Attached files
| file | filename |
|---|---|
| 8-K/A - AMENDMENT NO. 1 TO CURRENT REPORT - United Financial Bancorp, Inc. | unitedfinancial8kajan29-13.htm |
EXHIBIT 99.1
UNAUDITED COMBINED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL DATA
(AMOUNTS IN THOUSANDS)
The following unaudited combined condensed consolidated pro forma financial data and explanatory footnotes show information about United Financial Bancorp Inc.’s ("UFBI") financial position and operations, including per share data and financial ratios, after giving effect to the merger with New England Bancshares, Inc. ("NEBS"). The unaudited combined condensed consolidated pro forma financial data sets forth the information as if the merger had become effective on September 30, 2012, with respect to financial condition data, and at the beginning of the periods presented, with respect to operations data. The pro forma financial data in the tables reflect application of the acquisition method of accounting. Upon consummation of the merger on November 16, 2012, management of UFBI determined the fair market value of assets and liabilities based on appraisals and estimates. This table should be read in conjunction with, and is qualified in its entirety by, the historical financial statements, including the notes thereto of UFBI and NEBS by reference in this document.
The acquisition method of accounting requires that all of NEBS’ assets and liabilities be adjusted to their fair market values as of the date of acquisition. For purposes of the unaudited pro forma financial statements, the fair market value of assets and liabilities at September 30, 2012 is based upon the calculations completed after the consummation of the merger on November 16, 2012. This information may not necessarily be indicative of the financial position or results of operations that would have occurred if the merger had been consummated on the date or at the beginning of the period indicated or which may be obtained in the future.
Unaudited Combined Condensed Consolidated Pro Forma Statement of Financial Condition
As of September 30, 2012 (*)
(In Thousands)
|
Pro Forma
|
||||||||||||||||||
|
UFBI
|
NEBS
|
Adjustments
|
Pro Forma
|
|||||||||||||||
|
Historical
|
Historical
|
Inc. (Dec.)
|
Combined
|
|||||||||||||||
|
ASSETS
|
||||||||||||||||||
|
Cash and cash equivalents
|
$ | 28,344 | $ | 71,030 | $ | (2,337 | ) | (1 | ) | $ | 97,037 | |||||||
|
Investment securities
|
330,311 | 53,190 | - | 383,501 | ||||||||||||||
|
Loans receivable, net
|
1,207,902 | 555,564 | 1,932 | (2 | ) | 1,765,398 | ||||||||||||
|
Other real estate owned
|
1,349 | 1,049 | - | 2,398 | ||||||||||||||
|
Accrued interest receivable
|
4,770 | 2,350 | - | 7,120 | ||||||||||||||
|
Deferred tax asset, net
|
13,771 | 4,770 | (242 | ) | (3 | ) | 18,299 | |||||||||||
|
Stock in the Federal Home Loan Bank of Boston
|
14,454 | 4,100 | - | 18,554 | ||||||||||||||
|
Banking premises and equipment, net
|
18,145 | 5,871 | (115 | ) | (4 | ) | 23,901 | |||||||||||
|
Bank-owned life insurance
|
41,869 | 10,541 | - | 52,410 | ||||||||||||||
|
Core deposit intangible
|
257 | 744 | 3,012 | (5 | ) | 4,013 | ||||||||||||
|
Goodwill
|
8,192 | 16,783 | 16,266 | (6 | ) | 41,241 | ||||||||||||
|
Other assets
|
14,320 | 3,027 | 542 | (4 | ) | 17,889 | ||||||||||||
|
Total assets
|
$ | 1,683,684 | $ | 729,019 | $ | 19,058 | $ | 2,431,761 | ||||||||||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||||||||||||
|
Deposits
|
$ | 1,275.160 | $ | 584,268 | $ | 6,830 | (7 | ) | $ | 1,866,258 | ||||||||
|
Federal Home Loan Bank of Boston advances
|
118,120 | 31,970 | 2,309 | (8 | ) | 152,399 | ||||||||||||
|
