-----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, IcvYL6NqajkTSGZmthJ0vHQNKH2zGao/b5akBhnCZOxSNHBekD7LLL5xuGNAMlk8 1bB2etJ/z7EWgv4ZCJ8NWg== 0000909654-07-000934.txt : 20070425 0000909654-07-000934.hdr.sgml : 20070425 20070425165736 ACCESSION NUMBER: 0000909654-07-000934 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20070424 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20070425 DATE AS OF CHANGE: 20070425 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: 07788211 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 berkshire8kapril25.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) April 24, 2007 -------------- 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 April 24, 2007, Berkshire Hills Bancorp, Inc., the holding company for Berkshire Bank, announced: (1) its financial results for the quarter ended March 31, 2007; and (2) the declaration of a quarterly dividend of $0.14 per share. 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 April 24, 2007 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: April 24, 2007 By:/s/ John S. Millet --------------------------------------- John S. Millet SENIOR VICE-PRESIDENT AND INTERIM CHIEF FINANCIAL OFFICER EX-99.1 2 berkshireexb99april25.txt 1 BERKSHIRE HILLS BANCORP REPORTS 11% GROWTH IN CORE EARNINGS, TO A RECORD $5.0 MILLION FOR THE FIRST QUARTER OF 2007, REPORTING $0.56 PER SHARE FOR BOTH CORE AND GAAP EARNINGS, WITH 25% GROWTH IN TOTAL NET REVENUE SOLID BUSINESS MOMENTUM CONTINUES NON-INTEREST INCOME MORE THAN DOUBLES INSURANCE FEES MORE THAN QUADRUPLE ASSET QUALITY REMAINS WELL CONTROLLED DIVIDEND DECLARED PITTSFIELD, MA - April 24, 2007 - Berkshire Hills Bancorp, Inc. (the "Company") (NASDAQ: BHLB), the holding company for Berkshire Bank (the "Bank"), reported first quarter 2007 core income of $5.0 million ($0.56 per diluted share), an increase of 11% from $4.5 million ($0.51 per diluted share) in the first quarter of 2006. Earnings in the most recent quarter included after-tax charges of $0.06 per share related to the New York de novo branch program, which the Company views as an investment in franchise expansion. First quarter GAAP net income was $4.9 million ($0.56 per diluted share) in 2007 compared to $4.8 million ($0.55 per diluted share) in 2006. First quarter financial highlights include the following (income comparisons are to prior year first quarter): o 450% increase in insurance fee income o 21% increase in other fee income o 12% annualized commercial loan growth o 7% annualized total loan growth o 7% annualized deposit growth excluding managed run-off of brokered time deposits (3% annualized growth in total deposits) o 4% increase in net interest income o Nonperforming loans were 0.39% of assets, compared to 0.35% at year-end 2006 o Annualized net charge-offs were 0.11% of average loans for the quarter Michael P. Daly, President and Chief Executive Officer, stated, "We started the year with a clean, solid first quarter - continuing our strong growth momentum and producing a 25% increase in total net revenue. Insurance fees more than quadrupled due to our insurance agency acquisitions in the fourth quarter. This more than doubled our non-interest income, boosting non-interest income to 35% of total net revenue. This is an important milestone as we diversify our revenue sources, defend against a persistent inverted yield curve, and increase the product mix that we offer in our markets. Balance sheet growth was ongoing, led by 12% annualized growth in commercial loans, which resulted in 7% annualized growth of total loans. Deposits also grew by 7%, exclusive of managed run-off of brokered time deposits. Year-over-year first quarter average transaction deposits increased by 1%, and net interest income increased by 4%. Our emphasis on credit quality remains fundamental; we have no subprime lending programs Page 1 2 and our annualized loan charge-off rate remained low at 0.11% in the first quarter of 2007." Mr. Daly continued, "We unveiled our new branding as "America's Most Exciting Bank"SM in the first quarter, and we are encouraged by the initial response to our vision of creating an engaging and exciting financial services environment. We opened three new branches in our New York region during the quarter. With the imminent opening of an additional branch, we will now have ten branches operating in this promising market. Our total branch count will be 31, an increase of 15% from the beginning of the year. Our net income includes after-tax expenses of $0.06 per share related to the de novo branch program, which we view as an investment in franchise expansion. During the first quarter, we announced that Kevin P. Riley will become our Executive Vice President and Chief Financial Officer, effective August 1. Kevin was previously Executive Vice President and Chief Financial Officer of KeyBank National Association, KeyCorp's flagship community bank. We also announced important leadership appointments in Commercial Banking, Retail Banking, and Consumer Lending. Our expanded leadership team is focused on delivering the strong, quality earnings growth that we announced in our 2007 guidance." DIVIDEND DECLARATION - -------------------- The Board of Directors declared a quarterly cash dividend of $0.14 per share to be distributed to stockholders of record at the close of business on May 4, 2007, and payable on or about May 18, 2007. FINANCIAL CONDITION - ------------------- Total assets increased at a 5% annualized rate to $2.17 billion during the first quarter of 2007. Total loans increased by $31 million (7% annualized) to $1.73 billion, including growth in most categories. Loan growth was led by commercial