8-K/A
UNITED BANKSHARES INC/WV (UBSI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
May 1, 2020
United Bankshares, Inc.
(Exact name of registrant as specified in its charter)
| West Virginia | No. 002-86947 | 55-0641179 |
|---|---|---|
| (State or other jurisdiction of<br> <br>incorporation or organization) | (Commission<br> <br>File Number) | (I.R.S. Employer<br> <br>Identification No.) |
300 United Center
500 Virginia Street, East
Charleston, West Virginia 25301
(Address of Principal Executive Offices)
(304) 424-8800
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or address, if changed since last 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)) |
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br> <br>Symbol(s) | Name of each exchange<br> <br>on which registered |
|---|---|---|
| Common Stock, par value $2.50 per share | UBSI | 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. ☐
Explanatory Note
This current report on Form 8-K/A is filed as an amendment to the current report on Form 8-K of United Bankshares, Inc. (“United”) filed with the Securities and Exchange Commission (the “SEC”) on May 1, 2020 (the “Initial Report”) relating to United’s acquisition of Carolina Financial Corporation (“Carolina Financial”). This current report is filed to provide, and amends the Initial Report to include, additional acquisition information under Item 2.01 and the pro forma financial information required by Item 9.01(b) of Form 8-K. The pro forma information is included as an exhibit pursuant to Item 9.01(d) of Form 8-K.
Item 2.01. Completion of Acquisition or Disposition of Assets
As a result of the acquisition of Carolina Financial, United issued approximately 28.0 million shares of its common stock for all of Carolina Financial’s outstanding common stock, restricted stock and restricted stock units, and issued options to purchase approximately 117 thousand shares of its common stock upon conversion of Carolina Financial’s stock options. Cash in the amount of $2.47 million was paid by Carolina Financial to holders of outstanding stock options, restricted stock grants, restricted stock unit grants and other awards of Carolina Financial common stock subject to vesting who elected to receive cash consideration in lieu of United common stock. United paid approximately $47 thousand in cash to holders of Carolina Financial common stock and restricted stock in lieu of fractional shares of United common stock. The payment of cash in lieu of fractional shares was funded by cash on hand at United.
Item 9.01 Financial Statements and Exhibits.
| (b) | Pro forma financial information. |
|---|
The required unaudited pro forma condensed financial information of United and Carolina Financial as of and for the three-month period ended March 31, 2020 and for the twelve-month period ended December 31, 2019, giving effect to the acquisition of Carolina Financial, is attached hereto as Exhibit 99.1 and incorporated in this Item 9.01(b) by reference.
| (c) | None. |
|---|---|
| (d) | Exhibits. |
| --- | --- |
The following exhibits are filed with this Current Report on Form 8-K:
| Exhibit <br>No. | Exhibit Description | |
|---|---|---|
| 99.1 | Unaudited pro forma financial information as of and for the three-month period ended March 31, 2020 and for the twelve-month period ended December 31, 2019. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| UNITED BANKSHARES, INC. | ||
|---|---|---|
| Date: June 16, 2020 | By: | /s/ W. Mark Tatterson |
| W. Mark Tatterson, Executive Vice | ||
| President and Chief Financial Officer |
EX-99.1
Exhibit 99.1
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial statements are based on the separate historical financial statements of United Bankshares, Inc. (“United Bankshares”) and Carolina Financial Corporation (“Carolina Financial”) after giving effect to the merger, the issuance of United common stock in connection therewith and the other transactions contemplated by the Agreement and Plan of Merger dated as of November 17, 2019 by and between United Bankshares and Carolina Financial.
The unaudited pro forma condensed combined balance sheet as of March 31, 2020 is presented as if the merger with Carolina Financial and the transactions that occurred therewith had occurred on March 31, 2020. The unaudited pro forma condensed combined income statements for the year ended December 31, 2019 and the three months ended March 31, 2020 are presented as if the merger and transactions that occurred therewith had occurred on January 1, 2019. The historical consolidated financial information has been adjusted to reflect factually supportable items that are directly attributable to the merger and, with respect to the income statements only, expected to have a continuing impact on consolidated results of operations.
