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
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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.