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Filed by Banknorth Group, Inc.
(Commission File No. 0-16947)
Pursuant to Rule 425 under the Securities Act of
1933 and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Company: Andover Bancorp, Inc.
(Commission File No. 0-16358)
Date: June 11, 2001
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The following is a press release and a presentation given by Banknorth
Group, Inc. to investment analysts regarding the proposed acquisitions by
Banknorth of Andover Bancorp, Inc. and Metro West Bank on June 11, 2001.
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FOR IMMEDIATE RELEASE
FOR FURTHER INFORMATION, CONTACT:
BRIAN ARSENAULT, SVP, CORPORATE COMMUNICATIONS
207 761-8517
Banknorth to Expand Massachusetts Presence
Announces Acquisition of Andover and MetroWest
Banknorth Group will host a conference call at 2 P.M. Eastern Time today, June
11, 2001 to elaborate on the strategic rationale and financial implications of
the acquisitions. The dial-in number is 800 946-0720, Confirmation code, 742179.
International number is 719 457-2646, same confirmation code. A 48-hour replay
will commence at 5 p.m. today. Replay dial-in is 888 203-1112, confirmation code
742179. A webcast of the conference call is also available at www.banknorth.com
(go to Investor Relations site). Presentation materials to be used in the
conference call will be available at the website after 9:30 a.m. Eastern Time or
by calling 207 761-8510.
Portland, Maine, June 11, 2001 - Banknorth Group, Inc. (NASDAQ: BKNG), announced
today that it has signed separate definitive agreements to acquire both Andover
Bancorp, Inc. ("Andover") (NASDAQ: ANDB) for approximately $333 million in
stock, and MetroWest Bank ("MetroWest") (NASDAQ: MWBX) for approximately $166
million in cash. The acquisitions will increase the Company's total assets from
just over $18 billion to approximately $21 billion and expand its Massachusetts
banking franchise to 114 branches and nearly $9 billion in assets.
At March 31, 2001 Andover had total assets of $1.8 billion, deposits of $1.3
billion and shareholders' equity of $160 million, and serviced its customer base
from 15 branch locations covering Essex and Middlesex counties in Massachusetts
and Rockingham County in New Hampshire. At the same date, MetroWest had total
assets of $914 million, deposits of $705 million and shareholders' equity of $63
million, and served Middlesex, Norfolk, Suffolk, and Worcester counties in
Massachusetts through 17 branch locations.
"These acquisitions are a natural extension of our Massachusetts banking
franchise, and significantly enhance our presence in the economically vibrant
communities of Greater Boston," said William J. Ryan, Chairman, President and
Chief Executive Officer of Banknorth. "Both Andover and MetroWest customers will
benefit from having greater convenience through our extensive network of
branches and ATMs and will enjoy a broader selection of products and services."
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Gerald T. Mulligan, Andover's President, said the enhanced product offerings
include trust and investments services, cash management and government banking
services.
"Banknorth is an ideal acquirer for Andover," said Mr. Mulligan. "Banknorth
shares Andover's commitment to customer service and lending to the local
community."
John J. McArdle III, Chief Executive Officer of MetroWest Bank, similarly noted
that its customers would benefit from expanded services.
"It was important to us that any acquirer share our commitment to community
banking and be in a position to enhance our ability to meet our customers'
needs," said Mr. McArdle. "Our customers will now also be served by a much
larger banking franchise with branches in many surrounding communities."
Under the terms of the agreement to acquire Andover, shareholders will receive a
fixed exchange ratio of 2.27 shares of Banknorth common stock for each share of
Andover they hold plus cash in lieu of any fractional share interest. Based on
Banknorth's closing price on June 8, 2001 of $21.19 per share, this would equal
$48.10 a share. The exchange will be tax free and accounted for as a purchase
transaction.
The MetroWest agreement calls for shareholders of MetroWest to receive $11.50 in
cash for each share they hold.
