-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E1BFco2+AHKQg4PUAcsytzGn2PvABg1AtExc4KqhbJ011y88/ym7FZDhpGrBR82R vgX0M+s1IiGAxR0CCHTt2w== 0000909654-06-001683.txt : 20060727 0000909654-06-001683.hdr.sgml : 20060727 20060727105805 ACCESSION NUMBER: 0000909654-06-001683 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060725 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060727 DATE AS OF CHANGE: 20060727 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERKSHIRE HILLS BANCORP INC CENTRAL INDEX KEY: 0001108134 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTIONS, NOT FEDERALLY CHARTERED [6036] IRS NUMBER: 043510455 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-51584 FILM NUMBER: 06983393 BUSINESS ADDRESS: STREET 1: 24 NORTH ST. CITY: PITTSFIELD STATE: MA ZIP: 01201 BUSINESS PHONE: 4134435601 MAIL ADDRESS: STREET 1: 24 NORTH ST CITY: PITTSFIELD STATE: MA ZIP: 01201 8-K 1 berkshirehills8kjuly26.txt 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) July 25, 2006 ------------- BERKSHIRE HILLS BANCORP, INC. ----------------------------- (Exact name of registrant as specified in its charter) Delaware 0-51584 04-3510455 -------- --------- ---------- (State or other jurisdiction of (Commission (IRS Employer incorporation) File Number) Identification No.) 24 North Street, Pittsfield, Massachusetts 01201 ------------------------------------------ ------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (413) 443-5601 -------------- Not Applicable -------------- (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) 2 ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION. --------------------------------------------- On July 25, 2006, Berkshire Hills Bancorp, Inc., the holding company for Berkshire Bank, announced: (1) its financial results for the quarter ended June 30, 2006; (2) the declaration of a quarterly dividend of $0.14 per share; (3) the anticipated opening of two full-service branches to be located in the towns of Halfmoon and Colonie, New York; and (4) its submission of applications for regulatory approvals to open two branches in the towns of Glenville and Guilderland, New York. The press release containing these announcements is filed as Exhibit 99.1 and incorporated herein by reference. ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS. --------------------------------- (a) Financial Statements of Businesses Acquired: Not applicable (b) Pro Forma Financial Information: Not applicable (c) Shell Company Transactions: Not applicable (d) Exhibits Number Description ------ ----------- 99.1 Press Release Dated July 25, 2006 2 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. BERKSHIRE HILLS BANCORP, INC. Dated: July 26, 2006 By: /s/ Wayne F. Patenaude ----------------------------------- Wayne F. Patenaude Senior Vice President and Chief Financial Officer EX-99.1 2 berkshirehillsexb99.txt 1 BERKSHIRE HILLS BANCORP REPORTS 18% INCREASE IN SECOND QUARTER CORE INCOME, WITH 48% ANNUALIZED COMMERCIAL LOAN GROWTH ANNOUNCES INTENTION TO OPEN TWO ADDITIONAL NEW YORK BRANCHES PITTSFIELD, MA - July 25, 2006 - Berkshire Hills Bancorp, Inc. (the "Company") (NASDAQ: BHLB), the holding company for Berkshire Bank (the "Bank"), today reported an 18% increase in second quarter core income to $4.1 million in 2006, compared to $3.5 million in 2005. Core earnings growth reflected the benefits of the acquisition of Woronoco Bancorp in June 2005 and organic growth. Second quarter 2006 income excluded any revenue related to dividends from the Federal Home Loan Bank of Boston ("the FHLBB") due to a timing change in the FHLBB dividend declaration schedule. Such revenue would normally have been about $400 thousand ($0.03 per diluted share after tax). The FHLBB has announced that it expects to declare two dividends in the third quarter, with a catch-up for the delayed dividend. However, this catch-up has not yet been declared and could be eliminated by proposed regulations. All FHLBB dividends are subject to a number of factors, including FHLBB earnings. Second quarter GAAP net income was $4.5 million in 2006 compared to a net loss of $4.6 million in the second quarter of 2005. The 2005 loss was due primarily to an $8.7 million non-cash charge related to the termination of the Employee Stock Ownership Program, along with Woronoco merger and systems conversion related expenses. Second quarter GAAP earnings per diluted share totaled $0.51 in 2006, compared to a loss of $0.74 in 2005. Second quarter core diluted earnings per share totaled $0.47 in 2006, compared to $0.53 in 2005, decreasing primarily due to the issuance of shares in connection with the Woronoco acquisition. For the first six months of 2006, core income increased by 33% to $8.6 million compared to $6.5 million in the same period of 2005. Core earnings per diluted share measured $0.98 and $1.05 for these periods, respectively. Six month GAAP net income was $9.3 million in 2006 ($1.06 per diluted share), compared to a net loss of $1.4 million ($0.23 per diluted share) for the same period in 2005. Changes between the six month periods resulted principally from the same