Exhibit 99.1
BERKSHIRE HILLS REPORTS ANOTHER STRONG QUARTER WITH
FOURTH QUARTER EPS OF $0.44 AND $2.06 FOR THE YEAR
Dividend Declared; Annual Meeting Date Set
PITTSFIELD, MA – January 26, 2009 – Berkshire Hills Bancorp (BHLB) reported fourth quarter earnings totaled $5.2 million, or $0.44 per share. For the year 2008, earnings were $22.2 million, or $2.06 per share. Core earnings per share increased by 8% in 2008, reflecting the benefit of acquisitions and organic growth. GAAP earnings per share increased by 43% due to non-core charges in 2007.
Most categories of income and expense increased in the first nine months of 2008 including the benefit of the acquired Vermont operations. Results in 2007 included non-core charges primarily due to the completion of that merger and a related balance sheet restructuring. Net income in 2007 totaled $13.5 million, or $1.44 per share. Fourth quarter 2007 net income was $3.1 million, or $0.29 per share.
Fourth Quarter Financial Highlights
| | • | | $0.44 core earnings per share vs. $0.36 in 2007; GAAP EPS of $0.44 vs. $0.29 |
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| | • | | 0.48% nonperforming assets to total assets at year-end; accruing delinquent loans were 0.51% of total loans |
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| | • | | 0.27% annualized charge-offs on average loans |
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| | • | | Public issuance of nearly $40 million in common stock and the issuance of $40 million of preferred stock under the U.S. Treasury Capital Purchase Program |
Annual Financial Highlights
| | • | | 8% increase in core EPS; 43% increase in GAAP EPS |
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| | • | | 12% increase in year-end tangible book value per share to $15.47; 3% decrease in total book value per share to $30.07 |
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| | • | | 21% increase in total net revenue |
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| | • | | 3.44% net interest margin |
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| | • | | 8% increase in total commercial loans; 7% increase in total residential mortgage and home equity loans |
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| | • | | 61.4% efficiency ratio, improved from 62.9% in 2007 |
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| BHLB — Berkshire Hills Bancorp | | Page 1 | | www.berkshirebank.com |
Michael P. Daly, President and Chief Executive Officer, stated, “We had another solid quarter, and finished out a strong year with higher earnings and earnings per share. We generated positive operating leverage due to organic growth and the benefit of our Vermont operations acquired last year. Despite growing headwinds towards the end of the year, we generated higher earnings and core earnings per share in every quarter of the year.”
Mr. Daly continued, “We produced these solid results despite the impact of our October common stock offering, which reduced EPS by $0.06 in the fourth quarter and by $0.07 for the year. This successful public offering totaled nearly $40 million and bolstered our equity capital, which totaled 15% of total assets at year-end –our highest equity capital ratio since we went public. We combined the common equity with $40 million in preferred stock issued under the Treasury Capital Purchase Program to better position the Company to expand the flow of credit and support economic vitality in the communities that we serve.”
Mr. Daly concluded, “Our loan performance continued to hold up through year-end, and our charge-offs remained modest in 2008. We also had no writedowns on any of our investment securities during the year and our investment portfolio remained high quality at year-end. We recognize that the coming year will be challenging for our industry and we will again be disciplined in our budgeting process. The interest rate reductions by the Federal Reserve Bank have negatively impacted our pricing, thereby reducing our net interest margin. Should economic conditions continue to deteriorate in 2009, it is likely that we will increase our provision despite our strong loan performance through year-end 2008. We will also be incurring some earnings dilution from the common stock offering and the Treasury preferred stock. We aggressively supplemented our capital to prepare for the current environment, and we plan to be proactive in developing programs to meet the needs of our markets and in working promptly to address loan problems if they develop.”
DIVIDEND DECLARED
The Board of Directors declared a quarterly cash dividend of $0.16 per share to stockholders of record at the close of business on February 12, 2009 and payable on February 26, 2009. Common stock dividends totaled $0.63 per share in 2008, an increase of 9% over 2007.
ANNUAL MEETING SET
The 2009 annual meeting of stockholders will be held on May 7, 2009 at the Crowne Plaza Hotel, One West Street, Pittsfield, Massachusetts at 10:00 A.M. (ET). The voting record date has been set as March 10, 2009.
FINANCIAL CONDITION
Total assets were $2.7 billion at year-end 2008, increasing by 6% over year-end 2007. Total loans increased by 8% in 2008 excluding auto loans, reflecting growth in total commercial loans, along with higher residential mortgage and home equity loans. Growth in commercial real estate loans mostly reflected loan opportunities previously serviced by national providers in the Company’s New England lending areas. Home equity loan growth was due to new lines opened as a result of relationship promotions. Residential and home equity underwriting is based on prime lending standards with 80% maximum loan-to-value. Commercial business loans decreased due to paydowns. The bank made a decision early in the year to discontinue originations of indirect auto loans and this portfolio is declining as existing balances runoff. Fourth quarter loan activity generally reflected these annual trends.
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| BHLB — Berkshire Hills Bancorp | | Page 2 | | www.berkshirebank.com |
In the fourth quarter, securities available for sale increased by $71 million and short term investments increased by $10 million, primarily reflecting the utilization of stock issuance proceeds pending further investment activities in 2009. Securities purchases consisted primarily of short duration collateralized mortgage obligations issued by federal agencies. The Company’s securities portfolio consists primarily of U.S. agency mortgage backed securities, and municipal and economic development bonds. All debt securities are rated investment grade except for $40 million in unrated local municipal and economic development bonds. The total unrealized loss on securities available for sale was $3 million at year-end 2008, all of which was deemed to be temporary.
The Company’s problem loan measures at year-end 2008 remained comparatively low and were not significantly changed from the prior year-end. Year-end 2008 nonperforming assets totaled 0.48% of total assets, and accruing delinquent loans were up moderately to 0.51% of total loans. The year-end loan loss allowance was 1.14% of total loans for 2008 and 2007. The portion of the allowance assigned to specific reserves on impaired loans was $1.0 million at year-end 2008 and $1.2 million at year-end 2007.
Total deposits increased by $7 million to $1.83 billion in 2008. Deposit activity included an estimated $45 million in targeted run-off of higher cost municipal, commercial, and brokered time deposit accounts primarily in the second quarter. Estimated deposit growth excluding this run-off was 3%. Most of the Company’s retail deposit and loan promotions are linked to companion checking accounts. The Company offers 100% insurance on all deposit balances due to its participation in the Massachusetts Depositors Insurance Fund. The Bank expects to benefit from the temporary increase in FDIC deposit insurance limits and it is also participating in the optional temporary unlimited transaction account insurance offered by the FDIC.
Stockholders’ equity increased by $82 million in 2008 primarily due to the benefit of the common and preferred stock offerings. The contribution from earnings was partially offset by dividends and an unrealized mark-to-market loss on interest rate swaps. Total equity to assets increased to 15.3% at year-end 2008, while tangible equity to assets measured 9.2%. The risk based capital ratio of Berkshire Bank was approximately 12% at year-end. Total return on equity was 6.5% in 2008, while the core return on tangible equity was 16.2%. The Company views this latter measure as an important measure of its capital generation and capital strength. Tangible common book value per share was $15.47 at year-end 2008, compared to $13.82 at the prior year-end. Total common book value per share was $30.07 and $31.15 at these two dates, respectively.
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| BHLB – Berkshire Hills Bancorp | | Page 3 | | www.berkshirebank.com |
RESULTS OF OPERATIONS
Most major categories of income and expense increased in 2008 primarily due to the contribution of Vermont operations resulting from the Factory Point Bancorp acquisition in September 2007. Total annual core revenue increased by 16%, while total core income increased by 25%. Several non-core charges related principally to the Factory Point acquisition reduced revenue and income in 2007. As a result, total GAAP revenue increased by 21% and total GAAP earnings increased by 64% in 2008 compared to 2007. Fourth quarter GAAP earnings increased by 69%, including results from Vermont operations in both periods. The increase was primarily due to non-core charges and a larger loan loss provision in 2007.