Both agreements were approved by the Board of Directors of Banknorth and by the
Board of Directors of Andover and MetroWest, respectively. The transactions are
expected to be completed by year-end, and are subject to regulatory approval and
approval by the respective shareholders of Andover and MetroWest. It is expected
that the operational integration of the institutions will be completed during
the first quarter of 2002.
In connection with these transactions, Andover and MetroWest each granted to
Banknorth an option to purchase 19.9 percent of its outstanding common stock
under certain conditions.
Andover's Massachusetts franchise (including Gloucester Bank and Trust Company),
and MetroWest's branches will be merged into Banknorth's existing Massachusetts
bank, First Massachusetts Bank, N.A., resulting in a subsidiary bank with 114
branches, $5.5 billion in deposits and nearly $9 billion in assets. Andover also
operates three branches in Rockingham County, New Hampshire, where Banknorth
already enjoys the leading deposit market share with First Massachusetts
branches and branches of its New Hampshire subsidiary, Bank of New Hampshire,
N.A.
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The addition of Andover and MetroWest to Banknorth's Massachusetts franchise
will move Banknorth into the No. 5 market share position in the Boston
metropolitan statistical area, the fourth most populous MSA in the country. In
addition, the acquisitions will give Banknorth the No. 2 deposit market share in
Essex County (currently No. 7), with an average household income of $67,906, and
the No. 7 deposit market share in Middlesex County (currently No. 19), with an
average household income of $82,492, as well as enhancing Banknorth's existing
No. 3 market share position in Worcester County, with an average household
income of $58,198.
"We gain significant market share in important Massachusetts markets," said Mr.
Ryan. "We are becoming an important force in banking and financial services in
Massachusetts, which complements our leading market position in Maine and New
Hampshire and number two market position in Vermont."
Banknorth Group, Inc., headquartered in Portland, Maine, is the country's 36th
largest commercial banking company by assets with total assets of $18.3 billion
at March 31, 2001. The Company operates banking subsidiaries in Maine, Peoples
Heritage Bank, NA, in New Hampshire, Bank of New Hampshire, NA, in
Massachusetts, First Massachusetts Bank, NA, in Vermont, The Howard Bank, NA,
Franklin Lamoille Bank, NA and First Vermont Bank, NA, and New York, Evergreen
Bank, NA. In north central Connecticut, the Company's banking presence is GBT, a
division of First Massachusetts Bank, NA.
The Company also operates a variety of insurance agencies in New England as
subsidiaries of Morse, Payson & Noyes, Insurance, its lead agency, a money
management firm, The Stratevest Group, NA, an investment subsidiary, Bancnorth
Investment Planning Group, and a leasing company, Banknorth Leasing. Other
subsidiaries and divisions provide services in mortgage banking, asset based
lending, private banking, merchant services and other financial services.
Andover Bancorp Inc. is a $1.8 billion bank holding company headquartered in
Andover Massachusetts, approximately 25 miles north of Boston. Andover Bancorp
is the parent company of Andover Bank and Gloucester Bank and Trust Company,
which serve consumer and business customers in northern Massachusetts and
southern New Hampshire. Andover Bank operates banking offices in Andover,
Lawrence, Methuen, North Andover and Tewksbury, Massachusetts and in Derry,
Londonderry and Salem, New Hampshire. Gloucester Bank and Trust operates banking
offices in Gloucester, Massachusetts.
MetroWest Bank is a state chartered financial institution headquartered in
Framingham, Massachusetts with assets of nearly $1 billion. The former
Framingham Savings Bank was renamed MetroWest Bank in 1996 to reflect its
geographic presence in the western area of metropolitan Boston and to signify
its transition to commercial banking. MetroWest has branches in Middlesex,
Worcester and Norfolk counties in Massachusetts.
