Exhibit 99.4
Pro Forma Post Acquisition Form 8-K
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The accompanying unaudited pro forma combined consolidated financial information has been prepared using the acquisition method of accounting, giving effect to Norwood’s proposed acquisition of UpState New York Bancorp, Inc. (“UpState”). Under this method, UpState’s assets and liabilities as of the date of the acquisition will be recorded at their respective fair values and added to those of Norwood. Any difference between the purchase price for UpState and the fair value of the identifiable net assets acquired (including core deposit intangibles) will be recorded as goodwill. The goodwill resulting from the acquisition will not be amortized to expense, but instead will be reviewed for impairment at least annually. Any core deposit intangible and other intangible assets with estimated useful lives to be recorded by Norwood in connection with the acquisition will be amortized to expense over their estimated useful lives. The financial statements of Norwood issued after the acquisition will reflect the results attributable to the acquired operations of UpState beginning on the date of completion of the acquisition.
The accompanying unaudited pro forma combined consolidated balance sheet as of March 31, 2020 combines the historical financial statements of Norwood and UpState. The unaudited pro forma consolidated financial statements give effect to the proposed acquisition as if the acquisition occurred on March 31, 2020 with respect to the balance sheet, and at the beginning of the period for the twelve months ended December 31, 2019 and for the three months ended March 31, 2020, with respect to the statement of income. The unaudited pro forma consolidated financial statements were prepared with Norwood as the acquirer and UpState as the acquiree under the acquisition method of accounting. Accordingly, the consideration paid by Norwood to complete the acquisition of UpState will be allocated to UpState’s assets and liabilities based upon their estimated fair values as of the date of completion of the acquisition. The allocation is dependent upon certain valuations and other studies that have not been finalized at the time of the acquisition announcement; however, preliminary valuations based on the fair value of the acquired assets and liabilities have been estimated and included in the unaudited pro forma financial statements.
The final allocation of the purchase price will be determined after the merger is completed and after completion of thorough analyses to determine the fair value of UpState’s tangible and identifiable intangible assets and liabilities as of the date the merger is completed. Increases or decreases in the estimated fair values of the net assets as compared with the information shown in the unaudited pro forma combined consolidated financial information may change the amount of the purchase price allocated to goodwill and other assets and liabilities and may impact Norwood’s consolidated statement of income due to adjustments in yield and/or amortization of the adjusted assets or liabilities. Any changes to UpState shareholders’ equity, including results of operations from March 31, 2020 through the date the merger is completed will also change the purchase price allocation, which may include the recording of a lower or higher amount of goodwill. The final adjustments may be materially different from the unaudited pro forma adjustments presented herein. The pro forma calculations, shown herein, assume a closing price for Norwood common stock of $24.30, which represents the closing price of Norwood common stock on July 6, 2020.
The pro forma income statement and per share data information does not include anticipated cost savings or revenue enhancements, nor does it include one-time merger-related expenses which will be expensed against income. UpState and Norwood are currently in the process of assessing the two companies’ personnel, benefits plans, premises, equipment, computer systems and service contracts to determine where the companies may take advantage of redundancies or where it will be beneficial or necessary to convert to one system. Certain decisions arising from these assessments may involve canceling contracts between either UpState or Norwood and certain service providers. The pro forma combined basic earnings and diluted earnings per share of Norwood common stock is based on the pro forma combined net income per common share for UpState and Norwood divided by the pro forma common shares or diluted common shares of the combined entities. The pro forma information includes adjustments related to the fair value of assets and liabilities of UpState and is subject to adjustment as additional information becomes available and as a final merger date analyses are performed. The pro forma combined balance sheet and book value per share data does include the impact of merger-related expenses on the balance sheet with UpState’s after-tax charges currently estimated at $4.9 million, illustrated as a pro forma fair value liability accrual, and Norwood’s after-tax estimated charges of $1.7 million, illustrated as a pro forma adjustment to retained earnings and liability accrual. The pro forma combined book value and tangible book value of Norwood common stock is based on the pro forma combined common stockholders’ equity of UpState and Norwood divided by total pro forma common shares of the combined entities.
1
Certain reclassification adjustments have been made to UpState’s unaudited pro forma financial statements to conform to Norwood’s financial statement presentation. The unaudited pro forma information, while helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not reflect the benefits of expected cost savings or opportunities to earn additional revenue and, accordingly, does not attempt to predict or suggest future results. It also does not necessarily reflect what the historical results of the combined company would have been had our companies been combined during this period. The unaudited pro forma combined financial information has been derived from, and should be read in conjunction with, the historical consolidated financial statements and the related notes of both UpState and Norwood that have been included in or incorporated by reference into this joint proxy statement/prospectus.