Net interest income increased by 18% in 2008 and increased sequentially in all quarters during the year. Average earning assets also increased sequentially in each quarter in 2008, with the fourth quarter average exceeding the 2007 fourth quarter average by 6%. This was primarily driven by continuous loan growth, despite the impact of runoff in the indirect auto loan portfolio. The net interest margin increased sequentially in the first three quarters to a five year peak of 3.48%, and then declined in the fourth quarter to 3.41% due to market floors on deposit rates following the drop in the federal funds rate to the lowest levels since 1954. The net interest margin improvement to 3.44% in 2008 reflected disciplined loan and deposit pricing throughout the year, together with the benefit of the Factory Point acquisition and the related balance sheet restructuring in 2007.
Fee income increased by 14% in 2008, resulting from higher deposit, loan, and interest rate swap fee income. Insurance fees decreased by 1% in 2008 primarily due to softer pricing conditions in the property casualty markets. Wealth management fees increased by 29% in 2008; however they were adversely affected by stock market conditions in the fourth quarter. The stock market decline caused a 21% reduction in fourth quarter wealth management revenues. Non-interest income in 2007 included non-core balance sheet restructuring charges related to the Factory Point acquisition.
The loan loss provision increased by 7% in 2008, which was in line with the growth in total loans during the year. The 2008 loan loss provision was $4.6 million, while net loan charge-offs totaled $3.8 million in 2008, compared to $6.0 million in 2007.
The 9% increase in non-interest expense in 2008 was primarily due to the Factory Point acquisition. Fourth quarter results included the acquired Vermont operations in both 2008 and 2007, and fourth quarter core expenses were flat from year to year. Non-core charges were recorded in 2007 primarily due to the Factory Point acquisition, and there were additional non-core expense restructuring charges recorded in both years. The Bank’s efficiency ratio improved to 59% in 2008, while the consolidated ratio improved to 61%. The effective income tax rate was 28% in both 2008 and 2007, and also in the most recent quarter. The tax rate in 2008 included a second quarter non-core credit resulting from the reduction in the valuation reserve for deferred state tax assets.
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| BHLB — Berkshire Hills Bancorp | | Page 4 | | www.berkshirebank.com |
CONFERENCE CALL
The Company will conduct a conference call/webcast at 9:00 A.M. eastern time on Tuesday, January 27, 2009 to discuss the results for the quarter and the year, and guidance about expected future results.Additionally, the Company intends to post a document with supplemental information in the Investor Relations section of its web site at www.berkshirebank.com shortly before the commencement of the call.
Information about the conference call follows:
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| Dial-in: | | 800-860-2442
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| Webcast: | | www.berkshirebank.com (Investor Relations link) |
A telephone replay of the call will be available until February 4, 2009 by calling 877-344-7529 and entering replay passcode: 426862. The webcast and a podcast will be available at the Company’s website above for an extended period of time.
BACKGROUND
Berkshire Hills Bancorp is headquartered in Pittsfield, Massachusetts. It has approximately $2.7 billion in assets and is the parent of Berkshire Bank —America’s Most Exciting BankSM. The Company provides business and consumer banking, insurance, wealth management, and investment services through 48 banking and insurance offices in Western Massachusetts, Northeastern New York, and Southern Vermont. For more information, visitwww.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 2007 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.
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| BHLB — Berkshire Hills Bancorp | | Page 5 | | www.berkshirebank.com |
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.
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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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| BHLB — Berkshire Hills Bancorp | | Page 6 | | www.berkshirebank.com |
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED BALANCE SHEETS — UNAUDITED
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| | | December 31, | | | September 30, | | | December 31, | |
| (In thousands) | | 2008 | | | 2008 | | | 2007 | |
Assets | | | | | | | | | | | | |
| Total cash and cash equivalents | | $ | 26,582 | | | $ | 26,445 | | | $ | 33,259 | |
| Fed funds sold & short-term investments | | | 18,216 | | | | 8,124 | | | | 7,883 | |
| Trading securities | | | 18,144 | | | | 15,267 | | | | — | |
| Securities available for sale, at fair value | | | 276,423 | | | | 205,554 | | | | 197,964 | |
| Securities held to maturity, at amortized cost | | | 25,872 | | | | 25,923 | | | | 39,456 | |
| Federal Home Loan Bank stock | | | 21,077 | | | | 21,077 | | | | 21,077 | |
| Loans held for sale | | | 1,768 | | | | 5,401 | | | | 3,445 | |
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| Residential mortgages | | | 677,254 | | | | 672,004 | | | | 657,045 | |
| Commercial mortgages | | | 808,591 | | | | 794,780 | | | | 704,764 | |
| Commercial business loans | | | 175,799 | | | | 181,224 | | | | 203,564 | |
| Consumer loans | | | 345,508 | | | | 344,359 | | | | 378,643 | |
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| Total loans | | | 2,007,152 | | | | 1,992,367 | | | | 1,944,016 | |
| Less: Allowance for loan losses | | | (22,908 | ) | | | (22,886 | ) | | | (22,116 | ) |
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| Net loans | | | 1,984,244 | | | | 1,969,481 | | | | 1,921,900 | |
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| Premises and equipment, net | | | 37,448 | | | | 37,902 | | | | 38,806 | |
| Goodwill | | | 161,178 | | | | 161,178 | | | | 161,632 | |
| Other intangible assets | | | 17,652 | | | | 18,490 | | | | 20,820 | |
| Cash surrender value of life insurance policies | | | 35,668 | | | | 35,331 | | | | 35,316 | |
| Other assets | | | 42,457 | | | | 35,526 | | | | 31,874 | |
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| Total assets | | $ | 2,666,729 | | | $ | 2,565,699 | | | $ | 2,513,432 | |
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Liabilities and stockholders’ equity | | | | | | | | | | | | |
