) | [M] | 11,734 | ||||||
| Net<br>income | $ | 29,926 | $ | 9,758 | $ | (157 | ) | $ | 39,527 | |||
| Earnings per common share | ||||||||||||
| Basic | $ | 0.96 | $ | 0.83 | $ | 1.01 | ||||||
| Diluted | $ | 0.96 | $ | 0.82 | $ | 1.01 | ||||||
| Weighted average basic<br>shares | 31,247,379 | 11,614,333 | (3,806,624 | ) | [N] | 39,055,088 | ||||||
| Weighted average diluted<br>shares | 31,306,033 | 11,673,475 | (3,865,766 | ) | [N] | 39,113,742 | ||||||
| Shares outstanding | 31,259,183 | 11,824,487 | (4,016,778 | ) | [N] | 39,066,892 | ||||||
| [A] | Adjustments to record<br> combined merger costs and the cash settlement of First Choice stock options. | |||||||||||
| --- | --- | |||||||||||
| [B] | Adjustments to record<br> loans at fair value. Adjustments include: | |||||||||||
| Loan credit mark | $ | (33,028 | ) | |||||||||
| --- | --- | --- | --- | |||||||||
| Loan interest rate mark | 19,204 | |||||||||||
| Reversal of First Choice's existing loan fair value mark | 3,400 | |||||||||||
| Reversal of First Choice's allowance for loan losses | 19,271 | |||||||||||
| Establishment of allowance on non-PCD loans | (22,674 | ) | ||||||||||
| Total loan adjustment | $ | (13,827 | ) | |||||||||
| [C] | Adjustments to eliminate First Choice goodwill of $73.4 million and reflect $171.2 million of goodwill for the amount of<br> consideration paid in excess of fair value of asset received and liabilities assumed. | |||||||||||
| --- | --- | |||||||||||
| [D] | Adjustments to eliminate First Choice core deposit intangible of $4.8 million and reflect a new core deposit intangible of<br> $4.6 million to be amortized over 10 years using of sum of the years digit methodology | |||||||||||
| [E] | Adjustment to reflect the tax effects of the fair value adjustments and deductible merger-related costs using a 25%<br> tax rate. | |||||||||||
| [F] | Adjustment to record time deposits at fair value. | |||||||||||
| [G] | Adjustment to record borrowed funds at fair value. | |||||||||||
| [H] | Estimated loan interest yield adjustment and elimination of First Choice existing purchase accounting accretion. | |||||||||||
| [I] | Estimated time deposit fair value amortization. | |||||||||||
| [J] | Estimated borrowings fair value amortization. | |||||||||||
| [K] | Adjustment to record initial lifetime allowance for credit losses on First Choice’s non-purchase credit deteriorated loan portfolio. | |||||||||||
| [L] | Core deposit intangible amortization and merger related costs, including: | |||||||||||
| Full Year <br><br>2020 | First Quarter<br><br> 2021 | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | ||||||
| Core deposit intangible amortization | $ | 845 | $ | 190 | ||||||||
| Reversal of First Choice core deposit intangible amortization | (771 | ) | (188 | ) | ||||||||
| Merger related costs | 23,300 | - | ||||||||||
| Total "other" noninterest expense | $ | 23,374 | $ | 2 | ||||||||
| [M] | Tax effect on the pro forma adjustments at an assumed 25% effective combined federal and state tax rate. | |||||||||||
| --- | --- | |||||||||||
| [N] | Adjustment to reflect the estimated issuance of 7,807,709 shares of Enterprise stock based on First<br> Choice’s shares outstanding on March 31, 2021 of 11,824,487 and the fixed exchange ratio of .6603. |