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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

On December 16, 2024, Beacon Financial Corporation, a Delaware corporation previously known as “Berkshire Hills Bancorp, Inc.” (“Berkshire”), Commerce Acquisition Sub, Inc., a direct, wholly-owned subsidiary of Berkshire (“Merger Sub”), and Brookline Bancorp, Inc., a Delaware corporation (“Brookline”) entered into a merger agreement (the “Merger Agreement”). Pursuant to the Merger Agreement, on September 1, 2025, Merger Sub merged with and into Brookline, with Brookline as the surviving corporation (the “Merger”), immediately followed by the merger of Brookline with and into Berkshire, with Berkshire as the surviving corporation (the “Holdco Merger” and collectively with the Merger, the “Mergers”).

 

The unaudited pro forma combined condensed consolidated financial information assumes that the Mergers were accounted for as a reverse acquisition using the acquisition method of accounting, pursuant to FASB Topic 805-10, Business Combinations, with Berkshire treated as the legal acquirer and Brookline treated as the accounting acquirer. In identifying Brookline as the acquiring entity for accounting purposes, Berkshire and Brookline took into account a number of factors, including the relative voting rights of all equity instruments in the surviving corporation and the intended corporate governance structure of the surviving corporation. Following the Mergers, legacy stockholders of Brookline controlled approximately 45% of the pro forma voting interests in the surviving corporation (based on common shares outstanding as of December 31, 2024). However, no single factor was the sole determinant in the overall conclusion that Brookline is the acquirer for accounting purposes; rather all factors were considered in arriving at such conclusion. See the section entitled “Description of the Mergers — Accounting Treatment of the Mergers” beginning on page 103 of Berkshire and Brookline’s joint proxy statement/prospectus. Under the acquisition method of accounting, the assets and liabilities of Berkshire, as the accounting acquiree, were recorded at their respective fair values as of the date the Mergers were completed.

 

The unaudited pro forma combined condensed consolidated balance sheet combines the historical information of Berkshire and Brookline as of June 30, 2025 and assumes that the Mergers were completed on that date. The unaudited pro forma combined condensed consolidated income statements combine the historical financial information of Berkshire and Brookline and give effect to the Mergers as if the Mergers had been completed as of January 1, 2024, for the year ended December 31, 2024 and for the six months ended June 30, 2025.

 

The unaudited pro forma combined condensed consolidated financial information is provided for illustrative information purposes only. The unaudited pro forma combined condensed consolidated financial information is not necessarily, and should not be assumed to be, an indication of the actual results that would have been achieved had the Mergers been completed as of the dates indicated or that may be achieved in the future. The unaudited pro forma combined condensed consolidated financial information has been prepared in accordance with Regulation S-X Article 11, Pro Forma Financial. The adjustments made related to the fair value determinations are preliminary with the exception of those assets and liabilities where carrying value has been determined to reasonably represent fair value.

 

The unaudited pro forma combined condensed consolidated financial information also does not consider any potential effects of changes in market conditions on revenues, expense efficiencies, asset dispositions (other than the divestitures), and share repurchases, among other factors. In addition, as explained in more detail in the accompanying notes, the preliminary allocation of the pro forma purchase price reflected in the unaudited pro forma combined condensed consolidated financial information is subject to adjustment and may vary significantly from the final purchase price allocation.

 

The unaudited pro forma combined condensed consolidated financial information are based on and should be read in conjunction with (i) the historical audited consolidated financial statements of Berkshire and accompanying notes included in Berkshire's Annual Report on Form 10-K for the year ended December 31, 2024, (ii) the historical unaudited consolidated financial statements of Berkshire and accompanying notes included in Berkshire's quarterly report on Form 10-Q for the six months ended June 30, 2025, (iii) the historical audited consolidated financial statements of Brookline and accompanying notes included in Brookline’s Annual Report on Form 10-K for the year ended December 31, 2024, and (iv) the historical unaudited consolidated financial statements of Brookline and accompanying notes included in Brookline’s quarterly report on Form 10-Q for the six months ended June 30, 2025.