| Demand deposits | | $ | 233,040 | | | $ | 227,271 | | | $ | 231,994 | |
| NOW deposits | | | 190,828 | | | | 196,217 | | | | 213,150 | |
| Money market deposits | | | 448,238 | | | | 450,818 | | | | 439,341 | |
| Savings deposits | | | 211,156 | | | | 220,800 | | | | 210,186 | |
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| Total non-maturity deposits | | | 1,083,262 | | | | 1,095,106 | | | | 1,094,671 | |
| Brokered time deposits | | | 2,942 | | | | 3,008 | | | | 21,497 | |
| Other time deposits | | | 743,376 | | | | 739,090 | | | | 706,395 | |
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| Total time deposits | | | 746,318 | | | | 742,098 | | | | 727,892 | |
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| Total deposits | | | 1,829,580 | | | | 1,837,204 | | | | 1,822,563 | |
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| Borrowings | | | 359,157 | | | | 366,092 | | | | 334,474 | |
| Junior subordinated debentures | | | 15,464 | | | | 15,464 | | | | 15,464 | |
| Derivative liabilities | | | 23,868 | | | | 2,608 | | | | — | |
| Due to broker | | | 19,895 | | | | — | | | | — | |
| Other liabilities | | | 10,340 | | | | 11,649 | | | | 14,094 | |
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| Total liabilities | | | 2,258,304 | | | | 2,233,017 | | | | 2,186,595 | |
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| Total stockholders’ equity | | | 408,425 | | | | 332,682 | | | | 326,837 | |
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| Total liabilities and stockholders’ equity | | $ | 2,666,729 | | | $ | 2,565,699 | | | $ | 2,513,432 | |
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F-1
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED LOAN & DEPOSIT ANALYSIS — UNAUDITED
LOAN ANALYSIS
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| | | December 31, 2008 | | | | | | | |
| | | | | | | Quarterly | | | | | | | | | | |
| | | | | | | annualized | | | Annual | | | September 30, 2008 | | | December 31, 2007 | |
| (Dollars in millions) | | Balance | | | growth | | | growth | | | Balance | | | Balance | |
| | | | | | | | | | | | | | | | | | | | | |
| Residential mortgages: | | | | | | | | | | | | | | | | | | | | |
| 1 - 4 Family | | $ | 642 | | | | 4 | % | | | 5 | % | | $ | 636 | | | $ | 610 | |
| Construction | | | 35 | | | | (11 | ) | | | (26 | ) | | | 36 | | | | 47 | |
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| Total residential mortgages | | | 677 | | | | 3 | | | | 3 | | | | 672 | | | | 657 | |
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| Commercial mortgages: | | | | | | | | | | | | | | | | | | | | |
| Construction | | | 130 | | | | (12 | ) | | | 4 | | | | 134 | | | | 125 | |
| Single and multi-family | | | 70 | | | | — | | | | 1 | | | | 70 | | | | 69 | |
| Other commercial mortgages | | | 608 | | | | 12 | | | | 19 | | | | 591 | | | | 510 | |
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| Total commercial mortgages | | | 808 | | | | 7 | | | | 15 | | | | 795 | | | | 704 | |
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| Commercial business loans | | | 176 | | | | (11 | ) | | | (14 | ) | | | 181 | | | | 204 | |
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| Total commercial loans | | | 984 | | | | 3 | | | | 8 | | | | 976 | | | | 908 | |
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| Consumer loans: | | | | | | | | | | | | | | | | | | | | |
| Auto and other | | | 140 | | | | (43 | ) | | | (34 | ) | | | 157 | | | | 211 | |
| Home equity | | | 206 | | | | 41 | | | | 23 | | | | 187 | | | | 168 | |
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| Total consumer loans | | | 346 | | | | 2 | | | | (9 | ) | | | 344 | | | | 379 | |
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| Total loans | | $ | 2,007 | | | | 3 | % | | | 3 | % | | $ | 1,992 | | | $ | 1,944 | |
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DEPOSIT ANALYSIS
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| | | December 31, 2008 | | | | | | | |
| | | | | | | Quarterly | | | | | | | | | | |
| | | | | | | annualized | | | Annual | | | September 30, 2008 | | | December 31, 2007 | |
| (Dollars in millions) | | Balance | | | growth | | | growth | | | Balance | | | Balance | |
| |
| Demand | | $ | 233 | | | | 11 | % | | | — | % | | $ | 227 | | | $ | 232 | |
| NOW | | | 191 | | | | (10 | ) | | | (10 | ) | | | 196 | | | | 213 | |
| Money market | | | 448 | | | | (3 | ) | | | 2 | | | | 451 | | | | 439 | |
| Savings | | | 211 | | | | (18 | ) | | | — | | | | 221 | | | | 211 | |
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| Total non-maturity deposits | | | 1,083 | | | | (4 | ) | | | (1 | ) | | | 1,095 | | | | 1,095 | |
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| Time less than $100,000 | | | 392 | | | | (2 | ) | | | (4 | ) | | | 394 | | | | 409 | |
| Time $100,000 or more | | | 351 | | | | 7 | | | | 18 | | | | 345 | | | | 298 | |
| Brokered time | | | 3 | | | | — | | | | (86 | ) | | | 3 | | | | 21 | |
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| Total time deposits | | | 746 | | | | 2 | | | | 2 | | | | 742 | | | | 728 | |
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| Total deposits | | $ | 1,829 | | | | (2 | )% | | | — | % | | $ | 1,837 | | | $ | 1,823 | |
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F-2
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME — UNAUDITED
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| | | Three Months Ended | | | Years Ended | |
| | | December 31, | | | December 31, | |
| (In thousands, except per share data) | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
Interest and dividend income | | | | | | | | | | | | | | | | |
| Loans | | $ | 29,343 | | | $ | 32,666 | | | $ | 120,567 | | | $ | 120,059 | |
| Securities and other | | | 3,419 | | | | 3,183 | | | | 12,644 | | | | 11,885 | |
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| Total interest and dividend income | | | 32,762 | | | | 35,849 | | | | 133,211 | | | | 131,944 | |
Interest expense | | | | | | | | | | | | | | | | |
| Deposits | | | 9,248 | | | | 13,749 | | | | 41,733 | | | | 50,597 | |
| Borrowings and junior subordinated debentures | | | 4,044 | | | | 3,882 | | | | 15,738 | | | | 17,422 | |
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| Total interest expense | | | 13,292 | | | | 17,631 | | | | 57,471 | | | | 68,019 | |
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Net interest income | | | 19,470 | | | | 18,218 | | | | 75,740 | | | | 63,925 | |
Non-interest income | | | | | | | | | | | | | | | | |
| Insurance commissions and fees | | | 2,139 | | | | 2,290 | | | | 13,619 | | | | 13,728 | |
