1
FOR IMMEDIATE RELEASE
BERKSHIRE HILLS BANCORP, INC. ANNOUNCES RECORD FOURTH QUARTER AND
2003 EPS; PROVIDES EPS GUIDANCE FOR 2004
ANNUAL MEETING DATE ANNOUNCED AND DIVIDEND DECLARED
PITTSFIELD, MA - January 28, 2004 - Berkshire Hills Bancorp, Inc. (the
"Company"), (AMEX: BHL), the holding company for Berkshire Bank (the "Bank"),
today reported net income of $2.6 million, or $0.45 diluted earnings per share,
for the quarter ended December 31, 2003 as compared to $2.4 million, or $0.43,
for the quarter ended September 30, 2003 and a net loss of $4.2 million, or
$0.78, for the quarter ended December 31, 2002. Net income totaled $9.0 million
for 2003, as compared to $2.1 million for 2002. Earnings per diluted share for
2003 were $1.57 compared to $0.36 for 2002.
Exclusive of net security gains and net non-recurring charges and using a core
effective tax rate of 34.3%, earnings for the quarter and year ended December
31, 2003 would have been $2.3 million, or $0.40 per diluted share and $8.6
million, or $1.51 per diluted share, respectively. Following the fourth quarter
and 2003 highlights, contained elsewhere herein, is a table containing a
reconciliation of GAAP net income to core net income and the resulting core
earnings per diluted share for the quarter and year ended December 31, 2003.
Commenting on the Company's performance, Michael P. Daly, President and Chief
Executive Officer stated, "I am pleased to report record earnings per share for
the Company for the fourth quarter and the full year. I am proud of the efforts
of all of our employees who executed the aggressive agenda we outlined early in
2003. These efforts resulted in customer service initiatives that produced
double digit growth in both core deposits and loans. In addition, we were
successful in significantly reducing expenses in 2003. I am especially pleased
with our sound credit quality. The fourth quarter sale of almost all of the
remaining sub-prime loans evidences our commitment to this culture.
The following chart illustrates how we have performed against goals we announced
during the second quarter of 2003. We expect to achieve these goals by the end
of 2005."
1Q2003 4Q2003 Goals
--------- -------- --------------------
ROA 0.70 0.86 Greater than 1.00
ROE 6.06 8.49 10.00
Efficiency Ratio- 67.15% 64.44% Less than 60.00%
exclusive of EastPoint
Mr. Daly stated further, "Economic conditions in the markets we serve continue
to improve, and we are anticipating interest rates to remain stable throughout
most of 2004. Using these assumptions, we expect to achieve 17% to 20% earnings
growth in 2004, and therefore we are estimating, at this time, earnings between
$1.77 and $1.81 per share on a diluted basis, before security gains. We will
also look for ways to expand our franchise in 2004, including non-dilutive
acquisitions."
Dividend Declared
The Board of Directors declared a quarterly cash dividend of $0.12 per share,
payable on February 23, 2004 to stockholders of record at the close of business
on February 9, 2004.
2
Annual Meeting
The Company also announced that its 2004 Annual Meeting of Stockholders will be
held on May 6, 2004 at the Crowne Plaza Hotel, One West Street, Pittsfield, MA
at 10:00 A.M. (ET) The voting record date has been set as March 18, 2004. The
Company intends to distribute proxy solicitation materials on or about April 1,
2004.
Fourth Quarter Highlights
o Commercial loans increased $20.1 million, or 22.8% on an annualized basis,
from September 30, 2003.
o Core deposits increased $8.5 million, or 6.8% on an annualized basis, from
September 30, 2003.
o The Bank committed to securitize $55.0 million of one-to four-family fixed
rate residential mortgages, in an effort to increase balance sheet
liquidity and strategic flexibility.
o The Bank sold $9.9 million of sub-prime automobile loans, leaving a balance
of $1.4 million.
2003 Highlights
o Core deposits increased $56.7 million, or 12.5%, from December 31, 2002.
o Organic loan growth, which excludes purchases, securitizations and sales of
loans, was $88.1 million, or an increase of 12.2%, from December 31, 2002.
o Operating expenses, exclusive of $437,000 of non-recurring retirement
benefit charges in 2003 and severance costs of $6.9 million in 2002,
decreased $3.1 million, or 8.0%, as compared to 2002.
o Improved credit quality, as loan delinquencies, non-performing assets and
sub-prime loans were down significantly from year-end 2002.