Repurchased agreements
|
34,579 | 29,849 | - | 64,428 | ||||||||||||||
|
Subordinated debentures
|
5,608 | 3,931 | 192 | (9 | ) | 9,731 | ||||||||||||
|
Accrued expenses and other liabilities
|
20,054 | 5,544 | - | 25,598 | ||||||||||||||
|
Total liabilities
|
1,453,521 | 655,562 | 9,331 | 2,118,414 | ||||||||||||||
|
Stockholders’ equity:
|
||||||||||||||||||
|
Preferred stock
|
- | - | - | - | ||||||||||||||
|
Common stock
|
187 | 69 | 56 | (10 | ) | 312 | ||||||||||||
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Paid-in capital
|
183,476 | 60,026 | (2,317 | ) | (10 | ) | 241,185 | |||||||||||
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Retained earnings
|
93,317 | 25,350 | - | 118,667 | ||||||||||||||
|
Unearned compensation
|
(9,523 | ) | (1,476 | ) | 1,476 | (10 | ) | (9,523 | ) | |||||||||
|
Treasury stock, at cost
|
(44,808 | ) | (11,121 | ) | 11,121 | (10 | ) | (44,808 | ) | |||||||||
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Accumulated other comprehensive income, net of taxes
|
7,514 | 609 | (609 | ) | (10 | ) | 7,514 | |||||||||||
|
Total stockholders’ equity
|
230,163 | 73,457 | 9,727 | 313,347 | ||||||||||||||
|
Total liabilities and stockholders' equity
|
$ | 1,683,684 | $ | 729,019 | $ | 19,058 | $ | 2,431,761 | ||||||||||
|
______________________
|
||||||||||||||||||
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(*)
|
Assumes that the acquisition of NEBS was completed as of the beginning of the period presented utilizing the acquisition method of accounting. Estimated fair value adjustments for loans, premises and equipment, core deposit intangible, time deposits, borrowed funds and subordinated debentures were determined by the management of UFBI and NEBS. The resulting premiums and discounts for purposes of the unaudited combined condensed consolidated pro forma financial data, where appropriate, are being amortized and accreted into income as more fully described in the notes below. Actual fair value adjustments, where appropriate, will be determined as of the merger completion date and will be amortized and accreted into income.
|
|
(1)
|
Reflects a cash payment of $2,318,000 to holdings of in-the-money NEBS stock options and $18,960 of cash paid for fractional shares.
|
|
(2)
|
Represents the estimated fair value adjustment to loans, which includes an estimate of credit losses. Accordingly, the existing NEBS allowance for loan losses cannot be carried over. The estimated fair value adjustment to loans is $1.9 million, net of the elimination of the NEBS $5.0 million allowance for loan losses as well as write-offs of NEBS net deferred origination costs and existing fair value adjustments related to previous acquisitions.
|
|
(3)
|
Represents adjustments in the net deferred tax assets resulting from the fair value adjustments related to the acquired assets and liabilities, identifiable intangibles, and other deferred tax items. The actual tax liability adjustment will depend on facts and circumstances existing at the completion of the merger. The fair value adjustment in net deferred tax asset is calculated using an assumed tax rate of 40.9%.
|
|
(4)
|
Represents the difference between fair values and net carrying values of premises and equipment, mortgage servicing assets and other assets acquired in the acquisition.
|
|
(5)
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Represents the elimination of existing identifiable intangibles of NEBS, offset by the recognition of the fair value of the core deposit intangible asset, which is assumed to be 1.2% of core deposit liabilities assumed. Core deposits are defined as total deposits less time deposits.
