Gaston Federal Bancorp, Inc. and Subsidiary
Pro Forma Consolidated Condensed Statement of Condition (unaudited)
(in thousands)
Gaston Federal Innes Street
Bancorp, Inc. Financial Corp.
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September 30, 2001 September 30, 2001
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Assets
- ------
Cash and cash equivalents $ 32,796 $ 16,221
Investment securities, available for sale 28,332 -
Investment securities, held to maturity - -
Mortgage-backed securities, available for sale 25,015 2,204
Mortgage-backed securities, held to maturity - 439
Loans, net 165,743 190,052
Premises and equipment, net 4,857 2,119
Accrued interest receivable 1,303 1,006
Federal Home Loan Bank stock 2,177 1,715
Goodwill and other intangible assets - -
Other assets 6,375 2,892
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Total assets $ 266,598 $ 216,648
=================== ===================
Liabilities and Equity
- ----------------------
Deposits $ 180,155 $ 175,053
Advances from borrowers for taxes and insurance 918 464
Borrowed money 42,158 12,000
Other liabilities 1,740 1,855
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Total liabilities 224,971 189,372
Common stock and additional paid in capital, net of ESOP loan 15,211 8,597
Retained earnings, substantially restricted 25,015 19,183
Unrealized gain on securities available for sale, net of tax 1,401 42
Unearned compensation MRP - (546)
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Total equity 41,627 27,276
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------------------- -------------------
Total liabilities and equity $ 266,598 $ 216,648
=================== ===================
Pro Forma Pro Forma
Adjustments Combined
------------ -----------
Assets
- ------
Cash and cash equivalents $ (37,852) (a) $ 11,165
Investment securities, available for sale - 28,332
Investment securities, held to maturity - -
Mortgage-backed securities, available for sale - 27,219
Mortgage-backed securities, held to maturity 22 (b) 461
Loans, net 1,286 (b) 357,081
Premises and equipment, net 2,566 (b) 9,542
Accrued interest receivable - 2,309
Federal Home Loan Bank stock - 3,892
Goodwill and other intangible assets 10,716 (b) 10,716
Other assets - 9,267
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Total assets $ (23,262) $ 459,984
============ ===========
Liabilities and Equity
- ----------------------
Deposits $ 1,454 (b) $ 356,662
Advances from borrowers for taxes and insurance - 1,382
Borrowed money - 54,158
Other liabilities 2,560 (c) 6,155
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Total liabilities 4,014 418,357
Common stock and additional paid in capital, net of ESOP loan (8,597) (d) 15,211
Retained earnings, substantially restricted (19,183) (d) 25,015
Unrealized gain on securities available for sale, net of tax (42) (d) 1,401
Unearned compensation MRP 546 (d) 0
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Total equity (27,276) 41,627
------------ -----------
------------ -----------
Total liabilities and equity $ (23,262) $ 459,984
============ ===========
Notes to the Unaudited Pro Forma Condensed Consolidated Statement of Condition
(a) Amount reflects the use of cash to fund the merger consideration of $37.413
million, payment of transaction costs of $1.374 million, aftertax
restructuring costs of $898,000, repayment of ESOP loan of $1.588 million,
and tax benefit of MRPs of $245,000.
(b) Amounts reflect the allocation of the purchase price based on the fair
market value of assets acquired and liabilities assumed. The fair market
value of investments held was estimated using quoted market values. The
fair market values of loans and deposits were estimated using discounted
expected future cash flows for these items based on their weighted average
life and weighted average yields. The fair market value of premises and
equipment was estimated based on the appraised value of significant assets.
The core deposit intangible asset of $1.962 million represents the premium
paid for the deposits assumed in the transaction and was estimated by
discounting the spread between the Company's weighted average cost of funds
and the weighted average rate paid on the liabilities of Innes Street
Financial Corporation. The servicing intangible asset of $367,000
represents the excess of servicing fees over related costs of servicing the
assets. The excess of the purchase price paid over the fair value of net
assets of $8.387 million is reflected as goodwill.