Reconciliation of GAAP Net Income to Core Net Income and EPS
------------------------------------------------------------
4Q2003 FY 2003
---------------- ------------------
(In thousands, except per share data)
Income before income taxes-GAAP $3,690 $14,030
Plus:
Forfeiture of interest income on sale of sub-prime automobile loans 245 245
Loss on the sale of sub-prime automobile loans 2,233 2,233
Loss on impairment of other assets-repossessed vehicle inventory 206 206
Retirement benefit charge - 800
REIT interest charge - 29
Less:
Reversal of provision for loan losses-sub-prime loans 1,000 1,000
Gain on sale of securities, net 1,564 3,077
Reversal of retirement benefit charge 363 363
Income before taxes-core 3,447 13,103
Less: Provision for taxes @ 34.3% (1) 1,182 4,494
NET INCOME-CORE $2,265 $ 8,609
Earnings per diluted share-core $ 0.40 $ 1.51
Average diluted shares outstanding 5,717 5,703
(1) Excludes the charge of $243,000 for the disallowance of the dividend
received deduction on the Bank's REIT
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Financial Condition
After purchases, securitizations and sales, loans increased $69.2 million from
December 31, 2002. This growth was primarily due to a $50.4 million, or 15.6%,
increase in total commercial loans, a $23.9 million, or 9.9%, increase in
residential mortgage loans and a $5.1 million, or 12.5%, increase in home equity
loans, partially offset by the sale of $9.9 million of sub-prime automobile
loans in December 2003. Loans declined $8.1 million from September 30, 2003,
primarily due to the sale of sub-prime automobile loans, the securitization of
$16.3 million of one-to four-family fixed rate residential mortgages and the
sale of $6.0 million of one-to four-family fixed rate residential mortgages,
partially offset by a $20.1 million increase in total commercial loans and
organic growth of $3.0 million in residential mortgages. Residential mortgage
loans were sold or securitized as part of a strategy to enhance the Bank's
ability to deal with a volatile and potentially rising interest rate
environment. An additional $38.7 million of one-to four-family fixed rate
residential mortgages were committed to be securitized in January 2004.
Securities available for sale increased $134.3 million from December 31, 2002,
with $64.0 million of this increase occurring since September 30, 2003. The
fourth quarter increase includes the $16.3 million of securitized loans.
Security purchases were made to take advantage of a steep yield curve and were
primarily in mortgage-backed securities with durations averaging 3.5 years.
Earning assets were funded by increases in deposits and borrowings. Core
deposits, represented by demand, NOW, savings and money market accounts, were
$508.9 million at December 31, 2003, an increase of $56.7 million, or 12.5%,
from December 31, 2002, and an increase of $8.5 million, or 1.7%, from September
30, 2003. Certificates of deposit decreased $8.8 million, or 2.7%, from December
31, 2002 and $6.1 million, or 1.9%, from September 30, 2003 due primarily to the
relative cost advantage of borrowings. Borrowings from the Federal Home Loan
Bank increased $60.1 million from September 30, 2003 and $118.5 million from
December 31, 2002.
The Company's tangible book value per share at December 31, 2003, September 30,
2003, and December 31, 2002 was $19.13, $18.71 and $18.00, respectively.
Asset Quality
Non-performing loans were $3.2 million at December 31, 2003, a decrease of
$452,000 from September 30, 2003, and a decrease of $542,000 from December 31,
2002. The Bank held no foreclosed real estate at December 31, 2003 and September
30, 2003 compared to $1.5 million at December 31, 2002.
Sub-prime automobile loans totaled $1.4 million at December 31, 2003, a decrease
of $11.6 million from September 30, 2003 and a decrease of $18.2 million from
December 31, 2002, as the Bank sold $9.9 million of sub-prime automobile loans
in December 2003, accelerating its strategy of exiting the sub-prime automobile
loan business.
The ratio of loans delinquent 30 days or more to total loans was 0.67% at
December 31, 2003, as compared to 0.98% at September 30, 2003, and 1.40% at
December 31, 2002. The improvement in the delinquency ratio from September 30,
2003 was primarily in total commercial loans, which declined from 1.22% to
0.69%, and consumer loans, which declined from 2.20% to 1.59%.
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The allowance for loan losses totaled $9.0 million, representing 1.13% of total
loans at December 31, 2003, compared to $10.1 million, or 1.26%, of total loans
at September 30, 2003, and $10.3 million, or 1.43%, of total loans at December
31, 2002. The decline in the allowance was consistent with improvement in the
Company's credit risk profile and asset quality, particularly in consideration
of the significant reduction in sub-prime automobile loans.