|
|
(6)
|
Calculated to reflect the acquisition accounting adjustments related to the acquisition of NEBS. The consideration paid to acquire NEBS consists of the issuance of 5,559,496 shares of UFBI’s common stock based upon the fixed exchange rate of 0.9575 established in the merger agreement and 5,807,684 common shares of NEBS outstanding at November 16, 2012. The value of United Financial’s common stock to be issued is based upon the closing stock price of $14.24 as of November 16, 2012. Acquisition accounting adjustments assume that NEBS’ equity is eliminated and the purchase price, goodwill and intangible assets are reflected on the financial statements of UFBI pursuant to the application of acquisition accounting (amounts in thousands).
|
|
Assumptions/Inputs:
|
|
Note
|
||||||
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Value of UFBI's common stock issued
|
$ | 79,167 | ||||||
|
Add: cash paid for fractional shares
|
19 | |||||||
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Add: cash paid for NEBS' option holders
|
2,318 | |||||||
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Total deal value as of 11-16-12 merger date
|
81,504 | |||||||
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NEBS' net assets at fair value:
|
||||||||
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NEBS tangible common stockholders' equity
|
69,440 | |||||||
|
Fair value adjustments:
|
||||||||
|
Write-off of goodwill
|
(6 | ) | (16,783 | ) | ||||
|
Write-off of other intangible assets
|
(5 | ) | (718 | ) | ||||
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Loans
|
(2 | ) | 1,932 | |||||
|
Other assets
|
(4 | ) | 427 | |||||
|
Core deposit intangible
|
(5 | ) | 3,730 | |||||
|
Time deposits
|
(7 | ) | (6,830 | ) | ||||
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FHLB borrowings
|
(8 | ) | (2,309 | ) | ||||
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Trust preferred
|
(9 | ) | (192 | ) | ||||
|
Fair value adjustments
|
(20,743 | ) | ||||||
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Tax effect of fair value adjustments and other transaction related items
|
(3 | ) | (242 | ) | ||||
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Total adjustment of net assets acquired
|
(20,985 | ) | ||||||
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Adjusted net assets acquired
|
48,455 | |||||||
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Estimated goodwill
|
$ | 33,049 | ||||||
|
(7)
|
Yield adjustment to reflect the difference between portfolio yields and market rates as of November 16, 2012 for time deposits acquired in the acquisition. Yield adjustments were calculated using present value analysis. Cash flow was discounted to present value using market rates for similar deposits. The yield adjustment is the aggregate present value of the difference.
|
|
(8)
|
Yield adjustments reflect the difference between portfolio yields and market rates as of November 16, 2012 for borrowings acquired in the acquisition. Yield adjustments were based upon FHLB prepayment penalty indications as of November 16, 2012.
|
|
(9)
|
Reflects the difference between the fair value and net carrying value of the trust preferred debt obligation.
|
|
(10)
|
Reflects elimination of NEBS equity accounts.
|
Unaudited Combined Condensed Consolidated Pro Forma Income Statement
For the Year Ended December 31, 2011 (1)
|
Pro Forma
|
||||||||||||||||||
|
UFBI
|
NEBS
|
Adjustments
|
Pro Forma
|
|||||||||||||||
|
Historical
|
Historical
|
Inc. (Dec.)
