-----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, KqZI2Tp5KmhLzS1d6Dlay9k99zBPieEgd/CDj8rCpRxzmRPHRos9LMJ0DIDR73l0 laBHlusbnj6HbJSETCo16g== 0000914317-01-500278.txt : 20010813 0000914317-01-500278.hdr.sgml : 20010813 ACCESSION NUMBER: 0000914317-01-500278 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERKSHIRE HILLS BANCORP INC CENTRAL INDEX KEY: 0001108134 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTIONS, NOT FEDERALLY CHARTERED [6036] FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-15781 FILM NUMBER: 1704591 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 10-Q 1 form10q40125_88.txt BERKSHIRE UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________ to _________________ Commission File Number 1-15781 BERKSHIRE HILLS BANCORP, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 04-3510455 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 24 North Street, Pittsfield, Massachusetts 01201 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (413) 443-5601 - -------------------------------------------------------------------------------- (Issuer's telephone number, including area code) Not Applicable - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changes since last report) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The Issuer had 6,925,570 shares of common stock, par value $0.01 per share, outstanding as of August 10, 2001. BERKSHIRE HILLS BANCORP, INC. FORM 10-Q INDEX Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Consolidated Balance Sheets as of 1 June 30, 2001 and December 31, 2000 Consolidated Statements of Operations for the Three and Six 2 Months Ended June 30, 2001 and 2000 Consolidated Statements of Changes in Stockholders' Equity 3 for the Six Months Ended June 30, 2001 and 2000 Consolidated Statements of Cash Flows for the 4 Six Months Ended June 30, 2001 and 2000 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial 7 Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk 16 PART II: OTHER INFORMATION Item 1. Legal Proceedings 18 Item 2. Changes in Securities and Use of Proceeds 18 Item 3. Defaults Upon Senior Securities 18 Item 4. Submission of Matters to a Vote of Security Holders 18 Item 5. Other Information 18 Item 6. Exhibits and Reports on Form 8-K 19 PART I. FINANCIAL INFORMATION Item 1. Financial Statements. --------------------
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS Unaudited June 30, December 31, 2001 2000 ----------- ----------- (In thousands) Assets: Cash and due from banks $ 21,268 $ 26,891 Short-term investments 9,743 16,721 ----------- ----------- Total cash and cash equivalents 31,011 43,612 Securities available for sale, at fair value 97,326 99,309 Securities held to maturity, at amortized cost 31,581 32,238 Federal Home Loan Bank stock, at cost 7,027 5,651 Savings Bank Life Insurance stock, at cost 2,043 2,043 Loans 822,283 793,621 Loans held for sale, at fair value 1,200 -- Allowance for loan losses (10,877) (10,216) ----------- ----------- Net loans 812,606 783,405 Premises and equipment, net 13,823 12,370 Foreclosed real estate 26 50 Accrued interest receivable 5,952 6,310 Goodwill 11,887 6,260 Other assets 17,507 20,092 ----------- ----------- Total assets $ 1,030,789 $ 1,011,340 =========== =========== Liabilities and Stockholders' Equity: Deposits $ 723,933 $ 729,594 Federal Home Loan Bank advances 140,536 101,385 Securities sold under agreements to repurchase 1,030 2,030 Net deferred tax liability 4,610 4,482 Loans sold with recourse 1,198 7,740 Accrued expenses and other liabilities 5,754 4,787 ----------- ----------- Total liabilities 877,061 850,018 ----------- ----------- Minority Interests 500 -- Stockholders' equity: Preferred stock ($.01 par value; 1,000,000 shares -- -- authorized; none issued or outstanding) Common stock ($.01 par value: 26,000,000 shares 77 77 authorized; shares issued: 7,673,761 at June 30, 2001 and December 31, 2000; shares outstanding: 7,290,073 at June 30, 2001 and 7,673,761 at December 31, 2000) Additional paid-in capital 74,162 74,054 Unearned compensation (11,929) (7,187) Retained earnings 77,690 74,554 Accumulated other comprehensive income 20,052 19,824 Treasury stock, at cost (383,688 shares at June 30, 2001) (6,824) -- ----------- ----------- Total stockholders' equity 153,228 161,322 ----------- ----------- Total liabilities and stockholders' equity $ 1,030,789 $ 1,011,340 =========== ===========
See accompanying notes to unaudited consolidated financial statements. 1
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Unaudited Unaudited Three Months Ended Six Months Ended June 30, June 30, --------------------- ---------------------- 2001 2000 2001 2000 -------- -------- -------- -------- (In thousands, except per share amounts) Interest and Dividend Income: Bond interest $ 1,451 $ 1,305 $ 2,964 $ 2,467 Stock dividends 356 370 750 688 Short-term investment interest 69 130 144 182 Loan interest 17,388 15,429 34,542 29,503 -------- -------- -------- -------- Total interest and dividend income 19,264 17,234 38,400 32,840 -------- -------- -------- -------- Interest expense: Interest on deposits 6,989 6,732 14,250 13,052 Interest on FHLB advances 1,701 1,502 3,374 2,512 Interest on securities sold under agreements to repurchase and other borrowings 61 16 240 30 -------- -------- -------- -------- Total interest expense 8,751 8,250 17,864 15,594 -------- -------- -------- -------- Net interest income 10,513 8,984 20,536 17,246 Provision for loan losses 840 810 1,680 1,620 -------- -------- -------- -------- Net interest income, after provision for loan losses 9,673 8,174 18,856 15,626 -------- -------- -------- -------- Non-interest income: Customer service fees 516 459 923 795 Trust department fees 445 287 875 826 Loan servicing fees 132 96 251 254 Gain (loss) on securities, net 278 (12) 277 221 Other income 76 44 231 96 -------- -------- -------- -------- Total non-interest income 1,447 874 2,557 2,192 -------- -------- -------- -------- Operating expenses: Salaries and benefits 3,980 3,363 7,602 6,798 Occupancy and equipment 952 1,083 2,041 2,181 Marketing and advertising 143 120 289 199 Data processing 269 350 440 694 Professional services 177 96 430 242 Office supplies 235 159 520 433 Foreclosed real estate and other loan expenses, net 700 297 1,236 628 Amortization of goodwill 125 137 249 274 Contributions -- 5,684 -- 5,684 Other expenses 793 665 1,768 1,252 -------- -------- -------- -------- Total operating expenses 7,374 11,954 14,575 18,385 -------- -------- -------- -------- Income (loss) before taxes 3,746 (2,906) 6,838 (567) Provision (benefit) for income taxes 1,239 (975) 2,253 (193) -------- -------- -------- -------- Net income (loss) $ 2,507 $ (1,931) $ 4,585 $ (374) ======== ======== ======== ======== Earnings per share: Basic $ 0.39 NA $ 0.70 NA Diluted $ 0.37 NA $ 0.67 NA Weighted average shares outstanding: Basic 6,425 NA 6,550 NA Diluted 6,784 NA 6,847 NA
