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%.