factors that affected earnings for the second quarter, described above, including the FHLBB dividend change. Second quarter and recent highlights include: o 48% annualized growth in total commercial loans o 28% annualized growth in total loans o 22% annualized increase linked quarter in combined deposit and wealth management fees o 6% annualized increase in total deposits, excluding brokered deposit runoff o 1% annualized increase linked quarter in core non-interest expense o Opened full-service branches in the New York towns of Delmar, East Greenbush, and Guilderland. o Received regulatory approvals for new full-service branches in the New York towns of Halfmoon and Colonie, and filed regulatory applications for new full-service branches in Glenville and Guilderland. Michael P. Daly, President and Chief Executive Officer, stated, "We had an exceptional quarter for loan growth in all three of our regional markets. We achieved a 28% annualized increase in total loans, including 48% annualized growth in total commercial loans. We also made excellent progress with our New York branch expansion efforts, opening three new branches and announcing plans for an additional two branches. We successfully hired additional sales staff to develop business in our expanded markets. All of these efforts are consistent with our strategic plan as we evolve into a regional bank. 2 For the first half of the year, we achieved 19% annualized loan growth and 14% annualized deposit growth. To mitigate the impact of a tighter margin due to increased deposit competition, we have held our total core non-interest expenses steady for the last two quarters, despite higher costs associated with new branches in New York. We were pleased to be recognized by the Boston Globe for the fifth consecutive year as one of the top performing publicly traded companies in Massachusetts." Mr. Daly continued, "The major elements of our first half earnings generally came in as we expected. For the second half, we feel that the margin pressures that we are seeing will continue, and we expect to take a more selective approach to managing our growth. This will result in more modest near-term growth in our earnings, compared to our earlier expectations, while we also continue to invest in growing our New York branches. We will discuss our guidance further in our conference call on July 26." DIVIDEND DECLARATION - -------------------- On June 30, 2006, the Company announced that the Board of Directors had declared a quarterly cash dividend of $0.14 per share, payable on August 24, 2006, to stockholders of record at the close of business on August 10, 2006. BRANCH EXPANSION - ---------------- The Bank is also announcing today that it has applied for regulatory approvals to open branches at 262 Saratoga Road, Glenville, New York and at Town Center Plaza, 1704 Western Avenue, Guilderland, New York. Both locations are former bank branches that were closed due to post-merger consolidations. These two new branches will bring to ten the total number of full-service branches that the Bank has so far named in New York. They bring the total number of operating and announced Berkshire Bank branches to 31, compared to 24 offices which were operating at the beginning of this year. FINANCIAL CONDITION - ------------------- Total assets were $2.1 billion at June 30, 2006, increasing at an 18% annualized rate during the quarter. Total loans increased by $102 million during the second quarter, growing at a 28% annualized rate to $1.55 billion. Annualized loan growth was 19% for the first half of the year. While most categories of loans increased, second quarter growth was strongest in commercial loans, including a $27 million increase in commercial construction loans and a $32 million increase in commercial business loans. Double digit commercial loan growth was recorded in all three of the Bank's regional markets. Asset quality remained favorable during the most recent quarter, with annualized net charge-offs measuring 0.04% of average loans and quarter-end nonperforming assets measuring 0.04% of total assets. Delinquent loans remained under 0.50% of total loans at mid-year. Total deposits increased by $13 million to $1.46 billion during the second quarter. Second quarter annualized deposit growth was 6%, excluding brokered deposit run-off. Total deposits increased at a 14% annualized rate for the first half of the year. The Bank's new branches did not open until near the end of the second quarter, and the deposit market has become more competitive due to higher prevailing interest rates. Borrowings increased by $76 million to provide additional funding for the strong loan growth. The ratio of tangible stockholders' equity/assets decreased to 7.3% from 7.6% due to loan growth, while total equity/assets decreased to 11.6% from 12.0%. 