See accompanying notes to unaudited consolidated financial statements. 2
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND 2000 UNAUDITED (In Thousands) Accumulated Additional Other Common Paid-in Unearned Retained Comprehensive Treasury Stock Capital Compensation Earnings Income Stock Total --------- --------- --------- --------- --------- ----- --------- Balance at December 31, 2000 $ 77 $ 74,054 $ (7,187) $ 74,554 $ 19,824 $ -- $ 161,322 Comprehensive income: Net income -- -- -- 4,585 -- -- 4,585 Change in net unrealized gain on securities available for sale, net of reclassification adjustments and tax effects -- -- -- -- 228 -- 228 --------- Total comprehensive income 4,813 Cash dividends declared -- -- -- (1,449) -- -- (1,449) Treasury stock purchased -- -- -- -- -- (6,824) (6,824) Purchase of common stock - MRP -- -- (5,453) -- -- -- (5,453) Change in unearned compensation - MRP -- -- 454 -- -- -- 454 Change in unearned compensation - ESOP -- 108 257 -- -- -- 365 --------- --------- --------- --------- --------- ----- --------- Balance at June 30, 2001 $ 77 $ 74,162 $ (11,929) $ 77,690 $ 20,052 $ (6,824) $ 153,228 ========= ========= ========= ========= ========= ========= ========= Balance at December 31, 1999 $ -- $ -- $ -- $ 70,679 $ 17,673 $ -- $ 88,352 Comprehensive income (loss): Net income (loss) -- -- -- (374) -- -- (374) Change in net unrealized gain on securities available for sale, net of reclassification adjustments and tax effects -- -- -- -- (4,265) -- (4,265) --------- Total comprehensive income (loss) (4,639) Issuance of common stock in connection with conversion from mutual to stock- owned bank holding company 77 74,057 (6,139) -- -- -- 67,995 --------- --------- --------- --------- --------- ----- --------- Balance at June 30, 2000 $ 77 $ 74,057 $ (6,139) $ 70,305 $ 13,408 $ -- $ 151,708 ========= ========= ========= ========= ========= ========= =========
See accompanying notes to unaudited consolidated financial statements. 3
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Unaudited Six Months Ended June 30, ------------------------- 2001 2000 --------- --------- (In thousands) Cash flows from operating activities: Net income (loss) $ 4,585 $ (374) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Provision for loan losses 1,680 1,620 Net amortization of securities 86 136 Charitable contribution in the form of equity securities -- 5,684 Depreciation and amortization expense 857 892 Amortization of goodwill 249 274 Management Rewards Plan expense 454 -- Employee stock ownership plan expense 365 -- Gain on securities, net (277) (221) Losses on foreclosed real estate, net -- 36 Loss on sale of equipment 35 18 Deferred tax provision (benefit) (3) (3,125) Loans originated for sale (15,515) (8,250) Principal balance of loans sold 14,315 8,250 Changes in operating assets and liabilities: Accrued interest receivable and other assets 3,514 (3,059) Accrued expenses and other liabilities (101) 123 --------- --------- Net cash provided by operating activities 10,244 2,004 Cash flows from investing activities: Activity in available-for-sale securities: Sales 6,430 10,443 Maturities 17,202 22,041 Principal payments 6,806 4,213 Purchases (27,930) (69,288) Activity in held-to-maturity securities: Maturities 6,149 4,480 Principal payments 10,269 3,937 Purchases (15,736) (19,500) Purchase of Federal Home Loan Bank stock (1,376) (1,454) Loan originations, net of principal payments (29,707) (79,448) Additions to banking premises and equipment (1,447) (1,630) Proceeds from sales of foreclosed real estate 50 164 Proceeds from sale of equipment 20 3 Loan to fund employee stock ownership plan -- (6,139) Payment for purchase of EastPoint Technologies, LLC (7,300) -- --------- --------- Net cash used in investing activities (36,570) (132,178)
(continued) See accompanying notes to unaudited consolidated financial statements. 4
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded) Unaudited Six Months Ended June 30, ------------------------- 2001 2000 --------- --------- (In thousands) Cash flows from financing activities: Net increase (decrease) in deposits (4,158) 49,939 Net increase (decrease) in securities sold under agreements to repurchase (1,000) 320 Proceeds from Federal Home Loan Bank advances with maturities 90,000 74,000 in excess of three months Repayments of Federal Home Loan Bank advances with maturities (50,849) (38,174) in excess of three months Proceeds of borrowings with maturities of three months or less, net of -- -- repayments Net decrease in loans sold with recourse (6,542) -- Treasury stock purchased (6,824) -- Purchase of common stock in connection with employee and non- employee directors benefit programs (5,453) -- Dividends paid (1,449) -- Net proceeds from initial public offering -- 68,450 --------- --------- Net cash provided by financing activities 13,725 154,535 Net change in cash and cash equivalents (12,601) 24,361 Cash and cash equivalents at beginning of period 43,612 24,642 --------- --------- Cash and cash equivalents at end of period $ 31,011 $ 49,003 ========= ========= Supplemental cash flow information: Interest paid on deposits $ 14,461 $ 13,022 Interest paid on borrowed funds 3,374 2,353 Income taxes paid (refunded), net 1,120 3,177 Transfers from loans to foreclosed real estate 26 --