 

 

 

 

BEACON FINANCIAL CORPORATION

CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF FINANCIAL CONDITION (Unaudited)

(in thousands)

 

   At June 30, 2025 
   Brookline   Berkshire   Adjustments
(1)		      Pro forma 
Assets                   
Cash and short term investments  $506,748   $802,731   $-      $1,309,479 
Net Securities   866,587    1,172,467    (67,850)  (2)   1,971,204 
Loans Held for Sale   -    4,014            4,014 
Loans, net of deferred fees and costs   9,582,374    9,498,849    (361,843)  (3)   18,719,380 
Allowance for credit losses   (126,725)   (117,344)   (16,654)  (4)   (260,723)
Bank premises and equipment   83,963    58,439    8,973   (5)   151,375 
Goodwill   241,222    -    112,248   (6)   353,470 
Identifiable intangible assets   14,600    12,809    176,358   (7)   203,767 
Other assets   399,976    602,783    71,045   (8)   1,073,804 
Total Assets  $11,568,745   $12,034,748   $(77,722)     $23,525,771 
                        
Liabilities                       
Deposits  $8,961,202   $9,979,031    (4,600)  (9)  $18,935,633 
Borrowings   1,155,051    585,597    (7,464)  (10)   1,733,184 
Other liabilities  $198,321   $247,809    3,740   (11) & (12)  $449,870 
Stockholders’ equity   1,254,171    1,222,311    (69,398)  (13)   2,407,084 
Total Liabilities and Shareholders’ Equity  $11,568,745   $12,034,748   $(77,722)     $23,525,771 
Outstanding Shares   89,958,939    46,302,528#   (52,176,185)  (14)   84,085,282 

 

 

 

 

 

BEACON FINANCIAL CORPORATION

CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF INCOME (Unaudited)

(in thousands, except for share data)

 

   Twelve Months Ended December 31, 2024 
   Brookline   Berkshire   Adjustments
(1)(2)		      Pro forma 
INTEREST AND DIVIDEND INCOME                   
Loans and leases  $587,929   $556,527   $54,157   (15)  $1,198,613 
Debt and equity securities   40,592    57,411    25,511   (16)   123,514 
Total Interest and Dividend Income   628,521    613,938    79,668       1,322,127 
INTEREST EXPENSE                       
Deposits   232,963    228,015    3,033   (17)   464,011 
Borrowed Funds   65,973    34,337    1,163   (18)   101,473 
Total Interest Expense   298,936    262,352    4,196       565,484 
Net Interest Income   329,585    351,586    75,472       756,643 
Less Provision for Credit Losses   21,644    23,999    53,903   (19)   99,546 
Net Interest Income after Provision for Loan Losses   307,941    327,587    21,569       657,097 
NONINTEREST INCOME                       
Deposit Fees   10,548    33,759    -       44,307 
Loans Fees   4,052    11,280    -       15,332 
Gain (Loss) on investment securities, net   -    (49,937)   -       (49,937)
Gain on sales of loans   951    12,648    -       13,599 
Gain on sale of business operations and assets net   -    16,241    -       16,241 
Other noninterest income   10,064    24,423    -       34,487 
Total Noninterest Income   25,615    48,414    -       74,029 
NONINTEREST EXPENSE                       
Compensation and employee benefits   143,723    160,453    -       304,176 
Occupancy, equipment and data processing   49,430    71,864    (533)  (20)   120,761 
Professional services   7,133    10,307    -       17,440 
FDIC assessment   8,044    7,395    -       15,439 
Advertising and marketing   5,240    4,522    -       9,762 
Amortization of identified intangible assets   6,746    4,601    24,386   (21)   35,733 
Merger and restructuring expense   4,201    9,493    (9,935)  (22)   3,759 
Other noninterest expense   17,348    27,851    -       45,199 
Total Noninterest Expense   241,865    296,486    13,918       552,269 
Income Before Income Taxes   91,691    79,515    7,651       178,857 
Provision For Income Taxes   22,976    18,512    1,981   (23)   43,469 
NET INCOME  $68,715   $61,003   $5,670      $135,388 
Basic Earnings Per Share  $0.77   $1.44           $1.69 
Diluted Earnings Per Share  $0.77   $1.43           $1.69 
Basic Average Shares   88,983    42,508    (51,610)  (14)   79,881 
Diluted Average Shares   89,302    42,761    (51,795)  (14)   80,268 