The unaudited pro forma condensed combined financial information has been prepared using the acquisition method of accounting for business combinations under accounting principles generally accepted in the United States. United Bankshares is the acquirer for accounting purposes. United Bankshares has not had sufficient time to completely evaluate the fair value of the assets and liabilities as well identifiable intangible assets of Carolina Financial. Accordingly, the unaudited pro forma adjustments, including the allocations of the purchase price, are preliminary and have been made solely for the purpose of providing unaudited pro forma condensed combined financial information.
A final determination of the acquisition consideration and fair values of Carolina Financial’s assets and liabilities will be based on the actual net tangible and intangible assets of Carolina Financial that existed as of the date of completion of the merger, which was after the close of business on May 1, 2020. Consequently, amounts preliminarily allocated to all assets and liabilities, goodwill and identifiable intangibles could change from those allocations used in the unaudited pro forma condensed combined financial statements presented and could result in a change in amortization of acquired intangible assets and amortization or accretion of other fair value adjustments.
In connection with the integration of the operations of United Bankshares and Carolina Financial, United Bankshares will incur nonrecurring charges, such as costs associated with systems implementation, severance and other costs related to exit or disposal activities. United Bankshares is not fully able to determine the timing, nature and amount of these charges as of the date of this filing. However, these charges will affect the results of operations of United Bankshares, in the period in which they are incurred. The unaudited pro forma condensed combined financial statements do not include the effects of the costs associated with any restructuring or integration activities resulting from the transaction, as they are nonrecurring in nature and were not factually supportable at the time that the unaudited pro forma condensed combined financial statements were prepared. Additionally, the unaudited pro forma adjustments do not give effect to any nonrecurring or unusual restructuring charges that may be incurred as a result of the integration of the two companies or any anticipated disposition of assets that may result from such integration.
The unaudited pro forma condensed combined financial statements are provided for informational 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 transaction been completed as of the dates indicated or that may be achieved in the future. 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; |
|---|---|
| • | United Bankshares’ separate audited historical consolidated financial statements and accompanying notes as<br>of and for the year ended December 31, 2019, included in United Bankshares’ Annual Report on Form 10-K for the year ended December 31, 2019; |
| --- | --- |
| • | Carolina Financial’s separate audited historical consolidated financial statements and accompanying notes as<br>of and for the year ended December 31, 2019, included in Carolina Financial’s Annual Report on Form 10-K for the year ended December 31, 2019; |
| --- | --- |
| • | United Bankshares’ separate unaudited historical consolidated financial statements and accompanying notes as<br>of and for the three months ended March 31, 2020, included in United Bankshares’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2020; and |
| --- | --- |
| • | other information pertaining to United Bankshares and Carolina Financial in previous filings with the Securities<br>and Exchange Commission. |
| --- | --- |
UNITED BANKSHARES
SELECTED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION (UNAUDITED)
(Dollars in thousands)
| Three Months EndedMarch 31, 2020 | Year EndedDecember 31, 2019 | |||
|---|---|---|---|---|
| INCOME STATEMENT: | ||||