See accompanying notes to unaudited consolidated financial statements. 5 BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2001 and 2000 (Unaudited) Note 1. Basis of Presentation - ------------------------------- The consolidated interim financial statements of Berkshire Hills Bancorp, Inc. ("Berkshire Hills" or the "Company") and its wholly-owned subsidiaries, Berkshire Bank (the "Bank"), Berkshire Hills Funding Corp., and Berkshire Hills Technology, Inc. herein presented are intended to be read in conjunction with the consolidated financial statements presented in the Company's most recent Securities and Exchange Commission Form 10-K and accompanying notes to the Consolidated Financial Statements filed by the Company for the year ended December 31, 2000. The consolidated financial information at June 30, 2001 and for the three and six month periods ended June 30, 2001 and 2000 are derived from unaudited consolidated financial statements but, in the opinion of management, reflect all adjustments necessary to present fairly the results for these interim periods in accordance with accounting principles generally accepted in the United States of America. These adjustments consist only of normal recurring adjustments. The interim results are not necessarily indicative of the results of operations that may be expected for the entire year. Note 2. Commitments - --------------------- At June 30, 2001, the Company had outstanding commitments to originate new residential and commercial loans totaling $23.9 million which are not reflected on the consolidated balance sheet. In addition, unadvanced funds on home equity lines totaled $36.5 million while unadvanced commercial lines, including unadvanced construction loan funds, totaled $69.1 million. The Company anticipates it will have sufficient funds to meet these commitments. Note 3. Earnings Per Share - ---------------------------- Basic earnings per share represents net income divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflects additional common shares that would have been outstanding if potential diluted shares, such as stock options, had been issued. Unallocated shares of common stock held by the Bank's employee stock ownership plan (the "ESOP") are not included in the weighted-average number of common shares outstanding for either basic or diluted earnings per share calculations. Earnings per share data is presented for the three and six months ended June 30, 2001, but not for the three and six months ended June 30, 2000, since shares of common stock were not issued until June 27, 2000. Earnings per share equaled $0.39 for the quarter ending June 30, 2001, based on 6,425,239 average shares outstanding. Diluted earnings per share equaled $0.37 for the quarter ending June 30, 2001, based on 6,783,784 average shares outstanding. For the six months ending June 30, 2001, earnings per share equaled $0.70 based on 6,550,071 shares outstanding. Diluted earnings per share equaled $0.67 based on 6,847,244 shares outstanding. 6 Note 4. Acquisition - --------------------- On June 29, 2001, the Company, through it's wholly-owned subsidiary Berkshire Hills Technology, Inc., purchased a controlling interest in EastPoint Technologies, LLC, which on the same date acquired all of the domestic operations and service contracts of M&I EastPoint Technology, Inc., Bedford, New Hampshire, a software and data processing provider for financial institutions, as well as substantially all of the operations and service contracts of Preferred Financial Systems, Inc., Arden Hills, Minnesota, a data processing service provider which utilized the EastPoint system. EastPoint Technologies, LLC was formed by a consortium of several clients of M&I EastPoint Technology, Inc. and/or Preferred Financial Systems, Inc. and intends to position itself as a leader in the development of client/server software applications for the financial industry. A portion of the Company's initial investment in EastPoint Technologies, LLC may be purchased by other consortium participants upon their receipt of the necessary regulatory approvals. Note 5. Recent Accounting Pronouncements - ------------------------------------------ On June 30, 2001, the Financial Accounting Standards Board ("FASB") issued Statements of Financial Accounting Standards ("SFAS") No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting. With the adoption of SFAS No. 142, effective January 1, 2001, goodwill is no longer subject to amortization over its estimated useful life. Goodwill will be subject to at least an annual assessment for impairment by applying a fair value based test. Additionally, under SFAS No. 142, acquired intangible assets should be separately recognized if the benefit of the intangible asset is obtained through contractual or other legal rights, or if the intangible asset can be sold, transferred, licensed, rented, or exchanged, regardless of intent to do so. Item 2. Management's Discussion and Analysis of Financial Condition and - ------------------------------------------------------------------------ Results of Operations. ---------------------- The following analysis discusses changes in the financial condition and results of operations at and for the three and six months ended June 30, 2001 and 2000, and should be read in conjunction with Berkshire Hills Bancorp, Inc.'s Consolidated Financial Statements and the notes thereto, appearing in Part I, Item 1 of this document. Forward Looking Statements This report contains forward-looking statements that are based on assumptions and may describe future plans, strategies, and expectations of Berkshire Hills and Berkshire Bank. These forward-looking statements are generally identified by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," or similar expressions. Berkshire Hills' and Berkshire Bank's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on the operations of Berkshire Hills and its subsidiaries include, but are not limited to, changes in interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board, the quality and composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in Berkshire Hills' and Berkshire Bank's market area, changes in real estate market values in Berkshire Hills' market area, and changes in relevant accounting principles and guidelines. These risks and uncertainties should be considered in evaluating forward looking statements and undue reliance should not be placed on such statements. Except as required by applicable law or regulation, Berkshire Hills does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward looking statements to reflect events or circumstances after the date of the statements or to reflect the occurrence of anticipated or unanticipated events. 