-----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, AF2MvmVSEToBJHj7lahLDiVzSNLX3wdDmuxA/Bjlk3c5YJOYMd3d2RvbAJ69/Ld7 VAxqgQHkRs9oRa6eaD+DUw== 0000909654-08-000181.txt : 20080125 0000909654-08-000181.hdr.sgml : 20080125 20080125161632 ACCESSION NUMBER: 0000909654-08-000181 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20080124 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20080125 DATE AS OF CHANGE: 20080125 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: 08551167 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 berkshire8kjan24-08.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): January 24, 2008 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 January 24, 2008, Berkshire Hills Bancorp, Inc. (the "Company"), the holding company for Berkshire Bank (the "Bank"), announced: (1) its financial results for the quarter and year ended December 31, 2007; (2) the declaration of a quarterly dividend of $0.15 per share; and (3) its annual meeting of stockholders will be held on May 1, 2008. 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 January 24, 2008 3 SIGNATURE 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 thereunto duly authorized. Berkshire Hills Bancorp, Inc. Date: January 24, 2008 By: /s/ Kevin P. Riley --------------------------------------------- Kevin P. Riley Executive Vice President, Treasurer and Chief Financial Officer EX-99.1 2 berkshirexb99jan24-08.txt 1 [BERKSHIRE HILLS BANCORP, INC. LETTERHEAD] BERKSHIRE HILLS REPORTS RECORD EARNINGS FOR 2007 NET INCOME INCREASES 20% FOR THE YEAR DIVIDEND DECLARED PITTSFIELD, MA - January 24, 2008 - Berkshire Hills Bancorp (BHLB), parent of Berkshire Bank, reported record net income of $13.5 million ($1.44 per share) for the year 2007, an increase of 20% over $11.3 million ($1.29 per share) for the prior year, and an increase of 12% on a per share basis. Results for 2007 included a $2.5 million fourth quarter loan loss provision ($0.16 per share after tax) related to one commercial loan involving borrower fraud. Core earnings per share in 2007 before that charge were $2.06, which was 3% higher than the 2006 core earnings of $2.00. Including that loan charge, 2007 core earnings per share were $1.90. Berkshire produced these results while also absorbing higher expenses related to its strategic initiatives for de novo branch growth and for rebranding as AMERICA'S MOST EXCITING BANK(SM). Earnings results in both years also included non-core charges related primarily to restructurings and acquisitions. Berkshire's fourth quarter core earnings per share before the above loan charge were $0.50 in 2007, compared to $0.48 in 2006. 2007 results benefited from organic growth, expense control, and the contribution of the new Southern Vermont region. Fourth quarter 2007 core earnings per share were $0.36 including the loan charge ($0.14 per share after tax in the quarter). Fourth quarter results included net non-core charges of $0.07 per share in 2007 and $0.01 per share in 2006. Non-core charges in 2007 included merger integration charges following the acquisition of Factory Point Bancorp in September 2007, and other restructuring charges. After these charges, Berkshire's fourth quarter GAAP net income was $3.1 million ($0.29 per share) in 2007 compared to $4.1 million ($0.47 per share) in 2006. FOURTH QUARTER HIGHLIGHTS o 18% increase in total net revenue, including the benefit of the Factory Point acquisition o Net interest margin increased to 3.38% from 3.20% for the linked quarter o Accruing delinquent loans decreased to 0.43% of total loans from 0.71% due to payoffs o Nonperforming assets were 0.45% of total assets at year-end o 5% annualized organic increase in commercial mortgage loans o 14% annualized organic increase in core non-maturity deposit balances o 8% annualized organic increase in transaction deposit accounts Page 1 2 ANNUAL FINANCIAL HIGHLIGHTS o Acquisition of Factory Point Bancorp, contributing to a 17% increase in total assets o Four new branches were opened, increasing the New York Capital Region to ten branches o First full year of operations for the expanded Berkshire Insurance Group - with an increase of $10 million in revenues in 2007 o 7% organic growth in commercial mortgages o 6% organic growth in core non-maturity deposits o 32% growth in bank fee income o 12% organic growth in wealth management assets to $781 million. Michael P. Daly, President and Chief Executive Officer, stated, "We took major steps to improve Berkshire's fundamental position in 2007. Our merger with Factory Point Bancorp gave us a solid entry into the attractive Southern Vermont market, and helped boost our total year-end assets by 17%. Including the seven new Vermont branches and the four new branches we added in the Albany area, we now have 38 banking offices, which is a 41% increase over the prior year-end. We also introduced our branding as AMERICA'S MOST EXCITING BANK(SM), achieving higher recognition as we build a better banking experience for our customers." Mr. Daly continued, "Our earnings included a previously disclosed $2.5 million charge that we recorded for the fourth quarter writedown of one commercial loan. In addition to the 20% increase in GAAP earnings, we produced a 3% increase in core earnings before this loan writedown. This reflects the forward progress we made as a result of our organic growth and acquisitions, and this is net of the $0.16 per share strategic investment we made in additional de novo branch and branding expenses. Our fourth quarter net interest margin increased to 3.38%, the highest quarterly level in fourteen quarters and our annual net revenue increased by 23% to $89 million. We ended the year with strong fundamentals, and we are optimistic that the momentum for higher earnings will carry forward into 2008." Mr. Daly concluded, "We have long maintained that our markets are geographically conservative, and this has been demonstrated in the current economic situation. While there has naturally been some increase in delinquencies and nonperforming loans during the year, our loan portfolio is in solid shape and many of our performance metrics improved in the most recent quarter. Our annual loan charge-offs were 0.34% of average loans, but this metric was only 0.11% before the above noted fraud related situation, which compares favorably to the 0.16% average for the prior four years. I am pleased to report that we promoted our Risk Officer, Shepard D. Rainie, to Executive Vice President this month. Mr. Rainie joined us in August, 2006 and has guided the expansion of this critical function. We are committed to maintaining strong asset quality and proactively managing credit risk in what is expect to be a softer 2008 economic environment. We have not operated subprime lending programs and we have not purchased subprime investments. Our decision to adjust our underwriting and pricing criteria in 2007 resulted in lower volume and earnings