| Deposit service fees | | | 2,623 | | | | 2,620 | | | | 9,782 | | | | 7,747 | |
| Wealth management fees | | | 1,171 | | | | 1,476 | | | | 5,704 | | | | 4,407 | |
| Loan service and interest rate swap fees | | | 203 | | | | 91 | | | | 1,229 | | | | 772 | |
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| Total fee income | | | 6,136 | | | | 6,477 | | | | 30,334 | | | | 26,654 | |
| Other | | | 241 | | | | 551 | | | | 1,283 | | | | 1,710 | |
| Loss on sale of securities, net | | | — | | | | — | | | | (22 | ) | | | (591 | ) |
| Loss on prepayment of borrowings, net | | | — | | | | — | | | | — | | | | (1,180 | ) |
| Gain (loss) on sale of loans, net | | | — | | | | 41 | | | | — | | | | (1,950 | ) |
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| Total non-interest income | | | 6,377 | | | | 7,069 | | | | 31,595 | | | | 24,643 | |
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Total net revenue | | | 25,847 | | | | 25,287 | | | | 107,335 | | | | 88,568 | |
Provision for loan losses | | | 1,400 | | | | 3,060 | | | | 4,580 | | | | 4,300 | |
Non-interest expense | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | | 8,988 | | | | 9,386 | | | | 38,282 | | | | 34,018 | |
| Occupancy and equipment | | | 2,736 | | | | 2,656 | | | | 11,238 | | | | 9,945 | |
| Marketing, data processing, and professional services | | | 2,338 | | | | 2,275 | | | | 8,761 | | | | 8,598 | |
| Non-recurring expense | | | — | | | | 1,198 | | | | 683 | | | | 2,956 | |
| Amortization of intangible assets | | | 838 | | | | 1,050 | | | | 3,830 | | | | 3,058 | |
| Other | | | 2,356 | | | | 1,828 | | | | 8,905 | | | | 6,919 | |
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| Total non-interest expense | | | 17,256 | | | | 18,393 | | | | 71,699 | | | | 65,494 | |
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| Income before income taxes | | | 7,191 | | | | 3,834 | | | | 31,056 | | | | 18,774 | |
| Income tax expense | | | 1,985 | | | | 761 | | | | 8,812 | | | | 5,239 | |
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Net income | | $ | 5,206 | | | $ | 3,073 | | | $ | 22,244 | | | $ | 13,535 | |
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Basic earnings per common share | | $ | 0.44 | | | $ | 0.29 | | | $ | 2.08 | | | $ | 1.47 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Diluted earnings per common share | | $ | 0.44 | | | $ | 0.29 | | | $ | 2.06 | | | $ | 1.44 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Weighted average common shares outstanding | | | | | | | | | | | | | | | | |
| Basic | | | 11,804 | | | | 10,524 | | | | 10,700 | | | | 9,223 | |
| Diluted | | | 11,892 | | | | 10,664 | | | | 10,791 | | | | 9,370 | |
F-3
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS — UNAUDITED
| | | | | | | | | | | | | | | | | | | | | |
| | | Quarters Ended | |
| | | Dec. 31, | | | Sept. 30, | | | June 30, | | | Mar. 31, | | | Dec. 31, | |
| (In thousands, except per share data) | | 2008 | | | 2008 | | | 2008 | | | 2008 | | | 2007 | |
Interest and dividend income | | | | | | | | | | | | | | | | | | | | |
| Loans | | $ | 29,343 | | | $ | 30,078 | | | $ | 29,823 | | | $ | 31,323 | | | $ | 32,666 | |
| Securities and other | | | 3,419 | | | | 3,014 | | | | 3,011 | | | | 3,200 | | | | 3,183 | |
| | | | | | | | | | | | | | | | |
| Total interest and dividend income | | | 32,762 | | | | 33,092 | | | | 32,834 | | | | 34,523 | | | | 35,849 | |
Interest expense | | | | | | | | | | | | | | | | | | | | |
| Deposits | | | 9,248 | | | | 9,676 | | | | 10,521 | | | | 12,288 | | | | 13,749 | |
| Borrowings and junior subordinated debentures | | | 4,044 | | | | 4,087 | | | | 3,666 | | | | 3,941 | | | | 3,882 | |
| | | | | | | | | | | | | | | | |
| Total interest expense | | | 13,292 | | | | 13,763 | | | | 14,187 | | | | 16,229 | | | | 17,631 | |
| | | | | | | | | | | | | | | | |
Net interest income | | | 19,470 | | | | 19,329 | | | | 18,647 | | | | 18,294 | | | | 18,218 | |
Non-interest income | | | | | | | | | | | | | | | | | | | | |
| Insurance commissions and fees | | | 2,139 | | | | 2,640 | | | | 3,694 | | | | 5,146 | | | | 2,290 | |
| Deposit service fees | | | 2,623 | | | | 2,518 | | | | 2,486 | | | | 2,155 | | | | 2,620 | |
| Wealth management fees | | | 1,171 | | | | 1,338 | | | | 1,567 | | | | 1,628 | | | | 1,476 | |
| Loan service and interest rate swap fees | | | 203 | | | | 561 | | | | 228 | | | | 237 | | | | 91 | |
| | | | | | | | | | | | | | | | |
| Total fee income | | | 6,136 | | | | 7,057 | | | | 7,975 | | | | 9,166 | | | | 6,477 | |
| Other | | | 241 | | | | 174 | | | | 562 | | | | 306 | | | | 551 | |
| Gain (loss) on securities, net | | | — | | | | 4 | | | | (26 | ) | | | — | | | | — | |
| Gain on sale of loans, net | | | — | | | | — | | | | — | | | | — | | | | 41 | |
| | | | | | | | | | | | | | | | |
| Total non-interest income | | | 6,377 | | | | 7,235 | | | | 8,511 | | | | 9,472 | | | | 7,069 | |
| | | | | | | | | | | | | | | | |
Total net revenue | | | 25,847 | | | | 26,564 | | | | 27,158 | | | | 27,766 | | | | 25,287 | |
Provision for loan losses | | | 1,400 | | | | 1,250 | | | | 1,105 | | | | 825 | | | | 3,060 | |
Non-interest expense | | | | | | | | | | | | | | | | | | | | |
| Salaries and employee benefits | | | 8,988 | | | | 9,796 | | | | 9,842 | | | | 9,656 | | | | 9,386 | |
| Occupancy and equipment | | | 2,736 | | | | 2,760 | | | | 2,774 | | | | 2,968 | | | | 2,656 | |
| Marketing, data processing, and professional services | | | 2,338 | | | | 2,121 | | | | 2,181 | | | | 2,121 | | | | 2,275 | |
| Non-recurring expense | | | — | | | | — | | | | 683 | | | | — | | | | 1,198 | |
| Amortization of intangible assets | | | 838 | | | | 889 | | | | 1,019 | | | | 1,084 | | | | 1,050 | |
| Other | | | 2,356 | | | | 2,171 | | | | 2,133 | | | | 2,245 | | | | 1,828 | |
| | | | | | | | | | | | | | | | |
| Total non-interest expense | | | 17,256 | | | | 17,737 | | | | 18,632 | | | | 18,074 | | | | 18,393 | |
| | | | | | | | | | | | | | | | |
| Income before income taxes | | | 7,191 | | | | 7,577 | | | | 7,421 | | | | 8,867 | | | | 3,834 | |
| Income tax expense | | | 1,985 | | | | 2,301 | | | | 1,708 | | | | 2,818 | | | | 761 | |
| | | | | | | | | | | | | | | | |
Net income | | $ | 5,206 | | | $ | 5,276 | | | $ | 5,713 | | | $ | 6,049 | | | $ | 3,073 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Basic earnings per share | | $ | 0.44 | | | $ | 0.51 | | | $ | 0.55 | | | $ | 0.58 | | | $ | 0.29 | |
| | | | | | | | | | | | | | | | | | | | | |
Diluted earnings per share | | $ | 0.44 | | | $ | 0.51 | | | $ | 0.55 | | | $ | 0.58 | | | $ | 0.29 | |
| | | | | | | | | | | | | | | | | | | | | |
| Weighted average shares outstanding | | | | | | | | | | | | | | | | | | | | |