7 General Berkshire Hills is a Delaware corporation and the holding company for Berkshire Bank, a state-chartered savings bank headquartered in Pittsfield, Massachusetts. Established in 1846, Berkshire Bank is one of Massachusetts' oldest and largest independent banks. With eleven full service branch offices serving communities throughout Berkshire County, Berkshire Bank is the largest banking institution based in Western Massachusetts. The Bank is a community-based financial institution that originates a variety of loan products including real estate loans, commercial loans, and consumer loans primarily in Berkshire County, Massachusetts and its surrounding areas. The Bank offers a wide variety of deposit products and other investment products and financial services to its customers, including asset management and trust services. In connection with the mutual to stock conversion of Berkshire Bancorp, the Bank's former mutual holding company, on June 27, 2000, Berkshire Hills sold 7,105,334 shares of common stock raising net proceeds of $68,415,488. As part of the conversion, 568,427 shares of Berkshire Hills common stock were donated to the Berkshire Hills Foundation, a charitable foundation. On April 25, 2001, our Board of Directors approved the payment of a cash dividend of $0.11 per share, payable on May 25, 2001, to stockholders of record on May 7, 2001. The book value per share of Berkshire Hills' common stock was $21.02 at June 30, 2001, unchanged from December 31, 2000. On June 29, 2001, the Company, through it's wholly-owned subsidiary Berkshire Hills Technology, Inc., purchased a controlling interest in EastPoint Technologies, LLC, which on the same date acquired all of the domestic operations and service contracts of M&I EastPoint Technology, Inc., Bedford, New Hampshire, a software and data processing provider for financial institutions, as well as substantially all of the operations and service contracts of Preferred Financial Systems, Inc., Arden Hills, Minnesota, a data processing service provider which utilized the EastPoint system. EastPoint Technologies, LLC was formed by a consortium of several clients of M&I EastPoint Technology, Inc. and/or Preferred Financial Systems, Inc. and intends to position itself as a leader in the development of client/server software applications for the financial industry. A portion of the Company's initial investment in EastPoint Technologies, LLC may be purchased by other consortium participants upon their receipt of the necessary regulatory approvals. 8 Comparison of Financial Condition at June 30, 2001 and December 31, 2000 Total assets at June 30, 2001 were $1,030.8 million, an increase of $19.4 million, or 1.9%, from $1,011.3 million at December 31, 2000. Additional borrowings of $39.2 million from the Federal Home Loan Bank of Boston along with the decline of $12.6 million in cash and cash equivalents funded a $5.7 million decrease in deposits, a $29.9 million increase in loans outstanding, the purchase of 383,688 shares under the Company's 5% stock repurchase program and the purchase of 306,950 shares to fund the Company's 2001 Stock-Based Incentive Plan. Loans Total loans outstanding increased $29.9 million, or 3.8%, during the first six months of 2001. Increased commercial real estate related and commercial loan activity more than offset a small decline in residential one-to four-family real estate loans. Berkshire County tourism remained strong in the first half of 2001, prompting loan demand from lodging, leisure, and cultural organizations. As a result, commercial real estate related and commercial loans increased $27.0 million, to $277.5 million at June 30, 2001, from $250.5 million at December 31, 2000.
At June 30, 2001 At December 31, 2000 ------------------------ ------------------------ Balance Percent Balance Percent of Total of Total -------- ------- -------- --------- (Dollars in thousands) Mortgage loans on real estate: Residential 1 - 4 family $241,448 29.32% $244,290 30.78% Commercial 1 - 4 family 12,032 1.46% 11,063 1.39% Commercial real estate 82,596 10.03% 63,871 8.05% Commercial construction 11,556 1.40% 8,480 1.07% Multi-family 15,579 1.89% 15,699 1.98% -------- -------- Total real estate loans 363,211 44.11% 343,403 43.27% Commercial loans 171,364 20.81% 167,085 21.05% Consumer loans: Automobile 232,169 28.19% 230,648 29.06% Home equity loans 34,708 4.21% 34,471 4.34% Other 22,031 2.68% 18,014 2.27% -------- -------- Total consumer loans 288,908 35.08% 283,133 35.68% Total loans 823,483 793,621 Less: Allowance for loan losses (10,877) 1.32% (10,216) 1.29% -------- -------- Loans, net $812,606 $783,405 ======== ========
Consumer loans grew $5.8 million, or 2.0%, to $288.9 million during the first six months of 2001. Automobile loans increased $1.5 million as new originations more than offset the sale of $11.6 million of loans. However, 9 automobile loans now comprise only 28.2% of total loans outstanding, as compared to 29.1% at December 31, 2000. Automobile loan growth is being affected by the Company's decision to refocus its marketing efforts towards other consumer loans. Other consumer loans increased $4.0 million, or 22.3%, to $22.0 million due to a number of smaller consumer loans other than automobile and home equity loans being granted. Allowance for Loan Losses All banks that manage loan portfolios will experience losses to varying degrees. The allowance for loan losses is the amount available to absorb these losses and represents management's evaluation of the risks inherent in the portfolio including the collectibility of the loans, changing collateral values, past loan loss history, specific borrower situations, and general economic conditions. Management continually assesses the adequacy of the allowance for loan losses and makes monthly provisions in an amount considered adequate to cover losses in the loan portfolio. Because future events affecting the loan portfolio cannot be predicted with complete accuracy, there can be no assurances that management's estimates are correct and that the existing allowance for loan losses is adequate. However, management believes that based on the information available to it on June 30, 2001, the Company's allowance for loan losses is sufficient to cover losses inherent in the Company's current loan portfolio. The allowance consists of allocated, general and unallocated components. The allocated component relates to loans that are classified as either doubtful, substandard or special mention. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors. An unallocated component is maintained to cover uncertainties that could affect management's estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating losses in the portfolio. On June 30, 2001, the allowance for loan losses totaled $10.9 million, or 1.32%, of total loans as compared to $10.2 million, or 1.29%, of total loans on December 31, 2000. Charged-off loans increased $859,000 to $1.5 million during the first six months this year as compared to $630,000 last year due to weakness in the indirect automobile portfolio and a more aggressive charge-off policy. However, recoveries totaled $470,000 this year as compared to $203,000 last year as the Company bolstered efforts to collect previously charged-off loans. On June 30, 2001, the allowance expressed as a percentage of nonperforming loans was 268.63% while on June 30, 2000, it was 461.65%.