|
Combined
|
|||||||||||||||
|
Interest and dividend income:
|
||||||||||||||||||
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Loans
|
$ | 58,220 | $ | 30,247 | $ | (542 | ) | (2 | ) | $ | 87,925 | |||||||
|
Investments
|
12,728 | 2,053 | - | 14,781 | ||||||||||||||
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Other interest-earning assets
|
126 | 148 | - | 274 | ||||||||||||||
|
Total interest and dividend income
|
71,074 | 32,448 | (542 | ) | 102,980 | |||||||||||||
|
Interest expense:
|
||||||||||||||||||
|
Deposits
|
12,449 | 8,372 | (3,455 | ) | (2 | ) | 17,366 | |||||||||||
|
FHLB borrowings
|
4,513 | 1,571 | - | 6,084 | ||||||||||||||
|
Other borrowings
|
1,299 | - | - | 1,299 | ||||||||||||||
|
Total interest expense
|
18,261 | 9,943 | (3,455 | ) | 24,749 | |||||||||||||
|
Net interest income before provision for loan losses
|
52,813 | 22,505 | 2,913 | 78,231 | ||||||||||||||
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Provision for loan losses
|
3,242 | 1,584 | - | 4,826 | ||||||||||||||
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Net interest income after provision for loan losses
|
49,571 | 20,921 | 2,913 | 73,405 | ||||||||||||||
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Non-interest income:
|
||||||||||||||||||
|
Fee income on depositors’ accounts
|
5,554 | 1,334 | - | 6,888 | ||||||||||||||
|
Wealth management income
|
919 | - | - | 919 | ||||||||||||||
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Income from bank-owned life insurance
|
1,642 | 357 | - | 1,999 | ||||||||||||||
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Net gain on sales of loans
|
274 | 173 | - | 447 | ||||||||||||||
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Net gain (loss) on sales/calls of securities
|
1 | 279 | - | 280 | ||||||||||||||
|
Impairment charges on securities
|
(99 | ) | - | - | (99 | ) | ||||||||||||
|
Other income
|
1,062 | 1,481 | - | 2,543 | ||||||||||||||
|
Total non-interest income
|
9,353 | 3,624 | - | 12,977 | ||||||||||||||
|
Non-interest expense:
|
||||||||||||||||||
|
Salaries and benefits
|
24,818 | 8,971 | - | 33,789 | ||||||||||||||
|
Occupancy expenses
|
3,317 | 3,304 | (4 | ) | (2 | ) | 6,617 | |||||||||||
|
Marketing expenses
|
1,797 | 453 | - | 2,250 | ||||||||||||||
|
Data processing expenses
|
3,970 | 699 | - | 4,669 | ||||||||||||||
|
Professional fees
|
2,174 | 959 | - | 3,133 | ||||||||||||||
|
FDIC insurance assessment
|
1,029 | 809 | - | 1,838 | ||||||||||||||
|
Core deposit intangible amortization
|
78 | 384 | 687 | (2 | ) | 1,149 | ||||||||||||
|
Other expenses
|
6,879 | 2,672 | - | 9,551 | ||||||||||||||
|
Total non-interest expense
|
44,062 | 18,251 | 683 | (3 | ) | 62,996 | ||||||||||||
|
Income before income taxes
|
14,862 | 6,294 | 2,230 | 23,386 | ||||||||||||||
|
Income tax expense
|
3,678 | 2,188 | 911 | (2 | ) | 6,777 | ||||||||||||
|
Net income
|
$ | 11,184 | $ | 4,106 | $ | 1,319 | $ | 16,609 | ||||||||||
|
Earnings per share:
|
||||||||||||||||||
|
Basic
|
$ | 0.75 | $ | 0.69 | $ | 0.81 | ||||||||||||
|
Diluted
|
$ | 0.74 | $ | 0.68 | $ | 0.80 | ||||||||||||
|
Weighted average shares outstanding:
|
||||||||||||||||||
|
Basic
|
14,929,714 | 5,927,714 | (368,218 | ) | 20,489,210 |
(4)
|
||||||||||||
|
Diluted
|
15,198,702 | 6,001,977 | (442,481 | ) | 20,758,198 |
(4)
|
||||||||||||
Unaudited Combined Condensed Consolidated Pro Forma Income Statement
For the Nine Months Ended September 30, 2012 (1)
(In Thousands)
|
Pro Forma
|
|||||||||||||||||||
|
UFBI
|
NEBS
|
Adjustments
|
Pro Forma
|
||||||||||||||||
|
Historical
|
Historical
|
Inc. (Dec.)