| Basic | | | 11,804 | | | | 10,303 | | | | 10,302 | | | | 10,386 | | | | 10,524 | |
| Diluted | | | 11,892 | | | | 10,400 | | | | 10,384 | | | | 10,457 | | | | 10,664 | |
F-4
BERKSHIRE HILLS BANCORP AND SUBSIDIARIES
ASSET QUALITY ANALYSIS
| | | | | | | | | | | | | | | | | | | | | |
| | | At or for the Quarters Ended | |
| | | Dec. 31, | | | Sept. 30, | | | June 30, | | | Mar. 31, | | | Dec. 31, | |
| (Dollars in thousands) | | 2008 | | | 2008 | | | 2008 | | | 2008 | | | 2007 | |
NON-PERFORMING ASSETS | | | | | | | | | | | | | | | | | | | | |
| Nonaccruing loans: | | | | | | | | | | | | | | | | | | | | |
| Residential mortgages | | $ | 1,646 | | | $ | 1,315 | | | $ | 763 | | | $ | 1,060 | | | $ | 726 | |
| Commercial mortgages | | | 7,738 | | | | 6,178 | | | | 5,329 | | | | 7,082 | | | | 5,177 | |
| Commercial business loans | | | 1,921 | | | | 2,210 | | | | 3,103 | | | | 3,557 | | | | 4,164 | |
| Indirect auto and installment loans | | | 693 | | | | 576 | | | | 503 | | | | 374 | | | | 346 | |
| Home equity | | | 173 | | | | 74 | | | | 74 | | | | 67 | | | | 95 | |
| | | | | | | | | | | | | | | | |
| Total nonaccruing loans | | | 12,171 | | | | 10,353 | | | | 9,772 | | | | 12,140 | | | | 10,508 | |
| Other real estate owned | | | 498 | | | | 941 | | | | 1,050 | | | | 755 | | | | 866 | |
| | | | | | | | | | | | | | | | |
| Total nonperforming assets | | $ | 12,669 | | | $ | 11,294 | | | $ | 10,822 | | | $ | 12,895 | | | $ | 11,374 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total nonperforming loans/total loans | | | 0.61 | % | | | 0.52 | % | | | 0.49 | % | | | 0.63 | % | | | 0.54 | % |
| Total nonperforming assets/total assets | | | 0.48 | % | | | 0.44 | % | | | 0.42 | % | | | 0.51 | % | | | 0.46 | % |
| | | | | | | | | | | | | | | | | | | | | |
PROVISION AND ALLOWANCE FOR LOAN LOSSES | | | | | | | | | | | | | | | | | | | | |
| Balance at beginning of period | | $ | 22,886 | | | $ | 22,581 | | | $ | 22,130 | | | $ | 22,116 | | | $ | 22,108 | |
| Charged-off loans | | | (1,474 | ) | | | (1,331 | ) | | | (754 | ) | | | (883 | ) | | | (3,117 | ) |
| Recoveries on charged-off loans | | | 96 | | | | 386 | | | | 100 | | | | 72 | | | | 65 | |
| | | | | | | | | | | | | | | | |
| Net loans charged-off | | | (1,378 | ) | | | (945 | ) | | | (654 | ) | | | (811 | ) | | | (3,052 | ) |
| Acquired allowance | | | — | | | | — | | | | — | | | | — | | | | — | |
| Provision for loan losses | | | 1,400 | | | | 1,250 | | | | 1,105 | | | | 825 | | | | 3,060 | |
| | | | | | | | | | | | | | | | |
| Balance at end of period | | $ | 22,908 | | | $ | 22,886 | | | $ | 22,581 | | | $ | 22,130 | | | $ | 22,116 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Allowance for loan losses/nonperforming loans | | | 188 | % | | | 221 | % | | | 231 | % | | | 182 | % | | | 210 | % |
| Allowance for loan losses/total loans | | | 1.14 | % | | | 1.15 | % | | | 1.14 | % | | | 1.14 | % | | | 1.14 | % |
| | | | | | | | | | | | | | | | | | | | | |
NET LOAN CHARGE-OFFS | | | | | | | | | | | | | | | | | | | | |
| Residential mortgages | | $ | — | | | $ | (119 | ) | | $ | — | | | $ | (24 | ) | | $ | — | |
| Commercial mortgages | | | (900 | ) | | | (63 | ) | | | (131 | ) | | | (175 | ) | | | — | |
| Commercial business loans | | | (10 | ) | | | (265 | ) | | | (121 | ) | | | (213 | ) | | | (2,683 | ) |
| Indirect auto and installment loans | | | (468 | ) | | | (498 | ) | | | (402 | ) | | | (339 | ) | | | (319 | ) |
| Home equity | | | — | | | | — | | | | — | | | | (60 | ) | | | (50 | ) |
| | | | | | | | | | | | | | | | |
| Total net | | $ | (1,378 | ) | | $ | (945 | ) | | $ | (654 | ) | | $ | (811 | ) | | $ | (3,052 | ) |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Net charge-offs (YTD annualized)/average loans | | | 0.19 | % | | | 0.16 | % | | | 0.15 | % | | | 0.17 | % | | | 0.34 | % |
| | | | | | | | | | | | | | | | | | | | | |
DELINQUENT LOANS / TOTAL LOANS | | | | | | | | | | | | | | | | | | | | |
| 30-89 Days delinquent | | | 0.46 | % | | | 0.45 | % | | | 0.33 | % | | | 0.41 | % | | | 0.39 | % |
| 90 + Days delinquent and still accruing | | | 0.05 | % | | | 0.03 | % | | | 0.04 | % | | | 0.03 | % | | | 0.04 | % |
| | | | | | | | | | | | | | | | |
| Total accruing delinquent loans | | | 0.51 | % | | | 0.48 | % | | | 0.37 | % | | | 0.44 | % | | | 0.43 | % |
| | | | | | | | | | | | | | | | | | | | | |
| Nonaccruing loans | | | 0.61 | % | | | 0.52 | % | | | 0.49 | % | | | 0.63 | % | | | 0.54 | % |
| | | | | | | | | | | | | | | | |
| Total delinquent loans | | | 1.12 | % | | | 1.00 | % | | | 0.86 | % | | | 1.07 | % | | | 0.97 | % |
| | | | | | | | | | | | | | | | |
F-5
BERKSHIRE HILLS BANCORP AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
| | | | | | | | | | | | | | | | | | | | | |
| | | At or for the Quarters Ended | |
| | | Dec. 31, | | | Sept. 30, | | | June 30, | | | Mar. 31, | | | Dec. 31, | |
| | | 2008 | | | 2008 | | | 2008 | | | 2008 | | | 2007 | |
| |
PERFORMANCE RATIOS | | | | | | | | | | | | | | | | | | | | |
| Core return on tangible assets | | | 0.98 | % | | | 1.03 | % | | | 1.16 | % | | | 1.24 | % | | | 0.83 | % |
| Return on total assets | | | 0.79 | | | | 0.82 | | | | 0.91 | | | | 0.97 | | | | 0.50 | |
| Core return on tangible common equity | | | 12.70 | | | | 15.85 | | | | 17.89 | | | | 19.52 | | | | 12.90 | |
| Return on total common equity | | | 5.62 | | | | 6.26 | | | | 6.89 | | | | 7.38 | | | | 3.74 | |
| Net interest margin, fully taxable equivalent | | | 3.41 | | | | 3.48 | | | | 3.45 | | | | 3.41 | | | | 3.38 | |
| Core tangible non-interest income to tangible assets | | | 1.04 | | | | 1.21 | | | | 1.47 | | | | 1.64 | | | | 1.23 | |
| Non-interest income to assets | | | 0.97 | | | | 1.13 | | | | 1.36 | | | | 1.52 | | | | 1.14 | |
| Core tangible non-interest expense to tangible assets | | | 2.68 | | | | 2.82 | | | | 2.91 | | | | 2.95 | | | | 2.80 | |
| Non-interest expense to assets | | | 2.62 | | | | 2.76 | | | | 2.97 | | | | 2.89 | | | | 2.95 | |
| Efficiency ratio | | | 62.24 | | | | 62.18 | | | | 61.08 | | | | 60.12 | | | | 62.51 | |
| | | | | | | | | | | | | | | | | | | | | |
YEAR-TO-DATE GROWTH | | | | | | | | | | | | | | | | | | | | |
| Total loans | | | 3 | % | | | 3 | % | | | 4 | % | | | (2 | )% | | | 3 | % |
| Total deposits | | | — | | | | 1 | | | | (1 | ) | | | 12 | | | | 2 | |
| Total revenues | | | 21 | | | | 29 | | | | 21 | | | | 19 | | | | 23 | |
| | | | | | | | | | | | | | | | | | | | | |
FINANCIAL DATA(In millions) | | | | | | | | | | | | | | | | | | | | |
| Total assets | | $ | 2,667 | | | $ | 2,566 | | | $ | 2,547 | | | $ | 2,546 | | | $ | 2,513 | |
| Total loans | | | 2,007 | | | | 1,992 | | | | 1,978 | | | | 1,935 | | | | 1,944 | |