growth than we had planned, and we will continue Page 2 3 to emphasize strong asset quality while we also take advantage of current opportunities to gain market share in our multi-state franchise." DIVIDEND DECLARATION - -------------------- The Board of Directors declared a quarterly cash dividend of $0.15 per share to stockholders of record on February 7, 2008 and payable on February 21, 2008. Due to the third quarter dividend increase of $0.01 per share, Berkshire's total dividends paid per share increased by 4% to $0.58 in 2007 compared to $0.56 in 2006. FINANCIAL CONDITION - ------------------- Total assets were $2.51 billion at year-end 2007, increasing by $364 million (17%). Most categories of assets and liabilities increased due to the impact of the acquisition and organic growth. In conjunction with the acquisition, Berkshire restructured its balance sheet in the third quarter and sold $82 million in assets, including $32 million in securities and $50 million in residential mortgage loans. Total loans increased by $245 million, including acquired Factory Point loans. Organic loan growth in 2007 totaled $58 million (3%) primarily due to growth of $40 million (7%) in commercial mortgages. Commercial mortgages continued to be the primary loan growth component in the fourth quarter, increasing at a 5% annualized rate. Fourth quarter home equity loan balances grew by 5% primarily due to pricing promotions, with no change in underwriting requirements. This growth offset a decrease in automobile loans due to a change in the pricing approach for these loans. Net loan charge-offs measured 0.34% of average loans in 2007, and they measured 0.11% of average loans before $4.0 million recorded in the second half of the year related to the previously mentioned commercial loan. Accruing delinquent loans decreased in the fourth quarter to approximately $8.4 million (0.43% of total loans) from $13.8 million (0.71% of total loans) at the end of the third quarter. This decrease resulted primarily from payoffs in the commercial mortgage portfolio. Total nonperforming assets also decreased in the fourth quarter to $11.4 million (0.45% of total assets) from $11.8 million (0.48% of total assets) at the end of the third quarter. Net loan charge-offs of $3.1 million were mostly offset by $2.7 million in net new nonperforming assets during the fourth quarter. The loan loss allowance totaled 1.14% of total loans at year-end 2007, which was unchanged from the prior quarter-end and the prior year-end. The year-end loan loss allowance included impaired loan reserves totaling $1.2 million, compared to $0.6 million at the end of the third quarter. Total deposits increased by $301 million in 2007, including acquired Factory Point deposits. Organic deposit growth in 2007 totaled $25 million (2%) due to growth of $49 million (6%) in core non-maturity deposit balances. Berkshire allowed expensive time deposits to decrease as loan growth declined, and the Company promoted non-time accounts to take advantage of more favorable cost and cross sale characteristics. Total borrowings decreased by $11 million in 2007, Page 3 4 with the increase relating to the Factory Point acquisition being more than offset by the third quarter balance sheet deleveraging. Stockholders' equity increased in 2007 primarily due to $63 million recorded in conjunction with the Factory Point acquisition, including the issuance of 1.91 million common shares. Goodwill increased by $57 million, primarily due to the Factory Point acquisition. Total book value per share increased to $31.15, while tangible book value per share decreased to $13.82. The ratio of total equity to assets increased to 13.0% reflecting the benefit of the new shares issued and the balance sheet deleveraging. The ratio of tangible equity to assets decreased to 6.2% due primarily to the additional goodwill recognized. Net income of $14 million in 2007 was primarily used for dividends of $5 million and treasury stock buybacks of $8 million. In the fourth quarter, the Company repurchased 270,000 shares at an average price of $26.55 per share. RESULTS OF OPERATIONS - --------------------- Most major categories of income and expense increased in 2007 compared to 2006, due to the acquisition of five affiliated insurance agencies in the fourth quarter of 2006 and Factory Point Bancorp near the end of the third quarter of 2007. Net income in both years was reduced by net non-core charges. Non-core charges in 2007 included $3.8 million related to the balance sheet restructuring in the third quarter, $1.7 million in expenses related to the Factory Point acquisition, and $1.3 million in other restructuring expenses. All per share 2007 income measures included 1.9 million in additional shares issued for the Factory Point acquisition in September. Net interest income increased by $3.7 million (6%) for 2007 and by $2.6 million (17%) for the fourth quarter, compared to the prior year periods. These increases reflected both the Factory Point acquisition and organic growth. Also, the net interest margin increased to 3.38% in the most recent quarter, the highest result in fourteen quarters. This reflected the benefit of the third quarter balance sheet restructuring, the Factory Point acquisition, and revised pricing strategies. Berkshire's interest rate risk was modestly liability sensitive at year-end. Total fee income increased by $13.1 million (97%) in 2007 compared to 2006, and year-to-year fourth quarter fee income increased by $2.0 million (45%), reflecting the benefit of organic growth and the insurance and bank acquisitions. Insurance fee income increased by $10 million to $13.7 million for the year. Total core non-interest income increased to 31% of core revenues in 2007, compared to 20% in 2006, reflecting Berkshire's goal of diversifying its revenue stream. The $3.8 million in total 2007 charges recorded to non-interest income represented net costs for the third quarter balance sheet restructuring, which boosted fourth quarter net interest income and also improved Berkshire's capital, liquidity, and interest rate sensitivity position. Berkshire had boosted its loan loss allowance from 0.92% of loans to 1.14% of loans in 2006 in recognition that the benign credit environment of the previous several years was ending. The Company recorded a $7.9 million loan loss provision in 2006 to accomplish this increase. In 2007, Berkshire maintained its allowance at 1.14% of loans and the resulting provision was $4.3 million. The lower provision in 2007 also reflected the impact of residential mortgage sales, commercial loan outplacements, and lower organic loan portfolio growth. The provision in 2007 Page 4 5 included a $2.5 million fourth quarter charge related to the one commercial loan previously mentioned. In addition to the contribution from the provision, the loan loss allowance also increased by $4.5 million in 2007 due to the inclusion of the Factory Point loan loss