Results of Operations
Net interest income was $9.7 million for the fourth quarter of 2003, increasing
$435,000 and $742,000 compared to the quarters ended September 30, 2003 and
December 31, 2002, respectively. The Company's net interest margin was 3.42% for
the fourth quarter of 2003 compared to 3.51% for the third quarter of 2003 and
3.59% for the fourth quarter of 2002. Exclusive of the forfeiture of $245,000
and $758,000 of interest income resulting from the sale of sub-prime automobile
loans in the fourth quarters of 2003 and 2002, respectively, the Company's net
interest margin was 3.50% and 3.89%, respectively. This decline of 39 basis
points was primarily attributed to reinvestment of cash flows from the maturity
and prepayment of loans and securities at lower yields, as well as the increase
in securities, which typically have a lower yield than loans.
The sale of $9.9 million of sub-prime automobile loans in the fourth quarter of
2003 resulted in the reversal of approximately $1.0 million of previously
provided loan loss provision. This reversal resulted in a net credit for loan
losses of $225,000 for the fourth quarter of 2003. The $225,000 credit is
$800,000 less than the provision of $575,000 for the quarter ended September 30,
2003 and $2.5 million less than the $2.3 million provision for the fourth
quarter in 2002. Net loan charge-offs totaled $903,000 for the quarter ended
December 31, 2003, compared to $760,000 for the quarter ended September 30, 2003
and $2.7 million for the quarter ended December 31, 2002. Net charge-offs
consisted primarily of automobile loans.
Non-interest income was $2.5 million for the quarter ended December 31, 2003, a
$1.1 million, or 31.4%, decrease compared to non-interest income for the quarter
ended September 30, 2003 and a $1.8 million, or 42.4%, decrease compared to
non-interest income of $4.3 million for the quarter ended December 31, 2002.
However, excluding certain non-recurring items and license maintenance and sales
fees attributed to EastPoint Technologies, LLC, the Company's majority-owned
data processing subsidiary ("EastPoint"), occurring in each of the quarters
ended December 31, 2003, September 30, 2003 and December 31, 2002 (all of which
are itemized in the table below), non-interest income was $1.6 million for the
quarter ended December 31, 2003, $1.6 million for the quarter ended September
30, 2003 and $1.1 million for the quarter ended December 31, 2002. This increase
in non-interest income compared to the fourth quarter of 2002 was primarily the
result of increases in trust department fees and income earned on increases in
cash surrender value of life insurance policies.
License maintenance and processing fees and license sales and other fees, which
represent revenue from EastPoint, totaled $1.8 million in the quarter ended
December 31, 2003, increasing $73,000 compared to the previous quarter and
$55,000 as compared to the same quarter in 2002. Associated expenses for
EastPoint, which are recorded in various expense categories, totaled $1.9
million, net of minority interests, for the quarter ended December 31, 2003, an
increase of $92,000 compared to the previous quarter and a decrease of $457,000
as compared to the same quarter in 2002.
Non-interest expense was $8.8 million for the quarter ended December 31, 2003, a
$178,000, or 2.1%, increase compared to non-interest expense for the quarter
ended September 30, 2003 and a $9.0 million, or 50.6%, decrease compared to
non-interest expense of $17.7 million for the quarter ended December 31, 2002.
However, excluding certain non-recurring items and expenses attributable to
EastPoint occurring in each of the quarters ended December 31, 2003 and
September 30, 2003 (all of which are itemized in the table below), operating
expenses totaled $7.2 million for the fourth quarter of 2003, an increase of
5
$449,000, or 6.6%, compared to the third quarter of 2003. This increase was
primarily attributed to additional marketing and consulting services. Exclusive
of the non-recurring items and EastPoint expenses occurring in each of the
quarters ended December 31, 2003 and December 31, 2002 (all of which are
itemized in the table below), non-interest expenses for the fourth quarter of
2003 declined $1.3 million, or 15.2%, compared to the fourth quarter of 2002.
The majority of this decline resulted from a $1.1 million decrease in foreclosed
real estate and other loan expenses, most of which was associated with the
Bank's automobile repossession and sales activity that was attributed to the
sale of $69.7 million in sub-prime automobile loans in December 2002.
