EX-99.1 2 c88152exv99w1.htm EXHIBIT 99.1 Exhibit 99.1
Exhibit 99.1
(NEWS RELEASE LOGO)
(BERKSHIRE HILLS LOGO)
BERKSHIRE HILLS ANNOUNCES SECOND QUARTER RESULTS
Dividend Declared
Pittsfield, MA — July 21, 2009 — Berkshire Hills Bancorp (BHLB) reported second quarter 2009 net income of $2.3 million. The Company’s 2009 second quarter earnings per share totaled $0.24 before an FDIC special assessment and preferred stock dividends. The FDIC levied a special industry assessment which totaled $1.3 million for Berkshire, or $0.06 per share after-tax.
During the most recent quarter, Berkshire recorded a $3.0 million deemed dividend related to the repayment of its preferred stock to the U.S. Treasury. The deemed dividend, together with cash preferred stock dividends and accretion, reduced earnings available to common shareholders by $0.26 per share. After these charges of $0.06 per share for the FDIC assessment and $0.26 per share for preferred dividends, GAAP earnings per common share were ($0.08). The one-time deemed dividend had no impact on cash or on stockholders’ equity.
FINANCIAL HIGHLIGHTS
  •  
Strong growth in targeted loans and deposits
  •  
12% annualized second quarter commercial loan growth
 
  •  
3% annualized second quarter deposit growth; 13% annualized first half growth
 
  •  
16% second quarter growth in commercial checking account balances
  •  
Continuing solid loan performance
  •  
0.42% nonperforming assets/assets and 0.66% accruing delinquent loans/loans at midyear
  •  
0.45% annualized net charge-offs to average loans in second quarter
  •  
Further expense reductions — 5% decrease in second quarter non-interest expense before FDIC insurance expense (7% increase including FDIC), compared to 2008 second quarter
  •  
Strong capital from common stock raise — 15% common equity to assets
Michael P. Daly, President and Chief Executive Officer, stated, “We made solid progress in building our business in the second quarter and are optimistic about our prospects for sustained growth as we gain share from national competitors. Annualized commercial loan growth moved into double digits, with substantial contributions from our new team in New York; we had another solid quarter of deposit growth, while managing our deposit pricing to minimize the pressure on our net interest margin; and new business generation accelerated in our integrated wealth management and insurance services. Before FDIC insurance expense, we further reduced core non-interest expense, resuming the downward trend in linked quarter core expense begun a year ago. We are positioning our Company for higher earnings when economic conditions normalize. Additionally, our recent loan and securities growth occurred near the end of the second quarter and is expected to benefit net interest income beginning in the third quarter.”
         
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Mr. Daly continued, “We successfully issued $32 million in common stock through a public offering in May, following a successful nearly $40 million offering last October. Our strong capital and liquidity position us to be able to participate in expansion opportunities where we feel that the pricing and fit are appropriate. Our New England and New York markets are expected to provide attractive investment opportunities as we pursue growth as the largest locally headquartered regional bank.”
DIVIDEND DECLARED
The Board of Directors maintained the cash dividend on our common stock, declaring a dividend of $0.16 per share to stockholders of record at the close of business on August 6, 2009 and payable on August 20, 2009.
GLOBE 100 AWARD
Berkshire was named in May to the “Globe 100” list of top performing public companies in Massachusetts. The annual Boston Globe survey identifies the best businesses based on growth of revenues, profitability, return on shareholder equity, and size. This is the ninth year in a row that Berkshire has received this recognition, and Berkshire’s ranking was the highest among the local/regional banks which were named. Mr. Daly stated, “We had record earnings in 2008, with 21% growth in revenues and a 64% increase in earnings. This earned us a spot in the top 50 companies named by the Globe. We have a dedicated team of professionals who are delivering the promise of America’s Most Exciting BankSM to our customers and communities.”
FINANCIAL CONDITION
Total assets were $2.7 billion at June 30, 2009 which was little changed from the prior quarter and prior year-end. After accumulating short-term investments resulting from first quarter deposit growth, in the second quarter the Company used this liquidity to increase investment securities and pay-down borrowings. Loans declined slightly in both periods due to run-off of auto loans and residential mortgages. Total equity was flat for the first six months, with income and common stock offering proceeds offsetting the repayment of preferred stock.
Short term investments declined to $36 million at mid-year from $113 million at the end of the first quarter. Some of these proceeds were invested in high grade short duration debt securities, bringing total investment securities to $370 million from $344 million during the second quarter.
Total commercial loans increased at a 12% annualized rate in the second quarter of 2009, and at a 4% annualized rate for the first half of the year. Growth was concentrated in commercial real estate loans, which increased by $28 million for the first half of the year. Home equity line outstandings increased by $27 million in the first half of the year due primarily to new originations. Berkshire originates conforming home equity lines to a maximum LTV of 80%. Growth in commercial loans and home equity loans partially offset declines in auto loans and residential mortgages. Auto loans decreased by $32 million to $101 million in the first half of the year due to the planned run-off of the indirect auto portfolio. Residential mortgage loans decreased in the first half of 2009 due to a high volume of refinancings as a result of low fixed rates. Berkshire originated a total of $140 million in residential mortgages in the first half of the year; most of this volume was fixed rate mortgages which were sold to federal agencies.
         