2 3 RESULTS OF OPERATIONS - --------------------- Most major categories of income and expense increased in 2006 compared to 2005, primarily due to the acquisition of Woronoco Bancorp in June 2005, plus the benefit of organic growth. Results in 2005 also included non-core charges related to the termination of the Employee Stock Ownership Plan and merger and systems conversion expenses related to the Woronoco acquisition. Second quarter net income decreased compared to the prior quarter, primarily due to the delay in the FHLBB dividend and to seasonal insurance fees in the first quarter related to contingent annual commissions. On a seasonally adjusted basis, and adjusting for the anticipated FHLBB dividend, core earnings would have increased at an 11% annual rate compared to the prior quarter. Net interest income decreased by $150 thousand in the second quarter of 2006, compared to the prior quarter, due to the delayed FHLBB dividend. The net interest margin declined by 11 basis points to 3.16% from 3.27%, with the FHLBB dividend accounting for 8 basis points of the decline and tighter deposit costs accounting for most of the remaining 3 basis points. The flat yield curve has also contributed to margin pressures. Much of the strong loan growth was recorded in the second half of the quarter, with the full benefit to be recognized beginning in the third quarter. Linked quarter non-interest income decreased by $181 thousand primarily due to the $327 thousand seasonal decrease in insurance commissions reflecting the fact that annual contingent revenues are normally recorded in the first quarter. The major fee income categories of deposit and wealth management fees together increased by $113 thousand (22% annualized) reflecting the Company's ongoing business expansion. Core non-interest expense increased by $28 thousand (1% annualized) compared to the linked quarter, reflecting spending controls which mostly offset the higher costs of new branches. Non-interest expense included $470 thousand in charges related to new branches in the most recent quarter, an increase of $240 thousand from the linked quarter. Total non-interest expense included $385 thousand of non-core charges related to nonrecurring contract terminations and merger related charges. The effective tax rate improved to 31.2% from 32.9% due to tax credits on community development investments. Results for the second quarter of 2006 also included $359 thousand of pretax income from discontinued operations from the sale of the Company's data processing subsidiary in June, 2004. CONFERENCE CALL AND EARNINGS GUIDANCE - ------------------------------------- Michael P. Daly, President and Chief Executive Officer, and Wayne F. Patenaude, Senior Vice President, Treasurer and Chief Financial Officer, will host a conference call at 10:00 a.m. (ET) on Wednesday, July 26, 2006. Persons wishing to access the conference call may do so by dialing 1-877-407-8035. Replays of the conference call will be available beginning July 26, 2006 at 1:00 p.m. (ET) through August 4, 2006 at 11:59 p.m. (ET) by dialing 1-877-660-6853 and using Account #286 and Conference ID #205656 (both numbers are needed to access the replay). The conference call will focus on a discussion of the Company's performance in the most recent quarter. Additionally, management will provide revised earnings guidance for the second half of the year. BACKGROUND - ---------- 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 the largest banking institution based in Western Massachusetts. The Bank is headquartered in Pittsfield, Massachusetts with branches serving communities throughout Western Massachusetts and Northeastern New York. The Bank is transitioning into a regional bank and is positioning itself as the financial institution of choice in its retail 3 4 and commercial markets, delivering exceptional customer service and a broad array of competitively priced deposit, loan, insurance, wealth management and trust services, and investment products. For more information on Berkshire Hills Bancorp, Inc. or Berkshire Bank, visit www.berkshirebank.com or call 800-773-5601. FORWARD-LOOKING STATEMENTS - -------------------------- Statements contained in this news release contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and expectations of management. Since these statements reflect the views of management concerning future events, these statements involve risks, uncertainties, and assumptions. These risks and uncertainties include among others: changes in market interest rates and general and regional economic conditions; changes in government regulations; changes in accounting principles; the quality or composition of the loan and investment portfolios; and the achievement of anticipated future earnings benefits from recent acquisitions. Additionally, other risks and uncertainties may be described in the Company's quarterly reports on Form 10-Q for the quarters ended March 31, June 30 and September 30 and in its annual report on Form 10-K, each filed with the Securities and Exchange Commission, which are available at the Securities and Exchange Commission's internet website (www.sec.gov) and to which reference is hereby made. Therefore, actual future results may differ significantly from results discussed in these forward-looking statements and undue reliance should not be placed on such statements. The Company assumes no obligation to update any forward-looking statements. NON-GAAP FINANCIAL MEASURES - --------------------------- This press release contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles ("GAAP"). The Company's management uses certain non-GAAP measures for operational and investment decisions and believes that these measures are among several useful measures for understanding its operating results, performance trends, and financial condition. These measures should not be construed as a substitute for GAAP measures; they should be read and used in conjunction with the Company's GAAP financial information. A reconciliation of non-GAAP financial measures to GAAP measures is included in the accompanying financial tables and elsewhere in this release. 5
