As filed with the Securities and Exchange Commission on February 21, 2017
Registration No. 333-215644
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
to
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
INDEPENDENT BANK GROUP, INC.
(Exact name of registrant as specified in its charter)
Texas | 6022 | 13-4219346 | ||
(State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
1600 Redbud Boulevard, Suite 400
McKinney, Texas 75069-3257
(972) 562-9004
(Address, including zip code and telephone number, including area code, of registrants principal executive offices)
Mr. David R. Brooks
Chairman and Chief Executive Officer
1600 Redbud Boulevard, Suite 400
McKinney, Texas 75069-3257
(972) 562-9004
(Name, address, including zip code and telephone number, including area code, of agent for service)
Copies to:
Joseph A. Hoffman, Esq. Dudley W. Murrey, Esq. Andrews Kurth Kenyon LLP 1717 Main Street, Suite 3700 Dallas, Texas 75201 (214) 659-4593 |
Mark Haynie, Esq. Haynie Rake Repass & Klimko, P.C. 14643 Dallas Parkway, Suite 550 Dallas, Texas 75254 (972) 716-1855 |
Chet A. Fenimore, Esq. Fenimore, Kay, Harrison & Ford, LLP 812 San Antonio Street, Suite 600 Austin, Texas 78701 (512) 583-5900 |
Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement becomes effective and all other conditions to the proposed merger described herein have been satisfied or waived.
If the securities being registered on this form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: ☐
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ☐
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☒ | |||
Nonaccelerated filer | ☐ (Do not check if a smaller reporting company) | Smaller reporting company | ☐ |
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
CARLILE BANCSHARES, INC.
201 Main Street, Suite 1320
Fort Worth, Texas 76102
March 2, 2017
Dear Shareholder:
We cordially invite you to attend a special meeting of the shareholders of Carlile Bancshares, Inc. to be held on March 30, 2017, at 2:00 p.m., Central Time, at the City Club of Fort Worth, 301 Commerce Street, Fort Worth, Texas 76102.
At the special meeting, the holders of shares of the voting common stock of Carlile Bancshares, Inc. will be voting on the reorganization agreement providing for the acquisition of Carlile Bancshares, Inc. by Independent Bank Group, Inc. through a merger transaction.
I have enclosed a notice of the special meeting and a joint proxy statement/prospectus of Carlile and Independent Bank Group. I encourage you to review these materials carefully and to contact us if you have any questions prior to the meeting.
As the materials describe, the holders of shares of the voting common stock of Carlile Bancshares, Inc. are requested to complete and mail the enclosed proxy card to us in the enclosed postage paid envelope whether or not you plan to attend the meeting. The proxy can be rescinded at the meeting or any time before the meeting if you so choose.
We appreciate your support of Carlile Bancshares and Northstar Bank and look forward to seeing you at the meeting.
Sincerely, |
Tom C. Nichols Chairman of the Board and Chief Executive Officer |
The information in this joint proxy statement/prospectus is not complete and may be changed. Independent Bank Group, Inc. may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This joint proxy statement/prospectus is not an offer to sell these securities, and Independent Bank Group, Inc. is not soliciting offers to buy these securities, in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED FEBRUARY 21, 2017
CARLILE BANCSHARES, INC.
MERGER PROPOSEDYOUR VOTE IS VERY IMPORTANT
You are invited to attend a special meeting of shareholders of Carlile Bancshares, Inc., or Carlile, on March 30, 2017, at 2:00 p.m., Central Time, at the City Club of Fort Worth, 301 Commerce Street, Fort Worth, Texas 76102. At this special meeting, holders of record of shares of Carlile voting common stock will be asked to vote on the approval of a reorganization agreement, which provides for the acquisition of Carlile by Independent Bank Group, Inc., or Independent, through certain merger transactions. Holders of record of Carlile voting common stock will also be asked to vote on a proposal to adjourn the special meeting to a later date if the Carlile board of directors determines such an adjournment is in the Carlile shareholders best interest.
If the reorganization agreement and the merger contemplated thereby are approved by the holders of the Carlile voting common stock and the merger is completed, each outstanding share of Carlile common stock will be converted into a fraction of a share of Independent common stock, which fraction will be equal to the Carlile Share Exchange Ratio. The Carlile Share Exchange Ratio will be determined by means of the following formula:
Carlile Share Exchange Ratio |
= | (Shareholder Value ÷ outstanding number of shares of Carlile common stock)
|
||||||
Average Stock Price |
The Average Stock Price is the average of the daily volume-weighted average sales price for a share of Independent common stock for the 20 trading days ending on and including the third trading day preceding the closing date of the merger, and the Shareholder Value is an amount to be obtained (i) by dividing $434 million (which represents the agreed upon value of Carlile and is subject to a dollar-per-dollar downward adjustment if Carliles adjusted tangible equity is less than $200 million) by $47.40, (ii) multiplying that resulting quotient by the Average Stock Price and (iii) deducting from that resulting product the aggregate amount paid to cash out and cancel the Carlile stock options in connection with the merger. See The MergerTreatment of Shares of Carlile Common Stock beginning on page 75 for more information.
Carlile has the right to terminate the reorganization agreement if the Average Stock Price is less than $40.29 and the percentage decrease in the Average Stock Price is 15% more than the decline in the NASDAQ Bank Index, from and excluding November 4, 2016, through and including the third trading date prior to the closing date of the merger, Independent may prevent such termination by increasing the merger consideration through adjustment to the Carlile Share Exchange Ratio. Carlile shareholders will receive only whole shares of Independent common stock. Cash will be paid for any fraction of a share issuable in exchange for all of a Carlile shareholders shares of Carlile common stock. Independents common stock is listed on the NASDAQ Global Select Market under the symbol IBTX.
Options to acquire shares of Carlile common stock outstanding and unexercised immediately prior to the effective time of the merger will be automatically cashed out based on the value of the aggregate number of shares of Independent common stock to be issued in the merger as determined by certain factors. See The MergerTreatment of Shares of Carlile Stock Options beginning on page .
If the merger occurs and the Average Stock Price were to be $66.70 (the closing price for a share of Independent common stock on February 16, 2017), the aggregate number of outstanding shares of Carlile common stock at the time of the merger remains unchanged from the 35,064,719 shares that are now outstanding, the Carlile adjusted tangible equity equals or exceeds $200 million on the determination date and none of the 2,504,726 options to acquire Carlile common stock now outstanding are exercised prior to the merger, each of the then outstanding shares of Carlile common stock would be converted into 0.2517 share of Independent common stock which, based on the foregoing assumption and the assumption that the value of a share of Independent common stock is $66.70, represents a value of $16.79 per share of Carlile common stock, and all of the outstanding shares of Carlile would be exchanged for an aggregate of 8,825,790 shares of Independent common stock. In addition, each option would be automatically cashed out for an amount that, based on the foregoing assumptions, would equal $16.79 per underlying share of Carlile common stock minus the particular exercise price for the option that is cashed out. For further explanation regarding the number of shares of Carlile common stock that will be issued and outstanding on the mergers effective date, how Carliles adjusted tangible equity will be calculated, the effect on the merger consideration if such adjusted tangible equity is less than $200 million on the determination date, and other estimates, see The Merger, beginning on page 75 of this joint proxy statement/prospectus.
The vote of every holder of Carlile voting common stock is very important. Whether you plan to attend the special meeting, if you hold shares of Carlile voting common stock, please vote by completing and mailing the enclosed proxy card in the return envelope provided to you. We cannot complete the merger unless holders of at least two-thirds of the issued and outstanding shares of Carlile voting common stock vote to approve the reorganization agreement. Based on our reasons for the merger described in the accompanying joint proxy statement/prospectus, our board of directors believes that the transaction is fair, from a financial point of view, to and in the best interests of, the Carlile shareholders. Accordingly, our board of directors unanimously recommends that you vote FOR approval of the reorganization agreement and, if necessary, adjournment of the Carlile special meeting.
Tom C. Nichols |
Chairman of the Board and Chief Executive Officer |
Carlile Bancshares, Inc. |
An investment in Independent common stock in connection with the merger involves risks. See Risk Factors beginning on page 54.
Neither the SEC nor any state securities commission has approved or disapproved of the securities to be issued under this joint proxy statement/prospectus or determined if this joint proxy statement/prospectus is accurate or adequate. Any representation to the contrary is a criminal offense. The securities that Independent is offering through this document are not savings or deposit accounts or other obligations of any bank or nonbank subsidiary of either of our companies, and they are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.
This joint proxy statement/prospectus dated , 2017, was mailed to Carlile shareholders on March 2, 2017.
The information in this joint proxy statement/prospectus is not complete and may be changed. Independent Bank Group, Inc. may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This joint proxy statement/prospectus is not an offer to sell these securities, and Independent Bank Group, Inc. is not soliciting offers to buy these securities, in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED FEBRUARY 21, 2017
INDEPENDENT BANK GROUP, INC.
MERGER PROPOSEDYOUR VOTE IS VERY IMPORTANT
You are invited to attend a special meeting of shareholders of Independent Bank Group, Inc., or Independent, on March 30, 2017, at 3:30 p.m. Central Time, at the branch office of Independent Bank, 1600 Redbud Boulevard, Suite 100, McKinney, Texas 75069. At this special meeting, you will be asked to vote on the approval of a reorganization agreement that provides for our acquisition of Carlile Bancshares, Inc., or Carlile, through certain merger transactions. You will also be asked to approve the issuance of shares of Independent common stock to the Carlile shareholders in the merger that will in number and voting power exceed 20% of the number and voting power of the shares of Independent common stock outstanding immediately prior to the issuance of the shares of Independent common stock in the merger and to vote on the election of three nominees mutually agreed to by Independent and Carlile and nominated by the Independent board of directors to stand for election in accordance with the reorganization agreement as directors of Independent to fill vacancies on the Independent board of directors. You will also be asked to vote on a proposal to adjourn the special meeting to a later date if our board of directors determines such an adjournment is in the Independent shareholders best interest. If the reorganization agreement and the issuance of the shares of Independent common stock in the merger are approved and the merger is completed, assuming the average of the daily volume-weighted average sales price for a share of Independent common stock on the Nasdaq Global Select Market for the twenty trading days ending on and including the third trading date prior to the closing date of the merger were to be $66.70 (which price was the closing price for a share of Independent common stock on February 16, 2017), the number of outstanding shares of Carlile common stock does not change after the date of this joint proxy statement/prospectus and Carlile has at least $200 million of adjusted tangible equity (as calculated in accordance with the terms of the reorganization agreement), Independent estimates that it will issue an aggregate of 8,825,790 shares of Independent common stock in exchange for the outstanding shares of Carlile common stock, which would be approximately 31.8% of the shares of Independent common stock outstanding immediately after the merger is complete, and Independent will pay approximately $22.1 million in cash to the holders of the then outstanding options to purchase Carlile common stock to cashout those options. Independent common stock is listed on the Nasdaq Global Select Market under the symbol IBTX. Please see The MergerTerms of the Merger, beginning on page 76 of this joint proxy statement/prospectus.
Your vote is important. Whether you plan to attend the special meeting, please vote by completing and mailing the enclosed proxy card in the return envelope provided to you or by following the instructions to vote via the Internet or by telephone as indicated on the proxy card. We cannot complete the merger unless we obtain the necessary regulatory approvals and the holders of at least two-thirds of the outstanding shares of Independent common stock approve the reorganization agreement, the holders of a majority of the votes cast on the proposal vote to approve the issuance of the shares of Independent common stock in the merger, and at least a plurality of the votes cast on the election of directors vote to elect the three nominees named in the accompanying joint proxy statement/prospectus who have been nominated by our board of directors. Based on our reasons for the merger described in the accompanying joint proxy statement/prospectus, our board of directors believes that the transaction is fair from a financial point of view to Independent. Accordingly, our board of directors unanimously recommends that you vote FOR approval of the reorganization agreement, the issuance of shares of Independent common stock to Carlile shareholders in the merger that will exceed in number and voting power 20% of the numbers and voting power of our outstanding shares of common stock, the election of the nominees for election as directors of Independent named in this joint proxy statement/prospectus and, if necessary, the adjournment of the Independent special meeting.
David R. Brooks
Chairman of the Board and Chief Executive Officer
Independent Bank Group, Inc.
The completion of the proposed merger and the issuance of shares of Independent common stock in connection with the merger involves certain risks. See Risk Factors beginning on page 54.
Neither the SEC nor any state securities commission has approved or disapproved of the securities to be issued under this joint proxy statement/prospectus or determined if this joint proxy statement/prospectus is accurate or adequate. Any representation to the contrary is a criminal offense. The securities that Independent is offering through this document are not savings or deposit accounts or other obligations of any bank or nonbank subsidiary of either of our companies, and they are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.
This joint proxy statement/prospectus dated , 2017, was mailed to Independent shareholders on March 2, 2017.
HOW TO OBTAIN ADDITIONAL INFORMATION
Certain business and financial information about Independent included in documents filed with the SEC has not been included in or incorporated by reference in this document. This information is described on page 234 under Where You Can Find More Information. You can obtain free copies of this information by writing or calling:
Independent Bank Group, Inc.
1600 Redbud Boulevard, Suite 400
McKinney, Texas 75069-3257
Attention: Michelle S. Hickox
Executive Vice President and Chief Financial Officer
(972) 562-9004
To obtain timely delivery of the documents before the special meeting of shareholders of Independent or Carlile, you must request the information by March 15, 2017.
In addition, if Independent shareholders have specific questions about the merger or the Independent special meeting, need additional copies of this joint proxy statement/prospectus or need to obtain proxy cards or other information related to the proxy solicitation for the Independent special meeting, they may contact Jan Webb, Independents Corporate Secretary, at the following address or by calling the following telephone number:
Independent Bank Group, Inc.
1600 Redbud Boulevard, Suite 400
McKinney, Texas 75069-3257
(972) 562-9004
If Carlile shareholders have specific questions about the merger or the Carlile special meeting, need additional copies of this joint proxy statement/prospectus or need to obtain proxy cards or other information related to the proxy solicitation for the Carlile special meeting, they may contact Mindy Hegi, Carliles Chief Financial Officer, at the following address or by calling the following telephone number:
Carlile Bancshares, Inc.
201 Main Street, Suite 1320
Fort Worth, Texas 76102
(817) 877-4440
Carlile does not have a class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, is not subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act and, accordingly, does not file documents or reports with the SEC.
PLEASE NOTE
We have not authorized anyone to provide you with any information other than the information included in this document and the documents to which we refer you. If someone provides you with other information, please do not rely on it as being authorized by us.
This joint proxy statement/prospectus has been prepared as of February , 2017. There may be changes in the affairs of Carlile or Independent after that date, that are not reflected in this document.
Carlile Bancshares, Inc.
201 Main Street, Suite 1320
Fort Worth, Texas 76102
(817) 877-4440
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the holders of Carlile common stock:
A special meeting of holders of Carlile common stock will be held on March 30, 2017, at 2:00 p.m., Central Time, at the City Club of Fort Worth, 301 Commerce Street, Fort Worth, Texas 76102, for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and Plan of Reorganization, or the reorganization agreement, dated as of November 21, 2016, by and between Independent Bank Group, Inc., or Independent, and Carlile Bancshares, Inc., or Carlile, pursuant to which Carlile will merge with and into Independent, all on and subject to the terms and conditions contained therein, and the merger described therein; and
2. To consider and vote upon any proposal to adjourn the special meeting to a later date or dates if the board of directors of Carlile determines such an adjournment is necessary to permit solicitation of additional proxies if there are not sufficient votes at the time of the special meeting to constitute a quorum or to approve the reorganization agreement.
No other business may be conducted at the special meeting.
All holders of Carlile common stock of record as of 5:00 p.m. on February 17, 2017, will be entitled to notice of the Carlile special meeting. However, only holders of Carlile voting common stock of record as of 5:00 p.m. on February 17, 2017 will be entitled to vote at the Carlile special meeting and any adjournments thereof. The special meeting may be adjourned from time to time upon approval of holders of Carlile voting common stock without any notice other than by announcement at the meeting of the adjournment thereof, and any and all business for which notice is hereby given may be transacted at such adjourned meeting.
Holders of Carlile voting common stock have the right to dissent from the merger and obtain payment in cash of the appraised fair value of their shares of Carlile voting common stock under applicable provisions of the Texas Business Organizations Code, or TBOC. In order for a holder of Carlile voting common stock to perfect his or her right to dissent, such holder must carefully follow the procedure set forth in the TBOC. A copy of the applicable statutory provisions of the TBOC is included as Appendix D to the accompanying joint proxy statement/prospectus and a summary of these provisions can be found under the caption The MergerDissenters Rights of Carlile Shareholders, beginning on page 130 of the joint proxy statement/prospectus. The merger may not be completed if the holders of more than 5% of the outstanding shares of Carlile common stock exercise dissenters rights.
If you have any questions concerning the merger or the joint proxy statement/prospectus, would like additional copies of the joint proxy statement/prospectus, need a proxy card or need help voting your shares of Carlile common stock, please contact Mindy Hegi, Carliles Chief Financial Officer, at (817) 877-4440.
By Order of the Board of Directors,
Tom C. Nichols
Chairman of the Board and Chief Executive Officer
Fort Worth, Texas
March 2, 2017
The board of directors of Carlile unanimously recommends that holders of record of Carlile voting common stock entitled to vote at the Carlile special meeting vote FOR the proposals to approve the reorganization agreement and the merger and any adjournment of the Carlile special meeting if such adjournment is necessary to permit solicitation of additional proxies if there are not sufficient votes at the time of the Carlile special meeting to constitute a quorum or to approve the reorganization agreement.
Your Vote is Very Important
A proxy card is enclosed. Whether or not you plan to attend the Carlile special meeting, if you are a holder of shares of Carlile voting common stock please vote by completing, signing and dating the proxy card and promptly mailing it in the enclosed envelope. You may revoke your proxy in the manner described in the joint proxy statement/prospectus at any time before it is exercised. If you are a holder of shares of Carlile voting common stock and attend the Carlile special meeting, you may vote in person if you desire, even if you have previously returned your proxy card.
Independent Bank Group, Inc.
1600 Redbud Boulevard, Suite 400
McKinney, Texas 75069-3257
(972) 562-9004
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the shareholders of Independent:
A special meeting of shareholders of Independent will be held on March 30, 2017, at 3:30 p.m. Central Time, at the branch office of Independent Bank, 1600 Redbud Boulevard, Suite 100, McKinney Texas 75069-3257, for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and Plan of Reorganization, or the reorganization agreement, dated as of November 21, 2016, by and between Independent Bank Group, Inc., or Independent, and Carlile Bancshares, Inc., or Carlile, pursuant to which Carlile will merge with and into Independent, all on and subject to the terms and conditions contained therein, and the merger described therein;
2. To consider and vote upon a proposal to approve the issuance of shares of Independent common stock to Carlile shareholders in the merger that in number and voting power will exceed 20% of the number and voting power of the shares of Independent common stock outstanding immediately prior to the issuance of the shares of Independent common stock in the merger;
3. To consider and vote upon a proposal to elect the following three nominees as directors of Independent to fill vacancies on the Independent board of directors:
| Tom C. Nichols, to serve as a Class I director for a term that will expire at the annual meeting of shareholders to be held in 2017; |
| Mark K. Gormley, to serve as a Class II director for a term that will expire at the annual meeting of shareholders to be held in 2018; and |
| Christopher M. Doody, to serve as a Class III director for a term that will expire at the annual meeting of shareholders to be held in 2019. |
The election of these nominees is subject to, and will only become effective upon, the mergers completion; and
4. To consider and vote upon any proposal to adjourn the special meeting to a later date or dates, if the board of directors of Independent determines such an adjournment is necessary to permit solicitation of additional proxies if there are not sufficient votes at the time of the special meeting to constitute a quorum or to approve the first three proposals listed above.
No other business may be conducted at the special meeting.
Only shareholders of Independent of record as of 5:00 p.m. on February 21, 2017, will be entitled to notice of and to vote at the special meeting and any adjournments thereof. The special meeting may be adjourned from time to time upon approval of Independents shareholders without any notice other than by announcement at the meeting of the adjournment thereof, and any and all business for which notice is hereby given may be transacted at such adjourned meeting.
If you have any questions concerning the merger or the joint proxy statement/prospectus, would like additional copies of the joint proxy statement/prospectus or need help voting your shares of Independent common stock, please contact Jan Webb, Independents Corporate Secretary, at (972) 562-9004.
By Order of the Board of Directors,
David R. Brooks
Chairman of the Board, President and Chief Executive Officer
McKinney, Texas
March 2, 2017
The board of directors of Independent unanimously recommends that you vote FOR the proposals to approve the reorganization agreement and the merger, the issuance of shares of Independent common stock, the election of the named director nominees for Independent director, and the adjournment of the Independent special meeting if necessary to permit solicitation of additional proxies if there are not sufficient votes at the time of the Independent special meeting to constitute a quorum or to approve the other proposals.
Your Vote is Very Important
A proxy card is enclosed. Whether or not you plan to attend the Independent special meeting, please vote by completing, signing and dating the proxy card and promptly mailing it in the enclosed envelope or via the Internet or by telephone pursuant to the instructions provided on the enclosed proxy card. You may revoke your proxy in the manner described in the joint proxy statement/prospectus at any time before it is exercised. If you attend the Independent special meeting, you may vote in person if you desire, even if you have previously returned your proxy card or submitted your vote via the Internet or by telephone.
i
ii
130 | ||||
130 | ||||
INDEPENDENT PROPOSAL TWOISSUANCE OF INDEPENDENT COMMON STOCK |
134 | |||
135 | ||||
152 | ||||
161 | ||||
164 | ||||
BENEFICIAL OWNERSHIP OF CARLILE COMMON STOCK BY MANAGEMENT AND PRINCIPAL SHAREHOLDERS OF CARLILE |
167 | |||
INDEPENDENT PROPOSAL FOURADJOURNMENT OF THE SPECIAL MEETING |
169 | |||
169 | ||||
170 | ||||
171 | ||||
178 | ||||
220 | ||||
220 | ||||
220 | ||||
223 | ||||
223 | ||||
223 | ||||
223 | ||||
COMPARISON OF RIGHTS OF SHAREHOLDERS OF CARLILE AND INDEPENDENT |
227 | |||
233 | ||||
233 | ||||
SHAREHOLDER PROPOSALS FOR ANNUAL MEETING OF SHAREHOLDERS IN 2017 |
233 | |||
234 | ||||
234 | ||||
235 | ||||
F-1 | ||||
A-1 | ||||
B-1 | ||||
Appendix CFairness Opinion of Sandler ONeill & Partners, L.P. |
C-1 | |||
Chapter 10, Subchapter H of the Texas Business Organizations Code |
D-1 |
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QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETINGS
The following are some questions that you may have regarding the Agreement and Plan of Reorganization, or the reorganization agreement, dated as of November 21, 2016, by and between Independent Bank Group, Inc., or Independent, and Carlile Bancshares, Inc., or Carlile, and the special meetings, and brief answers to those questions. Independent and Carlile advise you to read carefully the remainder of this joint proxy statement/prospectus because the information contained in this section does not provide all of the information that might be important to you with respect to the merger and the special meetings. Additional important information is also referred to under the caption Where You Can Find More Information beginning on page 234.
Q. | Why am I receiving this joint proxy statement/prospectus? |
A: | Carlile shareholders: Carlile is sending these materials to the holders of record of shares of Carlile voting common stock as of 5:00 p.m. on February 17, 2017 in accordance with the requirements of the Texas Business Organizations Code, the TBOC, and the federal securities law and to help the holders of record of shares of Carlile voting common stock decide how to vote their shares of Carlile voting common stock with respect to the proposal to approve the reorganization agreement and the merger and other matters to be considered at the Carlile special meeting and to solicit their proxies in respect of the Carlile special meeting. Shareholders of record of shares of Carlile nonvoting common stock have been sent these materials to ensure compliance with the federal securities laws. |
Independent shareholders: Independent is sending these materials to its shareholders to help them decide how to vote their shares of Independent common stock with respect to the proposal to approve the reorganization agreement and other matters to be considered at the Independent special meeting and to solicit their proxies in respect of the Independent special meeting.
This document constitutes both a proxy statement of Carlile and Independent and a prospectus of Independent. It is a joint proxy statement because the boards of directors of Carlile and Independent are soliciting proxies from their respective shareholders using this document. It is a prospectus because Independent is offering shares of its common stock to Carlile shareholders as the merger consideration to be provided to holders of Carlile common stock in the merger.
Q: | What are Carlile shareholders being asked to vote upon? |
A: | Carlile is proposing to be acquired by Independent through certain merger transactions. As part of the overall transaction, the holders of Carlile voting common stock are being asked to consider and vote on the following two proposals: |
Carlile Proposal One: to approve the reorganization agreement, pursuant to which Carlile will merge with and into Independent, with Independent being the surviving entity following the merger, which transaction is referred to herein as the merger and is further described in the section entitled The Merger beginning on page 75; and
Carlile Proposal Two: to approve the adjournment of the Carlile special meeting to a later date or dates if the board of directors of Carlile determines it is necessary to permit solicitation of additional proxies if there are not sufficient votes at the time of the Carlile special meeting to constitute a quorum or to approve the reorganization agreement.
No other business may be conducted at the Carlile special meeting.
1
Q: | What are Independent shareholders being asked to vote upon? |
A: | Independent is proposing to acquire Carlile through the merger. As part of the overall transaction, the shareholders of Independent are being asked to consider and vote on the following four proposals: |
Independent Proposal One: to approve the reorganization agreement, pursuant to which Carlile will merge with and into Independent, with Independent being the surviving entity following the merger, as is further described in the section entitled The Merger beginning on page 75;
Independent Proposal Two: to approve the issuance of shares of Independent common stock to Carlile shareholders in connection with the merger that in number and voting power will exceed 20% of the number and voting power of the shares of Independent common stock outstanding immediately prior to the issuance of the shares of Independent common stock in the merger, which is further described in the section entitled Independent Proposal Two-Issuance of Independent Common Stock beginning on page 134;
Independent Proposal Three: to elect each of the following three director nominees who are persons mutually agreed to by Carlile and Independent pursuant to the reorganization agreement, or the named director nominees, and whose directorships will only become effective upon consummation of the merger, and whose business experience and qualifications are further described in the section entitled Independent Proposal ThreeElection of Directors beginning on page 135, to fill vacancies on the Independent board of directors:
| Tom C. Nichols, to serve as a Class I director for a term that will expire at the annual meeting of shareholders to be held in 2017; |
| Mark K. Gormley, to serve as a Class II director for a term that will expire at the annual meeting of shareholders to be held in 2018; and |
| Christopher M. Doody, to serve as a Class III director for a term that will expire at the annual meeting of shareholders to be held in 2019; and |
Independent Proposal Four: to approve the adjournment of the Independent special meeting to a later date or dates, if the board of directors of Independent determines it is necessary to permit solicitation of additional proxies if there are not sufficient votes at the time of the Independent special meeting to constitute a quorum or to approve the first three proposals listed above.
No other business may be conducted at the Independent special meeting.
Q: | What will happen in the merger? |
A: | In the merger, Carlile will be merged with and into Independent, with Independent being the surviving entity. At the effective time of the merger, Carlile will cease to exist. Immediately following the merger, Northstar Bank will be merged with and into Independent Bank, with Independent Bank being the surviving bank. Northstar Bank will cease to exist after the bank merger occurs. Northstar Bank is a commercial bank headquartered in Denton, Texas, and is a wholly owned subsidiary of Carlile. Independent Bank is a commercial bank headquartered in McKinney, Texas, and is a wholly owned subsidiary of Independent. Upon the merger of Carlile with and into Independent, the then outstanding shares of Carlile common stock and the then outstanding and unexercised options to purchase shares of Carlile common stock will be converted into the right to receive the consideration described below. For ease of reference: (i) the merger of Carlile with and into Independent is referred to in this joint proxy statement/prospectus as the merger and (ii) the merger of Northstar Bank with and into Independent Bank is referred to in this joint proxy statement/prospectus as the bank merger. |
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Q: | What is the aggregate amount of consideration that Independent will pay in the merger? |
A: | The merger consideration will consist of: |
| shares of Independent common stock to be issued in exchange for the shares of Carlile common stock outstanding immediately prior to the mergers effective time; and |
| cash to be paid in an automatic cashout of all options to purchase Carlile common stock outstanding and unexercised immediately prior to the mergers effective time, or the Carlile stock options. |
The number of shares to be issued to the Carlile shareholders by Independent and the amount to be paid to cashout the Carlile stock options in connection with the merger will be determined by means of formulas set forth in the reorganization agreement. Those formulas use, among other factors, the average of the daily volume-weighted average sales price of the Independent common stock on the Nasdaq Global Select Market over a certain period to determine the fraction of a share of Independent common stock for which a share of Carlile common stock will be exchanged in the merger and the amount of cash that will be paid to cash out the Carlile stock options. If such average stock price and the value of a share of Independent common stock at the mergers effective time were to be $66.70 (the closing price for a share of Independent common stock on February 16, 2017), the number of shares of Carlile common stock outstanding were to remain unchanged after the date of this joint proxy statement/prospectus, and Carlile has adjusted tangible equity, which will be calculated in accordance with the terms of the reorganization agreement, or the adjusted tangible equity, of at least $200 million on the fifth business day prior to the closing date of the merger, or the tangible equity determination date, the aggregate number of shares of Independent common stock to be exchanged for the outstanding shares of Carlile common stock and the aggregate amount of cash to be paid to cashout the outstanding and unexercised Carlile stock options would be valued at approximately $610.8 million. However, as a consequence of not knowing the exact fraction of a share of Independent common stock that will be exchanged for each share of Carlile common stock in connection with the merger and because the price per share of Independent common stock will fluctuate between now and the effective date of the merger, the holders of Carlile common stock will not know the exact value of the Independent common stock they will receive in the merger until the mergers effective date.
Q: | How will the per share merger consideration be calculated? |
A: | Upon the merger becoming effective, each share of Carlile common stock will be converted into a fraction of a share of Independent common stock, rounded to the nearest ten-thousandth of a share, determined by means of a formula that uses the following factors: |
| the Average Stock Price, which will be the average of the daily volume-weighted average sales price for a share of Independent common stock for the twenty trading days ending on and including the third trading day preceding the closing date of the merger; |
| the Gross Share Number, which will equal the quotient of (a) $434,000,000, subject to adjustment as provided in the reorganization agreement, divided by (b) $47.40; |
| the Deal Value, which will equal the product of (a) the Gross Share Number multiplied by (b) the Average Stock Price; and |
| the Shareholder Value, which will equal (a) the Deal Value minus (b) the aggregate amount of cash to be paid by Independent to effectuate the automatic cashout of the Carlile stock options in connection with the merger. |
The Carlile Share Exchange Ratio will be equal to the quotient of (a) the quotient of (i) the Shareholder Value, divided by (ii) the number of shares of Carlile common stock outstanding immediately prior to the effective time of the merger, divided by (b) the Average Stock Price. The exact Carlile Share Exchange Ratio will depend on the Average Stock Price, any adjustment being made in computing the Gross Share Number if the
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adjusted tangible equity of Carlile is less than $200 million on the tangible equity determination date, and the number of shares of Carlile common stock outstanding immediately prior to the mergers effective time, which number may increase as a result of the exercise of options to acquire such stock.
As noted, the per share merger consideration is dependent in part upon the number of shares of Carlile common stock outstanding at the effective time of the merger. Carlile currently estimates that if none of the Carlile stock options are exercised, 35,064,719 shares of Carlile voting and non-voting common stock will be issued and outstanding, and options to purchase 2,504,706 shares of Carlile common stock will be outstanding and unexercised prior to completion of the merger. The reorganization agreement provides for the cashout of stock options that are outstanding and unexercised in connection with the merger. Carlile also estimates that if all options to purchase Carlile common stock outstanding at the date of this joint proxy statement/prospectus were to be exercised prior to the merger, 37,569,445 shares of Carlile voting and non-voting common stock would be issued and outstanding immediately prior to the effective time of the merger. For more detail on these estimates, please see The MergerEstimated Number of Shares of Carlile Common Stock to be Issued and Outstanding on the Closing Date beginning on page 78.
Q: | What consideration will Carliles shareholders receive for each share of Carlile common stock as a result of the merger? |
A: | If the necessary shareholder and regulatory approvals are obtained and the merger is completed, assuming the Average Stock Price were $66.70 (the closing price for a share of Independent common stock on February 16, 2017), 35,064,719 shares of Carlile voting and non-voting common stock are outstanding immediately prior to the merger (which is expected to be the case if, as anticipated, no Carlile stock options are exercised after the date of this joint proxy statement/prospectus), the adjusted tangible equity of Carlile is at least $200 million at the tangible equity determination date and the payments to the holders of the outstanding Carlile stock options were an aggregate of approximately $22.1 million, each share of Carlile common stock then outstanding would be exchanged for 0.2517 of a share of Independent common stock and all outstanding shares of Carlile common stock would be exchanged for an aggregate of 8,825,790 shares of Independent common stock. Independents common stock is listed on the NASDAQ Global Select Market under the symbol IBTX. Based on the assumptions set forth above and the closing price of Independents common stock as of February 16, 2017 of $66.70 per share, we estimate Carlile shareholders would receive merger consideration with a value of $16.79 for each share of Carlile common stock they hold immediately prior to the effective time of the merger and with an aggregate value of $610.8 million. The aggregate value of the shares of Independent common stock to be issued to the Carlile shareholders in connection with the merger and the value of the fraction of a share of Independent common stock to be issued in exchange for each share of Carlile common stock in connection with the merger will increase or decrease between the date hereof and the effective time of the merger depending on a number of factors, including fluctuations in the market price of Independent common stock and the number of shares Carlile common stock outstanding immediately prior to the mergers effective time. |
For further explanation of how the Carliles adjusted tangible equity will be calculated, the effect on the merger consideration to be paid if Carliles adjusted tangible equity is less than $200 million on the tangible equity determination date, the number of shares of Carlile common stock that will be issued and outstanding immediately prior to the mergers effective time, and other estimates, please refer to The Merger beginning on page 75 of this joint proxy statement/prospectus.