| Net interest income | $ | 184,536 | $ | 725,911 |
| Provision for loan losses | 30,089 | 35,866 | ||
| Net interest income after provision for loan losses | 154,447 | 690,045 | ||
| Noninterest income | 48,111 | 197,594 | ||
| Noninterest expense | 132,010 | 487,825 | ||
| Income before income taxes | 70,548 | 399,814 | ||
| Income taxes | 14,355 | 81,049 | ||
| Net income | $ | 56,194 | $ | 318,765 |
| As of March 31, 2020 | ||||
| BALANCE SHEET: | ||||
| Cash and cash equivalents | $ | 1,628,407 | ||
| Net loans | 16,870,759 | |||
| Total assets | 25,246,402 | |||
| Deposits | 17,602,333 | |||
| Borrowings | 3,115,342 | |||
| Shareholders’ equity | 4,149,125 |
PRO FORMA CONDENSED BALANCE SHEET (UNAUDITED)
UNITED BANKSHARES
As ofMarch 31, 2020
| (In thousands) | As<br>Reported | UnitedBankshares &<br>CarolinaFinancial<br>Pro Forma<br>Combined | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| United<br>Bankshares | CarolinaFinancial | Proforma<br>Adjustments | ||||||||||||
| ASSETS | ||||||||||||||
| Cash and due from bank | $ | 248,238 | $ | 63,707 | $ | (2,514 | ) | (a | ) | $ | 309,431 | |||
| Interest-bearing deposits with other banks | 1,087,772 | 230,381 | 1,318,153 | |||||||||||
| Federal funds sold and securities purchased under agreements to resell | 823 | 0 | 823 | |||||||||||
| Securities available for sale | 2,417,521 | 829,851 | 3,247,372 | |||||||||||
| Securities held to maturity | 1,226 | 0 | 1,226 | |||||||||||
| Securities - equities | 9,013 | 0 | 9,013 | |||||||||||
| Securities - other | 245,655 | 23,605 | 269,260 | |||||||||||
| Loans held for sale | 503,514 | 39,792 | 543,306 | |||||||||||
| Loans (net of unearned income) | 13,855,558 | 3,189,623 | 4,447 | (b | ) | 17,049,628 | ||||||||
| Less: allowance for loan losses | (154,923 | ) | (19,517 | ) | (4,429 | ) | (c | ) | (178,869 | ) | ||||
| Net loans | 13,700,635 | 3,170,106 | 18 | 16,870,759 | ||||||||||
| Bank premises and equipment | 96,169 | 85,318 | 181,487 | |||||||||||
| Operating lease<br>right-of-use assets | 57,280 | 17,767 | 75,047 | |||||||||||
| Goodwill | 1,478,014 | 184,259 | 69,090 | (d | ) | 1,731,363 | ||||||||
| Mortgage servicing rights | 0 | 23,601 | 23,601 | |||||||||||
| Other intangibles | 28,354 | 15,778 | 6,412 | (e | ) | 50,544 | ||||||||
| Other assets | 496,439 | 118,175 | 403 | (f | ) | 615,017 | ||||||||
| Total Assets | $ | 20,370,653 | $ | 4,802,340 | $ | 73,409 | $ | 25,246,402 | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||
| Noninterest-bearing deposits | $ | 4,837,538 | $ | 224,913 | $ | 5,062,451 | ||||||||
| Interest-bearing deposits | 9,176,630 | 3,356,330 | 6,922 | (g | ) | 12,539,882 | ||||||||
| Total deposits | 14,014,168 | 3,581,243 | 6,922 | 17,602,333 | ||||||||||
| Federal funds purchased | 0 | 0 | 0 | |||||||||||
| Securities sold under agreements to repurchase | 124,561 | 0 | 124,561 | |||||||||||
| FHLB borrowings | 2,326,282 | 384,000 | (970 | ) | (h | ) | 2,709,312 | |||||||
| Other long-term borrowings | 236,479 | 42,786 | 2,204 | (i | ) | 281,469 | ||||||||
| Operating lease liabilities | 60,887 | 18,197 | 79,084 | |||||||||||
| Other liabilities | 264,574 | 35,187 | 757 | (j | ) | 300,518 | ||||||||
| Total Liabilities | 17,026,951 | 4,061,413 | 8,913 | 21,097,277 | ||||||||||
| SHAREHOLDERS’ EQUITY: | ||||||||||||||
| Preferred stock | 0 | 0 | 0 | |||||||||||
| Common stock | 264,211 | 248 | 69,831 | (k | )(l) | 334,290 | ||||||||
| Surplus | 2,141,266 | 514,408 | 233,343 | (k | )(l) | 2,889,017 | ||||||||
| Retained earnings | 1,092,827 | 231,956 | (244,363 | ) | (k | ) | 1,080,420 | |||||||
| Accumulated other comprehensive (loss) income | (16,171 | ) | (5,685 | ) | 5,685 | (k | ) | (16,171 | ) | |||||
| Treasury stock | (138,431 | ) | 0 | (138,431 | ) | |||||||||
| Total Shareholders’ equity | 3,343,702 | 740,927 | 64,496 | 4,149,125 | ||||||||||
| Total Liabilities and Shareholders’ Equity | $ | 20,370,653 | $ | 4,802,340 | $ | 73,409 | $ | 25,246,402 |
See notes to the unaudited pro forma condensed combined financial information.