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This press release may contain forward-looking statements with respect to the
financial condition, results of operations and business of Banknorth upon
consummation of the acquisitions of Andover and MetroWest, including statements
relating to: (a) the estimated cost savings and accretion to reported earnings
that will be realized from the acquisitions; (b) the estimated impact on
revenues of the acquisitions, and (c) the restructuring charges expected to be
incurred in connection with the acquisitions. These forward-looking statements
involve certain risks and uncertainties. Factors that may cause actual results
to differ materially from those contemplated by such forward-looking statements
include, among others, the following possibilities: (1) estimated cost savings
from the acquisitions cannot be fully realized within the expected time frame;
(2) revenues following the acquisitions are lower than expected; (3) competitive
pressure among depository institutions increases significantly; (4) costs or
difficulties related to the integration of the businesses of Banknorth and
Andover and/or MetroWest are greater than expected; (5) changes in the interest
rate environment reduce interest margins; (6) general economic conditions,
either nationally or in the markets in which Banknorth will be doing business,
are less favorable than expected; or (7) legislation or changes in regulatory
requirements adversely affect the businesses in which Banknorth would be
engaged.
Banknorth and Andover will be filing relevant documents concerning the merger
with the Securities and Exchange Commission including a registration statement
on Form S-4 containing a prospectus/proxy statement. WE URGE INVESTORS TO READ
THESE DOCUMENTS BECAUSE THEY CONTAIN IMPORTANT INFORMATION. Investors will be
able to obtain these documents free of charge at the SEC's website, www.sec.gov.
In addition, documents filed with the SEC by Banknorth will be available free of
charge from the Secretary of Banknorth (Carol L. Mitchell, Secretary, Banknorth
Group, Inc., Two Portland Square, P.O. Box 9540, Portland, Maine 04112-9540,
telephone (207) 761-8500), and documents filed with the SEC by Andover will be
available free of charge from the Secretary of Andover (Cynthia J. Milne,
Secretary, Andover Bancorp, Inc., 61 Main Street, Andover, Massachusetts 01810,
telephone (978) 749-2000). The directors and executive officers of Andover may
be deemed to be participants in the solicitation of proxies to approve the
merger. Information about the directors and executive officers of Andover and
ownership of Andover common stock is set forth in Andover's proxy statement as
filed with the SEC on March 19, 2001. Additional information about the interests
of those participants may be obtained from reading the definitive
prospectus/proxy statement regarding the proposed acquisition when it becomes
available. ANDOVER INVESTORS SHOULD READ THE PROSPECTUS/PROXY STATEMENT AND
OTHER DOCUMENTS TO BE FILED WITH THE SEC CAREFULLY BEFORE MAKING A DECISION
CONCERNING THE MERGER.
MetroWest will be filing relevant documents concerning the acquisition with the
Federal Deposit Insurance Corporation including a proxy statement. WE URGE
INVESTORS TO READ THESE DOCUMENTS BECAUSE THEY CONTAIN IMPORTANT INFORMATION.
Investors will be able to obtain these documents from the offices of the FDIC
located at 250 E Street, S.W., Washington, D.C. 20219, telephone (800) 945-2186.
The FDIC also maintains a website at www.fdic.gov. In addition, documents filed
with the FDIC by MetroWest will be available free of charge from MetroWest
(Brian Manning, Chief Financial Officer, MetroWest Bank, 15 Park Street,
Framingham, Massachusetts 01701-9111, telephone (508) 620-0300). The directors
and executive officers of MetroWest may be deemed to be participants in the
solicitation of proxies to approve the acquisition. Information about the
directors and executive officers of MetroWest and ownership of MetroWest common
stock is set forth in MetroWest's proxy statement as filed with the FDIC on
March 19, 2001. Additional information about the interests of those participants
may be obtained from reading the definitive proxy statement regarding the
proposed acquisition when it becomes available. MetroWest INVESTORS SHOULD READ
THE PROXY STATEMENT AND OTHER DOCUMENTS TO BE FILED WITH THE FDIC CAREFULLY
BEFORE MAKING A DECISION CONCERNING THE ACQUISITION.