allowance. Total non-interest expense increased by $16.6 million (34%) in 2007, and year-to-year fourth quarter non-interest expense increased by $3.7 million (26%). These increases primarily resulted from the bank and insurance acquisitions. The cost of the New York de novo branch program increased by $1.8 million ($0.11 per share after tax) due to recent branch expansion. Expenses in 2007 also included approximately $775 thousand ($0.05 per share after tax) for the costs of the Company's branding program. The effective income tax rate decreased to 28% in 2007 from 30% in 2006 due to higher tax exempt revenue sources and the availability of tax credits. The year-to-year fourth quarter effective income tax rate declined to 20% from 32% due primarily to the impact of the commercial loan writedown in 2007. CONFERENCE CALL - --------------- Berkshire will conduct a conference call at 10:00 A.M. eastern time on Friday, January 25, 2008. President and Chief Executive Officer Michael P. Daly and Executive Vice President and Chief Financial Officer Kevin P. Riley will discuss highlights of the Company's fourth quarter and year-end financial results, along with guidance about expected financial results. Information about the conference call follows: Dial-in: 1-800-860-2442 Replay Dial-in: 1-877-344-7529 Replay Passcode: 414744 Replay Dates: January 25, 2008 at 12:00 P.M. (noon ET) through February 2, 2008 at 9:00 A.M. (ET) Webcast replay: www.berkshirebank.com --------------------- 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 Riley 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 is the holding company for Berkshire Bank - AMERICA'S MOST EXCITING BANK(SM). 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, Northeastern New York and Southern Vermont. 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 Page 5 6 investment products. For more information on Berkshire Hills Bancorp 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. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words like "believe," "expect," "anticipate," "estimate," and "intend" or future or conditional verbs such as "will," "would," "should," "could" or "may." 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. 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 Page 6 7 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. During the third quarter of 2007, the Company identified charges in conjunction with the acquisition of Factory Point Bancorp as non-core in the computation of core earnings. These charges included indirect merger costs and balance sheet deleveraging costs. Additionally, expense restructuring costs were deemed as non-core. # # # CONTACTS - -------- Kevin P. Riley Executive Vice President and Chief Financial Officer 413-236-3195 David H. Gonci Corporate Finance Officer 413-281-1973 Page 7 8
BERKSHIRE HILLS BANCORP CONSOLIDATED BALANCE SHEETS - UNAUDITED - ---------------------------------------------------------------------------------------------------------------------- December 31, September 30, December 31, - ---------------------------------------------------------------------------------------------------------------------- (IN THOUSANDS) 2007 2007 2006 - ---------------------------------------------------------------------------------------------------------------------- ASSETS Total cash and cash equivalents $ 41,142 $ 33,882 $ 30,985 Securities available for sale, at fair value 219,041 194,374 194,206 Securities held to maturity, at amortized cost 39,456 41,978 39,968 Residential mortgages 657,045 658,594 599,273 Commercial mortgages 704,764 694,650 567,074 Commercial business loans 203,564 203,594 189,758 Consumer loans 378,643 381,688 342,882 - ---------------------------------------------------------------------------------------------------------------------- Total loans 1,944,016 1,938,526 1,698,987 Less: Allowance for loan losses (22,116) (22,108) (19,370) - ---------------------------------------------------------------------------------------------------------------------- Net loans 1,921,900 1,916,418 1,679,617 Premises and equipment, net 38,806 38,578 29,130 Goodwill 161,632 161,296 104,531 Other intangible assets 20,820 21,876 16,810 Cash surrender value of life insurance policies 35,316 35,027 30,338 Other assets 35,319 28,633 24,057 - ---------------------------------------------------------------------------------------------------------------------- Total assets $ 2,513,432 $ 2,472,062 $ 2,149,642 - ---------------------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Demand deposits $ 231,994 $ 228,731 $ 178,109 NOW deposits 213,150 207,326 153,087 Money market deposits 439,341 388,251 297,155 Savings deposits 210,186 212,065 202,213 - ---------------------------------------------------------------------------------------------------------------------- Total non-maturity deposits 1,094,671 1,036,373 830,564 Brokered time deposits 21,497 26,578 41,741 Other time deposits 706,395 733,193 649,633 - --------------------------------------------------------------------------------------------------------------------- Total time deposits 727,892 759,771 691,374 - ---------------------------------------------------------------------------------------------------------------------- Total deposits 1,822,563 1,796,144 1,521,938 - ---------------------------------------------------------------------------------------------------------------------- Borrowings 334,474 316,095 345,005 Junior subordinated debentures 15,464 15,464 15,464 Other liabilities 14,094 13,713 9,074 - ---------------------------------------------------------------------------------------------------------------------- Total liabilities 2,186,595 2,141,416 1,891,481 Total stockholders' equity 326,837 330,646 258,161 - ---------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $ 2,513,432 $ 2,472,062 $ 2,149,642 - ----------------------------------------------------------------------------------------------------------------------