|
Combined
|
||||||||||||||||
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Interest and dividend income:
|
|||||||||||||||||||
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Loans
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$ | 42,750 | $ | 22,334 | $ | 116 | (2 | ) | $ | 65,200 | |||||||||
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Investments
|
8,171 | 1,230 | - | 9,401 | |||||||||||||||
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Other interest-earning assets
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119 | 128 | - | 247 | |||||||||||||||
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Total interest and dividend income
|
51,040 | 23,692 | 116 | 74,848 | |||||||||||||||
|
Interest expense:
|
|||||||||||||||||||
|
Deposits
|
7,795 | 5,563 | (1,401 | ) | (2 | ) | 11,957 | ||||||||||||
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FHLB borrowings
|
2,431 | 823 | - | 3,254 | |||||||||||||||
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Other borrowings
|
870 | 263 | - | 1,133 | |||||||||||||||
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Total interest expense
|
11,096 | 6,649 | (1,401 | ) | 16,344 | ||||||||||||||
|
Net interest income before provision for loan losses
|
39,944 | 17,043 | 1,517 | 58,504 | |||||||||||||||
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Provision for loan losses
|
2,450 | 1,087 | - | 3,537 | |||||||||||||||
|
Net interest income after provision for loan losses
|
37,494 | 15,956 | 1,517 | 54,967 | |||||||||||||||
|
Non-interest income:
|
|||||||||||||||||||
|
Fee income on depositors’ accounts
|
4,389 | 1,141 | - | 5,530 | |||||||||||||||
|
Wealth management income
|
795 | - | - | 795 | |||||||||||||||
|
Income from bank-owned life insurance
|
1,324 | 255 | - | 1,579 | |||||||||||||||
|
Net gain on sale of loans
|
458 | 387 | - | 845 | |||||||||||||||
|
Net gain on sale of securities
|
27 | 456 | - | 483 | |||||||||||||||
|
Other income
|
661 | 393 | - | 1,054 | |||||||||||||||
|
Total non-interest income
|
7,654 | 2,632 | - | 10,286 | |||||||||||||||
|
Non-interest expense:
|
|||||||||||||||||||
|
Salaries and benefits
|
19,103 | 6,769 | - | 25,872 | |||||||||||||||
|
Occupancy expenses
|
2,567 | 2,300 | (3 | ) | (2 | ) | 4,864 | ||||||||||||
|
Marketing expenses
|
1,257 | 370 | - | 1,627 | |||||||||||||||
|
Data processing expenses
|
3,140 | 547 | - | 3,687 | |||||||||||||||
|
Professional fees
|
1,282 | 555 | - | 1,837 | |||||||||||||||
|
Acquisition related expenses
|
958 | 675 | (1,633 | ) | (3 | ) | - | ||||||||||||
|
FDIC insurance assessment
|
800 | 341 | - | 1,141 | |||||||||||||||
|
Core deposit intangible amortization
|
53 | 260 | 415 | (2 | ) | 728 | |||||||||||||
|
Other expenses
|
4,775 | 2,114 | - | 6,889 | |||||||||||||||
|
Total non-interest expense
|
33,935 | 13,931 | (1,221 | ) | 46,645 | ||||||||||||||
|
Income before income taxes
|
11,213 | 4,657 | 2,738 | 18,608 | |||||||||||||||
|
Income tax expense
|
2,853 | 1,742 | 1,118 | (2 | ) | 5,713 | |||||||||||||
|
Net income
|
$ | 8,360 | $ | 2,915 | $ | 1,619 | $ | 12,894 | |||||||||||
|
Earnings per share:
|
|||||||||||||||||||
|
Basic
|
$ | 0.57 | $ | 0.34 | $ | 0.64 | |||||||||||||
|
Diluted
|
$ | 0.56 | $ | 0.33 | $ | 0.63 | |||||||||||||
|
Weighted average shares outstanding:
|
|||||||||||||||||||
|
Basic
|
14,578,253 | 5,720,983 | (161,487 | ) | 20,137,749 |
(4)
|
|||||||||||||
|
Diluted
|
14,827,428 | 5,815,989 | (256,493 | ) | 20,386,924 |
(4)
|
|||||||||||||
|
(1)
|
Assumes that the acquisition of NEBS was completed as of the beginning of the period presented utilizing the acquisition method of accounting. Fair value adjustments for loans, premises and equipment, core deposit intangible, time deposits, borrowed funds and subordinated debentures were determined by the management of UFBI and NEBS as of the merger completion date of November 16, 2012. The resulting premiums and discounts for purposes of the unaudited combined condensed consolidated pro forma financial data, where appropriate, are being amortized and accreted into income as more fully described in the notes below.