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Banknorth Group, Inc.
announces the acquisition of:
Andover Bancorp, Inc.
and
MetroWest Bank
Significantly Expanding
its Massachusetts Franchise
June 11, 2001
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Note on Forward Looking Information
This presentation contains forward looking information for Banknorth Group, Inc.
on a stand alone basis and a pro forma combined basis. Actual results may vary
materially from the forward looking statements. Factors which could result in
material variations from forward looking statements include, but are not limited
to: changes in interest rates which could affect net interest margins and net
interest income; delays in cost savings measures or a failure to realize
anticipated cost savings; competitive factors which could affect non interest
income, costs of deposits, and interest income; and general economic conditions
which could negatively affect the volume of loan originations, the amount of
loan losses and levels of non interest income.
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A Great Step Forward
Compelling strategic fit:
Quality institutions with solid earnings
Strongest demographics in Massachusetts
High asset quality and strong core deposit bases
Substantial opportunity to expand Andover's and MetroWest's market penetration
by applying Banknorth's broader array of products.
Satisfies investment criteria - "new" GAPP EPS and cash basis EPS accretive in
2002.
Strong asset quality does not add credit risk.
Andover and MetroWest are exactly the types of acquisitions that we have
consistently and successfully executed throughout out history.
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Low Risk Transactions
These transaction pose very low risk.
Fit within our long term strategic plan.
Fit within our Massachusetts footprint.
Both franchises are well-known to Banknorth and we have been following them for
several years.
Management and the boards are well-known to Banknorth management
We view both banks as "clean" and straightforward, with consistent and familiar
business lines.
Small banks that are profitable and have solid asset quality.
Straightforward, low risk integration
Manageable sized deals
Experienced Banknorth integration team
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Transaction Overview - Building on a Winning Strategy
Financial data as of 3/31/01
Consistent with Banknorth's acquisition philosophy of targeting high quality
banks and thrifts in complementary markets.
Andover MetroWest
Assets $1,799 $914
Loans 1,363 581
Deposits 1,254 705
Branches 15 17
Returns on Assets 1.17% 1.16%
Return on Equity 13.4% 16.5%
Net Interest Margin 3.56% 4.21%
Efficiency Ratio 48.6% 57.9%
Fee Revenue / Total Revenue 6.4% 9.9%
NPAs / Loans + OREO 0.15% 0.08%
Loan Loss Reserve / Loans 1.11% 1.52%
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Transaction Overview - Building on a Winning Strategy
Financial data as of 3/31/01
Expands Eastern Massachusetts footprint. Middlesex and Essex Counties are
among the most attractive banking markets in Massachusetts. Banknorth's
geography continues to improve.
FirstMass*
Banknorth* FirstMass.* Contribution
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Assets $20,919 $8,953 43%
Loans 12,702 5,563 44%
Deposits 14,141 5,541 39%
*Pro forma for the acquisition of Andover and MetroWest
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Transaction Overview - Building on a Winning Strategy
Provides significant cross-sell opportunities from the addition of Banknorth's
broad array of products:
Trust and investments Internet banking
Insurance sales Commercial business lending
Asset based lending and leasing services Small business lending
Cash management Consumer lending
Merchant credit card processing
Conservative cost savings assumptions of 25% of both Andover's and MetroWest's
operating expenses.
Accretive to "new" GAAP and cash earnings per share with conservative assumption
of NO benefit from revenue enhancements.
