EX-99.1 3 berkshirehillsex991-03.txt 1 BERKSHIRE HILLS BANCORP, INC., REPORTS FOURTH QUARTER AND YEAR END 2002 EARNINGS, DECLARATION OF DIVIDEND AND ANNUAL MEETING PITTSFIELD, MA - January 22, 2003 - Berkshire Hills Bancorp, Inc. (the "Company"), (AMEX: BHL), the holding company for Berkshire Bank (the "Bank"), reported a net loss of $4.3 million for the fourth quarter of 2002 compared to net income of $1.7 million for the same quarter of 2001. For the year ended December 31, 2002, net income totaled $1.8 million as compared to $8.9 million for the year ended December 31, 2001. Year end and fourth quarter earnings were lower primarily due to charges from the restructuring of the Company's senior management and the reorganizing of its long-term business strategies. Earnings(loss) per share for the quarter ended December 31, 2002 was ($0.80), compared to basic and diluted earnings per share of $0.30 and $0.28, respectively, for the fourth quarter of 2001. For the year ended December 31, 2002, basic and diluted earnings per share equaled $0.33 and $0.30 respectively, compared to $1.42 and $1.35 for the year ended December 31, 2001. The Company's book value per share at December 31, 2002, September 30, 2002, and December 31, 2001 was $19.66, $21.75, and $21.68, respectively. Dividend Declared Berkshire Hills also reported that the Board of Directors declared a quarterly cash dividend of $0.12 per share payable on February 21, 2003 to stockholders of record at the close of business on February 6, 2003. Annual Meeting Berkshire Hills Bancorp, Inc., announced today that its 2003 Annual Meeting of Stockholders will be held on May 1, 2003 at the Crowne Plaza Hotel, One West Street, Pittsfield, MA at 10:00 a.m. The voting record date has been set as March 13, 2003. The Company intends to distribute proxy solicitation materials on or about March 27, 2003. Fourth Quarter Events In the fourth quarter of 2002, the Company restructured its management team which resulted in approximately $6.6 million of charges, consisting of the payment to or accrual of severance payments for three executive officers and one senior vice president under existing contractual obligations. Additionally, seven directors retired from the Boards of the Company and the Bank and, as a result, the Company incurred a $300,000 charge in the fourth quarter to fund retirement plan benefits. In December, the Company accelerated its efforts to exit the sub-prime indirect automobile loan business by selling $69.7 million of such loans which resulted in charges of $11.2 million. The Company intends to remain active in the indirect automobile business, but not the sub-prime segment of the market. 2 As part of the revised long-term business strategy, the Company restructured its investment portfolio placing less emphasis on equity securities. Equities totaling $18.8 million were sold in December resulting in a gain of $14.8 million. Excluding Federal Home Loan Bank (FHLB) and Savings Bank Life Insurance (SBLI) stock, equities comprised 9% of the investment portfolio at December 31, 2002. As part of its revised policy and procedures for reviewing and estimating writedowns of repossessed assets, the Company recognized a charge of $1.8 million of which $1.3 million was the result of writing down the values of repossessed automobiles and $500,000 was related to the writedown of one foreclosed property. The Company also increased its allowance for loan losses by $1.5 million to reflect a lower estimate for recoverability of the Bank's remaining sub-prime indirect automobile loans. Management also decided to prepay several higher-rate FHLB borrowings and replace them with lower rate, shorter-term FHLB borrowings in December. FHLB borrowings totaling $21.2 million with a weighted average maturity of approximately 26 months and a weighted average interest rate of approximately 5.56% were replaced by $20.0 million of new FHLB borrowings with a weighted average maturity of nine months at a weighted average cost of 1.53%. The Company incurred a prepayment penalty of $1.1 million in the fourth quarter of 2002 to do so. In total, net charges taken in the fourth quarter of 2002 relating to the restructuring of the Company's senior management team and the reorganizing of the Company's long-term business strategy amounted to $8.3 million. Financial Condition Total assets at December 31, 2002 were $1.05 billion compared to $1.03 billion at December 31, 2001, an increase of $14.9 million. Total loans decreased $79.9 million to $723.0 million at December 31, 2002 from $803.0 million at December 31, 2001. Consumer loans declined $112.0 million during 2002 as the Company accelerated its efforts to exit the sub-prime indirect automobile loan business and discontinued the origination of sub-prime automobile loans. The