mortgages, which increased by $23 million (16% annualized). A $6 million (16% annualized) decrease in home equity and other consumer loans was related in part to the expiration of certain introductory rate offerings. The Company introduced a home equity line campaign in the first quarter to promote growth in home equity borrowings. Asset quality remained well controlled during the quarter. The Company does not offer subprime lending programs. The average FICO scores on its consumer auto loans have increased in each of the last four quarters, reaching an average of 728 in the first quarter of 2007. The annualized rate of net loan charge-offs was low at 0.11% during the quarter. Total nonperforming assets increased slightly during the quarter to 0.39% of total assets from 0.35% at year-end 2006. Nonperforming assets totaled $8.5 million, and included one $6.0 million commercial relationship, which is in bankruptcy. All other nonperforming assets were only 0.12% of total assets at quarter-end. Loans delinquent 30 - 90 days remained low at 0.28% of total loans at quarter-end, compared to 0.26% of total loans at year-end 2006. The loan loss allowance remained flat at 1.14% of total loans. The allowance included a $1.0 million impaired loan reserve on the above Page 2 3 mentioned nonperforming commercial relationship; this reserve was increased by $500 thousand during the quarter. The Company had no foreclosed real estate at March 31, 2007. Total deposits increased by $13 million to $1.54 billion during the first quarter of 2007. Excluding $13 million of planned run-off of brokered time deposits, total deposits increased by $26 million (7% annualized). Deposit growth included an increase of $14 million (51% annualized) to $122 million in the de novo New York branch program. Excluding the brokered time deposit runoff, Massachusetts deposits increased by $12 million (4% annualized). Balances of non-maturity accounts were flat during the quarter, with funds shifting into money market accounts from other non-maturity accounts. Growth in time deposits provided the overall deposit growth, with in-market time deposits increasing by $25 million (15% annualized) and more than offsetting the planned decline in brokered time deposits. Total borrowings increased by $7 million (8% annualized) to $352 million to provide supplemental funds for loan growth. Stockholders' equity increased by $5 million (8% annualized) to $263 million due primarily to the benefit of retained earnings. Tangible book value per share increased at an 11% annualized rate to $16.13, while total book value per share increased at a 3% annualized rate to $29.87. The ratio of tangible equity to assets increased during the quarter to 6.92% from 6.75%, while the ratio of total equity to assets increased to 12.10% from 12.01%. The Company repurchased 11,000 shares of common stock during the first quarter. RESULTS OF OPERATIONS - --------------------- First quarter core income increased by $500 thousand (11%) to $5.0 million in 2007 compared to $4.5 million in 2006. First quarter net income increased by $124 thousand (3%) from year-to-year. The increase in core income reflected the benefit of positive operating leverage, with a $4.7 million increase in net revenue, compared to a $4.2 million increase in non-interest expense. The increase in net revenue included a $582 thousand (4%) increase in net interest income, accompanied by a $4.6 million (143%) increase in fee income due primarily to insurance fee growth. Net income in 2006 included $333 thousand in net non-core income related to securities gains. The core return on tangible equity increased to 15.4% from 12.6%, while the net return on equity was unchanged at 7.6%. The return on assets decreased slightly to 0.92% in 2007 from 0.94% in 2006. The 4% increase in net interest income was due to 5% growth in average earning assets in the first quarter of 2007, compared to the same quarter of 2006. The net interest margin decreased as expected to 3.24% from 3.27% for these periods due primarily to time account repricings, along with the ongoing impact of the shifting of funds into higher yielding money market and time accounts. The Company is promoting lower cost transaction accounts to help offset margin pressures and to provide increased cross-selling opportunities. The Company is also promoting money market accounts to provide more relationship benefits compared to time accounts. The net interest margin in the Page 3 4 most recent quarter also included a negative impact of about 0.07% due to the cost of borrowings to finance the insurance agency acquisitions in the fourth quarter of 2006. The margin benefited from the securities restructuring at the beginning of the same quarter. Total first quarter non-interest income increased by $4.1 million (101%) to $8.2 million in 2007 compared to $4.1 million in 2006. This increase was primarily due to a $4.1 million (450%) increase in insurance fee revenue, following the acquisition of five affiliated insurance agencies in the fourth quarter of 2006. Insurance revenues are seasonally weighted towards the first half of the year, primarily due to contingency revenues which are received in the first and second quarters. All other fee revenues increased by $474 thousand (21%) reflecting growth in all areas. Deposit service fee growth of 18% included the benefit of new fee based convenience services implemented in the fourth quarter of 2006. Wealth management fee growth of 22% resulted primarily from growth in assets under management, which increased at a 13% annualized rate during the quarter to $510 million at quarter-end. The first quarter provision for loan losses