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BERKSHIRE HILLS BANCORP CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED - ----------------------------------------------------------------------------------------------------------------------------------- LOAN ANALYSIS ------------- December 31, September 30, December 31, 2007 2007 2006 ----------------------------------------- --------------------------------- ------------- (1) Q4 annualize (2) 2007 (3) Acq. organic organic FAPB Total w/o (DOLLARS IN MILLIONS) Balance growth rate growth rate Balance balance FAPB Balance - ----------------------------------------------------------------------------------------------------------------------------------- Residential mortgages: 1 - 4 Family $ 610 (1) % 5 % $ 612 $ 64 $ 548 $ 567 Construction 47 - 31 47 5 42 32 - ----------------------------------------------------------------------------------------------------------------------------------- Total residential mortgages 657 (1) 7 659 69 590 599 Commercial mortgages: Construction 125 (60) (8) 147 6 141 130 Single and multi-family 69 45 6 62 - 62 65 Other commercial mortgages 510 19 13 487 91 396 372 - ----------------------------------------------------------------------------------------------------------------------------------- Total commercial mortgages 704 5 7 696 97 599 567 Commercial business loans 204 - (13) 204 39 165 190 - ----------------------------------------------------------------------------------------------------------------------------------- Total commercial loans 908 4 2 900 136 764 757 Consumer loans: Auto 197 (17) (1) 206 3 203 196 Home equity and other 182 18 4 174 29 145 147 - ----------------------------------------------------------------------------------------------------------------------------------- Total consumer loans 379 (1) 1 380 32 348 343 - ----------------------------------------------------------------------------------------------------------------------------------- Total loans $ 1,944 1 % 3 % $ 1,939 $ 237 $ 1,702 $ 1,699 - ----------------------------------------------------------------------------------------------------------------------------------- DEPOSIT ANALYSIS ---------------- December 31, September 30, December 31, 2007 2007 2006 ----------------------------------------- --------------------------------- ------------- (1) Q4 annualize (2) 2007 (3) Acq. organic organic FAPB Total w/o (DOLLARS IN MILLIONS) Balance growth rate growth rate Balance balance FAPB Balance - ----------------------------------------------------------------------------------------------------------------------------------- Demand $ 232 5 % 4 % $ 229 $ 46 $ 183 $ 178 NOW 213 12 (5) 207 67 140 153 Money market 439 29 19 388 64 324 297 Savings 211 (2) (3) 212 16 196 202 - ----------------------------------------------------------------------------------------------------------------------------------- Total non-maturity deposits 1,095 14 6 1,036 193 843 830 Time less than $100,000 409 (14) (4) 424 54 370 370 Time $100,000 or more 298 (14) (3) 309 27 282 280 Brokered time 21 - - 27 - 27 42 - ----------------------------------------------------------------------------------------------------------------------------------- Total time deposits 728 (14) (3) 760 81 679 692 - ----------------------------------------------------------------------------------------------------------------------------------- Total deposits $ 1,823 2 % 2 % $ 1,796 $ 274 $ 1,522 $ 1,522 - ----------------------------------------------------------------------------------------------------------------------------------- (1) Q4 annualized and 2007 organic growth rates for deposits exclude the $22.7 million in Factory Point Bancorp, Inc. ("FAPB") repurchase liabilities that were converted to deposit accounts in the 4th quarter of 2007 and the brokered time deposit run-off of $6 million for the 4th quarter and $21 million for the full year. (2) 2007 organic growth rates exclude the FAPB acquired balances and $50 million in residential mortgage loans sold in September. (3) FAPB loans and deposits were acquired on September 21, 2007.
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BERKSHIRE HILLS BANCORP CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED - ------------------------------------------------------------------------------------------------------------------------------- Three Months Ended Years Ended December 31, December 31, - ------------------------------------------------------------------------------------------------------------------------------- (IN THOUSANDS, EXCEPT PER SHARE DATA) 2007 2006 2007 2006 - ------------------------------------------------------------------------------------------- ------------------------------- INTEREST AND DIVIDEND INCOME Loans $ 32,666 $ 28,076 $ 120,059 $ 100,837 Securities and other 3,183 3,305 11,885 17,214 - ------------------------------------------------------------------------------------------------------------------------------- Total interest and dividend income 35,849 31,381 131,944 118,051 INTEREST EXPENSE Deposits 13,749 11,679 50,597 41,044 Borrowings and junior subordinated debentures 3,882 4,131 17,422 16,767 - ------------------------------------------------------------------------------------------------------------------------------- Total interest expense 17,631 15,810 68,019 57,811 - ------------------------------------------------------------------------------------------------------------------------------- NET INTEREST INCOME 18,218 15,571 63,925 60,240 NON-INTEREST INCOME Insurance commissions and fees 2,290 1,645 13,728 3,757 Deposit service fees 2,620 1,800 7,747 5,803 Wealth management fees 1,476 877 4,407 3,287 Loan service fees 91 132 772 692 - ------------------------------------------------------------------------------------------------------------------------------- Total fee income 6,477 4,454 26,654 13,539 Other 551 453 1,710 1,639 Gain (loss) on sale of securities, net - 924 (591) (3,130) Loss on prepayment of borrowings, net - - (1,180) - Gain (loss) on sale of loans, net 41 - (1,950) - - ------------------------------------------------------------------------------------------------------------------------------- Total non-interest income 7,069 5,831 24,643 12,048 - ------------------------------------------------------------------------------------------------------------------------------- TOTAL NET REVENUE 25,287 21,402 88,568 72,288 PROVISION FOR LOAN LOSSES 3,060 785 4,300 7,860 NON-INTEREST EXPENSE Salaries and employee benefits 9,386 7,296 34,018 24,708 Occupancy and equipment 2,656 2,061 9,945 7,699 Marketing, data processing, and professional services 2,275 1,791 8,598 6,648 Non-recurring expense 1,198 1,125 2,956 1,510 Amortization of intangible assets 1,050 601 3,058 2,035 Other 1,828 1,778 6,919 6,268 - ------------------------------------------------------------------------------------------------------------------------------- Total non-interest expense 18,393 14,652 65,494 48,868 - ------------------------------------------------------------------------------------------------------------------------------- Income from continuing operations before income taxes 3,834 5,965 18,774 15,560 Income tax expense 761 1,880 5,239 4,668 - ------------------------------------------------------------------------------------------------------------------------------- NET INCOME FROM CONTINUING OPERATIONS 3,073 4,085 13,535 10,892 Income from discontinued operations before income taxes - 29 - 606 Income tax expense - 11 - 235 - ------------------------------------------------------------------------------------------------------------------------------- NET INCOME FROM DISCONTINUED OPERATIONS - 18 - 371 - ------------------------------------------------------------------------------------------------------------------------------- NET INCOME $ 