total amount of sub-prime indirect automobile loans remaining on the Company's books at December 31, 2002 was $13.4 million. In addition, commercial land development and construction loans declined $8.3 million as completed projects converted to permanent financing. Partially offsetting these decreases were commercial real estate loans which increased $34.7 million and residential one-to four-family loans which increased $5.6 million reflecting a strong local real estate loan market and the low interest rate environment. Securities, including FHLB and SBLI stock, rose $80.1 million to $226.9 million at December 31, 2002 from $146.8 at December 31, 2001, as loan and equity sales proceeds were invested in bonds, primarily CMO's and callable agency notes. In addition, short-term investment securities rose $23.9 million to $43.4 million at December 31, 2002, from $19.5 million at December 31, 2001. Foreclosed real estate totaled $1.5 million at December 31, 2002 versus zero at December 31, 2001, as the Company took possession of one commercial property in the first quarter of 2002 and wrote down the property by $500,000 in the fourth quarter. On December 31, 2002, the 3 Company signed a contract to sell this property at its estimated realizable value in the first quarter of 2003. The allowance for loan losses totaled $10.3 million, or 1.43% of total loans at December 31, 2002 versus $11.0 million, or 1.37% of total loans at December 31, 2001. Deposits increased $39.6 million to $782.4 million at December 31, 2002 from $742.7 at December 31, 2001. Deposit growth has been strong in all deposit categories since December 31, 2001. Certificates of deposit and savings accounts increased $19.9 million from December 31, 2001 and demand deposit accounts increased $4.4 million. Money market and NOW accounts increased $15.4 million. FHLB borrowings decreased $1.0 million to $133.0 million at December 31, 2002 from $134.0 million at December 31, 2001. During the fourth quarter of 2002, the Company continued its fifth 5% stock repurchase program purchasing 3,300 shares at a cost of $77,000. The Company repurchased 314,913 shares at a cost of $7.0 million in 2002. Stockholders' equity declined to $120.2 million at December 31, 2002 from $139.3 at December 31, 2001 due primarily to the stock repurchases, a $13.3 million decrease in accumulated other comprehensive income resulting from this year's restructuring of the investment portfolio, and $2.8 million of dividends paid to shareholders. Results of Operations The Company recorded a net loss of $4.3 million in the fourth quarter of 2002 compared to net income of $1.7 million for the same quarter last year primarily due to $8.3 million of charges related to the restructuring of senior management and the reorganizing of the Company's long-term business strategies. Interest and dividend income totaled $14.5 million for the three months ended December 31, 2002 versus $18.3 million for the three months ended December 31, 2001. This decrease is primarily due to lower loan interest which declined by $3.8 million to $12.6 million for the fourth quarter of 2002 from $16.5 million for the same quarter last year as a result of lower balances and yields on the Company's loan portfolio. The decrease also reflects the forfeiture of accrued interest of $492,000 related to the sale of sub-prime automobile loans. Interest expense was $5.5 million for the fourth quarter of 2002, a decrease of $1.7 million from $7.2 million for the fourth quarter last year. Higher balances in the Company's deposit accounts were more than offset by lower rates paid on all interest-bearing liabilities. The provision for loan losses for the fourth quarter of 2002 totaled $2.3 million compared to $4.6 million for the same period in 2001, a decrease of $2.2 million. The provision for 2002 includes $1.5 million attributable to management's assessment of its remaining sub-prime indirect automobile loans. The decrease in the provision in 2002 primarily resulted from management's assessment of the decline in consumer loan charge-offs which, net of recoveries, totaled $2.7 million in the quarter as compared to $4.4 million in the same quarter last year. The higher provision for the fourth quarter of 2001 reflects the adoption of a more aggressive policy regarding the charge-off of automobile loans whereby all automobile loans that were 120 days or more past due, except for customers who are in bankruptcy proceedings, were charged off. Net interest income after the provision for loan losses equaled $6.7 million for the last quarter of 2002 compared to $6.5 million for the last quarter of 2001. 