totaled $750 thousand in 2007, compared to $290 thousand in 2006. This reflected a $267 thousand increase in net charge-offs, along with higher reserving ratios initiated in the third quarter of 2006. The first quarter loan loss provision of $750 thousand measured 160% of net charge-offs during the quarter. First quarter non-interest expense increased by $4.2 million (37%) in 2007 compared to 2006. This increase reflected the acquisition of insurance agencies in the fourth quarter of 2006, along with the higher carrying costs related to the opening of six new branches since the beginning of 2006. This increase was more than offset by the benefit of positive operating leverage related to higher revenues previously noted. The efficiency ratio increased as expected to 61.1% from 57.5% due to the impact of different operating margins in the acquired insurance businesses. First quarter 2007 non-interest expense included nonrecurring charges totaling $153 thousand on the sale of swaps related to brokered time deposits. First quarter costs of the de novo branch program in New York totaled $837 thousand in 2007, compared to $230 thousand in 2006. These costs equated to $0.06 per share in 2007 and are viewed by the Company as an investment in franchise growth. The first quarter effective tax rate decreased to 32% in 2007 from 32.9% in 2006, and was consistent with the rate in the linked quarter. CONFERENCE CALL - --------------- The Company will conduct a conference call at 10:00 A.M. eastern time on Wednesday, April 25, 2007. President and Chief Executive Officer Michael P. Daly and Interim Chief Financial Officer John S. Millet will discuss highlights of the Company's first quarter financial results, along with guidance about expected financial results. Information about the conference call follows: Dial-in: 1-877-407-8035 Replay Dial-in: 1-877-660-6853 Page 4 5 Replay Access Codes: Account #286; Conference ID #236317 (Both are needed to access the Replay) Replay Dates: April 25, 2007 at 1:00 P.M. (ET) through May 4, 2007 at 11:59 P.M. (ET) All interested parties are welcome to access the conference call and are requested to call in a few minutes prior to 10:00 A.M. (ET) to register for the event. After the presentation by Messrs. Daly and Millet there will be an opportunity for questions and answers. Live access to the call on a listen only basis will also be available on the internet at the Company's website at www.berkshirebank.com by clicking on the --------------------- Investor Relations link and then selecting the Webcast link on the Corporate Profile page. A replay of the call will also be available at the website for an extended period of time. BACKGROUND - ---------- Berkshire Hills Bancorp, Inc. is the holding company for Berkshire Bank - America's Most Exciting BankSM. 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, 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. In addition, the following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: adverse governmental or regulatory policies may be enacted; the risks associated with continued diversification of assets and adverse changes to credit quality; and difficulties associated with achieving expected future financial results. 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. Page 5 6 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. In all cases, it should be understood that non-GAAP per share measures do not depict amounts that accrue directly to the benefit of shareholders. The Company utilizes the non-GAAP measure of core earnings in evaluating operating trends during the current fiscal period, and compared to the prior fiscal period. The core earnings measure is not intended to substitute for GAAP net income, but is an additional measure that the Company uses and believes is useful for understanding its operating results. During the third quarter of 2006, the Company identified charges related to the balance sheet repositioning and to the loan loss allowance adjustment as non-core in the computation of core earnings. The Company views these charges as infrequent and not specifically related to the Company's operating activities during the year. CONTACTS - -------- Michael P. Daly, President and Chief Executive Officer 413-236-3194 John S. Millet, Senior Vice President, Interim Chief Financial Officer, and Treasurer 413-236-3252 Page 6 7
BERKSHIRE HILLS BANCORP, INC. CONSOLIDATED BALANCE SHEETS - UNAUDITED - ---------------------------------------------------------------------------------------------------------- March 31, December 31, - ---------------------------------------------------------------------------------------------------------- (IN THOUSANDS, EXCEPT SHARE DATA) 2007 2006 - ---------------------------------------------------------------------------------------------------------- ASSETS Total cash and cash equivalents $ 27,567 $ 30,985 Securities available for sale, at fair value 191,454 194,206 Securities held to maturity, at amortized cost 38,152 39,968 Residential mortgages 608,004 599,273 Commercial mortgages 590,362 567,074 Commercial business loans 188,256 189,758 Consumer loans 343,438 342,882 - ---------------------------------------------------------------------------------------------------------- Total loans 1,730,060 1,698,987 Less: Allowance for loan losses (19,652) (19,370) - ---------------------------------------------------------------------------------------------------------- Net loans 1,710,408 1,679,617 Premises and equipment, net 30,576 29,130 Goodwill 104,923 104,531 Other intangible assets 16,142 16,810 Cash surrender value of life insurance policies 30,579 30,338 Other assets 24,772 