The unaudited pro forma data are qualified by the statements set forth under this caption and should not be considered indicative of the market value of Norwood common stock or the actual or future results of operations of Norwood for any period. Actual results may be materially different than the pro forma information presented.
2
Unaudited Combined Pro Forma Balance Sheets as of March 31, 2020
($ In Thousands, Except Share and Per Share Data)
Norwood Financial Corp. | Upstate New York Bancorp, Inc. | Pro Forma Adjustments | Pro Forma Combined | |||||||||||||
ASSETS | ||||||||||||||||
Cash and due from banks | $ | 14,712 | $ | 20,897 | $ | — | $ | 35,609 | ||||||||
Interest-bearing deposits with banks | 23,706 | 4,443 | — | 28,149 | ||||||||||||
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Cash and cash equivalents | 38,418 | 25,340 | — | 63,758 | ||||||||||||
Securities available for sale | 196,998 | 18,765 | (8,844 | ) (1)(3) | 206,919 | |||||||||||
Securities held to maturity | — | 2,610 | 88 | (4) | 2,698 | |||||||||||
Loans receivable | 928,565 | 392,186 | (15,180 | ) (5) | 1,305,571 | |||||||||||
Less: Allowance for loan losses | 9,088 | 8,209 | (8,209 | ) (6) | 9,088 | |||||||||||
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Net loans receivable | 919,477 | 383,977 | (6,971 | ) | 1,296,483 | |||||||||||
Regulatory stock, at cost | 3,770 | 2,502 | — | 6,272 | ||||||||||||
Bank premises and equipment, net | 14,071 | 5,718 | (1,211 | ) (7) | 18,578 | |||||||||||
Bank owned life insurance | 38,971 | — | — | 38,971 | ||||||||||||
Foreclosed real estate owned | 1,077 | 866 | — | 1,943 | ||||||||||||
Accrued interest receivable | 3,669 | 1,702 | — | 5,371 | ||||||||||||
Goodwill | 11,331 | — | 20,209 | (1) | 31,540 | |||||||||||
Other intangible assets | 212 | — | 409 | (8) | 621 | |||||||||||
Other assets | 14,297 | 1,813 | 4,077 | (9) | 20,187 | |||||||||||
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Total assets | $ | 1,242,291 | $ | 443,293 | $ | 7,757 | $ | 1,693,341 | ||||||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
LIABILITIES | ||||||||||||||||
Deposits: | ||||||||||||||||
Non-interest-bearing | $ | 213,359 | $ | 65,084 | $ | — | $ | 278,443 | ||||||||
Interest-bearing | 776,801 | 328,785 | 2,754 | (10) | 1,108,340 | |||||||||||
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Total deposits | 990,160 | 393,869 | 2,754 | 1,386,783 | ||||||||||||
Short-term borrowings | 40,656 | — | — | 40,656 | ||||||||||||
Other borrowings | 51,350 | 1,627 | — | 52,977 | ||||||||||||
Accrued interest payable | 2,895 | 231 | — | 3,126 | ||||||||||||
Other liabilities | 15,043 | 1,057 | 7,901 | (11) | 24,001 | |||||||||||
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Total liabilities | 1,100,104 | 396,784 | 10,655 | 1,507,543 | ||||||||||||
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STOCKHOLDERS’ EQUITY | ||||||||||||||||
Common stock | 634 | 10,935 | (10,748 | ) (1)(2) | 821 | |||||||||||
Surplus | 49,644 | 6,749 | 38,401 | (1)(2) | 94,794 | |||||||||||
Retained earnings | 88,032 | 28,923 | (30,649 | ) (2)(9) | 86,306 | |||||||||||
Treasury stock | (400 | ) | — | — | (400 | ) | ||||||||||
Accumulated other comprehensive income (loss) | 4,277 | (98 | ) | 98 | (2) | 4,277 | ||||||||||
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Total stockholders’ equity | 142,187 | 46,509 | (2,898 | ) | 185,798 | |||||||||||
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Total liabilities and stockholders’ equity | $ | 1,242,291 | $ | 443,293 | $ | 7,757 | $ | 1,693,341 | ||||||||
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Per Share Data | ||||||||||||||||
Common shares outstanding | 6,330,561 | 2,208,000 | (342,262 | ) (1) | 8,196,299 | |||||||||||
Book value per common share | $ | 22.52 | $ | 21.06 | $ | 22.72 | ||||||||||
Tangible book value per common share | $ | 20.70 | $ | 21.06 | $ | 18.79 |
3
Unaudited Pro Forma Combined Statements of Income for the twelve months ended December 31, 2019
($ In Thousands, Except Share and Per Share Data)
Norwood Financial Corp. | Upstate New York Bancorp, Inc. | Pro Forma Adjustments | Pro Forma Combined | |||||||||||||
INTEREST AND DIVIDEND INCOME | ||||||||||||||||
Loans receivable, including fees | $ | 41,889 | $ | 19,994 | $ | 1,574 | (5) | $ | 63,457 | |||||||