3,073 $ 4,103 $ 13,535 $ 11,263 - ------------------------------------------------------------------------------------------------------------------------------- BASIC EARNINGS PER SHARE Continuing operations $ 0.29 $ 0.48 $ 1.47 $ 1.28 Discontinued operations - - - 0.04 - ------------------------------------------------------------------------------------------------------------------------------- TOTAL $ 0.29 $ 0.48 $ 1.47 $ 1.32 - ------------------------------------------------------------------------------------------------------------------------------- DILUTED EARNINGS PER SHARE Continuing operations $ 0.29 $ 0.47 $ 1.44 $ 1.25 Discontinued operations - - - 0.04 - ------------------------------------------------------------------------------------------------------------------------------- TOTAL $ 0.29 $ 0.47 $ 1.44 $ 1.29 - ------------------------------------------------------------------------------------------------------------------------------- Weighted average shares outstanding Basic 10,524 8,599 9,223 8,538 Diluted 10,664 8,823 9,370 8,726
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BERKSHIRE HILLS BANCORP CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED - ---------------------------------------------------------------------------------------------------------------------------------- Quarters Ended - ---------------------------------------------------------------------------------------------------------------------------------- Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31, (IN THOUSANDS, EXCEPT PER SHARE DATA) 2007 2007 2007 2007 2006 - ---------------------------------------------------------------------------------------------------------------------------------- INTEREST AND DIVIDEND INCOME Loans $ 32,666 $ 29,719 $ 29,152 $ 28,522 $ 28,076 Securities and other 3,183 2,912 2,842 2,948 3,305 - ---------------------------------------------------------------------------------------------------------------------------------- Total interest and dividend income 35,849 32,631 31,994 31,470 31,381 INTEREST EXPENSE Deposits 13,749 12,581 12,318 11,949 11,679 Borrowings and junior subordinated debentures 3,882 4,571 4,638 4,331 4,131 - ---------------------------------------------------------------------------------------------------------------------------------- Total interest expense 17,631 17,152 16,956 16,280 15,810 - ---------------------------------------------------------------------------------------------------------------------------------- NET INTEREST INCOME 18,218 15,479 15,038 15,190 15,571 NON-INTEREST INCOME Insurance commissions and fees 2,290 2,661 3,786 4,991 1,645 Deposit service fees 2,620 1,825 1,788 1,514 1,800 Wealth management fees 1,476 1,044 968 919 877 Loan service fees 91 324 48 309 132 - ---------------------------------------------------------------------------------------------------------------------------------- Total fee income 6,477 5,854 6,590 7,733 4,454 Other 551 433 303 423 453 (Loss) gain on sale of securities, net - (672) - 81 924 Loss on prepayment of borrowings, net - (1,180) - - - Gain (loss) on sale of loans, net 41 (1,991) - - - - ---------------------------------------------------------------------------------------------------------------------------------- Total non-interest income 7,069 2,444 6,893 8,237 5,831 - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL NET REVENUE 25,287 17,923 21,931 23,427 21,402 PROVISION FOR LOAN LOSSES 3,060 390 100 750 785 NON-INTEREST EXPENSE Salaries and employee benefits 9,386 7,891 8,230 8,511 7,296 Occupancy and equipment 2,656 2,418 2,385 2,486 2,061 Marketing, data processing, and professional services 2,275 2,260 2,116 1,947 1,791 Non-recurring expense 1,198 1,606 - 153 1,125 Amortization of intangible assets 1,050 684 662 662 601 Other 1,828 1,730 1,710 1,650 1,778 - ---------------------------------------------------------------------------------------------------------------------------------- Total non-interest expense 18,393 16,589 15,103 15,409 14,652 - ---------------------------------------------------------------------------------------------------------------------------------- Income from continuing operations before income taxes 3,834 944 6,728 7,268 5,965 Income tax expense 761 - 2,152 2,326 1,880 - ---------------------------------------------------------------------------------------------------------------------------------- NET INCOME FROM CONTINUING OPERATIONS 3,073 944 4,576 4,942 4,085 Income from discontinued operations before income taxes - - - - 29 Income tax expense - - - - 11 - ---------------------------------------------------------------------------------------------------------------------------------- NET INCOME FROM DISCONTINUED OPERATIONS - - - - 18 - ---------------------------------------------------------------------------------------------------------------------------------- NET INCOME $ 3,073 $ 944 $ 4,576 $ 4,942 $ 4,103 - ---------------------------------------------------------------------------------------------------------------------------------- BASIC EARNINGS PER SHARE Continuing operations $ 0.29 $ 0.11 $ 0.52 $ 0.57 $ 0.48 Discontinued operations - - - - - - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL $ 0.29 $ 0.11 $ 0.52 $ 0.57 $ 0.48 - ---------------------------------------------------------------------------------------------------------------------------------- DILUTED EARNINGS PER SHARE Continuing operations $ 0.29 $ 0.10 $ 0.52 $ 0.56 $ 0.47 Discontinued operations - - - - - - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL $ 0.29 $ 0.10 $ 0.52 $ 0.56 $ 0.47 - ---------------------------------------------------------------------------------------------------------------------------------- Weighted average shares outstanding Basic 10,524 8,922 8,732 8,662 8,599 Diluted 10,664 9,045 8,875 8,842 8,823
F-4 12
BERKSHIRE HILLS BANCORP AND SUBSIDIARIES ASSET QUALITY ANALYSIS - ------------------------------------------------------------------------------------------------------------------------------------ At or for the Quarters Ended - ------------------------------------------------------------------------------------------------------------------------------------ Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31, (DOLLARS IN THOUSANDS) 2007 2007 2007 2007 2006 - ------------------------------------------------------------------------------------------------------------------------------------ NON-PERFORMING ASSETS Nonaccruing loans: Residential mortgages $ 726 $ 623 $ 533 $ 22 $ 15 Commercial mortgages 5,177 4,977 1,580 1,346 308 Commercial business loans 4,164 5,553 6,816 7,049 7,203 Consumer loans 441 274 210 124 66 - ------------------------------------------------------------------------------------------------------------------------------------ Total nonaccruing loans 10,508 11,427 9,139 8,541 7,592 Real estate owned 866 348 - - - - ------------------------------------------------------------------------------------------------------------------------------------ Total nonperforming assets $ 11,374 $ 11,775 $ 9,139 $ 8,541 $ 7,592 - ------------------------------------------------------------------------------------------------------------------------------------ Total nonperforming loans/total loans 0.54% 0.59% 0.53% 0.49% 0.45% Total nonperforming assets/total assets 0.45% 0.48% 0.42% 0.39% 0.35% PROVISION AND ALLOWANCE FOR LOAN LOSSES Balance at beginning of period $ 22,108 $ 19,151 $ 19,652 $ 19,370 $ 19,154 Charged-off loans (3,117) (1,954) (678) (627) (754) Recoveries on charged-off loans 65 68 77 159 185 - ------------------------------------------------------------------------------------------------------------------------------------ Net loans charged-off (3,052) (1,886) (601) (468) (569) Acquired allowance - 4,453 - - - Provision for loan losses 3,060 390 100 750 785 - ------------------------------------------------------------------------------------------------------------------------------------ Balance at end of period $ 22,116 $ 22,108 $ 19,151 $ 19,652 $ 19,370 - ------------------------------------------------------------------------------------------------------------------------------------ Allowance for loan losses/nonperforming loans 210% 193% 210% 230% 255% Allowance for loan losses/total loans 1.14% 1.14% 1.11% 1.14% 1.14% NET LOAN CHARGE-OFFS Residential mortgages $ - $ - $ - $ - $ - Commercial mortgages - - - - - Commercial business loans (2,683) (1,497) (406) (251) (420) Consumer loans (369) (389) (195) (217) (149) - ------------------------------------------------------------------------------------------------------------------------------------ Total net $ (3,052) $ (1,886) $ (601) $ (468) $ (569) - ------------------------------------------------------------------------------------------------------------------------------------ Net charge-offs (YTD annualized)/average loans 0.34% 0.23% 0.12% 0.11% 0.07% AVERAGE FICO SCORES OF CONSUMER AUTOMOBILE LOANS 730 729 730 728 726 DELINQUENT LOANS / TOTAL LOANS 30-90 Days delinquent 0.39% 0.60% 0.29% 0.28% 0.24% 90 + Days delinquent and still accruing 0.04% 0.11% 0.07% 0.10% 0.02% - ------------------------------------------------------------------------------------------------------------------------------------ Total accruing delinquent loans 0.43% 0.71% 0.36% 0.38% 0.26% Nonaccruing loans 0.54% 0.59% 0.53% 0.49% 0.45% - ------------------------------------------------------------------------------------------------------------------------------------ Total delinquent loans 0.97% 1.30% 0.89% 0.87% 0.71% - ------------------------------------------------------------------------------------------------------------------------------------
F-5 13
BERKSHIRE HILLS BANCORP AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS - ------------------------------------------------------------------------------------------------------------------------------- At or for the Quarters Ended ------------------------------------------------------------------------- Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31, 2007 2007 2007 2007 2006 ------------------------------------------------------------------------- PERFORMANCE RATIOS Core return on tangible assets 0.78 % 0.93 % 0.97 % 1.07 % 0.91 % Return on total assets 0.50 0.18 0.84 0.92 0.77 Core return on tangible equity 12.10 13.04 13.75 15.40 12.97 Return on total equity 3.74 1.44 6.86 7.57 6.38 Net interest margin, fully taxable equivalent 3.38 3.20 3.15 3.24 3.31 Core tangible non-interest income to assets 1.23 1.21 1.33 1.60 0.97 Non-interest income to assets 1.14 0.44 1.26 1.53 1.09 Core tangible non-interest expense to assets 2.80 2.74 2.80 2.87 2.54 Non-interest expense to assets 2.95 3.00 2.76 2.86 2.73 Efficiency ratio 62.51 64.13 64.27 61.07 61.42 ANNUALIZED YEAR-TO-DATE ORGANIC GROWTH Total loans 3 % 4 % - % 7 % 20 % Total deposits 2 - (2) 3 11 FINANCIAL DATA (IN MILLIONS) Total assets $ 2,513 $ 2,472 $ 2,170 $ 2,175 $ 2,150 Total loans 1,944 1,939 1,730 1,730 1,699 Total intangible assets 182 183 121 121 121 Total deposits 1,823 1,796 1,529 1,535 1,522 Total stockholders' equity 327 331 266 263 258 Total core income 3.8 4.4 4.6 5.0 4.2 Total net income 3.1 0.9 4.6 4.9 4.1 ASSET QUALITY RATIOS Net charge-offs (YTD annualized)/average loans 0.34 % 0.23 % 0.12 % 0.11 % 0.07 % Non-performing assets/total assets 0.45 0.48 0.42 0.39 0.35 Loan loss allowance/total loans 1.14 1.14 1.11 1.14 1.14 Loan loss allowance/nonperforming loans 2.10 x 1.93 x 2.10 x 2.30 x 2.55 x PER SHARE DATA Core earnings, diluted $ 0.36 $ 0.49 $ 0.52 $ 0.56 $ 0.48 Net earnings, diluted 0.29 0.10 0.52 0.56 0.47 Tangible book value 13.82 13.79 16.40 16.13 15.70 Total book value 31.15 30.82 30.12 29.87 29.63 Market price at period end 26.00 30.23 31.51 33.65 33.46 Dividends 0.15 0.15 0.14 0.14 0.14 CAPITAL RATIOS Stockholders' equity to total assets 13.00 % 13.38 % 12.28 % 12.10 % 12.01 % Tangible stockholders' equity to tangible assets 6.22 6.47 7.08 6.92 6.75 ----------------------------------------------------------------------------------------------------------------------------
(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. (3) 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. (4) The Dec. 31, 2007 and Sept. 30, 2007 total loan annualized year-to-date organic growth calculations both exclude the acquired FAPB balances and $50 million in residential mortgage loans sold during September. (5) The Dec. 31, 2007 and Sept. 30, 2007 total deposit annualized year-to-date organic growth calculations both exclude the acquired FAPB balances, $22.7 million in repurchase liabilities converted to deposit accounts, and $21 million in brokered time deposit run-off. F-6 14
BERKSHIRE HILLS BANCORP AND SUBSIDIARIES AVERAGE BALANCES - ------------------------------------------------------------------------------------------------------------------------------------ Quarters Ended ---------------------------------------------------------------------------------------- Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31, (IN THOUSANDS) 2007 2007 2007 2007 2006 ---------------------------------------------------------------------------------------- ASSETS Loans Residential mortgages $ 661,937 $ 634,374 $ 612,289 $ 603,858 $ 592,016 Commercial mortgages 694,339 608,891 593,134 577,645 547,096 Commercial business loans 203,539 171,334 191,967 188,194 187,997 Consumer loans 381,401 349,311 344,069 340,563 341,311 - ------------------------------------------------------------------------------------------------------------------------------------ Total loans 1,941,216 1,763,910 1,741,459 1,710,260 1,668,420 Securities 254,847 224,207 228,471 231,035 259,838 Short-term investments 4,526 4,511 5,232 1,915 16,343 - ------------------------------------------------------------------------------------------------------------------------------------ Total