UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Combined Balance Sheet as of June 30,
2000 combines the historical consolidated balance sheets of Lincoln Bancorp and
Citizens Bancorp as if the merger had been effective on June 30, 2000. The
Unaudited Pro Forma Combined Statements of Income for the period ended June 30,
2000, and for the fiscal year ended December 31, 1999 presents the combined
results of operations of Lincoln Bancorp and Citizens Bancorp as if the merger
had been effective at the beginning of the period. Dollars are in thousands
except for per share data.
The Unaudited Pro Forma Combined Financial Information and accompanying
notes reflect the application of the purchase method of accounting for the
merger. Under this method of accounting, the recorded assets and liabilities of
Citizens Bancorp are marked to their fair values through an allocation of the
purchase price. Any excess of purchase price remaining after the allocation of
the purchase price to assets and liabilities is recorded as goodwill and
amortized over a period of time. The pro forma combined figures are simply
arithmetical combinations of Lincoln Bancorp's and Citizens Bancorp's separate
financial results in order to assist you in analyzing the future prospects of
Lincoln Bancorp. The pro forma combined figures illustrate the possible scope of
the change in Lincoln Bancorp's historical figures caused by the merger. You
should not assume that Lincoln Bancorp and Citizens Bancorp would have achieved
the pro forma combined results if the merger had actually occurred during the
periods presented.
The combined company expects to achieve merger benefits in the form of
operating cost savings. The pro forma earnings, which do not reflect any
potential savings that are expected to result from the consolidation of the
operations of Lincoln Bancorp and Citizens Bancorp, are not indicative of the
results of future operations. No assurances can be given with respect to the
ultimate level of expense savings.
For purposes of preparing these financial statements, we used the
audited consolidated financial statements contained in the Lincoln Bancorp
Annual Report to Shareholders for the year ended December 31, 1999 which were
filed with the Securities and Exchange Commission for the year ended December
31, 1999 on Form 10-K. We also used the unaudited consolidated financial
statements of Lincoln Bancorp filed with the Securities and Exchange Commission
for the quarter ended June 30, 2000 on Form 10-Q. In addition, we used the
unaudited consolidated financial statements of Citizens Bancorp for the year
ended December 31, 1999. The December 31, 1999 financial statements were derived
from the audited consolidated financial statements which Citizens Bancorp
previously filed with the Securities and Exchange Commission for the year ended
June 30, 1999 on Form 10-K, and the unaudited consolidated financial statements
of Citizens Bancorp previously filed with the Securities and Exchange Commission
for the quarter ended December 31, 1999, which included financial statements for
the six month period ended December 31, 1999. Also, we used the unaudited
consolidated financial statements of Citizens Bancorp for the quarters ended
March 31, 2000 and June 30, 2000 to prepare the financial statements as of and
for the six months ended June 30, 2000.
Lincoln Bancorp's and Citizens Bancorp's consolidated financial
statements are prepared in conformity with generally accepted accounting
principles. In the opinion of Lincoln Bancorp and Citizens Bancorp, the
unaudited pro forma combined financial statements include all adjustments
necessary to present fairly the results of the periods presented.
<PAGE>
Lincoln Bancorp
Unaudited Pro Forma
Combined Balance Sheet
June 30, 2000
<TABLE>
<CAPTION>
Lincoln Citizens Pro Forma Pro Forma
Bancorp Bancorp Adjustments Combined
------------------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Assets
Cash and due from banks $1,266 $ 732 $1,998
Short-term interest-bearing deposits 4,275 615 $(2,851) (a)(q) 2,039
--------------------------------------------------------------------------
Cash and Cash equivalents 5,541 1,347 (2,851) 4,037
Interest bearing deposits 1,486 1,486
Investment securities
Available for sale 141,219 396 141,615
Held to maturity 500 500
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Total investment securities 141,719 396 142,115
Loans, net of allowance for loan losses 249,792 56,320 (567) (e) 305,545
Premises and equipment 4,515 547 190 (f) 5,252
Federal Home Loan Bank of
Indianapolis stock, at cost 5,447 650 6,097
Intangible assets 2,497 (b)(i) 2,497
Other assets 11,792 2,986 (64) (c)(g) 14,714
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Total assets $418,806 $63,732 $ (795) $481,743
==========================================================================
Liabilities
Deposits $214,772 $35,454 $ (302) (e) $249,924
Securities sold under repurchase agreements 4,600 4,600
Federal Home Loan Bank of
Indianapolis advances 107,938 12,000 5,246 (e)(q) 125,364
Note payable 1,226 1,226
Other liabilities 4,163 767 1,196 (d) 6,126
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Total liabilities 332,699 48,221 6,320 387,240
--------------------------------------------------------------------------
Equity Received From Contributions to the ESOP 385 (385) (a) 0
Shareholders' Equity
Preferred stock, without par value
Common stock, without par value 55,546 8,230 507 (a) 64,283
Retained earnings 44,506 7,332 (7,332) (a) 44,506
Accumulated other comprehensive loss (5,831) (20) 20 (a) (5,831)