| Total intangible assets | | | 179 | | | | 180 | | | | 181 | | | | 182 | | | | 182 | |
| Total deposits | | | 1,830 | | | | 1,837 | | | | 1,811 | | | | 1,880 | | | | 1,823 | |
| Total stockholders’ equity | | | 408 | | | | 333 | | | | 330 | | | | 329 | | | | 327 | |
| Total stockholders’ common equity | | | 368 | | | | 333 | | | | 330 | | | | 329 | | | | 327 | |
| Total core income | | | 5.2 | | | | 5.3 | | | | 5.7 | | | | 6.0 | | | | 3.8 | |
| Total net income | | | 5.2 | | | | 5.3 | | | | 5.7 | | | | 6.0 | | | | 3.1 | |
| | | | | | | | | | | | | | | | | | | | | |
ASSET QUALITY RATIOS | | | | | | | | | | | | | | | | | | | | |
| Net charge-offs (annualized)/average loans | | | 0.27 | % | | | 0.19 | % | | | 0.13 | % | | | 0.17 | % | | | 0.34 | % |
| Non-performing assets/total assets | | | 0.48 | | | | 0.44 | | | | 0.42 | | | | 0.51 | | | | 0.45 | |
| Loan loss allowance/total loans | | | 1.14 | | | | 1.15 | | | | 1.14 | | | | 1.14 | | | | 1.14 | |
| Loan loss allowance/nonperforming loans | | | 1.88 | x | | | 2.21 | x | | | 2.31 | x | | | 1.82 | x | | | 2.10 | x |
| | | | | | | | | | | | | | | | | | | | | |
PER SHARE DATA | | | | | | | | | | | | | | | | | | | | |
| Core earnings, diluted | | $ | 0.44 | | | $ | 0.51 | | | $ | 0.55 | | | $ | 0.58 | | | $ | 0.36 | |
| Net earnings, diluted | | | 0.44 | | | | 0.51 | | | | 0.55 | | | | 0.58 | | | | 0.29 | |
| Tangible common book value | | | 15.47 | | | | 14.58 | | | | 14.36 | | | | 13.97 | | | | 13.82 | |
| Total common book value | | | 30.07 | | | | 31.71 | | | | 31.78 | | | | 31.38 | | | | 31.15 | |
| Market price at period end | | | 30.86 | | | | 32.00 | | | | 23.65 | | | | 25.19 | | | | 26.00 | |
| Dividends | | | 0.16 | | | | 0.16 | | | | 0.16 | | | | 0.15 | | | | 0.15 | |
| | | | | | | | | | | | | | | | | | | | | |
CAPITAL RATIOS | | | | | | | | | | | | | | | | | | | | |
| Common stockholders’ equity to total assets | | | 13.82 | % | | | 12.97 | % | | | 12.96 | % | | | 12.91 | % | | | 13.00 | % |
| Tangible common stockholders’ equity to tangible assets | | | 7.62 | | | | 6.41 | | | | 6.30 | | | | 6.19 | | | | 6.22 | |
| Stockholders’ equity to total assets | | | 15.32 | % | | | 12.97 | % | | | 12.96 | % | | | 12.91 | % | | | 13.00 | % |
| Tangible stockholders’ equity to tangible assets | | | 9.23 | | | | 6.41 | | | | 6.30 | | | | 6.19 | | | | 6.22 | |
| | | |
| (1) | | Reconciliations of Non-GAAP financial measures, including all references to core and tangible amounts, appear onpage F-9. Tangible assets are total assets less total intangible assets. |
| |
| (2) | | All performance ratios are annualized and are based on average balance sheet amounts, where applicable. |
| |
| (3) | | The Dec. 31, 2007 total loan annualized year-to-date growth calculations exclude the acquired FAPB balances and $50 million in residential mortgage loans sold during September 07. |
| |
| (4) | | The Dec. 31, 2007 total deposit annualized year-to-date growth calculations both exclude the acquired FAPB balances, $22.7 million in repurchase liabilities converted to deposit accounts, and $21 million in brokered time deposit run-off. |
F-6
BERKSHIRE HILLS BANCORP AND SUBSIDIARIES
AVERAGE BALANCES
| | | | | | | | | | | | | | | | | | | | | |
| | | Quarters Ended | |
| | | Dec. 31, | | | Sept. 30, | | | June 30, | | | Mar. 31, | | | Dec. 31, | |
| (In thousands) | | 2008 | | | 2008 | | | 2008 | | | 2008 | | | 2007 | |
Assets | | | | | | | | | | | | | | | | | | | | |
| Loans | | | | | | | | | | | | | | | | | | | | |
| Residential mortgages | | $ | 679,000 | | | $ | 672,363 | | | $ | 665,407 | | | $ | 659,406 | | | $ | 661,937 | |
| Commercial mortgages | | | 808,308 | | | | 787,543 | | | | 745,727 | | | | 712,317 | | | | 694,339 | |
| Commercial business loans | | | 185,434 | | | | 192,065 | | | | 196,962 | | | | 201,433 | | | | 203,539 | |
| Consumer loans | | | 343,894 | | | | 346,068 | | | | 354,321 | | | | 369,659 | | | | 381,401 | |
| | | | | | | | | | | | | | | | |
| Total loans | | | 2,016,636 | | | | 1,998,039 | | | | 1,962,417 | | | | 1,942,815 | | | | 1,941,216 | |
| Securities | | | 304,466 | | | | 266,720 | | | | 260,046 | | | | 254,561 | | | | 254,847 | |
| Short-term investments | | | 15,345 | | | | 4,384 | | | | 12,633 | | | | 16,498 | | | | 4,526 | |
| | | | | | | | | | | | | | | | |
| Total earning assets | | | 2,336,447 | | | | 2,269,143 | | | | 2,235,096 | | | | 2,213,874 | | | | 2,200,589 | |
| Goodwill & other intangible assets | | | 179,187 | | | | 180,387 | | | | 181,705 | | | | 182,895 | | | | 183,902 | |
| Other assets | | | 105,097 | | | | 105,937 | | | | 105,109 | | | | 104,027 | | | | 105,525 | |
| | | | | | | | | | | | | | | | |
| Total assets | | $ | 2,620,731 | | | $ | 2,555,467 | | | $ | 2,521,910 | | | $ | 2,500,796 | | | $ | 2,490,016 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Liabilities and stockholders’ equity | | | | | | | | | | | | | | | | | | | | |
| Deposits | | | | | | | | | | | | | | | | | | | | |
| NOW | | $ | 196,326 | | | $ | 193,192 | | | $ | 202,747 | | | $ | 208,275 | | | $ | 207,671 | |
| Money market | | | 453,977 | | | | 447,184 | | | | 491,945 | | | | 466,673 | | | | 422,514 | |
| Savings | | | 220,565 | | | | 221,746 | | | | 212,680 | | | | 210,310 | | | | 212,760 | |
| Time | | | 746,913 | | | | 734,195 | | | | 705,305 | | | | 715,026 | | | | 749,785 | |
| | | | | | | | | | | | | | | | |
| Total interest-bearing deposits | | | 1,617,781 | | | | 1,596,317 | | | | 1,612,677 | | | | 1,600,284 | | | | 1,592,730 | |
| Borrowings and debentures | | | 382,015 | | | | 380,453 | | | | 343,816 | | | | 346,475 | | | | 327,383 | |
| | | | | | | | | | | | | | | | |
| Total interest-bearing liabilities | | | 1,999,796 | | | | 1,976,770 | | | | 1,956,493 | | | | 1,946,759 | | | | 1,920,113 | |
| Non-interest-bearing demand deposits | | | 229,175 | | | | 232,762 | | | | 221,471 | | | | 217,355 | | | | 225,507 | |
| Other liabilities | | | 17,566 | | | | 10,804 | | | | 10,780 | | | | 7,079 | | | | 11,267 | |
| | | | | | | | | | | | | | | | |
| Total liabilities | | | 2,246,537 | | | | 2,220,336 | | | | 2,188,744 | | | | 2,171,193 | | | | 2,156,887 | |
| | | | | | | | | | | | | | | | | | | | | |
| Stockholders’ equity | | | 374,194 | | | | 335,131 | | | | 333,166 | | | | 329,603 | | | | 333,129 | |
| | | | | | | | | | | | | | | | |
| Total liabilities and stockholders’ equity | | $ | 2,620,731 | | | $ | 2,555,467 | | | $ | 2,521,910 | | | $ | 2,500,796 | | | $ | 2,490,016 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Supplementary data | | | | | | | | | | | | | | | | | | | | |
| Total non-maturity deposits | | $ | 1,100,043 | | | $ | 1,094,884 | | | $ | 1,128,843 | | | $ | 1,102,613 | | | $ | 1,068,452 | |
