-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GH3Iz/kPnIx2IALdpgTvtenVX7DXfGqFbQ2Cm58THyRYe+ryb9NEwaGAWriCqY87 i2dQy6D1RmFunOqBRea0/Q== 0000909654-07-002826.txt : 20071207 0000909654-07-002826.hdr.sgml : 20071207 20071207091119 ACCESSION NUMBER: 0000909654-07-002826 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20070921 ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20071207 DATE AS OF CHANGE: 20071207 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERKSHIRE HILLS BANCORP INC CENTRAL INDEX KEY: 0001108134 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTIONS, NOT FEDERALLY CHARTERED [6036] IRS NUMBER: 043510455 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-51584 FILM NUMBER: 071291061 BUSINESS ADDRESS: STREET 1: 24 NORTH ST. CITY: PITTSFIELD STATE: MA ZIP: 01201 BUSINESS PHONE: 4134435601 MAIL ADDRESS: STREET 1: 24 NORTH ST CITY: PITTSFIELD STATE: MA ZIP: 01201 8-K/A 1 berkshire8ka12-5.txt 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A AMENDMENT NO. 1 TO CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): SEPTEMBER 21, 2007 Berkshire Hills Bancorp, Inc. ----------------------------- (Exact name of registrant as specified in its charter) Delaware 0-51584 04-3510455 -------- ------- ---------- (State or other jurisdiction of (Commission (IRS Employer incorporation or organization) File Number) Identification No.) 24 North Street, Pittsfield, Massachusetts 01201 ------------------------------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code): (413) 443-5601 ------------- Not Applicable -------------- (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) 2 ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS. ---------------------------------- Pursuant to the requirements of Item 9.01(a)(4) and Item 9.01(b)(2) of Form 8-K, Berkshire Hills Bancorp, Inc. ("Berkshire Hills Bancorp") hereby files this Amendment No. 1 to its Current Report on Form 8-K initially filed with the Securities and Exchange Commission on September 26, 2007 with the financial information required by Item 9.01. a. Financial statements of businesses acquired. The following audited financial statements of Factory Point Bancorp, Inc. ("Factory Point Bancorp") are incorporated by reference to Berkshire Hills Bancorp's Registration Statement on Form S-4 (SEC File No. 333-144062): Report of Independent Auditors Consolidated Balance Sheets as of December 31, 2006 and 2005 Consolidated Statements of Income for the years ended December 31, 2006, 2005 and 2004 Consolidated Statement of Changes in Shareholders' Equity for the years ended December 31, 2006, 2005 and 2004 Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004 Notes to Consolidated Financial Statements The following unaudited, consolidated interim financial statements of Factory Point Bancorp, Inc. are incorporated herein by reference to Exhibit 99.1: Consolidated Balance Sheets at June 30, 2007 Consolidated Statements of Income for the six months ended June 30, 2007 and 2006 Consolidated Statements of Cash Flows for the six months ended June 30, 2007 and 2006 Notes to Consolidated Financial Statements b. Pro forma financial information. The pro forma financial information required by this Item 9.01(b) is incorporated herein by reference to Exhibit 99.2. c. Exhibits. Exhibit Number Description -------------- ----------- 99.1 Unaudited consolidated financial statements of Factory Point Bancorp, Inc. as of and for the six months ended June 30, 2007 99.2 Pro forma financial information 3 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. Berkshire Hills Bancorp, Inc. Date: December 7, 2007 By: /s/ Kevin P. Riley ----------------------------------------- Kevin P. Riley Executive Vice President, Treasurer and Chief Financial Officer EX-99.1 2 berkshire8ka991.txt 1
FACTORY POINT BANCORP, INC. AND SUBSIDIARY Consolidated Balance Sheets June 30, 2007 and December 31, 2006 (unaudited) Assets 6/30/2007 12/31/2006 -------------- --------------- Cash and due from banks $ 7,572,922 $ 9,143,850 Other short-term investments 67,617 194,862 -------------- --------------- Cash and cash equivalents 7,640,539 9,338,712 Loans held for sale 96,476 601,987 Securities available for sale, at fair value 80,248,494 89,090,111 Net loans receivable 231,799,721 225,533,774 Bank premises and equipment, net 5,351,798 5,561,245 Accrued interest receivable 1,896,300 1,912,376 Goodwill 2,298,707 2,298,707 Bank owned life insurance 3,869,643 3,708,996 Other assets 2,877,838 2,453,205 -------------- --------------- Total assets $ 336,079,516 $ 340,499,113 ============== =============== Liabilities and Shareholders' Equity Liabilities: Deposits: Demand deposits $ 43,725,516 $ 50,631,815 Savings, N.O.W., and money market 134,037,336 135,391,290 Time deposits under $100,000 55,621,794 58,458,891 Time deposits $100,000 and greater 27,210,173 25,484,924 -------------- --------------- Total deposits 260,594,819 269,966,920 -------------- --------------- Short-term borrowings: Securities sold under agreements to repurchase 22,193,599 19,872,086 Borrowings from FHLB Boston 14,750,000 17,500,000 Borrowings from U.S. Treasury 1,027,653 1,305,078 -------------- --------------- Total short-term borrowings 37,971,252 38,677,164 -------------- --------------- Accrued expenses and other liabilities 2,639,153 2,677,828 Long-term borrowings: Borrowings from FHLB Boston 5,347,911 353,286 -------------- --------------- Total liabilities 306,553,135 311,675,198 -------------- --------------- Shareholders' equity: Common stock, $1.00 par value; 6,000,000 shares authorized at June 30, 2007 and December 31, 2006, respectively; 4,102,610 shares issued at June 30, 2007 and December 31, 2006, respectively 4,105,765 4,102,610 Paid-in capital 18,793,109 18,734,232 Retained earnings 7,221,458 6,698,736 Accumulated other comprehensive loss (581,350) (292,387) Treasury stock, at cost (9,199 and 28,698 shares at June 30, 2007 and December 31, 2006, respectively) (12,601) (419,276) -------------- --------------- Total shareholders' equity 29,526,381 28,823,915 -------------- --------------- Total liabilities and shareholders' equity $ 336,079,516 $ 340,499,113 ============== ===============
See accompanying notes to unaudited consolidated interim financial statements. 2
FACTORY POINT BANCORP, INC. AND SUBSIDIARY Consolidated Statements of Income Six months ended June 30, 2007 and 2006 (unaudited) 2007 2006 --------------- ----------------- Interest and dividend income: Interest and fees on loans $ 8,595,744 $ 7,723,724 Securities available for sale 1,901,274 1,900,481 Other short-term investments 13,717 3,064 --------------- ----------------- Total interest and dividend income 10,510,735 9,627,269 --------------- ----------------- Interest expense: Deposits 3,134,275 2,222,005 Short-term borrowings 861,597 810,729 Long-term debt 82,558 4,544 --------------- ----------------- Total interest expense 4,078,430 3,037,278 --------------- ----------------- Net interest income 6,432,305 6,589,991 Provision for loan losses -- 390,000 --------------- ----------------- Net interest income after provision after loan losses 6,432,30 6,199,991 --------------- ----------------- Noninterest income: Trust service fees 656,338 596,525 Service charges on deposit accounts 670,495 525,151 Other service charges 241,727 220,233 Net gain on sale of loans 67,877 46,665 Other 138,772 102,418 --------------- ----------------- Total noninterest income 1,775,209 1,490,992 --------------- ----------------- Noninterest expenses: Salaries and wages 2,026,924 1,894,384 Employee benefits 742,356 641,208 Occupancy expenses 364,102 318,174 Equipment expenses 561,364 502,806 Other 1,540,125 1,500,121 --------------- ----------------- Total noninterest expenses 5,234,871 4,856,693 --------------- ----------------- Income before income taxes 2,972,643 2,834,290 Income tax expense 755,100 732,500 --------------- ----------------- Net income $ 2,217,543 $ 2,101,790 =============== ================= Basic earnings per share $ 0.54 $ 0.52 Diluted earnings per share $ 0.53 $ 0.51
3
FACTORY POINT BANCORP, INC. AND SUBSIDIARY Consolidated Statements of Cash Flows Six months ended June 30, 2007, and 2006 (unaudited) 2007 2006 ------------- ------------- Increase in cash and cash equivalents: Cash flows from operating activities: Net income $ 2,217,543 $ 2,101,790 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of bank premises and equipment 412,353 281,215 Stock based compensation 80,630 25,340 Provision for loan losses - 390,000 Net amortization of premiums and on securities 69,132 101,203 Net gain on sale of loans (71,620) (50,553) Loans originated for sale (4,670,490) (3,860,843) Proceeds from sale of loans held for sale 5,247,621 4,255,381 Net gain on sale of other real estate owned - (59,020) Net (increase) decrease in cash surrender value of bank-owned life insurance (160,647) 14,128 Net decrease in other assets 8,812 649,275 Net decrease in accrued expenses and other liabilities (22,599) (462,857) ------------- ------------- Net cash provided by operating activities 3,110,735 3,385,059 ------------- ------------- Cash flows from investing activities: Proceeds from maturity and paydowns of securities available for sale 8,115,977 5,274,486 Proceeds from sales of securities available for sale 175,100 325,000 Purchases of securities available for sale (241,000) (9,625,178) Net loans made to customers (6,265,947) (7,434,802) Capital expenditures (202,906) (1,569,057) Proceeds from sale on other real estate owned - 151,954 ------------- ------------- Net cash provided by (used in) investing activities 1,581,224 (12,877,597) ------------- ------------- Cash flows from financing activities: Net decrease in deposits $ (9,372,101) $ (17,500,591) Net (decrease) increase in short-term borrowings (705,912) 25,620,638 Repayments of long-term borrowings from FHLB Boston (5,375) (5,243) Proceeds from long-term borrowings from FHLB Boston 5,000,000 - Dividends (1,388,932) (1,205,427) Purchase of treasury stock (305,010) (477,411) Issuance of treasury stock related to exercise of stock options 387,198 242,601 ------------- ------------- Net cash (used in) provided by financing activities (6,390,132) 6,674,567 ------------- ------------- Net decrease in cash and cash equivalents (1,698,173) (2,817,971) Cash and cash equivalents at beginning of period 9,338,712 12,635,890 ------------- ------------- Cash and cash equivalents at end of period $ 7,640,539 9,817,919 ============= ============= Additional disclosures relative to cash flows: Interest paid $ 3,981,930 $ 3,008,213 Taxes paid 875,000 1,035,000 Supplemental schedule of noncash investing and financing activities: Adjustment of securities available for sale to fair value, net of tax (433,455) (1,224,182) See accompanying notes to unaudited consolidated interim financial statements.
4 FACTORY POINT BANCORP, INC. NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - ORGANIZATION Factory Point Bancorp, Inc. is a publicly-held, one-bank holding company whose wholly-owned subsidiary, The Factory Point National Bank of Manchester Center ("Factory Point National Bank"), maintains its corporate offices in Manchester Center, Vermont. Factory Point Bancorp, Inc. is incorporated in the state of Delaware. Its subsidiary, Factory Point National Bank, is regulated by the Office of the Comptroller of the Currency. Factory Point National Bank operates seven full-service community banking offices in Arlington, Dorset, Ludlow, Manchester, and Rutland, Vermont. Factory Point Bancorp, Inc.'s primary product lines include residential real estate lending (for portfolio and sale in the secondary market), small business loan and deposit services as well as a variety of consumer loan and deposit services. Factory Point National Bank is chartered with trust powers and offers trust and investment services in the markets it serves. NOTE 2 - BASIS OF PRESENTATION The accompanying unaudited consolidated interim financial statements of Factory Point Bancorp, Inc. and subsidiary (the "Company") conform to accounting principles generally accepted in the United States of America and general practices within the banking industry. The Company utilizes the accrual method of accounting for financial reporting purposes. The results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the full year. The preparation of the unaudited consolidated interim financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. The unaudited consolidated interim financial statements include the accounts of Factory Point Bancorp, Inc. and Factory Point National Bank, its wholly owned subsidiary. All significant intercompany accounts and transactions have been eliminated. All adjustments are of a normal recurring nature. Prior period amounts are reclassified whenever necessary to conform to the current period presentation. NOTE 3 - EARNINGS PER SHARE Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock (such as the Company's stock options) were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. 5
Quarter Ended -------------------------- 30-June-07 30-June-06 ---------- ---------- Net income $2,217,544 2,101,790 ========== ========== Weighted average common shares outstanding 4,089,004 4,075,075 Dilutive effect of potential common shares related to stock based compensation plans 59,420 78,564 ---------- ---------- Weighted average common shares including potential dilution 4,148,429 4,153,639 ========== ========== Basic earnings per share $ 0.54 0.52 Diluted earnings per share 0.53 0.51