 

 

 

 

BEACON FINANCIAL CORPORATION

CONDENSED CONSOLIDATED PRO FORMA STATEMENTS OF INCOME (Unaudited)

(in thousands, except for share data)

 

   Six Months Ended June 30, 2025 
   Brookline   Berkshire   Adjustments
(1)(2)		      Proforma 
INTEREST AND DIVIDEND INCOME                   
Loans and leases  $287,242   $273,353   $27,079   (24)  $587,674 
Debt and equity securities and other investment   20,558    26,446    12,756   (25)   59,760 
Total Interest and Dividend Income   307,800    299,799    39,834       647,433 
INTEREST EXPENSE                       
Deposits   106,160    105,511    489   (26)   212,160 
Borrowed Funds   27,125    12,596    528   (27)   40,249 
Total Interest Expense   133,285    118,107    1,017       252,409 
Net Interest Income   174,515    181,692    38,817       395,024 
Less Provision for Credit Losses   12,986    9,500    -       22,486 
Net Interest Income after Provision for Loan Losses   161,529    172,192    38,817       372,538 
NONINTEREST INCOME                       
Deposit Fees   4,833    16,142    -       20,975 
Loans Fees   931    8,887    -       9,818 
Gain (Loss) on investment securities, net   -    -    -       - 
Gain on sales of loans   288    5,564    -       5,852 
Other noninterest income   5,578    11,831    -       17,409 
Total Noninterest Income   11,630    42,424    -       54,054 
NONINTEREST EXPENSE                       
Compensation and employee benefits   71,000    79,938    -       150,938 
Occupancy, equipment and data processing   24,923    34,690    (266)  (28)   59,347 
Professional services   3,197    2,675    -       5,872 
FDIC assessment   3,917    3,275    -       7,192 
Advertising and marketing   2,239    2,808    -       5,047 
Amortization of identified intangible assets   2,861    2,256    11,030   (29)   16,147 
Merger and restructuring expense   1,410    3,945    (5,355)  (30)   - 
Other noninterest expense   8,536    8,923    -       17,459 
Total Noninterest Expense   118,083    138,510    5,409       262,002 
Income Before Income Taxes   55,076    76,106    33,408       164,590 
Provision For Income Taxes   13,950    20,021    8,649   (31)   42,620 
NET INCOME  $41,126   $56,085   $24,759      $121,970 
Basic Earnings Per Share  $0.46   $1.23           $1.47 
Diluted Earnings Per Share  $0.46   $1.22           $1.46 
Basic Average Shares   89,104    45,731    (51,680)  (14)   83,155 
Diluted Average Shares   89,590    46,042    (51,962)  (14)   83,670 

 

 

 

 

Notes to Pro Forma Combined Condensed Consolidated Financial Statements (Unaudited)

 

1Estimated merger costs of $73.9 million (net of $19.1 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  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  $50.4 
Termination of vendor and system contracts   16.2 
Professional and legal fees   21.4 
Other acquisition related expenses   5.1 
   Pre-tax merger costs   93.0 
Tax impact of merger costs   19.1 
Merger costs   73.9 

 

 

 

 

2Adjustment to reflect the estimated fair value of securities classified as held to maturity as of June 30, 2025 as well as removal of deferred fees, cost and premiums

 

3Adjustment to reflect acquired loans at their estimated fair value, including current interest rates and liquidity, as well as the credit related adjustment for non-purchased credit-deteriorated ("non-PCD") loans

 

4Adjustments to the allowance for credit losses include the following:

 

Reversal of historical Berkshire's allowance for credit losses   117,344 
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.   (80,311)
Immediate charge-off of previously charged-off loans   15,800 
Provision for estimate of lifetime credit losses on non-PCD loans and leases   (69,487)
    (16,654)

 

5Adjustment to reflect bank premises and equipment values to their estimated fair value.