PRO FORMA CONDENSED INCOME STATEMENT (UNAUDITED)
UNITED BANKSHARES
For theThree Months Ended March 31, 2020
| As Reported | UnitedBankshares &<br><br><br>Carolina | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (In thousands, except share data) | United<br>Bankshares | CarolinaFinancial | Pro Forma<br>Adjustments | Financial<br>ProForma<br>Combined | |||||||
| Interest income | $ | 180,482 | $ | 50,706 | $ | 1,030 | (m | ) | $ | 232,218 | |
| Interest expense | 38,964 | 9,873 | (1,155 | ) | (n | ) | 47,682 | ||||
| Net Interest Income | 141,518 | 40,833 | 2,185 | 184,536 | |||||||
| Provision for credit losses | 27,119 | 2,970 | 30,089 | ||||||||
| Net interest income after provision for credit losses | 114,399 | 37,863 | 2,185 | 154,447 | |||||||
| Non-interest income | 36,806 | 11,305 | 48,111 | ||||||||
| Non-interest expense | 101,133 | 32,091 | (1,214 | ) | (p | ) | 132,010 | ||||
| Income Before Income Taxes | 50,072 | 17,077 | 3,399 | 70,548 | |||||||
| Provision for income taxes | 9,889 | 3,674 | 791 | (q | ) | 14,354 | |||||
| Net Income | $ | 40,183 | $ | 13,403 | $ | 2,608 | $ | 56,194 | |||
| Net income per common share: | |||||||||||
| Basic | $ | 0.40 | $ | 0.54 | $ | 0.43 | |||||
| Diluted | $ | 0.40 | $ | 0.54 | $ | 0.43 | |||||
| Average common shares outstanding | |||||||||||
| Basic | 101,295,073 | 24,696,442 | 3,210,537 | (r | ) | 129,202,052 | |||||
| Diluted | 101,399,181 | 24,871,893 | 3,233,346 | (r | ) | 129,504,420 |
See notes to the unaudited pro forma condensed combined financial information.
PRO FORMA CONDENSED INCOME STATEMENT (UNAUDITED)
UNITED BANKSHARES
For theYear Ended December 31, 2019
| As Reported | Pro Forma<br>Adjustments | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (In thousands, except share data) | United<br>Bankshares | CarolinaFinancial | UnitedBankshares &<br>CarolinaFinancial<br>Pro Forma<br>Combined | ||||||||
| Interest income | $ | 762,562 | $ | 177,116 | $ | 4,119 | (m | ) | $ | 943,797 | |
| Interest expense | 184,640 | 37,866 | (4,620 | ) | (n | ) | 217,886 | ||||
| Net Interest Income | 577,922 | 139,250 | 8,739 | 725,911 | |||||||
| Provision for credit losses | 21,313 | 2,580 | 11,973 | (o | ) | 35,866 | |||||
| Net interest income after provision for credit losses | 556,609 | 136,670 | (3,234 | ) | 690,045 | ||||||
| Non-interest income | 150,484 | 47,110 | 197,594 | ||||||||
| Non-interest expense | 382,654 | 103,092 | 2,079 | (p | ) | 487,825 | |||||
| Income Before Income Taxes | 324,439 | 80,688 | (5,313 | ) | 399,814 | ||||||
| Provision for income taxes | 64,340 | 17,948 | (1,239 | ) | (q | ) | 81,049 | ||||
| Net Income | $ | 260,099 | $ | 62,740 | $ | (4,074 | ) | $ | 318,765 | ||
| Net income per common share: | |||||||||||
| Basic | $ | 2.55 | $ | 2.83 | $ | 2.52 | |||||
| Diluted | $ | 2.55 | $ | 2.80 | $ | 2.51 | |||||
| Average common shares outstanding | |||||||||||
| Basic | 101,585,599 | 22,168,082 | 2,881,851 | (r | ) | 126,635,532 | |||||
| Diluted | 101,852,577 | 22,385,127 | 2,910,067 | (r | ) | 127,147,771 |
See notes to the unaudited pro forma condensed combined financial information.
