REORGANIZATION AND ACQUISITION ACTIVITY

9 Months Ended

Sep. 30, 2011

REORGANIZATION AND ACQUISITION ACTIVITY [Abstract]

REORGANIZATION AND ACQUISITION ACTIVITY

NOTE 2 – REORGANIZATION AND ACQUISITION ACTIVITY

Reorganization into Customers Bancorp, Inc.

The Bancorp and the Bank entered into a Plan of Merger and Reorganization effective September 17, 2011 pursuant to which all of the issued and outstanding common stock of the Bank was exchanged on a three to one basis for shares of common stock and Non-Voting common stock of the Company. The Bank became a wholly-owned subsidiary of the Bancorp (the “Reorganization”).  The Bancorp is authorized to issue up to 100,000,000 shares of common stock, 100,000,000 shares of Class B Non-Voting Common Stock and 100,000,000 shares of preferred stock.  All share and per share information has been retrospectively restated to reflect the reorganization including the three for one consideration used in the Reorganization.

In the Reorganization, the Bank's issued and outstanding shares of common stock of 22,525,825 shares and Class B Non-Voting common stock of 6,834,895 shares converted into 7,508,473 shares of the Bancorp's common stock and 2,278,294 shares of the Bancorp's Class B Non-Voting common stock.  Cash will be paid in lieu of fractional shares.  Outstanding warrants to purchase 1,410,732 shares of the Bank's common stock with an weighted average exercise price of $3.55 per share and 243,102 shares of the Bank's Class B Non-Voting common stock with an weighted average exercise price of $3.50 per share were converted into warrants to purchase 470,260 shares of the Bancorp's common stock with a weighted average exercise price of $10.64 per share and warrants to purchase 81,036 shares of the Bancorp's Class B Non-Voting common stock with a weighted average exercise price of $10.50 per share.  Outstanding stock options to purchase 2,572,404 shares of the Bank's common stock with a weighted average exercise price of $3.50 per share and stock options to purchase 231,500 shares of the Bank's the Class B Non-Voting common stock with a weighted average exercise price of $4.00 per share were converted into stock options to purchase 855,774 shares of the Bancorp's common stock with a weighted average exercise price of $10.49 per share and stock options to purchase 77,166 shares of the Bancorp's Class B Non-Voting common stock with a weighted average exercise price of $12.00 per share.

Berkshire Bancorp Acquisition

On September 17, 2011, the Bancorp completed its acquisition of Berkshire Bancorp, Inc. (“BBI”) and its subsidiary Berkshire Bank (collectively, “Berkshire”).  Berkshire Bank merged within and into the Bank immediately following the acquisition.   BBI served Berks County, Pennsylvania through the five branches of its subsidiary, Berkshire Bank.  Under the terms of the merger agreement, each outstanding share of BBI common stock (a total of 4,067,729) was exchanged for 0.1534 shares of the Bancorp common stock, resulting in the issuance of 623,990 shares of the Bancorp's common stock.  Cash will be paid in lieu of fractional shares.  The most recent price for the sale of CBI common stock, $13.20, was used to determine the fair value of the Bancorp stock issued.  The total purchase price was approximately $11.3 million.

The table below illustrates the calculation of the consideration effectively transferred.
Reconcilement of Pro Forma Shares Outstanding
Berkshire shares outstanding	4,067,729
Exchange ratio	0.1534
Bancorp shares to be issued to Berkshire	623,990
Customers shares outstanding	9,786,765
Pro Forma Customers shares outstanding	10,410,755
Percentage ownership for Customers	94.01	%
Percentage ownership for Berkshire	5.99	%

As a result of the Berkshire Merger, the Bancorp recognized assets acquired and liabilities assumed at their acquisition date (September 17, 2011) fair value as presented below.
Total purchase price			$	11,274
Net Assets Acquired:
Cash	19,207
Securities held to maturity	-
Securities available for sale	-
Restricted investments	947
Loans	98,387
Accrued interest receivable	276
Premises & equipment, net	3,374
Core deposit intangible	-
Deferred tax assets	3,244
Other assets	6,210
Time deposits	(45,721	)
Deposits other than time deposits	(76,145	)
Borrowings	-
Accrued interest payable	(48	)
Other liabilities	(922	)
				8,809
Goodwill resulting from Berkshire Merger			$	2,465

In addition, the Bancorp exchanged each share of BBI's shares of Series A Preferred Securities and Series B Preferred Shares to the U.S. Treasury for one share of the Bancorp's Fixed Rate Cumulative Perpetual Preferred Stock for the total issuance of 2,892 shares of Series A Fixed Rate Cumulative Perpetual Preferred Stock (“Series A Preferred Stock”) and 145 shares of Series B Fixed Rate Cumulative Perpetual Preferred Stock (“Series B Preferred Stock”) with a par value of $1.00 per share and a liquidation of $1,000 per share.  Cumulative dividends on the Series A Preferred Stock are 5% per year and Series B Preferred Stock are 9%. Upon the exchange of the Series A and B preferred shares, the Bancorp paid $218 of cumulative dividends to the Treasury which were previously unpaid.  The Bancorp's next scheduled dividend payment for the Series A and B Preferred Stock will be November 2011.

In addition, 774,571 warrants to purchase shares of BBI common stock were converted into warrants to purchase 118,853 shares of the Bancorp's common stock with an exercise price ranging from $21.38 to $68.82 per share.  The warrants were extended for a five year period and will expire on September 17, 2016.  

BBI's operating results are included in the Bancorp's financial results from the date of acquisition, September 17, 2011 through September 30, 2011.   BBI had total assets of approximately $134.1 million including total loans of $98.4 million and total liabilities of approximately $122.9 million, including total deposits of $121.9 million on September 17, 2011.   Goodwill as a result of the merger was approximately $2.5 million.  The assets acquired and liabilities assumed from Berkshire are recorded at their fair value.  The fair value adjustments made to the assets and liabilities are preliminary estimates and are subject to change as further data is analyzed to complete the valuation based upon information available at the closing date.

Loan Portfolio Acquisition

On September 30, 2011, the Bancorp purchased from Tammac Holding Corporation ("Tammac") $19.3 million of loans and a 1.50% interest only strip security with an estimated value of $3 million secured by a pool of $70 million of loans originated by Tammac.  The total purchase price for these assets was $13 million.