BERKSHIRE HILLS BANCORP, INC. CONSOLIDATED BALANCE SHEETS - UNAUDITED - -------------------------------------------------------------------------------------------------------------------------------- June 30, March 31, December 31, 2006 2006 2005 -------------------------------------------------------- (IN THOUSANDS, EXCEPT SHARE DATA) ASSETS Cash and due from banks $ 28,099 $ 27,426 $ 30,977 Short-term investments 956 352 110 ----------- ----------- ----------- Total cash and cash equivalents 29,055 27,778 31,087 Securities available for sale, at fair value 353,322 384,629 390,876 Securities held to maturity, at amortized cost 42,524 28,846 29,908 Loans held for sale - 1,267 2,093 Total loans 1,551,112 1,448,505 1,416,449 Less: Allowance for loan losses (13,537) (13,090) (13,001) ----------- ----------- ----------- Net loans 1,537,575 1,435,415 1,403,448 Premises and equipment, net 28,005 26,226 26,236 Accrued interest receivable 8,361 8,915 8,508 Goodwill 88,544 88,123 88,092 Other intangible assets 10,556 11,040 11,524 Bank owned life insurance 19,402 19,201 19,002 Cash surrender value - other life insurance 10,418 11,262 11,503 Other assets 20,227 13,631 13,276 ----------- ----------- ----------- Total assets $ 2,147,989 $ 2,056,333 $ 2,035,553 =========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits $ 1,463,545 $ 1,450,554 $ 1,371,218 Borrowings 412,641 336,265 397,453 Junior subordinated debentures 15,464 15,464 15,464 Other liabilities 8,089 6,413 5,352 ----------- ----------- ----------- Total liabilities 1,899,739 1,808,696 1,789,487 Total stockholders' equity 248,250 247,637 246,066 ----------- ----------- ----------- Total liabilities and stockholders' equity $ 2,147,989 $ 2,056,333 $ 2,035,553 =========== =========== ===========
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BERKSHIRE HILLS BANCORP, INC. CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED - -------------------------------------------------------------------------------- LOAN ANALYSIS June 30, 2006 March 31, 2006 December 31, 2005 -------------------- ------------------- ----------------------- Percent Percent Percent Balance of Total Balance of Total Balance of Total -------------------- ------------------- ----------------------- (DOLLARS IN MILLIONS) Residential mortgages 1 - 4 Family $ 535 34 % $ 520 36 % $ 514 37 % Construction 34 2 36 2 35 2 ------- ---- ------- ---- ------- ---- Total residential mortgages 569 36 556 38 549 39 Commercial mortgages Construction 87 6 60 4 59 4 Single and multi-family 66 4 67 5 69 5 Other commercial real estate 322 21 310 21 283 20 ------- ---- ------- ---- ------- ---- Total commercial mortgages 475 31 437 30 411 29 Commercial business loans 184 12 152 11 159 11 Consumer loans Auto 168 11 153 11 148 10 Home equity and other 155 10 151 10 149 11 ------- ---- ------- ---- ------- ---- Total consumer loans 323 21 304 21 297 21 Total loans $ 1,551 100 % $ 1,449 100 % $ 1,416 100 % ======= ==== ======= ==== ======= ==== DEPOSIT ANALYSIS June 30, 2006 March 31, 2006 December 31, 2005 -------------------- -------------------- --------------------- Percent Percent Percent Balance of Total Balance of Total Balance of Total -------------------- -------------------- --------------------- (DOLLARS IN MILLIONS) Demand $ 188 13 % $ 169 12 % $ 180 13 % NOW 137 9 148 10 149 11 Money market 274 19 284 20 245 18 Savings 207 14 216 15 222 16 ------- ---- ------- ---- ------- ---- Total non-maturity (core) deposits 806 55 817 57 796 58 Time less than 100 thousand 355 24 342 23 308 23 Time 100 thousand or more 253 17 235 16 210 15 Brokered time 50 4 57 4 57 4 ------- ---- ------- ---- ------- ---- Total time deposits 658 45 634 43 575 42 Total deposits $ 1,464 100 % $ 1,451 100 % $ 1,371 100 % ======= ==== ======= ==== ======= ====