NOTE A – BASIS OF PRESENTATION
After the close of business on May 1, 2020, United Bankshares consummated its merger with Carolina Financial. Carolina Financial was merged with and into United Bankshares. At the effective time of the merger, Carolina Financial ceased to exist and United Bankshares survived and continues to exist as a West Virginia corporation.
At the effective time of the merger, each outstanding share of common stock of Carolina Financial, restricted stock and restricted stock units was converted into the right to receive 1.13 shares of United Bankshares common stock, par value $2.50 per share. Each outstanding Carolina Financial stock option, at such option holder’s election, (i) was converted into an option to purchase United Bankshares common stock or (ii) was entitled to receive cash consideration equal to the difference between (a) the option’s exercise price and (b) $28.99, representing the volume weighted average trading price of the Carolina Financial common stock on NASDAQ for the twenty full trading days ending on the second trading day immediately preceding the closing date (the “CFC Closing Price”) multiplied by the number of shares of Carolina Financial common stock subject to such stock options. Each restricted stock grant, restricted stock unit grant or any other award of a share of Carolina Financial common stock subject to vesting, repurchase or other lapse restriction under a Carolina Financial stock plan (other than a stock option) (each, a “Stock Award”) that was outstanding immediately prior to the effective time of the Merger, vested in accordance with the terms of the Carolina Financial stock plan and at the election of the holder (i) converted into the right to receive shares of United Bankshares common stock based on the 1.13 exchange ratio or (ii) converted into cash in an amount equal to the CFC Closing Price multiplied by the shares of Carolina Financial common stock subject to the Stock Award.
As a result of the merger, United Bankshares issued approximately 28.0 million shares of its common stock for all of Carolina Financial’s outstanding common stock, restricted stock and restricted stock units, and issued options to purchase approximately 117 thousand shares of its common stock upon conversion of Carolina Financial’s stock options. Cash in the amount of $2.47 million was paid by Carolina Financial to holders of outstanding stock options, restricted stock grants, restricted stock unit grants and other awards of Carolina Financial common stock subject to vesting who elected to receive cash consideration in lieu of United common stock. United paid approximately $47 thousand in cash to holders of Carolina Financial common stock and restricted stock in lieu of fractional shares of United Bankshares common stock. The payment of cash in lieu of fractional shares was funded by cash on hand at United.
After the effective time of the merger, CresCom Bank, a wholly-owned subsidiary of Carolina Financial, merged with and into United Bank, a wholly-owned subsidiary of United Bankshares. United Bank survived the bank merger and continues to exist as a Virginia banking corporation.
The unaudited pro forma condensed combined financial information of United Bankshares’ financial condition and results of operations, including per share data, are presented after giving effect to the merger. The pro forma financial information assumes that the merger with Carolina Financial was consummated on January 1, 2019 for purposes of the unaudited pro forma condensed combined statement of income and on March 31, 2020 for purposes of the pro forma balance sheet and gives effect to the merger, for purposes of the unaudited pro forma condensed combined statement of income, as if it had been effective during the entire period presented.
The merger will be accounted for using the acquisition method of accounting; accordingly, the difference between the purchase price over the estimated fair value of the assets acquired (including identifiable intangible assets) and liabilities assumed will be recorded as goodwill.
The pro forma financial information includes estimated adjustments to record the assets and liabilities of Carolina Financial at their respective fair values and represents management’s estimates based on available information. The pro forma adjustments included herein may be revised as additional information becomes available and as additional analysis is performed. The final allocation of the purchase price will be determined after the merger is completed and after completion of a final analysis to determine the fair values of Carolina Financial’s tangible, and identifiable intangible, assets and liabilities as of the closing date and any differences could be material.