Q: | What consideration will holders of outstanding Carlile stock options receive in the merger? |
A: | The Carlile stock options will be automatically cashed out pursuant to the Carlile Bancshares, Inc. Amended and Restated 2015 Equity Incentive Plan, or the Carlile Equity Incentive Plan, in connection with the merger. As a result of the automatic cashout, Independent will pay to the holder of each Carlile stock option |
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outstanding and unexercised at the effective time of the merger an amount of cash to be determined by means of a formula, which formula uses certain factors, including the Closing Date Fair Market Value of the option and the options exercise price, to determine the amount to be paid to cash out each Carlile stock option. The Closing Date Fair Market Value of an option will be equal to the quotient of (a) the sum of (I) the aggregate number of shares of Independent common stock into which the shares of Carlile common stock will be converted in the merger multiplied by the Average Stock Price, plus (II) the aggregate amount of cash distributed by Carlile to its shareholders after the execution of the reorganization agreement and before the effective time of the merger (as permitted by the reorganization agreement) that is not a return of capital to its shareholders plus (III) the aggregate exercise price payable to exercise the Carlile stock options divided by (b) the sum of (X) the number of shares of Carlile common stock outstanding immediately prior to the mergers effective time plus (Y) the number of shares of Carlile common stock underlying the Carlile stock options outstanding and unexercised immediately prior to the effective time of the merger, plus (Z) 190,000 shares, representing the shares of Carlile common stock underlying certain options to purchase Carlile common stock that were cancelled in December 2016 in exchange for certain cash payments. Based on the assumptions discussed in the immediately preceding question, the amount of the aggregate payments to the holders of the Carlile stock options would be $22.1 million (which includes $1.6 million paid by Carlile in December 2016 in connection with the cancellation of certain options to purchase Carlile common stock). See The MergerTreatment of Carlile Stock Options beginning on page 76 for additional information regarding the cashout of the Carlile stock options and the calculation of the amount to be paid by Independent to cash out the Carlile stock options in connection with the merger. |
Q: | Are there any circumstances where the $434 million agreed amount used in the calculation of the Carlile Share Exchange Ratio could be adjusted downward? |
A: | Yes. The $434 million agreed amount used in the calculation of the Carlile Share Exchange Ratio will be adjusted downward if the adjusted tangible equity of Carlile is less than $200 million on the tangible equity determination date. |
Pursuant to the terms of the reorganization agreement, the adjusted tangible equity of Carlile will be determined from Carliles financial statements prepared in accordance with generally accepted accounting principles, consistently applied, or GAAP, adjusted as provided for below. Any unrealized gains or losses in investment securities and the amount paid in December 2016 by Carlile to cash out options to purchase Carlile common stock then held by certain Carlile executive officers will also be excluded from the calculation of adjusted tangible equity. The amount paid by Independent to cash out the Carlile stock options in connection with the merger will not affect Carliles adjusted tangible equity or otherwise affect the calculation of the Carlile Share Exchange Ratio.
As of December 31, 2016, the estimated tangible equity of Carlile (calculated in accordance with GAAP) was $209.2 million. For purposes of determining the Carlile Share Exchange Ratio, that amount of Carliles adjusted tangible equity will be increased by the amount of the consolidated net income of Carlile or decreased by the amount of the consolidated net loss of Carlile from January 1, 2017 through the tangible equity determination date and reduced by the amount of certain costs and expenses to be incurred by Carlile in connection with the merger. Carlile currently estimates that it will have consolidated net income of between $5.0 million and $5.8 million from January 1, 2017 through March 24, 2017, which would be the tangible equity determination date assuming that the closing date of the merger will be March 31, 2017 and the effective date of the merger will be April 1, 2017.
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The table set forth below shows the range of estimates for the amounts that will affect the calculation of Carliles adjusted tangible equity, assuming the closing of the merger occurs on March 31, 2017:
Low Range | High Range |
|||||||
(in thousands) | ||||||||
Estimated tangible equity of Carlile as of December 31, 2016 |
$ | 209,177 | $ | 209,177 | ||||
Estimated consolidated net income of Carlile for the period from January 1, 2017 through March 24, 2017 |
5,030 | 5,760 | ||||||
Estimated tax savings on stock option cash out |
2,615 | 3,678 | ||||||
Estimated costs and expenses of Carlile and Northstar Bank related to the merger, on an after tax equivalent basis, and other deductions contemplated by the reorganization agreement |
(14,055 | ) | (13,493 | ) | ||||
|
|
|
|
|||||
Estimated adjusted tangible equity of Carlile as of March 24, 2017 |
$ | 202,767 | $ | 205,122 | ||||
|
|
|
|
If Carlile achieves the estimates in the range set forth above, Carliles adjusted tangible equity as of the closing date would be greater than $200 million, and, thus, the agreed amount used to calculate the Carlile Share Exchange Ratio would not be adjusted downward. No upward adjustment of such agreed amount used to determine the Carlile Share Exchange Ratio and, thus, to calculate the fraction of a share of Independent common stock to be issued in exchange for a share of Carlile common stock in the merger, will be made as a result of Carlile adjusted tangible equity exceeding $200 million at the tangible equity determination date.
These amounts in the table above are only estimates and are based upon several assumptions, many of which are beyond the control of Carlile and Northstar Bank. Accordingly, the actual amount of Carliles adjusted tangible equity at the tangible equity determination date may vary from these estimated amounts. Carlile will not resolicit proxies from holders of its common stock in the event that Carlile adjusted tangible equity is below $200 million on the tangible equity determination date and the agreed amount used to determine the Carlile Share Exchange Ratio is adjusted downward as Carlile has no right to do so under the reorganization agreement. For more information regarding how the Carlile adjusted tangible equity will be calculated and how Carlile has estimated what that amount will be on or about April 1, 2017, the anticipated effective date of the merger, please see The MergerPossible Downward Adjustment to the $434 million Agreed Amount to be Used in the Calculation of the Carlile Share Exchange Ratio beginning on page 78.
Q: | Are there other financial aspects to the transactions contemplated by the reorganization agreement of which shareholders of Independent and Carlile should be aware of? |
A: | Under the terms of the reorganization agreement, Carlile may make cash distributions to its shareholders of up to an aggregate of $55,250,000 after the date of the reorganization agreement and prior to the effective time of the merger, a portion of which may be in the form of a return of capital to the Carlile shareholders. In addition, if the closing of the merger does not occur on or before June 30, 2017, the amount of cash distributions Carlile may make under the reorganization agreement will be increased by an amount equal to the consolidated net income of Carlile from June 1, 2017 through the tangible equity determination date for the adjusted tangible equity of Carlile. Carlile made cash distributions of $52,600,000 to its shareholders in December 2016 as a return of capital to the Carlile shareholders. Depending on the adjusted tangible equity of Carlile at the tangible equity determination date, Carlile may make additional cash distributions that, together with the December 2016 distributions, do not exceed the upper limit on such distributions. All such cash distributions made after December 31, 2016 will reduce the amount of adjusted tangible equity of Carlile as of December 31, 2016 as disclosed above. |
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Q: | Will the holders of Carlile common stock know, at the time of or prior to the Carlile special meeting, the exact fraction of a share of Independent common stock or the value of such fraction of a share they will receive for each share of Carlile common stock they hold? |
A: | No. Because of the possibility of a downward adjustment to the agreed amount to be used to calculate the Carlile Share Exchange Ratio, the uncertainty in the number of shares of Carlile common stock that will be outstanding immediately prior to the effective time of the merger, the Average Stock Price and the amount to be paid to the option holders in the merger, Carlile shareholders will not know the exact fraction of a share of Independent common stock that Carlile shareholders will receive for each share of Carlile common stock (including the shares of Carlile common stock issued upon the exercise of outstanding options to purchase Carlile common stock prior to closing, if any) held by holders of Carlile common stock immediately prior to the effective time of the merger when the Carlile shareholders vote on the reorganization agreement. As a consequence of not knowing the exact fraction of a share of Independent common stock that will be exchanged for each share of Carlile common stock in connection with the merger and because the price per share of Independent common stock will fluctuate between now and the effective date of the merger, the holders of Carlile common stock will not know, at the time of or prior to the Carlile special meeting, the value of the Independent common stock they will receive in the merger. |
Q: | Will the Independent shareholders know prior to the Independent special meeting the exact aggregate number of shares of Independent common stock that will be issued to the Carlile shareholders in the merger? |
A: | For the reasons discussed in the answer to the immediately preceding question, the Independent shareholders will not know the exact aggregate number of shares of Independent common stock that will be issued in the merger at the time they vote on the proposals to be considered at the Independent special meeting. As a result and although Independent anticipates that the aggregate number of shares of Independent common stock to be issued to the Carlile shareholders in the merger will be approximately 46.6% of, and have voting power of approximately 46.6% of the voting power of, the shares of Independent common stock that will be outstanding immediately prior to the issuance of the shares of Independent common stock to the Carlile shareholders in the merger, the Independent shareholders will not know the exact percentage of, or the exact percentage of the voting power of, such shares of Independent common stock at the time of the Independent special meeting. Independent anticipates that the aggregate number of shares of Independent common stock to be issued to the Carlile shareholders in connection with the merger will be approximately 31.8% of the shares of Independent common stock to be issued and outstanding immediately following the issuance of the shares of Independent common stock in connection with the merger. |
Q: | Do Carlile shareholders have a choice of the form of consideration that they will receive in the merger? |
A: | No. In accordance with the reorganization agreement, each share of Carlile common stock (including shares of Carlile common stock issued upon the exercise of outstanding options to purchase Carlile common stock prior to closing, if any) will be exchanged for a fraction of a share of Independent common stock. |
Q. | Will Independent shareholders receive any consideration as a result of the merger? |
A: | No. Whether or not the merger is completed, Independent shareholders will retain the Independent common stock that they currently own. They will not receive any merger consideration, whether cash or any additional shares of Independent common stock in the merger. If the merger is consummated, the issuance of the shares of Independent common stock to the Carlile shareholders in the merger will result in the existing Independent shareholders ownership interest in and voting power with respect to Independent being diluted. |
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Q: | When do you expect the merger to be completed? |
A: | We are working to complete the merger on April 1, 2017, although delays could occur. |
Q: | Are there any risks I should consider in deciding whether I will vote for the reorganization agreement and the merger and, if I am an Independent shareholder, the other proposals to be considered at the Independent special meeting? |
A: | Yes. Set forth under the heading of Risk Factors, beginning on page 54, are a number of risk factors that you should consider carefully. |
Q: | When and where will the special shareholders meetings be held? |
A: | Carlile shareholders: The Carlile special shareholders meeting is scheduled to take place at 2:00 p.m., Central Time, on March 30, 2017, at the City Club of Fort Worth, 301 Commerce Street, Fort Worth, Texas 76102. |
Independent shareholders: The Independent special shareholders meeting is scheduled to take place at 3:30 p.m., Central Time, on March 30, 2017, at the branch office of Independent Bank, 1600 Redbud Boulevard, Suite 100, McKinney, Texas 75069.
Q: | Who is entitled to vote at the special meeting? |
A: | Carlile shareholders: The holders of record of Carlile voting common stock, as of 5:00 p.m. on February 17, 2017, which is the date that Carliles board of directors has fixed as the record date for the Carlile special meeting, or the Carlile record date, are entitled to vote at the Carlile special meeting. Holders of Carlile voting common stock will vote as separate class. Holders of shares of Carlile nonvoting common stock will not be entitled to any vote with respect to any of the proposals to be voted on at the Carlile special meeting, whether as a separate class or otherwise. |
Independent shareholders: The holders of record of Independent common stock, as of 5:00 p.m. on February 21, 2017, which is the date that Independents board of directors has fixed as the record date for the Independent special meeting, are entitled to vote at the Independent special meeting.
Q: | What are my choices when voting? |
A: | With respect to each of the proposals, holders of common stock entitled to vote may vote for, against or abstain from voting on the proposals in question presented at either the Carlile special meeting or the Independent special meeting, as the case may be. |
Q: | Why are the Independent shareholders voting to approve the reorganization agreement and the merger and to separately approve the issuance of the shares of Independent common stock in exchange for the shares of Carlile common stock in the merger? |
A: | Independents common stock is listed on the Nasdaq Global Select Market and, therefore, is subject to the rules of The NASDAQ Stock Market LLC for companies with equity securities listed for trading on that exchange. One of those rules requires that a listed companys shareholders must approve any issuance of securities of the listed company in an acquisition of stock or assets of another company if the shares to be issued (i) are or will be equal to or in excess of 20% of the shares of common stock of the listed company outstanding immediately prior to the issuance of such new shares or (ii) will have voting power that is or will be equal to or in excess of the voting power of the listed company in effect immediately prior to the |
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issuance of such new shares. The shares of Independent common stock to be issued in the merger are expected to exceed in number and voting power 20% of the number and voting power of the shares of Independent common stock that will be outstanding immediately prior to the issuance of those shares in the merger. Independent does not expect to have other voting securities outstanding at any time prior to the closing of the merger. As a result and in view of the SECs position regarding bundling proposals to be voted on at meetings of shareholders, Independent will have its shareholders vote on the issuance of the shares of Independent common stock in the merger separately from voting on the reorganization agreement. If either of the proposals mentioned above does not receive the requisite affirmative vote from the Independent shareholders, the merger will not be consummated. |
Q: | What votes are required for approval of the reorganization agreement and the merger? |
A: | Carlile shareholders: Approval of the reorganization agreement and the merger by Carlile shareholders requires the affirmative vote of the holders of at least two-thirds of the issued and outstanding shares of Carlile voting common stock entitled to vote at the Carlile special meeting on the proposal to approve the reorganization agreement and the merger, or at least 18,301,578 shares of Carlile voting common stock if no other shares of Carlile voting common stock are issued. |
Independent shareholders: Approval of the reorganization agreement and the merger by Independent shareholders requires the affirmative vote of the holders of at least two-thirds of the outstanding shares of Independent common stock or at least 12,613,066 shares of Independent common stock if no other shares of Independent common stock are issued.
Q: | What votes are required to adjourn the special meeting? |
A: | Carlile shareholders: Adjournment of the Carlile special meeting requires the approval of the holders of a majority of the issued and outstanding shares of Carlile voting common stock entitled to vote and present or represented by proxy at the Carlile special meeting. |
Independent shareholders: To adjourn the Independent special meeting, the affirmative vote of a majority of votes cast on such proposal at the meeting is required.
Q: | What vote is required to approve the issuance of shares of Independent common stock that will exceed in number and voting power 20% of the number and voting power of outstanding shares of Independent common stock? |
A: | Such issuance must be approved by the affirmative vote of a majority of the total votes cast by the shareholders of Independent entitled to vote on such proposal at the Independent special meeting. |
Q: | What vote is required to elect the three named director nominees for election as directors of Independent at the Independent special meeting? |
A: | Election of the three named director nominees as directors of Independent requires the affirmative vote of the holders of a plurality of all votes cast by holders of shares entitled to vote on such election of directors at the Independent special meeting. |
Q: | How does the board of directors of Carlile recommend that I vote at the special meeting? |
A: | The board of directors of Carlile unanimously recommends that Carlile shareholders vote their shares as follows: |
Carlile Proposal One: FOR the approval of the reorganization agreement and the merger; and
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Carlile Proposal Two: FOR the adjournment of the Carlile special meeting to a later date or dates if the board of directors of Carlile determines it is necessary to permit solicitation of additional proxies if there are not sufficient votes at the time of the Carlile special meeting to constitute a quorum or to approve the reorganization agreement and the merger.
Q: | How does the board of directors of Independent recommend that I vote at the Independent special meeting? |
A: | The board of directors of Independent unanimously recommends that Independent shareholders vote their shares as follows: |
Independent Proposal One: FOR the approval of the reorganization agreement and the merger;
Independent Proposal Two: FOR the approval of the issuance of shares of Independent common stock to the Carlile shareholders as merger consideration under the reorganization agreement that in number and voting power will exceed 20% of the number and voting power of the shares of Independent common stock that will be outstanding immediately prior to the issuance of the shares of Independent common stock in the merger;
Independent Proposal Three: FOR the election of each of Tom C. Nichols, Mark K. Gormley and Christopher M. Doody as directors of Independent to fill the vacancies on the Independent board of directors, with the election of such directors being subject to the mergers completion; and
Independent Proposal Four: FOR the adjournment of the Independent special meeting to a later date or dates if the board of directors of Independent determines it is necessary to permit solicitation of additional proxies if there are not sufficient votes at the time of the Independent special meeting to constitute a quorum or to approve the first three proposals listed above.
Q: | Do I have any rights to avoid participating in the merger? |
A: | Holders of Carlile Voting Common Stock: Each holder of Carlile voting common stock has the right to dissent from the merger and seek payment of the appraised fair value of his or her shares of Carlile voting common stock in cash. In order for a shareholder of Carlile to perfect his or her right to dissent, such shareholder must: |
| deliver to Carlile a written objection to the merger prior to the Carlile special meeting that states that such shareholder will exercise his or her right to dissent if the reorganization agreement and the merger are approved and the merger is completed; |
| vote his or her shares of Carlile voting common stock against approval of the reorganization agreement and the merger at the Carlile special meeting; |
| not later than the 20th day after Independent sends such shareholder notice that the merger was completed, deliver to Independent a written demand for payment of the fair value of his or her shares of Carlile voting common stock that states the number and class of shares of Carlile capital stock the shareholder owns (i.e., that states that he or she owns a particular number of the shares of Carlile voting common stock), his or her estimate of the fair value of such shares and an address to which a notice relating to the dissent and appraisal procedures may be sent; and |
| not later than the 20th day after he or she makes that demand, submit to Independent the certificates representing his or her shares of Carlile voting common stock. |
The steps that a holder of Carlile voting common stock must follow to perfect his or her right of dissent are described in greater detail under the caption The MergerDissenters Rights of Carlile Shareholders
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starting on page 130, and this discussion is qualified by that description and by the text of the provisions of the TBOC relating to rights of dissent set forth in Appendix D hereto. The appraised fair value of any number of shares of Carlile voting common stock may be more or less than the value of the shares of the Independent common stock that would be issued in exchange for that number of shares of Carlile voting common stock in the merger. If the holders of more than 5% of the outstanding shares of Carlile common stock (including the outstanding shares of Carlile nonvoting common stock) dissent from the merger, Independent has the right to terminate the reorganization agreement and to not consummate the merger.
Holders of Carlile Nonvoting Common Stock: The holders of Carlile nonvoting common stock are not entitled to appraisal rights or dissenters rights in connection with the merger under Texas law or under the governing documents of Carlile with respect to their shares of Carlile nonvoting common stock.
Independent shareholders: No. The shareholders of Independent are not entitled to appraisal rights or dissenters rights in connection with the merger under Texas law or under the governing documents of Independent.
Q: | What happens if I transfer my shares after the record date for the special meetings? |
A: | Holders of Carlile Voting Common Stock: The record date for the Carlile special meeting is earlier than the expected date of completion of the merger. Therefore, if you transfer your shares of Carlile voting common stock after the record date, but prior to the effective time of the merger, you will retain the right to vote at the Carlile special meeting, but the right to receive the merger consideration will transfer with the shares of Carlile voting common stock. |
Holders of Carlile Nonvoting Common Stock: If you hold shares of Carlile nonvoting common stock of record and transfer those shares after the record date for the Carlile special meeting, but prior to the effective time of the merger, you may still attend the special meeting, but the right to receive merger consideration will transfer with the shares of Carlile nonvoting common stock you transfer.
Independent shareholders: The record date for the Independent special meeting is earlier than the expected date of completion of the merger. Therefore, if you transfer your shares of Independent common stock after the applicable record date, but prior to the mergers completion, you will retain the right to vote at the Independent special meeting.
Q: | What do I need to do now? |
A: | Holders of Carlile Voting Common Stock: After you have thoroughly read and considered the information contained in this joint proxy statement/prospectus, you simply need to vote your shares of Carlile voting common stock at the Carlile special meeting. The process for voting your shares depends on how your shares are held. Generally you may hold shares as the record holder (that is, in your own name) or in street name (that is, through a nominee, such as a broker or a bank). If you hold shares in street name, you are considered the beneficial owner of those shares. |
If you are a record holder, you may vote by proxy or you may attend the Carlile special meeting and vote in person the shares of Carlile voting common stock you are entitled to vote at the Carlile special meeting. If you are a record holder on the record date for the Carlile special meeting and want to vote your shares of Carlile voting common stock by proxy, simply indicate on the proxy card(s) applicable to your shares of Carlile common stock how you want to vote and sign, date and mail your proxy card(s) in the enclosed envelope as soon as possible, but in any event no later than the time necessary for your proxy card to be actually received by Carlile prior to the vote at the Carlile special meeting.
Your proxy card must be received by Carlile by no later than the time the polls close for voting at the Carlile special meeting for your vote to be counted at the Carlile special meeting.
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Voting your shares by proxy will enable your shares of Carlile voting common stock to be represented and voted at the Carlile special meeting if you do not attend the special meeting and vote your shares in person.
Holders of Carlile Nonvoting Common Stock: There are no actions that holders of Carlile nonvoting common stock need to take with respect to the Carlile special meeting.
Independent shareholders: After you have thoroughly read and considered the information contained in this joint proxy statement/prospectus, you simply need to vote your shares of Independent common stock at the Independent special meeting. The process for voting your shares depends on how your shares are held. Generally you may hold shares as the record holder (that is, in your own name) or in street name (that is, through a nominee, such as a broker or a bank). If you hold shares in street name, you are considered the beneficial owner of those shares.
If you are a record holder on the record date for the Independent special meeting, you may vote by proxy or you may attend the Independent special meeting and vote in person. If you are a record holder and want to vote you shares by proxy, you have three ways to vote:
| simply indicate on the proxy card(s) applicable to your Independent common stock how you want to vote and sign, date and mail your proxy card(s) in the enclosed pre-addressed postage-paid envelope as soon as possible, but in any event no later than the time necessary for your proxy card to be actually received by Independent prior to the vote at the Independent special meeting; |
| call 1 (866) 883-3382 using a touch-tone telephone and follow the instructions provided on the call; or |
| go to the website www.proxypush.com/ibtx and follow the instructions for Internet voting on that website. |
Your proxy card must be received by Independent by no later than the time the polls close for voting at the Independent special meeting for your vote to be counted at the meeting. Please note that telephone and Internet voting will close at 11:59 p.m. Central Time, on March 29, 2017.
Voting your shares by proxy will enable your shares of Independent common stock to be represented and voted at the Independent special meeting if you do not attend the Independent special meeting and vote your shares in person.
Q: | If my shares of voting common stock are held in street name by my broker, will my broker vote my shares for me? |
A: | If your broker has not provided to you a proxy that allows you to vote your shares of voting common stock that it holds for you, your broker may vote your shares of voting common stock on the reorganization agreement and the merger proposal and, in the case of shares of Independent common stock, the proposals regarding the issuance of shares of Independent common stock to the Carlile shareholders in connection with the merger and the election of the three named director nominees as directors of Independent only if you provide instructions to your broker on how to vote. You should instruct your broker how to vote your shares of voting common stock, following the directions your broker provides. If you do not provide instructions to your broker, your shares will not be voted, which will have the same effect as a vote against the proposal to approve the reorganization agreement and the merger. |
Q: | How will my shares be voted if I return a signed and dated proxy card, but dont specify how my shares will be voted? |
A: | Holders of Carlile Voting Common Stock: The shares to which such proxy card relates will be voted FOR approval of the reorganization agreement and the merger and FOR any adjournments of the meeting that the board of directors of Carlile deems necessary. |
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Independent shareholders: The shares to which such proxy card relates will be voted FOR approval of the reorganization agreement and the merger, FOR approval of the issuance of shares of Independent common stock to the Carlile shareholders in connection with the merger, FOR election of each of the three named director nominees for election as directors of Independent to fill the vacancies on the Independent board of directors, and FOR any adjournments of the meeting that the board of directors of Independent deems necessary.
Q: | Can I attend the special meeting and vote in person? |
A: | Carlile shareholders: Yes. All Carlile shareholders are invited to attend the Carlile special meeting. However, only holders of record of Carlile voting common stock on the record date for the Carlile special meeting can vote, whether in person or by proxy, at the Carlile special meeting. |
Independent shareholders: Yes. All Independent shareholders are invited to attend the Independent special meeting. Shareholders of record on the record date for the Independent special meeting can vote in person at the Independent special meeting.
If your shares of Independent or Carlile are held in street name, then you are not the shareholder of record. In order for you to vote the shares that you beneficially own and that are held in street name in person at the special meeting, you must bring a legal proxy from the broker, bank or other nominee that was the record holder of your shares held in street name as of 5:00 p.m. on February 21, 2017, confirming that you were the beneficial owner of those shares as of 5:00 p.m. on February 21, 2017, stating the number of shares of which you were the beneficial owner that were held for your benefit at that time by that broker, bank or other nominee and appointing you as the record holders proxy to vote the shares covered by that proxy at the special meeting.
Q: | May I change my vote after I have submitted my proxy card? |
A: | Carlile shareholders: Yes. If a Carlile shareholder is a holder of record of shares of Carlile voting common stock, he or she may change his or her vote prior to such time that the proxy card for any such holder of Carlile voting common stock must be received by: |
| delivering to Carlile prior to such time a written notice of revocation addressed to: Ms. Mindy Hegi, Chief Financial Officer, Carlile Bancshares, Inc., 201 Main Street, Suite 1320, Fort Worth, Texas 76102; |
| completing, signing and returning to Ms. Mindy Hegi, the Chief Financial Officer of Carlile, at the address appearing above prior to such time a new proxy card dated with a later date than the date with which your original proxy card was dated, in which case any earlier proxy will be revoked automatically; or |
| attending the Carlile special meeting and voting in person by ballot, in which case any earlier proxy will be revoked. However, simply attending the Carlile special meeting without voting on a proposal by ballot will not revoke your proxy previously provided. |
If your shares are held in street name and you desire to change any voting instructions you have previously given to the record holder of the shares of which you are the beneficial owner, you should contact the broker, bank or other nominee holding your shares in street name in order to direct a change in the manner your shares will be voted.
Independent shareholders: Yes. Regardless of the method used to cast a vote, if an Independent shareholder is a holder of record, he or she may change his or her vote by:
| delivering to Independent prior to the Independent special meeting a written notice of revocation addressed to: Jan Webb, Corporate Secretary, 1600 Redbud Boulevard, Suite 400, McKinney, Texas 75069-3257; |
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| completing, signing and returning a new proxy card dated with a later date than the date on your original proxy card prior to such time that the proxy card for any such holder of Independent common stock must be received, in which, are any earlier proxy will be revoked automatically; |
| logging onto the Internet website specified on your proxy card in the same manner you would to submit your proxy electronically or by calling the telephone number specified on your proxy card, in each case if you are eligible to do so, and following the instructions indicated on the proxy card prior to 11:59 p.m. on March 29, 2017; or |
| attending the Independent special meeting and voting in person, in which case any earlier proxy will be revoked. However, simply attending the Independent special meeting without voting on a proposal will not revoke your proxy previously provided as to that proposal. |
If your shares are held in street name and you desire to change any voting instructions you have previously given to the record holder of the shares of which you are the beneficial owner, you should contact the broker, bank or other nominee holding your shares in street name in order to direct a change in the manner your shares will be voted.
Q: | What happens if I abstain from voting or fail to instruct my broker to vote? |
A: | Carlile shareholders: If you are a record holder of Carlile voting common stock and you abstain from voting or if you hold your shares of Carlile voting common stock in street name and you instruct your broker to abstain from voting such shares or fail to instruct your broker to vote your shares and the broker submits a proxy, referred to as a broker nonvote, then the abstention or broker nonvote of shares of Carlile voting common stock will be counted towards a quorum at the Carlile special meeting, but such shares will have the same effect as a vote against the proposal to approve the reorganization agreement and the merger and the proposal to adjourn the special meeting, if necessary. |
Independent shareholders: If you are a record holder of Independent common stock and you abstain from voting or if you hold your shares of Independent common stock in street name and you instruct your broker to abstain from voting on the proposals or you fail to instruct your broker to vote your shares even if the broker submits a proxy, referred to as a broker nonvote, then the abstention or broker nonvote of shares of Independent common stock will be counted towards a quorum at the Independent special meeting, but such shares will have the same effect as a vote against the proposal to approve the reorganization agreement and the merger. Abstentions and broker nonvotes will have no effect on the proposals to regarding the issuance of shares of Independent common stock to Carlile shareholders in connection with the merger, to elect the three nominees for election as directors of Independent named in this joint proxy statement/prospectus to fill the vacancies on the Independent board of directors, or to adjourn the Independent special meeting, if necessary.
Q: | Should Carlile shareholders send in their stock certificates now? |
A: | No. As soon as practical after the effective time, with the intent for that to be no later than five business days after the effective time of the merger, Wells Fargo Shareowner Services, Independents exchange agent, will send the Carlile shareholders written instructions for exchanging their stock certificates. Carlile shareholders should not send their Carlile stock certificates with their proxy card. |
Q: | Who can help answer my questions? |
A: | Carlile shareholders: If you have additional questions about the merger, you should contact Ms. Mindy Hegi, Chief Financial Officer, Carlile Bancshares, Inc., 201 Main Street, Suite 1320 Fort Worth, Texas 76102, telephone (817) 877-4400. |
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Independent shareholders: If you have additional questions about the merger, you should contact Jan Webb, Corporate Secretary, Independent Bank Group, Inc., 1600 Redbud Boulevard, Suite 400, McKinney, Texas 75069, telephone (972) 562-9004.
[The balance of this page intentionally left blank.]
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This summary highlights selected information from this joint proxy statement/prospectus and may not contain all of the information that is important to you regarding the merger and related matters. Independent and Carlile urge you to carefully read this entire document and the other information that is referred to in this joint proxy statement/prospectus or contained in the reports and documents incorporated by reference in this joint proxy statement/prospectus. These documents will give you a more complete description of the items for consideration at the special meeting. For more information about Independent and Carlile, see Where You Can Find More Information on page 234. Independent has included page references in this summary to direct you to other places in this joint proxy statement/prospectus where you can find a more complete description of the topics that Independent has summarized.
The | Companies |
Independent Bank Group, Inc.
1600 Redbud Boulevard, Suite 400
McKinney, Texas 75069-3257
(972) 562-9004
www.ibtx.com
Independent, a Texas corporation, is a bank holding company registered under the Bank Holding Company Act of 1956, as amended, or the BHC Act. Through Independent Bank, its wholly owned subsidiary bank, which is a Texas state bank, Independent provides a wide range of relationship driven, commercial banking products and services. Independent currently operates a total of 41 full-service banking centers in the Dallas/North Texas metropolitan area, including McKinney, Dallas, Plano and Sherman/Denison, the greater Austin, Texas, area, including Austin and Waco, and the Houston, Texas metropolitan area. As of September 30, 2016, on a consolidated basis, Independent had total assets of $5.7 billion, total loans of $4.3 billion, total deposits of $4.4 billion and shareholders equity of $643 million.
Independents common stock is traded on the NASDAQ Global Select Market under the symbol IBTX.
Carlile Bancshares, Inc.
201 Main Street, Suite 1320
Fort Worth, Texas 76201
817-877-4440
www.carlilebancshares.com
Carlile Bancshares, Inc., a Texas corporation, is a bank holding company registered under the BHC Act. Carlile conducts its banking operations through its wholly owned subsidiary, Northstar Bank, a Texas banking association, that operates 24 full service banking locations in Texas and 18 full service banking locations in Colorado. As of September 30, 2016, Carlile, on a consolidated basis, reported total assets of $2.3 billion, total loans of $1.5 billion, total deposits of $1.9 billion and total equity capital of $383 million.
The reorganization agreement is attached to this joint proxy statement/prospectus as Appendix A. Please read the entire reorganization agreement. It is the legal document that governs the merger.
The reorganization agreement provides for Independent to acquire all of the issued and outstanding securities of Carlile through the merger of Carlile with and into Independent, with Independent being the
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surviving corporation following the merger. If the shareholders of Carlile and Independent approve the reorganization agreement at the special meetings, and if the required regulatory approvals are obtained and the other conditions to the parties obligations to effect the merger are satisfied or are waived by the party entitled to do so, Independent and Carlile anticipate that the merger will be completed on April 1, 2017, although delays could occur.
Independent is the sole shareholder of Independent Bank, and Carlile is the sole shareholder of Northstar Bank. Upon the mergers completion, both Independent Bank and Northstar Bank will be wholly owned subsidiaries of Independent. Pursuant to the reorganization agreement, immediately following the mergers completion, Northstar Bank will merge with and into Independent Bank, with Independent Bank being the surviving bank following the bank merger.
The merger will be accounted for as an acquisition of Carlile and Northstar Bank by Independent and Independent Bank under the acquisition method of accounting in accordance with the Financial Accounting Standard Boards Accounting Standard Codification Topic 805, Business Combinations.