Unearned recognition and retention plan shares (3,097) (416) 75 (h) (3,438)
Unearned ESOP shares (5,017) (5,017)
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Total shareholders' equity 86,107 15,126 (6,730) 94,503
--------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 418,806 $63,732 $ (795) $481,743
==========================================================================
----------------
Footnotes on page 4
</TABLE>
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<PAGE>
Lincoln Bancorp
Unaudited Pro Forma
Combined Statement of Income
<TABLE>
<CAPTION>
For the Six Month Period Ended
June 30, 2000
---------------------------------------------------------------
Lincoln Citizens Pro Forma Pro Forma
Bancorp Bancorp Adjustments Combined
-------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Interest Income
Loans, including fees $ 9,524 $ 2,291 $ 63 (j) $ 11,878
Investment securities 5,065 10 5,075
Deposits with financial institutions 217 71 288
Dividends 217 24 241
---------------------------------------------------------------
Total interest income 15,023 2,396 63 17,482
---------------------------------------------------------------
Interest Expense
Deposits 5,113 745 76 (l) 5,934
Short term borrowings 136 136
Federal Home Loan Bank advances 2,989 342 234 (m)(r) 3,565
---------------------------------------------------------------
Total interest expense 8,238 1,087 112 9,437
---------------------------------------------------------------
Net Interest Income 6,785 1,309 (49) 8,045
Provision for loan losses 49 30 79
---------------------------------------------------------------
Net Interest Income After Provision
for Loan Losses 6,736 1,279 (49) 7,966
---------------------------------------------------------------
Other Income
Equity in losses of limited partnerships (205) (205)
Other income 486 117 603
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Total other income 281 117 0 398
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Other Expenses
Salaries and employee benefits 2,370 350 10 (p) 2,730
Premises and equipment 470 87 2 (k) 559
Data processing fees 407 65 472
Amortization of intangibles 103 (n)(o) 103
Other expenses 1,064 339 1,403
---------------------------------------------------------------
Total other expense 4,311 841 115 5,267
---------------------------------------------------------------
Income Before Income Tax 2,706 555 (362) 2,899
Income tax expense 707 253 (103) (s) 857
---------------------------------------------------------------
Net Income $ 1,999 $ 302 $ (259) $ 2,042
===============================================================
Basic Earnings per Share $ 0.39 $ 0.34 $ 0.34
Diluted Earnings per Share $ 0.39 $ 0.33 $ 0.33
Weighted Average Shares Outstanding
Basic 5,095,408 900,638 6,093,043
Diluted 5,095,408 904,852 6,101,110
-------------------
Footnotes on page 4
</TABLE>
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<PAGE>
Lincoln Bancorp
Unaudited Pro Forma
Combined Statement of Income
<TABLE>
<CAPTION>
For the Twelve Months Ended
December 31, 1999
------------------------------------------------------------------------
Lincoln Citizens Pro Forma Pro Forma
Bancorp Bancorp Adjustments Combined
---------------------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Interest Income
Loans, including fees $ 16,866 $ 4,325 $ 126 (j) $ 21,317
Investment securities 10,177 21 10,198
Deposits with financial institutions 263 115 378
Dividends 436 29 465
------------------------------------------------------------------------
Total interest income 27,742 4,490 126 32,358
------------------------------------------------------------------------
Interest Expense
Deposits 9,579 1,524 151 (l) 11,254
Short term borrowings 190 190
Federal Home Loan Bank advances 4,178 442 468 (m)(r) 5,088
------------------------------------------------------------------------
Total interest expense 13,947 1,966 619 16,532
------------------------------------------------------------------------
Net Interest Income 13,795 2,524 (493) 15,826
Provision for loan losses 384 60 444
------------------------------------------------------------------------
Net Interest Income After Provision
for Loan Losses 13,411 2,464 (493) 15,382
------------------------------------------------------------------------
Other Income
Net realized losses on sales of available
for sale securities (4) (4)
Equity in losses of limited partnerships (323) (323)
Other income 941 209 1,150
------------------------------------------------------------------------
Total other income 614 209 0 823
------------------------------------------------------------------------
Other Expenses
Salaries and employee benefits 3,859 693 20 (p) 4,572
Premises and equipment 898 165 5 (k) 1,068
Data processing fees 736 136 872
Amortization of intangibles 205 (n)(o) 205
Other expenses 1,838 317 2,155
------------------------------------------------------------------------
Total other expense 7,331 1,311 230 8,872
------------------------------------------------------------------------
Income Before Income Tax 6,694 1,362 (723) 7,333
Income tax expense 2,346 518 (205) (s) 2,659
------------------------------------------------------------------------
Net Income $ 4,348 $ 844 $ (518) $ 4,674
========================================================================
Basic Earnings per Share $ 0.71 $ 0.92 $ 0.67
Diluted Earnings per Share $ 0.71 $ 0.92 $ 0.67
Weighted Average Shares Outstanding
Basic 6,115,522 918,923 6,976,517
Diluted 6,115,522 918,923 6,990,812
-------------
Footnotes on page 4
</TABLE>
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<PAGE>
Footnotes.