At and for the Six Months Ended ----------------------------- June 30, June 30, 2001 2000 ----------- ------------ (Dollars in thousands) Allowance for loan losses, beginning of period $ 10,216 $8,534 Charged-off loans: Real estate 0 -- Consumer 1,454 504 Commercial 35 126 ----------- ------------ Total charged-off loans 1,489 630 Recoveries: Real estate -- 46 Consumer 250 119 Commercial 220 38 ----------- ------------ Total recoveries 470 203 Provision for loan losses 1,680 1,620 ----------- ------------ Allowance for loan losses, end of period $ 10,877 $9,727 =========== ============ Net loans charged-off to total loans 0.12% 0.06% Allowance for loan losses to total loans 1.32% 1.29% Allowance for loan losses to nonperforming loans 268.63% 461.65% Recoveries to charge-offs 31.56% 32.22%
10 Nonperforming Assets The following table sets forth information regarding nonperforming assets as of June 30, 2001 and December 31, 2000.
At June 30, At December 31, 2001 2001 ----------- --------------- (Dollars in thousands) Nonaccruing loans: One-to four-family real estate $ 231 $ 390 Commercial real estate -- -- Commercial 761 466 Consumer 3,057 1,993 Home equity -- 20 ------ ------ Total 4,049 2,869 ------ ------ Real estate owned 26 50 ------ ------ Total nonperforming assets $4,075 $ 2,919 ====== ======= Total nonperforming loans as a percentage 0.49% 0.36% of total loans Total nonperforming assets as a percentage of 0.40% 0.29% total assets
Generally, the Company ceases accruing interest on all loans when principal or interest payments are 90 days or more past due unless management determines the principal and interest to be fully secured and in the process of collection. Once management determines that interest is uncollectible and ceases accruing interest on a loan, all previously accrued interest is reversed against current interest income. At June 30, 2001, the Company had $34,000 of loans that were 90 days or more past due but which were still accruing interest. As has been the case with charged-off loans, the amount of nonaccruing loans increased since December 31, 2000. As of June 30, 2001, total nonaccruing loans amounted to $4.0 million, an increase of $1.2 million, or 41.1%, from $2.9 million at December 31, 2000. The negative effect of a slowing economy in industries other than those that are tourist related, coupled with the normal aging of the automobile portfolio, has resulted in an increase in nonaccruing consumer loans, primarily indirect automobile loans, as balances now total $3.1 million against $2.0 million at December 31, 2000. As a result, the ratio of nonperforming loans as a percentage of total loans increased to 0.49% in June of 2001, from 0.36% as of December 31, 2000. 11 Investment Securities Securities totaled $138.0 million at the end of June 2001 as compared to $139.2 million at December 31, 2000. Balances declined during the first six months of 2001 as maturing funds from investments were used to support other operating activities. The net unrealized gain in the portfolio increased $228,000 from December 31, 2000 as falling interest rates bolstered bond prices. This change was recognized in accumulated other comprehensive income on the consolidated statement of changes in stockholders' equity. Other Assets From December 31, 2000 to June 30, 2001, other assets fell $2.6 million. Prominent in the decline was a decrease of $837,000 in repossessed automobiles from $3.2 million at December 31, 2000 to $2.3 million at June 30, 2001 as a continuing strong sales effort during the first half of 2001 enabled the Bank to bring down the balance of its repossessed automobile portfolio. Other assets also declined due to the January 2, 2001 collection of a $1.0 million security that matured on Sunday, December 31, 2000. Deposits Customers' deposits are the primary funding vehicle for the Company's asset base. The following table sets forth the Company's deposit stratification as of June 30, 2001 and December 31, 2000.
At June 30, 2001 At December 31, 2000 ---------------------------- ---------------------------- Balance % of Balance % of Deposits Deposits -------- -------- -------- -------- (Dollars in thousands) Demand deposits $ 71,835 9.92% $ 76,750 10.52% NOW accounts 76,401 10.55% 79,978 10.96% Savings accounts 139,835 19.32% 137,293 18.82% Money Market accounts 108,532 14.99% 115,800 15.87% Certificates of Deposit 327,330 45.22% 319,773 43.83% -------- -------- Total $723,933 $729,594 ======== ========
Total deposits were $723.9 million on June 30, 2001, a decrease of 0.78% for the first six months of the year. Core deposits, which the Company considers to be all but certificates of deposit, were 54.8% of total deposits on June 30, 2001 as compared to 56.2% on December 31, 2000. Historically, the first quarter of the year is a difficult period for deposit growth. This year was no exception. Although deposits rebounded in the second quarter, they remain below year-end 2000 levels. Borrowings Since deposit growth has been insufficient to keep up with loan growth, the Company has found it necessary to supplement its funding of the loan portfolio with borrowings from the Federal Home Loan Bank of Boston. The amount of these borrowings increased $39.2 million to $140.5 million since the end of last year. The Company's borrowing capacity at the Federal Home Loan Bank of Boston is in excess of $230 million. Stockholders' Equity and Regulatory Capital At June 30, 2001, the Company had $153.2 million in stockholders' equity compared to $161.3 million at December 31, 2000. The decrease was primarily due to the purchase of 306,950 shares of the Company's common stock at a cost of $5.5 million to fund the granting of restricted stock 12 awards under the Company's 2001 Stock-Based Incentive Plan and the purchase of 383,688 shares at a cost of $6.8 million to complete a 5% repurchase program. The Company also declared and paid cash dividends totaling $0.21 per common share, amounting to $1.4 million during the first half of 2001. Partially offsetting these decreases in stockholders' equity was net income of $4.6 million. The Company's capital to assets ratios for June 30, 2001, and December 31, 2000, were 14.87% and 15.95%, respectively. The various regulatory capital ratios for the Company on June 30, 2001 and December 31, 2000 were as follows:
June 30, 2001 December 31, 2000 ----------------- ----------------- Total capital to risk weighted assets 17.94% 20.15% Tier 1 capital to risk weighted assets 14.97% 17.12% Tier 1 capital to average assets 12.35% 14.54%