NOTE B – PRO FORMA ADJUSTMENTS
(In thousands, except share data)
The following pro forma adjustments have been reflected in the unaudited pro forma condensed combined financial information. All adjustments are based on current valuations, estimates and assumptions that are subject to change.
| (a) | Represents the amount paid in cash by United Bankshares to holders of Carolina Financial common stock and<br>restricted stock in lieu of fractional shares of United Bankshares common stock and the amount of cash paid by Carolina Financial to holders of outstanding stock options, restricted stock grants, restricted stock unit grants and other awards of<br>Carolina Financial common stock subject to vesting who elected to receive cash consideration in lieu of United common stock. | |||||||
|---|---|---|---|---|---|---|---|---|
| (b) | A fair value adjustment was recorded to Carolina Financial’s outstanding loan portfolio. This fair value<br>adjustment was based on (1) current market interest rates and spreads including consideration for liquidity concerns and (2) United Bankshares’ initial evaluation of credit deterioration identified in the Carolina Financial’s<br>loan portfolio. Loans were adjusted for credit deterioration of the acquired loan portfolio (PCD loans) in the amount of $11,973. Acquired non-PCD loans were adjusted by $11,973 through provision for credit<br>losses expense. A downward interest-rate fair value adjustment of $16,477 was also recorded on Carolina Financial’s outstanding loan portfolio. In addition, a downward fair value adjustment of $20,924 from prior mergers of Carolina Financial<br>was reversed. Subsequent to the completion of the merger, United Bankshares will use an independent third party to determine the fair value related to market interest rates of the acquired loans that could significantly change the amount of the<br>estimated fair value adjustment. | |||||||
| --- | --- | |||||||
| (c) | The allowance for loan losses of Carolina Financial is eliminated. Purchased loans acquired in a business<br>combination are required to be recorded at fair value and the recorded allowance of the acquired company may not be carried over. | |||||||
| --- | --- | |||||||
| (d) | Previous goodwill in the amount of $184,259 of Carolina Financial is eliminated. Goodwill of $253,349 generated<br>as a result of the total purchase price based on United Bankshares’ stock price of $29.11 as of May 1, 2020 and the fair value of assets purchased exceeding the fair value of liabilities assumed is recorded. The following table depicts the<br>sensitivity of the purchase price and resulting goodwill to changes in the price of United Bankshares’ common stock. | |||||||
| --- | --- | |||||||
| (Unaudited, in thousands) | Purchase Price | Estimated Goodwill | ||||||
| --- | --- | --- | --- | --- | ||||
| As presented in pro forma | $ | 817,877 | $ | 253,349 | ||||
| Up 10% | 899,477 | 334,949 | ||||||
| Down 10% | 736,277 | 171,749 | ||||||
| (e) | Previous other intangibles in the amount of $15,778 of Carolina Financial is eliminated. New amount of $22,190<br>representing United Bankshares’ estimate of the fair value of the core deposit intangible asset to be recorded. The estimate represents a 1% premium on Carolina Financial’s core deposits. The actual amount of such core deposit intangible<br>asset will be determined at the completion of the merger and will be valued by an independent third party that could change the amount of the adjustment significantly. | |||||||
| --- | --- | |||||||
| (f) | Deferred taxes associated with the adjustments to record the assets and liabilities of Carolina Financial at<br>fair value were recognized using United Bankshares’ statutory rate of 23.3%. | |||||||
| --- | --- | |||||||
| (g) | An upward fair value adjustment of $8,342 was recorded to Carolina Financial’s outstanding deposit<br>liabilities to reflect current market interest rates. In addition, an upward fair value adjustment of $1,420 from prior mergers of Carolina Financial was reversed. Subsequent to the closing of the merger, United Bankshares will use an independent<br>third party to determine the fair value of the assumed deposit liabilities that could significantly change the amount of the estimated fair value adjustment. | |||||||
| --- | --- | |||||||