There were 8,045 and 183 anti-dilutive stock options outstanding at June 30, 2007 and 2006, respectively. NOTE 4 - ACCUMULATED OTHER COMPREHENSIVE LOSS (IN THOUSANDS) Comprehensive (loss) income represents the sum of net income and items of "other comprehensive (loss) income" which are reported directly in shareholders' equity, such as the net unrealized gain or loss on securities available for sale. The Company's accumulated other comprehensive gain (loss), which is included in shareholders' equity, represents the after-tax net unrealized (loss) gain on securities available for sale at the consolidated balance sheet date. The Company's other comprehensive (loss) income, which is attributable to unrealized gains and losses on securities available for sale during the respective periods, consisted of the following amounts for the six months ended June 30, 2007 and 2006:
2007 2006 ---------- ---------- Net unrealized holding losses arising during the period, net of taxes of ($192,642) in 2007 and ($544,081) in 2006 $(288,963) $(816,121) ========== ==========
Total comprehensive income for the six-months ended June 30, 2007 and 2006 was $1,928,581 and $1,285,669 respectively. NOTE 5 - GUARANTEES Factory Point National Bank does not issue any guarantees that would require liability-recognition or disclosure, other than its standby letters of credit. Standby and other letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public or private borrowing arrangements, including bond financing and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Typically, these instruments have terms of twelve months or less. Some expire unused, and therefore, the total amounts do not necessarily represent future cash requirements. For letters of credit, the amount of the collateral obtained, if any, is based on management's credit evaluation of the counter-party. Factory Point National Bank had approximately $1,049,000 of standby letters of credit on June 30, 2007 and $557,000 on December 31, 2006, most of which will expire within one year. All the letters of credit were for private borrowing arrangements. The fair value of standby letters of credit at June 30, 2007 and December 31, 2006 was not significant. 6 NOTE 6 - ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES On January 1, 2007, the Company adopted FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109" (FIN 48). The adoption of FIN 48 did not result in an increase or decrease to the Company's income tax liability. The Company's accounting policy calls for any interest expense and/or penalties related to any underpayment of income taxes to be recorded as a component of the provision for income taxes. There was no accrual for interest expense or penalties at December 31, 2006 or at June 30, 2007. NOTE 7 - RECENT ACCOUNTING PRONOUNCEMENTS FASB Statement No. 157, "Fair Value Measurements" (FAS No. 157) issued in September 2006, defines fair value, establishes a framework for measuring fair value in United States generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. FAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. The provisions of FAS No. 157 are effective for financial statements issued for fiscal years beginning after November 15, 2007. The adoption of this standard is not expected to have a material effect on the Company's results of operations or financial position. FASB Statement No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" (FAS No. 159) issued in February 2007, permits entities to choose to measure eligible items at fair value at specified election dates. A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings (or another performance indicator if the business entity does not report earnings) at each subsequent reporting date. The fair value option may be applied instrument by instrument, with a few exceptions, such as investments otherwise accounted for by the equity method. The election is irrevocable (unless a new election date occurs) and is applied only to entire instruments and not to portions of instruments. FAS No. 159 is effective for fiscal years beginning after November 15, 2007. The adoption of this standard is not expected to have a material effect on the Company's results of operations or financial position. NOTE 8 - DEFINITIVE MERGER AGREEMENT On May 15, 2007, the Company entered into a definitive merger agreement in which the Company will be acquired by Berkshire Hills Bancorp, Inc. (Berkshire Hills) in exchange for cash and common stock of Berkshire Hills. Berkshire Hills is a corporation based in Pittsfield, Massachusetts and is the holding company for Berkshire Bank in Pittsfield, Massachusetts. At the effective time of the merger, the separate corporate existence of the Company shall cease, and Factory Point National