Regulations have been established that require the Company and the Bank to maintain minimum amounts and ratios of Tier 1 and total capital to average assets to ensure capital adequacy. Failure to meet these requirements can initiate regulatory actions that could have a material effect on the Company's financial statements. As of December 31, 2000, the Company was in compliance with all capital adequacy requirements to be categorized as well capitalized. Management knows of no events that have since occurred that would jeopardize this rating and believes that the Company would continue to be considered well capitalized on June 30, 2001. Comparison of Operating Results for the Three Months Ended June 30, 2001 and 2000 Net Interest Income. Net interest income is the largest component of the Company's revenue stream and is the difference between the interest and dividends earned on the loan and investment portfolios and the interest paid on the Company's funding sources, primarily customer deposits and advances from the Federal Home Loan Bank of Boston. Net interest income, before the provision for loan losses, increased $1.5 million or 17.0%, to $10.5 million for the second quarter of 2001. The Company's net interest margin increased to 4.37% this quarter from 4.15% for the same quarter last year. Higher yields in the loan and investment portfolios were the main contributors to the increase in net interest margin. Total interest and dividend income increased $2.0 million, or 11.8%, to $19.3 million for the second quarter of 2001 as compared to the same period last year. Loan interest grew to $17.4 million in the current quarter, an increase of $2.0 million, or 12.7%, from the same period last year as strong commercial real estate and other commercial loan growth contributed to a higher level of interest earnings. Investment income rose $71,000 as higher yields in 2001 were partially offset by higher invested balances in 2000. Interest expense rose $501,000, or 6.1%, to $8.8 million this year due to a higher concentration of certificates of deposit and additional FHLB advances. Deposit expense grew by $257,000 this year to $7.0 million while interest on FHLB advances increased $199,000, to $1.7 million from $1.5 million last year. Other interest expense rose $45,000 due to interest expense related to loans sold with recourse. The Company's provision for loan losses was $840,000 in the second quarter of this year as compared to $810,000 in the same quarter last year. In setting the provision for the second quarter of 2001, management considered the current level of commercial and automobile loan originations, which generally bear a greater degree of risk than one-to four-family real estate loans, current delinquencies in the loan portfolio, prospects for future loan delinquencies, especially automobile loans, current recoveries and the likelihood for future recoveries of previously charged-off loans, among other items. 13 After the provision, net interest income was $9.7 million for the quarter ending June 30, 2001, as compared to $8.2 million for the same period last year, an increase of $1.5 million, or 18.3%. Non-interest Income. Non-interest income earned by the Company comes primarily from three sources: Trust department fees, customer service fees, and servicing fees on loans sold to others. For the three months ending June 30, 2001, non-interest income totaled $1.4 million, an increase of $573,000, or 65.6%, from the same quarter last year. Trust department fees jumped $158,000 as 2000's second quarter was abnormally low. Customer service fees rose $57,000 primarily due to increased ATM fees and overdraft fees. Loan servicing fees increased $36,000 as the Company initiated a program to sell its newly originated fixed rate mortgages to a third party. In addition, $278,000 of securities gains were realized in the second quarter this year versus a loss of $12,000 in the same period last year. Non-interest Expense. Non-interest (operating) expense amounted to $7.4 million for the three months ending June 30, 2001 as compared to $12.0 million for the same three months last year. Included in 2000's figure is a donation of $5.7 million to Berkshire Hills Foundation, a charitable foundation established by the Company in conjunction with the June 27, 2000 stock conversion. Excluding this expense, non-interest expense rose $1.1 million in the current quarter as compared to the same quarter last year. Expenses related to foreclosed real estate, and in particular, automobile loans rose $403,000 to $700,000 this year due to increased delinquencies in the automobile loan portfolio. Salaries and benefits expense increased $617,000 to $4.0 million as the Company incurred $167,000 in one-time expenses in connection with the termination of its defined benefit pension plan. The Company expects to book a one-time gain of approximately $2.3 million in the fourth quarter of 2001 upon final settlement of the plan. Other pension and benefit costs, including ESOP and Stock-Based Incentive Plan costs, caused salaries and benefits expense to increase $535,000 in 2001. Professional services increased $81,000 due to additional audit fees along with legal and other expenses incurred in connection with the EastPoint Technologies, LLC acquisition. Partially offsetting these increases was a decline in occupancy and equipment expense of $131,000 resulting from the closing of one branch in April 2000 and a second branch in February 2001. Also, data processing expenses decreased $81,000 as the Company realized cost savings from bringing its imaging system in-house. Income Taxes. Income taxes were $1.2 million in this year's second quarter with an effective tax rate of 33.1%. Due to the contribution to Berkshire Hills Foundation, the Company's effective tax rate for the second quarter of 2000 was negative. Comparison of Operating Results for the Six Months Ended June 30, 2001 and 2000 Net Interest Income. Net interest income before the provision for loan losses rose $3.3 million, or 19.1%, to $20.5 million during the first half of 2001. Higher loan balances along with higher yields were primarily responsible for the increase. For principally the same reasons, the Company's net interest margin was 4.28% for the first six months of 2001 versus 4.13% for the first six months of 2000. Total interest and dividend income from the loan and investment portfolios increased $5.6 million, or 16.9%, to $38.4 million over the first six months of 2001 as compared to the first six months of 2000. Due largely to the growth in loans outstanding, particularly commercial real estate related and other commercial loans, loan interest rose to $34.5 million in 2001 from $29.5 million in 2000. In addition, investment income rose $521,000 to $3.9 million this year as the Company benefited from higher yields and a higher level of investment in fixed income securities. 14 Interest expense rose $2.3 million, or 14.6%, to $17.9 million in the first six months of 2001. Borrowings from the Federal Home Loan Bank of Boston have been used to support loan growth and increased significantly over the past six months causing interest paid on the borrowings to increase to $3.4 million this year from $2.5 million last year. Interest on deposits rose more slowly, increasing $1.2 million to $14.3 million this year, as slightly higher rates were paid on a growing certificate of deposit base. In addition, other interest expense rose $210,000 to $240,000 this year primarily due to interest expense related to loans sold with recourse. The Company's provision for loan losses was $1.7 million in the first six months of this year, as compared to $1.6 million in the same period last year. In setting the provision for the first half of 2001, management considered the current level of commercial and automobile loan originations, which generally bear a greater degree of risk than one-to four-family real estate loans, current delinquencies in the loan portfolio, prospects for future loan delinquencies, especially automobile, current recoveries and the likelihood for future recoveries of previously charged-off loans, among other items. After the provision, the Company's net interest income for the first six months of 2001 was $18.9 million, up from $15.6 million for the same period in 2000, an increase of 20.7%. Non-interest Income. Through the first six months of this year, non-interest income rose $365,000, or 16.7%, over the comparable period last year. Customer service fees increased to $923,000 through June 30, 2001, as compared to $795,000 for the same period last year, primarily due to increased ATM fees and overdraft fees. Trust department fees advanced $49,000 to $875,000 due to increased assets