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Nonperforming assets decreased to 0.42% of assets at quarter-end, compared to 0.47% at the start of the quarter and 0.48% at the beginning of the year. Performing delinquent loans increased modestly due primarily to higher commercial loan delinquencies. Performing delinquent loans measured 0.66% of total loans at midyear, compared to 0.46% at the start of the quarter and 0.51% at the beginning of the year. Annualized net loan charge-offs measured 0.45% in the second quarter and 0.48% for the first half of the year. The loan loss allowance remained flat at 1.16% of total loans during the quarter.
Total deposits increased by $13 million in the second quarter and $122 million in the first half. Demand deposits grew by $20 million in the second quarter, including 8% annualized growth of personal accounts. NOW account balances decreased primarily due to seasonal decreases in municipal balances. The cost of deposits decreased from 1.99% in the fourth quarter of 2008 to 1.81% in the most recent quarter, reflecting the Company’s pricing strategies and the impact of competitive market pricing floors in the current environment. During the first half of the year, proceeds from deposit growth were primarily used to reduce borrowings, which declined by $77 million over this time.
Total stockholders’ equity was $408 million at mid-year, which was unchanged from year-end 2008. During the second quarter, Berkshire raised $32 million in net proceeds from a public common stock offering and repaid $40 million in preferred stock previously issued to the U.S. Treasury. Additionally, Berkshire paid $1 million to repurchase the common stock warrant issued to the Treasury, thereby ending all involvement with financing from the Treasury. Stockholders’ equity also benefited from $6 million in net income and $6 million in comprehensive income as a result of improved securities prices. The ratio of tangible common equity to assets improved to a strong 9.2% at mid-year, while the ratio of total equity to assets measured 15.2%. Tangible book value per common share improved to $16.52 from $15.73 at the start of the year. Midyear total book value per share measured $29.29, compared to $30.33 at the start of the year.
RESULTS OF OPERATIONS
Second quarter 2009 net income was $2.3 million, compared to $5.7 million in the second quarter of 2008. For the first six months, net income was $6.2 million in 2009 compared to record earnings of $11.8 million in 2008. Major changes in the first six months included decreases of $2.5 million in net interest income and $2.1 million in fee income, together with increases of $3.0 million in FDIC insurance premiums and $2.8 million in the provision for loan losses.
The year-to-year decline in net interest income was due to margin compression. The net interest margin was 2.91% in the second quarter and 3.01% in the first half of 2009, compared to 3.45% and 3.43% in the same periods of 2008, respectively. This decline was primarily due to the impact of near-zero short term interest rates, which reduced the yields on assets, while deposit costs declined less due to competitive market floors. Berkshire is maintaining modest asset interest rate sensitivity in order to benefit from anticipated future interest rate increases. Net interest income also was affected by runoff of indirect auto loans and residential mortgages. Berkshire is exiting the indirect auto loan business; residential mortgage runoff reflects the refinancing of mortgages into fixed rate mortgages sold to federal agencies. Income was also reduced by the elimination in 2009 of dividends from the Federal Home Loan Bank of Boston; these dividends totaled $0.5 million in the first half of 2008. Growth in commercial loans and securities near the end of the second quarter is expected to benefit net interest income beginning in the third quarter.
         
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Fee income declined by $1.3 million and $2.1 million year-to-year in the second quarter and first half of 2009 compared to 2008. First half wealth management fees decreased $0.9 million mainly due to lower stock market prices on which these fees are based. Assets under management increased to $681 million in the first half of 2009 as a result of 15% annualized new business generation, and the new business pipeline was strong at mid-year. First half insurance income decreased $1.0 million, primarily reflecting lower contingency income due to changes in industry pricing conditions. Insurance fee income is seasonal, with most contingency income received in the first half of the year. Deposit and loan fee income declined slightly by $0.2 million in the first half. Non-recurring income totaled $1.2 million in 2009, primarily due to $1.0 million in fees related to the June termination of the merger agreement with CNB Financial Corp.
The loan loss provision increased by $1.1 million and $2.8 million year-to-year in the second quarter and first half. The 2009 loan loss provision exceeded net loan charge-offs, which measured an annualized 0.48% of average loans in 2009, increasing from 0.15% in the first half of 2008 primarily due to higher commercial loan charge-offs, which measured a modest 0.64% of average commercial loans in 2009. Second quarter commercial loan charge-offs included $0.6 million related to the Company’s decision to accelerate certain problem asset dispositions.
Total non-interest expense increased by $1.3 million and $1.7 million year-to-year for the second quarter and first half. This increase resulted from FDIC insurance expense increases of $2.3 million and $3.0 million respectively. Second quarter FDIC expense included a $1.3 million special industry assessment ($0.06 per share after tax). Excluding FDIC insurance expense, all other second quarter non-interest expense declined by $1.0 million (5%) in 2009 compared to 2008. The decrease was concentrated in compensation expense for both the second quarter and year-to-date. Non-core expense totaling $0.6 million in the most recent quarter included charges related to the terminated merger agreement with CNB Financial Corp, together with restructuring charges in the new Integrated Services division. The first half effective income tax rate decreased to 26% from 28% year-to-year due to lower pre-tax earnings in 2009.
CONFERENCE CALL
Berkshire will conduct a conference call/webcast at 10:00 A.M. eastern time on Wednesday, July 22, 2009 to discuss this news release and guidance about expected future results. Please call in a few minutes prior to the scheduled time to register for the event. A copy of the presentation for this call will be available prior to the call at www.berkshirebank.com in the investor relations section. Information about the conference call follows:
     
Dial-in:
  800-860-2442
Webcast:
  www.berkshirebank.com (Investor Relations link)
A telephone replay of the call will be available through July 29, 2009 by calling 877-344-7529 and entering replay passcode: 431997. The webcast and a podcast will be available at Berkshire’s website above for an extended period of time.
         