Bank will be merged into Berkshire Bank. The transaction is subject to the approval of the shareholders of both companies, as well as state and federal regulatory agencies. EX-99.2 3 berkshire8ka99-2.txt 1 PRO FORMA FINANCIAL INFORMATION The following unaudited pro forma consolidated condensed combined balance sheet as of June 30, 2007 and the unaudited pro forma consolidated condensed combined statements of income for the six months ended June 30, 2007 and the year ended December 31, 2006 give effect to the pending merger. The unaudited pro forma consolidated condensed combined financial information is based on the historical consolidated financial statements of Berkshire Hills Bancorp and Factory Point Bancorp under the assumptions and adjustments set forth in the accompanying notes. The unaudited pro forma consolidated condensed combined balance sheet gives effect to the merger as if the merger had been consummated at June 30, 2007. The unaudited pro forma consolidated condensed combined statements of income give effect to the merger as if the merger had been completed at the beginning of the periods presented. You should read the unaudited pro forma consolidated condensed combined financial statements in conjunction with the historical consolidated financial statements of Berkshire Hills Bancorp that are incorporated by reference into this document and of Factory Point Bancorp that appear elsewhere in this document. The pro forma information is not necessarily indicative of the combined financial position or the results of operations in the future or of the combined financial position or the results of operations that would have been realized had the merger been consummated during the periods or as of the dates for which the pro forma information is presented. Pro forma per share amounts for the combined company are based on the exchange ratio of 0.5844 set forth in the Agreement and Plan of Merger. 2 BERKSHIRE HILLS BANCORP, INC. AND FACTORY POINT BANCORP, INC. UNAUDITED PRO FORMA CONSOLIDATED CONDENSED COMBINED BALANCE SHEET AS OF JUNE 30, 2007
Historical ------------------------------- Berkshire Hills Factory Point Pro Forma Pro Forma (in thousands) Bancorp Bancorp Adjustment Combined - ---------------------------------- --------------- -------------- ---------- ----------- ASSETS Cash and securities $ 249,677 $ 87,889 $ -- $ 337,566 Net loans 1,711,09 231,800 (5,300) 1,937,59 Goodwill 105,051 2,299 56,200 (3) 163,550 Other intangibles 15,474 -- 8,400 (4) 23,874 Other assets 88,339 14,091 (1,300)(5) 101,130 ----------- -------- -------- ---------- Total assets $ 2,169,632 $336,079 $ 58,000 $2,563,711 =========== ======== ======== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits $ 1,528,514 $260,595 $ -- $1,789,109 Borrowings 353,083 43,319 -- 396,402 Subordinated debentures 15,464 -- 23,000 (6) 38,464 Other liabilities 6,219 2,639 -- 8,858 ----------- -------- -------- ---------- Total liabilities 1,903,28 306,553 23,000 2,232,833 Common stock 106 4,106 (4,083)(7) 129 Additional paid-in capital 202,441 18,793 45,710 (7) 266,944 Unearned compensation (2,805) -- -- (7) (2,805) Retained earnings 112,621 7,221 (7,221)(7) 112,621 Net accumulated other comprehensive income/(loss) (1,274) (581) 581 (7) (1,274) Treasury stock at cost (44,737) (13) 13 (7) (44,737) ----------- -------- -------- ---------- Total stockholders' equity 266,352 29,526 35,000 330,878 ----------- -------- -------- ---------- Total liabilities and stockholders' equity $ 2,169,632 $336,079 $ 58,000 $2,563,711 =========== ======== ======== ==========
See Notes to the Unaudited Pro Forma Consolidated Condensed Combined Financial Statements 3 BERKSHIRE HILLS BANCORP, INC. AND FACTORY POINT BANCORP, INC. UNAUDITED PRO FORMA CONSOLIDATED CONDENSED COMBINED STATEMENT OF INCOME SIX MONTHS ENDED JUNE 30, 2007
Historical ------------------------------ Berkshire Hills Factory Point Pro Forma Pro Forma (In thousands, except per share data) Bancorp Bancorp Adjustment Combined - -------------------------------------- ---------------- ------------- ---------- ---------- INTEREST AND DIVIDEND INCOME Loans $ 57,674 $ 8,596 $ 300 (2) $66,570 Investments and other 5,790 1,915 -- 7,705 ----------- -------- -------- -------- Total interest and dividend income 63,464 10,511 300 74,275 INTEREST EXPENSE Deposits 24,267 3,134 -- 27,401 Borrowings 8,969 944 850 (6) 10,763 ----------- -------- -------- -------- Total interest expense 33,236 4,078 850 38,164 ----------- -------- -------- -------- NET INTEREST INCOME 30,228 6,433 (550) 36,111 NON-INTEREST INCOME Fee income 