4 Noninterest income dropped $871,000 to $4.3 million for the fourth quarter of 2002 from $5.2 million for the fourth quarter of 2001. The fourth quarter of 2002 reflects a $14.8 million gain on the sale of equity securities which was offset, in part, by $13.4 million of charges related to the sale of sub-prime indirect automobile loans, the writedown of one security, the writedown of repossessed automobiles and the prepayment penalty on the FHLB advances. Higher noninterest income in the fourth quarter of 2001 reflects a $2.2 million gain on the curtailment of the Company's defined benefit pension plan. Operating expenses totaled $17.9 million for the three months ended December 31, 2002 compared to $9.2 million for the three months ended December 31, 2001. Salaries and benefits expense equaled $12.2 million for the fourth quarter of 2002 versus $4.9 million for the fourth quarter of 2001. Included in the 2002 fourth quarter figure is $6.9 million of severance and retirement expenses. Foreclosed real estate and other loan expenses increased $1.0 million to $1.4 million this year as the Company wrote down one manufacturing property. For the year ended December 31, 2002, net income totaled $1.8 million, a decrease of $7.1 million from $8.9 million for the year ended December 31, 2001. Similar to the fourth quarter of 2002, year end earnings were adversely impacted by the same restructuring events. Net interest income totaled $40.7 million for 2002, a decline of $1.5 million from 2001. Interest and dividend income declined $11.7 million to $64.1 million for 2002 from last year as a significant number of customers refinanced higher rate loans and excess cash flows from prepaid or maturing loans were reinvested in lower yielding securities. The results for 2002 also reflect the forfeiture of accrued interest receivable of $492,000 related to the sub-prime automobile loan sale. Interest expense dropped $10.1 million to $23.4 million for 2002 from $33.6 million for 2001 as the Company paid lower rates on all deposit accounts and borrowings from the FHLB. The provision for loan losses totaled $6.2 million for the year ended December 31, 2002, as compared to $7.2 million for last year. The decrease of $1.0 million in the provision from last year primarily reflects management's assessment of the lower balances of sub-prime automobile loans which typically bear higher risk compared to other loans. Net interest income, after the provision for loan losses, totaled $34.5 million for the twelve months ended December 31, 2002, a decrease of $541,000 from 2001. Noninterest income increased $2.1 million to $13.4 million for the year ended December 31, 2002 from $11.4 million for the year ended December 31, 2001 as the net effects of the fourth quarter events in 2002 increased noninterest income by $1.4 million. The figure for 2001 was aided by a one-time gain of $2.2 million on the curtailment of the Company's defined benefit pension plan. The increase in 2002 was aided by the recording of a full year's worth of fees earned from the operations of EastPoint Technologies, LLC versus only six months last year. For the year ended December 31, 2002 operating expenses equaled $45.8 million, an increase of $12.6 million over last year's $33.2 million. Significant portions of this increase were due to the $6.9 million of charges related to management severance and board retirement expenses and the $500,000 writedown of a foreclosed commercial property. In addition, operating expenses 5 increased due to the recognition of a full year's worth of expenses of EastPoint versus only six months last year. Berkshire Hills Bancorp, Inc. is the holding company for Berkshire Bank. Established in 1846, Berkshire Bank is one of Massachusetts' oldest and largest independent banks and is the largest banking institution based in Western Massachusetts. The Bank is headquartered in Pittsfield, Massachusetts with 11 branch offices serving communities throughout Berkshire County. The Bank is committed to continuing to operate as an independent bank, delivering exceptional customer service and a broad array of competitively priced retail and commercial products to customers. This press release may contain certain forward-looking statements with regard to the Company's prospective performance and strategies within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of said safe harbor provisions. Forward-looking statements, which are based on certain assumptions, and describe future plans, strategies, and expectations of the Company, are generally identified by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," or other similar expressions. The Company's ability to predict results or the actual effects of its plans and strategies are inherently uncertain. Accordingly, actual results may differ materially from anticipated results. Factors that could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to, the price of loans or other assets sold