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BACKGROUND
Berkshire Hills Bancorp is headquartered in Pittsfield, Massachusetts. It has $2.7 billion in assets and is the parent of Berkshire Bank — America’s Most Exciting BankSM. The Company provides personal and business banking, insurance, wealth management, and investment services through 48 financial centers in western Massachusetts, northeastern New York, and southern Vermont. Berkshire Bank provides 100% deposit insurance protection, regardless of amount, based on a combination of FDIC insurance and the Depositors Insurance Fund (DIF). For more information, visit www.berkshirebank.com or call 800-773-5601.
FORWARD LOOKING STATEMENTS
Statements in this news release regarding Berkshire Hills Bancorp that are not historical facts are “forward-looking statements”. These statements reflect management’s views of future events, and involve risks and uncertainties. For a discussion of factors that could cause actual results to differ materially from expectations, see “Forward Looking Statements” in the Company’s 2008 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which are available at the Securities and Exchange Commission’s Internet website (www.sec.gov) and to which reference is hereby made. Actual future results may differ significantly from results discussed in these forward-looking statements, and undue reliance should not be placed on such statements. Except as required by law, the Company assumes no obligation to update any forward-looking statements.
NON-GAAP FINANCIAL MEASURES
This news release contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles (“GAAP”). These non-GAAP measures provide supplemental perspectives on operating results, performance trends, and financial condition. They are not 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. 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, including components for core revenue and expense. These measures exclude amounts which the Company views as unrelated to its normalized operations, including merger costs and restructuring costs. Similarly, the efficiency ratio is also adjusted for these non-core items. Additionally, the Company adjusts core income to exclude amortization of intangibles to arrive at a measure of the underlying operating cash return for the benefit of stockholders. The Company also adjusts certain equity related measures to exclude intangible assets due to the importance of these measures to the investment community. In the first quarter of 2009, the Company adjusted core earnings per share and core return on tangible common equity to be net of preferred stock dividends. These measures were not adjusted in this manner in the second quarter of 2009. The second quarter deemed dividend was a nonrecurring non-cash charge with no impact on stockholders’ equity and did not reflect a core economic event in the Company’s view. Additionally, the Company held cash at near-zero interest rates in the second quarter while it awaited the approval of the U.S. Treasury to repay the preferred stock. Accordingly, the preferred stock cash dividend and accretion charges were viewed by the Company as non-core one-time charges against income available to common stockholders related to the process of repaying the preferred stock.
         
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# # #
CONTACTS
Investor Relations Contact
David H. Gonci
Corporate Finance Officer
413-281-1973
Media Contact
Fedelina Madrid
Vice President — Marketing
413-236-3733
         
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BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED BALANCE SHEETS — UNAUDITED
                         
    June 30,     March 31,     December 31,  
(In thousands)   2009     2009     2008  
Assets
                        
Total cash and cash equivalents
   $ 30,746     $ 22,887     $ 26,582  
Fed funds sold & short-term investments
     36,037       113,225       18,216  
 
Trading security
     16,247       17,565       18,144  
Securities available for sale, at fair value
     303,546       274,879       274,380  
Securities held to maturity, at amortized cost
     26,851       27,972       25,872  
Federal Home Loan Bank stock and other restricted securities
     23,120       23,120       23,120  
 
                  
Total Securities
     369,764       343,536       341,516  
 
Loans held for sale
     8,901       5,276       1,768  
 
Residential mortgages
     627,958       651,507       677,254  
Commercial mortgages
     833,598       797,363       805,456  
Commercial business loans
     172,341       179,765       178,934  
Consumer loans
     334,882       340,743       345,508  
 
                  
Total loans
     1,968,779       1,969,378       2,007,152  
Less: Allowance for loan losses
     (22,917 )     (22,903 )     (22,908 )
 
                  
Net loans
     1,945,862       1,946,475       1,984,244  
 
                        
Premises and equipment, net
     36,197       37,029       37,448  
Goodwill
     161,725       161,725       161,178  
Other intangible assets
     15,987       16,820       17,652  
Cash surrender value of life insurance policies
     36,267       35,964       35,668  
Other assets
     39,600       41,414       42,457  
 
                  
Total assets
   $ 2,681,086     $ 2,724,351     $ 2,666,729  
 
                  
 
                        
Liabilities and stockholders’ equity
                        
Demand deposits
   $ 257,133     $ 237,619     $ 233,040  
NOW deposits
     176,238       199,236       190,828  
Money market deposits
     506,100       505,937       448,238  
Savings deposits
     209,232       212,687       211,156  
 
                  
Total non-maturity deposits
     1,148,703       1,155,479       1,083,262  
Time deposits
     802,691       782,601       746,318  
 
                  
Total deposits
     1,951,394       1,938,080       1,829,580  
 
                  
 
                        
Borrowings
     281,860       327,160       359,157  
Junior subordinated debentures
     15,464       15,464       15,464  
Derivative liabilities
     13,838       22,485       24,068  
Due to broker
     —       —       19,895  
Other liabilities
     10,980       8,344       10,140  
 
                  
Total liabilities
     2,273,536       2,311,533       2,258,304  
 
                        
Total preferred stockholders’ equity
     —       36,959       36,822  
Total common stockholders’ equity
     407,550       375,859       371,603  
 
                  
Total stockholders’ equity
     407,550       412,818       408,425  
 
                  
 
                        
Total liabilities and stockholders’ equity
   $ 2,681,086     $ 2,724,351     $ 2,666,729  
 
                  

 

F-1

 

BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED LOAN & DEPOSIT ANALYSIS — UNAUDITED
LOAN ANALYSIS
                                         
    June 30, 2009     March 31, 2009     December 31, 2008  
            Quarterly             Quarterly        
            Annualized             Annualized        
(Dollars in millions)   Balance     Growth %     Balance     Growth %     Balance  
Residential mortgages:
                                        
Total residential mortgages
   $ 628       (14 )     651       (16 )     677  
 
                                        
Commercial mortgages:
                                        
Construction
     135       9       132       6       130  
Single and multi-family
     67       6       66       (23 )     70  
Other commercial mortgages
     632       22       599       (4 )     605  
 
                              
Total commercial mortgages
     834       19       797       (4 )     805  
 
                                        
Commercial business loans
     172       (18 )     180       2       179  
 
                              
Total commercial loans
     1,006       12       977       (3 )     984  
 
                                        
Consumer loans:
                                        
Auto
     101       (52 )     116       (52 )     133  
Home equity and other
     234       16       225       23       213  
 