24,057 - ---------------------------------------------------------------------------------------------------------- Total assets $ 2,174,573 $ 2,149,642 ========================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Demand deposits $ 174,887 $ 178,109 NOW deposits 146,679 153,087 Money market deposits 311,365 297,155 Savings deposits 198,262 202,213 - ---------------------------------------------------------------------------------------------------------- Total non-maturity deposits 831,193 830,564 Brokered time deposits 29,186 41,741 Other time deposits 675,233 649,633 - ---------------------------------------------------------------------------------------------------------- Total time deposits 704,419 691,374 - ---------------------------------------------------------------------------------------------------------- Total deposits 1,535,612 1,521,938 - ---------------------------------------------------------------------------------------------------------- Borrowings 351,638 345,005 Junior subordinated debentures 15,464 15,464 Other liabilities 8,772 9,074 - ---------------------------------------------------------------------------------------------------------- Total liabilities 1,911,486 1,891,481 Total stockholders' equity 263,087 258,161 - ---------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 2,174,573 $ 2,149,642 ==========================================================================================================
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BERKSHIRE HILLS BANCORP, INC. CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED - --------------------------------------------------------------------------------------------------------------------- LOAN ANALYSIS ------------- Mar. 31, 2007 Dec. 31, 2006 Annualized % (DOLLARS IN MILLIONS) Balance Balance $ Change $ Change - --------------------------------------------------------------------------------------------------------------------- Residential mortgages: 1 - 4 Family $ 574 $ 567 $ 7 5 % Construction 34 32 2 25 - --------------------------------------------------------------------------------------------------------------------- Total residential mortgages 608 599 9 6 Commercial mortgages: Construction 132 130 2 6 Single and multi-family 66 65 1 6 Other commercial mortgages 392 372 20 22 - --------------------------------------------------------------------------------------------------------------------- Total commercial mortgages 590 567 23 16 Commercial business loans 189 190 (1) (2) - --------------------------------------------------------------------------------------------------------------------- Total commercial loans 779 757 22 12 Consumer loans: Auto 202 196 6 12 Home equity and other 141 147 (6) (16) - --------------------------------------------------------------------------------------------------------------------- Total consumer loans 343 343 - 0 - --------------------------------------------------------------------------------------------------------------------- Total loans $ 1,730 $ 1,699 $ 31 7 % ===================================================================================================================== DEPOSIT ANALYSIS ---------------- Mar. 31, 2007 Dec. 31, 2006 Annualized % (DOLLARS IN MILLIONS) Balance Balance $ Change Change - --------------------------------------------------------------------------------------------------------------------- Demand $ 175 $ 178 $ (3) (7)% NOW 147 153 (6) (16) Money market 311 297 14 19 Savings 198 202 (4) (8) - --------------------------------------------------------------------------------------------------------------------- Total non-maturity deposits 831 830 1 0 Time less than $100,000 381 370 11 12 Time $100,000 or more 294 280 14 20 Brokered time 29 42 (13) (124) - --------------------------------------------------------------------------------------------------------------------- Total time deposits 704 692 12 7 - --------------------------------------------------------------------------------------------------------------------- Total deposits $ 1,535 $ 1,522 $ 13 3 % =====================================================================================================================
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BERKSHIRE HILLS BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED - -------------------------------------------------------------------------------------------------- Three Months Ended March 31, - -------------------------------------------------------------------------------------------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) 2007 2006 - -------------------------------------------------------------------------------------------------- INTEREST AND DIVIDEND INCOME Loans $ 28,522 $ 22,356 Securities and other 2,948 4,714 - -------------------------------------------------------------------------------------------------- Total interest and dividend income 31,470 27,070 INTEREST EXPENSE Deposits 11,949 8,756 Borrowings and junior subordinated debentures 4,331 3,706 - -------------------------------------------------------------------------------------------------- Total interest expense 16,280 12,462 - -------------------------------------------------------------------------------------------------- NET INTEREST INCOME 15,190 14,608 NON-INTEREST INCOME Insurance commissions and fees 4,991 908 Deposit service fees 1,514 1,286 Wealth management fees 919 756 Loan service fees 309 226 - -------------------------------------------------------------------------------------------------- Total fee income 7,733 3,176 Other 423 418 Gain on sale of securities, net 81 497 - -------------------------------------------------------------------------------------------------- Total non-interest income 8,237 4,091 - -------------------------------------------------------------------------------------------------- TOTAL NET REVENUE 23,427 18,699 PROVISION FOR LOAN LOSSES 750 290 NON-INTEREST EXPENSE Salaries and employee benefits 8,511 5,653 Occupancy and equipment 2,486 1,931 Marketing, data processing, and professional services 1,947 1,630 Non-recurring expense 153 - Amortization of intangible assets 662 478 Other 1,650 1,533 - -------------------------------------------------------------------------------------------------- Total non-interest expense 15,409 11,225 Income before income taxes 7,268 7,184 Income tax expense 2,326 2,366 - -------------------------------------------------------------------------------------------------- NET INCOME $ 4,942 $ 4,818 - -------------------------------------------------------------------------------------------------- Basic earnings per share $ 0.57 $ 0.57 - -------------------------------------------------------------------------------------------------- DILUTED EARNINGS PER SHARE $ 0.56 $ 0.55 - -------------------------------------------------------------------------------------------------- Weighted average shares outstanding Basic 8,662 8,476 Diluted 8,841 8,755
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BERKSHIRE HILLS BANCORP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED - ---------------------------------------------------------------------------------------------------------------------------------- Quarters Ended - ---------------------------------------------------------------------------------------------------------------------------------- Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, (IN THOUSANDS, EXCEPT PER SHARE DATA) 2007 2006 2006 2006 2006 - ---------------------------------------------------------------------------------------------------------------------------------- INTEREST AND DIVIDEND INCOME Loans $ 28,522 $ 28,076 $ 26,388 $ 24,017 $ 22,356 Securities and other 2,948 3,305 5,000 4,195 4,714 - ---------------------------------------------------------------------------------------------------------------------------------- Total interest and dividend income 31,470 31,381 31,388 28,212 27,070 INTEREST EXPENSE Deposits 11,949 11,679 10,766 9,843 8,756 Borrowings and junior subordinated debentures 4,331 4,131 5,019 3,911 3,706 - ---------------------------------------------------------------------------------------------------------------------------------- Total interest expense 16,280 15,810 15,785 13,754 12,462 - ---------------------------------------------------------------------------------------------------------------------------------- NET INTEREST INCOME 15,190 15,571 15,603 14,458 14,608 Non-interest income Insurance commissions and fees 4,991 1,645 623 581 908 Deposit service fees 1,514 1,800 1,334 1,383 1,286 Wealth management fees 919 877 882 772 756 Loan service fees 309 132 209 125 226 - ---------------------------------------------------------------------------------------------------------------------------------- Total fee income 7,733 4,454 3,048 2,861 3,176 Other 423 453 248 520 418 Gain (loss) on sale of securities, net 81 924 (5,080) 529 497 - ---------------------------------------------------------------------------------------------------------------------------------- Total non-interest income 8,237 5,831 (1,784) 3,910 4,091 - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL NET REVENUE 23,427 21,402 13,819 18,368 18,699 Provision for loan losses 750 785 6,185 600 290 Non-interest expense Salaries and employee benefits 8,511 7,296 6,001 5,758 5,653 Occupancy and equipment 2,486 2,061 1,885 1,822 1,931 Marketing, data processing, and professional services 1,947 1,791 1,632 1,595 1,630 Non-recurring expense 153 1,125 - 385 - Amortization of intangible assets 662 601 478 478 478 Other 1,650 1,778 1,357 1,600 1,533 - ---------------------------------------------------------------------------------------------------------------------------------- Total non-interest expense 15,409 14,652 11,353 11,638 11,225 - ---------------------------------------------------------------------------------------------------------------------------------- Income (loss) from continuing operations before income taxes 7,268 5,965 (3,719) 6,130 7,184 Income tax expense (benefit) 2,326 1,880 (1,466) 1,888 2,366 NET INCOME (LOSS) FROM CONTINUING OPERATIONS 4,942 4,085 (2,253) 4,242 4,818 Income from discontinued operations before income taxes - 29 217 359 - Income tax expense - 11 84 138 - ================================================================================================================================== Net income from discontinued operations - 18 133 221 - - ---------------------------------------------------------------------------------------------------------------------------------- Net income (loss) $ 4,942 $ 4,103 $ (2,120) $ 4,463 $ 4,818 ================================================================================================================================== Basic earnings (loss) per share Continuing operations $ 0.57 $ 0.48 $ (0.26) $ 0.50 $ 0.57 Discontinued operations - - 0.01 0.02 - - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL $ 0.57 $ 0.48 $ (0.25) $ 0.52 $ 0.57 - ---------------------------------------------------------------------------------------------------------------------------------- DILUTED EARNINGS (LOSS) PER SHARE Continuing operations $ 0.56 $ 0.47 $ (0.26) $ 0.48 $ 0.55 Discontinued operations - - 0.01 0.03 - - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL $ 0.56 $ 0.47 $ (0.25) $ 0.51 $ 0.55 - ---------------------------------------------------------------------------------------------------------------------------------- Weighted average shares outstanding Basic 8,662 8,599 8,557 8,512 8,476 Diluted 8,841 8,823 8,557 8,760 8,755