by the Bank in the future, changes in market interest rates, general economic conditions, legislation, and regulation; changes in the monetary and fiscal policies of the U.S. Government; changes in the quality or composition of the loan and investment portfolios; changes in deposit flows, competition, and demand for financial services and loan, deposit, and investment products in the Company's local markets; changes in local real estate values; changes in accounting principles and guidelines; war or terrorist activities; and other economic, competitive, governmental, regulatory, geopolitical, and technological factors affecting the Company's operations, pricing, and services. Specific factors that could cause future results to vary from current management expectations are detailed from time to time in the Company's SEC filings. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. Except as required by applicable law or regulation, the Company undertakes no obligation to update these forward-looking statements, to reflect events or circumstances that occur after the date on which such statements were made. MEDIA AND INVESTOR CONTACT: MICHAEL P. DALY 413-236-3194 6 BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
UNAUDITED DECEMBER 31, DECEMBER 31, 2002 2001 ---- ---- IN THOUSANDS ASSETS ------ Cash and due from banks $ 17,258 $ 22,652 Short term investments 43,397 19,471 ------- ------ Total cash and cash equivalents 60,655 42,123 Securities available for sale, at fair value 173,169 104,446 Securities held to maturity, at amortized cost 44,267 33,263 Federal Home Loan Bank stock, at cost 7,440 7,027 Savings Bank Life Insurance stock, at cost 2,043 2,043 Loans 723,022 800,414 Loans held for sale, at lower of cost or fair value - 2,540 Allowance for loan losses (10,308) (11,034) -------- -------- Net loans 712,714 791,920 Premises and equipment, net 13,267 14,213 Foreclosed real estate 1,500 - Accrued interest receivable 5,125 5,873 Goodwill and other intangibles 9,938 10,592 Net deferred tax asset 2,185 - Other assets 13,315 19,201 ------ ------ TOTAL ASSETS $ 1,045,618 $ 1,030,701 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Deposits $ 782,360 $ 742,729 Federal Home Loan Bank advances 133,002 133,964 Securities sold under agreements to repurchase 700 1,890 Net deferred tax liability - 4,573 Loan sold with recourse 1,201 - Accrued expenses and other liabilities 5,677 5,099 ----- ----- Total Liabilities 922,940 888,255 ------- ------- Minority Interests 2,438 3,123 Stockholders' Equity: Preferred stock ($.01 par value; 1,000,000 shares authorized; none issued or outstanding) - - Common stock ( $.01 par value: 26,000,000 shares authorized; shares issued: 7,673,761 at December 31, 2002 and December 31, 2001; shares outstanding: 6,117,134 at December 31, 2002 and 6,425,140 at December 31, 2001) 77 77 Additional paid-in capital 74,632 74,146 Unearned compensation (9,535) (11,101) Retained earnings 79,682 80,657 Accumulated other comprehensive income 5,542 18,836 Treasury stock, at cost (1,556,627 shares at December 31, 2002 and 1,248,621 shares at December 31, 2001) (30,158) (23,292) -------- -------- Total stockholders' equity 120,240 139,323 ------- ------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 1,045,618 $ 1,030,701 =========== ===========
7 BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES SUPPLEMENTAL INFORMATION
UNAUDITED DECEMBER 31, 2002 DECEMBER 31, 2001 ----------------- ----------------- Percent Percent Balance of Total Balance of Total Dollars in Thousands LOAN ANALYSIS ------------- Real estate loans Residential 1-4 family $235,020 32.50% $229,432 28.57% Residential land development and construction 6,576 0.91% 3,585 0.45% Commercial one-to four-family 11,932 1.65% 11,517 1.43% Commercial real estate 119,198 16.49% 84,538 10.53% Commercial land development and construction 11,051 1.53% 19,351 2.41% Multi-family 14,920 2.06% 13,183 1.64% -------- -------- Total real estate loans 398,697 55.14% 361,606 45.03% Commercial loans 165,274 22.86% 170,305 21.21% Consumer loans Automobile 105,047 14.53% 216,026 26.90% Home Equity Loans 40,713 5.63% 34,439 4.30% Other 13,291 1.84% 20,578 2.56% -------- -------- Total consumer loans 159,051 22.00% 271,043 33.76% -------- -------- Total loans 723,022 802,954 Less: Allowance for loan losses (10,308) 1.43% (11,034) 1.37% -------- -------- Loans, net $712,714 $791,920 ======== ======== Percent Percent Balance of Total Balance of Total Dollars in Thousands DEPOSIT ANALYSIS ---------------- Demand Deposits $ 87,149 11.14% $82,758 11.14% NOW Accounts 92,245 11.79% 80,970 10.90% 4Savings Accounts 158,468 20.26% 151,565 20.41% Money Market Accounts 114,309 14.61% 110,199 14.84% Certificates of Deposits 330,189 42.20% 317,237 42.71% -------- -------- Total Deposits $782,360 $742,729 ======== ========