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BERKSHIRE HILLS BANCORP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED - --------------------------------------------------------------------------------------------------------------------------------- Three Months Ended Six Months Ended ------------------------ ------------------------- June 30, June 30, June 30, June 30, 2006 2005 2006 2005 ------------------------ ------------------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) INTEREST AND DIVIDEND INCOME Loans $ 24,017 $ 15,226 $ 46,373 $ 27,142 Securities 4,180 4,100 8,877 8,210 Short-term investments 15 22 32 38 -------- -------- -------- -------- Total interest and dividend income 28,212 19,348 55,282 35,390 -------- -------- -------- -------- INTEREST EXPENSE Deposits 9,843 4,318 18,599 7,691 Borrowings 3,911 3,522 7,617 6,159 -------- -------- -------- -------- Total interest expense 13,754 7,840 26,216 13,850 -------- -------- -------- -------- NET INTEREST INCOME 14,458 11,508 29,066 21,540 PROVISION FOR LOAN LOSSES 600 300 890 793 -------- -------- -------- -------- Net interest income after provision for loan losses 13,858 11,208 28,176 20,747 -------- -------- -------- -------- NON-INTEREST INCOME Deposit fees 1,383 1,033 2,669 1,648 Wealth management fees 772 663 1,528 1,333 Insurance fees 581 175 1,489 207 Loan fees 125 198 351 372 Increase in cash surrender value of life insurance 247 200 540 403 Gain on sale of securities, net 529 1,388 1,026 1,817 Gain on sale of loans and securitized loans, net - 162 - 751 Other 273 97 397 125 -------- -------- -------- -------- Total non-interest income 3,910 3,916 8,000 6,656 -------- -------- -------- -------- NON-INTEREST EXPENSE Salaries and benefits 5,758 4,485 11,411 8,820 Occupancy and equipment 1,822 1,212 3,753 2,352 Data processing and telecommunications 813 635 1,697 1,127 Professional services 432 363 935 838 Marketing and advertising 350 200 593 361 Foreclosed real estate and other loans, net 105 218 137 312 Amortization of intangible assets 478 156 956 186 Other recurring non-interest expense 1,495 1,162 2,995 1,972 Termination of Employee Stock Ownership Plan - 8,667 - 8,667 Other non-recurring expense 385 963 385 963 -------- -------- -------- -------- Total non-interest expense 11,638 18,061 22,862 25,598 -------- -------- -------- -------- Income (loss) from continuing operations before income taxes 6,130 (2,937) 13,314 1,805 Income tax expense 1,888 1,671 4,254 3,161 -------- -------- -------- -------- Net income (loss) from continuing operations 4,242 (4,608) 9,060 (1,356) ======== ======== ======== ======== Income from discontinued operations before income taxes 359 - 359 - Income tax expense 138 - 138 - -------- -------- -------- -------- Net income from discontinued operations 221 - 221 - ======== ======== ======== ======== NET INCOME (LOSS) $ 4,463 $ (4,608) $ 9,281 $ (1,356) ======== ======== ======== ======== Earnings (loss) per share Basic $ 0.52 $ (0.74) $ 1.09 $ (0.23) Diluted $ 0.51 $ (0.74) $ 1.06 $ (0.23) Average shares outstanding Basic 8,512 6,257 8,492 5,782 Diluted 8,760 6,257 8,758 5,782
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BERKSHIRE HILLS BANCORP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED - ------------------------------------------------------------------------------------------------------------------------------------ Quarters Ended ------------------------------------------------------------------- June 30, Mar. 31, Dec. 31, Sept. 30, June 30, (IN THOUSANDS, EXCEPT PER SHARE DATA) 2006 2006 2005 2005 2005 ------------------------------------------------------------------- INTEREST AND DIVIDEND INCOME Residential mortgages $ 7,290 $ 7,055 $ 7,142 $ 7,101 $ 4,444 Commercial mortgages 8,218 7,625 7,001 6,673 4,977 Commercial business loans 3,250 2,815 2,865 2,884 2,505 Consumer loans 5,259 4,861 4,812 4,491 3,300 -------- -------- -------- -------- -------- Total interest on loans 24,017 22,356 21,820 21,149 15,226 Securities 4,180 4,697 4,679 4,628 4,100 Short-term investments 15 17 13 62 22 -------- -------- -------- -------- -------- Total interest and dividend income 28,212 27,070 26,512 25,839 19,348 -------- -------- -------- -------- -------- INTEREST EXPENSE Deposits 9,843 8,756 7,359 5,979 4,318 Borrowings 3,911 3,706 4,116 4,806 3,522 -------- -------- -------- -------- -------- Total interest expense 13,754 12,462 11,475 10,785 7,840 -------- -------- -------- -------- -------- NET INTEREST INCOME 14,458 14,608 15,037 15,054 11,508 PROVISION FOR LOAN LOSSES 600 290 315 204 300 -------- -------- -------- -------- -------- Net interest income after provision for loan losses 13,858 14,318 14,722 14,850 11,208 -------- -------- -------- -------- -------- NON-INTEREST INCOME Deposit fees 1,383 1,286 1,452 1,439 1,033 Wealth management fees 772 756 729 680 663 Insurance fees 581 908 664 472 175 Loan fees 125 226 189 179 198 Increase in cash surrender value of life insurance 247 293 244 245 200 Gain on sale of securities, net 529 497 882 832 1,388 Gain on sale of loans and securitized loans, net - - - 22 162 Other 273 125 137 86 97 -------- -------- -------- -------- -------- Total non-interest income 3,910 4,091 4,297 3,955 3,916 -------- -------- -------- -------- -------- NON-INTEREST EXPENSE Salaries and benefits 5,758 5,653 5,758 5,699 4,485 Occupancy and equipment 1,822 1,931 1,799 1,655 1,212 Data processing and telecommunications 813 884 875 736 635 Professional services 432 503 471 590 363 Marketing and advertising 350 243 355 372 200 Foreclosed real estate and other loans, net 105 32 187 241 218 Amortization of intangible assets 478 478 481 481 156 Other