14,323 1,326 -- 15,649 Gain on securities 81 -- -- 81 Other non-interest income 726 448 -- 1,174 ----------- -------- -------- -------- Total non-interest income 15,130 1,774 -- 16,904 ----------- -------- -------- -------- TOTAL NET REVENUE 45,358 8,207 (550) 53,015 PROVISION FOR LOAN LOSSES 850 -- -- 850 NON-INTEREST EXPENSE Salaries and employee benefits 16,741 2,769 (800) 18,710 Occupancy and equipment 4,871 925 -- 5,796 Non-recurring expense 153 -- -- 153 Other non-interest expense 8,747 1,540 100 (8) 10,387 ----------- -------- -------- -------- Total non-interest expense 30,512 5,234 (700) 35,046 ----------- -------- -------- -------- Income before income taxes 13,996 2,973 150 (8) 17,119 Income tax expense 4,478 755 50 5,283 ----------- -------- -------- -------- NET INCOME $ 9,518 $ 2,218 $ 100 $ 11,836 =========== ======== ======== ======== BASIC EARNINGS PER SHARE $ 1.09 $ 0.54 $ 1.12 DILUTED EARNINGS PER SHARE $ 1.07 $ 0.53 $ 1.09 Weighted average common shares Basic 8,697 4,089 1,914 10,611 Diluted 8,855 4,152 1,978 10,833
See Notes to the Unaudited Pro Forma Consolidated Condensed Combined Financial Statements 3 BERKSHIRE HILLS BANCORP, INC. AND FACTORY POINT BANCORP, INC. UNAUDITED PRO FORMA CONSOLIDATED CONDENSED COMBINED STATEMENT OF INCOME YEAR ENDED DECEMBER 31, 2006
Historical ------------------------------ Berkshire Hills Factory Point Pro Forma Pro Forma (In thousands, except per share data) Bancorp Bancorp Adjustment Combined - -------------------------------------- ---------------- ------------- ---------- ---------- Loans $ 100,836 $ 16,312 $ 600 (2) $117,748 Investments and other 17,215 3,889 -- 21,104 ---------------- ------------- ---------- ---------- Total interest and dividend income 118,051 20,201 600 138,852 INTEREST EXPENSE Deposits 41,044 5,064 -- 46,108 Borrowings 16,767 1,943 1,700 (6) 20,410 ---------------- ------------- ---------- ---------- Total interest expense 57,811 7,007 1,700 66,518 ---------------- ------------- ---------- ---------- NET INTEREST INCOME 60,240 13,194 (1,100) 72,334 NON-INTEREST INCOME Fee income 13,539 2,846 -- 16,385 Loss on securities (3,130) -- -- (3,130) Other non-interest income 1,639 258 -- 1,897 ---------------- ------------- ---------- ---------- Total non-interest income 12,048 3,104 -- 15,152 ---------------- ------------- ---------- ---------- TOTAL NET REVENUE 72,288 16,298 (1,100) 87,486 PROVISION FOR LOAN LOSSES 7,860 390 -- 8,250 NON-INTEREST EXPENSE Salaries and employee benefits 24,708 5,148 (1,600) (8) 28,256 Occupancy and equipment 7,699 1,733 -- 9,432 Non-recurring expense 1,510 -- -- 1,510 Other non-interest expense 14,951 3,009 200 (8) 18,160 ---------------- ------------- ---------- ---------- Total non-interest expense 48,868 9,890 (1,400) 57,358 ---------------- ------------- ---------- ---------- Income from continuing operations before income taxes 15,560 6,018 300 (8) 21,878 Income tax expense 4,668 1,553 100 6,321 ---------------- ------------- ---------- ---------- INCOME FROM CONTINUING OPERATIONS 10,892 4,465 200 15,557 Income from discontinued operations before income taxes 606 -- -- 606 Income tax expense 235 -- -- 235 ---------------- ------------- ---------- ---------- NET INCOME FROM DISCONTINUED OPERATIONS 371 -- -- 371 ---------------- ------------- ---------- ---------- NET INCOME $ 11,263 $ 4,465 $ 200 $ 15,928 ================ ============= ========== =========== BASIC EARNINGS PER SHARE Continuing operations $ 1.28 $ 1.10 $ 1.49 Discontinued operations 0.04 -- 0.03 ---------------- ------------- ---------- ---------- TOTAL $ 1.32 $ 1.10 $ 1.52 ================ ============= ========== =========== DILUTED EARNINGS PER SHARE Continuing operations $ 1.25 $ 1.08 $ 1.46 Discontinued operations 0.04 -- 0.03 ---------------- ------------- ---------- ---------- TOTAL $ 1.29 $ 1.08 $ 1.49 ================ ============= ========== =========== Weighted average common shares Basic 8,538 4,073 1,914 10,452 Diluted 8,730 4,150 1,978 10,708