Treatment of Shares of Carlile Common Stock (page 75)
As a result of the merger, holders of Carlile voting common stock and Carlile nonvoting common stock will be entitled to receive whole shares of Independent common stock in exchange for their shares of Carlile voting common stock and Carlile nonvoting common stock. The fraction of a share of Independent common stock to be issued in exchange for a share of Carlile voting common stock and for a share of Carlile nonvoting common stock will be the same. Independent will pay cash in lieu of issuing fractional shares. After the merger, the Carlile shareholders will no longer be owners of Carlile common stock. As a result of the merger, certificates of Carlile common stock will represent only the right to receive the merger consideration pursuant to the reorganization agreement. Carlile will cease to exist following the mergers completion.
If the shareholders of Carlile and Independent approve the reorganization agreement and the merger, the Independent shareholders approve the issuance of shares of Independent common stock in the merger, the necessary regulatory approvals of the merger are received, and the merger is completed, assuming the Average Stock Price were $66.70 (the closing price for a share of Independent common stock on February 16, 2017), 35,064,719 shares of Carlile voting and non-voting common stock are outstanding immediately prior to the merger (which assumes that none of the outstanding options to acquire Carlile common stock are exercised after the date of this joint proxy statement/prospectus), Carlile has adjusted tangible equity of at least $200 million on the tangible equity determination date, and the aggregate payment to cash out the holders of the Carlile stock options were approximately $22.1 million (which includes $1.6 million paid by Carlile in December 2016 in connection with the cancellation of certain options to purchase Carlile common stock), each of the shares of Carlile common stock then outstanding would be exchanged for 0.2517 of a share of Independent common stock and all of those outstanding shares of Carlile common stock would be exchanged for an aggregate of 8,825,790 shares of Independent common stock. For more detail on this estimate, please see The MergerEstimated Number of Shares of Carlile Common Stock to be Issued and Outstanding on the Closing Date on page 78.
Treatment of Carlile Stock Options (page 76)
Pursuant to the terms of the reorganization agreement and the Carlile Equity Incentive Plan, the administrator of that plan will unilaterally provide for the vesting of each outstanding and unvested option to acquire shares of Carlile common stock not fully vested and immediately exercisable as of the fifth business day prior to the closing date of the merger. All of the outstanding options to acquire shares of Carlile common stock will then no longer be subject to forfeiture and will be immediately exercisable. Each such option that is not exercised prior to the effective time of the merger will be automatically cashed out under the terms of the Carlile Equity Incentive Plan and the holder of each cashed out Carlile stock option will have the right to receive a cash
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payment in an amount equal to the difference between (X) the quotient of (a) the sum of (I) the aggregate number of shares of Independent common stock into which the shares of Carlile common stock will be converted in the merger multiplied by the Average Stock Price, plus (II) an amount equal to any cash distribution by Carlile to its shareholders as permitted by the reorganization agreement that is not a return of capital to its shareholders plus (III) the aggregate exercise price payable to exercise the Carlile stock options divided by (b) the sum of (i) the number of shares of Carlile common stock outstanding immediately prior to the mergers effective time plus (ii) the number of shares of Carlile common stock underlying the Carlile stock options outstanding and unexercised at the effective time of the merger plus (iii) 190,000 shares, representing the shares of Carlile common stock underlying the Carlile stock options that were cancelled in December 2016 minus (Y) the exercise price of such Carlile stock option. Such amount will be paid to the option holders within five business days following the closing date of the merger.
In connection with certain tax planning matters being conducted by Carlile, in December 2016, Carlile cancelled options to purchase an aggregate of 190,000 shares of Carlile voting common stock that were previously held by certain executive officers of Carlile in exchange for aggregate cash consideration of approximately $1.6 million. In an effort to ensure that these executive officers ultimately receive the same consideration upon the cancellation of their options that other Carlile option holders will receive from Independent following consummation of the merger, the executive officers and Independent agreed to a true-up mechanism whereby: (i) in the event that the cash amount paid to cancel each option is less than the Per Option Share Price (as defined in the reorganization agreement), Independent would make an additional cash payment to the executive officers equal to the amount of the deficiency multiplied by the number of their options cancelled in December 2016; and (ii) in the event that the cash amount paid to cancel each option is greater than the Per Option Share Price, the aggregate Option Holder Payment (as defined in the reorganization agreement) to which the executive officers will be entitled to receive from Independent upon consummation of the merger would be reduced, on a dollar-for-dollar basis, by the amount of the excess multiplied by the number of their options cancelled in December 2016. As a result of this true-up procedure, the executive officers who have received a cash payment in exchange for the cancellation of a portion of their stock options in December 2016 will receive the same net cash amount in exchange for those cancelled stock options as will be received by all other Carlile option holders upon the consummation of the merger. In addition, each of Carlile and Independent further clarified their intent that the cash payments made to the executive officers in exchange for the cancellation of a portion of their options to purchase Carlile common stock will be disregarded from the calculation of the adjusted tangible equity of Carlile so as to ensure that such payments do not otherwise affect the Carlile Share Exchange Ratio or the amount of any pre-closing distribution by Carlile as permitted by the reorganization agreement.
Estimated Number of Shares of Carlile Common Stock to be Issued and Outstanding on the Closing Date (page 78)
The amount of per share merger consideration to be received by the Carlile shareholders is dependent, among other factors, upon the number of shares of Carlile common stock issued and outstanding immediately prior to the effective time of the merger. As of February 17, 2017, the record date for the Carlile special meeting, 35,064,719 shares of Carlile voting and non-voting common stock were issued and outstanding, including 27,452,367 shares of Carlile voting common stock, and options to purchase 2,504,726 shares of Carlile common stock were outstanding and unexercised. Carlile anticipates that none of those stock options will be exercised prior to the mergers effective time. However, if all of the currently outstanding options to purchase Carlile common stock are exercised, 37,569,445 shares of Carlile voting and non-voting common stock would be issued and outstanding immediately prior to the effective time of the merger. For more detail on these estimates, please see The MergerEstimated Number of Shares of Carlile Common Stock to be Issued and Outstanding on the Closing Date on page 78. The shares of Carlile common stock outstanding at the tangible equity determination date will include all shares of restricted stock of Carlile common stock currently outstanding. Pursuant to the
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terms of the reorganization agreement and the provisions of the Carlile Equity Incentive Plan, the administrator of that plan will unilaterally provide for the vesting of each outstanding and unvested share of restricted Carlile stock as of the fifth business day prior to the closing date of the merger. Upon such vesting, such restricted stock will no longer be subject to forfeiture or to the restrictions imposed by the provisions of the Carlile Equity Incentive Plan or any award agreement. Such shares will be exchanged for shares of Independent common stock in the merger on the same basis as all other shares of Carlile common stock outstanding immediately prior to the effective time of the merger.
Possible Downward Adjustment to the $434 Million Amount to be Used in the Calculation of the Carlile Share Exchange Ratio (page 78)
The agreed amount to be used in the calculation of the Carlile Share Exchange Ratio and, therefore, to determine the fraction of a share of Independent common stock to be exchanged for each share of Carlile common stock in the merger and to calculate the amount of cash to be paid in the cashout of the Carlile stock options is $434 million, which is the agreed value of all of the outstanding shares of Carlile common stock and all of the outstanding and unexercised Carlile stock options. This agreed amount will be adjusted downward if the adjusted tangible equity of Carlile is less than $200 million on the fifth business day prior to the mergers closing date. Specifically, if on that date Carliles adjusted tangible equity is less than $200 million, the $434 million agreed amount used in the calculation of the Carlile Share Exchange Ratio would be reduced by an amount equal to the difference between $200 million minus the actual Carlile adjusted tangible equity as of such date.
Pursuant to the terms of the reorganization agreement, the adjusted tangible equity of Carlile will be determined from Carliles financial statements prepared in accordance with GAAP, adjusted as provided for below. Any unrealized gains or losses in investment securities held by Carlile and the amount paid by Carlile in December 2016 to cash out a portion of the options to purchase shares of Carlile common stock then held by certain executive officers of Carlile will be excluded from the calculation of Carliles adjusted tangible equity.
As of December 31, 2016, the estimated tangible equity of Carlile (calculated in accordance with GAAP) was $209.2 million. For purposes of determining the Carlile Share Exchange Ratio, that amount of Carliles adjusted tangible equity will be increased by the amount of the consolidated net income of Carlile or decreased by the amount of the consolidated net loss of Carlile from January 1, 2017 through the tangible equity determination date and reduced by the amount of certain costs and expenses to be incurred by Carlile in connection with the merger. Carlile currently estimates that it will have consolidated net income of between $5.0 million and $5.8 million from January 1, 2017 through March 24, 2017, which date would be the tangible equity determination date assuming that the closing date of the merger will be March 31, 2017 and the effective date of the merger will be April 1, 2017.
The table set forth below shows the range of estimates for the amounts that will affect the calculation of Carliles adjusted tangible equity, assuming the closing of the merger occurs on March 31, 2017:
Low | High | |||||||
(in thousands) | ||||||||
Estimated tangible equity of Carlile as of December 31, 2016 |
$ | 209,177 | $ | 209,177 | ||||
Estimated consolidated net income of Carlile for the period from January 1, 2017 through March 24, 2017 |
5,030 | 5,760 | ||||||
Estimated tax savings on stock option cash out |
2,615 | 3,678 | ||||||
Estimated costs and expenses of Carlile and Northstar Bank related to the merger, on an after tax equivalent basis, and other deductions contemplated by the reorganization agreement |
(14,055 | ) | (13,493 | ) | ||||
|
|
|
|
|||||
Estimated adjusted tangible equity of Carlile as of March 24, 2017 |
$ | 202,767 | $ | 205,122 | ||||
|
|
|
|
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If Carlile achieves the estimates in the range set forth above, Carliles adjusted tangible equity as of the closing date would be greater than $200 million, and, thus, the $434 million agreed amount used in the calculation of the Carlile Share Exchange Ratio would not be adjusted downward. No upward adjustment of the amount used to determine the Carlile Share Exchange Ratio and, thus, to calculate the fraction of a share of Independent common stock to be issued in exchange for a share of Carlile common stock in the merger, will be made as a result of Carlile adjusted tangible equity exceeding $200 million at the date of calculation.
The amounts shown in the table above are only estimates and are based upon several assumptions, many of which are beyond the control of Carlile and Northstar Bank. Accordingly, the actual amount of Carliles adjusted tangible equity on the tangible equity determination date may vary from either of the estimated amounts of adjusted tangible equity shown in the table above. Carlile will not resolicit proxies from holders of its common stock in the event that Carlile adjusted tangible equity is below $200 million on the tangible equity determination date and the $434 million agreed amount used in the calculation of the Carlile Share Exchange Ratio is adjusted downward as Carlile has no right to do so under the reorganization agreement. For more information regarding how the Carlile adjusted tangible equity will be calculated and how Carlile has estimated what that amount will be on or about March 24, 2017, the anticipated tangible equity determination date, please see The MergerPossible Downward Adjustment to the $434 Million Agreed Amount to be Used in the Calculation of the Carlile Share Exchange Ratio beginning on page 78.
Value of Merger Consideration to be Received (page 81)
The following tables illustrate the effect that the amount of the Average Stock Price will have on the amount and value of the consideration that will be received by the Carlile shareholders and the holders of the Carlile stock options in the merger. The exact fraction of a share of Independent common stock that will be exchanged for each share of Carlile common stock outstanding immediately prior to the effective time of the merger, the aggregate number of shares of Independent common stock that will be issued as merger consideration and the aggregate amount of cash that will be paid to cash out the Carlile stock options (including the cash paid to cancel 190,000 options to purchase shares of Carlile common stock in December 2016) if the merger is consummated will depend in part on the Average Stock Price (calculated as described in, and used in the formula for calculating the Carlile Share Exchange Ratio described in, the The MergerTreatment of Shares of Carlile Common Stock beginning on page 75). At the effective time of the merger, the value of such a fraction of a share of Independent common stock and of the aggregate number of shares of Independent common stock to be issued in the merger and the value of the aggregate merger consideration to be received by the Carlile shareholders and the holders of the Carlile stock options in the merger will depend on the market price of a share of Independent common stock at the effective time of the merger.
The amounts in each of the tables below have been calculated based on the assumed Average Stock Prices shown in such tables, and assuming 35,064,719 shares of Carlile voting and non-voting common stock will be outstanding immediately prior to the mergers effective time, no Carlile stock options will be exercised prior to closing of the merger and the market price of a share of Independent common stock at the effective time of the merger will be equal to the assumed Average Stock Price used to calculate the various amounts and values shown in such tables. Table 1 assumes that Carlile will have adjusted tangible equity of $200 million (as calculated in accordance with the terms of the reorganization agreement) on the tangible equity determination date; Table II assumes that Carlile will have adjusted tangible equity of $195 million on the tangible equity determination date.
The actual Average Stock Price, determined as provided in the reorganization agreement, may be materially less or more than any of the assumed Average Stock Prices in each of the tables below and the price at which a share of Independent common stock is trading in the market at the effective time of the merger may be materially less or more than the assumed Average Stock Price used for determining the value of the merger consideration shown in each of the tables below. As a result, the actual amounts and values of the merger consideration
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received by the Carlile shareholders and the holders of Carlile stock options in the merger may differ materially from any of the amounts and values set forth in either or both of the following tables.
Table I
Assumed Average Stock Price |
Fraction
of |
Value of Such |
Aggregate |
Value of |
Aggregate |
Aggregate |
||||||||||||||||||
$66.70(1) | 0.2517 | $ | 16.79 | 8,825,790 | $ | 588,680,178 | $ | 22,139,057 | $ | 610,819,235 | ||||||||||||||
$65.00 | 0.2519 | 16.37 | 8,832,803 | 574,132,177 | 21,028,223 | 595,160,399 | ||||||||||||||||||
$60.00 | 0.2527 | 15.16 | 8,860,854 | 531,651,269 | 17,761,063 | 549,412,332 | ||||||||||||||||||
$55.00 | 0.2536 | 13.95 | 8,892,413 | 489,082,701 | 14,493,903 | 503,576,603 | ||||||||||||||||||
$50.00 | 0.2547 | 12.74 | 8,930,984 | 446,549,196 | 11,226,743 | 457,775,939 | ||||||||||||||||||
$47.40(2) | 0.2554 | 12.11 | 8,955,529 | 424,492,086 | 9,527,820 | 434,019,905 |
(1) | The closing price of a share of Independent common stock on February 16, 2017. |
(2) | The closing price of a share of Independent common stock on November 4, 2016, which will be used in the formula to calculate the Carlile Share Exchange Ratio. |
(3) | Determined using the formula used to calculate the Carlile Share Exchange Ratio. See The MergerTreatment of Shares of Carlile Common Stock beginning on page 75 for more detailed information regarding the calculation of such ratio. |
(4) | Determined using the formula described under The MergerTreatment of Carlile Stock Options beginning on page 76. Includes $1.6 million paid by Carlile in December 2016 in connection with the cancellation of options to purchase 190,000 shares of Carlile common stock and the related true-up mechanism. |
Table II
Assumed |
Fraction
of |
Value of |
Aggregate |
Value of |
Aggregate |
Aggregate |
||||||||||||||||||
$66.70(1) | 0.2489 | $ | 16.60 | 8,727,609 | $ | 582,131,491 | $ | 21,447,820 | $ | 603,579,310 | ||||||||||||||
$65.00 | 0.2492 | 16.20 | 8,738,128 | 567,978,318 | 20,349,783 | 588,328,101 | ||||||||||||||||||
$60.00 | 0.2500 | 15.00 | 8,766,180 | 525,970,785 | 17,120,263 | 543,091,048 | ||||||||||||||||||
$55.00 | 0.2509 | 13.80 | 8,797,738 | 483,875,590 | 13,890,743 | 497,766,333 | ||||||||||||||||||
$50.00 | 0.2520 | 12.60 | 8,836,309 | 441,815,459 | 10,661,223 | 452,476,682 | ||||||||||||||||||
$47.40(2) | 0.2527 | 11.98 | 8,860,854 | 420,004,503 | 8,981,873 | 428,986,376 |
(1) | The closing price of a share of Independent common stock on February 16, 2017. |
(2) | The closing price of a share of Independent common stock on November 4, 2016, which will be used in the formula to calculate the Carlile Share Exchange Ratio. |
(3) | Determined using the formula used to calculate the Carlile Share Exchange Ratio. See The MergerTreatment of Shares of Carlile Common Stock beginning on page 75 for more detailed information regarding the calculation of such ratio. |
(4) | Determined using the formula described under The MergerTreatment of Carlile Stock Options beginning on page 76. Includes $1.6 million paid by Carlile in December 2016 in connection with the cancellation of options to purchase 190,000 shares of Carlile common stock and the related true-up mechanism. |
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The value of the total merger consideration and the per share merger consideration will increase or decrease based upon fluctuations in the market price of Independent common stock occurring prior to the closing of the merger.
Other Financial Aspects of the Merger (Page 83)
Under the terms of the reorganization agreement, Carlile may make cash distributions to its shareholders of up to an aggregate of $55,250,000 after the date of the reorganization agreement and prior to the effective time of the merger, a portion of which may be in the form of a return of capital to the Carlile shareholders. In addition, if the closing of the merger does not occur on or before June 30, 2017, the amount of cash distributions Carlile may make under the reorganization agreement will be increased by an amount equal to the consolidated net income of Carlile from July 1, 2017 through the tangible equity determination date for the adjusted tangible equity of Carlile. Carlile made cash distributions of $52,600,000 to its shareholders in December 2016 as a return of capital to the Carlile shareholders. Depending on the adjusted tangible equity of Carlile at the tangible equity determination date, Carlile may make additional cash distributions that, together with the December 2016 distributions, do not exceed the upper limit on such distributions. All such cash distributions made after December 31, 2016 will reduce the amount of adjusted tangible equity of Carlile.
Material U.S. Federal Income Tax Consequences (page 126)
The merger is intended to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, as amended, or the Code, for U.S. federal income tax purposes, and the closing is conditioned upon the receipt by Independent of an opinion from Andrews Kurth Kenyon LLP, special counsel to Independent, and the receipt by Carlile of an opinion from Fenimore, Kay, Harrison & Ford, LLP, counsel to Carlile, to the effect that the merger so qualifies. This summary of U.S. federal income tax consequences assumes that the merger will be consummated as described in the reorganization agreement and this joint proxy statement/prospectus and that Independent and Carlile will not waive the opinion condition described in The MergerMaterial U.S. Federal Income Tax Consequences of the MergerTax Opinions. If the merger qualifies as such a reorganization, the material U.S. federal income tax consequences of the merger to a U.S. holder of Carlile common stock will generally be as follows: a holder of Carlile common stock will not recognize gain or loss as a result of the surrender of shares of Carlile common stock solely in exchange for shares of Independent common stock pursuant to the merger, except with respect to cash received instead of a fractional share of Independent common stock. A holder of Carlile common stock who receives cash instead of a fractional share of Independent common stock will be treated as having received the fractional share in the merger and then as having exchanged the fractional share for cash. This holder of Carlile common stock will generally recognize gain or loss equal to the difference between the holders adjusted tax basis in the Carlile common stock allocable to the fractional share and the amount of cash received.
For further information, please refer to The MergerMaterial U.S. Federal Income Tax Consequences of the Merger. The U.S. federal income tax consequences described above may not apply to all holders of Carlile common stock. The tax consequences to a holder of Carlile common stock will depend on his or her individual situation. Accordingly, we strongly urge holders of Carlile common stock to consult their tax advisors for a full understanding of the particular tax consequences of the merger to them.
Fairness Opinion of Financial Advisor to Independent (page 89)
Stephens, Inc., or Stephens, has delivered a written opinion to the board of directors of Independent that, as of the date of the reorganization agreement, based upon and subject to certain matters stated in the opinion, the consideration to be paid in the merger by Independent is fair, from a financial point of view, to Independent. This opinion is attached to this joint proxy statement/prospectus as Appendix B. The opinion of Stephens is not a recommendation to any Independent shareholder as to how to vote on the proposals to approve the reorganization agreement, the merger or the issuance of Independent common stock to the shareholders of Carlile in the merger.
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You should read this opinion completely to understand the procedures followed, matters considered and limitations on the reviews undertaken by Stephens in providing its opinion.
Fairness Opinion of Financial Advisor to Carlile (page 95)
Sandler ONeill & Partners, L.P., or Sandler ONeill, has delivered a written opinion, dated November 21, 2016, to the board of directors of Carlile to the effect that, as of the date of the opinion, based upon and subject to certain matters stated in the opinion, the aggregate merger consideration was fair to the holders of Carlile common stock, collectively as a group, from a financial point of view. This opinion is attached to this joint proxy statement/prospectus as Appendix C. The opinion of Sandler ONeill is not a recommendation to any Carlile shareholder as to how to vote on the proposal to approve the reorganization agreement and the merger. You should read this opinion completely to understand the procedures followed, matters considered and limitations on the reviews undertaken by Sandler ONeill in providing its opinion.
Independent Plans to Continue Payment of Quarterly Dividends (page 220)
Independent paid a cash dividend of $0.08 per share to its shareholders in each of the first three quarters of 2016 and a cash dividend of $0.10 per share in the fourth quarter of 2016. Independent intends to continue paying quarterly cash dividends in the first quarter of 2017 and following the merger.
Ownership of Independent After the Merger (page 134)
Although the exact number of shares of Independent common stock that would be issued upon consummation of the merger cannot be determined at the date of this joint proxy statement/prospectus, based on 18,919,598 shares of Independent common stock outstanding as of February 21, 2017, 35,064,719 shares of Carlile voting and non voting common stock outstanding as of February 17, 2017, and assuming no options to purchase Carlile common stock are exercised prior to the effective time of the merger, an Average Stock Price of $66.70 (the closing stock price of Independent common stock on February 16, 2017), and that Carlile has adjusted tangible equity of at least $200 million on the tangible equity determination date, Independent estimates it would issue a total of 8,825,790 shares of Independent common stock to the shareholders of Carlile in connection with the merger. In that circumstance, the former Carlile shareholders would own approximately 31.8% of the shares of Independent common stock that would be outstanding immediately after such shares are issued in connection with the merger. Such ownership percentage will be reduced by any future issuances of shares of Independent common stock.
Market Prices of Independent Common Stock (page 220)
Shares of Independent common stock are listed for trading on the NASDAQ Global Select Market under the symbol IBTX. On November 18, 2016, the last trading day before the merger was announced, Independent common stock closed at $53.95 per share. On February 16, 2017, Independent common stock closed at $66.70 per share. The market price of Independent common stock will fluctuate prior to the merger. You should obtain the most recent closing price for Independent common stock on the NASDAQ Global Select Market prior to deciding how to vote. Shares of Carlile are not traded on any national securities exchange or on an established public trading market and no quotations of any market price exists for Carlile shares.
Carlile Special Meeting (page 70)
The special meeting of shareholders of Carlile will be held on March 30, 2017, at 2:00 p.m. Central Time, at the City Club of Fort Worth, 301 Commerce Street, Fort Worth, Texas 76102. At the Carlile special meeting, holders of shares of Carlile voting common stock will be asked to consider and vote on the following:
| a proposal to approve the reorganization agreement, which provides for Independent to acquire Carlile through the merger, and to approve the merger; and |
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| a proposal to adjourn the Carlile special meeting to a later date or dates if the board of directors of Carlile determines such adjournment is necessary to permit solicitation of additional proxies if there are not sufficient votes at the time of the Carlile special meeting to constitute a quorum or to approve the reorganization agreement and the merger. |
Independent Special Meeting (page 63)
The special meeting of shareholders of Independent will be held on March 30, 2017, at 3:30 p.m., Central Time, at the branch office of Independent Bank, 1600 Redbud Boulevard, Suite 100, McKinney, Texas 75069. At the Independent special meeting, Independents shareholders will be asked to consider and vote on the following:
| a proposal to approve the reorganization agreement, which provides for Independent to acquire Carlile through the merger, and to approve the merger; |
| a proposal to approve the issuance of shares of Independent common stock to the Carlile shareholders as merger consideration under the reorganization agreement that in number and voting power would equal or exceed 20% of the number and voting power of the shares of Independent common stock to be outstanding immediately prior to the issuance of such shares of Independent common stock in connection with the merger; |
| a proposal to elect as directors of Independent each of Tom C. Nichols, Mark K. Gormley and Christopher M. Doody, who have been nominated by the Independent board of directors to stand for election as directors of Independent pursuant to the terms of the reorganization agreement and to fill the vacancies on Independents board of directors, subject to and conditioned upon the mergers completion; and |
| a proposal to adjourn the Independent special meeting to a later date or dates if the board of directors of Independent determines such adjournment is necessary to permit solicitation of additional proxies if there are not sufficient votes at the time of the Independent special meeting to constitute a quorum or to approve the first three proposals listed above. |
Carlile Record Date Set at February 17, 2017; Two-Thirds Shareholder Vote Required to Approve the Reorganization Agreement and the Merger (page 70)
You may vote on the proposals to come before special meeting of Carlile shareholders if you owned shares of Carlile voting common stock of record as of 5:00 p.m. on February 17, 2017. You can cast one vote for each share of Carlile voting common stock that you owned of record at that time. As of February 17, 2017, there were 27,452,367 shares of Carlile voting common stock outstanding.
Approval of the reorganization agreement and the merger requires the affirmative vote of the holders of at least two-thirds of the shares of Carlile voting common stock outstanding and entitled to vote as of 5:00 p.m. on the record date. If a holder of Carlile voting common stock fails to vote, it will have the effect of a vote against the reorganization agreement and the merger. The affirmative vote of a majority of the issued and outstanding shares of Carlile voting common stock entitled to vote at the Carlile special meeting and that is present in person or by proxy at the Carlile special meeting is required to approve the adjournment of the Carlile special meeting.
A holder of Carlile voting common stock may vote his or her shares of Carlile voting common stock by attending the special meeting and voting in person or by completing and mailing the enclosed proxy card. If you are the record holder of such shares, you can revoke your proxy at any time before the vote is taken at the Carlile special meeting by sending a written notice revoking the proxy or submitting a later-dated proxy to Ms. Mindy Hegi, Chief Financial Officer of Carlile, which notice or later dated proxy must be received no later than immediately prior to the vote at the Carlile special meeting. You may also revoke your proxy by voting in person
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at the Carlile special meeting. If your shares of Carlile voting common stock are held in street name and you desire to change any voting instructions you have previously given to the record holder of such shares of Carlile voting common stock of which you are the beneficial owner, you should contact the broker, bank or other nominee holding such shares in street name in order to direct a change in the manner your shares of Carlile voting common stock will be voted. See The Carlile Special MeetingVoting of Proxies by Holders of Record, Attending the Meeting; Voting in Person and Revocation of Proxies.
Independent Record Date Set at February 21, 2017; Two-Thirds Shareholder Vote Required to Approve the Reorganization Agreement and the Merger (page 63)
You may vote at the special meeting of Independent shareholders if you owned Independent common stock of record as of 5:00 p.m. on February 21, 2017. You can cast one vote for each share of Independent common stock you owned of record at that time. As of February 21, 2017, there were 18,919,598 shares of Independent common stock outstanding.
Approval of the reorganization agreement and the merger requires the affirmative vote of the holders of at least two-thirds of the shares of Independent common stock outstanding and entitled to vote as of 5:00 p.m. on the Independent record date. If holders of Independent common stock fail to vote, it will have the effect of a vote against the reorganization agreement and the merger. Approval of the issuance of the shares of Independent common stock to be issued to holders of Carlile common stock in connection with the merger, which shares of Independent common stock will, in number and voting power, exceed 20% of the number and voting power of the shares of Independent common stock to be outstanding immediately prior to the effective time of the merger, requires the affirmative vote of a majority of votes cast by holders of Independent common stock entitled to vote at the Independent special meeting. Election of the three named director nominees as directors of Independent to fill the vacancies on the Independent board of directors requires an affirmative vote of at least a plurality of all votes cast at the Independent special meeting. The affirmative vote of a majority of the votes cast on any proposal to adjourn the Independent special meeting is required to approve the adjournment of the Independent special meeting.
You may vote your shares of Independent common stock by attending the special meeting and voting in person, by completing and mailing the enclosed proxy card or by following the instructions to vote via the Internet or by telephone as indicated on the proxy card and elsewhere in this joint proxy statement/prospectus. If you are the record holder of your shares, you can revoke your proxy at any time before the vote is taken at the Independent special meeting by sending a written notice revoking the proxy or submitting a later dated proxy to the Corporate Secretary of Independent, which must be received no later than immediately prior to the vote at the Independent special meeting. You may also revoke your proxy by voting in person at the Independent special meeting. If your shares of Independent common stock are held in street name and you desire to change any voting instructions you have previously given to the record holder of the shares of which you are the beneficial owner, you should contact the broker, bank or other nominee holding your shares in street name in order to direct a change in the manner your shares will be voted. See The Independent Special MeetingVoting of Proxies by Holders of Record, Attending the Meeting; Voting in Person and Revocation of Proxies.
Carliles Reasons for the Merger and Recommendation of Carliles Board of Directors (page 86)
Based on the reasons discussed elsewhere in this joint proxy statement/prospectus, the board of directors of Carlile believes that the merger is fair, from a financial point of view to, and in the best interests of, the shareholders of Carlile and unanimously recommends that you vote FOR the proposal to approve the reorganization agreement and the merger. For a discussion of the circumstances surrounding the merger and the factors considered by Carliles board of directors in approving the reorganization agreement, see pages 84 and 87.
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Certain Shareholders of Carlile are Expected to Vote Their Shares of Carlile Voting Common Stock For Approval of the Reorganization Agreement (page 126)
The directors of Carlile and certain entities that they represent have entered into an agreement to vote the shares of Carlile voting common stock that they control in favor of approval of the reorganization agreement and the merger and in the manner most favorable to the consummation of the merger and the transactions contemplated by the reorganization agreement; provided, however, that the Carlile shareholders who entered into the voting and lockup agreement would be permitted to vote to accept a superior proposal to acquire Carlile (as defined) of the reorganization agreement). As of the Carlile record date, 17,069,700 shares of Carlile voting common stock, or 62.2% of the 27,452,367 shares of Carlile voting common stock then outstanding and entitled to vote at the Carlile special meeting, were bound by the voting and lockup agreement.
Independents Reasons for the Merger and Recommendations of Independents Board of Directors (page 87)
Based on the reasons discussed elsewhere in this joint proxy statement/prospectus, the board of directors of Independent believes that the merger is fair from a financial point of view to Independent and unanimously recommends that you vote FOR the proposal to approve the reorganization agreement and the merger, FOR the proposal to approve the issuance of shares of Independent common stock in connection with the merger that will exceed in number and voting power exceed 20% of the number and voting power of the shares of Independent common stock to be outstanding immediately prior to such issuance, and FOR the election of the nominees named in this joint proxy statement/prospectus for election as directors of Independent. For a discussion of the circumstances surrounding the merger and the factors considered by Independents board of directors in approving the reorganization agreement, see pages 84 and 87.
Effective Time of the Merger (page 108)
The merger will become effective at the date and time specified in the certificate of merger to be filed with the Texas Secretary of State. If Carlile and Independent shareholders approve the reorganization agreement and the merger at the special meetings, and if all necessary regulatory approvals are obtained and the other conditions to the parties respective obligations to effect the merger are satisfied or are waived by the party entitled to do so, Independent anticipates that the merger will be completed and effective on April 1, 2017, although delays in the completion of the merger could occur.
Carlile and Independent cannot assure you that the necessary shareholder and regulatory approvals will be obtained or that the other conditions to completion of the merger can or will be satisfied. See Risk FactorsRisks Related to the MergerThe merger of Independent and Carlile may not be completed.
Exchange of Carlile Stock Certificates (page 107)
After the effective time of the merger, the Carlile shareholders will receive a letter and instructions from Wells Fargo Shareowner Services, acting as Independents exchange and transfer agent, or the exchange agent, describing the procedures for surrendering their stock certificates representing shares of Carlile common stock in exchange for shares of Independent common stock. The shares of Independent common stock issuable in exchange for the shares of Carlile common stock will be issued solely in uncertificated book-entry form and a holders shares of Independent common stock will be reflected in the shareholders account established in the Direct Registration System by Independents stock transfer agent. As soon as practicable after the effective time of the merger, with the intent for that to be within five business days of the effective time of the merger, Independent will cause the exchange agent to mail to each record holder of Carlile common stock the letter and instructions for exchange. Please do not send Carlile or Independent any of your Carlile stock certificates until
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you receive these instructions. Carlile stock certificates delivered to the exchange agent without a properly completed letter of transmittal will be rejected and returned for corrective action.