recurring non-interest expense 1,495 1,501 1,354 998 1,162 Termination of Employee Stock Ownership Plan - - 168 - 8,667 Other non-recurring expense 385 - 352 828 963 -------- -------- -------- -------- -------- Total non-interest expense 11,638 11,225 11,800 11,600 18,061 -------- -------- -------- -------- -------- Income (loss) from continuing operations before income taxes 6,130 7,184 7,219 7,205 (2,937) Income tax expense 1,888 2,366 2,381 2,459 1,671 -------- -------- -------- -------- -------- Net income (loss) from continuing operations 4,242 4,818 4,838 4,746 (4,608) ======== ======== ======== ======== ======== Income from discontinued operations before income taxes 359 - - - - Income tax expense 138 - - - - -------- -------- -------- -------- -------- Net income from discontinued operations 221 - - - - ======== ======== ======== ======== ======== NET INCOME (LOSS) $ 4,463 $ 4,818 $ 4,838 $ 4,746 $(4,608) ======== ======== ======== ======== ======== Earnings (loss) per share Basic $ 0.52 $ 0.57 $ 0.57 $ 0.56 $ (0.74) Diluted $ 0.51 $ 0.55 $ 0.55 $ 0.54 $ (0.74) Average shares outstanding Basic 8,512 8,476 8,420 8,456 6,257 Diluted 8,760 8,755 8,813 8,856 6,257 Dividends per share $ 0.14 $ 0.14 $ 0.14 $ 0.14 $ 0.12
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BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES ASSET QUALITY ANALYSIS - ------------------------------------------------------------------------------------------------------------------------------------ At or for the Quarters Ended ------------------------------------------------------------------------- June 30, Mar. 31, Dec. 31, Sept. 30, June 30, 2006 2006 2005 2005 2005 ------------------------------------------------------------------------- (DOLLARS IN THOUSANDS) NON-PERFORMING ASSETS Nonaccruing loans: Residential mortgages $ 234 $ 289 $ 360 $ 393 $ 663 Commercial mortgages - - 127 130 209 Commercial business loans 405 480 553 876 613 Consumer loans 133 139 146 161 107 -------- -------- -------- -------- -------- Total nonaccruing loans $ 772 $ 908 $ 1,186 $ 1,560 $ 1,592 Real estate owned 105 - - - - -------- -------- -------- -------- -------- Total nonperforming assets $ 877 $ 908 $ 1,186 $ 1,560 $ 1,592 ======== ======== ======== ======== ======== Total nonperforming loans/total loans 0.05% 0.06% 0.08% 0.11% 0.11% Total nonperforming assets/total assets 0.04% 0.04% 0.06% 0.08% 0.08% PROVISION AND ALLOWANCE FOR LOAN LOSSES Balance at beginning of period $ 13,090 $ 13,001 $ 13,123 $ 13,044 $ 9,645 Charged-off loans (364) (331) (538) (284) (391) Recoveries on charged-off loans 211 130 101 159 169 -------- -------- -------- -------- -------- Net loans charged-off (153) (201) (437) (125) (222) Allowance attributed to loans acquired by merger - - - - 3,321 Provision for loan losses 600 290 315 204 300 -------- -------- -------- -------- -------- Balance at end of period $ 13,537 $ 13,090 $ 13,001 $ 13,123 $ 13,044 ======== ======== ======== ======== ======== Allowance for loan losses/nonperforming loans 1753% 1442% 1096% 841% 819% Allowance for loan losses/total loans 0.87% 0.90% 0.92% 0.93% 0.92% NET LOAN (CHARGE-OFFS) RECOVERIES Residential mortgages $ (27) $ - $ - $ - $ - Commercial mortgages - - - - - Commercial business loans 5 3 (268) 4 (109) Consumer loans (131) (204) (169) (129) (113) -------- -------- -------- -------- -------- Total net $ (153) $ (201) $ (437) $ (125) $ (222) ======== ======== ======== ======== ======== Net charge-offs (annualized)/average loans 0.04% 0.06% 0.12% 0.04% 0.08% AVERAGE FICO SCORES OF CONSUMER AUTOMOBILE LOANS 721 719 716 715 711
F-5 10
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------------------------------------------------------------ At or for the Quarters Ended -------------------------------------------------------------------------- June 30, Mar. 31, Dec. 31, Sept. 30, June 30, 2006 2006 2005 2005 2005 -------------------------------------------------------------------------- PER SHARE DATA Core earnings, diluted $ 0.47 $ 0.51 $ 0.52 $ 0.54 $ 0.53 Net earnings (loss), diluted 0.51 0.55 0.55 0.54 (0.74) Tangible book value 17.30 17.26 17.15 17.04 16.56 Total book value 28.79 28.79 28.81 28.68 28.45 Market price at period end 35.48 34.94 33.50 34.00 33.32 PERFORMANCE RATIOS Core return on tangible assets 0.89 % 0.98 % 1.02% 1.04 % 0.94% Return (loss) on total assets 0.85 0.94 0.96 0.92 (1.19) Core return on tangible equity 11.41 12.63 13.49 14.47 11.42 Return (loss) on total equity 7.00 7.64 7.89 7.90 (11.26) Net interest margin, fully taxable equivalent 3.16 3.27 3.36 3.31 3.26 Core tangible non-interest income to assets 0.68 0.74 0.71 0.64 0.66 Non-interest income to assets 0.75 0.80 0.85 0.77 1.00 Core tangible non-interest expense to assets 2.17 2.21 2.24 2.10 2.17 Non-interest expense to assets 2.23 2.20 2.32 2.25 4.62 Efficiency ratio 58.73 57.48 57.00 55.17 57.65 ASSET QUALITY RATIOS Net charge-offs (annualized)/average loans 0.04 % 0.06 % 0.12 % 0.04 % 0.08 % Non-performing assets/total assets 0.04 0.04 0.06 0.08 0.08 Loan loss allowance/total loans 0.87 0.90 0.92 0.93 0.92 Loan loss allowance/nonperforming loans 17.53 x 14.42 x 10.96 x 8.41 x 8.19 x CAPITAL RATIOS Stockholders' equity to total assets 11.56 % 12.04 % 12.09 % 12.08 % 11.80 % Tangible stockholders' equity to tangible assets 7.28 7.59 7.56 7.55 7.25 ANNUALIZED YEAR-TO-DATE GROWTH Total loans 19 % 9 % 71 % 94 % 142 % Total deposits 14 23 62 79 109 FINANCIAL DATA (IN MILLIONS) Total assets $ 2,148 $ 2,056 $ 2,036 $ 2,033 $ 2,067 Total loans 1,551 1,449 1,416 1,412 1,416 Total intangible assets 99 99 100 100 102 Total deposits 1,464 1,451 1,371 1,348 1,306 Total stockholders' equity 248 248 246 246 244 Total core income 4.1 4.5 4.6 4.7 3.5 Total net income (loss) 4.5 4.8 4.8 4.7 (4.6)