Securities | 5,314 | 431 | (111 | ) (3) | 5,634 | |||||||||||
Other | 81 | 314 | — | 395 | ||||||||||||
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Total Interest Income | 47,284 | 20,739 | 1,463 | 69,486 | ||||||||||||
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INTEREST EXPENSE | ||||||||||||||||
Deposits | 7,139 | 5,620 | (1,731 | ) (9) | 11,028 | |||||||||||
Short-term borrowings | 468 | 1 | — | 469 | ||||||||||||
Other borrowings | 1,071 | 45 | — | 1,116 | ||||||||||||
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Total Interest Expense | 8,678 | 5,666 | (1,731 | ) | 12,613 | |||||||||||
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Net Interest Income | 38,606 | 15,073 | 3,194 | 56,873 | ||||||||||||
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PROVISION FOR LOAN LOSSES | 1,250 | 1,942 | — | 3,192 | ||||||||||||
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Net Interest Income after Provision for Loan Losses | 37,356 | 13,131 | 3,194 | 53,681 | ||||||||||||
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OTHER INCOME | ||||||||||||||||
Service charges and fees | 4,450 | 497 | — | 4,947 | ||||||||||||
Income from fiduciary activities | 610 | — | — | 610 | ||||||||||||
Net realized gains on sales of securities | 254 | — | — | 254 | ||||||||||||
Gains on sales of loans, net | 169 | 439 | — | 608 | ||||||||||||
Earnings and proceeds on life insurance policies | 830 | — | — | 830 | ||||||||||||
Other | 465 | 245 | — | 710 | ||||||||||||
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Total Other Income | 6,778 | 1,181 | — | 7,959 | ||||||||||||
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OTHER EXPENSES | ||||||||||||||||
Salaries and employee benefits | 14,655 | 4,140 | — | 18,795 | ||||||||||||
Occupancy, furniture and equipment | 3,719 | 902 | (24 | ) (7) | 4,597 | |||||||||||
Data processing and related operations | 1,869 | 680 | — | 2,549 | ||||||||||||
Taxes, other than income | 751 | 77 | — | 828 | ||||||||||||
Professional fees | 1,113 | 471 | — | 1,584 | ||||||||||||
FDIC Insurance assessment | 153 | 110 | — | 263 | ||||||||||||
Foreclosed real estate | 45 | — | — | 45 | ||||||||||||
Amortization of intangibles | 101 | — | 74 | (8) | 175 | |||||||||||
Other | 4,905 | 2,184 | — | 7,089 | ||||||||||||
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Total Other Expenses | 27,311 | 8,564 | 50 | 35,925 | ||||||||||||
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Income before Income Taxes | 16,823 | 5,748 | 3,144 | 25,715 | ||||||||||||
PROVISION FOR INCOME TAXES | 2,608 | 1,121 | 660 | (9) | 4,389 | |||||||||||
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Net income | $ | 14,215 | $ | 4,627 | $ | 2,484 | $ | 21,326 | ||||||||
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Earnings per common share: | ||||||||||||||||
Basic | $ | 2.27 | $ | 2.12 | $ | 2.62 | ||||||||||
Diluted | $ | 2.25 | $ | 2.12 | $ | 2.60 | ||||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 6,260,215 | 2,182,397 | (316,659 | ) (1) | 8,125,953 | |||||||||||
Diluted | 6,332,291 | 2,182,397 | (316,659 | ) (1) | 8,198,029 |
4
Unaudited Pro Forma Combined Statements of Income for the three months ended March 31, 2020
($ In Thousands, Except Share and Per Share Data)
Norwood Financial Corp. | Upstate New York Bancorp, Inc. | Pro Forma Adjustments | Pro Forma Combined | |||||||||||||
INTEREST AND DIVIDEND INCOME | ||||||||||||||||
Loans receivable, including fees | $ | 10,683 | $ | 4,898 | $ | 521 | (5) | $ | 16,102 | |||||||
Securities | 1,179 | 150 | (28 | ) (3) | 1,301 | |||||||||||
Other | 6 | 34 | — | 40 | ||||||||||||
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Total Interest Income | 11,868 | 5,082 | 493 | 17,443 | ||||||||||||
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INTEREST EXPENSE | ||||||||||||||||
Deposits | 1,790 | 1,248 | (594 | ) (9) | 2,444 | |||||||||||
Short-term borrowings | 111 | — | — | 111 | ||||||||||||
Other borrowings | 302 | 10 | — | 312 | ||||||||||||
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Total Interest Expense | 2,203 | 1,258 | (594 | ) | 2,867 | |||||||||||
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Net Interest Income | 9,665 | 3,824 | 1,087 | 14,576 | ||||||||||||
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PROVISION FOR LOAN LOSSES | 700 | 898 | — | 1,598 | ||||||||||||
