This excerpt taken from the FBIZ DEF 14A filed Nov 26, 2008.
Estimated Pro Forma Impact of the Capital Purchase Program
The following unaudited pro forma condensed consolidated financial statements set forth our financial position as of September 30, 2008 and results of operations for the nine months ended September 30, 2008 and the year ended December 31, 2007:
The pro forma financial information below assumes that we received proceeds from the sale of the CPP shares and related warrants to the Treasury and sold the funds in the federal funds market during the periods presented. This pro forma impact does not reflect our ultimate planned use of the sale proceeds because such specific uses are not currently subject to quantification. If the Treasury invests in our preferred stock and warrants, we currently expect to use the proceeds to continue to invest in our growth markets, pursue strategic opportunities and maintain our strong history of expanding existing client relationships and developing new relationships. We believe that the financial benefit from such investments will be significant, but we have not included the benefit in the pro forma financial information.
The carrying value of the CPP shares and warrants are based on their estimated relative fair values as of the issue date. We estimated the fair value of the warrants using a Black-Scholes methodology. That methodology includes assumptions regarding our common stock price, dividend yield, stock price volatility and a risk-free rate. We estimated the fair value of the CPP shares by reducing the expected gross proceeds from the sale of the CPP shares by the amount allocated to the warrants.
The net income attributable to the CPP shares includes the 5% annual cash dividend to be paid plus the accretion up to the liquidation preference on a straight-line basis over the five-year expected life of the CPP shares.
The number of shares of our common stock that would be issuable upon the exercise of the warrants to be issued in conjunction with the CPP shares would be 85,335 and 256,005, assuming the issuance of CPP shares with a liquidation preference of $9 million and $27 million, respectively. The pro forma average diluted shares outstanding includes the estimated effect of the exercise of the warrants at the $15.82 exercise price, based on a 20- trading day trailing average market price of our common stock calculated as of November 14, 2008, and accounted for under the treasury stock method.
The following unaudited pro forma condensed consolidated financial statements are presented for illustration purposes only and in accordance with the assumptions set forth above and contained in the footnotes to the unaudited pro forma financial statements. The pro forma financial statements include various estimates and are not necessarily indicative of the operating results or financial position that would have occurred had the sale of the CPP shares and related warrants occurred as of the assumed dates or of the operating results or financial position in the future.
The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the information under Managements Discussion and Analysis of Financial Condition and Results of Operations, our unaudited condensed consolidated financial statements for the nine months ended September 30, 2008 and related notes and other financial information included in our Quarterly Report on Form 10-Q for the quarter then ended and the information under Managements Discussion and Analysis of Financial Condition and Results of Operations, our audited consolidated financial statements for the year ended December 31, 2007 and related notes and other financial information included in our Annual Report on Form 10-K for the year then ended.