EX-99 2 a05-5630_1ex99.htm EX-99

 

Exhibit 99

 

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Unaudited Pro Forma Balance Sheet

December 31, 2004

 

 

 

Brookline

 

Mystic

 

 

 

 

 

 

 

Bancorp, Inc.

 

Financial, Inc.

 

Pro Forma

 

Combined

 

 

 

Historical

 

Historical

 

Adjustments

 

Pro Forma

 

 

 

 

 

(In thousands)

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

136,865

 

$

9,739

 

$

(28,166

)(1)

$

118,438

 

Securities available for sale

 

260,852

 

58,396

 

9,788

(2)

328,836

 

 

 

 

 

 

 

(177

)(3)

 

 

 

 

 

 

 

 

(23

)(4)

 

 

Securities held to maturity

 

889

 

9,788

 

(9,788

)(2)

889

 

Restricted equity securities

 

17,444

 

4,042

 

—

 

21,486

 

Loans

 

1,269,637

 

346,996

 

(3,418

)(5)

1,613,215

 

Allowance for loan losses

 

(17,540

)

(2,770

)

(600

)(6)

(20,910

)

Loans, net

 

1,252,097

 

344,226

 

(4,018

)

1,592,305

 

Bank premises and equipment, net

 

3,900

 

4,409

 

3,188

(7)

11,497

 

Other real estate owned

 

—

 

1,532

 

(132

)(8)

1,400

 

Goodwill

 

—

 

—

 

32,941

(9)

33,854

 

 

 

 

 

 

 

913

(10)

 

 

Other identifiable intangible assets

 

—

 

297

 

11,841

(11)

12,138

 

Deferred income tax asset

 

9,980

 

1,120

 

(2,383

)(12)

8,717

 

Other assets

 

12,472

 

4,067

 

(913

)(10)

15,626

 

Total assets

 

$

1,694,499

 

$

437,616

 

$

13,071

 

$

2,145,186

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

Deposits

 

$

773,958

 

$

325,850

 

$

1,100

(13)

$

1,100,908

 

Federal Home Loan Bank borrowings

 

320,171

 

69,442

 

319

(14)

389,932

 

Subordinated debt

 

—

 

12,000

 

337

(15)

12,337

 

Other liabilities

 

15,357

 

2,480

 

—

 

17,837

 

Total liabilities

 

1,109,486

 

409,772

 

1,756

 

1,521,014

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

 

Common stock

 

605

 

27

 

25

(16)

630

 

 

 

 

 

 

 

(27

)(16)

 

 

Additional paid-in capital

 

471,799

 

27,340

 

39,157

(16)

510,956

 

 

 

 

 

 

 

(27,340

)(16)

 

 

Retained earnings, partially restricted

 

144,081

 

17,914

 

(17,914

)(16)

144,081

 

Accumulated other comprehensive income (loss)

 

560

 

(289

)

289

(16)

560

 

Treasury stock

 

(17,017

)

(16,136

)

16,136

(16)

(17,040

)

 

 

 

 

 

 

(23

)(4)

 

 

Unearned compensation - recognition and retention plans

 

(10,963

)

(178

)

178

(16)

(10,963

)

Unearned common stock held by employee stock ownership plans

 

(4,052

)

(834

)

834

(16)

(4,052

)

Total stockholders’ equity

 

585,013

 

27,844

 

11,315

 

624,172

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

1,694,499

 

$

437,616

 

$

13,071

 

$

2,145,186

 

 

See accompanying notes to the unaudited pro forma financial statements.

 


 

Exhibit 99 (Continued)

 

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Unaudited Pro Forma Statement of Income

Year Ended December 31, 2004

 

 

 

 

Brookline

 

Mystic

 

 

 

 

 

 

 

Bancorp, Inc.

 

Financial, Inc.

 

Pro Forma

 

Combined

 

 

 

Historical

 

Historical

 

Adjustments

 

Pro Forma

 

 

 

(In thousands, except per share data)

 

Interest income:

 

 

 

 

 

 

 

 

 

Loans

 

$

63,527

 

$

18,083

 

$

494

(17)

$

82,104

 

Securities

 

7,043

 

3,449

 

248

(17)

10,070

 

 

 

 

 

 

 

(670

)(18)

 

 

Other earning assets

 

1,540

 

73

 

 

 

1,613

 

Total interest income

 

72,110

 

21,605

 

72

 

93,787

 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

Deposits

 

11,708

 

5,250

 

(772

)(17)

16,186

 

Federal Home Loan Bank borrowings

 

9,416

 

1,949

 

(119

)(17)

11,246

 

Subordinated debt

 

—

 

599

 

(118

)(17)

481

 

Total interest expense

 

21,124

 

7,798

 

(1,009

)

27,913

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

50,986

 

13,807

 

1,081

 

65,874

 

Provision for loan losses

 

2,603

 

425

 

600

(20)

3,628

 

Net interest income after provision for loan losses

 