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Net Interest Income after Provision for Loan Losses | 8,965 | 2,926 | 1,087 | 12,978 | ||||||||||||
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OTHER INCOME | ||||||||||||||||
Service charges and fees | 1,063 | 119 | — | 1,182 | ||||||||||||
Income from fiduciary activities | 153 | — | — | 153 | ||||||||||||
Net realized gains on sales of securities | 38 | — | — | 38 | ||||||||||||
Gains on sales of loans, net | 56 | 99 | — | 155 | ||||||||||||
Earnings and proceeds on life insurance policies | 208 | — | — | 208 | ||||||||||||
Other | 136 | 58 | — | 194 | ||||||||||||
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Total Other Income | 1,654 | 276 | — | 1,930 | ||||||||||||
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OTHER EXPENSES | ||||||||||||||||
Salaries and employee benefits | 3,777 | 902 | — | 4,679 | ||||||||||||
Occupancy, furniture and equipment | 968 | 365 | (24 | ) (7) | 1,309 | |||||||||||
Data processing and related operations | 437 | 174 | — | 611 | ||||||||||||
Taxes, other than income | 214 | — | — | 214 | ||||||||||||
Professional fees | 218 | 84 | — | 302 | ||||||||||||
FDIC Insurance assessment | — | 37 | — | 37 | ||||||||||||
Foreclosed real estate | 16 | — | — | 16 | ||||||||||||
Amortization of intangibles | 23 | — | 19 | (8) | 42 | |||||||||||
Merger cost | — | 610 | (610 | ) (11) | — | |||||||||||
Other | 1,406 | 450 | — | 1,856 | ||||||||||||
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Total Other Expenses | 7,059 | 2,622 | (615 | ) | 9,066 | |||||||||||
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Income before Income Taxes | 3,560 | 580 | 1,702 | 5,842 | ||||||||||||
PROVISION FOR INCOME TAXES | 481 | 250 | 357 | (9) | 1,088 | |||||||||||
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Net income | $ | 3,079 | $ | 330 | $ | 1,345 | $ | 4,754 | ||||||||
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Earnings per common share: | ||||||||||||||||
Basic | $ | 0.49 | $ | 0.15 | $ | 0.58 | ||||||||||
Diluted | $ | 0.49 | $ | 0.15 | $ | 0.58 | ||||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 6,293,440 | 2,208,000 | (342,262 | ) (1) | 8,159,178 | |||||||||||
Diluted | 6,322,770 | 2,208,000 | (342,262 | ) (1) | 8,188,508 |
5
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1) | The acquisition will be effected by the issuance of shares of Norwood common stock and cash to UpState’s shareholders. Pursuant to the terms of the merger agreement, shareholders of UpState will have the opportunity to elect to receive for each share of UpState common stock they own, either 0.9390 shares of Norwood common stock or $33.33 in cash, or a combination of both. All shareholder elections will be subject to the allocation and proration procedures set forth in the merger agreement which are intended to ensure that 90% of the shares of UpState will be exchanged for Norwood common stock and 10% of the shares of UpState will be exchanged for cash. Based on the merger allocation requirements, this pro forma information assumes 1,987,206 of the 2,208,000 shares of UpState common stock outstanding as of March 31, 2019 would be exchanged for Norwood common stock, with the balance of the outstanding UpState shares being exchanged for cash of $7.4 million. In addition to the purchase price per share under the terms of the merger agreement Norwood also paid an additional $0.67 per share in cash for each share of UpState common stock held, or a total of $1.5 million to UpState’s shareholders. The transaction is expected to be a tax-free exchange for shareholders of UpState receiving Norwood common stock. The shares of Norwood common stock issued for the merger in the pro forma data were assumed to be recorded at a fair value of $24.30 per share, which represents Norwood’s common stock closing price per share as of July 6, 2020. |
The final accounting purchase price assigned to record the shares issued in the acquisition will be based on the closing price of Norwood common stock on the closing date of the acquisition. Norwood and UpState cannot predict what the value or price of Norwood common stock will be at the closing of the transaction or how the value or price of Norwood common stock may trade at any time.