See Notes to the Unaudited Pro Forma Consolidated Condensed Combined Financial Statements 4 BERKSHIRE HILLS BANCORP, INC. AND FACTORY POINT BANCORP, INC. NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED COMBINED FINANCIAL STATEMENTS NOTE 1 The unaudited pro forma consolidated condensed combined ("pro forma combined") balance sheet of Berkshire Hills Bancorp and Factory Point Bancorp at June 30, 2007 has been prepared as if the merger had been consummated on that date. The pro forma combined statements of income for the six months ended June 30, 2007 and year ended December 31, 2006 have been prepared as if the merger had been consummated at the beginning of the periods presented. The pro forma combined financial statements are based on the historical financial statements of Berkshire Hills Bancorp and Factory Point Bancorp and give effect to the merger under the purchase method of accounting and the assumptions and adjustments in the notes that follow. Certain reclassifications have been made to Factory Point Bancorp's financial information to conform to Berkshire Hills Bancorp's financial information. NOTE 2 The only material estimated purchase accounting adjustment to record the existing assets and liabilities of Factory Point Bancorp at fair value is a $5.3 million estimated discount for net loans based on the Factory Point Bancorp financial statements at December 31, 2006. This estimated fair value and resulting net discount, for purposes of these pro forma combined financial statements, is being accreted to interest income on a straight line basis over approximately nine years. The actual discount will be accreted to interest income to produce a constant yield to maturity. NOTE 3 The components of the purchase price of Factory Point Bancorp are as follows: (in thousands, except per share data)
Purchase Price of Factory Point Bancorp Factory Point Bancorp common stock outstanding 4,105 (a) Exchange ratio (80% stock consideration converted at 0.5844 exchange ratio) 0.4675 Total Berkshire Hills Bancorp common stock to be issued 1,919 Purchase price per Berkshire Hills Bancorp common shares $61,989 (b) Estimated value of converted Factory Point stock options 2,740 Cash payment to Factory Point Bancorp shareholders (20% cash consideration at $19.50 per share) 16,009 (c) Estimated transaction costs, net of 33% tax 6,816 (c) ------- Total purchase price $87,554 =======
(a) Based on shares of Factory Point Bancorp common stock outstanding as of March 31, 2007. (b) Based on the $32.30 average per share closing price of Berkshire Hills Bancorp common stock from May 11, 2007 through May 17, 2007. (c) Estimated transaction costs include severance, contract terminations and professional fees. 5 Goodwill is calculated as the difference between the total purchase price and the net fair value of assets and liabilities acquired, including the fair value of identified intangible assets and related tax adjustments. The pro forma combined financial statements do not include indirect merger costs which are estimated in the range of $1.0 to $2.0 million, after tax effects, for systems conversion and integration expenses. It is anticipated that these expenses will be recorded around the time of the merger date. NOTE 4 Other intangibles include an estimated core deposit intangible of $8.0 million, and the value of non-compete agreements and other intangible assets of $0.4 million. The core deposit intangible is estimated to have an estimated useful life of eight years and is amortized over this estimated useful life on a straight-line basis. The other intangible assets are amortized on a straight-line basis over a three year period. NOTE 5 The adjustment to other assets is the estimated change in the net deferred tax asset based on the other pro forma adjustments. NOTE 6 The increase in subordinated debentures is based on a projected issuance of $23.0 million in junior subordinated debentures to finance the $16.0 million cash consideration to shareholders and the $7.0 million in estimated direct costs of the merger, net of taxes. Interest expense includes the estimated interest cost of this financing. The actual form of this financing may be different from this assumption, based on capital market conditions. NOTE 7 Under the purchase method of accounting, the equity accounts of Factory Point are eliminated. Common stock is adjusted to include the $19 thousand par value of the 1.9 million common shares to be issued as part of the purchase consideration. Additional paid-in capital is adjusted for the value of the common stock issued, in excess of the par value, along with the $2.7 million estimated value of Berkshire Hills Bancorp stock options issued in exchange for Factory Point Bancorp options. NOTE 8 It is anticipated that there will be operating cost savings approximating $2.5 million, which will be partially offset by $1.1 million in increased amortization related to increased intangible assets. The allocation of operating cost savings is an estimate subject to further change. The net tax rate related to merger related changes in net income is estimated at approximately 33%. -----END PRIVACY-ENHANCED MESSAGE-----