 

6Adjustment to establish $112 million of goodwill for amount of consideration paid in excess of fair value of assets received over liabilities assumed.

 

7Adjustment to reflect core deposit and customer relationship intangibles at the estimated fair value and eliminate historical Berkshire intangible assets.

 

8Adjustments to the other assets include the following:

 

     
Reversal of historical Berkshire Right of Use Asset.   (46,021)
Establish Berkshire Right of Use Asset at estimated fair value.   43,177 
Adjustment to Servicing Right Asset   6,011 
Other Day 1 Adjustments   4,527 
Adjustment to net deferred tax assets due to the business combination and day 1 CECL reserves   63,351.47 
    71,045 

 

9Adjustment to reflect the estimate of fair value on time deposits and eliminate historical Berkshire premiums or discounts.

 

10Adjustment to reflect the fair value of borrowings at current market rates.

 

11Establish the day 1 reserve for unfunded credits under CECL.

 

 

 

 

12Adjustment to reverse historical Berkshire lease liabilities; and record lease liabilities at current market rates, and book accrued liability associated with the payment of Buyer success fee

 

Reverse historical lease liability   (49,283)
Acquired accrued expense for Berkshire Success Fee   6,022 
Record lease liability at current market rates   47,341 
To record fair value of Back-to-back hedges   315 
    4,395 

 

13Adjustments to stockholders’ equity:

 

To eliminate Berkshire’s stockholders’ equity   (1,222,311)
To reflect purchase price consideration including accruals   1,210,647 
Adjustment to record provision for credit losses on non-PCD acquired loans and leases, net of tax   (57,734)
    (69,398)

 

14Adjustment to convert Brookline shares at the stated exchange rate of .42 share of Beacon per share of Brookline

 

15Adjustment reflects the estimated yield adjustment for interest income on loans.

 

16Adjustment reflects the estimated yield adjustment for interest income on securities.

 

17Adjustment reflects the estimated yield adjustment for interest expense on deposits.

 

18Adjustment reflects the estimated yield adjustment for interest expense on borrowings.

  

19Adjustment to record day 1 provision for credit losses on non-PCD acquired loans and leases of $69.5 million and reserve for unfunded credits of $8.4 million and the elimination of the historical provision for credit losses of $24.0 million .

 

20Adjustment 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.

 

21Adjustment reflects the net increase, after removal of legacy Berkshire balances, in amortization of intangible assets for the acquired core deposit intangible and the customer relationship intangible both on a twelve years sum of years digit basis.

 

22Merger and restructuring expenses, which are non-recurring expenses, charged against income for the year ended December 31, 2024 and incurred during the 4th Quarter have been eliminated from the pro forma statements of income. Those cost associated prior to Q4 were deemed related to other activities.

 

23Adjustment represents income tax expense on the pro-forma adjustments at an estimated rate of 25.89%.

 

24Adjustment reflects the estimated yield adjustment for interest income on loans.

 

25Adjustment reflects the estimated yield adjustment for interest income on securities.

 

26Adjustment reflects the estimated yield adjustment for interest expense on deposits.

 

 

 

 

27Adjustment reflects the estimated yield adjustment for interest expense on borrowings.

  

28Adjustment 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.

 

29Adjustment reflects the net increase, after removal of legacy Berkshire balances, in amortization of intangible assets for the acquired core deposit intangible and the customer relationship intangible both on a twelve years sum of years digit basis.

  

30Merger and restructuring expenses, which are non-recurring expenses, charged against income for the year ended June 30, 2025 have been eliminated from the pro forma statements of income.

 

31Adjustment represents income tax expense on the pro-forma adjustments at an estimated rate of 25.89%.