8 BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
Unaudited Unaudited Three Months Ended Twelve Months Ended December 30, December 30, ------------------------------ --------------------------------- 2002 2001 2002 2001 (In thousands, except per share amounts) INTEREST AND DIVIDEND INCOME Bond interest $ 1,467 1,358 $ 5,407 $ 5,608 Stock dividends 324 341 1,355 1,484 Short term investment interest 130 141 456 413 Loan interest 12,628 16,460 56,910 68,291 -------- --------- --------- --------- TOTAL INTEREST AND DIVIDEND INCOME 14,549 18,300 64,128 75,796 -------- --------- --------- --------- INTEREST EXPENSE Interest on deposits 4,221 5,686 17,777 26,685 Interest on FHLB advances and securities sold under agreements to repurchase 1,326 1,547 5,651 6,875 -------- --------- -------- --------- TOTAL INTEREST EXPENSE 5,547 7,233 23,428 33,560 -------- --------- -------- --------- NET INTEREST INCOME 9,002 11,067 40,700 42,236 PROVISION FOR LOAN LOSSES 2,305 4,550 6,180 7,175 -------- --------- -------- --------- NET INTEREST INCOME, AFTER PROVISION 6,697 6,517 34,520 35,061 FOR LOAN LOSSES NONINTEREST INCOME Customer service fees 567 453 2,233 1,810 Trust department fees 431 479 1,796 1,782 Loan fees 46 109 440 595 Gain on sale of securities, net 14,833 2 15,143 268 Loss on impairment of securities (326) - (673) - Loss on sale of loans, net (10,702) - (10,702) - Loss on impairment of other assets (1,262) - (1,262) - Penalty on prepayment of FHLB borrowings (1,067) - (1,067) - License maintenance & processing fees 1,111 1,094 4,379 2,100 License sales & other fees 628 754 2,612 2,144 Gain on curtailment of defined benefit pension plan - 2,173 - 2,173 Other income 69 135 519 490 -------- --------- -------- --------- TOTAL NONINTEREST INCOME 4,328 5,199 13,418 11,362 -------- --------- -------- --------- OPERATING EXPENSES Salaries & benefits 12,227 4,925 28,488 17,590 Occupancy & equipment 1,356 1,357 5,288 4,689 Marketing & advertising 259 220 648 629 Data processing 264 201 758 1,065 Professional services 442 455 1,384 1,314 Office supplies 238 217 769 899 Foreclosed real estate and other loans, net 1,429 398 3,250 2,238 Amortization of other intangibles 175 382 700 827 Minority interests (385) (148) (685) (119) Other expenses 1,864 1,152 5,207 4,031 -------- --------- -------- --------- TOTAL OPERATING EXPENSES 17,869 9,159 45,807 33,163 -------- --------- -------- --------- INCOME (LOSS) BEFORE TAXES (6,844) 2,557 2,131 13,260 Provision (Benefit) for income taxes (2,555) 838 362 4,349 --------- --------- -------- --------- NET INCOME (LOSS) $ (4,289) $ 1,719 $ 1,769 $ 8,911 ========= ========= ======== ========= Earnings (Loss) per share: Basic $ (0.80) $ 0.30 $ 0.33 $ 1.42 Diluted $ (0.80) $ 0.28 $ 0.30 $ 1.35 Weighted average shares outstanding: Basic 5,370 5,763 5,435 6,264 Diluted 5,370 6,157 5,881 6,604
9 BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES SELECTED FINANCIAL RATIOS
Unaudited Unaudited At or for the At or for the Three Months Ended Twelve Months Ended December 31 December 31 2002 2001 2002 2001 ---- ---- ---- ---- DOLLARS IN THOUSANDS DOLLARS IN THOUSANDS Performance Ratios (1): Return (Loss) on average assets -1.60% 0.67% 0.17% 0.86% Return (Loss) on average equity -13.13% 4.87% 1.30% 5.74% Net interest margin as % of average earning assets 3.11% 4.57% 4.12% 4.35% Non-interest income to average earning assets 2.12% 2.15% 1.36% 1.17% Non-interest expense to average earning assets 7.01% 3.78% 4.64% 3.41% Asset Quality Ratios (2): Average earning assets to average assets 94.88% 93.78% 93.92% 93.80% Net charged-off loans to total loans 0.55% 0.54% 0.96% 0.79% Non-performing loans to total loans 0.52% 0.34% 0.52% 0.34% Non-performing assets to total assets 39.36% 0.26% 39.36% 0.26% Allowance for loan losses to non-performing loans 275.54% 408.36% 275.54% 408.36% Allowance for loan losses to total loans 1.43% 1.37% 1.43% 1.37% Capital ratios (2): Stockholders' equity to total assets -25.08% 13.50% -25.08% 13.50% Tier I capital to average assets 10.05% 11.00% 10.05% 11.00% Tier I capital to risk weighted assets 13.47% 12.97% 13.47% 12.97% Total capital to risk weighted assets 15.21% 15.73% 15.21% 15.73% Other data (2): Non-performing loans $ 3,741 $ 2,702 $ 3,741 $ 2,702 Foreclosed real estate $ 1,500 $ - $ 1,500 $ - Non-performing assets $ 5,241 $ 2,702 $ 5,241 $ 2,702 Efficiency ratio (3) 115.16% 56.31% 72.23% 62.18% Book value per share $ 19.66 $ 21.68 $ 19.66 $ 21.68
(1) Ratios are annualized for the three and twelve months ended December 31, 2002 and 2001 (2) End of period ratios and balances (3) Efficiency ratio for 2002 equals operating expenses less severance payments divided by net interest income plus noninterest income less gain on sale of securities plus loss on sale of loans.