| (h) | A downward fair value adjustment of $970 was recorded to Carolina Financial’s outstanding FHLB borrowings<br>to reflect current market interest rates and spreads for comparable instruments. Upon completion of the merger, United Bankshares will use an independent third party to determine the fair value of the assumed FHLB borrowings. Subsequent to the<br>closing of the merger, the amount and timing of the estimated fair value adjustments could be revised significantly. | |||||||
| --- | --- | |||||||
| (i) | Within other long-term borrowings on the balance sheet, an upward fair value adjustment of $175 was recorded to<br>Carolina Financial’s outstanding junior subordinated debt and downward fair value adjustment of $2,301 was recorded on Carolina Financial’s trust preferred issuances to reflect current market interest rates and spreads for comparable<br>instruments. In addition, an upward fair value adjustment of $127 to outstanding junior subordinated debt and a downward fair value adjustment of $4,457 on trust preferred issuances from prior mergers of Carolina Financial were reversed. Upon<br>completion of the merger, United Bankshares will use an independent third party to determine the fair value of the assumed junior subordinated debt and trust preferred issuances. Subsequent to the closing of the merger, the amount and timing of the<br>estimated fair value adjustments could be revised significantly. | |||||||
| --- | --- | |||||||
| (j) | Represents the net current liability for the expense incurred and taxes owed by recipients of the cash paid by<br>Carolina Financial to holders of outstanding stock options, restricted stock grants, restricted stock unit grants and other awards of Carolina Financial common stock subject to vesting who elected to receive cash consideration in lieu of United<br>common stock | |||||||
| --- | --- | |||||||
| (k) | Adjustments representing the elimination of the historical equity of Carolina Financial as part of the purchase<br>accounting adjustments. | |||||||
| --- | --- | |||||||
| (l) | Recognition of the equity portion of the merger consideration. The adjustment to common stock represents the<br>$2.50 par value of shares of United Bankshares common stock issued to effect the transaction. The adjustment to surplus represents in the amount of equity consideration above the par value of United Bankshares’ common stock issued.<br> | |||||||
| --- | --- | |||||||
| (m) | Represents the accretion of the fair value adjustment on portfolio loans assuming the merger closed on<br>January 1, 2019. This consists of an accretion of $1,030 and $4,119, respectively, for the three months ended March 31, 2020 and the year ended December 31, 2019 related to the interest- rate fair value adjustment on the acquired<br>loans. The average remaining life of the loans is approximately 4 years. | |||||||
| --- | --- | |||||||
| (n) | Represents net amortization of the premium on deposits and junior subordinated debt and net accretion of the<br>discount on FHLB borrowings and trust preferred issuances assuming the merger closed on January 1, 2019. For purposes of the pro forma financial information, the following table reflects the respective amortization (accretion) amounts using the<br>straight-line method and the average remaining life for each individual liability. | |||||||
| --- | --- | |||||||
| (Unaudited, dollars in thousands) | Average<br>Remaining<br>Life<br>(Years) | For the<br>Three Months<br>Ended<br>March 31, 2020 | For the<br>Year<br>Ended<br>December 31, 2019 | |||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Deposits | 1.50 | $ | 1,390 | $ | 5,561 | |||
| FHLB borrowings | 1.30 | (187 | ) | (746 | ) | |||
| Junior subordinated debt | 5.00 | 9 | 35 | |||||
| Trust preferred issuances | 10.00 | (57 | ) | (230 | ) | |||
| (o) | Represents the provision for credit losses on acquired non-PCD loans.<br> | |||||||
| --- | --- | |||||||
| (p) | Represents the amortization of the core deposit intangible to be acquired in the merger over an estimated<br>useful life of ten years using the sum-of-the years digits method assuming the merger closed on January 1, 2019. The estimated amount of the amortization is $908<br>for the three months ended March 31, 2020 and $4,035 for the year ended December 31, 2019. Also includes the elimination of acquisition-related nonrecurring transaction costs incurred of $2,122 for the three months ended March 31,<br>2020 and $1,956 for the year ended December 31, 2019. | |||||||
| --- | --- | |||||||
| (q) | Applicable income taxes at a 23.3% rate less deferred taxes associated with the net amortization and accretion<br>of the purchase accounting adjustments. | |||||||
