Exhibit 99.3
BROOKLINE BANCORP INC.
CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF FINANCIAL CONDITION (Unaudited)
(in thousands)
At December 31, 2022 | ||||||||||||||||
Brookline | PCSB | Adjustments | ||||||||||||||
Historical | Historical | (1) | Proforma | |||||||||||||
Assets | ||||||||||||||||
Cash and short term investments | $ | 382,959 | $ | 42,373 | $ | (130,462 | ) (2) | $ | 294,870 | |||||||
Securities | 656,766 | 430,488 | (63,712 | ) (3) | 1,023,542 | |||||||||||
Loans, net of deferred fees and costs | 7,644,388 | 1,381,665 | (47,040 | ) (4) | 8,979,013 | |||||||||||
Allowance for credit losses | (98,482 | ) | (9,296 | ) | (6,083 | ) (5) | (113,861 | ) | ||||||||
Bank premises and equipment | 71,391 | 12,675 | 4,216 | (6) | 88,282 | |||||||||||
Goodwill | 160,427 | 6,106 | 68,064 | (7) | 234,597 | |||||||||||
Identifiable intangible assets | 1,781 | 65 | 30,200 | (8) | 32,046 | |||||||||||
Other assets | 366,606 | 75,699 | 31,040 | (9) | 473,345 | |||||||||||
Total Assets | $ | 9,185,836 | $ | 1,939,775 | $ | (113,777 | ) | $ | 11,011,834 | |||||||
Liabilities | ||||||||||||||||
Deposits | $ | 6,522,146 | $ | 1,573,725 | (3,162 | ) (10) | $ | 8,092,709 | ||||||||
Borrowings | 1,432,652 | 53,254 | (331 | ) (11) | 1,485,575 | |||||||||||
Reserve for unfunded credits | 20,602 | - | 1,596 | (12) | 22,198 | |||||||||||
Other liabilities | 218,311 | 40,023 | 6,036 | (13) | 264,370 | |||||||||||
Stockholders’ equity | 992,125 | 272,773 | (117,916 | ) (14) | 1,146,982 | |||||||||||
Total Liabilities and Shareholders’ Equity | $ | 9,185,836 | $ | 1,939,775 | $ | (113,777 | ) | $ | 11,011,834 | |||||||
Common shares | 76,844,232 | 15,334,323 | $ | (3,513,420 | ) (15) | $ | 88,665,135 |
1
BROOKLINE BANCORP INC.
CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF INCOME (Unaudited)
(in thousands, except for share data)
Twelve Months Ended December 31, 2022 | ||||||||||||||||
Brookline Historical | PCSB Historical | Adjustments (1)(2) | Pro Forma | |||||||||||||
INTEREST AND DIVIDEND INCOME | ||||||||||||||||
Loans and leases | $ | 328,769 | $ | 53,605 | $ | 9,408 | (16) | $ | 391,782 | |||||||
Debt and equity securities | 14,977 | 9,286 | 12,742 | (17) | 37,005 | |||||||||||
Short term investments | 1,440 | 1,197 | - | 2,637 | ||||||||||||
Total Interest and Dividend Income | 345,186 | 64,088 | 22,150 | 431,424 | ||||||||||||
INTEREST EXPENSE | ||||||||||||||||
Deposits | 29,592 | 6,651 | 744 | (18) | 36,987 | |||||||||||
Borrowed Funds | 15,823 | 978 | 5,433 | (19) | 22,234 | |||||||||||
Total Interest Expense | 45,415 | 7,629 | 6,177 | 59,221 | ||||||||||||
Net Interest Income | 299,771 | 56,459 | 15,973 | 372,203 | ||||||||||||
Less Provision for Credit Losses | 8,627 | 841 | 15,903 | (20) | 25,371 | |||||||||||
Net Interest Income after Provision for Loan Losses | 291,144 | 55,618 | 70 | 346,832 | ||||||||||||
NONINTEREST INCOME | ||||||||||||||||
Fees and service charges | 13,127 | 1,765 | - | 14,892 | ||||||||||||
Loan level derivative income | 4,246 | 785 | - | 5,031 | ||||||||||||
Gain (Loss) on investment securities, net | 321 | 141 | - | 462 | ||||||||||||
Gain on sales of loans | 4,136 | 9 | - | 4,145 | ||||||||||||
Other noninterest income | 6,517 | 781 | - | 7,298 | ||||||||||||
Total Noninterest Income | 28,347 | 3,481 | - | 31,828 | ||||||||||||