Conditions to Completion of the Merger (page 113)
The completion of the merger depends on a number of conditions being satisfied. These include, among others:
| approval by holders of the Carlile voting common stock and holders of Independent common stock of the reorganization agreement and the transactions contemplated thereby by the requisite vote under the Carlile certificate of formation or the Independent certificate of formation, as the case may be, and applicable law; |
| receipt of all approvals and consents required by applicable law from all applicable governmental authorities in connection with the reorganization agreement, any other agreement contemplated thereby and the consummation of the transactions contemplated by the reorganization agreement and such other agreements and all applicable waiting periods will have expired as to Independent only, which approvals and consents do not impose any material requirement upon Independent or its subsidiaries that are reasonably unacceptable to Independent; |
| the registration statement of which this joint proxy statement/prospectus forms a part has become effective and no stop order suspending its effectiveness is in effect and no proceedings for that purpose have been initiated and continuing or threatened by the SEC, and all necessary approvals under federal or applicable state securities laws relating to the issuance or trading of the Independent common stock to be issued have been received; |
| the shares of Independent common stock to be issued to Carlile shareholders being authorized for listing on the NASDAQ Global Select Market and such approval is not withdrawn or revoked; |
| no action shall have been taken, and no statute, rule, regulation or order shall have been promulgated, enacted, entered, enforced or deemed applicable to the reorganization agreement, or the transactions contemplated hereby, by any governmental authority, including by means of the entry of a preliminary or permanent injunction, that would (i) make the reorganization agreement or any other agreement contemplated thereby, or the transactions contemplated thereby, illegal, invalid or unenforceable, (ii) as to Independent only, require the divestiture of a material portion of the assets of Carlile, (iii) impose material limits on the ability of any party to consummate the transactions contemplated by the reorganization agreement, (iv) as to Independent only, otherwise result in a material adverse change to Carlile, any Carlile subsidiary, Independent or Independent Bank or (v) could reasonably be expected to subject Independent, Carlile, or any of their respective subsidiaries, or any of their respective officers, directors, shareholders or employees, to criminal or civil liability upon the consummation of the reorganization agreement or any other agreement contemplated thereby, or the transactions contemplated thereby; |
| the other partys representations and warranties contained in the reorganization agreement being true and correct in all material respects as of the date of the reorganization agreement as of the date of the closing; |
| the performance or compliance in all material respects by each party with its respective covenants and obligations required by the reorganization agreement to be performed or complied with before or at the closing of the merger; and |
| receipt by each party of all documents required to be delivered by the other party on or before the closing date, all in form and substance reasonably satisfactory to the receiving party. |
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In addition to the conditions listed above, Carliles obligations to complete the merger is subject to the satisfaction of the following conditions:
| approval of the issuance of the shares of Independent common stock to the Carlile shareholders in connection with the merger and the election of the three nominees named in this joint proxy statement/prospectus for election as directors of Independent by the requisite vote under the Independent certificate of formation and applicable law; |
| Independents delivery of the merger consideration to Wells Fargo Shareowner Services, as exchange agent; |
| no material adverse change (as defined in the reorganization agreement) shall have occurred as to Independent since June 30, 2016; |
| the Independent shareholders shall have elected all of the named director nominees to fill the three vacancies on the Independent board of directors and Independent shall have entered into mutually acceptable nominee agreements with respect to each named director nominee; and |
| the receipt by Carlile of an opinion from Fenimore, Kay, Harrison & Ford, LLP to the effect that for U.S. federal income tax purposes (i) the merger will be treated as a reorganization within the meaning of Section 368(a) of the Code, and (ii) each of Independent and Carlile will be a party to such reorganization within the meaning of Section 368(b) of the Code. |
In addition to the conditions listed above, Independents obligation to complete the merger is subject to the satisfaction of the following conditions:
| the adjusted tangible equity of Carlile, as of the closing date of the merger, excluding the effect of the aggregate option holder payment on adjusted tangible equity of Carlile, must not be less than $195 million; |
| Northstar Banks allowance for loan and lease losses as of the closing date must be at least equal to $15.675 million; |
| no material adverse change (as defined in the reorganization agreement) shall have occurred as to Carlile or any subsidiary of Carlile since June 30, 2016; |
| all Carlile employee plans must be terminated in accordance with their respective terms and all applicable laws and regulations and the affected participants must have been notified of such terminations; |
| Carlile and each applicable Carlile subsidiary must have paid or accrued for the amounts and liabilities owed under the employment contracts as set forth in the reorganization agreement; |
| holders of no more than 5% of the capital stock of Carlile shall have demanded or exercised their statutory dissenters rights under the TBOC; |
| all material consents and approvals from all nongovernmental third parties which are required to be obtained under the terms of any contract, agreement or instrument to which Carlile is a party shall have been obtained; |
| the receipt by Independent of an opinion from Andrews Kurth Kenyon LLP to the effect that, for U.S. federal income tax purposes, (i) the merger will be treated as a reorganization within the meaning of Section 368(a) of the Code, and (ii) each of Independent and Carlile will be a party to such reorganization within the meaning of Section 368(b) of the Code; and with respect to the bank merger, that (i) the bank merger will be treated as a reorganization within the meaning of Section 368(a) of the Code, and (ii) each of Independent Bank and Northstar Bank will be a party to such reorganization within the meaning of Section 368(b) of the Code; and |
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| the Carlile board of directors must have adopted resolutions providing for the termination and cancellation, and the administrator shall have taken all action required under the Carlile Equity Incentive Plan to effectuate the automatic cashout, of all options to purchase Carlile common stock outstanding and unexercised immediately prior to the closing date. |
Additionally, the completion of the merger depends on the effectiveness of the following agreements, which agreements will not become effective until the effective time of the merger:
| employment agreements among Independent, Independent Bank and each of Messrs. Tony Clark, Mark White and Stacy Curtis; |
| separation agreements between Independent and each of Messrs. Tom C. Nichols and Don E. Cosby and Ms. Mindy Hegi, which agreements provide for the payment of severance benefits and continued insurance coverage as provided for under their respective employment agreements with Carlile, and affirm the survival of the confidentiality, noncompetition and nonsolicitation obligations of such persons under their employment agreements; |
| releases from each of the directors and certain officers of Carlile and Northstar Bank, releasing Carlile and Northstar Bank and their respective successors from any and all claims of such directors and officers, subject to certain limited exceptions; |
| support agreements from each of the directors of Carlile and Northstar Bank, agreeing to support, and not compete with, the business of Independent Bank following the closing of the merger; and |
| resignations from each of the directors of Carlile and each Carlile subsidiary, resigning from the board of directors of Carlile and each Carlile subsidiary. |
Any condition to the completion of the merger other than the required shareholder and regulatory approval and the absence of an order prohibiting the merger, may be waived in writing by the party to the reorganization agreement entitled to the benefit of such condition. A party to the reorganization agreement could choose to complete the merger even though a condition has not been satisfied, as long as permitted by applicable law. Neither Independent nor Carlile can be certain when or if the conditions to the merger will be satisfied or waived, or that the merger will be completed.
Regulatory Approvals Required for the Merger (page 130)
The acquisition of Carlile by Independent requires the approval of the Board of Governors of the Federal Reserve System, or Federal Reserve. In addition, the bank merger requires the approval of the Federal Deposit Insurance Corporation, or the FDIC, and the Texas Department of Banking, or TDB. On December 30, 2016, Independent, Independent Bank and Northstar Bank filed applications with the Federal Reserve, the FDIC and the TDB to obtain approval of the merger and the bank merger. Independent expects to obtain all necessary regulatory approvals, although Independent cannot be certain if or when Independent will obtain them.
Amendment or Waiver of the Reorganization Agreement (page 121)
Independent and Carlile may amend the reorganization agreement and each party may waive its right to require the other party to adhere to any term or satisfy any condition of the reorganization agreement in accordance with the terms of the reorganization agreement. However, the merger consideration to be received by the shareholders of Carlile pursuant to the terms of the reorganization agreement may not be decreased after shareholder approval of the reorganization agreement without the further approval each of the Carlile and Independent shareholders.
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Pursuant to the reorganization agreement, Carlile agreed that it will not, and that it will cause each Carlile subsidiary and their respective employees, directors, officers, financial advisors or agents of Carlile and Northstar Bank not to, propose to, solicit, knowingly encourage, initiate or participate in any negotiations or discussions with any third party with respect to any proposal that could reasonably be expected to lead to an acquisition proposal as described in the reorganization agreement, disclose to any third party any information concerning the business, properties, books or records of it in connection with any acquisition proposal, or cooperate with any third party to make any acquisition proposal. Promptly upon receipt of any unsolicited offer, Carlile will communicate to Independent the terms of any proposal or request for information and the identity of the parties involved.
Provided that Carlile has complied with the foregoing restrictions, if after the date of the reorganization agreement but prior to the closing of the merger, Carlile receives a bona fide, unsolicited written acquisition proposal, it may engage in negotiations and discussions with, and furnish any information and other access to, any person making such acquisition proposal if, and only if, Carliles board of directors determines in good faith, after consultation with outside legal and financial advisors, that such acquisition proposal is, or is reasonably, capable of becoming more favorable to Carliles shareholders from a financial point of view than the merger with Independent and the failure of Carliles board of directors to furnish such information or access or enter into such discussions or negotiations would reasonably be expected to be a violation of its fiduciary duties to the shareholders of Carlile and Carlile obtains an appropriately executed confidentiality agreement from such third party.
Termination of the Reorganization Agreement (page 121)
Independent and Carlile can mutually agree at any time to terminate the reorganization agreement without completing the merger. In addition, either Independent or Carlile may decide, without the consent of the other, to terminate the reorganization agreement if:
| the conditions to each partys obligations to close have not been satisfied on or before June 30, 2017, provided that if the conditions precedent have not been satisfied because approval of the reorganization agreement or any other agreement contemplated by it from any regulatory agency whose approval is required has not been received and such delay in the receipt of regulatory approval is not the result of a public comment or protest made in connection with an application for regulatory approval, then either Carlile or Independent can unilaterally extend the June 30, 2017 deadline by up to 30 days by providing written notice, and further provided that, if regulatory approval has not been received and such delay in the receipt of regulatory approval is the result of a protest, then the closing date deadline shall automatically be extended to December 31, 2017 without action by either party; |
| the required regulatory approvals have not been obtained; or |
| the merger is not approved by the shareholders of Independent and Carlile at their special meetings or the adjournment thereof. |
Carlile may terminate the reorganization agreement, without the consent of Independent, if:
| Independent breaches or fails to perform in any material respect any of its representations, warranties, covenants or other agreements contained in the reorganization agreement or any other agreement contemplated by the reorganization agreement, and such failure has not been cured within a period of 30 calendar days after written notice from Carlile; |
| at any time prior to the closing date in order to enter concurrently with such termination into an acquisition agreement or similar agreement with respect to a superior proposal, that has been received and considered by Carlile and the Carlile board in accordance with all of the requirements of the reorganization agreement; |
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| there has been any material adverse change, since June 30, 2016, in the assets, properties, liabilities, reserves, business, or financial condition or results of operation of Independent; or |
| at any time following the third trading day prior to the date of closing of the merger, (i) the number obtained by dividing (a) the Average Stock Price, by (b) $47.40, or the IBG Ratio, shall be less than 0.85, and (ii) the IBG Ratio is less than the number obtained by dividing (x) the average of the closing prices of the NASDAQ Bank Index for the 20 consecutive full trading days ending on and including the trading day prior to the third trading day prior to the closing date of the merger by (y) the closing price of the NASDAQ Bank Index on November 4, 2016, and subtracting 0.15 from the quotient. If Carlile elects to exercise its termination right pursuant to this section, it must give written notice to Independent. Following the receipt of notice, Independent has the right, but not the obligation, to increase the consideration to be received by the Carlile shareholders under the reorganization agreement by adjusting the Carlile Share Exchange Ratio to a number equal to the quotient of (A) the product of the (i) product of $47.40 multiplied by .90 multiplied by (ii) the Carlile Share Exchange Ratio, divided by (B) the Average Stock Price. Independent will give prompt written notice to Carlile of such election and the revised Carlile Share Exchange Ratio, in which case no termination will occur and reorganization agreement will remain in effect. |
In addition, Independent may terminate the reorganization agreement, without the consent of Carlile, if:
| Carlile breaches or fails to perform in any material respect any of its representations, warranties, covenants or other agreements contained in the reorganization agreement or any other agreement contemplated by the reorganization agreement, and such failure has not been cured within a period of 30 calendar days after written notice from Independent; |
| the Carlile board has (i) recommended to the holders of Carlile common stock that they tender their shares in a tender or exchange offer commenced by an unaffiliated third party for more than 15% of the outstanding Carlile common stock, (ii) effected a change in the boards recommendation with respect to the merger or recommended to the Carlile shareholders acceptance or approval of any alternative acquisition proposal or (iii) notified Independent in writing that Carlile intends to accept a superior proposal; |
| any of the following have occurred with respect to environmental matters regarding Carlile: (i) the factual substance of any representations and warranties of Carlile in the reorganization agreement is not materially true and accurate, (ii) the results of any environmental inspection or other environmental survey by Independent are disapproved by Independent because such inspection or survey identifies a material or potential material violation of applicable environmental laws, (iii) Carlile refuses to allow such inspection or survey in a manner that Independent reasonably considers necessary, (iv) such inspection or survey identifies an event, condition or circumstance that would or potentially could reasonably be expected to require a material remedial or cleanup action or result in a material adverse change in the assets, properties, business or financial condition of Carlile, (v) such inspection or survey reveals the presence of any underground or above ground storage tank in, on or under any real property owned or leased by Carlile or any Carlile subsidiary that is not shown to be in material compliance with all applicable environmental laws, or that has had a release of petroleum or some other hazardous material that has not been cleaned up to the satisfaction of the relevant governmental authority or any other party with a right to compel such cleanup or (vi) such inspection or survey identifies the presence of any asbestos-containing material in, on or under any real property owned or leased by Carlile or any Carlile subsidiary, the removal of which could reasonably be expected to result in a material adverse change in the assets, properties, business or financial condition of Carlile, subject, in the case of each of the foregoing, to notice and the right of Carlile to satisfactorily correct any such matter; or |
| there has been any material adverse change, since June 30, 2016, in the assets, properties, liabilities, reserves, business, financial condition or results of operation of Carlile or any Carlile subsidiary. |
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To compensate Independent for entering into the reorganization agreement, taking actions to consummate the transactions contemplated by the reorganization agreement and incurring the related costs and expenses and other losses and expense, including foregoing the pursuit of other opportunities, the reorganization agreement provides that Carlile has agreed to pay to Independent a termination fee of $10 million, which shall be Independents sole remedy if the reorganization agreement is terminated:
| by Carlile because it receives an alternative acquisition proposal and, under certain terms and conditions, determines that it is a superior proposal to that of the reorganization agreement, taking into account any adjustment made by Independent to the merger consideration, provided that Independent is not in material breach of the reorganization agreement; |
| by either Independent or Carlile if the Carlile shareholders do not approve the reorganization agreement and the merger by the requisite vote at their respective special meetings or any adjournment thereof and either (i) at the time of such disapproval, there exists an acquisition proposal with respect to Carlile other than that of Independent that has not been withdrawn prior to the special meeting or (ii) within 12 months of the termination of the reorganization agreement, Carlile enters into a definitive agreement with any third party with respect to any acquisition proposal; or |
| by Independent if the Carlile board has (i) recommended to the Carlile shareholders that they tender their shares in a tender or exchange offer commenced by an unaffiliated third party for more than 15% of the outstanding Carlile common stock, (ii) effected a change in the boards recommendation with respect to the merger or recommended to the Carlile shareholders acceptance or approval of any alternative acquisition proposal or (iii) notified Independent in writing that Carlile intends to accept a superior proposal. |
Except with respect to termination fees and expenses, as discussed above, in the event of the termination of the reorganization agreement without breach by any party, the reorganization agreement will be void and have no effect, without liability on the part of any party or the directors, officers or shareholders of any party, except as specifically contemplated in the reorganization agreement.
Some of the Directors and Officers of Carlile Have Financial Interests in the Merger that Differ from Your Interests (page 123)
Some of the directors and officers of Carlile have interests in the merger that differ from, or are in addition to, their interests as shareholders of Carlile. These interests include:
| Employment Agreements with Independent Bank. Independent and Independent Bank have entered into two-year employment agreements with each of Messrs. Tony Clark, Mark White and Stacy Curtis, who are currently executive officers and employees of Northstar Bank, to be effective, if at all, upon completion of the merger, that include noncompetition and nonsolicitation obligations to Independent Bank. Pursuant to these agreements, these individuals will become officers and employees of Independent Bank and will be entitled to receive annual salaries in the range of $250,000 to $285,000, annual incentive bonuses based upon attainment of pre-established performance goals of Independent Bank or upon the profitability of Independent Banks mortgage operations, grants of restricted shares of Independent common stock in the range of 5,000 to 6,000 shares, and certain additional incidental benefits from Independent Bank during the term of such persons employment with Independent Bank. |
| Separation Agreements with Independent. In August of 2010, Carlile entered into employment agreements with each of Messrs. Tom C. Nichols and Don E. Cosby and Ms. Mindy Hegi, each of whom is an executive officer of Carlile. The employment agreements provide for the payment of severance benefits and continued insurance coverage for the executive in the event the employment |
32
agreement is terminated by Carlile without cause or by the executive with good reason (as such terms are defined in the employment agreements). In connection with the merger, Independent has decided to not employ Mr. Nichols, Mr. Cosby or Ms. Hegi, although Mr. Nichols is nominated for election as a director of Independent at the Independent special meeting and will be appointed as a director of Independent Bank if the merger is completed. In conjunction with the termination of their employment following completion of the merger, each of Mr. Nichols, Mr. Cosby and Ms. Hegi entered into separation agreements with Independent contemporaneously with the execution of the reorganization agreement, which agreements will become effective only if the merger is completed. The separation agreements confirm the obligation of Independent, as successor to Carlile in the merger, with respect to the payment of the severance benefits and the continued insurance coverage as provided for under their respective employment agreements with Carlile. The severance agreement also affirms the survival of the confidentiality, noncompetition and nonsolicitation obligations of these executive officers of Carlile under their employment agreements. The reorganization agreement provides that it is a condition to the closing of the merger that the separation agreements be in effect at closing. The aggregate amount of severance payments to be made to these three Carlile executive officers is $6,285,200. Those payments will reduce the adjusted tangible equity of Carlile for purposes of calculating the merger consideration payable to Carlile shareholders. |
| Change in Control Payments. In addition, each of Carlile and Northstar Bank is a party to preexisting change in control agreements or employment agreements with certain of their respective officers, which provide, among other things, for change in control payments to be made in connection with the completion of the merger. Under the terms of the reorganization agreement, these change in control payments must be paid or properly accrued for by Carlile for purposes of calculating its adjusted tangible equity. The total aggregate change in control payments that are expected to be paid to such individuals as a result of the completion of the merger is $4.1 million. |
| Support Agreements. Independent has entered into separate support agreements with each of the directors of Carlile and Northstar Bank, specifically, Messrs. Rick J. Calhoun, Robert W. Gentry, Mark K. Gormley, Kent R. Hance, Curtis F. Harrell, Mark G. Merlo, H. Gil Moutray, Craig R. Stapleton, Ben Stribling, David Tanner and John M. Tye, III, all of whom are directors of Carlile, and Ms. Myra Crownover and Messrs. Kent Key, Brook Mahoney, James Mansfield, Dana L. Rasic, Richard Smith and Robert J. Widmer, all of whom are directors of Northstar Bank, to be effective, if at all, upon completion of the merger. Each of those agreements provides, among other things, that such director agrees to use reasonable efforts to refrain from harming the goodwill and customer and client relationships of Independent Bank, as well as limited confidentiality, noncompetition and nonsolicitation obligations following the closing date. |
| Indemnification. The directors and officers of Carlile will receive indemnification from Independent for a period of four years after completion of the merger to the same extent and subject to the conditions set forth in the certificate of formation and bylaws of Carlile and continued director and officer liability coverage for a period of four years after completion of the merger. Any amounts paid by Northstar Bank to purchase continued director and officer liability coverage will reduce Carliles adjusted tangible equity for purposes of calculating the merger consideration payable to Carlile shareholders. See Possible Downward Adjustment to the $434 Million Agreed Amount to be Used in the Calculation of the Carlile Share Exchange Ratio. |
| Cashout of Certain Outstanding Stock Options. Certain officers of Carlile and Northstar Bank hold options to purchase an aggregate of 2,504,726 shares of Carlile voting common stock. To the extent one or more of those persons do not exercise those options prior to the mergers effective time, they will receive cash in connection with the cashout of those stock options that are outstanding and unexercised at the mergers effective time. Any such payments made to those persons in respect of their options to purchase Carlile common stock will reduce the number of shares of Independent |
33
common stock to be issued in exchange for each share of Carlile common stock in the merger and, thus, reduce the merger consideration received by the Carlile shareholders in the merger. |
Restrictions on Resale Under the Voting and Lockup Agreements (page 129)
The voting and lockup agreements between the directors of Carlile and certain entities that they represent and Independent provide that such individuals and entities may not transfer 94% of the shares of Independent common stock they receive in exchange for their shares of Carlile common stock in connection with the merger prior to the first anniversary of the effective date of the merger without the prior consent of Independent. However, such persons may, without such consent, make bona fide gifts of such shares of Independent common stock, make certain transfers of such shares for estate or charitable planning purposes or transfer such shares to one or more of their affiliates or to trusts or other entities that they control.
Comparison of Rights of Shareholders of Carlile and Independent (page 227)
Carlile is a Texas corporation that is a registered bank holding company, and the rights of shareholders of Carlile are governed by Texas law and Carliles certificate of formation and bylaws. Independent is a Texas corporation that is a registered bank holding company, and the rights of Independents shareholders are governed by Texas law and Independents certificate of formation and bylaws. Upon completion of the merger, shareholders of Carlile common stock will become shareholders of Independent and their rights as shareholders of Independent will be governed by Independents certificate of formation and bylaws, in addition to Texas law. Independents certificate of formation and bylaws will not be amended in the merger, but could be later restated, amended or, with respect to the bylaws, repealed.
Dissenters Rights of the Holders of Carlile Voting Common Stock (page 130)
The holders of Carlile voting common stock have the right under Texas law to dissent from the merger and have the appraised fair value of their shares of Carlile voting common stock as of the date immediately preceding the effective date of the merger paid to them in cash. The appraised fair value of any particular number of shares of Carlile voting common stock as of such date may be more or less than the value of the shares of Independent common stock that a holder of that particular number of shares of Carlile voting common stock would be issued in connection with the merger in exchange for that particular number of shares of Carlile voting common stock.
The holders of Carlile nonvoting common stock are not entitled to appraisal rights or dissenters rights in connection with the merger under Texas law or under the governing documents of Carlile with respect to their shares of Carlile nonvoting common stock
Persons having beneficial interests in Carlile voting common stock held of record in the name of another person, such as a broker, bank or other nominee, must act promptly to cause the record holder to take the actions required under Texas law to exercise their dissenters rights.
In order to dissent, the holder of Carlile voting common stock must carefully follow the requirements of the TBOC, including providing Carlile, prior to the Carlile special meeting, with a written objection to the merger that states that he or she will exercise his or her right to dissent with respect to his or her shares of Carlile voting common stock if the holders of the Carlile voting common stock approve the reorganization agreement and the merger and the merger is completed. These steps for perfecting the right of dissent are summarized under the caption Dissenters Rights of Carlile Shareholders on page 130. The provisions of the TBOC pertaining to dissenters rights are attached to this joint proxy statement/prospectus as Appendix D and the summaries of those provisions in this joint proxy statement/prospectus should be read in conjunction with, and are qualified in their entirety by, those provisions of the TBOC.
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If you intend to exercise dissenters rights as to shares of Carlile voting common stock that you hold, you should read the provisions of the TBOC governing dissenters rights carefully and consult with your own legal counsel. Each holder of Carlile voting common stock should also remember that if he or she returns a signed proxy card, but fails to provide instructions on that proxy card as to how his or her shares of Carlile voting common stock are to be voted against the approval of the reorganization agreement and the merger, such Carlile shareholders shares of Carlile voting common stock will be considered to have voted in favor of the reorganization agreement and the merger. In that event, such Carlile shareholder will not be able to assert dissenters rights as to his or her shares of Carlile voting common stock.
If the Carlile shareholders approve the reorganization agreement, a holder of Carlile voting common stock who (i) delivers to the president and the secretary of Carlile a written objection to the merger prior to the Carlile special meeting that states that such holder will exercise his or her right to dissent if the reorganization agreement and the merger are approved and the merger is completed and includes an address for notice of the effectiveness of the merger, (ii) votes his or her shares of Carlile voting common stock against approval of the reorganization agreement and the merger are at the Carlile special meeting, (iii) not later than the 20th day after Independent sends such holder notice that the merger was completed, delivers to the president and secretary of Independent a written demand for payment of the fair value of his or her shares of Carlile voting common stock, which demand he or she holds shares of Carlile voting common stock and states the number of shares of Carlile voting common stock such holder owns, his or her estimate of the fair value of such shares and an address to which a notice relating to the dissent and appraisal procedures may be sent, and (iv) not later than the 20th day after he or she makes that demand for payment, submits to Independent the certificates representing his or her shares of Carlile voting common stock will be entitled under the TBOC to receive the appraised fair value of his or her shares of Carlile voting common stock as of the date immediately prior to the effective time of the merger.
Nomination of Directors (page 135)
Independents board of directors is divided into three classes, Class I, Class II and Class III, with each class serving staggered three-year terms. Independents board of directors currently has a total of twelve (12) seats, three of which are vacant as a result of resignations of directors. The nomination of the named director nominees to each fill one of the Class I, Class II and Class III positions on the Independent board of directors, whose directorships will only become effective upon consummation of the merger, and the submission of the named director nominees to the Independent shareholders for election are all obligations of Independent under the terms of the reorganization agreement and Independent and Carlile mutually agreed as to the persons who are the named directors nominees. See Independent Proposal ThreeElection of Directors beginning on page 135.
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CERTAIN FINANCIAL INFORMATION REGARDING INDEPENDENT AND CARLILE
Selected Financial Information of Independent
The following selected historical consolidated financial information of Independent as of and for the nine months ended September 30, 2016 and 2015, has been derived from Independents unaudited consolidated financial statements as of and for the nine months ended September 30, 2016 and 2015, incorporated by reference in this joint proxy statement/prospectus. The following selected consolidated financial information of Independent as of and for the years ended December 31, 2015, 2014 and 2013, has been derived from Independents audited consolidated financial statements incorporated by reference in this joint proxy statement/prospectus, and the selected consolidated financial information as of and for the years ended December 31, 2012 and 2011, has been derived from Independents audited consolidated financial statements not appearing or incorporated by reference in this joint proxy statement/prospectus.
You should read the following financial information relating to Independent in conjunction with other information contained in this joint proxy statement/prospectus, including consolidated financial statements of Independent and related accompanying notes appearing in Independents Annual Report on Form 10-K most recently filed with the SEC and in the Quarterly Reports on Form 10-Q of Independent filed with the SEC after that Annual Report on Form 10-K was filed, if any, and in any Current Report on Form 8-K of Independent containing consolidated financial statements of Independent that was filed with the SEC after such Annual Report on Form 10-K, each of which reports is incorporated by reference in this joint proxy statement/prospectus. Independents historical results for any prior period are not necessarily indicative of results to be expected in any future period, and Independents historical results for the nine months ended September 30, 2016, are not necessarily indicative of its results to be expected for all of 2016. Independent has consummated several acquisitions in recent fiscal periods. The results and other financial information of those acquired operations are not included in the table below for the periods or dates prior to their respective acquisition dates and, therefore, the results for these prior periods are not comparable in all respects and may not be predictive of Independents future results. In addition, the selected financial information in the table immediately below does not include, on any basis, the results or financial condition of Carlile for any period or as of any date.