                              
Total consumer loans
     335       (7 )     341       (6 )     346  
 
                              
Total loans
   $ 1,969       — %   $ 1,969       (8 )%   $ 2,007  
 
                              
DEPOSIT ANALYSIS
                                         
    June 30, 2009     March 31, 2009     December 31, 2008  
            Quarterly             Quarterly        
            Annualized             Annualized        
(Dollars in millions)   Balance     Growth %     Balance     Growth %     Balance  
Demand
   $ 257       34 %   $ 237       7 %   $ 233  
NOW
     176       (46 )     199       17       191  
Money market
     506       —       506       53       448  
Savings
     209       (8 )     213       4       211  
 
                              
Total non-maturity deposits
     1,148       (2 )     1,155       27       1,083  
 
                                        
Time less than $100,000
     403       2       401       6       395  
Time $100,000 or more
     400       19       382       36       351  
 
                              
Total time deposits
     803       10       783       20       746  
 
                              
Total deposits
   $ 1,951       3 %   $ 1,938       24 %   $ 1,829  
 
                              

 

F-2

 

BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME — UNAUDITED
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
(In thousands, except per share data)   2009     2008     2009     2008  
Interest and dividend income
                                
Loans
   $ 25,370     $ 29,823     $ 51,802     $ 61,146  
Securities and other
     3,395       3,011       6,843       6,211  
 
                        
Total interest and dividend income
     28,765       32,834       58,645       67,357  
Interest expense
                                
Deposits
     8,677       10,521       17,150       22,809  
Borrowings and junior subordinated debentures
     3,364       3,666       7,060       7,607  
 
                        
Total interest expense
     12,041       14,187       24,210       30,416  
 
                        
Net interest income
     16,724       18,647       34,435       36,941  
Non-interest income
                                
Insurance commissions and fees
     3,274       3,694       7,843       8,840  
Deposit service fees
     2,443       2,486       4,679       4,641  
Wealth management fees
     1,113       1,567       2,302       3,195  
Loan service and interest rate swap fees
     (136 )     228       255       465  
 
                        
Total fee income
     6,694       7,975       15,079       17,141  
Other
     468       562       820       880  
Gain (loss) on sale of securities, net
     3       (26 )     1       (26 )
Other non-recurring income
     1,240       —       1,177       (12 )
 
                        
Total non-interest income
     8,405       8,511       17,077       17,983  
 
                        
Total net revenue
     25,129       27,158       51,512       54,924  
Provision for loan losses
     2,200       1,105       4,700       1,930  
Non-interest expense
                                
Salaries and employee benefits
     8,902       9,842       18,254       19,498  
Occupancy and equipment
     2,859       2,774       5,987       5,742  
Marketing, data processing, and professional services
     2,233       2,127       4,323       3,986  
FDIC premium and special assessment
     2,387       54       3,079       108  
Other non-recurring expense
     601       683       601       683  
Amortization of intangible assets
     833       1,019       1,666       2,103  
Other
     2,163       2,133       4,521       4,586  
 
                        
Total non-interest expense
     19,978       18,632       38,431       36,706  
 
                        
 
                                
Income before income taxes
     2,951       7,421       8,381       16,288  
Income tax expense
     620       1,708       2,167       4,526  
 
                        
Net income
   $ 2,331     $ 5,713     $ 6,214     $ 11,762  
 
                        
 
                                
Less: Cumulative preferred stock dividend and accretion
     393       —       1,030       —  
Less: Deemed dividend resulting from preferred stock repayment
     2,954       —       2,954       —  
 
                        
Net income available to common stockholders
   $ (1,016 )   $ 5,713     $ 2,230     $ 11,762  
 
                        
 
                                
Basic earnings per common share
   $ (0.08 )   $ 0.55     $ 0.18     $ 1.14  
Diluted earnings per common share
   $ (0.08 )   $ 0.55     $ 0.18     $ 1.13  
 
                                
Weighted average common shares outstanding
                                
Basic
     12,946       10,302       12,556       10,344  
Diluted
     12,946       10,384       12,593       10,420  

 

F-3

 

BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME — UNAUDITED
                                         
    Quarters Ended  
    June 30,     Mar. 31,     Dec. 31,     Sept. 30,     June 30,  
(In thousands, except per share data)   2009     2009     2008     2008     2008  
Interest and dividend income
                                        
Loans
   $ 25,370     $ 26,432     $ 29,343     $ 30,078     $ 29,823  
Securities and other
     3,395       3,448       3,419       3,014       3,011  
 
                              
Total interest and dividend income
     28,765       29,880       32,762       33,092       32,834  
Interest expense
                                        
Deposits
     8,677       8,473       9,248       9,676       10,521  
Borrowings and junior subordinated debentures
     3,364       3,696       4,044       4,087       3,666  
 
                              
Total interest expense
     12,041       12,169       13,292       13,763       14,187  
 
                              
Net interest income
     16,724       17,711       19,470       19,329       18,647  
Non-interest income
                                        
Insurance commissions and fees
     3,274       4,569       2,139       2,640       3,694  
Deposit service fees
     2,443       2,236       2,623       2,518       2,486  
Wealth management fees
     1,113       1,189       1,171       1,338       1,567  
Loan service and interest rate swap fees
     (136 )     391       203       561       228  
 
                              
Total fee income
     6,694       8,385       6,136       7,057       7,975  
Other
     468       352       241       174       562  
Gain (loss) on sale of securities, net
     3       (2 )     —       4       (26 )
Other non-recurring income
     1,240       (63 )     —       —       —  
 
                              
Total non-interest income
     8,405       8,672       6,377       7,235       8,511  
 
                              
Total net revenue
     25,129       26,383       25,847       26,564       27,158  
Provision for loan losses
     2,200       2,500       1,400       1,250       1,105  
Non-interest expense
                                        