earning assets 2,200,589 1,992,628 1,975,162 1,943,210 1,944,601 Intangible assets 183,902 126,797 120,698 121,059 115,580 Other assets 105,525 93,165 91,320 91,298 88,125 - ------------------------------------------------------------------------------------------------------------------------------------ Total assets $ 2,490,016 $ 2,212,590 $ 2,187,180 $ 2,155,567 $ 2,148,306 - ------------------------------------------------------------------------------------------------------------------------------------ LIABILITIES AND STOCKHOLDERS' EQUITY Deposits NOW $ 207,671 $ 141,529 $ 140,089 $ 142,403 $ 138,293 Money market 422,514 329,943 309,675 294,015 299,927 Savings 212,760 198,372 195,551 199,517 204,104 Time 749,785 701,062 703,595 702,554 686,818 - ------------------------------------------------------------------------------------------------------------------------------------ Total interest-bearing deposits 1,592,730 1,370,906 1,348,910 1,338,489 1,329,142 Borrowings and debentures 327,383 374,537 386,044 375,730 371,201 - ------------------------------------------------------------------------------------------------------------------------------------ Total interest-bearing liabilities 1,920,113 1,745,443 1,734,954 1,714,219 1,700,343 Non-interest-bearing demand deposits 225,507 186,654 178,356 170,819 178,756 Other liabilities 11,267 4,298 7,359 8,456 10,511 - ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities 2,156,887 1,936,395 1,920,669 1,893,494 1,889,610 Stockholders' equity 333,129 276,195 266,511 262,073 258,696 - ------------------------------------------------------------------------------------------------------------------------------------ Total liabilities and stockholders' equity $ 2,490,016 $ 2,212,590 $ 2,187,180 $ 2,155,567 $ 2,148,306 - ------------------------------------------------------------------------------------------------------------------------------------ SUPPLEMENTARY DATA Total non-maturity deposits $ 1,068,452 $ 856,498 $ 823,671 $ 806,754 $ 821,080 Total deposits 1,818,237 1,557,560 1,527,266 1,509,308 1,507,898 Fully taxable equivalent income adj. 541 533 540 553 566 - ------------------------------------------------------------------------------------------------------------------------------------
(1) Average balances for securities available-for-sale are based on amortized cost. F-7 15
BERKSHIRE HILLS BANCORP AND SUBSIDIARIES AVERAGE YIELDS (Fully Taxable Equivalent - Annualized) - ------------------------------------------------------------------------------------------------------------------- Quarters Ended ------------------------------------------------------------------------------ Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31, 2007 2007 2007 2007 2006 ------------------------------------------------------------------------------ Earning assets Loans Residential mortgages 5.54 % 5.35 % 5.36 % 5.29 % 5.29 % Commercial mortgages 7.34 7.49 7.55 7.47 7.57 Commercial business loans 7.68 8.06 7.81 8.09 7.98 Consumer loans 6.91 7.03 6.98 6.97 7.01 Total loans 6.68 6.68 6.71 6.76 6.68 Securities 5.85 6.15 5.92 6.06 5.64 Total earning assets 6.56 6.70 6.63 6.63 6.52 Funding liabilities Deposits NOW 1.39 1.40 1.50 1.54 1.23 Money Market 3.41 3.67 3.73 3.63 3.61 Savings 1.10 1.17 1.08 1.06 1.03 Time 4.65 4.69 4.78 4.77 4.62 Total interest-bearing deposits 3.42 3.64 3.66 3.62 3.49 Borrowings and debentures 4.70 4.84 4.82 4.67 4.42 Total interest-bearing liabilities 3.64 3.90 3.92 3.85 3.69 Net interest spread 2.92 2.80 2.71 2.78 2.83 Net interest margin 3.38 3.20 3.15 3.24 3.31 Cost of funds 3.26 3.52 3.55 3.50 3.34 Cost of deposits 3.00 3.20 3.24 3.21 3.07 - ------------------------------------------------------------------------------------------------------------------
(1) Average balances and yields for securities available-for-sale are based on amortized cost. (2) Cost of funds includes all deposits and borrowings. F-8 16
BERKSHIRE HILLS BANCORP AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES - ------------------------------------------------------------------------------------------------------------------------------------ At or for the Quarters Ended - ------------------------------------------------------------------------------------------------------------------------------------ Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31, (DOLLARS IN THOUSANDS) 2007 2007 2007 2007 2006 - ------------------------------------------------------------------------------------------------------------------------------------ Net income $ 3,073 $ 944 $ 4,576 $ 4,942 $ 4,103 Adj: Loss (gain) on sale of securities, net - 672 - (81) (924) Adj: Loss on prepayment of borrowings, net - 1,180 - - - Adj: Loss on sale of loans, net - 1,991 - - - Less: Income from discontinued operations - - - - (29) Plus: Other non-recurring expense 1,198 1,606 - 153 1,125 Adj: Income taxes (468) (1,995) - (29) (57) - ------------------------------------------------------------------------------------------------------------------------------------ Core income (A) 3,803 4,398 4,576 4,985 4,218 Plus: Amort. of intangible assets (net of taxes) 704 458 444 444 403 - ------------------------------------------------------------------------------------------------------------------------------------ Tangible core income (B) $ 4,507 $ 4,856 $ 5,020 $ 5,429 $ 4,621 - ------------------------------------------------------------------------------------------------------------------------------------ Total non-interest income $ 7,069 $ 2,444 $ 6,893 $ 8,237 $ 5,831 Adj: Loss (gain) on sale of securities, net - 672 - (81) (924) Adj: Loss on prepayment of borrowings, net - 1,180 - - - Adj: Loss on sale of loans, net - 1,991 - - - - ------------------------------------------------------------------------------------------------------------------------------------ Total core non-interest income (C) 7,069 6,287 6,893 8,156 4,907 Net interest income 18,218 15,479 15,038 15,190 15,571 - ------------------------------------------------------------------------------------------------------------------------------------ Total core revenue (D) $ 25,287 $ 21,766 $ 21,931 $ 23,346 $ 20,478 - ------------------------------------------------------------------------------------------------------------------------------------ Total non-interest expense $ 18,393 $ 16,589 $ 15,103 $ 15,409 $ 14,652 Less: Other non-recurring expense (1,198) (1,606) - (153) (1,125) - ------------------------------------------------------------------------------------------------------------------------------------ Core non-interest expense (E) 17,195 14,983 15,103 15,256 13,527 Less: Amortization of intangible assets (1,050) (684) (662) (662) (601) - ------------------------------------------------------------------------------------------------------------------------------------ Total core tangible non-interest expense (F) $ 16,145 $ 