As of and for the Nine Months Ended September 30, |
As of and for the Year Ended December 31, | |||||||||||||||||||||||||||
2016 | 2015 | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||||
(dollars in thousands except per share) | (unaudited) | |||||||||||||||||||||||||||
Selected Income Statement Data |
||||||||||||||||||||||||||||
Interest income |
$ | 156,145 | $ | 126,613 | $ | 174,027 | $ | 140,132 | $ | 87,214 | $ | 71,890 | $ | 59,639 | ||||||||||||||
Interest expense |
18,865 | 14,666 | 19,929 | 15,987 | 12,281 | 13,337 | 13,358 | |||||||||||||||||||||
Net interest income |
137,280 | 111,947 | 154,098 | 124,145 | 74,933 | 58,553 | 46,281 | |||||||||||||||||||||
Provision for loan losses |
7,243 | 7,261 | 9,231 | 5,359 | 3,822 | 3,184 | 1,650 | |||||||||||||||||||||
Net interest income after provision for loan losses |
130,037 | 104,686 | 144,867 | 118,786 | 71,111 | 55,369 | 44,631 | |||||||||||||||||||||
Noninterest income |
14,331 | 11,874 | 16,128 | 13,624 | 11,021 | 9,168 | 7,708 | |||||||||||||||||||||
Noninterest expense |
86,429 | 74,671 | 103,198 | 88,512 | 57,671 | 47,160 | 38,639 | |||||||||||||||||||||
Income tax expense |
19,174 | 13,664 | 19,011 | 14,920 | 4,661 | n/a | n/a | |||||||||||||||||||||
Net income |
38,765 | 28,225 | 38,786 | 28,978 | 19,800 | 17,377 | 13,700 | |||||||||||||||||||||
Pro forma net income(1) (unaudited) |
n/a | n/a | n/a | n/a | 16,174 | 12,147 | 9,357 | |||||||||||||||||||||
Per Share Data (Common Stock)(2) |
||||||||||||||||||||||||||||
Earnings: |
||||||||||||||||||||||||||||
Basic |
$ | 2.10 | $ | 1.64 | $ | 2.23 | $ | 1.86 | $ | 1.78 | $ | 2.23 | $ | 2.00 | ||||||||||||||
Diluted(3) |
2.09 | 1.63 | 2.21 | 1.85 | 1.77 | 2.23 | 2.00 | |||||||||||||||||||||
Pro forma earnings:(1) (unaudited) |
||||||||||||||||||||||||||||
Basic |
n/a | n/a | n/a | n/a | 1.45 | 1.56 | 1.37 | |||||||||||||||||||||
Diluted(3) |
n/a | n/a | n/a | n/a | 1.44 | 1.56 | 1.37 | |||||||||||||||||||||
Dividends(4) |
0.24 | 0.24 | 0.32 | 0.24 | 0.77 | 1.12 | 0.89 | |||||||||||||||||||||
Book value(5) |
34.79 | 31.81 | 32.79 | 30.35 | 18.96 | 15.06 | 12.55 | |||||||||||||||||||||
Tangible book value(6) |
20.03 | 17.72 | 17.85 | 16.15 | 15.89 | 11.19 | 10.53 |
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As of and for the Nine Months Ended September 30, |
As of and for the Year Ended December 31, | |||||||||||||||||||||||||||
2016 | 2015 | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||||
(dollars in thousands except per share) | (unaudited) | |||||||||||||||||||||||||||
Selected Period End Balance Sheet Data |
||||||||||||||||||||||||||||
Total assets |
$ | 5,667,195 | $ | 4,478,339 | $ | 5,055,000 | $ | 4,132,639 | $ | 2,163,984 | $ | 1,740,060 | $ | 1,254,377 | ||||||||||||||
Cash and cash equivalents |
589,600 | 353,950 | 293,279 | 324,047 | 93,054 | 102,290 | 56,654 | |||||||||||||||||||||
Securities available for sale |
267,860 | 200,188 | 273,463 | 206,062 | 194,038 | 113,355 | 93,991 | |||||||||||||||||||||
Total loans (gross) |
4,367,787 | 3,535,493 | 4,001,704 | 3,205,537 | 1,726,543 | 1,378,676 | 988,671 | |||||||||||||||||||||
Allowance for loan losses |
29,575 | 25,088 | 27,043 | 18,552 | 13,960 | 11,478 | 9,060 | |||||||||||||||||||||
Noninterest-bearing deposits |
1,143,479 | 884,272 | 1,071,656 | 818,022 | 302,756 | 259,664 | 168,849 | |||||||||||||||||||||
Interest-bearing deposits |
3,273,014 | 2,649,768 | 2,956,623 | 2,431,576 | 1,407,563 | 1,131,076 | 861,635 | |||||||||||||||||||||
Borrowings (other than junior subordinated debentures) |
577,974 | 334,485 | 371,283 | 306,147 | 195,214 | 201,118 | 118,086 | |||||||||||||||||||||
Junior subordinated debentures(7) |
18,147 | 18,147 | 18,147 | 18,147 | 18,147 | 18,147 | 14,538 | |||||||||||||||||||||
Series A preferred stock |
| 23,938 | 23,938 | 23,938 | | | | |||||||||||||||||||||
Total stockholders equity |
643,253 | 568,257 | 603,371 | 540,851 | 233,722 | 124,510 | 85,997 | |||||||||||||||||||||
Selected Performance Metrics(8) |
||||||||||||||||||||||||||||
Return on average assets(9) |
0.96 | % | 0.89 | % | 0.88 | % | 0.87 | % | 1.04 | % | 1.17 | % | 1.16 | % | ||||||||||||||
Return on average equity(9) |
8.25 | 7.04 | 6.83 | 6.65 | 9.90 | 16.54 | 17.36 | |||||||||||||||||||||
Pro forma return on average assets(1)(9) (unaudited) |
n/a | n/a | n/a | n/a | 0.85 | 0.82 | 0.79 | |||||||||||||||||||||
Pro forma return on average equity(1)(9) (unaudited) |
n/a | n/a | n/a | n/a | 8.09 | 11.56 | 11.86 | |||||||||||||||||||||
Net interest margin(10) |
3.89 | 4.08 | 4.05 | 4.19 | 4.30 | 4.40 | 4.42 | |||||||||||||||||||||
Efficiency ratio(11) |
57.01 | 60.31 | 60.62 | 64.25 | 67.10 | 69.64 | 71.57 | |||||||||||||||||||||
Dividend payout ratio(12) |
11.43 | 14.63 | 14.35 | 12.90 | 14.20 | 11.89 | 13.26 | |||||||||||||||||||||
Credit Quality Ratios |
||||||||||||||||||||||||||||
Nonperforming assets to total assets |
0.23 | % | 0.34 | % | 0.36 | % | 0.36 | % | 0.58 | % | 1.59 | % | 2.85 | % | ||||||||||||||
Nonperforming loans to total loans(13) |
0.26 | 0.33 | 0.37 | 0.32 | 0.53 | 0.81 | 1.14 | |||||||||||||||||||||
Allowance for loan losses to
nonperforming |
264.42 | 214.21 | 181.99 | 183.43 | 152.93 | 104.02 | 80.32 | |||||||||||||||||||||
Allowance for loan losses to total loans |
0.68 | 0.71 | 0.68 | 0.58 | 0.81 | 0.83 | 0.92 | |||||||||||||||||||||
Net charge-offs to average loans outstanding (unaudited)(8) |
0.15 | 0.03 | 0.02 | 0.03 | 0.09 | 0.06 | 0.11 | |||||||||||||||||||||
Capital Ratios |
||||||||||||||||||||||||||||
Common equity Tier 1 Capital to risk-weighted assets(14) |
7.92 | % | 8.26 | % | 7.94 | % | n/a | n/a | n/a | n/a | ||||||||||||||||||
Tier 1 capital to average assets |
7.46 | 8.67 | 8.28 | 8.15 | % | 10.71 | % | 6.45 | % | 6.89 | % | |||||||||||||||||
Tier 1 capital to risk-weighted assets(14) |
8.29 | 9.37 | 8.92 | 9.83 | 12.64 | 8.22 | 8.59 | |||||||||||||||||||||
Total capital to risk-weighted assets(14) |
11.24 | 11.86 | 11.14 | 12.59 | 13.83 | 10.51 | 11.19 | |||||||||||||||||||||
Total stockholders equity to total assets |
11.35 | 12.69 | 11.94 | 13.09 | 10.80 | 7.16 | 6.86 | |||||||||||||||||||||
Tangible common equity to tangible assets(15) |
6.86 | 7.15 | 6.87 | 7.07 | 9.21 | 5.42 | 5.81 |
(1) | Prior to April 1, 2013, Independent elected to be taxed for federal income tax purposes as an S corporation under the provisions of Sections 1361 through 1379 of the Internal Revenue Code of 1986, as amended, and, as a result, Independent did not pay U.S. federal income taxes and has not been required to make any provision or recognize any liability for federal income tax in its consolidated financial statements for any period ending on or before March 31, 2013. As of April 1, 2013, Independent terminated its S corporation election and commenced being subject to federal income taxation as a C corporation. Independent has calculated its pro forma net income, pro forma earnings per share on a basic and diluted basis, pro forma return on average assets and pro forma return on average equity for each period presented by calculating a pro forma provision for federal income taxes using an assumed annual effective federal income tax rate of 33.9%, 30.1% and 31.7% for the years ended December 31, 2013, 2012 and 2011, respectively, and adjusting its historical net income for each period presented to give effect to the pro forma provision for federal income taxes for such period. |
(2) | The per share amounts and the weighted-average shares outstanding for each of the periods shown have been adjusted to give effect to the 3.2-for-one split of the shares of Independents common stock that was effective as of February 22, 2013. |
(3) | Independent calculates its diluted earnings per share for each period shown as its net income divided by the weighted-average number of its common shares outstanding during the relevant period adjusted for the dilutive effect of its outstanding warrants to purchase shares of common stock. Earnings per share on a basic and diluted basis and pro forma earnings per share on a basic and diluted basis were calculated using the following outstanding share amounts, which includes participating shares (those shares with dividend rights): |
For the Nine Months Ended September 30, |
For the Year Ended December 31, | |||||||||||||||||||||||||||
2016 | 2015 | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||||
Weighted average shares outstandingbasic |
18,463,952 | 17,104,641 | 17,321,513 | 15,208,544 | 10,921,777 | 7,626,205 | 6,668,534 | |||||||||||||||||||||
Weighted average shares outstandingdiluted |
18,542,612 | 17,189,802 | 17,406,108 | 15,306,998 | 10,990,245 | 7,649,366 | 6,675,078 |
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(4) | Dividends declared for the years ended December 31, 2013, 2012 and 2011 include quarterly cash distributions paid to its shareholders as to the three months ended March 31, 2013 and the years ended December 31, 2012 and 2011 to provide them with funds to pay their federal income tax liabilities incurred as a result of the pass-through of its net taxable income for such periods to its shareholders as holders of shares in an S corporation for federal income tax purposes. The aggregate amounts of such cash distributions relating to the payment of tax liabilities were $0.52 per share, $0.85 per share and $0.63 per share for the years ended December 31, 2013, 2012 and 2011, respectively. |
(5) | Book value per share equals its total common stockholders equity (excludes preferred stock) as of the date presented divided by the number of shares of its common stock outstanding as of the date presented. The number of shares of its common stock outstanding as of September 30, 2016 and 2015, was 18,488,628 and 17,111,394, respectively, and as of December 31, 2015, 2014, 2013, 2012 and 2011 was 18,399,194 shares, 17,032,669 shares, 12,330,158 shares, 8,269,707 shares and 6,850,293 shares, respectively. |
(6) | Independent calculates tangible book value per share as of the end of a period as total common stockholders book value (excluding preferred stock) less goodwill and other intangible assets at the end of the relevant period divided by the outstanding number of shares of its common stock at the end of that period. Tangible book value is a non-GAAP financial measure, and, as Independent calculates tangible book value, the most directly comparable GAAP financial measure is total stockholders equity. Independent believes that the presentation of tangible book value per share provides useful information to investors regarding its financial condition because, as do its management, banking regulators, many financial analysts and other investors, you can use the tangible book value in conjunction with more traditional bank capital ratios to assess its capital adequacy without the effect of its goodwill and other intangible assets and compare its capital adequacy with the capital adequacy of other banking organizations with significant amounts of goodwill and/or other intangible assets, which typically stem from the use of the purchase accounting method of accounting for mergers and acquisition. A reconciliation of tangible book value to total stockholders equity is presented below. |
(7) | Each of five wholly owned, but nonconsolidated, subsidiaries of Independent Bank Group holds a series of its junior subordinated debentures purchased by the subsidiary in connection with, and paid for with the proceeds of, the issuance of trust preferred securities by that subsidiary. Independent has guaranteed the payment of the amounts payable under each of those issues of trust preferred securities. |
(8) | The values for the selected performance metrics and for the net charge-offs to average loans outstanding ratio presented for the nine months ended September 30, 2016 and 2015, other than the dividend payout ratio, are annualized. |
(9) | Independent has calculated its return on average assets and return on average equity for a period by dividing net income for that period by its average assets and average equity, as the case may be, for that period. Independent has calculated its pro forma return on average assets and pro forma return on average equity for a period by calculating its pro forma net income for that period as described in note 1 above and dividing that by its average assets and average equity, as the case may be, for that period. Independent calculates its average assets and average equity for a period by dividing the sum of its total asset balance or total stockholders equity balance, as the case may be, as of the close of business on each day in the relevant period and dividing by the number of days in the period. Independent calculates its return on average common equity by excluding the preferred stock dividends to derive our net income available to common stockholders and excluding the average balance of our Series A preferred stock from the total average equity to derive its common average equity. Independent calculates its return on average common equity by excluding the preferred stock dividends to derive its net income available to common stockholders and excluding the average balance of our Series A preferred stock from the total average equity to derive its common average equity. |
(10) | Net interest margin for a period represents net interest income for that period divided by average interest-earning assets for that period. |
(11) | Efficiency ratio for a period represents noninterest expenses for that period divided by the sum of net interest income and noninterest income for that period. |
(12) | Independent calculates dividend payout ratio for each period presented as the dividends paid per share for such period (excluding cash distributions made to shareholders in connection with tax liabilities as described in note (4) above) divided by its basic earnings per share for such period. |
(13) | Nonperforming loans include nonaccrual loans, loans past due 90 days or more and still accruing interest, and accruing loans modified under troubled debt restructurings. |
(14) | Prior to 2015, Independent calculated its risk-weighted assets using the standardized method of the Basel II Framework, as implemented by the Federal Reserve and the FDIC. Beginning January 1, 2015, Independent calculated its risk-weighted assets using the Basel III Framework. The common equity tier 1 capital to risk-weighted assets ratio was a new ratio required under the Basel III Framework, effective January 1, 2015. This ratio is not applicable for periods prior to January 1, 2015. Independent calculates common equity as of the end of the period as total stockholders equity less the preferred stock at period end. |
(15) | Independent calculates tangible common equity as of the end of a period as total common stockholders equity (excluding preferred stock) less goodwill and other intangible assets as of the end of the period and calculate tangible assets as of the end of a period as total assets less goodwill and other intangible assets as of the end of the period. Tangible common equity to tangible assets is a non-GAAP financial measure, and as Independent calculates tangible common equity to tangible assets, the most directly comparable GAAP financial measure is total stockholders equity to total assets. Independent believes that the presentation of tangible common equity to tangible assets provides useful information to investors regarding its financial condition because, as do its management, banking regulators, many financial analysts and other investors, you can use the tangible common equity in conjunction with more traditional bank capital ratios to assess its capital adequacy without the effect of its goodwill and core deposit intangibles and compare its capital adequacy with the capital adequacy of other banking organizations with significant amounts of goodwill and/or core deposit intangibles. A reconciliation of the ratios of tangible common equity to tangible assets to the ratios of total stockholders equity to total assets is presented below. |
38
Reconciliations of Non-GAAP Financial Measures
The following information reconciles: (i) Independents tangible book value per common share, a non-GAAP financial measure, as of the dates presented to Independents book value per common share, a financial measure calculated and presented in accordance with GAAP, as of the dates presented; and (ii) its ratio of tangible common equity to tangible assets, a non-GAAP financial measure, as of the dates presented to Independents ratios of total common equity to total assets, a financial measure calculated and presented in accordance with GAAP, as of the dates presented.
September 30 | December 31 | |||||||||||||||||||||||||||
2016 | 2015 | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||
(dollars in thousands except per share) |
||||||||||||||||||||||||||||
Tangible Common Equity |
||||||||||||||||||||||||||||
Total common equity |
$ | 643,253 | $ | 544,319 | $ | 603,371 | $ | 516,913 | $ | 233,772 | $ | 124,510 | $ | 85,997 | ||||||||||||||
Adjustments: |
||||||||||||||||||||||||||||
Goodwill |
(258,319 | ) | (229,818 | ) | (258,643 | ) | (229,457 | ) | (34,704 | ) | (28,742 | ) | (11,222 | ) | ||||||||||||||
Core deposit intangibles |
(14,669 | ) | (11,353 | ) | (16,357 | ) | (12,455 | ) | (3,148 | ) | (3,251 | ) | (2,664 | ) | ||||||||||||||
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Tangible Common Equity |
$ | 370,265 | $ | 303,148 | $ | 328,371 | $ | 275,001 | $ | 195,920 | $ | 92,517 | $ | 72,111 | ||||||||||||||
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Common shares outstanding |
18,488,628 | 17,111,394 | 18,399,194 | 17,032,669 | 12,330,158 | 8,269,707 | 6,850,293 | |||||||||||||||||||||
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Book value per common share |
$ | 34.79 | $ | 31.81 | $ | 32.79 | $ | 30.35 | $ | 18.96 | $ | 15.06 | $ | 12.55 | ||||||||||||||
Tangible book value per common share |
20.03 | 17.42 | 17.85 | 16.15 | 15.89 | 11.19 | 10.53 | |||||||||||||||||||||
Tangible Assets |
||||||||||||||||||||||||||||
Total assetsGAAP |
$ | 5,667,195 | $ | 4,478,339 | $ | 5,055,000 | $ | 4,132,639 | $ | 2,163,984 | $ | 1,740,060 | $ | 1,254,377 | ||||||||||||||
Adjustments: |
||||||||||||||||||||||||||||
Goodwill |
(258,319 | ) | (229,818 | ) | (258,643 | ) | (229,457 | ) | (34,704 | ) | (28,742 | ) | (11,222 | ) | ||||||||||||||
Core deposit intangibles |
(14,669 | ) | (11,353 | ) | (16,357 | ) | (12,455 | ) | (3,148 | ) | (3,251 | ) | (2,664 | ) | ||||||||||||||
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Tangible Assets |
$ | 5,394,207 | $ | 4,237,168 | $ | 4,780,000 | $ | 3,890,727 | $ | 2,126,132 | $ | 1,708,067 | $ | 1,240,491 | ||||||||||||||
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Total common equity to total assets |
11.35 | % | 12.15 | % | 11.94 | % | 12.51 | % | 10.80 | % | 7.16 | % | 6.86 | % | ||||||||||||||
Tangible common equity to tangible assets |
6.86 | 7.15 | 6.87 | 7.07 | 9.21 | 5.42 | 5.81 |
39
Selected Financial Information of Carlile
The following selected historical consolidated financial information of Carlile as of and for the nine months ended September 30, 2016 and 2015, has been derived from Carliles unaudited financial statements, which Carliles management believes reflect all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of its financial position and results of operations as of and for the periods ended on such dates, regulatory filings made by Carlile, and from other information provided by Carlile. The following selected historical consolidated financial information of Carlile as of and for each of the five years ended December 31, 2015, has been derived from Carliles audited financial statements, regulatory filings made by Carlile, and from other information provided by Carlile. You should read the following selected financial information relating to Carlile in conjunction with other information appearing elsewhere in this prospectus or incorporated by reference herein, including the information set forth under Carlile Managements Discussion and Analysis of Carliles Financial Condition and Results of Operations beginning on page 178 and the consolidated financial statements of Carlile and related accompanying notes appearing after page 236 hereof.
As of and for the Nine Months Ended September 30, |
As of and for the Year Ended December 31, | |||||||||||||||||||||||||||
2016 | 2015 | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||
(dollars in thousands except per share) |
||||||||||||||||||||||||||||
Selected Income Statement Data |
||||||||||||||||||||||||||||
Interest income |
$ | 65,352 | $ | 65,081 | $ | 86,255 | $ | 80,989 | $ | 75,254 | $ | 32,439 | $ | 10,476 | ||||||||||||||
Interest expense |
3,849 | 3,390 | 4,538 | 4,947 | 6,172 | 3,109 | 795 | |||||||||||||||||||||
Net interest income |
61,503 | 61,691 | 81,717 | 76,042 | 69,082 | 29,330 | 9,681 | |||||||||||||||||||||
Provision for loan losses |
1,546 | 1,803 | 2,218 | 4,222 | 9,135 | 2,672 | 2,314 | |||||||||||||||||||||
Net interest income after provision for loan losses |
59,957 | 59,888 | 79,499 | 71,820 | 59,947 | 26,658 | 7,367 | |||||||||||||||||||||
Noninterest income |
21,420 | 20,627 | 25,869 | 24,657 | 22,711 | 8,741 | (131 | ) | ||||||||||||||||||||
Noninterest expense |
57,496 | 56,888 | 75,084 | 76,459 | 75,989 | 34,601 | 10,007 | |||||||||||||||||||||
Net income |
17,294 | 16,561 | 22,287 | 13,885 | 3,450 | 5,530 | (2,771 | ) | ||||||||||||||||||||
Per Share Data (Common Stock)(1) |
||||||||||||||||||||||||||||
Earnings: |
||||||||||||||||||||||||||||
Basic(1) |
$ | 0.48 | $ | 0.47 | $ | 0.62 | $ | 0.43 | $ | 0.20 | $ | 0.44 | $ | (0.68 | ) | |||||||||||||
Diluted |
0.48 | 0.47 | 0.62 | 0.43 | 0.20 | 0.44 | (0.68 | ) | ||||||||||||||||||||
Dividends |
1.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||||||||
Book value(2) |
10.92 | 11.28 | 11.38 | 10.75 | 10.26 | 10.15 | 9.13 | |||||||||||||||||||||
Tangible book value(3) |
7.42 | 7.75 | 7.85 | 7.18 | 7.84 | 7.17 | 6.80 | |||||||||||||||||||||
Selected Period End Balance Sheet Data |
||||||||||||||||||||||||||||
Total assets |
$ | 2,320,317 | 2,316,328 | $ | 2,341,230 | $ | 2,389,778 | $ | 1,791,779 | $ | 1,988,986 | $ | 305,312 | |||||||||||||||
Cash and cash equivalents |
114,853 | 224,969 | 250,246 | 195,348 | 242,266 | 383,291 | 76,112 | |||||||||||||||||||||
Securities available for sale |
369,219 | 408,948 | 405,722 | 428,512 | 247,879 | 210,659 | 61,089 | |||||||||||||||||||||
Total loans (gross) |
1,530,836 | 1,399,977 | 1,390,535 | 1,443,869 | 1,039,019 | 1,086,225 | 129,859 | |||||||||||||||||||||
Allowance for loan losses |
(15,675 | ) | (14,308 | ) | (14,479 | ) | (12,780 | ) | (10,110 | ) | (3,365 | ) | (1,578 | ) | ||||||||||||||
Goodwill and core deposit intangible |
125,755 | 127,522 | 127,051 | 128,936 | 76,625 | 89,798 | 13,581 | |||||||||||||||||||||
Other real estate owned |
7,092 | 9,983 | 8,862 | 17,387 | 27,104 | 29,806 | 4,480 | |||||||||||||||||||||
Noninterest-bearing deposits |
652,286 | 622,202 | 638,092 | 615,899 | 371,863 | 351,859 | 84,753 | |||||||||||||||||||||
Interest-bearing deposits |
1,219,727 | 1,248,526 | 1,255,788 | 1,348,926 | 1,103,922 | 1,228,203 | 162,073 | |||||||||||||||||||||
FHLB advances |
21,300 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||
Total shareholders equity |
382,768 | 394,898 | 398,282 | 376,083 | 270,053 | 267,086 | 48,577 | |||||||||||||||||||||
Total equity |
382,768 | 399,411 | 402,885 | 380,318 | 274,526 | 273,617 | 48,577 | |||||||||||||||||||||
Selected Performance Metrics(4) |
||||||||||||||||||||||||||||
Return on average assets(5) |
1.00 | % | 0.96 | % | 0.94 | % | 0.69 | % | 0.28 | % | 0.73 | % | (1.50 | )% | ||||||||||||||
Return on average equity(5) |
5.94 | 5.77 | 5.54 | 4.08 | 1.92 | 5.13 | (2.54 | ) | ||||||||||||||||||||
Net interest margin(6) |
4.23 | 4.15 | 4.11 | 4.74 | 4.46 | 4.49 | 5.85 | |||||||||||||||||||||
Efficiency ratio(7) |
69.35 | 69.11 | 69.80 | 75.97 | 82.78 | 90.89 | 102.20 |
40
As of and for the Nine Months Ended September 30, |
As of and for the Year Ended December 31, | |||||||||||||||||||||||||||
2016 | 2015 | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||
(dollars in thousands except per share) | ||||||||||||||||||||||||||||
Credit Quality Ratios |
||||||||||||||||||||||||||||
Nonperforming assets to total assets |
0.91 | % | 0.84 | % | 0.89 | % | 1.05 | % | 1.82 | % | 1.60 | % | 1.77 | % | ||||||||||||||
Nonperforming loans to total loans(8) |
0.91 | 0.93 | 0.86 | 0.54 | 0.54 | 0.18 | 0.67 | |||||||||||||||||||||
Allowance for loan losses to nonperforming loans(8) |
112.59 | 110.23 | 121.19 | 165.29 | 181.54 | 168.17 | 182.01 | |||||||||||||||||||||
Allowance for loan losses to total loans |
1.02 | 1.02 | 1.04 | 0.89 | 0.97 | 0.31 | 1.22 | |||||||||||||||||||||
Net charge-offs to average loans outstanding |
0.03 | 0.05 | 0.04 | 0.14 | 0.24 | 0.25 | 0.83 | |||||||||||||||||||||
Capital Ratios |
||||||||||||||||||||||||||||
Common equity Tier 1 capital to risk-weighted assets |
||||||||||||||||||||||||||||
Tier 1 capital to average assets |
12.19 | % | 12.80 | % | 13.16 | % | 11.19 | % | 11.59 | % | 11.24 | % | 11.79 | % | ||||||||||||||
Tier 1 capital to risk-weighted assets(9) |
14.82 | 16.53 | 16.73 | 15.93 | 16.35 | 16.21 | 21.96 | |||||||||||||||||||||
Total capital to risk-weighted assets(9) |
15.70 | 17.39 | 18.36 | 16.74 | 17.19 | 16.48 | 22.87 | |||||||||||||||||||||
Tangible equity to tangible assets(2) |
11.85 | 12.57 | 12.60 | 11.28 | 12.17 | 10.19 | 12.33 |
(1) | Carlile calculates its diluted earnings per share for each period shown as its net income divided by the weighted-average number of its common shares outstanding during the relevant period adjusted for the dilutive effect of outstanding options to purchase shares of its common stock. Earnings per share on a basic and diluted basis were calculated using the following outstanding share amounts: |
As of September 30, | As of December 31, | |||||||||||||||||||||||||||
2016 | 2015 | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||||
Weighted average shares outstandingbasic |
35,051,650 | 34,995,590 | 34,995,704 | 30,357,224 | 26,313,997 | 12,451,136 | 4,029,994 | |||||||||||||||||||||
Weighted average shares outstandingdiluted |
35,405,412 | 35,280,166 | 35,278,116 | 30,633,921 | 26,426,600 | 12,451,136 | 4,029,994 |
(2) | Book value per share equals Carliles total shareholders equity as of the date presented divided by the number of Carlile common shares outstanding as of the date presented. The number of Carlile common shares outstanding as of September 30, 2016 and 2015, was 35,064,719 and 34,995,044, respectively, and as of December 31, 2015, 2014, 2013, 2012 and 2011 was 34,996,044 shares, 34,995,044 shares, 26,313,997 shares, 26,313,997 shares and 5,318,953 shares, respectively. |
(3) | Carlile calculates tangible book value per share as of the end of any period as total shareholders equity less goodwill and other intangible assets (net of any related deferred tax assets and liabilities) as of the end of the relevant period divided by the outstanding number of shares of its common stock at the end of that period. Tangible book value is a non-GAAP financial measure, and, as Carlile calculates tangible book value, the most directly comparable GAAP financial measure is total shareholders equity. Carlile calculates tangible assets as of the end of any period as total assets less goodwill and other intangible assets (net of any related deferred tax assets and liabilities) as of the end of the relevant period. Tangible assets is a non-GAAP financial measure, and, as Carlile calculates tangible assets, the most directly comparable GAAP financial measure is tangible assets. Carlile calculates tangible common equity as of the end of any period as total shareholders equity less goodwill and other intangible assets (net of any related deferred tax assets and liabilities) as of the end of the relevant period divided by total assets less good will and other intangible assets (net of any related deferred tax assets and liabilities) at the end of that period. The ratio of tangible common equity to tangible assets is a non-GAAP financial measure, and, as Carlile calculates this ratio, the most directly comparable GAAP financial measure is total shareholders equity to total assets. Carliles management believes that these non-GAAP financial measures are important information to be provided to you because, as do its management, banking regulators, many financial analysts and other investors, you can use the tangible book value per common share and the ratio of tangible common equity to tangible assets in conjunction with more traditional bank capital ratios to assess Carliles capital adequacy without the effect of its goodwill and other intangible assets (net of any related deferred tax assets and liabilities) and compare its capital adequacy with the capital adequacy of other banking organizations with significant amounts of goodwill and/or other intangible assets, which typically stem from the use of the purchase accounting method of accounting for mergers and acquisitions. |
41
The following table presents, as of the dates set forth below, Carliles total assets, tangible assets, total common equity, total shareholders equity and tangible common equity and presents reconciliations of Carliles tangible book value per common share to its book value per common share and of its ratio of tangible common equity to tangible assets to its ratio of total shareholders equity to total assets:
As of September 30, | As of December 31, | |||||||||||||||||||||||||||
2016 | 2015 | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||||||
(dollars in thousands except per share data) |
||||||||||||||||||||||||||||
Tangible Assets |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
Total Assets |
2,320,317 | 2,316,328 | 2,341,230 | 2,389,778 | 1,791,779 | 1,988,986 | 305,312 | |||||||||||||||||||||
Adjustments |
||||||||||||||||||||||||||||
Goodwill, net |
117,021 | 117,124 | 117,092 | 117,243 | 59,181 | 73,012 | 10,947 | |||||||||||||||||||||
Core deposit intangibles, net |
5,271 | 6,659 | 6,309 | 7,703 | 5,032 | 6,054 | 1,529 | |||||||||||||||||||||
Tangible assets |
$ | 2,198,025 | $ | 2,192,545 | $ | 2,217,829 | $ | 2,264,832 | $ | 1,727,566 | $ | 1,909,920 | $ | 292,836 | ||||||||||||||
Tangible Common Equity |
||||||||||||||||||||||||||||
Total shareholders equity |
$ | 382,768 | $ | 394,898 | $ | 398,282 | $ | 376,083 | $ | 270,053 | $ | 267,086 | $ | 48,577 | ||||||||||||||
Adjustments: |
||||||||||||||||||||||||||||
Goodwill, net |
117,021 | 117,124 | 117,092 | 117,243 | 59,181 | 73,012 | 10,947 | |||||||||||||||||||||
Core deposit intangibles, net |
5,271 | 6,659 | 6,309 | 7,703 | 5,032 | 6,054 | 1,529 | |||||||||||||||||||||
Tangible common equity |
$ | 260,476 | $ | 271,115 | $ | 274,881 | $ | 251,137 | $ | 205,840 | $ | 188,020 | $ | 36,101 | ||||||||||||||
Common shares outstanding(a) |
35,064,719 | 34,995,044 | 34,996,044 | 34,995,044 | 26,313,997 | 26,313,997 | 5,318,953 | |||||||||||||||||||||
Book value per common share |
$ | 10.92 | $ | 11.28 | $ | 11.38 | $ | 10.75 | $ | 10.26 | $ | 10.15 | $ | 9.13 | ||||||||||||||
Tangible book value per common share |
7.43 | 7.75 | 7.85 | 7.18 | 7.82 | 7.15 | 6.79 | |||||||||||||||||||||
Total equity to total assets |
16.50 | % | 17.24 | % | 17.21 | % | 15.91 | % | 15.32 | % | 13.76 | % | 15.91 | % | ||||||||||||||
Tangible common equity to tangible assets |
11.85 | 12.37 | 12.39 | 11.09 | 11.92 | 9.84 | 12.33 |
(a) | Carlile calculates the common shares outstanding as set forth in note (2) above. |
(4) | The values for the selected performance metrics presented for the nine months ended September 30, 2016 and 2015, are annualized. |
(5) | Carlile has calculated its return on average assets and return on average equity for a period by dividing net income for that period by its average assets and average equity, as the case may be, for that period. Carlile calculates its average assets and average equity for a period by dividing the sum of its total asset balance or total shareholders equity balance, as the case may be, as of the close of business on each day in the relevant period and dividing by the number of days in the period. |
(6) | Net interest margin for a period represents net interest income for that period divided by average interest-earning assets for that period. |
(7) | Efficiency ratio for a period represents noninterest expenses for that period divided by the sum of net interest income and noninterest income for that period, excluding realized gains or losses from sales of investment securities for that period. |
(8) | Nonperforming loans include nonaccrual loans, loans past due 90 days or more and still accruing interest, and accruing loans modified under troubled debt restructurings. |
(9) | Carlile calculates its risk-weighted assets using the standardized method of the Basel III Framework, as implemented by the FDIC. |
42
Unaudited Pro Forma Combined Financial Information
Independent has prepared the unaudited pro forma consolidated income statements appearing below to present on a pro forma basis the consolidated income statements of Independent assuming that the acquisition of Carlile was consummated on January 1, 2015, and to provide information with respect to the pro forma consolidated results of operations that Independent would have had for the year ended December 31, 2015, and the nine months ended September 30, 2016, had the merger with Carlile been consummated on January 1, 2015. The merger of Independent and Carlile will be accounted for as an acquisition of Carlile and Northstar Bank by Independent and Independent Bank under the acquisition method of accounting in accordance with the Financial Accounting Standard Boards Accounting Standard Codification Topic 805, Business Combinations. The unaudited pro forma combined financial statements of Independent and the other pro forma combined financial information appearing below have been prepared using the acquisition method of accounting. Such unaudited pro forma combined financial statements and other unaudited pro forma combined financial information are not necessarily indicative of the results that might have occurred had the merger taken place on January 1, 2015, for statement of income purposes and on September 30, 2016, for balance sheet purposes, and is not intended to be a projection of future results. Historical results for any prior period are not necessarily indicative of results to be expected in any future period, and historical results for the nine months ended September 30, 2016, are not necessarily indicative of its results to be expected for all of 2016. Future results may differ materially from the results reflected because of various factors, including those discussed in the section entitled Risk Factors beginning on page 54 and appearing under the caption Risk Factors in Independents most recently filed Annual Report on Form 10-K, which is incorporated by reference in this joint proxy statement/prospectus, and the factors discussed under the caption Cautionary Note Regarding Forward-Looking Statements appearing elsewhere in this joint proxy statement/prospectus.
The selected unaudited pro forma combined income statement data for the nine months ended September 30, 2016, and the year ended December 31, 2015, appearing below gives effect to the merger as if the merger had been completed on January 1, 2015 and includes the 400,000 shares of Independent common stock issued and sold by Independent for cash in the aggregate net amount of $19,950,000 (after underwriting discounts) on November 29, 2016, as well as 8,825,790 shares of Independent common stock assumed to be issued in the merger.
