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8-K/A - FORM 8-K AMENDMENT - BankFinancial CORPd8ka.htm
EX-99.2 - AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF DG BANCORP, INC. - BankFinancial CORPdex992.htm

Exhibit 99.3

BANKFINANCIAL CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL CONDITION

Pro forma December 31, 2010

(In thousands)

 

     BankFinancial
Corporation
     DG Bancorp,
Inc.
     Purchase
Adjustments
    Notes     Combined
Pro forma
 

ASSETS

            

Cash and cash equivalents

   $ 220,810       $ 45,558       $ (3,270     (1)      $ 263,098   

Securities, at fair value

     120,747         20,034         102        (2)        140,883   

Loans held-for-sale

     2,716         —           —            2,716   

Loans receivable, net of allowance for loan losses

     1,050,766         134,947         (7,144     (3)        1,178,569   

Other real estate owned and other real estate owned in process

     14,622         13,233         (3,151     (4)        24,704   

Stock in Federal Home Loan Bank and Federal Reserve Bank at cost

     15,598         903         —            16,501   

Premises and equipment, net

     32,495         1,758         4,554        (5)        38,807   

Other intangible assets, net

     25,266         —           2,661        (6)        27,927   

Other assets

     47,635         2,495         2,681        (7)        52,811   
                                    

Total assets

   $ 1,530,655       $ 218,928       $ (3,567     $ 1,746,016   
                                    

LIABILITIES AND STOCKHOLDERS’ EQUITY

            

Deposits

     1,235,377         212,610         349        (8)        1,448,336   

Borrowings

     23,749         —           —            23,749   

Accrued interest payable and other liabilities

     18,244         846         —            19,090   

Stockholders’ equity

     253,285         5,472         (3,916     (15)        254,841   
                                    

Total liabilities and stockholders’ equity

   $ 1,530,655       $ 218,928       $ (3,567     $ 1,746,016   
                                    


BANKFINANCIAL CORPORATION

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

Pro forma for the Year Ended December 31, 2010

(In thousands, except per share data)

 

     BankFinancial
Corporation
    DG Bancorp,
Inc.
    Purchase
Adjustments
    Notes     Combined
Pro forma
 

Interest and dividend income

          

Loans

   $ 60,926      $ 9,119      $ 2,346        (9)      $ 72,391   

Securities

     3,488        402        —            3,890   

Other

     522        122        (12     (10)        632   
                                  

Total interest income

     64,936        9,643        2,334          76,913   

Interest expense

          

Deposits

     12,333        1,913        232        (11)        14,478   

Borrowings

     853        90        —            943   
                                  

Total interest expense

     13,186        2,003        232          15,421   
                                  

Net interest income

     51,750        7,640        2,102          61,492   

Provision for loan losses

     12,083        10,987        —            23,070   
                                  

Net interest income after provision for loan losses

     39,667        (3,347     2,102          38,422   

Noninterest income

          

Deposit service charges and fees

     3,020        316        —            3,336   

Other fee income

     1,868        —          —            1,868   

Other

     2,240        1,316        —            3,556   
                                  

Total noninterest expense

     7,128        1,632        —            8,760   

Noninterest expense

          

Compensation and benefits

     26,339        4,106        —            30,445   

Office occupancy and equipment

     6,380        911        240        (12)        7,531   

Advertising and public relations

     1,277        —          —            1,277   

Information technology

     3,733        419        —            4,152   

Supplies, telephone, and postage

     1,596        —          —            1,596   

Amortization of intangibles

     1,595        —          380        (13)        1,975   

Nonperforming asset management

     3,342        —          —            3,342   

Operations of other real estate owned

     3,972        (55     —            3,917   

FDIC insurance premiums

     2,126        760        —            2,886   

Other

     3,489        2,812        —            6,301   
                                  

Total noninterest expense

     53,849        8,953        620          63,422   
                                  

Income (loss) before income taxes

     (7,054     (10,668     1,482          (16,240

Income tax expense (benefit)

     (2,747     1,401        (58     (14)        (1,404
                                  

Net Income (loss)

   $ (4,307   $ (12,069   $ 1,540        $ (14,836
                                  

Basic and diluted income (loss) per common share

   $ (0.22   $ (137.15   $ 0.08        (16)      $ (0.75

`


BANKFINANCIAL CORPORATION

NOTES to PRO FORMA CONDENSED

COMBINED FINANCIAL STATEMENTS

As of and for the year ended December 31, 2010

Note 1 – Basis of Presentation

BankFinancial Corporation (the “Company”) completed its acquisition of DG Bancorp, Inc. and its wholly-owned subsidiary, Downers Grove National Bank on March 18, 2011. The acquisition was consummated through the merger of Kendachs Corporation, a wholly owned subsidiary of the Company, into DG Bancorp, Inc., and the merger of Downers Grove National Bank into the Company’s wholly-owned subsidiary, BankFinancial, F.S.B., in accordance with an Agreement and Plan of Merger dated as of September 13, 2010.

As a result of the mergers, each share of common stock of DG Bancorp, Inc. was converted into the right to receive approximately $37.16 in cash. The aggregate cash merger consideration was $3.27 million.