Salaries and employee benefits
     8,902       9,352       8,988       9,796       9,842  
Occupancy and equipment
     2,859       3,128       2,736       2,760       2,774  
Marketing, data processing, and professional services
     2,233       2,090       1,803       2,003       2,127  
FDIC premium and special assessment
     2,387       692       535       118       54  
Other non-recurring expense
     601       —       —       —       683  
Amortization of intangible assets
     833       833       838       889       1,019  
Other
     2,163       2,358       2,356       2,171       2,133  
 
                              
Total non-interest expense
     19,978       18,453       17,256       17,737       18,632  
 
                              
 
                                        
Income before income taxes
     2,951       5,430       7,191       7,577       7,421  
Income tax expense
     620       1,547       1,985       2,301       1,708  
 
                              
Net income
   $ 2,331     $ 3,883     $ 5,206     $ 5,276     $ 5,713  
 
                              
 
                                        
Less: Cumulative preferred stock dividend and accretion
     393       637       —       —       —  
Less: Deemed dividend resulting from preferred stock repayment
     2,954       —       —       —       —  
 
                              
Net income available to common stockholders
   $ (1,016 )   $ 3,246     $ 5,206     $ 5,276     $ 5,713  
 
                              
 
                                        
Basic earnings per common share
   $ (0.08 )   $ 0.27     $ 0.44     $ 0.51     $ 0.55  
Diluted earnings per common share
   $ (0.08 )   $ 0.27     $ 0.44     $ 0.51     $ 0.55  
 
                                        
Weighted average common shares outstanding
                                        
Basic
     12,946       12,164       11,804       10,303       10,302  
Diluted
     12,946       12,247       11,892       10,400       10,384  

 

F-4

 

BERKSHIRE HILLS BANCORP AND SUBSIDIARIES
ASSET QUALITY ANALYSIS
                                         
    At or for the Quarters Ended  
    June 30,     Mar. 31,     Dec. 31,     Sept. 30,     June 30,  
(Dollars in thousands)   2009     2009     2008     2008     2008  
NON-PERFORMING ASSETS
                                        
Non-accruing loans:
                                        
Residential mortgages
   $ 2,396     $ 2,740     $ 1,646     $ 1,315     $ 763  
Commercial mortgages
     6,087       7,276       7,738       6,178       5,329  
Commercial business loans
     1,442       1,861       1,921       2,210       3,103  
Consumer loans
     1,326       587       866       650       577  
 
                              
Total non-accruing loans
     11,251       12,464       12,171       10,353       9,772  
Other real estate owned
     130       371       498       941       1,050  
 
                              
Total non-performing assets
   $ 11,381     $ 12,835     $ 12,669     $ 11,294     $ 10,822  
 
                              
 
                                        
Total non-accruing loans/total loans
     0.57 %     0.63 %     0.61 %     0.52 %     0.49 %
Total non-performing assets/total assets
     0.42 %     0.47 %     0.48 %     0.44 %     0.42 %
 
                                        
PROVISION AND ALLOWANCE FOR LOAN LOSSES
                                        
Balance at beginning of period
   $ 22,903     $ 22,908     $ 22,886     $ 22,581     $ 22,130  
Charged-off loans
     (2,291 )     (2,643 )     (1,474 )     (1,331 )     (754 )
Recoveries on charged-off loans
     105       138       96       386       100  
 
                              
Net loans charged-off
     (2,186 )     (2,505 )     (1,378 )     (945 )     (654 )
Provision for loan losses
     2,200       2,500       1,400       1,250       1,105  
 
                              
Balance at end of period
   $ 22,917     $ 22,903     $ 22,908     $ 22,886     $ 22,581  
 
                              
 
                                        
Allowance for loan losses/non-accruing loans
     204 %     184 %     188 %     221 %     231 %
Allowance for loan losses/total loans
     1.16 %     1.16 %     1.14 %     1.15 %     1.14 %
 
                                        
NET LOAN CHARGE-OFFS
                                        
Residential mortgages
   $ (27 )   $ (117 )   $ —     $ (119 )   $ —  
Commercial mortgages
     (755 )     (1,448 )     (900 )     (63 )     (131 )
Commercial business loans
     (795 )     (150 )     (10 )     (265 )     (121 )
Consumer loans
     (609 )     (790 )     (468 )     (498 )     (402 )
 
                              
Total, net
   $ (2,186 )   $ (2,505 )   $ (1,378 )   $ (945 )   $ (654 )
 
                              
 
                                        
Net charge-offs (annualized)/average loans
     0.45 %     0.51 %     0.27 %     0.19 %     0.13 %
Net charge-offs (YTD annualized)/average loans
     0.48 %     0.51 %     0.19 %     0.16 %     0.15 %
 
                                        
DELINQUENT LOANS/TOTAL LOANS
                                        
30-89 Days delinquent
     0.63 %     0.45 %     0.46 %     0.45 %     0.33 %
90+ Days delinquent and still accruing
     0.03 %     0.01 %     0.05 %     0.03 %     0.04 %
 
                              
Total accruing delinquent loans
     0.66 %     0.46 %     0.51 %     0.48 %     0.37 %
 
                                        
Non-accruing loans
     0.57 %     0.63 %     0.61 %     0.52 %     0.49 %
 
                              
Total delinquent loans
     1.23 %     1.09 %     1.12 %     1.00 %     0.86 %
 
                              

 

F-5

 

BERKSHIRE HILLS BANCORP AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
                                         
    At or for the Quarters Ended  
    June 30,     Mar. 31,     Dec. 31,     Sep. 30,     June 30,  
    2009     2009     2008     2008     2008  
PERFORMANCE RATIOS
                                        