The final allocation of the purchase price will be determined after the acquisition is completed and additional analyses are performed to determine the fair values of UpState tangible and identifiable intangible assets and liabilities as of the date the acquisition is completed. Changes in the fair value of the net assets of UpState as of the date of the acquisition will likely change the amount of purchase price allocable to excess purchase price. The final adjustments may be materially different from the unaudited pro forma adjustments presented herein. The unaudited pro forma financial information has been prepared to include the estimated adjustments necessary to record the assets and liabilities of UpState at their respective fair values and represents management’s best estimate based upon the information available at this time. These pro forma adjustments included herein are subject to change as additional information becomes available and as additional analyses are performed. Such adjustments, when compared to the information shown in this document, may change the amount of the purchase price allocated to goodwill while changes to other assets and liabilities may impact the statement of income due to adjustments in the yield and/or amortization/accretion of the adjusted assets and liabilities.
The total estimated purchase price for the purpose of this pro forma financial information is $54.2 million. The following table provides the calculation and allocation of the purchase price used in the pro forma financial statements and a reconcilement of pro forma shares to be outstanding:
6
Summary of Purchase Price Calculation and Goodwill Resulting from Merger
Reconcilation of Pro Forma Shares Outstanding at March 31, 2020
($ in Thousands, Except per Share Data)
March 31, 2020 | ||||||||||||
Purchase Price Consideration in Common Stock: | ||||||||||||
UpState common shares settled for stock | 1,987,206 | |||||||||||
Exchange Ratio | 0.9390 | |||||||||||
Norwood shares to be issued | 1,865,738 | |||||||||||
Value assigned to Norwood common shares (7/06/2020 closing price) | $ | 24.30 | ||||||||||
Purchase price assigned to Norwood common shares exchanged for UpState stock | $ | 45,337 | ||||||||||
Purchase Price Consideration - Cash for Common Stock (1) | ||||||||||||
UpState shares exchanged for cash | 220,794 | |||||||||||
Purchase price paid to each UpState common share exchanged for cash | $ | 33.33 | ||||||||||
Purchase price assigned to UpState common shares exchanged for cash | 7,359 | |||||||||||
Purchase Price Consideration - Additional Cash Consideration | ||||||||||||
UpState common shares | 2,208,000 | |||||||||||
Purchase price paid to each UpState common share | $ | 0.67 | ||||||||||
Purchase price assigned to additional cash paid to each UpState common share | 1,479 | |||||||||||
Cash paid in lieu of fractional shares | 6 | |||||||||||
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Total Purchase Price | 54,181 | |||||||||||
Net Assets Acquired: | ||||||||||||
UpState stockholders’ equity as of 3/31/2020 | $ | 46,509 | ||||||||||
UpState goodwill and intangibles | — | |||||||||||
Estimated adjustments to reflect assets acquired at fair value: | ||||||||||||
Investments | 88 | |||||||||||
Loan - ASC 310-20 interest rate fair value | 3,982 | |||||||||||
Loan - ASC 310-20 general credit fair value | (10,528 | ) | ||||||||||
Loan - ASC 310-30 acquired with deteriorated credit quality | (6,937 | ) | ||||||||||
ASC 310-20 deferred loan expense, net | (1,697 | ) | ||||||||||
Allowance for loan losses | 8,209 | |||||||||||
Core deposit intangible | 409 | |||||||||||
Premises | (1,211 | ) | ||||||||||
Deferred tax assets | 3,941 | |||||||||||
Other assets | (48 | ) | ||||||||||
Estimated adjustments to reflect liabilities acquired at fair value: | ||||||||||||
Time deposits | (2,754 | ) | ||||||||||
Seller transaction merger liabilities accrued at closing | (5,991 | ) | ||||||||||
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Net Assets Acquired | 33,972 | |||||||||||
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Goodwill resulting from merger | $ | 20,209 | ||||||||||
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Reconcilement of Pro Forma Shares Oustanding | ||||||||||||
UpState shares outstanding including restricted stock | 1,987,206 | |||||||||||
Exchange ratio | 0.939 | |||||||||||
Norwood shares to be issued to UpState | 1,865,738 | |||||||||||
Norwood shares outstanding | 6,330,561 | |||||||||||
Pro Forma Norwood shares oustanding | 8,196,299 | |||||||||||
Percentage ownership for Norwood | 77.24 | % | ||||||||||