| Total deposits | | | 1,846,956 | | | | 1,829,079 | | | | 1,834,148 | | | | 1,817,639 | | | | 1,818,237 | |
| Fully taxable equivalent income adj. | | | 532 | | | | 532 | | | | 532 | | | | 492 | | | | 541 | |
| | | |
| (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 | |
| | | Dec. 31, | | | Sept. 30, | | | June 30, | | | Mar. 31, | | | Dec. 31, | |
| | | 2008 | | | 2008 | | | 2008 | | | 2008 | | | 2007 | |
| |
| Earning assets | | | | | | | | | | | | | | | | | | | | |
| Loans | | | | | | | | | | | | | | | | | | | | |
| Residential mortgages | | | 5.64 | % | | | 5.65 | % | | | 5.66 | % | | | 5.70 | % | | | 5.54 | % |
| Commercial mortgages | | | 6.01 | | | | 6.24 | | | | 6.44 | | | | 6.86 | | | | 7.34 | |
| Commercial business loans | | | 5.99 | | | | 6.41 | | | | 6.57 | | | | 7.55 | | | | 7.68 | |
| Consumer loans | | | 5.46 | | | | 5.86 | | | | 6.02 | | | | 6.58 | | | | 6.91 | |
| Total loans | | | 5.79 | | | | 5.99 | | | | 6.11 | | | | 6.48 | | | | 6.68 | |
| Securities | | | 5.14 | | | | 5.27 | | | | 5.39 | | | | 5.69 | | | | 5.85 | |
| Federal funds sold and short-term investments | | | 0.54 | | | | 1.45 | | | | 1.78 | | | | 2.24 | | | | 5.25 | |
| Total earning assets | | | 5.67 | | | | 5.89 | | | | 6.00 | | | | 6.36 | | | | 6.56 | |
| | | | | | | | | | | | | | | | | | | | | |
| Funding liabilities | | | | | | | | | | | | | | | | | | | | |
| Deposits | | | | | | | | | | | | | | | | | | | | |
| NOW | | | 0.52 | | | | 0.64 | | | | 0.73 | | | | 1.09 | | | | 1.39 | |
| Money Market | | | 1.73 | | | | 1.86 | | | | 2.14 | | | | 2.88 | | | | 3.41 | |
| Savings | | | 0.68 | | | | 0.61 | | | | 0.71 | | | | 0.97 | | | | 1.10 | |
| Time | | | 3.54 | | | | 3.76 | | | | 4.08 | | | | 4.43 | | | | 4.65 | |
| Total interest-bearing deposits | | | 2.27 | | | | 2.41 | | | | 2.62 | | | | 3.09 | | | | 3.42 | |
| Borrowings and debentures | | | 4.21 | | | | 4.27 | | | | 4.29 | | | | 4.57 | | | | 4.70 | |
| Total interest-bearing liabilities | | | 2.64 | | | | 2.77 | | | | 2.91 | | | | 3.35 | | | | 3.64 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net interest spread | | | 3.03 | | | | 3.12 | | | | 3.09 | | | | 3.01 | | | | 2.92 | |
| Net interest margin | | | 3.41 | | | | 3.48 | | | | 3.45 | | | | 3.41 | | | | 3.38 | |
| | | | | | | | | | | | | | | | | | | | | |
| Cost of funds | | | 2.37 | | | | 2.48 | | | | 2.62 | | | | 3.02 | | | | 3.26 | |
| Cost of deposits | | | 1.99 | | | | 2.10 | | | | 2.31 | | | | 2.72 | | | | 3.00 | |
| | | |
| (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 | |
| | | | | | | Dec. 31, | | | Sept. 30, | | | June 30, | | | Mar. 31, | | | Dec. 31, | |
| (Dollars in thousands) | | | | | | 2008 | | | 2008 | | | 2008 | | | 2008 | | | 2007 | |
| Net income | | | | | | $ | 5,206 | | | $ | 5,276 | | | $ | 5,713 | | | $ | 6,049 | | | $ | 3,073 | |
| Adj: Loss (gain) on sale of securities, net | | | | | | | — | | | | (4 | ) | | | 26 | | | | — | | | | — | |
| Plus: Other non-recurring expense | | | | | | | — | | | | — | | | | 683 | | | | — | | | | 1,198 | |
| Adj: Income taxes | | | | | | | — | | | | 2 | | | | (701 | ) | | | — | | | | (468 | ) |
| | | | | | | | | | | | | | | | | | | | |
| Core income | | | (A | ) | | | 5,206 | | | | 5,274 | | | | 5,721 | | | | 6,049 | | | | 3,803 | |
| Plus: Amort. of intangible assets | | | | | | | 838 | | | | 889 | | | | 1,019 | | | | 1,084 | | | | 1,050 | |
| | | | | | | | | | | | | | | | | | | | |
| Tangible core income | | | (B | ) | | $ | 6,044 | | | $ | 6,163 | | | $ | 6,740 | | | $ | 7,133 | | | $ | 4,853 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total non-interest income | | | | | | $ | 6,377 | | | $ | 7,235 | | | $ | 8,511 | | | $ | 9,472 | | | $ | 7,069 | |
| Adj: Loss (gain) on sale of securities, net | | | | | | | — | | | | (4 | ) | | | 26 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
| Total core non-interest income | | | (C | ) | | | 6,377 | | | | 7,231 | | | | 8,537 | | | | 9,472 | | | | 7,069 | |
| Net interest income | | | | | | | 19,470 | | | | 19,329 | | | | 18,647 | | | | 18,294 | | | | 18,218 | |
| | | | | | | | | | | | | | | | | | | | |
| Total core revenue | | | (D | ) | | $ | 25,847 | | | $ | 26,560 | | | $ | 27,184 | | | $ | 27,766 | | | $ | 25,287 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total non-interest expense | | | | | | $ | 17,256 | | | $ | 17,737 | | | $ | 18,632 | | | $ | 18,074 | | | $ | 18,393 | |
| Less: Other non-recurring expense | | | | | | | — | | | | — | | | | (683 | ) | | | — | | | | (1,198 | ) |
| | | | | | | | | | | | | | | | | | | | |
| Core non-interest expense | | | (E | ) | | | 17,256 | | | | 17,737 | | | | 17,949 | | | | 18,074 | | | | 17,195 | |
| Less: Amortization of intangible assets | | | | | | | (838 | ) | | | (889 | ) | | | (1,019 | ) | | | (1,084 | ) | | | (1,050 | ) |
| | | | | | | | | | | | | | | | | | | | |
| Total core tangible non-interest expense | | | (F | ) | | $ | 16,418 | | | $ | 16,848 | | | $ | 16,930 | | | $ | 16,990 | | | $ | 16,145 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| (Dollars in millions, except per share data) | | | | | | | | | | | | | | | | | | | | | | | | |
| Total average assets | | | | | | $ | 2,621 | | | $ | 2,555 | | | $ | 2,522 | | | $ | 2,501 | | | $ | 2,490 | |
| Less: Average intangible assets | | | | | | | (179 | ) | | | (180 | ) | | | (182 | ) | | | (183 | ) | | | (184 | ) |
| | | | | | | | | | | | | | | | | | | | |
| Total average tangible assets | | | (G | ) | | $ | 2,442 | | | $ | 2,375 | | | $ | 2,340 | | | $ | 2,318 | | | $ | 2,306 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total average stockholders’ equity | | | | | | $ | 374 | | | $ | 335 | | | $ | 333 | | | $ | 330 | | | $ | 333 | |
| Less: Average intangible assets | | | | | | | (179 | ) | | | (180 | ) | | | (182 | ) | | | (183 | ) | | | (184 | ) |
| | | | | | | | | | | | | | | | | | | | |
| Total average tangible stockholders’ equity | | | | | | | 195 | | | | 155 | | | | 151 | | | | 147 | | | | 149 | |
| Less: Preferred equity | | | | | | | (6 | ) | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
| Total average tangible common stockholders’ equity | | | (H | ) | | $ | 189 | | | $ | 155 | | | $ | 151 | | | $ | 147 | | | $ | 149 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Total stockholders’ equity, period-end | | | | | | $ | 408 | | | $ | 335 | | | $ | 330 | | | $ | 329 | | | $ | 327 | |
| Less: Intangible assets, period-end | | | | | | | (179 | ) | | | (180 | ) | | | (181 | ) | | | (182 | ) | | | (182 | ) |
| | | | | | | | | | | | | | | | | | | | |
| Total tangible stockholders’ equity, period-end | | | | | | | 229 | | | | 155 | | | | 149 | | | | 147 | | | | 145 | |