The following tables contain a reconciliation of GAAP non-interest income and
non-interest expense to what the Company believes to be core or operating
non-interest income and expense and also shows core non-interest income and
expense minus EastPoint:
4Q2003 3Q2003 4Q2002
--------- ---------- ---------
(In thousands)
Non-interest income-GAAP $2,494 $3,633 $ 4,328
Plus:
Loss on the sale of sub-prime automobile loans 2,233 - 10,702
Loss on impairment of other assets-repossessed 206 - 1,262
vehicle inventory
Penalty on the prepayment of FHLB borrowings - - 1,067
Loss on impairment of securities - - 326
Less:
Gain on sale of securities, net 1,564 356 14,833
NON-INTEREST INCOME-CORE $3,369 $3,277 $ 2,852
Less:
EastPoint license maintenance and sales fees 1,794 1,721 1,739
NON-INTEREST INCOME-CORE LESS EASTPOINT $1,575 $1,556 $ 1,113
4Q2003 3Q2003 4Q2002
--------- ---------- ---------
(In thousands)
Non-interest expense-GAAP $8,773 $8,595 $17,745
Plus:
Reversal of retirement benefit charge 363 - -
Less:
Severance costs - - 6,860
NON-INTEREST EXPENSE-CORE $9,136 $8,595 $10,885
Less:
EastPoint expense net of minority interest 1,906 1,814 2,363
NON-INTEREST EXPENSE-CORE LESS EASTPOINT $7,230 $6,781 $ 8,522
The Company's effective tax rate was 29.8% for the quarter ended December 31,
2003, decreasing the effective tax rate for the year to 36.1%. The lower
effective tax rate in the current quarter was due in part to an increase in
securities purchased in the Bank's subsidiary securities corporations, which are
taxed at a lower rate. The Company expects that its effective tax rate will be
approximately 34% in 2004.
Michael P. Daly, President and Chief Executive Officer and Wayne F. Patenaude,
Senior Vice President, Treasurer and Chief Financial Officer, will host a
conference call at 10:00 A.M. (ET) on Thursday,
6
January 29, 2004. This conference call will include forward-looking information
and may include other material information. Persons wishing to access the
conference call may do so by dialing 1-800-500-0177, and using access code
685172. Materials related to the topics to be discussed in the conference call
will be available on the Bank's website, www.berkshirebank.com, beginning at
---------------------
approximately 8:30 A.M. (ET) on January 29, 2004. Replays of the conference call
will be available beginning January 29, 2004 at 5:00 P.M. (ET) through February
6, 2004 at 11:00 P.M. (ET) by dialing 1-888-203-1112 and, using access code
685172. If you have difficulty accessing the material, please contact Rose
Borotto at 413-236-3144.
Berkshire Hills Bancorp, Inc. is the holding company for Berkshire Bank.
Established in 1846, Berkshire Bank is one of Massachusetts' oldest and largest
independent banks and is the largest banking institution based in Western
Massachusetts. The Bank is headquartered in Pittsfield, Massachusetts with 11
branch offices serving communities throughout Berkshire County. The Bank is
committed to continuing to operate as an independent bank, delivering
exceptional customer service and a broad array of competitively priced retail
and commercial products to its customers.
Statements contained in this news release contain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements are based on the beliefs and expectations of management as well
as the assumptions made using information currently available to management.
Since these statements reflect the views of management concerning future events,
these statements involve risks, uncertainties and assumptions. These risks and
uncertainties include among others: changes in market interest rates and general
and regional economic conditions; changes in government regulations; changes in
accounting principles; and the quality or composition of the loan and investment
portfolios and other factors that may be described in the Company's quarterly
reports on Form 10-Q for the quarters ended March 31, June 30 and September 30
and in its annual report on Form 10-K, each filed with the Securities and
Exchange Commission, which are available at the Securities and Exchange
Commission's internet website (www.sec.gov) and to which reference is hereby
-----------
made. Therefore, actual future results may differ significantly from results
discussed in these forward-looking statements.