under management. Realized gains on security sales increased $56,000 to $277,000 over the first six months of this year and other income rose $135,000, primarily from the proceeds of an insurance policy. Non-interest Expense. Non-interest (operating) expenses totaled $14.6 million over 2001's first six months, a decrease of $3.8 million, or 20.7%, over 2000's $18.4 million. Included in 2000's figure is a one-time $5.7 million donation to Berkshire Hills Foundation made in the second quarter. Excluding this expense, operating expenses rose $1.9 million, or 14.8%, for the first six months of this year. Foreclosed real estate and other loan expense rose to $1.2 million in 2001, from $628,000 in 2000, an increase of $608,000, or 96.8%, due to higher delinquencies in the automobile portfolio and increased expenses related to the administration and collection of the portfolio. Salary and benefit expense increased $804,000 to $7.6 million for this year. Included in the figure for 2001 was a one-time charge of $167,000 related to the termination of the Company's defined benefit pension plan. Also, expenses related to employee benefits, such as the 401(k) plan, ESOP, and 2001 Stock-Based Incentive Plan added $934,000 to the increase. Partially offsetting this increase was a decline of $258,000 in employee cash compensation. Professional services expense increased $188,000 to $430,000 this year, primarily due to additional audit fees along with legal and other costs associated with the EastPoint Technologies, LLC acquisition. Other expenses increased $516,000 to $1.8 million in 2001 as new expenses associated with being a public company contributed $424,000 to the total. On the other hand, data processing costs fell $254,000, to $440,000 this year as savings have been realized from the switch to an in-house imaging system from an outsourced operation. Occupancy and equipment costs have also declined, falling $140,000 to $2.0 million in 2001, from cost savings associated with the closing of one branch office in April 2000 and a second one in February 2001. 15 Income Taxes. Income taxes for the six months ended June 30, 2001 were $2.3 million, with an effective tax rate of 32.9%, an increase of $2.4 million from last year. The corresponding tax figure for 2000 was negative due to the $5.7 million contribution made to Berkshire Hills Foundation, a charitable foundation. Liquidity and Capital Resources Liquidity is the ability to meet current and future financial obligations of a short-term nature. Berkshire Bank further defines liquidity as the ability to respond to the needs of depositors and borrowers as well as maintaining the flexibility to take advantage of investment opportunities. Berkshire Bank's primary investing activities are: (1) originating residential one-to four-family mortgage loans, commercial business and real estate loans, multi-family loans, home equity loans and lines of credit, and consumer loans; and (2) investing in mortgage-and asset-backed securities, U.S. Government and agency obligations, and corporate equity securities and debt obligations. These activities are funded primarily by principal and interest payments on loans, maturities of securities, deposits and Federal Home Loan Bank of Boston advances. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and mortgage prepayments are greatly influenced by interest rates, economic conditions, and competition. Additionally, deposit flows are affected by the overall level of interest rates, the interest rates and products offered by Berkshire Bank and its local competitors, and other factors. Berkshire Bank closely monitors its liquidity position on a daily basis. If Berkshire Bank should require funds beyond its ability to generate them internally, additional sources of funds are available through advances or a line of credit with the Federal Home Loan Bank and through a repurchase agreement with the Depositors Insurance Fund. Berkshire Bank relies primarily on competitive rates, customer service, and long-standing relationships with customers to retain deposits. Occasionally, Berkshire Bank will also offer special competitive promotions to its customers to increase retention and promote deposit growth. Based upon Berkshire Bank's historical experience with deposit retention, management believes that, although it is not possible to predict future terms and conditions upon renewal, a significant portion of its deposits will remain with Berkshire Bank. Item 3. Quantitative and Qualitative Disclosures About Market Risk. ----------------------------------------------------------- Berkshire Bank's most significant form of market risk is interest rate risk. The principal objectives of Berkshire Bank's interest rate risk management are to evaluate the interest rate risk inherent in certain balance sheet accounts, determine the level of risk appropriate given its business strategy, operating environment, capital and liquidity requirements and performance objectives, and manage the risk consistent with its established policies. Berkshire Bank maintains an Asset/Liability Committee that is responsible for reviewing its asset/liability policies and interest rate risk position, which meets quarterly and reports to the Executive Committee of the Bank and the Board of Directors. The Asset/Liability Committee consists of Berkshire Bank's President and Chief Executive Officer, Senior Vice President, Treasurer and Chief Financial Officer, Executive Vice President-Senior Loan Officer, and Executive Vice President-Retail Banking. The extent of the movement of interest rates is an uncertainty that could have a negative impact on the earnings of Berkshire Bank. Berkshire Bank manages interest rate risk by: o emphasizing the origination of adjustable-rate loans and, from time to time, selling a portion of its longer term fixed-rate loans as market interest rate conditions dictate; o originating shorter-term commercial and consumer loans; o investing in a high quality liquid securities portfolio that provides adequate liquidity and flexibility to take advantage of opportunities that may arise from fluctuations in market interest rates, the overall maturity and duration of which is monitored in relation to the repricing of its loan portfolio; 16 o promoting lower cost liability accounts such as core deposits; and o using Federal Home Loan Bank advances to better structure maturities of its interest rate sensitive liabilities. For Berkshire Bank, market risk also includes price risk, primarily security price risk. The securities portfolio had unrealized gains before taxes of $30.8 million at June 30, 2001. Changes in this figure are reflected, net of taxes, in accumulated other comprehensive income as a separate component of Berkshire Bank's equity. Since December 31, 2000, this component has risen $228,000. It is not possible to predict with complete accuracy the direction and magnitude of securities price changes. Unfavorable market conditions or other factors could cause price declines in the securities portfolio. Berkshire Bank uses a simulation model to measure the potential change in net interest income, incorporating various assumptions regarding the shape of the yield curve, the pricing characteristics of loans, deposits and borrowings, prepayments on loans and securities, and changes in balance sheet mix. The table below sets forth, as of June 30, 2001, estimated net interest income and the estimated changes in Berkshire Bank's net interest income for the next twelve month period which may result given instantaneous increases or decreases in market interest rates of 100 and 200 basis points.