| Less: Preferred equity | | | | | | | (40 | ) | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | |
| Total tangible common stockholders’ equity, period-end | | | (I | ) | | $ | 189 | | | $ | 155 | | | $ | 149 | | | $ | 147 | | | $ | 145 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total shares outstanding, period-end (thousands) | | | (J | ) | | | 12,253 | | | | 10,493 | | | | 10,385 | | | | 10,475 | | | | 10,493 | |
Average diluted shares outstanding (thousands) | | | (K | ) | | | 11,892 | | | | 10,400 | | | | 10,384 | | | | 10,457 | | | | 10,664 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Core earnings per share | | | (A/K | ) | | $ | 0.44 | | | $ | 0.51 | | | $ | 0.55 | | | $ | 0.58 | | | $ | 0.36 | |
| Tangible book value per share | | | (I/J | ) | | $ | 15.47 | | | $ | 14.58 | | | $ | 14.36 | | | $ | 13.97 | | | $ | 13.82 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Core return on tangible assets | | | (B/G | ) | | | 0.98 | % | | | 1.03 | % | | | 1.16 | % | | | 1.24 | % | | | 0.84 | % |
| Core return on tangible common equity | | | (B/H | ) | | | 12.70 | | | | 15.84 | | | | 17.89 | | | | 19.52 | | | | 13.03 | |
| Core tangible non-interest income to tang. assets | | | (C/G | ) | | | 1.04 | | | | 1.21 | | | | 1.47 | | | | 1.64 | | | | 1.23 | |
| Core tangible non-interest exp to tang. assets | | | (F/G | ) | | | 2.68 | | | | 2.82 | | | | 2.91 | | | | 2.95 | | | | 2.80 | |
| Efficiency ratio | | | | | | | 62.24 | | | | 62.18 | | | | 61.08 | | | | 60.12 | | | | 62.63 | |
| | | |
| (1) | | Efficiency ratio is computed by dividing total tangible core non-interest expense by the sum of total net interest income on a fully taxable equivalent basis and total core non-interest income. The Company uses this non-GAAP measure, which is used widely in the banking industry, to provide important information regarding its operational efficiency. |
| |
| (2) | | Ratios are annualized and based on average balance sheet amounts, where applicable. |
| |
| (3) | | Quarterly data may not sum to year-to-date data due to rounding. |
F-9
BERKSHIRE HILLS BANCORP AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
| | | | | | | | | | | | | |
| | | | | | | For years ended | |
| | | | | | | Dec. 31, | |
| (Dollars in thousands) | | | | | | 2008 | | | 2007 | |
| Net income | | | | | | $ | 22,244 | | | $ | 13,535 | |
| Adj: Loss on sale of securities, net | | | | | | | 22 | | | | 591 | |
| Adj: Loss on prepayment of borrowings, net | | | | | | | — | | | | 1,180 | |
| Adj: Loss on sale of loans, net | | | | | | | — | | | | 1,991 | |
| Plus: Other non-recurring expense | | | | | | | 683 | | | | 2,956 | |
| Adj: Income taxes | | | | | | | (699 | ) | | | (2,492 | ) |
| | | | | | | | | | | |
| Core income | | | (A | ) | | | 22,250 | | | | 17,761 | |
| Plus: Amort. of intangible assets | | | | | | | 3,830 | | | | 3,058 | |
| | | | | | | | | | | |
| Tangible core income | | | (B | ) | | $ | 26,080 | | | $ | 20,819 | |
| | | | | | | | | | | |
| | | | | | | | | | | | | |
| Total non-interest income | | | | | | | 31,595 | | | $ | 24,643 | |
| Adj: Loss on sale of securities, net | | | | | | | 22 | | | | 591 | |
| Adj: Loss on prepayment of borrowings, net | | | | | | | — | | | | 1,180 | |
| Adj: Loss on sale of loans, net | | | | | | | — | | | | 1,991 | |
| | | | | | | | | | | |
| Total core non-interest income | | | (C | ) | | | 31,617 | | | | 28,405 | |
| Net interest income | | | | | | | 75,740 | | | | 63,925 | |
| | | | | | | | | | | |
| Total core revenue | | | (D | ) | | | 107,357 | | | $ | 92,330 | |
| | | | | | | | | | | |
| | | | | | | | | | | | | |
| Total non-interest expense | | | | | | | 71,699 | | | $ | 65,494 | |
| Less: Other non-recurring expense | | | | | | | (683 | ) | | | (2,956 | ) |
| | | | | | | | | | | |
| Core non-interest expense | | | (E | ) | | | 71,016 | | | | 62,538 | |
| Less: Amortization of intangible assets | | | | | | | (3,830 | ) | | | (3,058 | ) |
| | | | | | | | | | | |
| Total core tangible non-interest expense | | | (F | ) | | | 67,186 | | | $ | 59,480 | |
| | | | | | | | | | | |
| | | | | | | | | | | | | |
| (Dollars in millions, except per share data) | | | | | | | | | | | | |
| Total average assets | | | | | | $ | 2,551 | | | $ | 2,262 | |
| Less: Average intangible assets | | | | | | | (180 | ) | | | (138 | ) |
| | | | | | | | | | | |
| Total average tangible assets | | | (G | ) | | $ | 2,371 | | | $ | 2,124 | |
| | | | | | | | | | | |
| | | | | | | | | | | | | |
| Total average stockholders’ equity | | | | | | $ | 343 | | | $ | 288 | |
| Less: Average intangible assets | | | | | | | (180 | ) | | | (138 | ) |
| | | | | | | | | | | |
| Total average tangible stockholders’ equity | | | | | | | 163 | | | | 150 | |
| Less: Preferred equity | | | | | | | (1 | ) | | | — | |
| | | | | | | | | | | |
| Total average tangible common stockholders’ equity | | | (H | ) | | $ | 162 | | | $ | 150 | |
| | | | | | | | | | | |
| | | | | | | | | | | | | |
| Total stockholders’ equity, period-end | | | | | | $ | 408 | | | $ | 327 | |
| Less: Intangible assets, period-end | | | | | | | (179 | ) | | | (182 | ) |
| | | | | | | | | | | |
| Total tangible stockholders’ equity, period-end | | | | | | | 229 | | | | 145 | |
| Less: Preferred equity | | | | | | | (40 | ) | | | — | |
| | | | | | | | | | | |
| Total tangible common stockholders’ equity, period-end | | | (I | ) | | $ | 189 | | | $ | 145 | |
| | | | | | | | | | | |
| | | | | | | | | | | | | |
Total shares outstanding, period-end (thousands) | | | (J | ) | | | 12,253 | | | | 10,493 | |
Average diluted shares outstanding (thousands) | | | (K | ) | | | 10,791 | | | | 9,370 | |
| | | | | | | | | | | | | |
| Core earnings per share | | | (A/K | ) | | $ | 2.06 | | | $ | 1.90 | |
| Tangible book value per share | | | (I/J | ) | | $ | 15.47 | | | $ | 13.82 | |
| | | | | | | | | | | | | |
| Core return on tangible assets | | | (B/G | ) | | | 1.10 | % | | | 0.98 | % |
| Core return on tangible common equity | | | (B/H | ) | | | 16.16 | | | | 13.88 | |
| Core tangible non-interest income to tang. assets | | | (C/G | ) | | | 1.33 | | | | 1.34 | |
| Core tangible non-interest exp to tang. assets | | | (F/G | ) | | | 2.83 | | | | 2.80 | |
| Efficiency ratio | | | | | | | 61.40 | | | | 62.94 | |
| | | |
| (1) | | Efficiency ratio is computed by dividing total tangible core non-interest expense by the sum of total net interest income on a fully taxable equivalent basis and total core non-interest income. The Company uses this non-GAAP measure, which is used widely in the banking industry, to provide important information regarding its operational efficiency. |
F-10