News Contact: Wayne F. Patenaude
Senior Vice President, Treasurer
and Chief Financial Officer
413-236-3195
7
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
Unaudited
At
----------------------------------------------------
December 31, September 30, December 31,
2003 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands)
ASSETS:
Cash and due from banks $ 15,583 $ 17,803 $ 17,258
Short term investments 1,859 9,262 43,397
------------- ------------- -------------
Total cash and cash equivalents 17,442 27,065 60,655
Securities available for sale, at fair value 307,425 243,451 173,169
Securities held to maturity, at amortized cost 36,903 41,380 44,267
Federal Home Loan Bank stock, at cost 12,923 11,416 7,440
Savings Bank Life Insurance stock, at cost 2,043 2,043 2,043
Loans 792,227 800,280 723,022
Allowance for loan losses (8,969) (10,097) (10,308)
------------- ------------- -------------
Net loans 783,258 790,183 712,714
Premises and equipment, net 12,626 12,816 13,267
Foreclosed real estate, net - - 1,500
Accrued interest receivable 5,080 5,096 5,125
Goodwill and other intangibles (1) 10,233 10,284 10,436
Net deferred tax assets 1,894 2,843 2,185
Bank owned life insurance 7,721 7,626 -
Due from Broker 7,089 - -
Other assets 14,080 13,703 13,315
------------- ------------- -------------
TOTAL ASSETS $ 1,218,717 $ 1,167,906 $ 1,046,116
============= ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits $ 830,244 $ 827,782 $ 782,360
Federal Home Loan Bank advances 251,465 191,318 133,002
Securities sold under agreements to repurchase - - 700
Loans sold with recourse 473 598 1,201
Due to broker 5,646 20,019 -
Accrued expenses and other liabilities (1) 5,462 5,632 5,846
------------- ------------- -------------
Total liabilities 1,093,290 1,045,349 923,109
------------- ------------- -------------
Minority interests 2,252 2,300 2,438
------------- ------------- -------------
Stockholders' Equity:
Preferred stock ($.01 par value; 1,000,000 shares - - -
authorized; none issued or outstanding)
Common stock ($.01 par value; 26,000,000 shares
authorized; shares issued: 7,673,761 at December 31, 2003,
September 30, 2003 and December 31, 2002;
shares outstanding: 5,903,082 at December 31, 2003, 5,878,920
at September 30, 2003 and 6,117,134 at December 31, 2002) 77 77 77
Additional paid-in capital 75,764 75,605 74,632
Unearned compensation (8,507) (8,892) (9,535)
Retained earnings (1) 86,276 84,362 80,011
Accumulated other comprehensive income 5,559 5,427 5,542
Treasury stock at cost (1,770,679 shares at December 31, 2003,
1,794,841 at September 30, 2003 and 1,556,627 shares
at December 31, 2002) (35,994) (36,322) (30,158)
------------- ------------- -------------
Total stockholders' equity 123,175 120,257 120,569
------------- ------------- -------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 1,218,717 $ 1,167,906 $ 1,046,116
============= ============= =============
(1) For the period ended December 2002, the information reflects the adoption of SFAS 147.
The impact resulted in increases to goodwill of $497,000, deferred taxes of $169,000, and $328,000 to retained earnings.
8
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Unaudited
Three Months Ended Twelve Months Ended
------------------------------- --------------------------------
December 31, December 31, December 31, December 31,
2003 2002 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
INTEREST AND DIVIDEND INCOME:
Bond interest $ 2,761 $ 1,467 $ 7,560 $ 5,407
Stock dividends 209 324 956 1,355
Short-term investment interest 6 130 109 456
Loan interest 11,434 12,628 47,683 56,910
-------------- --------------- --------------- -----------------
TOTAL INTEREST AND DIVIDEND INCOME 14,410 14,549 56,308 64,128
-------------- --------------- --------------- -----------------
INTEREST EXPENSE:
Interest on deposits 3,148 4,221 13,862 17,777
Interest on FHLB advances and other borrowings 1,518 1,326 4,880 5,651
-------------- --------------- --------------- -----------------
TOTAL INTEREST EXPENSE 4,666 5,547 18,742 23,428
-------------- --------------- --------------- -----------------
NET INTEREST INCOME 9,744 9,002 37,566 40,700
PROVISION (CREDIT) FOR LOAN LOSSES (225) 2,305 1,460 6,180