Internal rates of return from each transaction in excess of 20%
Very low execution risk
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Andover Bancorp, Inc. Transaction Summary
Price Per Share: $48.10 per ANDB share*
Transaction Value: $333 million*
Consideration: 100% common stock, fixed exchange ratio
of 2.27 BKNG shares for each ANDB share
Accounting / Tax Treatment: Purchase accounting / tax free exchange
BKNG Lock-up Option 19.9% priced at market
Walkaway: Double trigger walk away
* Based on BKNG's price of $21.19 on June 8, 2001
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MetroWest Bank Transaction Summary
Price Per Share: $11.50 per MWBX share
Transaction Value: $166 million
Consideration: 100% Cash
Accounting: Purchase accounting
BKNG Lock-up Option: 19.9% priced at market
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Transaction Multiples
Andover MetroWest
Price Per Share (1): $48.10 $ 11.50
Premium to Market (1): 26% 18%
Price / Stated 3/31/01 Book Value Per Share: 201% 263%
Price / 3/31/01 Tangible Book Value Per Share: 212% 263%
Price / 2001 Estimated Earnings Per Share (2): 15.2x 15.5x
Price / 2002 Estimated Earnings Per Share (2): 14.0x 14.4x
Ownership: 10.2% NA
(1) Based on June 8, 2001 closing prices of $21.19, $38.22, and $9.75 for BKNG,
ANDB, and MWBX respectively
(2) Based on I/B/E/S consolidated earnings estimates
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Transaction Timetable
Expected Shareholder Approvals (1): Q3 - 2001
Expected Closing: Q4 - 2001
Expected Systems Conversion: Q1 - 2002
(1) Shareholder approval required for Andover and MetroWest, Banknorth does not
require shareholder approval
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Building the Dominant Community Banking Franchise in Mass.
Significantly increases Banknorth's Massachusetts market share
Number 5 rank in Boston MSA
Extends branch distribution system within the attractive I-495 loop around
Boston.
Franchise Map
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Building the Dominant Community Banking Franchise in Mass.
Franchise Map
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Market Characteristics
With 5.9 million residents, the Boston Metropolitan Statistical Area ("MSA") is
the nation's 4th largest MSA based on population.
The demographics of the markets covered by Andover and MetroWest are very
attractive:
2000 Median Household Income Graph
2000 - 2005 Population Growth Rate % Graph
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Enchanced Presence in Desirable Markets
Pro Forma
Existing Pro Forma
Rank Deposits (a) Branches Market Share (a) Rank
Massachusetts 6 $4,866,471 114 3.63% 5
Rockingham County, NH 1 856, 764 26 28.06 1
Essex County, MA 7 1,425,038 23 13.34 2
Worcester County, MA 3 843,175 26 11.71 3
Middlesex County, MA 19 966,434 21 3.77 7
Norfolk County, MA NA 59, 716 2 0.53 33
(a) SNL Branch Migration DataSource
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Summary Financial Overview
Financial Data as of 3/31/01
Banknorth Pro Forma*
Banknorth Andover MetroWest 3/01 Est. 12/01
Assets $ 18,252 $1,799 $ 914 $ 20,919 $21,756
Loans 10,758 1,363 581 12,702 13,210
Loan Loss Reserves 154 15 9 178 185
Intangibles 180 9 0 486 470
Deposits 12,181 1,254 705 14,141 14,565
Common Equity 1,361 160 63 1,527 1,686
Book Value Per Share $9.82 $10.43 $11.51
Tangible Book Value Per Share
$8.52 $7.11 $8.31
Leverage Ratio 7.07% 5.56% 6.17%
Tier 1 Risk
Based Capital Ratio 10.27% 7.94% 8.85%
Total Risk
Based Capital Ratio 11.52% 10.60% 11.41%
*Based on purchase related assumptions, $200 million in newly raised tier 2
capital and $28.0 in after-tax merger related charges. Additionally, purchase
accounting adjustments will be made at closing.