43
Pro Forma Consolidated Income Statement
(Unaudited)
Nine Months Ended September 30, 2016 | ||||||||||||||||
Independent | Carlile | Pro Forma Adjustments |
Pro Forma Independent with Carlile |
|||||||||||||
(dollars in thousands except per share) | ||||||||||||||||
Interest income |
||||||||||||||||
Interest and fees on loans |
$ | 151,522 | $ | 58,717 | $ | 3,563 | (a) | $ | 213,802 | |||||||
Interest on securities |
3,356 | 5,865 | | 9,221 | ||||||||||||
Interest on other |
1,267 | 770 | | 2,037 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total interest income |
156,145 | 65,352 | 3,563 | 225,060 | ||||||||||||
Interest expense |
||||||||||||||||
Interest on deposits |
11,623 | 3,216 | | 14,839 | ||||||||||||
Interest on other borrowings |
7,242 | 633 | | 7,875 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total interest expense |
18,865 | 3,849 | | 22,714 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net interest income |
137,280 | 61,503 | 3,563 | 202,346 | ||||||||||||
Provision for loan losses |
7,243 | 1,546 | | 8,789 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net interest income after provision |
130,037 | 59,957 | 3,563 | 193,557 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Noninterest income |
||||||||||||||||
Service charges |
5,287 | 3,095 | | 8,382 | ||||||||||||
Mortgage fee income |
5,319 | 10,075 | | 15,394 | ||||||||||||
Gain on sale of assets |
93 | 1,102 | | 1,195 | ||||||||||||
Other |
3,632 | 7,148 | | 10,780 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total noninterest income |
14,331 | 21,420 | | 35,751 | ||||||||||||
Noninterest expense |
||||||||||||||||
Salaries and employee benefits |
51,644 | 33,075 | | 84,719 | ||||||||||||
Occupancy |
12,119 | 7,369 | | 19,488 | ||||||||||||
Merger expenses |
732 | 550 | | 1,282 | ||||||||||||
Other |
21,934 | 16,502 | 557 | (b) | 38,993 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total noninterest expense |
86,429 | 57,496 | 557 | 144,482 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income before taxes |
57,939 | 23,881 | 3,006 | 84,826 | ||||||||||||
Income tax expense |
19,174 | 6,587 | 1,052 | (c) | 26,813 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
38,765 | 17,294 | 1,954 | 58,013 | ||||||||||||
Net income attributable to noncontrolling interest |
| (315 | ) | | (315 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income to shareholders |
$ | 38,765 | $ | 16,979 | $ | 1,954 | $ | 57,698 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Pro Forma Combined Per Share Data (Common Stock)(1) |
||||||||||||||||
Earnings: |
||||||||||||||||
Basic |
$ | 2.10 | $ | 2.08 | ||||||||||||
Diluted(2) |
2.09 | 2.08 | ||||||||||||||
Dividends |
0.24 | 0.24 | ||||||||||||||
Book value(3) |
34.79 | 45.01 | ||||||||||||||
Tangible book value(4) |
20.03 | 20.11 | ||||||||||||||
Weighted average shares outstanding:(2) |
||||||||||||||||
Basic |
18,463,952 | 27,689,742 | ||||||||||||||
Diluted |
18,542,612 | 27,768,401 |
Pro forma adjustments:
(a) | Adjustment to interest income for accretion on Carlile acquired loans based on expected fair market value adjustment to such loans. |
(b) | Expected amortization of additional core deposit intangible of $7.4 million is based on a 10 year life using the straight-line amortization method. |
(c) | Tax adjustment related to other pro forma adjustments is calculated at a 35% rate. |
44
Pro Forma Consolidated Income Statement
Year Ended December 31, 2015 | ||||||||||||||||
Independent | Carlile | Pro Forma Adjustments |
Pro Forma Independent with Carlile |
|||||||||||||
(dollars in thousands except per share) | ||||||||||||||||
Interest income |
||||||||||||||||
Interest and fees on loans |
$ | 169,504 | $ | 76,985 | $ | 4,750 | (a) | $ | 251,239 | |||||||
Interest on securities |
3,951 | 8,409 | | 12,360 | ||||||||||||
Interest on other |
572 | 861 | | 1,433 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total interest income |
174,027 | 86,255 | 4,750 | 265,032 | ||||||||||||
Interest expense |
||||||||||||||||
Interest on deposits |
12,024 | 3,799 | | 15,823 | ||||||||||||
Interest on other borrowings |
7,905 | 739 | | 8,644 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total interest expense |
19,929 | 4,538 | | 24,467 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net interest income |
154,098 | 81,717 | 4,750 | 240,565 | ||||||||||||
Provision for loan losses |
9,231 | 2,218 | | 11,449 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net interest income after provision |
144,867 | 79,499 | 4,750 | 229,116 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Noninterest income |
||||||||||||||||
Service charges |
6,898 | 4,487 | | 11,385 | ||||||||||||
Mortgage fee income |
5,269 | 10,956 | | 16,225 | ||||||||||||
Gain on sale of assets |
540 | | | 540 | ||||||||||||
Other |
3,421 | 10,426 | | 13,847 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total noninterest income |
16,128 | 25,869 | | 41,997 | ||||||||||||
Noninterest expense |
||||||||||||||||
Salaries and employee benefits |
60,541 | 42,940 | | 103,481 | ||||||||||||
Occupancy |
16,058 | 10,178 | | 26,236 | ||||||||||||
Merger expenses |
1,420 | 66 | | 1,486 | ||||||||||||
Other |
25,179 | 21,900 | 743 | (b) | 47,822 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total noninterest expense |
103,198 | 75,084 | 743 | 179,025 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income before taxes |
57,797 | 30,284 | 4,007 | 92,088 | ||||||||||||
Income tax expense |
19,011 | 7,997 | 1,402 | (c) | 28,410 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
38,786 | 22,287 | 2,605 | 63,678 | ||||||||||||
Net income attributable to noncontrolling interest |
| (627 | ) | | (627 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
$ | 38,786 | $ | 21,660 | $ | 2,605 | $ | 63,051 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Pro Forma Combined Per Share Data (Common Stock)(1) |
||||||||||||||||
Earnings: |
||||||||||||||||
Basic |
$ | 2.23 | $ | 2.38 | ||||||||||||
Diluted(2) |
2.21 | 2.37 | ||||||||||||||
Dividends |
0.32 | 0.32 | ||||||||||||||
Book value(3) |
32.79 | 43.72 | ||||||||||||||
Tangible book value(4) |
17.85 | 18.65 | ||||||||||||||
Weighted average shares outstanding:(2) |
||||||||||||||||
Basic |
17,321,513 | 26,547,303 | ||||||||||||||
Diluted |
17,406,108 | 26,631,898 |
Pro forma adjustments:
(a) | Adjustment to interest income for accretion on Carlile acquired loans based on expected fair market value adjustment to such loans. |
45
(b) | Expected amortization of additional core deposit intangible of $7.4 million is based on a 10 year life using the straight-line amortization method. |
(c) | Tax adjustment related to other pro forma adjustments is calculated at a 35% rate. |
Footnotes to Pro Forma Consolidated Income Statements
(1) | The per share amounts and the weighted average shares outstanding for each of the periods shown have been adjusted to give effect to the 400,000 shares of our common stock sold on November 29, 2016 and the assumed issuance of a total of 8,825,790 shares of Independent common stock to Carliles shareholders in the merger, effective as of January 1, 2015. |
(2) | The pro forma combined diluted earnings per share for each period presented are calculated as the pro forma combined net income for the relevant period divided by the weighted average number of Independents common shares outstanding during that period adjusted for the dilutive effect of outstanding warrants to purchase shares of Independent common stock, adjusted to give effect to the 400,000 shares of Independent common stock sold on November 29, 2016 and adjusted for the assumed issuance of a total of 8,825,790 shares of Independent common stock to Carliles shareholders in the merger, effective as of January 1, 2015. See Note 1 to Independents consolidated financial statements appearing in Independents most recently filed Annual Report on Form 10-K, which is incorporated by reference in this prospectus, for more information regarding the dilutive effect of Independents outstanding warrants and regarding certain nonvested shares of common stock, the effect of which is anti-dilutive. The pro forma combined earnings per share on a basic and diluted basis were calculated using the following outstanding share amounts: |
Independent | Pro Forma with Carlile | |||||||||||||||
As of September 30, 2016 |
As of December 31, 2015 |
As of September 30, 2016 |
As of December 31, 2015 |
|||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
Weighted average shares outstandingbasic |
18,463,952 | 17,321,513 | 27,689,742 | 26,547,303 | ||||||||||||
Weighted average shares outstandingdiluted |
18,542,612 | 17,406,108 | 27,768,401 | 26,631,898 |
(3) | Book value per share equals the pro forma combined total stockholders equity as of the date presented divided by the number of shares of Independent common stock outstanding as of the date presented adjusted to give effect to the issuance of 400,000 shares of Independent common stock issued and sold on November 29, 2016, and the assumed issuance of 8,825,790 shares of Independent common stock to Carliles shareholders in the merger, effective as of January 1, 2015. The pro forma number of shares of Independent common stock outstanding as of September 30, 2016, and December 31, 2015, was 27,714,418 and 27,624,984 shares, respectively. |
46
(4) | As discussed above in Note (6) to the tabular presentation in Certain Financial Information Regarding Independent and CarlileSelected Financial Information of Independent on page 36, tangible book value per common share is a non-GAAP financial measure. Independents management believes that such information is important information to be provided to you because, as do its management, banking regulators, many financial analysts and other investors, you can use the tangible book value per common share in conjunction with more traditional bank capital ratios to assess, on a pro forma basis, the combined companies capital adequacy without the effect of goodwill and other intangible assets and compare that capital adequacy with the capital adequacy of other banking organizations with significant amounts of goodwill and/or other intangible assets. Book value per common share is the most directly comparable financial measure calculated in accordance with GAAP. The following table presents, as of the dates set forth below, on a pro forma combined basis, the total stockholders equity and tangible common equity of the combined companies and presents a reconciliation of the pro forma combined tangible book value per common share compared to the pro forma combined book value per common share: |
Independent(a) | Pro Forma with Carlile(a) | |||||||||||||||
As of September 30, 2016 |
As of December 31, 2015 |
As of September 30, 2016 |
As of December 31, 2015 |
|||||||||||||
(dollars in thousands except per share data) | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||
Tangible common equity |
||||||||||||||||
Total common stockholders equity |
$ | 643,253 | $ | 603,371 | $ | 1,247,543 | $ | 1,207,661 | ||||||||
Adjustments: |
||||||||||||||||
Goodwill |
(258,319 | ) | (258,643 | ) | (660,033 | ) | (660,357 | ) | ||||||||
Core deposit intangibles |
(14,669 | ) | (16,357 | ) | (30,292 | ) | (31,980 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Tangible common equity |
$ | 370,265 | $ | 328,371 | $ | 557,218 | $ | 515,324 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Common shares outstanding(b) |
18,488,628 | 18,399,194 | 27,714,418 | 27,624,984 | ||||||||||||
Book value per common share |
$ | 34.79 | $ | 32.79 | $ | 45.01 | $ | 43.72 | ||||||||
Tangible book value per common share |
20.03 | 17.85 | 20.11 | 18.65 |
(a) | Pro forma balance sheet includes adjustments to record acquired assets and liabilities at estimated fair value as of the dates presented. These estimates of the fair values of the acquired assets and liabilities for inclusion in Independents consolidated financial statements as of dates on or after the effective date of the merger will be adjusted once final third party valuations are performed as of the actual effective time of the merger. |
(b) | The pro forma number of common shares outstanding are calculated as set forth in note (5) above. |
Independent has prepared the unaudited pro forma consolidated balance sheet appearing below to present on a pro forma basis the consolidated balance sheet of Independent assuming that the acquisition of Carlile was consummated on September 30, 2016, and to provide information with respect to the pro forma consolidated the financial condition that Independent would have had as of that date had the merger with Carlile been consummated on such date. When preparing the unaudited pro forma consolidated balance sheet appearing below, to determine the number of shares of Independent common stock that would be issued to the Carlile shareholders in the merger, Independent has assumed that its average daily volume-weighted stock price for the twenty trading days ending with and including the third trading day prior to the closing of the merger was its closing stock price on February 16, 2017, which was $66.70. Based on that assumed stock price, an aggregate of 8,825,790 shares of Independent common stock would have been issued to the Carlile shareholders in the merger.
The unaudited pro forma combined balance sheet information as of September 30, 2016, appearing below gives effect to the merger as if the merger was completed on September 30, 2016. You should read this information in conjunction with the other information contained or incorporated by reference in this joint proxy statement/prospectus including Selected Financial Information of Independent, Selected Financial Information of Carlile, and Carliles consolidated financial statements, related notes and Carlile managements discussion and analysis of Carliles financial condition and results of operations appearing elsewhere in this joint proxy statement/prospectus and the consolidated financial statements of Independent, the related accompanying
47
notes and Independent managements discussion and analysis of Independents financial condition and results of operations that are incorporated by reference in this joint proxy statement/prospectus as described above and under the caption Incorporation of Certain Documents by Reference below.
Pro Forma Consolidated Balance Sheet
(unaudited)
Independent | Carlile | Purchase Accounting Adjustment |
Pro Forma Independent with Carlile Consolidated |
|||||||||||||||||
(dollars in thousands) | As of September 30, 2016 |
As of September 30, 2016 |
Debits | Credits | As of September 30, 2016 |
|||||||||||||||
Assets: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 589,600 | $ | 114,853 | $ | 19,950 | (h) | $ | 83,492 | (f)(i)(j) | $ | 640,911 | ||||||||
Certificates of deposit held in other banks |
| 13,525 | | | 13,525 | |||||||||||||||
Securities available for sale |
267,860 | 369,219 | | | 637,079 | |||||||||||||||
Loans held for sale |
7,097 | 16,853 | | | 23,950 | |||||||||||||||
Loans (gross) |
4,358,792 | 1,530,836 | | 19,000 | (a) | 5,870,628 | ||||||||||||||
Allowance for loan losses |
(29,575 | ) | (15,675 | ) | 15,675 | (b) | | (29,575 | ) | |||||||||||
Premises and equipment, net |
89,928 | 62,286 | 2,633 | (c) | | 154,847 | ||||||||||||||
Other real estate |
2,083 | 7,092 | | | 9,175 | |||||||||||||||
Goodwill |
258,319 | 117,564 | 284,150 | (e) | | 660,033 | ||||||||||||||
Core deposit intangible, net |
14,669 | 8,191 | 7,432 | (d) | | 30,292 | ||||||||||||||
Deferred tax asset |
5,349 | 14,300 | | 5,826 | (g) | 13,823 | ||||||||||||||
Other assets |
103,073 | 81,273 | | | 184,346 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Assets |
$ | 5,667,195 | $ | 2,320,317 | $ | 329,840 | $ | 108,318 | $ | 8,209,034 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Liabilities and Stockholders Equity |
||||||||||||||||||||
Deposits: |
||||||||||||||||||||
Noninterest bearing |
$ | 1,143,479 | $ | 652,286 | $ | | $ | | $ | 1,795,765 | ||||||||||
Interest bearing |
3,273,014 | 1,219,727 | | | 4,492,741 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total deposits |
4,416,493 | 1,872,013 | | | 6,288,506 | |||||||||||||||
FHLB advances |
470,765 | 21,300 | | | 492,065 | |||||||||||||||
Repurchase agreements |
| 20,572 | | | 20,572 | |||||||||||||||
Other borrowings |
107,209 | | | | 107,209 | |||||||||||||||
Junior subordinated debentures(1) |
18,147 | 12,342 | | | 30,489 | |||||||||||||||
Other liabilities |
11,328 | 11,322 | | | 22,650 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Liabilities |
5,023,942 | 1,937,549 | | | 6,961,491 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Stockholders equity: |
||||||||||||||||||||
Total Stockholders Equity |
643,253 | 382,768 | 382,768 | (f) | 604,290 | (h)(i)(j) | 1,247,543 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Liabilities and Stockholders Equity |
$ | 5,667,195 | $ | 2,320,317 | $ | 382,768 | $ | 604,290 | $ | 8,209,034 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Pro forma adjustments
(a) | Estimated fair market value adjustment on the acquired loan portfolio. |
(b) | Eliminate Carliles allowance for loan loss. |
(c) | Estimated fair market value adjustment on premises acquired. |
(d) | Estimated core deposit intangible at 1% of the acquired non time deposits. |
(e) | Record goodwill for amount of consideration and liabilities assumed over fair value of the assets received. |
48
(f) | Eliminate Carlile capital accounts. Assumes Carlile distributes permitted dividend of up to $55.25 million on September 30, 2016 and has $200 million in adjusted tangible equity (as calculated pursuant to the reorganization agreement) after transaction expenses. |
(g) | Estimated fair market value adjustment on acquired deferred assets and record tax effect of purchase accounting adjustments at 35%. |
(h) | Record sale of 400,000 shares of Independent Bank Groups common stock, net of cost. |
(i) | Record transaction expenses at 1% of the aggregate merger consideration. |
(j) | Issue approximately 8,825,790 shares of our common stock (assuming an Average Stock Price of $66.70 per share) to former Carlile shareholders and pay $22.1 million in cash to Carlile option holders for a total consideration of $610.8 million. The estimated fair values of the assets acquired and liabilities assumed in the merger are as follows: |
(dollars in thousands) | ||||
Assets of acquired bank: |
||||
Cash and cash equivalents |
$ | 57,840 | ||
Certificates of deposit held in other banks |
13,525 | |||
Securities available for sale |
369,219 | |||
Loans |
1,528,689 | |||
Premises and equipment |
64,919 | |||
Core deposit intangible |
15,623 | |||
Goodwill |
401,714 | |||
Other real estate |
7,092 | |||
Deferred tax asset |
8,474 | |||
Other assets |
81,273 | |||
|
|
|||
Total assets acquired |
2,548,368 | |||
|
|
|||
Liabilities of acquired bank: |
||||
Deposits |
$ | 1,872,013 | ||
FHLB advances |
21,300 | |||
Junior subordinated debentures |
12,342 | |||
Other liabilities |
31,894 | |||
|
|
|||
Total liabilities assumed |
1,937,549 | |||
|
|
|||
Net assets acquired |
$ | 610,819 | ||
|
|
|||
Common stock issued |
$ | 588,680 | ||
Cash paid |
22,139 | |||
|
|
|||
Total purchase price |
$ | 610,819 | ||
|
|
Fair value estimates for loans, deposits, premises and the core deposit intangible are subject to adjustment upon receipt of third party appraisals.
Comparative Historical and Unaudited Pro Forma Per Share Financial Data
The following table presents: (1) historical per share information for Independent; (2) historical per share information for Carlile; (3) pro forma per share information of the combined company after giving effect to the merger; and (4) equivalent pro forma per share information for Carlile.
The combined company pro forma per share information was derived by combining information from the historical financial information presented above under Selected Financial Information of Independent, Selected Financial Information of Carlile and Selected Unaudited Pro Forma Combined Financial
49
Information. You should read this table together with the financial information discussed under those headings and the consolidated financial statements of Independent and the consolidated financial statements of Carlile incorporated by reference in this joint proxy statement/prospectus. You should not rely on the pro forma per share information as being necessarily indicative of actual results had the merger been effective on January 1, 2015, for purposes of net income per share data, and September 30, 2016, for purposes of book value per share data.
The information appearing in the column captioned Combined Pro Forma in the table below was prepared assuming that 8,825,790 shares of Independent common stock were issued to the shareholders of Carlile in the merger as of January 1, 2015, for purposes of net income per share data, and September 30, 2016, for purposes of book value per share data. The information appearing in the column captioned Per Equivalent Carlile Share was obtained by multiplying the pro forma amounts by 0.2517, the assumed Carlile Share Exchange Ratio at which shares of Independent common stock will be exchanged for a share of Carlile common stock in connection with the merger. Such assumed Carlile Share Exchange Ratio has been calculated based on the assumption that 35,064,719 shares of Carlile voting and non-voting common stock were outstanding on the date indicated, which is the expected number of shares to be outstanding at the effective time of the merger (assuming that none of the outstanding options to purchase shares of Carlile common stock will be exercised for cash prior to the effective time of the merger). The exact number of shares of Carlile common stock issued and outstanding immediately prior to the effective time of the merger cannot be determined with complete precision because Independent and Carlile cannot know whether the holders of options to purchase shares of Carlile common stock will elect to exercise those options into shares of Carlile common stock prior to the effective time of the merger and to what extent, if any, there will be an adjusted tangible equity adjustment if the adjusted tangible equity of Carlile is less than $200 million on the effective date of the merger.
Independent | Carlile | Combined Pro Forma |
Per Equivalent Carlile Share |
|||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
Book value per share(1): |
||||||||||||||||
At September 30, 2016 |
$ | 34.79 | $ | 10.92 | $ | 45.01 | $ | 11.33 | ||||||||
Cash dividends declared per share: |
||||||||||||||||
Nine months ended September 30, 2016 |
$ | 0.24 | $ | 1.00 | $ | 0.24 | $ | 0.06 | ||||||||
Year ended December 31, 2015 |
0.32 | 0.00 | 0.32 | 0.08 | ||||||||||||
Basic net income per share: |
||||||||||||||||
Nine months ended September 30, 2016 |
$ | 2.10 | $ | 0.48 | $ | 2.08 | $ | 0.52 | ||||||||
Year ended December 31, 2015 |
2.23 | 0.62 | 2.38 | 0.60 | ||||||||||||
Diluted net income per share: |
||||||||||||||||
Nine months ended September 30, 2016 |
$ | 2.09 | $ | 0.48 | $ | 2.08 | $ | 0.52 | ||||||||
Year ended December 31, 2015 |
2.21 | 0.61 | 2.37 | 0.60 |
(1) | The pro forma combined book value per share of Independent common stock is based upon the pro forma combined common stockholders equity for Independent and Carlile as of September 30, 2016, divided by total pro forma common shares of Independent issued and outstanding as of that date assuming the merger was effective as of September 30, 2016, and 9,225,790 shares of the Independent common stock in the aggregate were issued in connection with the merger (including the 400,000 shares of Independent common stock issued and sold on November 29, 2016 and the assumed issuance of 8,825,790 shares of Independent common stock in connection with the merger) as of September 30, 2016. |
50
Historical Consolidated Financial Statements of Independent and Carlile
Independents consolidated financial statements as of and for three years ended December 31, 2015, the related accompanying notes thereto, the report of RSM US LLP, Independents registered independent public accounting firm, with respect to their audit of those consolidated financial statements, and Independents managements discussion and analysis of financial condition and results of operations relating to such consolidated financial statements appear in our Annual Report on Form 10-K for the year ended December 31, 2015. Independents condensed consolidated financial statements as of and for the nine months ended September 30, 2016 and 2015, the related accompanying notes thereto and Independent managements discussion and analysis of Independents financial condition and results of operations relating to such condensed consolidated financial statements are included in Independents Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2016. You may review those reports, which are incorporated by reference in this joint proxy statement/prospectus as described under Incorporation of Certain Documents by Reference, and obtain copies of those reports as described below in Where You Can Find More Information.
Carlile is not required to file periodic and other reports with the SEC under the Securities Exchange Act of 1934, as amended, or Exchange Act. The consolidated financial statements of Carlile as of December 31, 2015 and 2014, and each the three years ended December 31, 2015, and the related accompanying notes thereto, the report of Crowe Horwath LLP, independent auditors of Carlile, with respect to their audit of those consolidated financial statements of Carlile, and the unaudited consolidated financial statements of Carlile as of and for the three and nine months ended September 30, 2016 and 2015, and the accompanying notes thereto appear following page 236. In addition, Carlile managements discussions and analyses of Carliles financial condition and results of operations relating to the dates and periods covered by such consolidated financial statements and condensed consolidated financial statements appear beginning on page 178.
We urge you to review the historical financial statements, the related accompanying notes thereto and the related managements discussions and analyses of financial condition and results of operations described above and incorporated by reference into this joint proxy statement/prospectus, as well as the selected financial information and pro forma financial statements appearing above, when considering how to vote on each proposal on which you are asked to vote as a shareholder of Carlile or Independent.
The following table shows (1) the market values of Independent common stock at the close of business on November 18, 2016, the business day prior to the announcement of the proposed merger, and as of the most recent date practicable preceding the date of this joint proxy statement/prospectus and (2) the equivalent pro forma value of a share of Carlile common stock at such dates based on the value of the consideration to be received in the merger with respect to each share. Historical market value information regarding Carlile common stock is not provided because there is no active trading market for Carlile common stock.
Independent Common Stock(1) |
Equivalent Pro Forma Per Share of Carlile Common Stock(2) |
|||||||
November 18, 2016 |
$ | 53.95 | $ | 13.70 | ||||
February 16, 2017 |
66.70 | 16.79 |
(1) | Represents the closing price of Independent common stock on the NASDAQ Global Select Market on the date indicated. |
(2) | Equivalent pro forma market value per share of Carlile common stock represents the historical market value per share of Independent common stock multiplied by, as to November 18, 2016, an assumed Carlile Share |
51
Exchange Ratio of 0.2539 of a share of Independent Common stock for each share of Carlile common stock (which ratio is based on the closing price of $53.95 per share of Independent common stock on November 18, 2016) and, as to February 16, 2017, an assumed Carlile Share Exchange Ratio of 0.2517 share of Independent common stock (which ratio is based on the closing price of $66.70 per share of Independent common stock on February 16, 2017) for each share of Carlile common stock and assumes an adjusted tangible equity of Carlile (calculated in accordance with the reorganization agreement) of at least $200 million. Such assumed ratio was calculated based on the assumption that 35,064,709 shares of Carlile voting and non-voting common stock were outstanding on the date indicated, which is the expected number of shares to be outstanding at the effective time of the merger and $22.1 million in the aggregate was paid to cashout the Carlile stock options (which includes $1.6 million paid by Carlile in December 2016 in connection with the cancellation of certain options to purchase Carlile common stock). |
For an explanation of how the Carlile adjusted tangible equity will be calculated, the effect on the purchase price if adjusted tangible equity is less than $200 million on the effective date, the calculation of the number of shares of Carlile common stock that will be issued and outstanding on the effective date, and other estimates, please refer to The Merger, beginning on page 75 of this joint proxy statement/prospectus.
Dividend Payments
As approved by Independents board of directors, Independent declared and paid a $0.08 per share dividend to holders of Independent common stock in each fiscal quarter of 2015 and the first three fiscal quarters of 2016 and a $0.10 per share dividend paid in the fourth fiscal quarter of 2016. Independent intends to continue to pay regularly quarterly cash dividends on its common stock in the first fiscal quarter of 2017 and following the merger, when, as and if declared by Independents board of directors out of funds legally available for that purpose and subject to regulatory restrictions. No dividends payable in the future have been declared by Independents board of directors.
Independents dividend policy may change with respect to the payment of dividends as a return on investment, and Independents board of directors may change or eliminate the payment of future dividends at its discretion, without notice to Independents shareholders. There can be no assurance that Independent will continue to pay dividends in the future. Future dividends on Independent common stock will depend upon its earnings and financial condition, liquidity and capital requirements, the general economic and regulatory climate, Independents ability to service any equity or debt obligations senior to the common stock and other factors deemed relevant by the board of directors of Independent.
Dividend Restrictions; Source of Strength
Under the terms of its junior subordinated debentures issued in connection with the issuance of trust preferred securities by subsidiaries of Independent, Independent is not permitted to pay any dividends on its common stock if it is in default on any payments required to be made on the junior subordinated debentures.
Independent is regarded as a legal entity separate and distinct from Independent Bank. The principal source of Independents revenues is dividends received from Independent Bank. Texas state law places limitations on the amount that state banks may pay in dividends, which Independent Bank must adhere to when paying dividends to Independent. The Federal Reserve has issued a policy statement that provides that a bank holding company should not pay dividends unless (a) its net income over the last four quarters (net of dividends paid) has been sufficient to fully fund the dividends, (b) the prospective rate of earnings retention appears to be consistent
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with the capital needs, asset quality and overall financial condition of the bank holding company and its subsidiaries and (c) the bank holding company will continue to meet minimum required capital adequacy ratios. Accordingly, Independent should not pay cash dividends that exceed its net income in any year or that can only be funded in ways that weaken its financial strength, including by borrowing money to pay dividends. Regulatory authorities could impose administratively stricter limitations on the ability of Independent Bank to pay dividends to Independent if such limits were deemed appropriate to preserve certain capital adequacy requirements.
Under Federal Reserve policy, bank holding companies have historically been required to act as a source of financial and managerial strength to each of its banking subsidiaries, and the Dodd-Frank Wall Street Reform and Consumer Protection Act codified this policy as a statutory requirement. Under this requirement, Independent is expected to commit resources to support Independent Bank, including at times when Independent may not be in a financial position to provide such resources. Any capital loans by a bank holding company to any of its subsidiary banks are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary banks. A bank holding company, in certain circumstances, could be required to guarantee the capital restoration plan of an undercapitalized banking subsidiary.
Dividends paid by Independent Bank have provided a substantial part of Independents operating funds, and for the foreseeable future, it is anticipated that dividends paid by Independent Bank to Independent will continue to be Independents principal source of operating funds. However, capital adequacy requirements serve to limit the amount of dividends that may be paid by Independent Bank. Under federal law, Independent Bank cannot pay a dividend if, after paying the dividend, it would be undercapitalized. The FDIC may declare a dividend payment to be unsafe and unsound even though Independent Bank would continue to meet its capital requirements after payment of the dividend.
Additionally, under the credit agreement between Independent and U.S. Bank National Association, or U.S. Bank, Independent cannot make any dividend payments without the prior written consent of U.S. Bank; provided, however, that, so long as no default under the credit agreement has occurred and is continuing, or will occur as a result of any such dividend, Independent may pay dividends and distributions to its shareholders as permitted by applicable governmental laws and regulations.
Recent Developments
On January 25, 2017, Independent announced its results of operations for the fourth quarter and year ended December 31, 2016. Independent had net income available to common shareholders of $14.8 million, or $0.79 per diluted share, for the quarter and of $53.5 million, or $2.88 per diluted share, for the year. Its net interest income was $46.5 million for the quarter and $183.8 million for 2016, its net interest margin was 3.59% for the quarter and 3.81% for 2016 and its yield on interest-earning assets was 4.16% for the quarter and 4.36% for the year. The total noninterest expenses of Independent were $27.4 million for the quarter and $113.8 million for the year. Independent had a provision for loan losses of $2.2 million for the quarter and $9.4 million for the year. At December 31, 2016, its allowance for loan losses totaled $31.6 million and total nonperforming assets were $19.8 million. Independents nonperforming assets to total assets ratio was 0.34% at the end of 2016. At December 31, 2016, Independent had loans held for investment, net allowance for loan losses, of $4.5 billion, total assets of $5.9 billion, total deposits of $4.6 billion, total interest-bearing deposits of $3.5 billion, and total liabilities of $5.2 billion. At December 31, 2016, Independents Tier 1 common equity was $409.6 million, its estimated Tier 1 common equity to risk-weighted assets ratio was 8.2% and its book value was $35.63 per common share.
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An investment by Carliles shareholders in Independent common stock as a result of the exchange of shares of Independent common stock for shares of Carlile common stock in the merger involves certain risks. Similarly, a decision on the part of Independent shareholders to approve the merger and the issuance of shares of Independent common stock in connection with that merger also involves risks for the shareholders of Independent, who will continue to hold their shares of Independent common stock after the merger. Certain material risks and uncertainties connected with the merger and ownership of Independent common stock are discussed below. In addition, Independent discusses certain other material risks connected with the ownership of Independent common stock and with Independents business under the caption Risk Factors appearing in Independents Annual Report on Form 10-K most recently filed with the SEC and may include additional or updated disclosures of such material risks in its Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that it files with the Commission after the date of this joint proxy statement/prospectus, each of which reports is or will be incorporated by reference in this joint proxy statement/prospectus.
Holders of Carlile voting common stock and holders of Independent common stock should carefully read and consider all of these risks and all other information contained in this joint proxy statement/prospectus, including the discussions of risk factors included in the documents incorporated by reference in this joint proxy statement/prospectus, in deciding whether to vote for approval of the various proposals for which they may vote at the special meeting of the Carlile shareholders or the special meeting of the Independent shareholder described herein. If any of the risks described in this joint proxy statement/prospectus or those documents incorporated by reference herein result in effects on Independent or Independent Bank, the value of Independent common stock that you, as an existing Independent shareholder, currently hold or that you, as an existing Carlile shareholder, would hold upon consummation of the merger could decline significantly, and the current holders of Independent common stock and/or the holders of Carlile common stock could lose all or part of their respective investments in the Independent common stock.
The merger of Independent and Carlile may not be completed.
Completion of the merger of Independent and Carlile is subject to regulatory approval, which approval may not be obtained. If Independent is not successful in obtaining the required regulatory approval, the merger will not be completed. Even if such regulatory approval is received, the timing of that regulatory approval and any conditions imposed by the regulatory approval could result in certain closing conditions of the merger not being satisfied.
The shareholders of Independent and Carlile should bear in mind that regulatory approval reflects only the view that the merger does not contravene applicable competitive standards imposed by law, and that the merger is consistent with regulatory policies relating to safety and soundness. Further, regulatory approval is not an opinion that the proposed merger is favorable to the shareholders of either party to the merger from a financial point of view or that the regulatory authority granting such approval has considered the adequacy of the terms of the merger. Regulatory approval is not an endorsement or recommendation of the merger.
The consummation of the merger is also subject to other conditions precedent as set forth in the reorganization agreement. Those conditions precedent include the approval of the merger by Independents shareholders and the holders of Carliles voting common stock, Carlile having minimum adjusted tangible equity capital (as calculated in accordance with the reorganization agreement) of $195 million, Northstar Bank maintaining a minimum allowance for loan losses of approximately $16 million, there being no material adverse change in the condition of Carlile or Northstar Bank, on the one hand, or Independent, on the other hand, and the holders of not more than 5% of the outstanding shares of Carliles common stock exercising their statutory dissenters rights with respect to the merger. If a condition to either partys obligation to consummate the merger is not satisfied, that party may be able to terminate the reorganization agreement and, in such case, the transaction would not be consummated.
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Carlile and Northstar Bank will be subject to business uncertainties and contractual restrictions while the merger is pending.
Uncertainty about the effect of the merger on employees and customers may have an adverse effect on Carlile and Northstar Bank and, consequently, on Independent and Independent Bank. Uncertainties surrounding the merger may impair the ability of one or more of Independent, Independent Bank, Carlile and Northstar Bank to attract, retain and motivate key personnel until the merger is completed, and could cause customers and others that deal with either of the banks to seek to change their existing business relationships with such bank. In addition, the reorganization agreement restricts Carlile and Northstar Bank from taking other specified actions until the merger occurs without Independents consent. These restrictions may prevent Carlile or Northstar Bank from pursuing attractive business opportunities that may arise prior to the mergers completion.
Integrating Northstar Bank into Independent Banks operations may be more difficult, costly or time-consuming than Independent expects.
Independent Bank and Northstar Bank have operated and, until the merger is completed, will continue to operate, independently. Accordingly, the process of integrating Northstar Banks operations into Independent Banks operations could result in the disruption of operations, the loss of Northstar Bank customers and employees and make it more difficult to achieve the intended benefits of the merger. Inconsistencies between the standards, controls, procedures and policies of Independent Bank and those of Northstar Bank could adversely affect Independent Banks ability to maintain relationships with current customers and employees of Northstar Bank if and when the merger is completed.
As with any merger of banking institutions, business disruptions may occur that may cause Independent Bank to lose customers or may cause Northstar Banks customers to withdraw their deposits from Northstar Bank prior to the mergers consummation and from Independent Bank thereafter. The realization of the anticipated benefits of the merger may depend in large part on Independents ability to integrate Northstar Banks operations into Independent Banks operations, and to address differences in business models and cultures. If Independent is unable to integrate the operations of Carlile and Northstar Bank into Independents and Independent Banks operations successfully and on a timely basis, some or all of the expected benefits of the merger may not be realized. Difficulties encountered with respect to such matters could result in an adverse effect on the financial condition, results of operations, capital, liquidity or cash flows of Independent Bank and Independent.
Independent is entering the Fort Worth/Tarrant County and Colorado financial markets for the first time and Independents failure to achieve the post-merger results it desires in those markets could materially adversely affect its operations, results of operations, liquidity or cash flows.
Upon the consummation of Independents merger with Carlile and the merger of Northstar Bank into Independent Bank, Independent would be entering the Fort Worth/Tarrant County and Colorado financial markets for the first time. Independent has no experience with operations in those markets, and, as a result, would initially rely on the management team at Northstar Bank to provide guidance regarding operating in those new geographic markets. Should Independent be unable to retain the services of these employees after the mergers or should those employees be unable to provide the necessary support and guidance to Independent necessary for it to operate successfully in the new market, Independent may not achieve the results it desires from the merger and may be unable to realize all planned operating efficiencies as a result of the merger of Independent Banks and Northstar Banks operations. Moreover, to the extent that operating in either of those markets presents difficulties that Independent has not anticipated or does not anticipate in planning for the integration of the operations of Northstar Bank into those of Independent Bank, that integration may be more difficult, costly or time-consuming than Independent anticipates the integration to be and could require that Independent devote more management time and more resources to that integration than now expected. To the extent Independent is unable to successfully integrate the Northstar Bank operations in the Fort Worth/Tarrant County and Colorado markets into Independents operations, Independent may be unable to retain the current customers of Northstar Bank in those
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new markets, their deposits and their other banking business to the degree now expected and the anticipated benefits of the acquisition of Carlile to Independent and its shareholders would not be as substantial as anticipated. Any unsuccessful or materially inadequate integration of those operations could materially adversely affect Independents financial condition, results of operations, liquidity and cash flows.