-------------- --------------- --------------- -----------------
NET INTEREST INCOME AFTER PROVISION (CREDIT) FOR LOAN LOSSES 9,969 6,697 36,106 34,520
-------------- --------------- --------------- -----------------
NON-INTEREST INCOME:
Customer service fees 557 567 2,300 2,140
Trust Department fees 527 431 2,090 1,796
Loan fees 49 46 386 533
Gain on sale of securities, net 1,564 14,833 3,077 15,143
Loss on impairment of securities - (326) - (673)
Loss on sales of loans, net (2,094) (10,702) (1,854) (10,702)
Loss on impairment of other assets (206) (1,262) (206) (1,262)
Penalty on prepayment of FHLB borrowings - (1,067) - (1,067)
License maintenance and processing fees 1,106 1,111 4,443 4,379
License sales and other fees 688 628 2,819 2,612
Other income 303 69 655 519
-------------- --------------- --------------- -----------------
TOTAL NON-INTEREST INCOME 2,494 4,328 13,710 13,418
-------------- --------------- --------------- -----------------
NON-INTEREST EXPENSE:
Salaries and benefits 4,839 12,227 21,219 28,488
Occupancy and equipment 1,251 1,356 5,045 5,288
Marketing and advertising 299 259 678 648
Data processing 246 264 989 758
Professional services 545 442 1,379 1,384
Office supplies 170 238 695 769
Foreclosed real estate and other loans, net 307 1,429 1,047 3,250
Amortization of other intangibles (1) 51 51 203 203
Minority interests (47) (385) (185) (685)
Other expenses 1,112 1,864 4,716 5,207
-------------- --------------- --------------- -----------------
TOTAL NON-INTEREST EXPENSE 8,773 17,745 35,786 45,310
-------------- --------------- --------------- -----------------
INCOME (LOSS) BEFORE INCOME TAXES 3,690 (6,720) 14,030 2,628
Provision for income taxes (1) 1,099 (2,512) 5,065 531
-------------- --------------- --------------- -----------------
NET INCOME (LOSS) $ 2,591 $ (4,208) $ 8,965 $ 2,097
============== =============== =============== =================
Earnings (Loss) per share:
Basic $ 0.50 $ (0.78) $ 1.70 $ 0.39
Diluted $ 0.45 $ (0.78) $ 1.57 $ 0.36
Weighted average shares outstanding:
Basic 5,222 5,370 5,266 5,435
Diluted 5,717 5,370 5,703 5,881
(1) For the quarter and twelve months ended December 31, 2002, the information
reflects the adoption of SFAS 147. The impact for the quarter, and every
quarter in 2002, resulted in a decrease of $124,000 in amortization expense,
and an increase of $42,000 in the provision for income taxes.
9
BERKSHIRE HILLS BANCORP, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
Unaudited
Quarters Ended
-----------------------------------------------------------------------
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
2003 2003 2003 2003 2002
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
INTEREST AND DIVIDEND INCOME:
Residential mortgage $ 3,793 $ 4,099 $ 4,564 $ 4,030 $ 3,896
Commercial real estate 2,969 2,760 2,627 2,607 2,521
Commercial 2,312 2,401 2,474 2,544 2,559
Indirect auto loans 1,665 1,945 1,836 1,920 2,686
Other consumer 695 703 859 880 966
-------- ------- -------- ------- --------
Total interest on loans 11,434 11,908 12,360 11,981 12,628
Securities 2,905 1,886 1,706 1,770 1,721
Federal Home Loan Bank 65 59 59 66 70
Short-term investments 6 5 14 84 130
-------- ------- -------- ------- --------
TOTAL INTEREST AND DIVIDEND INCOME 14,410 13,858 14,139 13,901 14,549
-------- ------- -------- ------- --------
INTEREST EXPENSE:
Interest on deposits 3,148 3,343 3,613 3,758 4,221
Interest on FHLB advances and other borrowings 1,518 1,206 1,093 1,063 1,326
-------- ------- -------- ------- --------
TOTAL INTEREST EXPENSE 4,666 4,549 4,706 4,821 5,547
-------- ------- -------- ------- --------
NET INTEREST INCOME 9,744 9,309 9,433 9,080 9,002
PROVISION (CREDIT) FOR LOAN LOSSES (225) 575 785 325 2,305
-------- ------- -------- ------- --------
NET INTEREST INCOME AFTER PROVISION (CREDIT) FOR LOAN LOSSES 9,969 8,734 8,648 8,755 6,697
-------- ------- -------- ------- --------
NON-INTEREST INCOME:
Customer service fees 557 568 619 556 567
Trust Department fees 527 573 554 436 431
Loan fees 49 142 147 48 46
Gain on sale of securities, net 1,564 356 317 840 14,507
License maintenance and sales fees 1,794 1,721 2,126 1,621 1,739
Net loan sales (losses)gains, net (2,094) 102 138 - (10,702)