14,299 $ 14,441 $ 14,594 $ 12,926 - ------------------------------------------------------------------------------------------------------------------------------------ (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) Total average assets $ 2,490 $ 2,213 $ 2,187 $ 2,156 $ 2,148 Less: Average intangible assets (184) (127) (121) (121) (116) - ------------------------------------------------------------------------------------------------------------------------------------ Total average tangible assets (G) $ 2,306 $ 2,086 $ 2,066 $ 2,035 $ 2,032 - ------------------------------------------------------------------------------------------------------------------------------------ Total average stockholders' equity $ 333 $ 276 $ 267 $ 262 $ 259 Less: Average intangible assets (184) (127) (121) (121) (116) - ------------------------------------------------------------------------------------------------------------------------------------ Total average tangible stockholders' equity (H) $ 149 $ 149 $ 146 $ 141 $ 143 - ------------------------------------------------------------------------------------------------------------------------------------ Total stockholders' equity, period-end $ 327 $ 331 $ 266 $ 263 $ 258 Less: Intangible assets, period-end (182) (183) (121) (121) (121) - ------------------------------------------------------------------------------------------------------------------------------------ Total tangible stockholders' equity, period-end (I) $ 145 $ 148 $ 145 $ 142 $ 137 - ------------------------------------------------------------------------------------------------------------------------------------ Total shares outstanding, period-end (thousands) (J) 10,493 10,729 8,842 8,807 8,713 Average diluted shares outstanding (THOUSANDS) (K) 10,664 9,045 8,875 8,842 8,823 Core earnings per share (A/K) $ 0.36 $ 0.49 $ 0.52 $ 0.56 $ 0.48 Tangible book value per share (I/J) $ 13.82 $ 13.79 $ 16.40 $ 16.13 $ 15.70 Core return on tangible assets (B/G) 0.78 % 0.93 % 0.97 % 1.07 % 0.91 % Core return on tangible equity (B/H) 12.10 13.04 13.75 15.40 12.97 Core tangible non-interest income to assets (C/G) 1.23 1.21 1.33 1.60 0.97 Core tangible non-interest exp to assets (F/G) 2.80 2.74 2.80 2.87 2.54 Efficiency ratio 62.51 64.13 64.27 61.07 61.42 - ------------------------------------------------------------------------------------------------------------------------------------
(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) Quarterly data may not sum to year-to-date data due to rounding. F-9 17
BERKSHIRE HILLS BANCORP AND SUBSIDIARIES RECONCILIATION OF NON-GAAP FINANCIAL MEASURES - ------------------------------------------------------------------------------------------------------------ For Years Ended - ------------------------------------------------------------------------------------------------------------ December 31, (DOLLARS IN THOUSANDS) 2007 2006 - ------------------------------------------------------------------------------------------------------------ Net income $ 13,535 $ 11,263 Adj: Loss on sale of securities, net 591 3,130 Adj: Loss on prepayment of borrowings, net 1,180 - Adj: Loss on sale of loans, net 1,991 - Less: Income from discontinued operations - (606) Plus: Loan loss allowance pool adjustment - 5,512 Plus: Other non-recurring expense 2,956 1,510 Adj: Income taxes (2,492) (3,252) - ------------------------------------------------------------------------------------------------------------ Core income (A) 17,761 17,557 Plus: Amort. intangible assets (net of taxes) 2,050 1,363 - ------------------------------------------------------------------------------------------------------------ Tangible core income (B) $ 19,811 $ 18,920 - ------------------------------------------------------------------------------------------------------------ Total non-interest income $ 24,643 $ 12,048 Adj: Loss on sale of securities, net 591 3,130 Adj: Loss on prepayment of borrowings, net 1,180 - Adj: Loss on sale of loans, net 1,991 - - ------------------------------------------------------------------------------------------------------------ Total core non-interest income (C) 28,405 15,178 Net interest income 63,925 60,240 - ------------------------------------------------------------------------------------------------------------ Total core revenue (D) $ 92,330 $ 75,418 - ------------------------------------------------------------------------------------------------------------ Total non-interest expense $ 65,494 $ 48,868 Less: Other non-recurring expense (2,956) (1,510) - ------------------------------------------------------------------------------------------------------------ Core non-interest expense (E) 62,538 47,358 Less: Amortization of intangible assets (3,058) (2,035) - ------------------------------------------------------------------------------------------------------------ Total core tangible non-interest expense (F) $ 59,480 $ 45,323 - ------------------------------------------------------------------------------------------------------------ (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) Total average assets $ 2,262 $ 2,116 Less: Average intangible assets (138) (103) - ------------------------------------------------------------------------------------------------------------ Total average tangible assets (G) $ 2,123 $ 2,013 - ------------------------------------------------------------------------------------------------------------ Total average stockholders' equity $ 285 $ 256 Less: Average intangible assets (138) (103) - ------------------------------------------------------------------------------------------------------------ Total average tangible stockholders' equity (H) $ 146 $ 153 - ------------------------------------------------------------------------------------------------------------ Total stockholders' equity, period-end $ 327 $ 258 Less: Intangible assets, period-end (182) (121) - ------------------------------------------------------------------------------------------------------------ Total tangible stockholders' equity, period-end (I) $ 145 $ 137 - ------------------------------------------------------------------------------------------------------------ Total shares outstanding, period-end (THOUSANDS) (J) 10,493 8,713 Average diluted shares outstanding (THOUSANDS) (K) 9,370 8,726 Core earnings per share (A/K) $ 1.90 $ 2.00 Tangible book value per share (I/J) $ 13.82 $ 15.70 Core return on tangible assets (B/G) 0.93 % 0.94 % Core return on tangible equity (B/H) 13.55 12.40 Core tangible non-interest income to assets (C/G) 1.34 0.75 Core tangible non-interest exp to assets (F/G) 2.80 2.25 Efficiency ratio 62.94 58.46 - --------------------------------------------------------------------------------------------------------------
(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) Quarterly data may not sum to year-to-date data due to rounding. F-10 -----END PRIVACY-ENHANCED MESSAGE-----