(c) Amount reflects the accrued liabilities of $1.381 million associated with
the costs for employee termination benefits and other exit costs and $1.179
million in deferred tax liability as a result of the fair market value
adjustments.
(d) Reflects the elimination of the equity accounts of Innes Street Financial
Corporation.
Gaston Federal Bancorp, Inc.
Pro Forma Consolidated Condensed Statement of Operations (unaudited)
(in thousands, except per share data)
Gaston Federal Innes Street Financial
Bancorp, Inc. Corp.
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Nine months ended Nine months ended
September 30, 2001 June 30, 2001
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Interest Income
- ---------------
Loans $ 9,392 $ $ 11,238
Investment securities 1,386 -
Interest-bearing deposits 771 404
Mortgage-backed and related securities 1,127 192
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Total interest income 12,676 11,834
Interest Expense
- ----------------
Deposits 5,938 6,819
Borrowed funds 1,813 679
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Total interest expense 7,751 7,498
Net interest income 4,925 4,336
Provision for loan losses 90 27
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Net interest income after provision 4,835 4,309
Noninterest Income
- ------------------
Service charges on deposit accounts 1,302 33
Gain on sale of assets - 97
Other income 853 215
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Total noninterest income 2,155 345
Noninterest Expense
- -------------------
Compensation and benefits 2,710 1,705
Occupancy and equipment expense 510 424
Loss on sale of assets 9 -
Other expenses 1,589 1,033
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Total noninterest expense 4,818 3,162
Income before income taxes 2,172 1,492
Provision for income taxes 689 565
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Net income $ 1,483 $ 927
=================== =========================
Basic earnings per share $ 0.36 $ 0.54
Diluted earnings per share $ 0.36 $ 0.53
Basic weighted average outstanding shares 4,080,122 1,707,684
Diluted weighted average outstanding shares 4,091,723 1,738,085
Pro Forma Pro Forma
Adjustments Combined
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Interest Income
- ---------------
Loans $ (1,248) (a),(b) $ 19,382
Investment securities - 1,386
Interest-bearing deposits (527) (a) 648
Mortgage-backed and related securities - 1,319
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Total interest income (1,775) 22,735
Interest Expense
- ----------------
Deposits (1,249) (b) 11,508
Borrowed funds - 2,492
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Total interest expense (1,249) 14,000
Net interest income (526) 8,735
Provision for loan losses - 117
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Net interest income after provision (526) 8,618
Noninterest Income
- ------------------
Service charges on deposit accounts - 1,335
Gain on sale of assets - 97
Other income (57) (b) 1,011
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Total noninterest income (57) 2,443
Noninterest Expense
- -------------------
Compensation and benefits - 4,415
Occupancy and equipment expense - 934
Loss on sale of assets - 9
Other expenses 496 (b) 3,118
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Total noninterest expense 496 8,476
Income before income taxes (1,079) 2,585
Provision for income taxes (378) (c) 876
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Net income $ (701) $ 1,709
============== =============
Basic earnings per share $ 0.42
Diluted earnings per share $ 0.42
Basic weighted average outstanding shares 4,080,122
Diluted weighted average outstanding shares 4,091,723
Gaston Federal Bancorp, Inc.
Pro Forma Consolidated Condensed Statement of Operations (unaudited)
(in thousands, except per share data)
Gaston Federal Innes Street Financial
Bancorp, Inc. Corp.