Core return on tangible assets
     0.45 %     0.77 %     0.98 %     1.03 %     1.16 %
Return on total assets
     0.35       0.59       0.79       0.82       0.91  
Core return on tangible common equity
     5.23       8.54       12.70       15.85       17.89  
Return on total common equity
     2.38       3.52       5.62       6.26       6.89  
Net interest margin, fully taxable equivalent
     2.91       3.11       3.41       3.48       3.45  
Core tangible non-interest income to tangible assets
     1.15       1.42       1.04       1.21       1.47  
Non-interest income to assets
     1.26       1.32       0.97       1.13       1.36  
Core tangible non-interest expense to tangible assets
     2.97       2.86       2.68       2.82       2.91  
Non-interest expense to assets
     2.99       2.80       2.62       2.76       2.97  
Efficiency ratio
     75.85       65.23       62.24       62.18       61.08  
 
                                        
GROWTH
                                        
Total loans, year-to-date (annualized)
     (4 )%     (8 )%     3 %     3 %     4 %
Total deposits, year-to-date (annualized)
     13       24       —       1       (1 )
Total revenues, year-to-year YTD
     (6 )     (5 )     21       29       21  
 
                                        
FINANCIAL DATA (In millions)
                                        
Total assets
   $ 2,681     $ 2,724     $ 2,667     $ 2,566     $ 2,547  
Total loans
     1,969       1,969       2,007       1,922       1,978  
Total intangible assets
     178       179       179       180       181  
Total deposits
     1,951       1,938       1,830       1,837       1,811  
Total stockholders’ equity
     408       413       408       333       330  
Total common stockholders’ equity
     408       376       372       333       330  
Total core income
     2.0       3.9       5.2       5.3       5.7  
Total net income
     2.3       3.9       5.2       5.3       5.7  
 
                                        
ASSET QUALITY RATIOS
                                        
Net charge-offs (annualized)/average loans
     0.45 %     0.51 %     0.27 %     0.19 %     0.13 %
Non-performing assets/total assets
     0.42       0.47       0.48       0.44       0.42  
Loan loss allowance/total loans
     1.16       1.16       1.14       1.15       1.14  
Loan loss allowance/nonperforming loans
     2.04 x     1.84 x     1.88 x     2.21 x     2.31 x
 
                                        
PER COMMON SHARE DATA
                                        
Core earnings, diluted
   $ 0.15     $ 0.27     $ 0.44     $ 0.51     $ 0.55  
Net earnings, diluted
     (0.08 )     0.27       0.44       0.51       0.55  
Tangible common book value
     16.52       16.02       15.73       14.58       14.36  
Total common book value
     29.29       30.54       30.33       31.71       31.78  
Market price at period end
     20.78       22.92       30.86       32.00       23.65  
Dividends
     0.16       0.16       0.16       0.16       0.16  
 
                                        
CAPITAL RATIOS
                                        
Common stockholders’ equity to total assets
     15.20 %     13.80 %     13.82 %     12.97 %     12.96 %
Tangible common stockholders’ equity to tangible assets
     9.18       7.74       7.62       6.41       6.30  
Stockholders’ equity to total assets
     15.20       15.15       15.32       12.97       12.96  
Tangible stockholders’ equity to tangible assets
     9.18       9.20       9.23       6.41       6.30  
     
(1)  
Reconciliations of Non-GAAP financial measures, including all references to core and tangible amounts, appear on page F-9. Tangible assets are total assets less total intangible assets.
 
(2)  
All performance ratios are annualized and are based on average balance sheet amounts, where applicable.

 

F-6

 

BERKSHIRE HILLS BANCORP AND SUBSIDIARIES
AVERAGE BALANCES
                                         
    Quarters Ended  
    June 30,     Mar. 31,     Dec. 31,     Sept. 30,     June 30,  
(In thousands)   2009     2009     2008     2008     2008  
Assets
                                        
Loans
                                        
Residential mortgages
   $ 637,232     $ 675,905     $ 679,000     $ 672,363     $ 665,407  
Commercial mortgages
     810,421       804,109       808,308       787,543       745,727  
Commercial business loans
     173,486       173,055       185,434       192,065       196,962  
Consumer loans
     338,506       343,296       343,894       346,068       354,321  
 
                              
Total loans
     1,959,645       1,996,365       2,016,636       1,998,039       1,962,417  
Securities
     346,274       335,414       304,466       266,720       260,046  
Fed funds sold & short-term investments
     73,874       49,966       15,345       4,384       12,633  
 
                              
Total earning assets
     2,379,793       2,381,745       2,336,447       2,269,143       2,235,096  
Goodwill & other intangible assets
     178,164       178,711       179,187       180,387       181,705  
Other assets
     125,446       113,471       105,097       105,937       105,109  
 
                              
Total assets
   $ 2,683,403     $ 2,673,927     $ 2,620,731     $ 2,555,467     $ 2,521,910  
 
                              
 
                                        
Liabilities and stockholders’ equity
                                        
Deposits
                                        
NOW
   $ 187,174     $ 193,038     $ 196,326     $ 193,192     $ 202,747  
Money market
     483,302       462,518       453,977       447,184       491,945  
Savings
     210,678       213,074       220,565       221,746       212,680  
Time
     795,155       762,940       746,913       734,195       705,305  
 
                              
Total interest-bearing deposits
     1,676,309       1,631,570       1,617,781       1,596,317       1,612,677  
Borrowings and debentures
     310,323       365,833       382,015       380,453       343,816  
 
                              
Total interest-bearing liabilities
     1,986,632       1,997,403       1,999,796       1,976,770       1,956,493  
Non-interest-bearing demand deposits
     251,565       232,480       229,175       232,762       221,471  
Other liabilities
     30,146       32,960       17,566       10,804       10,780  
 
                              
Total liabilities
     2,268,343       2,262,843       2,246,537       2,220,336       2,188,744  
 
                                        
Total stockholders’ common equity
     392,321       374,207       368,991       335,131       333,166  
Total stockholders’ preferred equity
     22,739       36,877       5,203       —       —  
 
                              
Total stockholders’ equity
     415,060       411,084       374,194       335,131       333,166  
 
                              
 
                                        
Total liabilities and stockholders’ equity
   $ 2,683,403     $ 2,673,927     $ 2,620,731     $ 2,555,467     $ 2,521,910  
 
                              
 
                                        
Supplementary data
                                        
Total non-maturity deposits
   $ 1,132,719     $ 1,101,110     $ 1,100,043     $ 1,094,884     $ 1,128,843  
Total deposits
     1,927,874       1,864,050       1,846,956       1,829,079       1,834,148  
Fully taxable equivalent income adj.
     562       566       532       532       532  
     
(1)  
Average balances for securities available-for-sale are based on amortized cost.