48,383

 

13,382

 

481

 

62,246

 

 

 

 

 

 

 

 

 

 

 

Non-interest income:

 

 

 

 

 

 

 

 

 

Fees and service charges

 

2,577

 

786

 

—

 

3,363

 

Gain on sales of securities

 

1,767

 

341

 

—

 

2,108

 

Other

 

866

 

478

 

—

 

1,344

 

Total non-interest income

 

5,210

 

1,605

 

—

 

6,815

 

 

 

 

 

 

 

 

 

 

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

Compensation and employee benefits

 

10,004

 

7,430

 

—

 

17,434

 

Recognition and retention plans

 

2,890

 

14

 

—

 

2,904

 

Occupancy

 

1,604

 

907

 

—

 

2,511

 

Equipment and data processing

 

4,458

 

1,203

 

—

 

5,661

 

Advertising and marketing

 

638

 

216

 

—

 

854

 

Professional services

 

787

 

881

 

—

 

1,668

 

Amortization of core deposit intangible

 

—

 

—

 

2,368

(17)

2,368

 

Acquisition related costs

 

—

 

701

 

—

 

701

 

Other

 

2,608

 

1,401

 

—

 

4,009

 

Total non-interest expense

 

22,989

 

12,753

 

2,368

(21)

38,110

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

30,604

 

2,234

 

(1,887

)

30,951

 

Provision for income taxes

 

12,837

 

792

 

(496

)(22)

13,133

 

Net income

 

$

17,767

 

$

1,442

 

$

(1,391

)

$

17,818

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.31

 

$

0.98

 

 

 

 

$

0.30

 

Diluted

 

$

0.31

 

$

0.92

 

 

 

 

$

0.29

 

 

 

 

 

 

 

 

 

 

 

Shares used for earnings per share calculation:

 

 

 

 

 

 

 

 

 

Basic

 

57,278

 

1,473

 

1,044

(23)

59,795

 

Diluted

 

58,128

 

1,563

 

954

(23)

60,645

 

 

See accompanying notes to the unaudited pro forma financial statements.

 

 

2


 

Exhibit 99 (Continued)

 

 

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Pro Forma Financial Statements

(Dollars in thousands except per share data)

 

 

Balance Sheet

 

The unaudited pro forma balance sheet assumes that the acquisition of Mystic Financial, Inc. was completed as of December 31, 2004.

 

(1)                          Represents the $27,677 of funds used to complete the cash portion of the acquisition purchase price and $489 of direct acquisition costs paid by Brookline Bancorp, Inc. after December 31, 2004.

 

(2)                          Represents the reclassification of Mystic Financial, Inc.’s securities held to maturity portfolio to the securities available for sale portfolio.

 

(3)                          Represents the estimated fair value adjustment relating to the securities portfolio. Included in the securities portfolio are mortgage-backed securities that were sold after the acquisition date to reduce interest risk exposure. The estimated fair value of the securities sold was established at an amount equal to $8,633 of net proceeds realized from their sale. The estimated life of the remainder of the securities portfolio not sold is approximately four years.

 

(4)                          Represents the estimated fair value of 1,500 shares of Brookline Bancorp, Inc. common stock owned by Mystic Financial, Inc. that were transferred to treasury stock as of the date of the acquisition.

 

(5)                          Represents the estimated fair value adjustment relating to the loan portfolio. Included in the loan portfolio are fixed rate one-to-four family residential mortgage loans that were sold after the acquisition date to reduce interest risk exposure. The estimated fair value of the loans sold was established at an amount equal to the $29,379 of net proceeds resulting from their sale. The estimated life of the remainder of the loan portfolio not sold is approximately 15 years.

 

(6)                          Represents an adjustment that will be charged to expense in the first quarter of 2005 to conform the allowance for loan losses of Mystic Financial, Inc. to the amount of allowance for loan losses that results from applying the methodology and policies of Brookline Bancorp, Inc.

 

(7)                          Represents the estimated fair market value adjustment relating to premises and equipment. The estimated fair market value of premises and equipment will be depreciated on a straight-line basis over the remaining estimated useful lives of the underlying assets.

 

(8)                          Represents the estimated fair market value adjustment relating to other real estate owned.

 

(9)                          Represents the estimate of the excess of the total direct acquisition costs over the estimated fair value of the net assets acquired based upon currently available information. Goodwill is expected to be tested for impairment at least annually with impairment losses, if any, charged to expense if and when they occur.

 

(10)                  Represents direct acquisition costs paid by Brookline Bancorp, Inc. prior to December 31, 2004 to be included in the aggregate cost of the acquisition.

 

(11)                  Represents the estimated fair market value adjustment relating to the future economic benefit of the acquired core deposits. The estimated life of the acquired core deposits is approximately nine years.

 

(12)                  Represents the net deferred tax asset recorded at a rate of 41.825% for the tax effect related to the fair market value adjustments and reduced by adjustment for the non-deductible portion of acquisition costs.