The acquired assets and assumed liabilities were measured at their estimated fair values, as required by the Financial Accounting Standards Board under standards governing Business Combinations (ASC 805-10). Management made significant estimates and exercised significant judgment in accounting for the acquisition. Among other things, management estimated the fair value of the loans acquired from Downers Grove National Bank based on loan file reviews (including borrower financial statements or tax returns), appraised collateral values, expected cash flows and historical loss factors. Other real estate acquired by Downers Grove National Bank through foreclosure was valued primarily on the basis of appraised collateral values. Management used quoted market prices to arrive at the fair value of investment securities. The Company recorded an identifiable intangible asset representing the estimated fair value of the core deposit base of Downers Grove National Bank based on management’s evaluation of the cost of such deposits relative to alternative funding sources. In conducting this evaluation, management used significant estimates, including estimates of the average lives of depository accounts, future interest rate levels and the cost of servicing various depository products.


BANKFINANCIAL CORPORATION

NOTES to PRO FORMA CONDENSED

COMBINED FINANCIAL STATEMENTS

As of and for the year ended December 31, 2010

 

Note 1Basis of Presentation (continued)

 

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed as of the date of the acquisition:

 

     March 18, 2011  
     (in thousands)  

Assets acquired and liabilities assumed:

   $     

Cash and due from other financial institutions

     1,040   

Interest-bearing deposits in other financial institutions

     60,579   
        

Cash and cash equivalents

     61,619   

Securities

     10,254   

Loans receivable

     120,677   

Other real estate owned

     7,542   

Stock in Federal Home Loan Bank and Federal Reserve Bank

     903   

Premises and equipment, net

     5,764   

Accrued interest receivable

     355   

Core deposit intangible

     2,660   

FDIC prepaid expense

     774   

Income tax receivable

     774   

Deferred taxes, net

     2,455   

Other assets

     42   
        

Total assets acquired

   $ 213,816   
        

LIABILITIES

  

Deposits

     212,939   

Advance payments by borrowers taxes and insurance

     34   

Accrued interest payable and other liabilities

     843   
        

Total liabilities assumed

   $ 213,816   
        

The Company has not completed the process of determining the acquisition date fair value of assets acquired and liabilities assumed, and the amounts disclosed above are considered provisional amounts. During the measurement period, the Company will retrospectively adjust the provisional amounts recognized at the acquisition date to reflect new facts and information that existed at the acquisition date. The measurement period will end when the Company receives all of the information it is seeking about such facts and circumstances, and will not exceed one year from the acquisition date. Preliminary estimates of goodwill or bargain purchase gain were considered immaterial and thus were not recorded during the quarter ended March 31, 2011. Subsequent adjustments to the provisional amounts may be material.

The Company recorded an identifiable intangible asset associated with the acquisition consisting of a core deposit intangible. Identifiable intangible assets are amortized to their estimated residual values over their expected useful lives. The core deposit intangible is being amortized on a straight line basis over the expected useful life of such asset. The gross carrying amount of the core deposit intangible at March 31, 2011 was $2.7 million, and there was no accumulated amortization as of that date. The expected useful


BANKFINANCIAL CORPORATION

NOTES to PRO FORMA CONDENSED

COMBINED FINANCIAL STATEMENTS

As of and for the year ended December 31, 2010

 

Note 1Basis of Presentation (continued)

 

lives of identifiable intangible assets are periodically reassessed to determine if any amortization period adjustments are required. No such adjustments were recorded during the quarter ended March 31, 2011,

The unaudited pro forma condensed combined statement of financial condition as of December 31, 2010 and the unaudited pro forma condensed combined statement of operations for the year then ended have been prepared to reflect the business combination as if the Company’s acquisition of DG Bancorp, Inc. had occurred on December 31, 2010 with respect to the pro forma combined statement of financial condition, and had occurred on January 1, 2010 with respect to the pro forma combined statement of operations. Both pro forma financial statements reflect the pro forma adjustments that are described in the accompanying notes.

The unaudited pro forma condensed combined pro forma statement of operations is not necessarily indicative of the results of operations that would have occurred if the acquisition had been effective as of January 1, 2010, or the Company’s future results. Pro forma adjustments have been limited to those directly attributable to the acquisition. The pro forma combined financial statements should be read in conjunction with the historical consolidated financial statements and related notes of the Company and DG Bancorp, Inc.

Note 2 – Pro Forma Adjustments

The following is a description of the pro forma adjustments applied to the pro forma condensed combined statements of financial condition and operations as of and for the year ended December 31, 2010.

 

(1) Cash expended in acquisition.
(2) Fair value adjustment applied to securities portfolio.
(3) Fair value adjustment applied to loan portfolio, net.
(4) Fair value adjustment to other real estate owned.
(5) Fair value adjustment to office premises and equipment.
(6) Core deposit intangible.
(7) Deferred tax consequences of purchase price adjustments, net.
(8) Fair value adjustment to deposits.
(9) Amortization of fair value adjustments for loans.
(10) Loss of interest income on acquisition costs at a pre-tax yield of 0.25%.
(11) Amortization of fair value adjustments for deposits.
(12) Depreciation and amortization on office premises and equipment.
(13) Amortization of core deposit intangible. Reflecting future economic benefits of deposit base.
(14) Income tax benefit on fair value adjustments, net.
(15) Elimination of DG Bancorp, Inc. equity.
(16) Except for the per share results of DG Bancorp, Inc., pro forma basic and diluted income (loss) per common share were calculated based on the Company’s historical weighted average basic and diluted shares outstanding of 19,664,109 for the year ended December 31, 2010.