| --- | --- | |||||||
| (r) | Weighted-average basic and diluted shares outstanding were adjusted to effect the transaction.<br> | |||||||
| --- | --- |
NOTE C – PRO FORMA ALLOCATION OF PURCHASE PRICE
The following table shows the pro forma allocation of the consideration paid for Carolina Financial’s common equity to the acquired identifiable assets and liabilities assumed and the pro forma goodwill generated from the transaction:
| Purchase price: | ||
|---|---|---|
| Fair value of common shares issued (28,031,501 shares), based on United Bankshares’ stock<br>price of $29.11 as of May 1, 2020 | $ | 815,997 |
| Fair value of stock options assumed | 1,833 | |
| Cash paid for fractional shares | 47 | |
| Total purchase price | 817,877 | |
| Identifiable assets: | ||
| Cash and cash equivalents | 294,088 | |
| Investment securities | 853,456 | |
| Loans held for sale | 39,792 | |
| Loans | 3,182,097 | |
| Premises and equipment | 85,318 | |
| Operating lease<br>right-of-use assets | 17,767 | |
| Mortgage servicing rights | 23,601 | |
| Other intangibles | 22,190 | |
| Other assets | 115,788 | |
| Total identifiable assets | $ | 4,634,097 |
| Identifiable liabilities: | ||
| Deposits | $ | 3,588,165 |
| Short-term borrowings | 0 | |
| Long-term borrowings | 428,020 | |
| Operating lease liabilities | 18,197 | |
| Other liabilities | 35,187 | |
| Total identifiable liabilities | 4,069,569 | |
| Net assets acquired including identifiable intangible assets | 564,528 | |
| Resulting goodwill | $ | 253,349 |
NOTE D – ESTIMATED AMORTIZATION/ACCRETION OF ACQUISITION ACCOUNTING ADJUSTMENTS
The following table sets forth an estimate of the expected effects of the estimated aggregate acquisition accounting adjustments reflected in the pro forma combined financial statements on the future pre-tax net income of United Bankshares after the merger with Carolina Financial:
| For the Years Ended December 31, | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Unaudited, in thousands) | 2020 | 2021 | 2022 | 2023 | 2024 | ||||||||||
| Loans, net of unearned income | $ | 2,746 | $ | 4,119 | $ | 4,119 | $ | 4,119 | $ | 1,374 | |||||
| Deposits | 3,707 | 4,635 | 0 | 0 | 0 | ||||||||||
| Core deposit intangible | (2,690 | ) | (3,766 | ) | (3,362 | ) | (2,959 | ) | (2,555 | ) | |||||
| FHLB borrowings | (497 | ) | (473 | ) | 0 | 0 | 0 | ||||||||
| Junior subordinated debt | 23 | 35 | 35 | 35 | 35 | ||||||||||
| Trust preferred issuances | (153 | ) | (230 | ) | (230 | ) | (230 | ) | (230 | ) | |||||
| Decrease in pre-tax income | $ | 3,136 | $ | 4,320 | $ | 562 | $ | 965 | $ | (1,376 | ) |
The actual effect of purchase accounting adjustments on the future pre-tax income of United Bankshares will differ from these estimates based on the estimates of fair values as of the effective date of the merger and the use of different amortization methods than assumed above.
NOTE E– ESTIMATED COST SAVINGS AND MERGER-RELATED COSTS
Estimated cost savings, expected to approximate 25% of Carolina Financial’s annualized pre-tax operating expenses, are excluded from the pro forma analysis. Cost savings are estimated to be realized in the first year after acquisition. In addition, estimated merger-related costs are not included in the pro forma combined statements of income since they will be recorded in the combined results of income as they are incurred prior to or after completion of the merger and not indicative of what historical results of the combined company would have been had the companies been actually combined during the periods presented. Merger-related costs are estimated to be approximately $50 million, before-tax.
Cautionary Statements Regarding Forward-Looking Information
This Current Report on Form 8-K may contain forward looking statements within the meaning of the Private SecuritiesLitigation Reform Act of 1995 giving United’s expectations or predictions of future financial or business performance or conditions. Forward-looking statements are typically identified by words such as “believe,” “expect,”“anticipate,” “intend,” “target,” “estimate,” “continue,” “positions,” “prospects” or “potential,” by future conditional verbs such as “will,”“would,” “should,” “could” or “may”, or by variations of such words or by similar expressions. These forward-looking statements are subject to numerous assumptions, risks and uncertainties which change overtime. Forward-looking statements speak only as of the date they are made and we assume no duty to update forward-looking statements.