NONINTEREST EXPENSE | ||||||||||||||||
Compensation and employee benefits | 113,487 | 31,516 | (7,927 | ) (21) | 137,076 | |||||||||||
Occupancy, equipment and data processing | 36,835 | 5,614 | (229 | ) (22) | 42,220 | |||||||||||
Professional services | 5,060 | 1,480 | - | 6,540 | ||||||||||||
FDIC assessment | 3,177 | 500 | - | 3,677 | ||||||||||||
Advertising and marketing | 4,980 | 532 | - | 5,512 | ||||||||||||
Amortization of indentified intangible assets | 494 | 54 | 7,512 | (23) | 8,060 | |||||||||||
Merger and acquisition expense | 2,249 | 18,061 | (20,310 | ) (24) | - | |||||||||||
Other noninterest expense | 13,260 | 4,696 | - | 17,956 | ||||||||||||
Total Noninterest Expense | 179,542 | 62,453 | (20,954 | ) | 221,041 | |||||||||||
Income Before Income Taxes | 139,949 | (3,354 | ) | 21,024 | 157,619 | |||||||||||
Provision For Income Taxes | 30,205 | 3,015 | 5,443 | (25) | 38,663 | |||||||||||
NET INCOME | $ | 109,744 | $ | (6,369 | ) | $ | 15,581 | $ | 118,956 | |||||||
Basic Earnings Per Share | $ | 1.42 | $ | (0.45 | ) | $ | - | $ | 1.34 | |||||||
Diluted Earnings Per Share | $ | 1.42 | $ | (0.45 | ) | $ | - | $ | 1.33 | |||||||
Basic Average Shares | 77,079,278 | 14,214,313 | (2,393,409 | ) (15) | 88,900,182 | |||||||||||
Diluted Average Shares | 77,351,834 | 14,301,600 | (2,480,696 | ) (15) | 89,172,738 |
2
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On January 1, 2023, Brookline Bancorp, Inc. (“Company”) completed the acquisition of PCSB Financial Corporation (“PCSB”) pursuant to an Agreement and Plan of Merger, dated as of May 23, 2022, between the Company and PCSB (the “Merger Agreement”). Under the Merger Agreement, PCSB merged with and into the Company, with the Company as the surviving corporation (the “Merger”). Pursuant to the Merger Agreement, each share of PCSB common stock outstanding at the effective time of the Merger was converted into the right to receive, at the holder’s election, either $22.00 in cash consideration or 1.3284 shares of Company common stock for each share of PCSB common stock, subject to allocation procedures to ensure that 60% of the outstanding shares of PCSB common stock will be converted to Company common stock. The transaction is accounted for as an acquisition and accordingly, PCSB assets and liabilities are recorded by the Company at their fair market value as of January 1, 2023.
The following unaudited pro forma condensed combined financial information and notes present how the combined financial statements of the Company and PCSB may have appeared had the Merger been completed at the beginning of the period presented. The unaudited pro forma condensed combined financial information reflects the impact of the Merger on the combined balance sheets and combined statements of income under the acquisition method of accounting with the Company as the acquirer. Under the acquisition method of accounting, PCSB assets and liabilities are recorded by the Company at their fair market value as of the date the Merger is completed. The unaudited pro forma condensed combined balance sheet as of December 31, 2022 assumes the Merger was completed on that date. The unaudited condensed combined statement of income for the period ending December 31, 2022 assumes the Merger was completed on January 1, 2022.