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BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES ASSET QUALITY ANALYSIS - ------------------------------------------------------------------------------------------------------------------------------- At or for the Quarters Ended - ------------------------------------------------------------------------------------------------------------------------------- Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, (DOLLARS IN THOUSANDS) 2007 2006 2006 2006 2006 - ------------------------------------------------------------------------------------------------------------------------------- NON-PERFORMING ASSETS Nonaccruing loans: Residential mortgages $ 22 $ 15 $ 238 $ 234 $ 289 Commercial mortgages 1,346 308 2,427 - - Commercial business loans 7,049 7,203 2,445 405 480 Consumer loans 124 66 122 133 139 - ------------------------------------------------------------------------------------------------------------------------------- Total nonaccruing loans 8,541 7,592 5,232 772 908 Real estate owned - - - 105 - - ------------------------------------------------------------------------------------------------------------------------------- Total nonperforming assets $ 8,541 $ 7,592 $ 5,232 $ 877 $ 908 =============================================================================================================================== Total nonperforming loans/total loans 0.49% 0.45% 0.32% 0.05% 0.06% Total nonperforming assets/total assets 0.39% 0.35% 0.24% 0.04% 0.04% PROVISION AND ALLOWANCE FOR LOAN LOSSES Balance at beginning of period $ 19,370 $ 19,154 $ 13,537 $ 13,090 $ 13,001 Charged-off loans (627) (754) (327) (364) (331) Recoveries on charged-off loans 159 185 184 211 130 - ------------------------------------------------------------------------------------------------------------------------------- Net loans charged-off (468) (569) (143) (153) (201) Transfer of commitment reserve - - (425) - - Provision for loan losses 750 785 6,185 600 290 - ------------------------------------------------------------------------------------------------------------------------------- Balance at end of period $ 19,652 $ 19,370 $ 19,154 $ 13,537 $ 13,090 =============================================================================================================================== Allowance for loan losses/nonperforming loans 230% 255% 366% 1753% 1442% Allowance for loan losses/total loans 1.14% 1.14% 1.18% 0.87% 0.90% NET LOAN (CHARGE-OFFS) RECOVERIES Residential mortgages $ - $ - $ - $ (27) $ - Commercial mortgages - - - - - Commercial business loans (251) (420) (6) 5 3 Consumer loans (217) (149) (137) (131) (204) - ------------------------------------------------------------------------------------------------------------------------------- Total net $ (468) $ (569) $ (143) $ (153) $ (201) =============================================================================================================================== Net charge-offs (annualized)/average loans 0.11% 0.14% 0.04% 0.04% 0.06% AVERAGE FICO SCORES OF CONSUMER AUTOMOBILE LOANS 728 726 724 721 719 DELINQUENT LOANS (30-90 DAYS)/TOTAL LOANS 0.28% 0.26% 0.29% 0.40% 0.27%
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BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------------------------------------------------------------ At or for the Quarters Ended - ------------------------------------------------------------------------------------------------------------------------------------ Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, 2007 2006 2006 2006 2006 - ------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE RATIOS Core return on tangible assets 1.07% 0.91 % 0.97% 0.89 % 0.98% Return (loss) on total assets 0.92 0.77 (0.37) 0.85 0.94 Core return on tangible equity 15.40 12.97 12.68 11.41 12.63 Return (loss) on total equity 7.57 6.38 (3.15) 7.00 7.64 Net interest margin, fully taxable equivalent 3.24 3.31 3.22 3.16 3.27 Core tangible non-interest income to assets 1.60 0.97 0.63 0.68 0.74 Non-interest income to assets 1.53 1.09 (0.33) 0.75 0.80 Core tangible non-interest expense to assets 2.87 2.54 2.09 2.17 2.21 Non-interest expense to assets 2.86 2.73 2.08 2.23 2.20 Efficiency ratio 61.07 61.42 55.92 58.73 57.48 YEAR-TO-YEAR GROWTH Total loans 7 % 20 % 20 % 19 % 9 % Total deposits 3 11 11 14 23 FINANCIAL DATA (IN MILLIONS) Total assets $ 2,175 $ 2,150 $ 2,205 $ 2,148 $ 2,056 Total loans 1,730 1,699 1,633 1,555 1,453 Total intangible assets 121 121 99 99 99 Total deposits 1,535 1,522 1,488 1,464 1,451 Total stockholders' equity 263 258 255 248 248 Total core income 5.0 4.2 4.7 4.1 4.5 Total net income (loss) 4.9 4.1 (2.1) 4.5 4.8 ASSET QUALITY RATIOS Net charge-offs (annualized)/average loans 0.11 % 0.14 % 0.04 % 0.04 % 0.06 % Non-performing assets/total assets 0.39 0.35 0.24 0.04 0.04 Loan loss allowance/total loans 1.14 1.14 1.18 0.87 0.90 Loan loss allowance/nonperforming loans 2.30 x 2.55 x 3.66 x 17.53 x 14.42 x PER SHARE DATA Core earnings, diluted $ 0.56 $ 0.48 $ 0.54 $ 0.47 $ 0.51 Net earnings (loss), diluted 0.56 0.47 (0.25) 0.51 0.55 Tangible book value 16.13 15.70 17.96 17.30 17.26 Total book value 29.87 29.63 29.31 28.79 28.79 Market price at period end 33.65 33.46 35.59 35.48 34.94 CAPITAL RATIOS Stockholders' equity to total assets 12.10 % 12.01 % 11.55 % 11.56 % 12.04 % Tangible stockholders' equity to tangible assets 6.92 6.75 7.41 7.28 7.59 - ------------------------------------------------------------------------------------------------------------------------------------