|
|
(2)
|
The following table summarizes the estimated full year impact of the amortization (accretion) of the accretable acquisition accounting adjustments on the pro-forma income statement (in thousands).
|
|
Amortization (Accretion)
|
|||||||||||||||||
|
Category
|
Premium/
(Discounts)
|
Estimated
Life in
Years |
Amortization
(Accretion)
Method
|
Year Ended
December 31, 2011
|
9 Months Ended
September 30, 2012
|
||||||||||||
|
Loans
|
$ | 680 | 3.6 |
EY
|
$ | (542 | ) | $ | 116 | ||||||||
|
Premises and equipment
|
(115 | ) | 30.0 |
SL
|
(4 | ) | (3 | ) | |||||||||
|
Core deposit intangible
|
3,730 | 10.0 |
SYD
|
687 | 415 | ||||||||||||
|
Time deposits
|
(6,830 | ) | 1.5 |
SL
|
(3,455 | ) | (1,401 | ) | |||||||||
The straight line (“SL”) and sum of the years digits (“SYD”) methods were utilized in preparing the pro forma statement of income for amortizing and/or accreting the related acquisition accounting adjustments for all categories except loans. Loan accretion was determined using the effective interest method and the contractual lives.
The following table summarizes the estimated impact of the amortization/(accretion) of the acquisition accounting adjustments made in connection with the merger on UFBI’s results of operations for the following years assuming such transaction was effected on January 1, 2011 (in thousands).
|
Projected Future Amounts
|
Net
|
Net Decrease
|
||||||||||
|
for the Years Ended
|
Amortization
|
Amortization
|
in Income
|
|||||||||
|
December 31,
|
of Intangibles
|
(Accretion)
|
Before Taxes
|
|||||||||
|
2011
|
$ | 687 | $ | (4,001 | ) | $ | (3,314 | ) | ||||
|
2012
|
553 | (1,718 | ) | (1,165 | ) | |||||||
|
2013
|
446 | (833 | ) | (387 | ) | |||||||
|
2014
|
400 | (228 | ) | 172 | ||||||||
|
2015
|
359 | 64 | 423 | |||||||||
|
thereafter
|
1,285 | 450 | 1,735 | |||||||||
|
(3)
|
Non-interest expenses do not include NEBS’s one-time merger and integration expenses totaling $7.4 million ($4.7 million after tax). These expenses are reflected as adjustments to cash and equity on the balance sheet in these pro forma financial statements. UFBI will incur approximately $5.4 million ($4.0 million after tax) in total transaction costs as a result of the merger. Through December 31, 2012 UFBI and NEBS have recognized transaction costs totaling $5.0 million and $7.4 million, respectively.
|
|
|
A summary of UFBI’s transaction costs is as follows (in thousands):
|
|
Merger related compensation and benefits
|
$ | 2,389 | ||
|
Professional fees
|
2,229 | |||
|
Other merger related expenses
|
334 | |||
|
Estimated pre-tax transaction costs
|
4,952 | |||
|
Less related tax benefit
|
990 | |||
|
Estimated transaction costs, net of taxes
|
$ | 3,962 |
|
(4)
|
Basic and diluted weighted average common shares outstanding were determined by adding the number of shares issued to NEBS to UFBI’s historical weighted average basic and diluted outstanding common shares.
|