The unaudited pro forma condensed combined financial information is derived from and should be read in conjunction with the historical consolidated financial statements and related notes of the Company, which are available on the Company’s 2022 Annual Report on Form 10-K and the financial statements and related notes of PCSB, which are incorporated into this document by reference.
Brookline and PCSB have different fiscal years. PCSB’s fiscal year ends on June 30 of each year and Brookline’s fiscal year ends on December 31 of each year. As the fiscal years differed by more than 93 days, pursuant to SEC rules, PCSB’s financial information was adjusted for the purpose of preparing the unaudited pro forma condensed statements of income. The historical income statement information of PCSB used in the unaudited pro forma condensed combined statements of income for the year ended December 31, 2022 was prepared by taking the audited condensed combined income statement for the year ended June 30, 2022, subtracting the unaudited condensed combined income statement for the six months ended December 31, 2021 and adding the unaudited condensed combined income statement for the six months ended December 31, 2022.
The unaudited pro forma condensed combined financial information is presented for illustrative and informative purposes only and is not necessarily indicative or representative of the financial position or results of operations presented as of the date or for the periods indicated, or the results of operations or financial position that may be achieved in the future. In addition, the unaudited pro forma condensed combined financial information does not reflect any cost savings, operating synergies or revenue enhancements the Company may achieve as a result of its acquisition of PCSB, the costs to integrate the operations of the Company and PCSB or the costs necessary to achieve these cost savings, operating synergies and revenue enhancements.
Notes to Pro Forma Combined Condensed Consolidated Financial Statements (Unaudited)
1 | Estimated merger costs of $22.9 million (net of $4.3 million of taxes) are excluded from the pro forma financial statements. It is expected these costs will be recognized over time. These cost estimates for both the Company and PCSB are forward-looking. The type and amount of actual costs incurred could vary materially from these estimates if future developments differ from the underlying assumptions used by management in determining the current estimate of these costs. The current estimates of the merger costs, primarily comprised of anticipated cash charges, are as follows: |
Change in control contract and severance contracts | $ | 8.7 | ||
Termination of vendor and system contracts | 2.7 | |||
Professional and legal fees | 13.1 | |||
Other acquisition related expenses | 1.4 | |||
Pre-tax merger costs | 25.9 | |||
Tax impact of merger costs | 4.3 | |||
Subtotal merger costs | 21.6 | |||
Estimated excise tax impact of cash consideration paid to PCSB stockholders pursuant to the August 16, 2022 Inflation Reduction Act | 1.3 | |||
Total merger costs | $ | 22.9 |
3
2 | Represents cash paid of $130.5 million for approximately 45% of outstanding PCSB stock. |
3 | Adjustment to reflect the estimated fair value of securities classified as held to maturity as of December 31, 2022. |
4 | Write-off of legacy purchase accounting and deferred fees and adjustments to reflect acquired loans at their estimated fair value, inclusive of $41.3 million yield adjustment and $6.1 million credit mark for non-purchased credit-deteriorated (“Non-PCD”) loans and leases. |
5 | Adjustments to the allowance for credit losses include the following: |
Reversal of historical PCSB’s allowance for credit losses | 9,296 | |||
Increase in allowance for credit losses for gross-up of estimated lifetime credit losses for purchased credit-deteriorated (“PCD”) loans and leases, inclusive of previously charged-off loans. | (2,344 | ) | ||
Immediate charge-off of previously charged-off loans | 2,112 | |||
Provision for estimate of lifetime credit losses on non-PCD loans and leases | (15,147 | ) | ||
(6,083 | ) |
6 | Adjustment to reflect bank premises and equipment values to their estimated fair value. |