(a) To reflect the issuance of 885,074 shares of Lincoln Bancorp common
stock to holders of Citizens Bancorp stock, cash paid to holders of
Citizens Bancorp stock and elimination of capital accounts of Citizens
Bancorp.
(b) To record the excess cost of acquisition over the estimated market
value of the net assets acquired (goodwill). The purchase price
allocation are summarized as follows:
<TABLE>
<CAPTION>
Purchase price paid as:
<S> <C> <C> <C>
Common stock, net of registration costs......................................... $ 8,509
Cash to holders of Citizens Bancorp common stock................................ 8,851
Fair value of Citizens Bancorp options acquired................................. 228
Purchase of Citizens Bancorp common stock prior to merger....................... 99
Acquisition expenses............................................................ 95
---------
17,782
Allocated to:
Historical book value of Citizens' assets and liabilities..................... $15,511
Adjustments:
Transaction fee due to Trident....................................... (353)
Professional fees.................................................... (160)
Cash payment for stock options vested not exercised.................. (126)
Pre-tax costs of severing data processing contract and
personnel severance package.......................................... (462)
Tax benefit on above adjustments
(excluding non-deductible fee due to Trident)................... 233
--------------
Adjusted book value of Citizens' assets and liabilities......................... $14,643
Adjustments to step-up assets and liabilities to fair value:
Loans......................................................................... (567)
Premises and equipment........................................................ 190
Deposits...................................................................... 302
Federal Home Loan Bank advances............................................... 574
Deferred taxes................................................................ (198)
Unearned RRP compensation..................................................... 341
Core deposit intangible....................................................... 1,074
-----------
Total allocation..................................................... 16,359
----------
Excess of purchase price over allocation to
identifiable assets and liabilities (goodwill)............................... $ 1,423
==========
</TABLE>
(c) To cancel the shares of Citizens Bancorp stock held by Lincoln
Bancorp.
(d) To adjust for the pre-tax costs of severing data processing contract
and a personnel severance package, payments made for stock options
vested not exercised, professional fees, acquistion expenses and the
transaction fee due to Trident.
(e) To adjust interest-earning assets and interest-bearing liabilities of
Citizens Bancorp to approximate market value.
(f) To adjust premises and equipment of Citizens Bancorp to the estimated
market value.
(g) To record the net deferred tax asset as a result of the adjustments to
Citizens historical book value and the purchase accounting adjustments
using Lincoln Bancorp's statutory rate of 39.61%.
(h) To adjust unearned RRP compensation as result of the cancellation of
shares of Citizens Bancorp common stock held in the reserve account of
the Citizens RRP Plan and to adjust for the difference between the
historical basis of the unearned RRP compensation and the total value
of the consideration received for the non-vested RRP shares.
(i) To record the core deposit intangible.
(j) To record amoritization of the fair value adjustment of loans using a
method that approximates the effective interest method over eight
years.
(k) To increase depreciation expense from step up of Citizens Bancorp's
premises and equipment to estimated fair value.
- 4 -
(l) To record amortization of the fair value adjustment of deposits using
the straight line method over two years.
(m) To record amortization of the fair value adjustment of Federal Home
Loan Bank advances using the straight line method over eight years.
(n) To record amortization of the core deposit intangible using the 125%
declining balance method over 10 years.
(o) To record amortization of goodwill using the straight line method over
20 years.
(p) To record additional unearned RRP compensation amortization.
(q) To record borrowings of $6.0 million used to fund cash portion of
payment to holders of Citizens Bancorp Stock.
(r) To record interest expense on borrowings of $6.0 million at an annual
interest rate of 6.6%.
(s) To record the impact of taxes at 39.61% rate.
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