- ----------------------------------------------------- (1) All performance ratios are annualized and are based on average balance sheet amounts, where applicable. (2) Data for the second quarter of 2006 has no revenue for Federal Home Loan Bank dividends due to a change in the dividend declaration schedule. F-6 11
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES AVERAGE BALANCES - ---------------------------------------------------------------------------------------------------------------------------- Quarters Ended -------------------------------------------------------------------------------- June 30, Mar. 31, Dec. 31, Sept. 30, June 30, 2006 2006 2005 2005 2005 -------------------------------------------------------------------------------- (IN THOUSANDS) Assets Loans Residential mortgages $ 561,444 $ 554,833 $ 554,328 $ 561,048 $ 352,776 Commercial mortgages 450,283 427,891 398,867 396,212 314,778 Commercial business loans 161,618 152,970 159,741 165,414 154,405 Consumer loans 312,813 298,020 298,917 300,347 225,540 ---------- ---------- ---------- ---------- ---------- Total loans 1,486,158 1,433,714 1,411,853 1,423,021 1,047,499 Securities 408,542 418,744 425,237 435,853 393,962 Short-term investments 744 1,561 538 7,028 1,873 ---------- ---------- ---------- ---------- ---------- Total earning assets 1,895,444 1,854,019 1,837,628 1,865,902 1,443,334 Intangible assets 98,944 99,318 99,862 100,955 38,879 Other assets 94,805 90,412 94,608 98,394 81,732 ---------- ---------- ---------- ---------- ---------- Total assets $2,089,193 $2,043,749 $2,032,098 $2,065,251 $1,563,945 ========== ========== ========== ========== ========== Liabilities and stockholders' equity Deposits NOW $ 140,103 $ 141,364 $ 143,120 $ 135,638 $ 112,775 Money market 284,447 269,685 251,462 241,088 183,273 Savings 208,345 217,475 226,267 240,396 192,250 Time 643,398 611,324 558,963 515,120 384,443 ---------- ---------- ---------- ---------- ---------- Total interest-bearing deposits 1,276,293 1,239,848 1,179,812 1,132,242 872,741 Borrowings 380,131 380,019 424,293 499,877 387,208 ---------- ---------- ---------- ---------- ---------- Total interest-bearing liabilities 1,656,424 1,619,867 1,604,105 1,632,119 1,259,949 Non-interest-bearing demand deposits 171,787 168,478 175,025 185,183 129,700 Other liabilities 6,456 5,099 6,661 6,409 9,579 ---------- ---------- ---------- ---------- ---------- Total liabilities 1,834,667 1,793,444 1,785,791 1,823,711 1,399,228 Stockholders' equity 254,526 250,305 246,307 241,540 164,717 ---------- ---------- ---------- ---------- ---------- Total liabilities and equity $2,089,193 $2,043,749 $2,032,098 $2,065,251 $ 1,563,945 ========== ========== ========== ========== ========== Supplementary data Total core deposits $ 804,682 $ 797,002 $ 795,874 $ 802,305 $ 617,998 Total deposits 1,448,080 1,408,326 1,354,837 1,317,425 1,002,441
- ------------------------------------------------------------------- (1) Average balances for securities available-for-sale are based on amortized cost. (2) Average balances reflect the acquisition of Woronoco Bancorp, Inc. on June 1, 2005. F-7 12
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES AVERAGE YIELDS (Fully Taxable Equivalent - Annualized) - ------------------------------------------------------------------------------------------------------------------- Quarters Ended ----------------------------------------------------------------------------- June 30, Mar. 31, Dec. 31, Sept. 30, June 30, 2006 2006 2005 2005 2005 ----------------------------------------------------------------------------- Earning assets Loans Residential mortgages 5.19 % 5.09 % 5.15 % 5.06 % 5.04 % Commercial mortgages 7.32 7.23 6.96 6.68 6.34 Commercial business loans 8.07 7.46 7.12 6.92 6.51 Consumer loans 6.74 6.61 6.39 5.93 5.87 Total loans 6.46 6.21 6.15 5.91 5.83 Securities 4.59 4.96 4.87 4.69 4.40 Short-term investments 4.94 4.45 3.96 3.50 2.91 Total earning assets 6.07 5.99 5.83 5.60 5.44 Funding liabilities Deposits NOW 1.02 1.01 0.65 0.42 0.18 Money Market 3.36 3.12 2.61 2.07 1.98 Savings 0.78 0.76 0.77 0.86 1.03 Time 4.17 3.92 3.57 3.12 2.99 Total interest-bearing deposits 3.09 2.86 2.47 2.10 1.98 Borrowings 4.13 3.96 3.85 3.81 3.65 Total interest-bearing liabilities 3.33 3.12 2.84 2.62 2.50 Net interest spread 2.74 2.87 2.99 2.98 2.94 Net interest margin 3.16 3.27 3.36 3.31 3.26 Cost of funds 3.02 2.83 2.56 2.35 2.24