------------------------------ ----------------------------
Twelve months ended Twelve months ended
December 31, 2000 September 30, 2000
------------------------------ ----------------------------
Interest Income
- ---------------
Loans $ 13,320 $ 13,644
Investment securities 1,890 260
Interest-bearing deposits 168 552
Mortgage-backed and related securities 1,455 297
------------------------------ ----------------------------
Total interest income 16,833 14,753
Interest Expense
- ----------------
Deposits 7,296 8,268
Borrowed funds 2,389 353
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Total interest expense 9,685 8,621
Net interest income 7,148 6,132
Provision for loan losses 53 -
------------------------------ ----------------------------
Net interest income after provision 7,095 6,132
Noninterest Income
- ------------------
Service charges on deposit accounts 762 40
Gain on sale of assets 271 52
Other income 1,440 343
------------------------------ ----------------------------
Total noninterest income 2,473 435
Noninterest Expense
- -------------------
Compensation and benefits 3,725 2,500
Occupancy and equipment expense 612 556
Loss on sale of assets 873 31
Other expenses 1,765 1,360
------------------------------ ----------------------------
Total noninterest expense 6,975 4,447
Income before income taxes 2,593 2,120
Provision for income taxes 846 789
------------------------------ ----------------------------
Net income $ 1,747 $ 1,331
============================== ============================
Basic earnings per share $ 0.43 $ 0.72
Diluted earnings per share $ 0.43 $ 0.72
Basic weighted average outstanding shares 4,082,270 1,838,692
Diluted weighted average outstanding shares 4,093,871 1,847,085
Pro Forma Pro Forma
Adjustments Combined
--------------------- ---------------------
Interest Income
- ---------------
Loans $ (1,597) (a),(b) $ 25,367
Investment securities - 2,150
Interest-bearing deposits (702) (a) 18
Mortgage-backed and related securities - 1,752
--------------------- ---------------------
Total interest income (2,299) 29,287
Interest Expense
- ----------------
Deposits (1,358) (b) 14,206
Borrowed funds - 2,742
--------------------- ---------------------
Total interest expense (1,358) 16,948
Net interest income (941) 12,339
Provision for loan losses - 53
--------------------- ---------------------
Net interest income after provision (941) 12,286
Noninterest Income
- ------------------
Service charges on deposit accounts - 802
Gain on sale of assets - 323
Other income (76) (b) 1,707
--------------------- ---------------------
Total noninterest income (76) 2,832
Noninterest Expense
- -------------------
Compensation and benefits - 6,225
Occupancy and equipment expense - 1,168
Loss on sale of assets - 904
Other expenses 662 (b) 3,787
--------------------- ---------------------
Total noninterest expense 662 12,084
Income before income taxes (1,679) 3,034
Provision for income taxes (588) (c) 1,047
--------------------- ---------------------
Net income $ (1,091) $ 1,987
===================== =====================
Basic earnings per share $ 0.49
Diluted earnings per share $ 0.49
Basic weighted average outstanding shares 4,082,270
Diluted weighted average outstanding shares 4,093,871
Notes to the Unaudited Pro Forma Condensed Consolidated Statements of Operations
(a) Reflects the financing costs associated with this transaction based on the
sale of $14.0 million of fixed rate mortgage loans yielding 7.5% and the
use of excess interest-bearing deposits yielding 3.0%. The weighted
average cost of the $37.413 million transaction is estimated to be 4.68%.
(b) Amount reflects the amortization of the fair value adjustment to related
assets and liabilities. The amortization periods for loans and deposits
are the weighted average lives of the portfolios and amortization expenses
are reflected in interest income and interest expense, respectively. The
amortization periods for the fair value adjustments for premises and
equipment, the servicing asset and the core deposit intangible asset are
their estimated lives and the amortization expenses are reflected in other
expense, other income and other expense, respectively. There is no amount
representing the amortization of goodwill recognized in this transaction in
accordance with Statement of Financial Accounting Standard No. 142,
Goodwill and Other Intangible Assets.
(c) Amount reflects the net impact on the provision for income taxes resulting
from the pro forma adjustments above, computed using an estimated effective
rate of 35%.
Note: Nonrecurring costs related to employee termination benefits and other
exit costs reflected in the pro forma statement of condition have not been
reflected in the pro forma statement of operations.