Loss on impairment of other assets (206) - - - (1,262)
Penalty on prepayment of FHLB borrowings - - - - (1,067)
Other non-interest income 303 171 121 60 69
-------- ------- -------- ------- --------
TOTAL NON-INTEREST INCOME 2,494 3,633 4,022 3,561 4,328
-------- ------- -------- ------- --------
NON-INTEREST EXPENSE:
Salaries and benefits 4,839 5,132 5,962 5,286 12,227
Occupancy and equipment 1,251 1,191 1,222 1,381 1,356
Professional and outside service fees 545 292 294 248 442
Marketing and advertising 299 137 139 103 259
Data processing 246 283 239 221 264
Foreclosed real estate and other loans, net 307 333 286 121 1,429
Amortization of other intangibles 51 51 51 51 51
Interest from disallowance of REIT - - (15) 44 -
Other non-interest expense 1,235 1,176 1,589 1,196 1,717
-------- ------- -------- ------- --------
TOTAL NON-INTEREST EXPENSE 8,773 8,595 9,767 8,651 17,745
-------- ------- -------- ------- --------
INCOME (LOSS) BEFORE INCOME TAXES 3,690 3,772 2,903 3,665 (6,720)
Income tax effect resulting from REIT disallowance - - (244) 487 -
Provision (credit) for income taxes 1,099 1,358 1,009 1,356 (2,512)
-------- ------- -------- ------- --------
NET INCOME (LOSS) $ 2,591 $ 2,414 $ 2,138 $ 1,822 $ (4,208)
======== ======= ======== ======= =========
Basic earnings (Loss) per share $ 0.50 $ 0.46 $ 0.40 $ 0.34 $ (0.78)
Diluted earnings (Loss) per share $ 0.45 $ 0.43 $ 0.38 $ 0.32 $ (0.78)
Average shares:
Basic 5,222 5,196 5,291 5,357 5,370
Diluted 5,717 5,655 5,687 5,731 5,370
10
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
- -----------------------------------------------------------------------------------------------------------------------------------
Unaudited
At or For the Period Ended
- -----------------------------------------------------------------------------------------------------------------------------------
Dec. 31, Sept. 30 June 30, Mar. 31, Dec. 31,
NON-PERFORMING ASSETS 2003 2003 2003 2003 2002
- -----------------------------------------------------------------------------------------------------------------------------------
(In thousands)
Non-accrual loans:
Residential mortgage $ 348 $ 221 $ 213 $ 220 $ 230
Commercial real estate 496 154 165 167 -
Commercial 1,887 2,578 2,490 2,641 2,850
Indirect automobile loans 451 696 710 706 593
Other consumer 17 2 10 148 68
--------- --------- -------- -------- --------
Total non-accrual loans $ 3,199 $ 3,651 $ 3,588 $ 3,882 $ 3,741
Real estate owned ("REO"), net of allowance for losses - - - - 1,500
Total non-performing assets $ 3,199 $ 3,651 $ 3,588 $ 3,882 $ 5,241
Non-performing loans as a percentage of total loans 0.40% 0.46% 0.44% 0.49% 0.52%
Non-performing assets as a percentage of total loans
and REO 0.40% 0.46% 0.44% 0.49% 0.72%
Non-performing assets to total assets 0.26% 0.31% 0.32% 0.37% 0.50%
Allowance for loan losses as a percentage of
non-performing loans 280.37% 276.55% 286.57% 266.59% 275.54%
Allowance for loan losses as a percentage of total loans 1.13% 1.26% 1.25% 1.31% 1.43%
Net charge-offs as a percentage of total loans 0.11% 0.09% 0.10% 0.04% 0.37%
- -----------------------------------------------------------------------------------------------------------------------------------
PROVISION (CREDIT) AND ALLOWANCE FOR LOAN LOSSES
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at beginning of period $ 10,097 $ 10,282 $ 10,349 $ 10,308 $ 10,676
Charge-offs (1,074) (1,015) (1,164) (1,111) (3,174)
Recoveries 171 255 312 827 501
--------- --------- --------- --------- ---------
Net loan charge-offs (903) (760) (852) (284) (2,673)
Provision (credit) for loan losses (225) 575 785 325 2,305
--------- --------- --------- --------- ---------
Balance at end of period $ 8,969 $ 10,097 $ 10,282 $ 10,349 $ 10,308
========= ========= ========= ========= =========
- -----------------------------------------------------------------------------------------------------------------------------------
NET LOAN (CHARGE-OFFS) RECOVERIES
- -----------------------------------------------------------------------------------------------------------------------------------
Residential mortgage $ - $ - $ - $ - $ -
Commercial real estate - - - - -
Commercial loans (110) 21 (26) 399 (196)