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Diversified Loan Portfolio
Financial data as of 3/31/01
Loans
Banknorth % of Andover % of Metro % of Banknorth % of
Group Total Bancorp Total West Bank Total Pro Forma Total
Residential
Real Estate $ 2,140,142 20% $ 817,575 60% $114,307 20% $ 3,072,024 24%
Commercial
Real Estate (1) 2,935,949 27% 374,314 27% 343,400 59% 3,653,663 29%
Consumer 3,373,255 31% 88,406 6% 63,100 11% 3,524,761 28%
Commercial
Loans & Leases 2,309,017 21% 82,626 6% 60,000 10% 2,451,643 19%
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$10,758,363 $1,362,921 $580,807 $12,702,091
=========== ========== ======== ===========
(1) Includes construction and land
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Complementary Deposit Mix
Financial data as of 3/31/01
Deposits
Banknorth % of Andover % of Metro % of Banknorth % of
Group Total Bancorp Total West Bank Total Pro Forma Total
Demand $ 2,031,478 17% $ 147,556 12% $ 81,500 12% $ 2,260,534 16%
Regular Savings
1,420,072 12% 261,272 21% 83,800 12% 1,765,144 12%
NOW &
Money Market 4,081,659 34% 274,918 22% 262,200 37% 4,618,777 33%
Certificates of
Deposit 4,481,266 37% 525,576 42% 277,823 39% 5,284,665 37%
Brokered Deposits 166,998 1% 45,000 4% 0 0% 211,998 1%
----------- ---------- -------- -----------
$12,181,473 $1,254,322 $705,323 $14,141,118
=========== ========== ======== ===========
Net Interest
Margin 3.84% 3.56% 4.21% 3.84%
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Strong Asset Quality
Financial data as of 3/31/01
Asset Quality
Banknorth Andover MetroWest Banknorth
Group Bancorp Bank Pro Forma
Gross Loans $10,758,363 $1,362,921 $580,807 $12,702,091
Reserves 153,621 15,080 8,817 177,518
Nonperforming Loans 61,624 2,007 485 64,116
Other Real Estate Owned 6,245 30 0 6,275
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Total Nonperforming Assets 67,869 2,037 485 70,391
=========== ========== ======== ===========
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Asset Quality Ratios:
Reserves / Loans (%) 1.43 1.11 1.52 1.40
Reserves / NPLs (%) 249 751 1,818 277
NPA / Loans + OREO (%) 0.63 0.15 0.08 0.55
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Solid Earnings Accretion - Cash
2002
Banknorth Cash Earnings (a) 284.8
Andover Cash Earnings (a) 24.3
MetroWest Cash Earnings (a) 11.5
Cost Savings (b) 8.3
Financing Costs (c) (14.9)
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Pro Forma Cash Earnings 314.0
Fully Diluted Shares Outstanding 138.3
Shares Issued (c) 7.8
Pro Forma Shares Outstanding 146.2
Pro Forma Cash Earnings Per Share $2.15
Stand Alone Cash Earnings Per Share $2.06
Accretion 4.3%
Pro Forma Cash Return on Average Tangible Assets 1.43%
Pro Forma Cash Return on Average Tangible Equity 23.6%
(a) Based on I/B/E/S consensus estimates
(b) Based on 25% cost savings for both Andover and MetroWest
(c) Includes opportunity cost to repurchase 50% of the BKNG shares issued in
ANDB transaction and cost of cash issued in MetroWest transaction
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Solid Earnings Accretion - "New" GAAP
2002
Pro Forma Cash Earnings 314.0
Existing Core Deposit Intangible Amortization (2.6)
Incremental Core Deposit Intangible Amortization * (9.2)
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Pro Forma "New" GAAP Earnings 302.2
Banknorth Cash Earnings 284.8
Existing Core Deposit Intangible Amortization (2.6)
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Stand Alone "New" GAAP Earnings 282.2
Pro Forma "New" GAAP Earnings Per Share $2.07
Stand Alone "New" GAAP Earnings Per Share $2.04
Accretion 1.3%
Pro Forma Return on Average Assets 1.35%
Pro Forma Return on Average Equity 16.8%
*Based on core deposit intangibles of 4.5% and 10 year sum-of-the-year's digits
amortization
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Summary
Solid, profitable franchises with sound asset quality.
Great strategic fit and geographic enhancement.
Consistent with our strategy of pursuing in market or contiguous acquisitions of
high quality companies.
Very low execution risk and conservative cost savings projections.
Attractive cross sell opportunities.
Solid earnings accretion.
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