 

F-7

 

BERKSHIRE HILLS BANCORP AND SUBSIDIARIES
AVERAGE YIELDS (Fully Taxable Equivalent — Annualized)
                                         
    Quarters Ended  
    June 30,     Mar. 31,     Dec. 31,     Sept. 30,     June 30,  
    2009     2009     2008     2008     2008  
Earning assets
                                        
Loans
                                        
Residential mortgages
     5.46 %     5.56 %     5.64 %     5.65 %     5.66 %
Commercial mortgages
     5.17       5.39       6.01       6.24       6.44  
Commercial business loans
     5.76       5.96       5.99       6.41       6.57  
Consumer loans
     4.46       4.64       5.46       5.86       6.02  
Total loans
     5.19       5.37       5.79       5.99       6.11  
Securities
     4.58       4.85       5.14       5.27       5.39  
Federal funds sold and short-term investments
     0.24       0.17       0.54       1.45       1.78  
Total earning assets
     4.94       5.18       5.67       5.89       6.00  
 
                                        
Funding liabilities
                                        
Deposits
                                        
NOW
     0.45       0.40       0.52       0.64       0.73  
Money Market
     1.42       1.40       1.73       1.86       2.14  
Savings
     0.34       0.44       0.68       0.61       0.71  
Time
     3.32       3.43       3.54       3.76       4.08  
Total interest-bearing deposits
     2.08       2.11       2.27       2.41       2.62  
Borrowings and debentures
     4.35       4.10       4.21       4.27       4.29  
Total interest-bearing liabilities
     2.43       2.47       2.64       2.77       2.91  
 
                                        
Net interest spread
     2.51       2.71       3.03       3.12       3.09  
Net interest margin
     2.91       3.11       3.41       3.48       3.45  
 
                                        
Cost of funds
     2.16       2.21       2.37       2.48       2.62  
Cost of deposits
     1.81       1.84       1.99       2.10       2.31  
     
(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

 

BERKSHIRE HILLS BANCORP AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
                                                 
            At or for the Quarters Ended  
            June 30,     Mar. 31,     Dec. 31,     Sept. 30,     June 30,  
(Dollars in thousands)           2009     2009     2008     2008     2008  
Net income
           $ 2,331     $ 3,883     $ 5,206     $ 5,276     $ 5,713  
Adj: Loss (gain) on sale of securities, net
             (3 )     2       —       (4 )     26  
Less: Merger termination fee
             (970 )     —       —       —       —  
Less: Other non-recurring income
             (270 )     63       —       —       —  
Plus: Merger related expenses
             215       —       —       —       —  
Plus: Other non-recurring expense
             386       —       —       —       683  
Adj: Income taxes
             269       (27 )     —       2       (701 )
 
                                      
Total core income
     (A )   $ 1,958     $ 3,921     $ 5,206     $ 5,274     $ 5,721  
Plus: Amortization of intangible assets
             833       833       838       889       1,019  
 
                                      
Total tangible core income
     (B )   $ 2,791     $ 4,754     $ 6,044     $ 6,163     $ 6,740  
 
                                      
 
                                                
Total non-interest income
           $ 8,405     $ 8,672     $ 6,377     $ 7,235     $ 8,511  
Adj: Loss (gain) on sale of securities, net
             (3 )     2       —       (4 )     26  
Less: Merger termination fee
             (970 )     —       —       —       —  
Less: Other non-recurring income
             (270 )     63       —       —       —  
 
                                      
Total core non-interest income
     (C )     7,162       8,737       6,377       7,231       8,537  
Net interest income
             16,724       17,711       19,470       19,329       18,647  
 
                                      
Total core revenue
     (D )   $ 23,886     $ 26,448     $ 25,847     $ 26,560     $ 27,184  
 
                                      
 
                                                
Total non-interest expense
           $ 19,978     $ 18,453     $ 17,256     $ 17,737     $ 18,632  
Less: Merger related expenses
             (215 )     —       —       —       —  
Less: Other non-recurring expense
             (386 )     —       —       —       (683 )
 
                                      
Core non-interest expense
     (E )     19,377       18,453       17,256       17,737       17,949  
Less: Amortization of intangible assets
             (833 )     (833 )     (838 )     (889 )     (1,019 )
 
                                      
Total core tangible non-interest expense
     (F )   $ 18,544     $ 17,620     $ 16,418     $ 16,848     $ 16,930  
 
                                      
 
                                                
(Dollars in millions, except per share data)
                                                
Total average assets
           $ 2,683     $ 2,674     $ 2,621     $ 2,555     $ 2,522  
Less: Average intangible assets
             (178 )     (179 )     (179 )     (180 )     (182 )
 
                                      
Total average tangible assets
     (G )   $ 2,505     $ 2,495     $ 2,442     $ 2,375     $ 2,340  
 
                                      
 
                                                
Total average stockholders’ equity
           $ 415     $ 411     $ 374     $ 335     $ 333  
Less: Average intangible assets
             (178 )     (179 )     (179 )     (180 )     (182 )
 
                                      
Total average tangible stockholders’ equity
             237       232       195       155       151  
Less: Average preferred equity
             (23 )     (37 )     (6 )     —       —  
 
                                      
Total average tangible common stockholders’ equity
     (H )   $ 214     $ 195     $ 189     $ 155     $ 151  
 
                                      
 
Total stockholders’ equity, period-end
           $ 408     $ 413     $ 408     $ 335     $ 330  
Less: Intangible assets, period-end
             (178 )     (179 )     (179 )     (180 )     (181 )
 