7 | Adjustment to eliminate historical PCSB goodwill of $6.1 million and to establish $74.2 million of goodwill for amount of consideration paid in excess of fair value of assets received over liabilities assumed. |
8 | Adjustment to reflect core deposit intangibles at the estimated fair value and eliminate historical PCSB intangible assets. |
9 | Adjustments to the other assets include the following: |
Reversal of historical PCSB Right of Use Asset. | (7,690 | ) | ||
Establish PCSB Right of Use Asset at estimated fair value. | 6,407 | |||
To record value of Defined Benefit Obligation at fair value. | 6,154 | |||
To record fair value of Back-to-back hedges | 240 | |||
Adjustment to net deferred tax assets due to the business combination and day 1 CECL reserves | 25,929 | |||
31,040 |
10 | Adjustment to reflect the estimate of fair value on time deposits and eliminate historical PCSB premiums or discounts. |
11 | Adjustment to reflect the fair value of borrowings at current market rates. |
12 | Establish the day 1 reserve for unfunded credits under CECL. |
4
13 | Adjustment to reverse historical PCSB define benefit plan and lease liabilities; and record lease liabilities at current market rates |
Reverse historical PCSB define benefit plan | 5,923 | ||
Reverse historical lease liability | (7,898 | ) | |
Record lease liability at current market rates | 7,771 | ||
To record fair value of Back-to-back hedges | 240 | ||
6,036 |
14 | Adjustments to stockholders’ equity: |
To eliminate PCSB’s stockholders’ equity | (272,773 | ) | |
To reflect issuance of the Company’s common stock in the merger | 167,266 | ||
Adjustment to record provision for credit losses on non-PCD acquired loans and leases, net of tax | (12,409 | ) | |
(117,916 | ) |
15 | Adjustment to eliminate shares of PCSB common stock outstanding, and to record shares of the Company’s common stock issued of 11,820,904. |
16 | Adjustment reflects the estimated yield adjustment for interest income on loans. |
17 | Adjustment reflects the estimated yield adjustment for interest income on securities. |
18 | Adjustment reflects the estimated yield adjustment for interest expense on deposits. |
19 | Adjustment reflects the estimated yield adjustment for interest expense on borrowings and the estimated interest expense to fund the cash portion of consideration at an estimated blended rate of 4%. |
20 | Adjustment to record day 1 provision for credit losses on non-PCD acquired loans and leases of $15.1 million and reserve for unfunded credits of $1.6 million and the elimination of the historical provision for credit losses of $0.8 million. |
21 | Termination costs of $7.9 million for the PCSB Employee Stock Ownership Plan which is a non-recurring expense associated with the merger, charged against income for the year ended December 31, 2022 has been eliminated from the pro forma statements of income. |
22 | Adjustment reflects the estimated net impact associated with the fair value adjustment for the acquired bank premises and equipment; and the change in right of use assets and lease liabilities. |
23 | Adjustment reflects the net increase in amortization of other intangible assets for the acquired core deposit intangible over seven years on an accelerated basis. |
24 | Merger and acquisition expenses, which are non-recurring expenses, charged against income for the year ended December 31, 2022 have been eliminated from the pro forma statements of income. This included $14.8 million of merger costs and $5.5 million of acquisition expenses associated with restricted stock awards and options. |
25 | Adjustment represents income tax expense on the pro-forma adjustments at an estimated rate of 25.89%. |
5 |
26 | PCSB Pro forma Income adjusted for merger related expenses and cost of terminating the PCSB Employee Stock Ownership Plan: |
Twelve months | Three months | ||||
ended December | ended December | ||||
31, 2022 | 31, 2022 | ||||
Pretax income | (3,354 | ) | (18,303 | ) | |
Adj. Merger chg | 18,061 | 16,498 | |||
Adj. ESOP term | 7,927 | 7,927 | |||
Adj Pretax Income | 22,634 | 6,122 | |||
Tax @ 21% | 4,753 | 1,286 | |||
Net Income | 17,881 | 4,836 |
6 |