(1) Reconciliations of Non-GAAP financial measures, including all references to core and tangible amounts, appear on page F-9. Tangible assets are total assets less total intangible assets. (2) All performance ratios are annualized and are based on average balance sheet amounts, where applicable. F-6 13
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES AVERAGE BALANCES - ----------------------------------------------------------------------------------------------------------------------------------- Quarters Ended - ----------------------------------------------------------------------------------------------------------------------------------- Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, (IN THOUSANDS) 2007 2006 2006 2006 2006 - ----------------------------------------------------------------------------------------------------------------------------------- ASSETS Loans Residential mortgages $ 603,858 $ 592,016 $ 576,105 $ 561,444 $ 554,833 Commercial mortgages 577,645 547,096 496,428 450,283 427,891 Commercial business loans 188,194 187,997 185,573 161,618 152,970 Consumer loans 340,563 341,311 327,746 312,813 298,020 - ----------------------------------------------------------------------------------------------------------------------------------- Total loans 1,710,260 1,668,420 1,585,852 1,486,158 1,433,714 Securities 231,035 259,838 398,915 408,542 418,744 Short-term investments 1,915 16,343 1,017 744 1,561 - ----------------------------------------------------------------------------------------------------------------------------------- Total earning assets 1,943,210 1,944,601 1,985,784 1,895,444 1,854,019 Intangible assets 121,059 115,580 98,793 98,944 99,318 Other assets 91,298 88,125 98,307 94,805 90,412 - ----------------------------------------------------------------------------------------------------------------------------------- Total assets $ 2,155,567 $ 2,148,306 $ 2,182,884 $ 2,089,193 $ 2,043,749 =================================================================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits NOW $ 142,403 $ 138,293 $ 131,687 $ 140,103 $ 141,364 Money market 294,015 299,927 283,194 284,447 269,685 Savings 199,517 204,104 212,706 208,345 217,475 Time 702,554 686,818 664,207 643,398 611,324 - ----------------------------------------------------------------------------------------------------------------------------------- Total interest-bearing deposits 1,338,489 1,329,142 1,291,794 1,276,293 1,239,848 Borrowings and debentures 375,730 371,201 445,494 380,131 380,019 - ----------------------------------------------------------------------------------------------------------------------------------- Total interest-bearing liabilities 1,714,219 1,700,343 1,737,288 1,656,424 1,619,867 Non-interest-bearing demand deposits 170,819 178,756 178,535 171,787 168,478 Other liabilities 8,456 10,511 8,221 6,456 5,099 - ----------------------------------------------------------------------------------------------------------------------------------- Total liabilities 1,893,494 1,889,610 1,924,044 1,834,667 1,793,444 Stockholders' equity 262,073 258,696 258,840 254,526 250,305 - ----------------------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 2,155,567 $ 2,148,306 $ 2,182,884 $ 2,089,193 $ 2,043,749 =================================================================================================================================== SUPPLEMENTARY DATA Total non-maturity deposits $ 806,754 $ 821,080 $ 806,122 $ 804,682 $ 797,002 Total deposits 1,509,308 1,507,898 1,470,329 1,448,080 1,408,326 Fully taxable equivalent income adj. 553 566 548 506 494 - ----------------------------------------------------------------------------------------------------------------------------------- (1) Average balances for securities available-for-sale are based on amortized cost.
F-7 14
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES AVERAGE YIELDS (FULLY TAXABLE EQUIVALENT - ANNUALIZED) - ------------------------------------------------------------------------------------------------------------------------------------ Quarters Ended - ------------------------------------------------------------------------------------------------------------------------------------ Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, 2007 2006 2006 2006 2006 - ------------------------------------------------------------------------------------------------------------------------------------ Earning assets Loans Residential mortgages 5.29 % 5.29 % 5.24 % 5.19 % 5.09 % Commercial mortgages 7.47 7.57 7.37 7.32 7.23 Commercial business loans 8.09 7.98 8.31 8.07 7.46 Consumer loans 6.97 7.01 6.94 6.74 6.61 Total loans 6.76 6.68 6.58 6.46 6.21 Securities 6.06 5.64 5.55 4.59 4.96 Short-term investments 5.25 5.25 5.25 4.94 4.45 Total earning assets 6.63 6.52 6.38 6.07 5.99 Funding liabilities Deposits NOW 1.54 1.23 0.98 1.02 1.01 Money Market 3.63 3.61 3.51 3.36 3.12 Savings 1.06 1.03 1.02 0.78 0.76 Time 4.77 4.62 4.41 4.17 3.92 Total interest-bearing deposits 3.62 3.49 3.31 3.09 2.86 Borrowings and debentures 4.67 4.42 4.47 4.13 3.96 Total interest-bearing liabilities 3.85 3.69 3.60 3.33 3.12 Net interest spread 2.78 2.83 2.78 2.74 2.87 Net interest margin 3.24 3.31 3.22 3.16 3.27 Cost of funds 3.50 3.34 3.27 3.02 2.83