                                      
Total tangible stockholders’ equity, period-end
             230       234       229       155       149  
Less: Preferred equity, period-end
             —       (37 )     (37 )     —       —  
 
                                      
Total tangible common stockholders’ equity, period-end
     (I )   $ 230     $ 197     $ 192     $ 155     $ 149  
 
                                      
 
                                                
Total common shares outstanding, period-end (thousands)
     (J )     13,916       12,306       12,253       10,493       10,385  
Average diluted common shares outstanding (thousands)
     (K )     12,946       12,247       11,892       10,400       10,384  
 
                                                
Core earnings per common share, diluted (1)
     (A/K )   $ 0.15     $ 0.27     $ 0.44     $ 0.51     $ 0.55  
Tangible book value per common share, period-end
     (I/J )   $ 16.52     $ 16.02     $ 15.73     $ 14.58     $ 14.36  
 
                                                
Core return on tangible assets
     (B/G )     0.45 %     0.77 %     0.98 %     1.03 %     1.16  
Core return on tangible common equity (1)
     (B/H )     5.23       8.54       12.70       15.85       17.89  
Core tangible non-interest income to tangible assets
     (C/G )     1.15       1.42       1.04       1.21       1.47  
Core tangible non-interest expense to tangible assets
     (F/G )     2.97       2.86       2.68       2.82       2.91  
Efficiency ratio (2)
             75.85       65.23       62.24       62.18       61.08  
     
(1)  
March 31, 2009 ratios include a $637,000 reduction in core income and tangible core income related to cumulative preferred stock dividend and accretion. Preferred dividend charges recorded in Q2 were deemed non-core due to preferred stock repayment.
 
(2)  
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.
 
(3)  
Ratios are annualized and based on average balance sheet amounts, where applicable.
 
(4)  
Quarterly data may not sum to year-to-date data due to rounding.
         
Other Non Core Items
        
Merger Termination Fee from CNB
  970    

 

F-9

 

BERKSHIRE HILLS BANCORP AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
                         
            At or for the Six Months Ended  
            June 30,     June 30,  
(Dollars in thousands)           2009     2008  
Net income
           $ 6,214     $ 11,762  
Adj: Loss (gain) on sale of securities, net
             (1 )     26  
Less: Merger termination fee
             (970 )     —  
Less: Other non-recurring income
             (207 )     —  
Plus: Merger related expenses
             215       —  
Plus: Other non-recurring expense
             386       683  
Adj: Income taxes
             242       (701 )
 
                    
Total core income
     (A )   $ 5,879     $ 11,770  
Plus: Amortization of intangible assets
             1,666       2,103  
 
                    
Total tangible core income
     (B )   $ 7,545     $ 13,873  
 
                    
 
                        
Total non-interest income
           $ 17,077     $ 17,983  
Adj: Loss (gain) on sale of securities, net
             (1 )     26  
Less: Merger termination fee
             (970 )     —  
Less: Other non-recurring income
             (207 )     —  
 
                    
Total core non-interest income
     (C )     15,899       18,009  
Net interest income
             34,435       36,941  
 
                    
Total core revenue
     (D )   $ 50,334     $ 54,950  
 
                    
 
                        
Total non-interest expense
           $ 38,431     $ 36,706  
Less: Merger related expenses
             (215 )     —  
Less: Other non-recurring expense
             (386 )     (683 )
 
                    
Core non-interest expense
     (E )     37,830       36,023  
Less: Amortization of intangible assets
             (1,666 )     (2,103 )
 
                    
Total core tangible non-interest expense
     (F )   $ 36,164     $ 33,920  
 
                    
 
                        
(Dollars in millions, except per share data)
                        
Total average assets
           $ 2,679     $ 2,511  
Less: Average intangible assets
             (178 )     (182 )
 
                    
Total average tangible assets
     (G )   $ 2,501     $ 2,329  
 
                    
 
Total average stockholders’ equity
           $ 413     $ 331  
Less: Average intangible assets
             (178 )     (182 )
 
                    
Total average tangible stockholders’ equity
             235       149  
Less: Average preferred equity
             (30 )     —  
 
                    
Total average tangible common stockholders’ equity
     (H )   $ 205     $ 149  
 
                    
 
                        
Total stockholders’ equity, period-end
           $ 410     $ 330  
Less: Intangible assets, period-end
             (178 )     (181 )
 
                    
Total tangible stockholders’ equity, period-end
             232       149  
Less: Preferred equity, period-end
             (18 )     —  
 
                    
Total tangible common stockholders’ equity, period-end
     (I )   $ 214     $ 149  
 
                    
 
                        
Total common shares outstanding, period-end (thousands)
     (J )     13,916       10,385  
Average diluted common shares outstanding (thousands)
     (K )     12,593       10,420  
 
                        
Core earnings per common share, diluted (1)
     (A/K )   $ 0.42     $ 1.13  
Tangible book value per common share, period-end
     (I/J )   $ 15.38     $ 14.36  
 
                        
Core return on tangible assets
     (B/G )     0.61 %     1.20  
Core return on tangible common equity (1)
     (B/H )     7.11       18.52  
Core tangible non-interest income to tangible assets
     (C/G )     1.28       1.55  
Core tangible non-interest expense to tangible assets
     (F/G )     2.92       2.92  
Efficiency ratio (2)
             70.27       60.60  
     
(1)  
June 30, 2009 ratios include a $637,000 reduction in core income and tangible core income for cumulative preferred stock dividend and accretion accumulated during Q1 2009. Preferred dividend charges recorded in Q2 were deemed non-core due to preferred stock repayment.
 
(2)  
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.
 
(3)  
Ratios are annualized and based on average balance sheet amounts, where applicable.
 
(4)  
Quarterly data may not sum to year-to-date data due to rounding.
         
Other Non Core Items
        
Merger Termination Fee from CNB
  970    

 

F-10