- ------------------------------------------------------------------------------- (1) Average balances and yields for securities available-for-sale are based on amortized cost. (2) Cost of funds includes all deposits and borrowings. (3) Data for the second quarter of 2006 has no revenue for Federal Home Loan Bank dividends due to a change in the dividend declaration schedule. F-8 13
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES - ------------------------------------------------------------------------------------------------------------------------------------ At or for the Quarters Ended For six months ended ---------------------------------------------------------- -------------------- June 30, Mar. 31, Dec. 31, Sept. 30, June 30, June 30, June 30, 2006 2006 2005 2005 2005 2006 2005 - ------------------------------------------------------------------------------------------------------------- -------------------- (DOLLARS IN THOUSANDS) Net income $ 4,463 $ 4,818 $ 4,838 $ 4,746 $(4,608) $ 9,281 $(1,356) Less: Gain on sale of securities, net (529) (497) (882) (832) (1,388) (1,026) (1,817) Less: income from discontinued operations (359) - - - - (359) - Plus: Termination of ESOP - - 168 - 8,667 - 8,667 Plus: Other nonrecurring expense 385 - 352 828 963 385 963 Adj: Income taxes 166 164 119 1 (139) 330 11 ------- ------- ------- ------- ------- ------- ------- Core income (A) 4,126 4,485 4,595 4,743 3,495 8,611 6,468 Plus: Amort. Intang. Assets (net of taxes) 320 320 322 322 105 640 125 ------- ------- ------- ------- ------- ------- ------- Tangible core income (B) $ 4,446 $ 4,805 $ 4,917 $ 5,065 $ 3,600 $ 9,251 $ 6,593 ======= ======= ======= ======= ======= ======= ======= Total non-interest income $ 3,910 $ 4,091 $ 4,297 $ 3,955 $ 3,916 $ 8,001 $ 6,660 Less: Gain on sale of securities, net (529) (497) (882) (832) (1,388) (1,026) (1,817) ------- ------- ------- ------- ------- ------- ------- Total core non-interest income (C) $ 3,381 $ 3,594 $ 3,415 $ 3,123 $ 2,528 $ 6,975 $ 4,843 ======= ======= ======= ======= ======= ======= ======= Total non-interest expense $11,638 $11,225 $11,800 $11,600 $18,061 $22,863 $25,597 Less: Termination of ESOP - - (168) - (8,667) - (8,667) Less: Other non-recurring expense (385) - (352) (828) (963) (385) (963) ------- ------- ------- ------- ------- ------- ------- Core non-interest expense 11,253 11,225 11,280 10,772 8,431 22,478 15,967 Less: Amortization of intangible assets (478) (478) (481) (481) (156) (956) (186) ------- ------- ------- ------- ------- ------- ------- Total core tangible non-interest expense (D) $10,775 $10,747 $10,799 $10,291 $ 8,275 $21,522 $15,781 ======= ======= ======= ======= ======= ======= ======= (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) Total average assets $ 2,089 $ 2,044 $ 2,032 $ 2,065 $ 1,564 $ 2,066 $ 1,438 Less: Average intangible assets (99) (99) (100) (101) (39) (99) (23) ------- ------- ------- ------- ------- ------- ------- Total average tangible assets (E) $ 1,990 $ 1,944 $ 1,932 $ 1,964 $ 1,525 $ 1,967 $ 1,415 ======= ======= ======= ======= ======= ======= ======= Total average stockholders' equity $ 255 $ 250 $ 246 $ 242 $ 165 $ 252 $ 149 Less: Average intangible assets (99) (99) (100) (101) (39) (99) (23) ------- ------- ------- ------- ------- ------- ------- Total average tangible stockholders' equity (F) $ 156 $ 151 $ 146 $ 141 $ 126 $ 153 $ 126 ======= ======= ======= ======= ======= ======= ======= Total stockholders' equity, period-end $ 248 $ 248 $ 246 $ 246 $ 244 $ 248 $ 244 Less: Intangible assets, period-end (99) (99) (100) (100) (102) (99) (102) ------- ------- ------- ------- ------- ------- ------- Total tangible stockholders' equity, period-end (G) $ 149 $ 149 $ 146 $ 146 $ 142 $ 149 $ 142 ======= ======= ======= ======= ======= ======= ======= Total shares outstanding, period-end (thousands)(H) 8,622 8,601 8,540 8,564 8,594 8,622 8,594 Average diluted shares outstanding (thousands) (I) 8,760 8,755 8,813 8,856 6,257 8,758 5,782 Core earnings per share (A/I) $ 0.47 $ 0.51 $ 0.52 $ 0.54 $ 0.53 $ 0.98 $ 1.05 Tangible book value per share (G/H) $ 17.30 $ 17.32 $ 17.15 $ 17.04 $ 16.56 $ 17.30 $ 16.56 Core return on tangible assets (B/E) 0.89 % 0.98 % 1.02 % 1.04 % 0.94 % 0.94 % 0.93 % Core return on tangible equity (B/F) 11.41 12.63 13.49 14.47 11.42 12.02 10.46 Core tangible non-interest income to assets (C/E) 0.68 0.74 0.71 0.64 0.66 0.71 0.68 Core tangible non-interest exp to assets (D/E) 2.17 2.21 2.24 2.10 2.17 2.19 2.24 Efficiency ratio 58.73 57.48 57.00 55.17 57.65 58.10 58.61
Efficiency ratio is computed by dividing total tangible core non-interest expense by the sum of total net interest income on a fully taxable equivalent basis and total core non-interest income. The Company uses this non-GAAP measure, which is used widely in the banking industry, to provide important information regarding its operational efficiency. Ratios are annualized and based on average balance sheet amounts, where applicable. Contact: Berkshire Hills Bancorp, Inc. Wayne F. Patenaude, 413-236-3195 Senior Vice President, Treasurer and Chief Financial Officer F-9 -----END PRIVACY-ENHANCED MESSAGE-----