- ------------------------------------------------------------------------------- (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 had no revenue for Federal Home Loan Bank dividends due to a delay in the dividend declaration schedule. Third quarter data includes 2 such dividends, including $420,000 delayed from the second quarter. F-8 15
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES - ----------------------------------------------------------------------------------------------------------------------------------- At or for the Quarters Ended - ----------------------------------------------------------------------------------------------------------------------------------- Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, (DOLLARS IN THOUSANDS) 2007 2006 2006 2006 2006 - ----------------------------------------------------------------------------------------------------------------------------------- Net income (loss) $ 4,942 $ 4,103 $ (2,120) $ 4,463 $ 4,818 Adj: (Gain) loss on sale of securities, net (81) (924) 5,080 (529) (497) Less: Income from discontinued operations - (29) (217) (359) - Plus: Loan loss allowance pool adjustment - - 5,512 - - Plus: Other non-recurring expense 153 1,125 - 385 - Adj: Income taxes (29) (57) (3,525) 166 164 - ----------------------------------------------------------------------------------------------------------------------------------- Core income (A) 4,985 4,218 4,730 4,126 4,485 Plus: Amort. intangible assets (net of taxes) 444 403 320 320 320 - ----------------------------------------------------------------------------------------------------------------------------------- Tangible core income (B)$ 5,429 $ 4,621 $ 5,050 $ 4,446 $ 4,805 =================================================================================================================================== Total non-interest income $ 8,237 $ 5,831 $ (1,784) $ 3,910 $ 4,091 Adj: (Gain) loss on sale of securities, net (81) (924) 5,080 (529) (497) - ----------------------------------------------------------------------------------------------------------------------------------- Total core non-interest income (C) 8,156 4,907 3,296 3,381 3,594 Net interest income 15,190 15,571 15,603 14,458 14,608 - ----------------------------------------------------------------------------------------------------------------------------------- Total core revenue (D)$ 23,346 $ 20,478 $ 18,899 $ 17,839 $ 18,202 =================================================================================================================================== Total non-interest expense $ 15,409 $ 14,652 $ 11,353 $ 11,638 $ 11,225 Less: Other non-recurring expense (153) (1,125) - (385) - - ----------------------------------------------------------------------------------------------------------------------------------- Core non-interest expense (E) 15,256 13,527 11,353 11,253 11,225 Less: Amortization of intangible assets (662) (601) (478) (478) (478) - ----------------------------------------------------------------------------------------------------------------------------------- Total core tangible non-interest expense (F)$ 14,594 $ 12,926 $ 10,875 $ 10,775 $ 10,747 =================================================================================================================================== (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) Total average assets $ 2,156 $ 2,148 $ 2,183 $ 2,089 $ 2,044 Less: Average intangible assets (121) (116) (99) (99) (99) - ----------------------------------------------------------------------------------------------------------------------------------- Total average tangible assets (G)$ 2,035 $ 2,032 $ 2,084 $ 1,990 $ 1,944 =================================================================================================================================== Total average stockholders' equity $ 262 $ 259 $ 259 $ 255 $ 250 Less: Average intangible assets (121) (116) (99) (99) (99) - ----------------------------------------------------------------------------------------------------------------------------------- Total average tangible stockholders' equity (H)$ 141 $ 143 $ 160 $ 156 $ 151 =================================================================================================================================== Total stockholders' equity, period-end $ 263 $ 258 $ 255 $ 248 $ 248 Less: Intangible assets, period-end (121) (121) (99) (99) (99) - ----------------------------------------------------------------------------------------------------------------------------------- Total tangible stockholders' equity, period-end (I)$ 142 $ 137 $ 156 $ 149 $ 149 =================================================================================================================================== Total shares outstanding, period-end (THOUSANDS) (J) 8,807 8,713 8,689 8,622 8,601 Average diluted shares outstanding (THOUSANDS) (K) 8,841 8,823 8,557 8,760 8,755 Core earnings per share (A/K)$ 0.56 $ 0.48 $ 0.54 $ 0.47 $ 0.51 Tangible book value per share (I/J)$ 16.13 $ 15.70 $ 17.96 $ 17.30 $ 17.32 Core return on tangible assets (B/G) 1.07 % 0.91 % 0.97 % 0.89 % 0.98 % Core return on tangible equity (B/H) 15.40 12.97 12.68 11.41 12.63 Core tangible non-interest income to assets (C/G) 1.60 0.97 0.63 0.68 0.74 Core tangible non-interest exp to assets (F/G) 2.87 2.54 2.09 2.17 2.21 Efficiency ratio 61.07 61.42 55.92 58.73 57.48 - 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(1) 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. (2) Ratios are annualized and based on average balance sheet amounts, where applicable. (3) In the third quarter 2006, the average diluted shares for core income per share totaled 8,805,000. (4) Quarterly data may not sum to year-to-date data due to rounding. F-9 -----END PRIVACY-ENHANCED MESSAGE-----