Independent may fail to realize the cost savings anticipated from the merger.
Although Independent anticipates that it would realize certain cost savings as to the operations of Carlile and Northstar Bank and otherwise from the merger if and when the operations of Carlile and Northstar Bank are fully integrated into Independents and Independent Banks operations, it is possible that Independent may not realize all of the cost savings that Independent has estimated it can realize from the merger. For example, for a variety of reasons, Independent may be required to continue to operate or maintain some facilities or support functions that are currently expected to be combined or reduced as a result of the merger. Independents realization of the estimated cost savings also will depend on Independents ability to combine the operations of Independent and Independent Bank with the operations of Carlile and Northstar Bank in a manner that permits those costs savings to be realized. If Independent is not able to integrate the operations of Carlile and Northstar Bank into Independents and Independent Banks operations successfully and to reduce the combined costs of conducting the integration operations of the two banks, the anticipated cost savings may not be fully realized, if at all, or may take longer to realize than expected. Independents failure to realize those cost savings could materially adversely affect Independents financial condition, results of operations, capital, liquidity or cash flows.
The completion of Independents merger with Carlile would result in the immediate dilution of Independents existing shareholders ownership percentages in Independents common stock and their voting power, which could adversely affect the market for Independents common stock.
The merger of Carlile with and into Independent would result in the issuance of a substantial number of additional shares of Independents common stock. That issuance would result in the immediate dilution of the percentage ownership and voting power of the existing holders of Independents common stock. Although Independent believes that the merger will be accretive to all of Independents shareholders, factors associated with the consummation of the merger of Carlile with and into Independent, such as those discussed above, could adversely affect the market for Independents common stock.
The fairness opinions obtained by the board of directors of each of Carlile and Independent from their financial advisors in connection with their companys entry into the reorganization agreement will not reflect changes in circumstances subsequent to the date of the fairness opinion.
Sandler ONeill, Carliles financial advisor in connection with the proposed merger, and Stephens, Independents financial advisor in connection with the proposed merger, have delivered to the respective boards of directors of Carlile and Independent their opinions on November 21, 2016. The opinions of the financial advisors, which are based upon and subject to the factors and assumptions set forth therein, speak only as of such dates and are necessarily based on economic, market, regulatory and other conditions as in effect on, and the information made available to the financial advisors, as of the date of those opinions. Events occurring after the date of the opinions could materially affect the factors used in preparing the opinions and result in actual results differing materially from such assumptions. As a result, a conclusion similar to that of each opinion might not be reached considering the subsequent events. Any such events, or other factors on which the opinions are based, may materially alter or affect the relative values of Independent and Carlile.
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Risks Related to Carlile Shareholders Interests if the Merger is Consummated
The adjusted tangible equity of Carlile could be an amount that results in a reduction in the Carlile Share Exchange Ratio and that could affect Independents obligation to consummate the merger.
The Carlile Share Exchange Ratio, which will determine fraction of a share of Independent common stock to be issued in exchange for each outstanding share of Carlile common stock upon consummation of the merger, will be reduced if Carliles adjusted tangible equity, as calculated pursuant to the reorganization agreement, is less than $200 million as of the tangible equity determination date. If, on the fifth business day prior to the closing date of the merger, Carliles adjusted tangible equity is less than $200 million, the $434 million agreed amount used in the calculation of the Carlile Share Exchange Ratio and, therefore, the fraction of a share of Independent common stock for which an outstanding share of Carlile common stock will be exchanged in the merger, will be reduced dollar for dollar by the difference between (x) $200 million minus (y) Carliles adjusted tangible equity as of the tangible equity determination date. Moreover, Independents obligation to consummate the merger is conditioned upon Carlile having adjusted tangible equity, as calculated pursuant to the reorganization agreement and as described herein, of at least $195 million as of the closing date. For a more detailed explanation of how the adjusted tangible equity of Carlile will be calculated, please see The MergerPossible Downward Adjustment in the $434 Million Agreed Amount to be Used in the Calculation of the Carlile Share Exchange Ratio, beginning on page 78.
Independent could elect to complete the merger transaction even if the Carlile adjusted tangible equity is less than $195 million on the fifth business day prior to the closing of the merger.
In the event that Carlile does not have adjusted tangible equity equal to or greater than $195 million on the fifth business day prior to the closing of the merger, Independent has the right to elect either to terminate the transaction without completing the merger or completing the merger regardless of Carliles adjusted tangible equity at that time. Carlile does not have the right to terminate the merger in the event the amount of its adjusted tangible equity is below $195 million under the terms of the reorganization agreement at that time. The result is that once the holders of Carlile common stock have approved the reorganization agreement and the merger, Independent can require Carlile to complete the merger even if Carlile adjusted tangible equity is below $195 million, in which case the number of shares of Independent common stock to be issued in conversion of the outstanding shares of Carlile common stock upon the consummation of the merger could be significantly reduced.
Neither Independent nor Carlile intends to resolicit proxies from their shareholders in the event that Carliles adjusted tangible equity is less than $195 million on the closing date.
If the Carlile adjusted tangible equity is below $195 million, Independents board of directors intends to exercise its independent judgment in determining whether to complete the merger or to terminate the reorganization agreement. Independent will not resolicit proxies from the holders of Independent common stock, some of whom may not have approved the reorganization agreement and the merger if they had known, at the time of the Independent special meeting, that the Carlile adjusted tangible equity would be less than $195 million prior to the mergers completion.
Carlile does not have a corresponding contractual right to choose not to complete the merger should its adjusted tangible equity fall below $195 million, even though such an event will result in the reduction in the number of shares of Independent common stock for which the outstanding shares of Carlile common stock will be exchanged in the merger, which reduction could be by a substantial number of shares. In such event, the decision whether to complete the merger will rest solely with Independent. Without the right to decline to complete the merger, there would be no practical advantage for Carlile to resolicit proxies from its shareholders under these circumstances. In determining whether to approve the reorganization agreement and the merger, the holders of Carlile common stock should consider that each of their shares of Carlile common stock will be converted into a smaller fraction of a share of Independent common stock in the merger if the Carlile adjusted tangible equity is less than $195 million at the time of the closing of the merger.
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Carlile shareholders will not know the exact fraction of a share of Independent common stock they will receive for each share of Carlile common stock they own when they vote on approving the reorganization agreement and the merger.
For reasons discussed above and because the fraction of a share of Independent common stock for which a share of Carlile common stock will be exchanged at the closing of the merger will depend in part on the Average Stock Price, when the Carlile shareholders vote on approving the reorganization agreement and the merger of Carlile with and into Independent, they will not know the exact fraction of a share of Independent common stock for which each of their outstanding shares of Carlile common stock will be exchanged in the merger and the exact number of shares of Independent common stock they will receive in the merger as consideration for their shares of Carlile common stock and must make their decision regarding how to vote with respect to the approval of the reorganization agreement and the merger without that information.
The value of the shares of Independent common stock to be received by the Carlile shareholders in the merger is dependent upon the market price of Independents common stock, which is subject to fluctuation and may decline over time thus reducing the economic benefits to be received by holders of Carlile common stock upon completion of the merger.
In instances in this joint proxy statement/prospectus, Independent has valued the Independent common stock to be issued in the merger to the holders of Carlile common stock based on the closing price of Independents common stock as of February 16, 2017, which was $66.70 a share. However, the value of each share of Independent common stock is subject to fluctuations in the marketplace, resulting in the possibility that its value could decrease between the date of this joint proxy statement/prospectus and the date of the Carlile special meeting when holders of Carlile common stock will be asked to approve the reorganization agreement and the merger, as well as between the date of that special meeting and the date of the closing of the merger. If the reorganization agreement and the merger are approved at the Carlile special meeting, there is the possibility that the value of the Independent common stock could decline materially prior to the issuance of the Independent common stock to the holders of Carlile common stock upon the completion of the merger and thereafter.
Carlile shareholders will have a reduced ownership and voting interest in Independent after the merger than they now have in Carlile and will exercise less influence over Independents management than they now exercise over Carliles management.
Carliles shareholders currently have the right to vote in the election of the board of directors of Carlile and on other matters affecting Carlile. The merger will transfer control of the operations of Carlile to Independent and to the shareholders of Independent. When the merger occurs, each Carlile shareholder will become a shareholder of Independent with a percentage ownership of Independent much smaller than such shareholders percentage ownership of Carlile immediately prior to the merger. Because of this occurrence, Carlile shareholders will have less influence on the management and policies of Independent than they now have on the management and policies of Carlile.
The shares of Independent common stock to be received by Carlile shareholders as a result of the merger will have different rights than the shares of Carlile common stock and in some cases may be less favorable.
The rights associated with Carlile voting common stock and with the Carlile nonvoting common stock are different from the rights associated with Independent common stock. In some cases, the rights associated with the Independent common stock may be less favorable to shareholders than those associated with the Carlile voting common stock or the Carlile nonvoting common stock. For example, holders of Carlile voting common stock currently elect each member of their board of directors at each annual meeting of the Carlile shareholders. Upon consummation of the merger, the holders of Carlile common stock will hold Independent common stock that provides that the members of only one of three classes of directors are elected at each annual meeting of Independent shareholders, which could have an anti-takeover effect and may delay, discourage or prevent an
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attempted acquisition or change in control of Independent. See Comparison of Rights of Shareholders of Carlile and Independent on page 227 for a more detailed description of the shareholder rights of each of Independent and Carlile.
The dissenters rights appraisal process relating to shares of the Carlile voting common stock is uncertain.
Holders of Carlile voting common stock may or may not be entitled to receive more than the amount provided for in the reorganization agreement for their shares of Carlile voting common stock if they elect to exercise their right to dissent from the proposed merger, depending on the appraisal of the fair value of the Carlile voting common stock pursuant to the dissenting shareholder procedures under the TBOC. See The MergerDissenters Rights of Carlile Shareholders on page 130 and Appendix D. For this reason, the amount of cash that such shareholders might be entitled to receive should they elect to exercise their right to dissent to the merger may be more or less than the value of the merger consideration to be paid pursuant to the reorganization agreement. In addition, it is a condition in the reorganization agreement that the holders of not more than 5% of the outstanding shares of Carlile common stock shall have exercised their statutory dissenters rights under the TBOC. The number of shares of Carlile common stock for which holders will exercise dissenters rights under the TBOC is not known and therefore there is no assurance of this closing condition being satisfied.
The holders of a significant number of shares of Carlile voting common stock have agreed to vote to approve the reorganization agreement.
The directors of Carlile and certain entities they represent have entered into a voting and lockup agreement with Independent pursuant to which they have agreed to vote the shares of Carlile voting common stock they own to approve the reorganization agreement. Those persons own an aggregate of 17,069,700 shares of Carlile voting common stock, or 62.2% of the 27,452,367 shares of Carlile voting common stock that were outstanding on the date of this joint proxy statement/prospectus. If no other shares of Carlile voting common stock were to be outstanding on the record date for the Carlile special meeting, the holders of only an additional 1,456,528 shares or 5.3% of the Carlile voting common stock would have to vote to approve the reorganization agreement in order for the merger of Carlile with and into Independent to be approved by the Carlile shareholders. In the circumstances, only a small percentage of the Carlile shareholders who are not affiliates of Carlile need to vote to approve the reorganization agreement in order for the reorganization agreement and, thus, the merger to be approved. Consequently, management of Carlile believes that it is highly likely that the reorganization agreement will be approved by the Carlile shareholders.
Some of the directors and officers of Carlile may have interests and arrangements that may have influenced their decisions to support or recommend that you approve the reorganization agreement.
The interests of some of the directors and officers of Carlile may be different from those of Carlile shareholders. The directors and certain officers of Carlile are or will be participants in arrangements relating to, or that are affected by the merger that are different from, or in addition to, those of Carlile shareholders including, without limitation, their receipt of change in control payments, in connection with the merger. These interests are described in more detail in the section of this joint proxy statement/prospectus entitled The MergerFinancial Interests of Directors and Officers of Carlile in the Merger beginning on page 123. Further, directors of Carlile and certain entities they represent have entered into an agreement to vote the shares of Carlile voting common stock that they control in favor of approval of the reorganization agreement and the merger and in the manner most favorable to the consummation of the merger and the transactions contemplated by the reorganization agreement, or voting and lockup agreement; provided, however, that the Carlile shareholders who entered into the voting and lockup agreement would be permitted to vote to accept a superior proposal to acquire Carlile (as defined in the reorganization agreement). As of the Carlile record date, 17,069,700 shares of Carlile voting common stock, or 62.2% of the 27,452,367 shares of Carlile voting common stock then outstanding and entitled to vote at the Carlile special meeting, were bound by the voting and lockup agreement.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this joint proxy statement/prospectus that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties and are made pursuant to the safe harbor provisions of Section 27A of the Securities Act. These forward-looking statements include information about possible or assumed future results of operations of Independent after the merger is completed as well as information about the merger, including Independents future revenues, income, expenses, provision for taxes, effective tax rate, earnings per share and cash flows, Independents future capital expenditures and dividends, Independents future financial condition and changes therein, including changes in Independents loan portfolio and allowance for loan losses, Independents future capital structure or changes therein, the plan and objectives of management for future operations, Independents future or proposed acquisitions, the future or expected effect of acquisitions on Independents operations, results of operations and financial condition, Independents future economic performance and the statements of the assumptions underlying any such statement. Such statements are typically, but not exclusively, identified by the use in the statements of words or phrases such as aim, anticipate, estimate, expect, goal, guidance, intend, is anticipated, is estimated, is expected, is intended, objective, plan, projected, projection, will affect, will be, will continue, will decrease, will grow, will impact, will increase, will incur, will reduce, will remain, will result, would be, variations of such words or phrases (including where the word could, may or would is used rather than the word will in a phrase) and similar words and phrases indicating that the statement addresses some future result, occurrence, plan or objective. The forward-looking statements that Independent make are based on Independents current expectations and assumptions regarding its business, the economy, and other future conditions. Because forward-looking statements relate to future results and occurrences, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. Many possible events or factors could affect the future financial results and performance of each of Independent and Carlile before the merger or Independent after the merger, and could cause those results or performance to differ materially from those expressed in the forward-looking statements. These possible events or factors include, but are not limited to:
| Independents ability continue to sustain its current internal growth rate or total growth rate or total growth rate; |
| changes in geo-political, business and economic events, occurrences and conditions, including changes in rates of inflation or deflation, nationally, regionally and in Independents target markets, particularly in Texas and, if the merger is consummated, Colorado; |
| Independents dependence on its management team, including its Chief Executive Officer, David R. Brooks, and Independents ability to attract, motivate and retain qualified personnel; |
| the concentration of business within the geographic areas of operation in Texas and, if the merger is consummated, Colorado; |
| changes in the asset quality and higher levels of nonperforming loans and loan charge-offs; |
| deposit attrition, changes in operating costs, customer loss and business disruption before and after Independents acquisition of other financial institutions by Independent if it is consummated, as well as other acquisitions by Independent, including difficulties in maintaining relationships with employees; |
| the effects of the combination of the operations of financial institutions Independent acquires with the operations of Independent and the operations of Independent Bank, the effects of the integration of such operations being unsuccessful, and the effects of such integration being more difficult, time-consuming or costly than expected or not yielding the cost savings Independent expects; |
| the quality of the assets of financial institutions and companies that Independent acquires being different than Independent determine in our due diligence investigation in connection with the acquisition of such financial institutions and any inadequacy of loan loss reserves relating to, and exposure to unrecoverable losses on, loans acquired; |
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| concentration of the loan portfolio of Independent, before and after the completion of its acquisition of financial institutions, including Carlile and Northstar Bank, in commercial and residential real estate loans and changes in the prices, values and sales volumes of commercial and residential real estate; |
| concentration of the loan portfolio of Independent Bank, before and after the completion of Independents acquisition of financial institutions, in commercial and residential real estate loans and changes in the prices, values and sales volumes of commercial and residential real estate; |
| the ability of Independent Bank to make loans with acceptable net interest margins and levels of risk of repayment and to otherwise invest in assets at acceptable yields and presenting acceptable investment risks; |
| inaccuracy of the assumptions and estimates that the managements of Independent and financial institutions that Independent acquires make in establishing reserves for probable loan losses and other estimates; |
| the liquidity of, and changes in the amounts and sources of liquidity available to, Independent, before and after its acquisition of any financial institutions that it acquires; |
| material increases or decreases in the amount of deposits held by Independent Bank or other financial institutions that Independent acquires; |
| regulatory requirements to maintain higher minimum capital levels; |
| Independents access to the debt and equity markets and its overall cost of funding its operations; |
| changes in market interest rates that affect the pricing of the loans and deposits of each of Independent Bank and the financial institutions that Independent acquires and the net interest income of each of Independent Bank and the financial institutions that Independent acquires; |
| changes in the cost of deposits to Independent Bank; |
| fluctuations in the market value and liquidity of the securities each of Independent Bank; |
| the development of products and services that appeal to Independents customers and consumer demand in general for Independent Banks products and services; |
| effects of competition from a wide variety of local, regional, national and other providers of financial, investment and insurance services; |
| changes in economic and market conditions that affect the amount and value of the assets of Independent Bank and financial institutions it acquires; |
| the institution and outcome of, and costs associated with, litigation and other legal proceedings against one or more of Independent, Independent Bank, and financial institutions it acquires or to which any of such entities is subject; |
| the failure of Carliles or Independents shareholders to approve the reorganization agreement; |
| the ability of Independent and Carlile to obtain the required regulatory approvals of the merger and the bank merger on the proposed terms and schedule; |
| the ability of Independent to continue to identify acquisition targets and successfully acquire desirable financial institutions to sustain its growth, to expand its presence in its markets and to enter new markets; |
| the occurrence of market conditions adversely affecting the financial industry generally; |
| the impact of recent and future legislative and regulatory changes, including changes in banking, securities and tax laws and regulations and their application by regulators, and changes in federal governmental policies, including as a result of initiatives of the administration of President Donald J. Trump; |
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| changes in accounting policies, practices and auditing standards adopted by regulatory agencies, the Financial Accounting Standards Board, the SEC and Public Company Accounting Oversight Board, as the case may be; |
| governmental monetary and fiscal policies; |
| changes in the scope and cost of FDIC insurance and other coverage; |
| the effects of war or other conflicts, acts of terrorism (including cyber-attacks) or other catastrophic events, including storms, droughts, tornadoes and flooding, that may affect general economic conditions; |
| an increase in the rate of personal or commercial customer bankruptcies; |
| technology-related changes are harder to make or are more expensive than expected; |
| attacks on the security of, and breaches of, Independent or Independent Banks digital information systems the costs Independent or Independent Bank incurs to provide security against such attacks and any costs and liability Independent or Independent Bank incurs in connection with any breach of those systems; and |
| the other factors that are described or referenced above under the caption Risk Factors and in Part I, Item 1A. of Independents most recently filed Annual Report on Form 10-K under the caption Risk Factors. |
For other factors, risks and uncertainties that could cause actual results to differ materially from estimates contained in forward-looking statements, please read the Risk Factors section of this joint proxy statement/prospectus.
Independent and Carlile urge you to consider all of these risks, uncertainties and other factors carefully in evaluating all such forward-looking statements made in this joint proxy statement/prospectus. As a result of these and other matters, including changes in facts, assumptions not being realized or other factors, the actual results relating to the subject matter of any forward-looking statement may differ materially from the anticipated results expressed or implied in that forward-looking statement. Any forward-looking statement made in this joint proxy statement/prospectus or made by Independent in any report, filing, document or information incorporated by reference in this joint proxy statement/prospectus, speaks only as of the date on which it is made. Neither Independent nor Carlile undertakes any obligation to update any such forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. We believe that these assumptions or bases have been chosen in good faith and that they are reasonable. However, we caution you that assumptions as to future occurrences or results almost always vary from actual future occurrences or results, and the differences between assumptions and actual occurrences and results can be material. Therefore, we caution you not to place undue reliance on the forward-looking statements contained in this proxy statement/prospectus or incorporated by reference herein.
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This document constitutes a joint proxy statement/prospectus of Carlile and Independent and is being furnished to all record holders of Carlile common stock on the record date and all record holders of Independent common stock on the record date in connection with the solicitation of proxies by the boards of directors of Carlile and Independent to be used at the special meetings of shareholders of Carlile and Independent, each to be held on March 30, 2017.
One of the purposes of the special meetings is to consider and vote to approve the reorganization agreement, which provides for, among other things, the merger of Carlile with and into Independent, with Independent being the surviving entity, followed by the merger of Northstar Bank with and into Independent Bank, with Independent Bank being the surviving bank. This document also constitutes a prospectus relating to the offer and sale of Independent common stock to be issued in connection with the merger to holders of Carlile common stock (including holders of stock options to purchase Carlile common stock that are exercised prior to the consummation of the merger).
Independent has supplied all of the information contained herein relating to Independent and Independent Bank, and Carlile has supplied all of the information contained herein relating to Carlile and Northstar Bank.
THE INDEPENDENT SPECIAL MEETING
This joint proxy statement/prospectus is being provided to the Independent shareholders as part of a solicitation of proxies by the Independent board of directors for use at the Independent special meeting to be held at the time and place specified below and at any properly convened meeting following an adjournment thereof. This joint proxy statement/prospectus provides Independent shareholders with information they need to know to be able to vote or instruct their vote to be cast at the Independent special meeting.
Date, Time and Place
The special meeting of Independent shareholders will be held on March 30, 2017, at 3:30 p.m. Central Time, at the branch office of Independent Bank, 1600 Redbud Boulevard, Suite 100, McKinney, Texas 75069-3257.
Purpose of the Independent Special Meeting
At the Independent special meeting, Independent shareholders will be asked to consider and vote on the following:
Independent Proposal One: to approve the reorganization agreement and the merger;
Independent Proposal Two: to approve the issuance of shares of Independent common stock to Carlile shareholders in connection with the merger that will in number and voting power exceed 20% of the number and voting power of the shares of Independent common stock outstanding immediately prior to the issuance of such new shares;
Independent Proposal Three: to elect each of the following three named director nominees, whose directorships will only become effective upon consummation of the merger, and whose business experience and qualifications are further described in the section entitled Independent Proposal ThreeElection of DirectorsElection of Named Director Nominees beginning on page 135, to fill the three vacancies on the Independent board of directors:
| Tom C. Nichols, to serve as a Class I director for a term that will expire at the annual meeting of shareholders to be held in 2017; |
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| Mark K. Gormley, to serve as a Class II director for a term that will expire at the annual meeting of shareholders to be held in 2018; and |
| Christopher M. Doody, to serve as a Class III director for a term that will expire at the annual meeting of shareholders to be held in 2019. |
Independent Proposal Four: to approve the adjournment of the Independent special meeting to a later date or dates, if the board of directors of Independent determines it is necessary to permit solicitation of additional proxies if there are not sufficient votes at the time of the Independent special meeting to approve the first three proposals listed above.
Completion of the merger is conditioned on, among other things, the approval of the reorganization agreement and the merger, approval of the issuance of shares of Independent common stock to Carlile shareholders in connection with the merger and the election of the named director nominees to fill the vacancies on the Independent board of directors.
Recommendation of the Independent Board of Directors
On January 19, 2017, Independents Corporate Governance and Nominating Committee recommended Tom C. Nichols, Mark K. Gormley and Christopher M. Doody as nominees to fill the vacancies on the Independent board of directors. On January 19, 2017, the Independent board of directors nominated each of Messrs. Nichols, Gormley and Doody, as nominees for election by the Independent shareholders at the Independent special meeting to fill the vacancies on the Independent board of directors, whose directorships will only become effective upon the consummation of the merger and proposed each of these nominees for election.
At a special meeting held on November 21, 2016, the Independent board of directors unanimously determined that the merger and the other transactions contemplated by the reorganization agreement, including the issuance of shares of Independent common stock to Carlile shareholders in connection with the merger, are in the best interests of Independent and its shareholders.
Accordingly, the Independent board of directors unanimously recommends that Independent shareholders vote as follows:
FOR Independent Proposal One approving the reorganization agreement and the merger;
FOR Independent Proposal Two approving the issuance of shares of Independent common stock to Carlile shareholders in connection with the merger that will exceed in number and voting power 20% of the number and voting power of the shares of Independent common stock outstanding immediately prior to the issuance of such new shares;
FOR Independent Proposal Three electing each of the named director nominees, whose directorships will only become effective upon consummation of the merger, to fill the three vacancies on the Independent board of directors; and
FOR Independent Proposal Four approving the adjournment of the Independent special meeting, if necessary, to permit solicitation of additional proxies.
Independent shareholders should carefully read this joint proxy statement/prospectus, including any documents incorporated by reference, and the Appendices in their entirety, for more detailed information concerning the merger and the transactions contemplated by the reorganization agreement.
Independent Record Date; Shareholders Entitled to Vote
The record date for the Independent special meeting is February 21, 2017, or the Independent record date. Only record holders of shares of Independent common stock at 5:00 p.m. Central Time, or the close of business,
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on the Independent record date are entitled to notice of, and to vote at, the Independent special meeting or any adjournment thereof. At the close of business on the Independent record date, the only outstanding voting securities of Independent were shares of common stock, and 18,919,598 shares of Independent common stock were issued and outstanding.
Each share of Independent common stock outstanding on the Independent record date is entitled to one vote on each proposal.
Voting by Independents Directors and Executive Officers and a Significant Shareholder of Independent
At the close of business on the record date for the Independent special meeting, Independent directors and executive officers and their respective affiliates were entitled to vote 1,933,332 shares of Independent common stock or approximately 10.2% of the shares of Independent common stock outstanding on that date. In addition, Mr. Vincent J. Viola, who is the largest shareholder of Independent and the father of Mr. Michael T. Viola, a director of Independent, owned 4,538,383 shares of Independent common stock, or approximately 23.9% of the shares of Independent common stock outstanding, as of the close of business on the record date for the Independent special meeting. We currently expect that Independent directors and executive officers and their affiliates, as well as Mr. Vincent J. Viola, will vote their shares in favor of all of the Independent proposals.
Quorum and Adjournment
No business may be transacted at the Independent special meeting unless a quorum is present. Shareholders who hold shares representing at least a majority of the shares outstanding and entitled to vote at the Independent special meeting must be present in person or represented by proxy to constitute a quorum, but the holders of at least two-thirds of the shares of Independent common stock outstanding and entitled to vote at the Independent special meeting must be present, in person or by proxy, at the special meeting in order for the necessary vote to be able to take action on the merger proposal. Specifically, the affirmative vote of at least two-thirds of the outstanding Independent common stock is required to approve the reorganization agreement and the merger. As a result, if shares representing at least two-thirds of the shares of Independent common stock outstanding on the close of business on the Independent record date are not present at the Independent special meeting, the presence of a quorum will still not permit the merger to be approved at the Independent special meeting.
If a quorum is not present, or if fewer shares than are required to approve the reorganization agreement and the merger, the issuance of shares of Independent common stock in the merger or the election of the named director nominees as directors of Independent are voted in favor of the reorganization agreement and the merger, then the Independent special meeting may be adjourned to allow for the solicitation of additional proxies provided that such proposal to adjourn the Independent special meeting is approved by a majority vote of the votes cast at the Independent special meeting by the holders of shares of Independent common stock entitled to vote at the Independent special meeting and present in person or represented by proxy at that meeting.
No notice of an adjourned Independent meeting need be given unless the adjournment is for more than 30 days or after the adjournment, a new record date is fixed for the adjourned meeting, in which case a notice of the adjourned meeting shall be given to each Independent shareholder of record entitled to vote at the meeting. At any adjourned meeting, all proxies will be voted in the same manner as they would have been voted at the original convening of the special meeting, except for any proxies that have been effectively revoked or withdrawn prior to the adjourned meeting.
All shares of Independent common stock represented at the Independent special meeting, including shares that are represented but that vote to abstain and broker nonvotes, will be treated as present for purposes of determining the presence or absence of a quorum.
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Required Vote
The required votes to approve the Independent proposals are as follows:
Independent Proposal One approving the reorganization agreement and the merger requires the affirmative vote of at least two-thirds of the issued and outstanding shares of Independent common stock entitled to vote at the Independent special meeting. Failures to vote, broker nonvotes and abstentions will have the same effect as a vote against this proposal.
Independent Proposal Two approving of the issuance of the shares of Independent common stock to Carlile shareholders in connection with the merger that will, in number and voting power, exceed 20% of the number and voting power of the shares of Independent common stock outstanding immediately prior to such issuance requires the approval of a majority of the votes cast on this proposal at the Independent special meeting, assuming a quorum is present at the Independent special meeting. Failures to vote, broker nonvotes and abstentions will have no effect on the vote for the proposal.
Independent Proposal Three electing each of the named director nominees as directors of Independent, whose directorships will only become effective upon consummation of the merger, to fill the three vacancies on the Independent board of directors requires the approval of a plurality of the votes cast on this proposal at the Independent special meeting, assuming a quorum is present at the Independent special meeting. Failures to vote, broker nonvotes and abstentions will have no effect on the vote for the proposal.
Independent Proposal Four approving the adjournment of the Independent special meeting, if necessary, to permit solicitation of additional proxies requires the approval of a majority of the votes cast on this proposal at the Independent special meeting, regardless of whether or not there is a quorum present at the Independent special meeting. Failures to vote, broker nonvotes and abstentions will have no effect on the vote for the proposal.
Voting of Proxies by Holders of Record
If you were a record holder of Independent common stock at the close of business on the record date of the Independent special meeting, a proxy card is enclosed for your use. Independent requests that you vote your shares as promptly as possible by doing one of the following:
| simply indicate on the proxy card applicable to your Independent common stock how you want to vote and sign, date and mail your proxy card(s) in the enclosed pre-addressed, postage-paid envelope as soon as possible, but in any event no later than the time necessary for your proxy card to be actually received by Independent immediately prior to the vote at the Independent special meeting; |
| call 1 (866) 888-3382 using a touch-tone telephone and follow the instructions for telephone voting provided on the call; or |
| Go to the website www.proxypush.com/ibtx and follow the instructions at that website. |
Any proxy cards must be returned to Wells Fargo Shareowner Services as soon as possible, but in any event, no later than immediately prior to the vote at the Independent special meeting. Internet and telephone voting is available until 11:59 p.m. Central Time, on March 29, 2017.
When the accompanying proxy card is properly executed, dated and returned, the shares of Independent common stock represented by it will be voted at the Independent special meeting or any adjournment thereof in accordance with the instructions contained in the proxy card. Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner as if you had marked, signed and returned a proxy card.
If a proxy card is returned without an indication as to how the shares of Independent common stock represented are to be voted with regard to a particular proposal, the Independent common stock represented by
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the proxy will be voted in accordance with the recommendation of the Independent board of directors and, therefore such shares will be voted:
FOR Independent Proposal One approving the reorganization agreement and the merger;
FOR Independent Proposal Two approving the issuance of shares of Independent common stock to Carlile shareholders in connection with the merger that will, in number and voting power, exceed 20% of the number and voting power of the shares of Independent common stock outstanding immediately prior to such issuance;
FOR Independent Proposal Three electing each of the named director nominees as directors of Independent, whose directorships will only become effective upon consummation of the merger, to fill the vacant seats on the Independent board of directors; and
FOR Independent Proposal Four approving the adjournment of the Independent special meeting, if necessary, to permit solicitation of additional proxies.
As of the date hereof, the Independent board of directors has no knowledge of any business that will be presented for consideration at the Independent special meeting and that would be required to be set forth in this joint proxy statement/prospectus or the related proxy card other than the matters set forth in Independents Notice of Special Meeting of Shareholders.
No other matters can be brought up or voted on at the Independent special meeting.
Your vote is important. Accordingly, if you were a record holder of Independent common stock at the close of business on the record date of the Independent special meeting, please sign and return the enclosed proxy card or vote via the Internet or telephone whether or not you plan to attend the Independent special meeting in person. Proxies submitted through the specified Internet website or by phone must be received by 11:59 p.m. Central Time, on March 29, 2017.
Attending the Meeting; Voting in Person
Only record holders of Independent common stock on the record date, their duly appointed proxies and invited guests may attend the Independent special meeting. All attendees must present government-issued photo identification (such as a drivers license or passport) for admittance. The additional items, if any, that attendees must bring to gain admittance to the Independent special meeting depend on whether they are shareholders of record, beneficial owners, or proxy holders.
An Independent shareholder who holds shares directly registered in such shareholders name with Independents transfer agent, Wells Fargo Shareowner Services, and who desires to attend the Independent special meeting in person should bring government-issued photo identification.
A shareholder who holds shares in street name through a broker, bank, trustee or other nominee (referred to in this joint proxy statement/prospectus as a beneficial owner) who desires to attend the Independent special meeting in person must bring proof of beneficial ownership as of the record date, such as a letter from the broker, bank, trustee or other nominee that is the record owner of such beneficial owners shares or a brokerage account statement or the voting instruction form provided by the broker.
A person who holds a validly executed proxy entitling such person to vote on behalf of a record owner of Independent shares who desires to attend the Independent special meeting in person must bring the validly executed proxy naming such person as the proxy holder, signed by the Independent shareholder, and proof of the signing shareholders record ownership as of the record date.