Increase/ (Decrease) in Market Interest Rates At June 30, 2001 in Basis Points ------------------------------------------------- (Rate Shock) Amount $ Change % Change ----------- ------ -------- -------- (Dollars in thousands) 200 $ 46,042 $ 690 1.52% 100 45,862 510 1.12% Static 45,352 -- -- (100) 44,476 (876) (1.93)% (200) 43,666 (1,686) (3.72)%
The above table indicates that in the event of a sudden and sustained decline in prevailing market interest rates of 100 basis points and 200 basis points, Berkshire Bank's net interest income would be expected to decrease by $876,000 and $1.7 million respectively. Computation of prospective effects of hypothetical interest rate changes are based on a number of assumptions including the level of market interest rates, the degree to which certain assets and liabilities with similar maturities or periods to repricing react to changes in market interest rates, the expected prepayment rates on loans and investments, the degree to which early withdrawals occur on certificates of deposit, and other deposit flows. As a result, these computations should not be relied upon as indicative of actual results. Further, the computations do not reflect any actions that management may undertake in response to changes in interest rates. Impact of Inflation and Changing Prices The consolidated financial statements and related data presented have been prepared in conformity with generally accepted accounting principles, which require the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative purchasing power of money over time due to inflation. Unlike many industrial companies, substantially all of the assets and liabilities of Berkshire Bank are monetary in nature. As a result, interest rates have a more significant impact on Berkshire Bank's performance than the general level of inflation. Over short periods of time, interest rates may not necessarily move in the same direction or in the same magnitude as inflation. 17 PART II. OTHER INFORMATION Item 1. Legal Proceedings. ----------------- The Company is not involved in any legal proceedings other than routine legal proceedings occurring in the normal course of business. Such routine proceedings, in the aggregate, are believed by management to be immaterial to the Company's financial condition or results of operations. Item 2. Changes in Securities and Use of Proceeds. ----------------------------------------- None. Item 3. Defaults Upon Senior Securities. ------------------------------- None. Item 4. Submission of Matters to a Vote of Security Holders. --------------------------------------------------- The annual meeting of the Stockholders of the Company was held on May 3, 2001. The results of the vote were as follows: 1. The following individuals were elected as directors, each for a three-year term: VOTES FOR VOTES WITHHELD --------- -------------- Henry D. Granger 6,395,303 1,427 Edward G. McCormick 6,394,754 1,976 Raymond B. Murray, III 6,395,413 1,317 Robert A. Wells 6,309,037 87,693 Ann H. Trabulsi 6,395,413 1,317 Anne Everest Wojtkowski 6,395,139 1,591 2. The appointment of Wolf & Company, P.C. as independent auditors of Berkshire Hills Bancorp, Inc. for the fiscal year ending December 31, 2001 was ratified by the stockholders by the following vote: FOR AGAINST ABSTAIN --- ------- ------- 6,336,284 31,554 28,892 Item 5. Other Information. ----------------- None. 18 Item 6. Exhibits and Reports on Form 8-K (ss.249.308 of this Chapter). (a) Exhibits 3.1 Certificate of Incorporation of Berkshire Hills Bancorp, Inc.(1) 3.2 Bylaws of Berkshire Hills Bancorp, Inc.(1) 4.0 Stock Certificate of Berkshire Hills Bancorp, Inc.(1) (1) Incorporated by reference into this document from the Exhibits filed with the Registration Statement on Form S-1, and any amendments thereto, Registration No. 333-32146. (b) Reports on Form 8-K On May 14, 2001, the "Company" issued a press release which reported that earnings for the three months ended March 31, 2001 were $0.31 per share as previously reported. A press release announcing the revised basic earnings per share was filed by exhibit. 19 SIGNATURES Pursuant to the requirements of the Securities and 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. Dated: August 10, 2001 By: /s/ James A. Cunningham, Jr. ---------------------------- James A. Cunningham, Jr. President, Chief Executive Officer and Director (principal executive officer) Dated: August 10, 2001 By: /s/ Charles F. Plungis, Jr. --------------------------- Charles F. Plungis, Jr. Senior Vice President, Treasurer and Chief Financial Officer (principal financial and accounting officer) -----END PRIVACY-ENHANCED MESSAGE-----