 

 

3


 

Exhibit 99 (Continued)

 

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Pro Forma Financial Statements (Continued)

(Dollars in thousands except per share data)

 

 

(13)                  Represents the estimated fair value adjustment relating to time deposits. The estimated life of the time deposits is approximately five years.

 

(14)                  Represents the estimated fair value adjustment relating to Federal Home Loan Bank borrowings. The estimated life of the borrowings is approximately nine years.

 

(15)                  Represents the estimated fair value adjustment relating to subordinated debt. The adjustment is assumed to be accreted to expense over four years.

 

(16)                  Represents the elimination of Mystic Financial, Inc.’s stockholders’ equity as of the date of the acquisition and the issuance of 2,516,525 shares of Brookline Bancorp, Inc. at $15.57 per share to complete the stock portion of the acquisition purchase price.

 

Income Statement

 

The unaudited pro forma income statement assumes that the acquisition of Mystic Financial, Inc. was completed at the beginning of the year presented.

 

(17)                      Purchase accounting adjustments are amortized or accreted using a level yield over the estimated life of the related assets and liabilities. The following table summarizes the estimated full-year impact of the amortization (accretion) of the purchase accounting adjustments on the pro forma statement of income.

 

 

 

 

 

 

 

 

 

 

 

 

 

Premiums (Discounts)

 

Estimated Life in Years

 

Amortization (Accretion) Method

 

Amortization (Accretion)

 

Category

 

 

 

 

 

Core deposit intangible

 

$

11,841

 

9

 

Accelerated

 

$

2,368

 

Deposits

 

(1,100

)

5

 

Level Yield

 

(772

)

Borrowed funds

 

(319

)

9

 

Level Yield

 

(119

)

Subordinated debt

 

(337

)

4

 

Level Yield

 

(118

)

Loans

 

(1,612

)

15

 

Level Yield

 

(494

)

Securities available for sale

 

—

 

4

 

Level Yield

 

(248

)

 

 

 

$

8,473

 

 

 

 

 

$

617

 

 

The premiums (discounts) column in the above table excludes discounts and premiums related to loans and debt securities sold in the first quarter of 2005.

 

Securities of Mystic Financial, Inc. classified as available for sale are presented on its balance sheet at fair value. Any premium or discount related to debt securities as of the acquisition date will be amortized or accreted to interest income over the remaining life of the related securities. Included in the pro forma statement of income is an adjustment to interest income to reflect amortization and accretion of debt securities available for sale based on the difference between the fair value and the amortized cost of such securities as of the acquisition date. The total of such difference to be amortized or accreted over the remaining life of the related debt securities amounted to $970 as of the acquisition date.

 

(18)                      Interest income is adjusted to reflect lost income of $670 resulting from the funding of $28,166 of acquisition-related payments described in note 1 to the unaudited pro forma balance sheet. The rate of interest applied to this amount was 2.38%, the average rate earned on debt securities by Brookline Bancorp for the year ended December 31, 2004.

 

4


 

Exhibit 99 (Continued)

 

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Pro Forma Financial Statements (Continued)

(Dollars in thousands except per share data)

 

 

 (19)                    The following table summarizes the estimated impact of the accretion (amortization) of the purchase accounting adjustments made in connection with the acquisition of Mystic Financial, Inc. on the results of operations of Brookline Bancorp, Inc. for the following years assuming the transaction was completed as of the beginning of the year ended December 31, 2005.

 

 

 

 

 

Projected Future Amounts

 

 

 

Amortization

 

 

 

Net Decrease

 

 

of

 

Net Accretion

 

in Income

Year Ended December 31,

 

Core Deposit Intangible

 

of Asset andLiabilities

 

before Income Taxes

 

2005

 

$

2,368

 

 

$

1,751

 

 

$

(617

)

2006

 

2,105

 

 

1,139

 

 

(966

)

2007

 

1,842

 

 

696

 

 

(1,146

)

2008

 

1,579

 

 

407

 

 

(1,172

)

2009

 

1,316

 

 

155

 

 

(1,161

)

 

(20)                      Provision for loan losses does not reflect a charge of approximately $600 to be recorded in the first quarter of 2005 to conform the allowance for loan losses of Mystic Financial, Inc. to the amount of allowance for loan losses that results from applying the methodology and policies of Brookline Bancorp, Inc.

 

(21)                      Non-interest expense does not reflect charges or cost savings anticipated from the merger of the two entities.

 

(22)                      Represents the tax effect of pre-tax adjustments to the pro forma statement of income recorded at a rate equal to 41.825% of the aggregate net amount of the pre-tax adjustments and the non-deductibility for income tax purposes of $701 of acquisition related costs incurred by Mystic Financial, Inc.

 

(23)                      Represents the difference between the 2,516,525 shares of Brookline Bancorp, Inc. issued in connection with the acquisition and the shares used for the historical earnings per share calculations by Mystic Financial, Inc.

 

 

5