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No cameras, recording equipment or other electronic devices will be allowed in the meeting room. Failure to provide the requested documents at the door or failure to comply with the procedures for the Independent special meeting may prevent Independent shareholders from being admitted to the Independent special meeting.
Revocation of Proxies
An Independent shareholder may revoke a previously provided proxy at any time before such time that the proxy card for any such holder of Independent common stock must be received in connection with the Independent special meeting by taking any of the following four actions:
| delivering written notice of revocation to Jan Webb, Corporate Secretary, Independent Bank Group, Inc., 1600 Redbud Boulevard, Suite 400, McKinney, Texas 75069; |
| delivering a proxy card bearing a later date than the proxy that such shareholder desires to revoke; |
| logging onto the Internet website specified on your proxy card in the same manner you would to submit your proxy electronically or by calling the telephone number specified on your proxy card, in each case if you are eligible to do so and following the instructions on the proxy card; or |
| attending the Independent special meeting and voting in person. |
Merely attending the Independent special meeting will not, by itself, revoke your proxy; you must cast a subsequent vote at the Independent special meeting by using a ballot provided at the Independent special meeting for that purpose. Your last valid vote that Independent receives before or at the Independent special meeting is the vote that will be counted.
If you hold your shares in street name through a bank or broker, you must contact such bank or broker if you desire to revoke your proxy.
Tabulation of Votes
Independent has appointed Wells Fargo Shareowner Services to serve as the Inspector of Election for the Independent special meeting. Wells Fargo Shareowner Services will independently tabulate affirmative votes, negative votes and abstentions.
Solicitation of Proxies
Independents board of directors is soliciting proxies for the Independent special meeting from the Independent shareholders. In accordance with the reorganization agreement, Independent will pay the costs it incurs in soliciting proxies from its shareholders, including the cost of mailing this joint proxy statement/prospectus. In addition to solicitation of proxies by mail, proxies may be solicited by Independents officers, directors and regular employees, without additional remuneration, by personal interview, telephone or other means of communication.
Independent will make arrangements with brokerage houses, custodians, nominees and fiduciaries to forward proxy solicitation materials to beneficial owners of Independent common stock. Independent may reimburse these brokerage houses, custodians, nominees and fiduciaries for their reasonable expenses incurred in forwarding the proxy materials.
Abstentions and shares held of record by a broker or nominee that are voted on any matter are included in determining whether a quorum exists at the special meeting. Brokers that are members of the NYSE or The NASDAQ Stock Market LLC, as holders of record, are permitted to vote on certain routine matters in their discretion, but not on nonroutine matters. The proposals to approve the reorganization agreement, the issuance of the shares of Independent common stock in the merger and the election of each of the three named director
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nominees to serve as directors of Independent are nonroutine matters. Accordingly, if a shareholder holds shares in street name and does not provide voting instructions to his or her bank, broker or nominee that is a member of NYSE or The NASDAQ Stock Market LLC, those shares will not be voted on that proposal at the Independent special meeting unless you receive a proxy from that broker that will allow you to vote the shares you beneficially own and that are held by that broker. Abstentions and broker nonvotes act as votes against the proposal to approve the reorganization agreement and the merger, but will have no effect on the proposal to approve the issuance of the shares of Independent common stock in the merger, to elect additional directors or to adjourn the Independent special meeting.
Adjournments
Any adjournment of the Independent special meeting may be made from time to time if the approval of the holders of a majority of the votes cast at the Independent special meeting is obtained, whether or not a quorum exists at the Independent special meeting, without further notice of the adjournment other than by an announcement made at the Independent special meeting unless a new record date for the adjourned meeting is fixed. If a quorum is not present at the Independent special meeting then the Independent special meeting may be adjourned to solicit additional proxies by a majority vote of the holders of Independent common stock, present in person or by proxy at the Independent special meeting. If a quorum is present at the Independent special meeting but there are not sufficient votes to obtain the necessary shareholder approvals, then Independent shareholders may be asked to approve an adjournment of the meeting to permit the solicitation of additional proxies.
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This joint proxy statement/prospectus is being provided to the holders of Carlile common stock as part of a solicitation of proxies by the Carlile board of directors for use at the Carlile special meeting to be held at the time and place specified below and at any properly convened meeting following an adjournment thereof. This joint proxy statement/prospectus provides the holders of Carlile voting common stock with information they need to know to be able to vote or instruct their vote to be cast at the Carlile special meeting.
Date, Time and Place
The special meeting of holders of Carlile common stock will be held at the City Club of Fort Worth, 301 Commerce Street, Fort Worth, Texas 76102., on March 30, 2017, at 2:00 p.m. Central Time.
Purpose of the Carlile Special Meeting
At the Carlile special meeting, the holders of shares of Carlile voting common stock will be asked to consider and vote on the following:
Carlile Proposal One: to approve the reorganization agreement and the merger; and
Carlile Proposal Two: to approve the adjournment of the Carlile special meeting to a later date or dates, if the board of directors of Carlile determines it is necessary, among other things, to permit solicitation of additional proxies if there are not sufficient votes at the time of the Carlile special meeting to approve the first proposal listed above.
Completion of the merger is conditioned on, among other things, the approval of the reorganization agreement, the merger and the other transactions contemplated by the reorganization agreement.
Recommendation of the Carlile Board of Directors
On November 21, 2016, the Carlile board of directors unanimously determined that the merger and the other transactions contemplated by the reorganization agreement are in the best interests of Carlile and its shareholders and it approved the reorganization agreement, the merger and the other transactions contemplated by the reorganization agreement.
Accordingly, the Carlile board of directors unanimously recommends that Carlile shareholders vote as follows:
FOR Carlile Proposal One approving the reorganization agreement and the merger; and
FOR Carlile Proposal Two approving the adjournment of the Carlile special meeting if necessary to permit solicitation of additional proxies.
Holders of Carlile common stock should carefully read this joint proxy statement/prospectus, including any documents incorporated by reference, and the Appendices in their entirety for more detailed information concerning the merger and the transactions contemplated by the reorganization agreement.
Carlile Record Date; Shareholders Entitled to Vote
The record date for the Carlile special meeting is February 17, 2017, or the Carlile record date. Only record holders of shares of Carlile common stock at 5:00 p.m. Central Time, or the close of business, on the Carlile record date are entitled to notice of the Carlile special meeting. However, only holders of Carlile voting common stock are entitled to vote at the Carlile special meeting or any adjournment thereof. At the close of business on the Carlile record date, the only outstanding securities of Carlile with a right to vote on the proposals
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were shares of Carlile voting common stock, with 27,452,367 shares of Carlile voting common stock being issued and outstanding at that time. Each share of Carlile voting common stock outstanding on the Carlile record date is entitled to one vote on each proposal. Holders of at least two-thirds of the outstanding shares of Carlile voting common stock must vote in favor of the reorganization agreement and the merger in order to permit consummation of the merger.
Voting by Carliles Directors and Executive Officers
At the close of business on the record date for the Carlile special meeting, Carlile directors and executive officers and their affiliates were entitled to vote 4,424,900 shares of Carlile voting common stock, or 16.1% of the shares of Carlile voting common stock outstanding on that date. Carlile currently expects that its directors and executive officers and their affiliates, many of whom have entered into a voting and lockup agreement in respect of their shares, will vote their shares of Carlile voting common stock in favor of both of the Carlile proposals. A total of 17,069,700 shares of Carlile voting common stock, or 62.2% of the 27,452,367 shares of Carlile voting common stock outstanding on the date of this joint proxy statement/prospectus, were subject to such voting and lockup agreements.
Shares of Carlile Subject to the Voting and Lockup Agreement
Directors and certain officers of Carlile have entered into an agreement to vote the shares of Carlile voting common stock that they control in favor of approval of the reorganization agreement and the merger and in the manner most favorable to the consummation of the merger and the transactions contemplated by the reorganization agreement. However, Carlile shareholders who entered into voting and lockup agreements would be permitted to vote to accept any superior proposal to acquire Carlile (as defined in the reorganization agreement). As of the Carlile record date, 17,069,700 shares of Carlile voting common stock, or 62.2% of the 27,452,367 shares of Carlile voting common stock then outstanding and entitled to vote at the Carlile special meeting, are bound by the voting and lockup agreement.
Quorum and Adjournment
No business may be transacted at the Carlile special meeting unless a quorum is present. Shareholders who hold shares representing at least a majority of each class of the shares entitled to vote at the Carlile special meeting must be present in person or represented by proxy to constitute a quorum, but the holders of at least two-thirds of the shares of Carlile voting common stock entitled to vote at the Carlile special meeting must be present, in person or by proxy, at the Carlile special meeting in order for the necessary vote to be able to take action on the merger proposal. The affirmative vote of the holders of at least two-thirds of the outstanding Carlile voting common stock is required to approve the reorganization agreement and the merger. As a result, if shares representing at least two-thirds of the shares of Carlile voting common stock outstanding on the close of business on the Carlile record date are not present at the Carlile special meeting, the presence of a quorum will still not permit the merger to be approved at the Carlile special meeting.
If a quorum is not present, or if fewer shares than are required to approve the reorganization agreement and the merger are voted in favor of the proposal to approve the reorganization agreement and the merger, then the Carlile special meeting may be adjourned to allow for the solicitation of additional proxies provided that such proposal to adjourn the Carlile special meeting is approved by the holders of a majority of the shares of Carlile voting common stock who are entitled to vote at the Carlile special meeting and are present or represented by proxy at the Carlile special meeting.
No notice of an adjourned Carlile special meeting need be given unless, after the adjournment, a new record date is fixed for the adjourned Carlile special meeting, in which case a notice of the adjourned Carlile special meeting shall be given to each Carlile shareholder of record entitled to vote at the Carlile special meeting. At any adjourned Carlile special meeting, all proxies will be voted in the same manner as they would have been voted at the original convening of the Carlile special meeting, except for any proxies that have been effectively revoked or withdrawn prior to the adjourned Carlile special meeting.
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All shares of Carlile voting common stock represented at the Carlile special meeting, including shares of Carlile voting common stock that are represented but that vote to abstain and broker nonvotes, will be treated as present for purposes of determining the presence or absence of a quorum.
Required Vote
The required votes to approve the Carlile proposals are as follows:
Carlile Proposal One: approving the reorganization agreement and the merger requires the affirmative vote of at least two-thirds of the issued and outstanding shares of Carlile voting common stock entitled to vote at the Carlile special meeting. Failures to vote, broker nonvotes and abstentions will have the same effect as a vote against this proposal. Please note that only the shares of Carlile voting common stock are entitled to be voted at the Carlile special meeting.
Carlile Proposal Two: approving the adjournment of the Carlile special meeting, if necessary, to allow for the solicitation of additional proxies requires the affirmative vote of at least a majority of the issued and outstanding shares of Carlile voting common stock and present or represented by proxy at the Carlile special meeting, regardless of whether there is a quorum present at the Carlile special meeting. Failures to vote, broker nonvotes and abstentions will have the same effect as a vote against the proposal. Please note that only the shares of Carlile voting common stock are entitled to be voted at the Carlile special meeting.
Voting of Proxies by Holders of Record of Carlile Voting Common Stock
If you were a record holder of Carlile voting common stock at the close of business on the Carlile record date, a proxy card is enclosed for your use. Carlile requests that you vote your shares as promptly as possible by submitting your Carlile proxy card by mail using the enclosed return envelope. When the accompanying proxy card is properly executed, dated and returned, the shares of Carlile voting common stock represented by it will be voted at the Carlile special meeting or any adjournment thereof in accordance with the instructions contained in the proxy card.
If a proxy card is returned without an indication as to how the shares of Carlile voting common stock represented by it are to be voted with regard to a particular proposal, the shares of Carlile voting common stock represented by the proxy will be voted in accordance with the recommendation of the Carlile board of directors and, therefore, such shares will be voted:
FOR Carlile Proposal One approving the reorganization agreement and the merger; and
FOR Carlile Proposal Two approving the adjournment of the Carlile special meeting if necessary to permit solicitation of additional proxies.
At the date hereof, the Carlile board of directors has no knowledge of any business that will be presented for consideration at the Carlile special meeting and that would be required to be set forth in this joint proxy statement/prospectus or the related proxy card other than the matters set forth in the Carlile Notice of Special Meeting of Shareholders.
No other matter can be brought up or voted upon at the Carlile special meeting.
Your vote is important. Accordingly, if you were a record holder of Carlile voting common stock on the record date of the Carlile special meeting, please sign and return the enclosed proxy card whether or not you plan to attend the Carlile special meeting in person.
Attending the Meeting; Voting in Person
Only record holders of Carlile voting common stock and Carlile nonvoting common stock on the record date, the persons duly appointed as proxies to vote shares of Carlile voting common stock, and invited guests
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may attend the Carlile special meeting. Only the holders of record of shares of the Carlile voting common stock as of the record date for the Carlile special meeting will be entitled to vote at the meeting. Such persons may not, however, vote any shares of Carlile nonvoting common stock they may hold at such record date at the Carlile special meeting. All attendees must present government-issued photo identification (such as a drivers license or passport) for admittance. The additional items, if any, that attendees must bring to gain admittance to the Carlile special meeting depend on whether they are shareholders of record or proxy holders.
A shareholder who holds shares in street name through a broker, bank, trustee or other nominee (referred to in this joint proxy statement/prospectus as a beneficial owner) who desires to attend the Carlile special meeting in person must bring proof of beneficial ownership as of the record date, such as a letter from the broker, bank, trustee or other nominee that is the record owner of such beneficial owners shares, a brokerage account statement or the voting instruction form provided by the broker.
A person who holds a validly executed proxy entitling such person to vote on behalf of a record owner of shares of Carlile voting common stock who desires to attend the Carlile special meeting in person must bring the validly executed proxy naming such person as the proxy holder, signed by the Carlile shareholder of record, and proof of the signing shareholders record ownership of shares of Carlile voting common stock as of the record date.
No cameras, recording equipment or other electronic devices will be allowed in the meeting room. Failure to provide the requested documents at the door or failure to comply with the procedures for the Carlile special meeting may prevent Carlile shareholders from being admitted to the Carlile special meeting.
Revocation of Proxies
A Carlile shareholder entitled to vote at the Carlile special meeting may revoke a previously provided proxy at any time before such time that the proxy card for any such holders of Carlile voting common stock must be received at the Carlile special meeting by taking any of the following three actions:
| delivering written notice of revocation to Mindy Hegi, Chief Financial Officer, Carlile Bancshares, Inc., 201 Main Street, Suite 1320, Fort Worth, Texas 76102; |
| delivering a proxy card bearing a later date than the date of the proxy that such shareholder desires to revoke; or |
| attending the Carlile special meeting and voting in person. |
Merely attending the Carlile special meeting will not, by itself, revoke your proxy; a holder of Carlile voting common stock must cast a subsequent vote at the Carlile special meeting using a ballot provided at the Carlile special meeting for that purpose. The last valid vote that Carlile receives before or at the Carlile special meeting is the vote that will be counted.
If you hold your shares in street name through a bank or broker, you must contact such bank or broker if you desire to revoke your proxy.
Tabulation of Votes
Carlile has appointed Mindy Hegi to serve as the Inspector of Election for the Carlile special meeting. The Inspector of Election will independently tabulate affirmative votes, negative votes and abstentions.
Solicitation of Proxies
The Carlile board of directors is soliciting proxies for the Carlile special meeting from holders of shares of Carlile voting common stock entitled to vote at such special meeting. In accordance with the reorganization
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agreement, Carlile will pay its own cost of soliciting proxies from its shareholders, including the cost of mailing this joint proxy statement/prospectus. In addition to solicitation of proxies by mail, proxies may be solicited by Carliles officers, directors and regular employees, without additional remuneration, by personal interview, telephone or other means of communication.
Carlile will make arrangements with brokerage houses, custodians, nominees and fiduciaries to forward proxy solicitation materials to beneficial owners of Carlile voting common stock. Carlile may reimburse these brokerage houses, custodians, nominees and fiduciaries for their reasonable expenses incurred in forwarding the proxy materials.
Abstentions and shares of Carlile voting common stock held of record by a broker or nominee that are voted on any matter are included in determining whether a quorum exists at the Carlile special meeting. Brokers that are members of the NYSE or NASDAQ Global Select Market, as holders of record, are permitted to vote on certain routine matters in their discretion, but not on nonroutine matters. The proposal to approve the reorganization agreement and the merger is a nonroutine matter. Accordingly, if a holder of shares of Carlile voting common stock holds such shares in street name and does not provide voting instructions to his or her bank, broker or nominee that is a member of NYSE or NASDAQ Global Select Market, those shares will not be voted on the proposal to approve the reorganization agreement and the merger at the Carlile special meeting unless you receive a proxy from that broker that will allow you to vote the shares you beneficially own and that are held by that broker.
Adjournments
Any adjournment of the Carlile special meeting may be made from time to time if the proposal to adjourn the meeting is approved by the affirmative vote of at least a majority of the issued and outstanding shares of Carlile voting common stock entitled to vote and present or represented by proxy at the Carlile special meeting, whether or not a quorum exists at the Carlile special meeting. Such adjournment may be made without further notice other than by an announcement made at the Carlile special meeting, unless a new record date for the adjourned special meeting is fixed. If a quorum is not present at the Carlile special meeting or if a quorum is present at the Carlile special meeting but there are not sufficient votes at the time of the Carlile special meeting to approve the proposals, then Carlile shareholders may be asked to vote on a proposal to adjourn the Carlile special meeting so as to permit solicitation of additional proxies.
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INDEPENDENT AND CARLILEPROPOSAL ONE
The shareholders of Independent and the shareholders of Carlile holding shares of Carlile voting common stock will each be voting upon a proposal to approve the reorganization agreement and the merger. Information about the merger and the reorganization agreement is presented below under The Merger and elsewhere in this joint proxy statement/prospectus
The following information describes the material aspects of the merger. A copy of the reorganization agreement is included as Appendix A to this joint proxy statement/prospectus and is incorporated herein by reference. The description of the material aspects of the merger appearing below is qualified in its entirety by the terms of the reorganization agreement. You are urged to read each of the Appendices to this joint proxy statement/prospectus in its entirety.
The reorganization agreement provides for Independent to acquire all of the issued and outstanding securities of Carlile through a merger of Carlile with and into Independent, with Independent being the surviving corporation following the merger. If the shareholders of Carlile and Independent approve the reorganization agreement at the special meetings, and if the required regulatory approvals are obtained and the other conditions to the parties obligations to effect the merger are satisfied or are waived by the party entitled to do so, Independent and Carlile anticipate that the merger will be completed on April 1, 2017, although delays in the completion of the merger could occur.
Independent is the sole shareholder of Independent Bank, a Texas banking association, and Carlile is the sole shareholder of Northstar Bank, a Texas banking association. Upon the effectiveness of the merger, both Independent Bank and Northstar Bank will be wholly owned subsidiaries of Independent. Pursuant to the reorganization agreement, immediately following the effectiveness of the merger, Northstar Bank will merge with and into Independent Bank, with Independent Bank being the surviving bank following the bank merger.
Treatment of Shares of Carlile Common Stock
As a result of the merger, holders of Carlile common stock will be entitled to receive whole shares of Independent common stock in exchange for their shares of Carlile common stock, with cash paid in lieu of any fractional share, and will no longer be owners of Carlile common stock. Upon completion of the merger, certificates representing shares of Carlile common stock immediately prior to the mergers completion will represent only the right to receive the shares of Independent common stock and payment for any fractional share of Independent common stock in accordance with the terms of the reorganization agreement. Carlile will cease to exist following the completion of the merger.
Each share of Carlile common stock will be exchanged for a fraction of a share of Independent common stock, which fraction will be equal to the Carlile Share Exchange Ratio. That fraction will be expressed as a decimal number that will be rounded to the nearest ten-thousandth. Only whole shares of Independent common stock will be issued, with Carlile shareholders to receive cash in lieu of any fractional share otherwise issuable to a Carlile shareholder, as discussed below under Cash in Lieu of Fractional Shares.
The Carlile Share Exchange Ratio will be determined by means of a formula that uses the following factors:
| the Average Stock Price, which will be the average of the daily volume-weighted average sales price for a share of Independent common stock for the twenty trading days ending on and including the third trading day preceding the closing date of the merger; |
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| the Gross Share Number, which will equal the quotient of (a) $434,000,000, subject to adjustment as provided in the reorganization agreement, divided by (b) $47.40; |
| the Deal Value, which will equal the product of (a) the Gross Share Number multiplied by (b) the Average Stock Price; and |
| the Shareholder Value, which will equal (a) the Deal Value minus (b) the aggregate amount of cash (i) to be paid by Independent to effectuate the automatic cashout of the Carlile stock options in connection with the merger and (ii) paid by Carlile in December 2016 in connection with the cancellation of options to purchase 190,000 shares of Carlile common stock. |
The formula in which those factors will be used provides that the Carlile Share Exchange Ratio will be equal to the quotient of (a) the quotient of (i) the Shareholder Value, divided by (ii) the number of shares of Carlile common stock outstanding immediately prior to the effective time of the merger, divided by (b) the Average Stock Price. Expressed as a mathematical equation, the formula is:
Carlile Share Exchange Ratio = | (Shareholder Value ÷ outstanding shares of Carlile common stock) Average Stock Price |
The exact fraction of a share of Independent common stock into which a share of Carlile is converted will depend on the Average Stock Price, the amount of any adjustment made in computing the Gross Share Number if the adjusted tangible equity of Carlile is less than $200 million on the tangible equity determination date, the number of shares of Carlile common stock outstanding immediately prior to the effective time of the merger, which number may increase as a result of the exercise prior to the effective time of the merger of any of the options to purchase shares of Carlile common stock outstanding on the date of this joint proxy statement/prospectus, and the sum of the aggregate amount of cash to be paid to the holders of the Carlile stock options by Independent plus the aggregate amount of cash that was paid by Carlile in December 2016 in consideration for the cancellation of a portion of the options to purchase shares of Carlile common stock that were then held by certain executive officers of Carlile.
If the necessary shareholder and regulatory approvals are obtained and the merger is completed, assuming the Average Stock Price were $66.70 (the closing price for a share of Independent common stock on February 16, 2017), that 35,064,719 shares of Carlile voting and non-voting common stock are outstanding immediately prior to the merger (which would mean that none of the options to acquire Carlile common stock outstanding on the date of this joint proxy statement/prospectus would be exercised after such date), the adjusted tangible equity of Carlile is at least $200 million at the tangible equity determination date and the payments to the holders of the outstanding Carlile stock options were an aggregate of $22.1 million in the aggregate (which includes $1.6 million paid by Carlile in December 2016 in connection with the cancellation of options to purchase 190,000 shares of Carlile common stock), each share of Carlile common stock then outstanding would be exchanged for 0.2517 of a share of Independent common stock and all outstanding shares of Carlile common stock would be exchanged for an aggregate of 8,825,790 shares of Independent common stock.
Treatment of Carlile Stock Options
Pursuant to the terms of the reorganization agreement and the provisions of the Carlile Equity Incentive Plan, the administrator of that plan will unilaterally provide for the vesting of each outstanding and unvested option to acquire shares of Carlile common stock not fully vested and immediately exercisable as of the fifth business day prior to the closing of the merger. All of the outstanding options to acquire shares of Carlile common stock will then no longer be subject to forfeiture and will be immediately exercisable. Each such Carlile stock option that is outstanding and not exercised immediately prior to the effective time of the merger will be automatically cashed out under the terms of the Carlile Equity Incentive Plan and the holder of each cashed out Carlile stock option will have the right to receive a cash payment for such cashed out option. The amount of such
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payment for each particular Carlile stock option will be determined pursuant to a formula set forth in the reorganization agreement that will use the following factors:
| the Option Shares, which are the shares of Carlile common stock underlying that particular Carlile stock option; |
| the Per Share Option Price, which will be the difference between (i) the Closing Date Fair Market Value minus (ii) the per share exercise price applicable to that particular Carlile stock option as scheduled in the reorganization agreement; |
| the Closing Date Fair Market Value which will be the quotient of: |
| the sum of (I) the aggregate number of shares of Independent common stock into which the shares of Carlile common stock will be converted in the merger (calculated by using a Shareholder Value equal to the Deal Value determined as described above) multiplied by the Average Stock Price, plus (II) an amount equal to the aggregate amount of the cash distributions actually made by Carlile to its shareholders in accordance with the reorganization agreement that are not a return of capital to the Carlile shareholders plus (III) the aggregate exercise price payable to exercise all of the Carlile stock options outstanding and unexercised immediately prior to the effective time of the merger divided by |
| the sum of (i) the number of shares of Carlile common stock issued and outstanding immediately prior to the mergers effective time plus (ii) the number of shares of Carlile common stock underlying the Carlile stock options outstanding and unexercised immediately prior to the effective time of the merger plus (iii) 190,000 shares, which represent the shares of Carlile common stock underlying the options to purchase shares of Carlile common stock that were cancelled in December 2016 in exchange for cash payments. |
Each holder of a Carlile stock option outstanding and unexercised immediately prior to the effective time of the merger will be entitled to receive an amount of cash equal to the product of (i) Per Option Share Price for each particular Carlile stock option he or she holds that is outstanding and unexercised immediately prior to the effective time of the merger multiplied by (ii) the total number of Option Shares underlying that particular Carlile stock option. Such amount will be paid to the option holders within five business days following the closing date of the merger.
In connection with certain tax planning matters being conducted by Carlile, in December 2016, Carlile terminated and cancelled options to purchase an aggregate of 190,000 shares of Carlile voting common stock that were previously held by certain executive officers of Carlile in exchange for aggregate cash consideration of $1.6 million. In an effort to ensure that these executive officers ultimately receive the same consideration for the cancellation of their options that other Carlile option holders will receive from Independent following consummation of the merger, the executive officers and Independent agreed to a true-up mechanism whereby: (i) in the event that the cash amount paid by Carlile in December 2016, to cancel each option is less than the Per Option Share Price, Independent would make an additional cash payment to the executive officers equal to the amount of the deficiency multiplied by the number of shares of Carlile common stock underlying such cancelled options; and (ii) in the event that the cash amount paid to cancel each option is greater than the Per Option Share Price, the aggregate payment that the executive officers will be entitled to receive from Independent upon consummation of the merger would be reduced, on a dollar-for-dollar basis, by the amount of the excess multiplied by the number of shares of Carlile common stock underlying such cancelled options. As a result of this true-up procedure, if the exercise price of each of the options cancelled in December 2016 and all of the Carlile stock options cashed out in connection with the merger were the same, the executive officers who have received a cash payment in exchange for the cancellation of a portion of their stock options in December 2016 will have received the same net cash amount for their cancelled stock options as will be received by all other Carlile option holders upon the consummation of the merger. In addition, each of Carlile and Independent further clarified their intent that the cash payments made to the executive officers in exchange for the cancellation of a portion of their options will be disregarded for purposes of the calculation of Carliles adjusted tangible equity as of the tangible equity
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determination date so as to ensure that such payments do not otherwise affect the Carlile Share Exchange Ratio or the amount of the pre-closing distributions by Carlile as permitted by the reorganization agreement.
As of February 17, 2017, the record date for the Carlile special meeting, there were outstanding and unexercised options to purchase 2,504,726 shares of Carlile common stock granted under the Carlile Equity Incentive Plan (some of which by their terms will not vest until after the date of the Carlile special meeting). If all of these options remain outstanding and unexercised at the effective time of the merger, based on the assumptions appearing in Tables I and II below under the caption Value of Total Merger Consideration to Be Received, the aggregate cash payment made to cash out the Carlile stock options in the merger would be approximately $22.1 million. This amount includes the $1.6 million paid by Carlile in December 2016 in connection with the cancellation of the options to purchase 190,000 shares of Carlile common stock discussed above and a true-up adjustment for the stock options of an aggregate of $210,000 in the favor of the former optionholders in accordance with the true-up mechanism described above. Pursuant to the terms of the reorganization agreement, Carlile is prohibited from granting any additional options to purchase Carlile common stock prior to the closing date.
Estimated Number of Shares of Carlile Common Stock to be Issued and Outstanding on the Closing Date
The amount of per share merger consideration to be received by the Carlile shareholders is dependent, among other factors, upon the number of shares of Carlile common stock issued and outstanding immediately prior to the effective time of the merger. As of February 17, 2017:
| 35,064,719 shares of Carlile voting and non-voting common stock were issued and outstanding; and |
| options to purchase 2,504,726 shares of Carlile voting common stock were outstanding and unexercised. |
While Carlile anticipates that none of the options to purchase shares of its common stock now outstanding will be exercised prior to the mergers effective time, if all outstanding stock options are exercised, then it is expected that there would be 37,569,445 shares of Carlile voting and non-voting common stock issued and outstanding immediately prior to the effective time of the merger.
The shares of Carlile common stock outstanding at the time of the tangible equity determination date will include all shares of restricted stock of Carlile common stock currently outstanding. Pursuant to the terms of the reorganization agreement and the provisions of the Carlile Equity Incentive Plan, the administrator of that plan will unilaterally provide for the vesting of each outstanding and unvested share of restricted Carlile stock as of the fifth business day prior to the closing date of the merger. Upon such vesting, such restricted stock will no longer be subject to forfeiture or to the restrictions imposed by the provisions of the Carlile Equity Incentive Plan or any award agreement. Such shares will be exchanged for shares of Independent common stock in the merger on the same basis as all other shares of Carlile common stock issued and outstanding immediately prior to the effective time of the merger.
Carlile has agreed that, prior to the closing of the merger or the termination of the reorganization agreement, Carlile will not issue any additional shares of its capital stock or additional securities or rights, such as options to purchase Carlile common stock, that could result in the issuance of additional shares of its capital stock except pursuant to the Carlile stock options outstanding at the date of the reorganization agreement.
Possible Downward Adjustment to the $434 Million Agreed Amount to be Used in the Calculation of the Carlile Share Exchange Ratio
The agreed amount to be used in the calculation of the Carlile Share Exchange Ratio and, therefore, the fraction of a share of Independent common stock to be exchanged for each share of Carlile common stock in the merger and to calculate the amount of cash to be paid in the cashout of the Carlile stock options is $434 million,
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which is the agreed value of all of the outstanding shares of Carlile common stock and all of the outstanding and unexercised Carlile stock options. This $434 million agreed amount will be adjusted downward if the adjusted tangible equity of Carlile calculated in accordance with the terms of the reorganization agreement on the fifth business day prior to the closing date of the merger, which we refer to herein as the tangible equity determination date, is less than $200 million. Specifically, if on the tangible equity determination date, Carliles adjusted tangible equity is less than $200 million, the $434 million amount used in the calculation of the Carlile Share Exchange Ratio would be reduced by an amount equal to the difference between $200 million minus the actual Carlile adjusted tangible equity as of such date.
Pursuant to the terms of the reorganization agreement, the adjusted tangible equity of Carlile will be determined from Carliles financial statements prepared in accordance with GAAP (adjusted as provided for below) as of the fifth business day prior to the closing date of the merger. Any unrealized gains or losses in investment securities and amounts paid by Carlile in December 2016 to cash out the Carlile stock options then held by certain executive officers of Carlile will also be excluded from the calculation of adjusted tangible equity.
The calculation of Carliles adjusted tangible equity for purposes of calculating the merger consideration to be received by the Carlile shareholders in, and by the Carlile stock option holders in connection with, the merger will include a deduction for the costs and expenses of Carlile and Northstar Bank listed below, on an after tax basis, which are currently estimated to range, in the aggregate, between approximately $13.5 million and $14.1 million:
| all professional fees incurred by Carlile and any Carlile subsidiary in connection with transactions contemplated by the reorganization agreement, which would include any investment banking fees, legal fees and accounting fees and similar costs and expenses; |
| any costs or fees (including forfeited prepaid expenses) associated with the termination and de-conversion of material contracts of Carlile and any Carlile subsidiary, including their respective data processing and other information technology contracts, as scheduled in the reorganization agreement; |
| all payments owed under the employment agreements, change-in control agreements, salary arrangements, continuation arrangements, deferred compensation arrangements, severance plans, or similar arrangements by Carlile or one of its subsidiaries and all other payments, if any, made to director, officers and employees of Carlile or a subsidiary of Carlile related to the consummation of the merger; |
| the premium for four (4) years of director and officer insurance tail coverage required by the reorganization agreement; and |
| the portion of the payroll and income tax owed by Carlile resulting from the cashout of the Carlile stock options on a net settlement basis. |
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The tangible equity of Carlile (calculated in accordance with GAAP and the terms of the reorganization agreement) as of December 31, 2016, was estimated to be $209.2 million. The amount of adjusted tangible equity will be increased by the amount of the consolidated net income of Carlile or decreased by the amount of the consolidated net loss of Carlile through the fifth business day prior to the mergers effective date. Management of Carlile estimates that Carlile will have net income of between $5.0 million and $5.8 million from January 1, 2017, through March 24, 2017. The table set forth below shows the range of Carliles estimates for the amounts that will affect the calculation of the Carlile adjusted tangible equity, assuming the closing of the merger occurs on March 31, 2017 and the merger has an effective date of April 1, 2017:
The table set forth below shows the range of estimates for the amounts that will affect the calculation of the Carlile adjusted tangible equity, assuming the closing of the merger on March 31, 2017:
Low Range | High Range | |||||||
(in thousands) | ||||||||
Estimated tangible equity of Carlile as of December 31, 2016 prior to deductions required by reorganization agreement |
$ | 209,177 | < |