Percentage ownership for UpState | 22.76 | % |
7
2) | Balance sheet adjustment to reflect the issuance of shares of Norwood common stock with $0.10 per share par value in connection with the acquisition and the adjustments to shareholders’ equity for the reclassification of UpState historical equity accounts (common stock, accumulated other comprehensive loss, and undivided profits) into surplus and adjustment for goodwill created in the transaction. |
3) | Securities available-for-sale were recorded at fair value at March 31, 2020 therefore no balance sheet adjustment is necessary. Income statement adjustment includes prospective reclassification of existing available-for-sale securities fair value adjustment to an amortizing premium which will be amortized into income based on the expected life. This investment adjustment is expected to decrease pro forma pre-tax interest income by $78 thousand in the first year following consummation. |
Balance sheet adjustment related to payment of cash consideration of $7.4 million and the special dividend of $1.5 million for the transaction and corresponding income statement adjustments includes related interest income impact of $7 thousand assumed at a rate of 0.08% (Fed Funds Effective Rate as of 3/31/20).
4) | Balance sheet adjustment to reflect the fair value premium of $88 thousand for securities held-to-maturity. This adjustment will be recognized into income over the expected life. This investment adjustment is expected to decrease pro forma pre-tax interest income by $26 thousand in the first year following consummation. |
5) | Balance sheet adjustment includes an ASC 310-20 interest rate fair value premium of $4.0 million based on current discount rates of similar loans, an ASC 310-20 general credit fair value discount of $10.5 million, an ASC 310-30 $6.9 million fair value credit discount and $1.7 million ASC 310-20 deferred loan expenses net reversal. The amortizable loan interest and credit fair value adjustments will be substantially recognized over the expected life of the loans and is expected to increase pro forma pre-tax interest income by $1.6 million in the first year following consummation. |
6) | Balance sheet adjustment for the reversal of the UpState allowance for loan losses in accordance with acquisition method of accounting for the acquisition. |
7) | Balance sheet adjustment to reflect a $1.2 million fair value write-down of bank premises amortized over the estimated life. These adjustments are expected to decrease pro forma expense by $24 thousand in the first year following consummation. |
8) | Balance sheet and income statement adjustment to intangible assets to reflect the fair value of $409 thousand for acquired core deposit intangible asset and the related amortization adjustment based upon an expected life of 10 years. The amortization of the core deposit intangible is expected to increase pro forma pre-tax expense by $74 thousand in the first year following consummation. It is anticipated that the brand names of UpState’s two units, Bank of the Finger Lakes and Bank of Cooperstown, will be used for a limited period of time (currently anticipated to be 1 year) and due to the limited time of use no trade name intangible asset is anticipated to be recorded. |
9) | Balance sheet and income statement adjustment to reflect an effective tax rate of 21%. |
10) | Balance sheet and income statement adjustments to reflect a fair value premium of $2.8 million for UpState’s certificates of deposit. This adjustment will be recognized using into income over the expected life. These adjustments are expected to decrease pro forma pre-tax interest expense by $1.7 million the first year following consummation. |
11) | Balance sheet adjustment to reflect the accrual of one-time merger-related charges for Norwood and UpState: (a) UpState pre-tax charges are estimated at $6.0 million ($4.9 million after-tax) and are included as a pro forma fair value liability accrual, and (b) Wayne Bank pre-tax charges are estimated at $1.9 million ($1.7 million after-tax) and are included as a pro forma liability accrual with the after-tax cost as reduction to retained earnings. Since the Day 1 balance sheet includes one-time merger-related charges, the pro forma income statement does not include one-time merger-related expenses which will be expensed against income when incurred. It is noted that a tax benefit was not taken for certain merger obligations and costs that were not considered to be tax deductible. |
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