Consumer loans (1) (793) (781) (826) (683) (2,477)
--------- --------- --------- --------- ---------
Total $ (903) $ (760) $ (852) $ (284) $ (2,673)
========= ========= ========= ========= =========
- -----------------------------------------------------------------------------------------------------------------------------------
SUB-PRIME LOANS
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at end of period $ 1,393 $ 13,006 $ 15,128 $ 17,238 $ 19,573
Allowance for sub-prime loans/Total sub-prime loans 44.94% 15.75% 15.79% 16.01% 15.83%
- -----------------------------------------------------------------------------------------------------------------------------------
AVERAGE FICO SCORES CONSUMER LOANS (1) 691 674 670 666 665
- -----------------------------------------------------------------------------------------------------------------------------------
(1) Consists primarily of automobile loans
11
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL RATIOS
- --------------------------------------------------------------------------------------------------------------------------------
Unaudited
At or for the three months ended
Dec 31, Sept 30, June 30, March 31, Dec 31,
2003 2003 2003 2003 2002
---- ---- ---- ---- ----
(In thousands, except per share data)
Performance Ratios (1):
Return (loss) on average assets 0.86% 0.86% 0.80% 0.70% (1.44%)
Return (loss) on average stockholders' equity 8.49% 8.10% 7.16% 6.06% (11.84%)
Return (loss) on average tangible stockholders' equity 9.27% 8.87% 7.85% 6.33% (12.87%)
Net interest margin 3.42% (2) 3.51% 3.73% 3.67% 3.59% (2)
Non-interest income to average assets 0.83% (3) 1.29% (4) 1.50% (4) 1.36% (4) 1.61% (5)
Non-interest expense to average assets 2.91% (6) 3.05% 3.64% (7) 3.31% (8) 6.60% (9)
Average earning assets to average assets 94.28% 94.14% 95.09% 94.67% 94.88%
Efficiency ratio (10) 68.40% (11) 68.29% 68.37% (12) 73.68% (13) 91.49% (14)
Capital ratios
Stockholders' equity to total assets 10.11% 10.30% 10.57% 11.20% 11.53%
Tier I capital to average adjusted assets 8.97% 9.36% 9.66% 10.00% 10.30%
Tier I capital to risk weighted assets 12.60% 12.51% 12.06% 13.02% 13.45%
Total capital to risk weighted assets 14.10% 14.16% 13.75% 14.67% 15.19%
Other data
Book value per share $ 20.86 $ 20.46 $ 20.14 $ 19.80 $ 19.71
Tangible book value per share $ 19.13 $ 18.71 $ 18.38 $ 18.07 $ 18.00
Stock price:
High $ 37.40 $ 33.90 $ 28.40 $ 24.00 $ 25.25
Low $ 33.55 $ 28.10 $ 23.10 $ 21.86 $ 22.94
Close $ 36.20 $ 33.69 $ 28.40 $ 23.00 $ 23.55
(1) Ratios are annualized for each of the quarters.
(2) Excluding the forfeiture of $245,000 and $758,000 in interest income upon the sale of sub-prime automobile loans in December
2003 and December 2002, respectively, the net interest margin would have been 3.50% and 3.89%, respectively.
(3) Excluding the gain on sale of securities of $1.6 million, the $2.2 million loss on the sale of sub-prime automobile loans,
and the loss of $206,000 on the impairment of other assets - repossessed vehicle inventory, the ratio would have been 1.12%.
(4) Excluding the gain on the sale of securities of $356,000, $317,000 and $804,000 in quarters ended September 2003, June
2003 and March 2003, respectively, the ratios would have been 1.16%, 1.38% and 1.04%, respectively.
(5) Excluding the gain on the sale of securities of $14.8 million, the loss on the sale of sub-prime automobile loans of $10.7
million, the loss on the impairment of other assets - repossessed vehicle inventory of $1.3 million, the penalty on the
pre-payment of FHLB borrowings of $1.1 million and the impairment of securities of $326,000, the ratio would have been 1.06%.
(6) Excluding $363,000 representing the partial reversal of an $800,000 retirement benefit charge that was recorded in the second
quarter of 2003, the ratio would have been 3.21%.
(7) Excluding the retirement benefit charges of $800,000 and $15,000 representing the partial reversal of a $44,000 interest
charge associated with the disallowance of the dividend received deduction from the Bank's REIT that was recorded in the
first quarter of 2003, the ratio would have been 3.36%.
(8) Excluding the $44,000 interest charge associated with the disallowance of the Bank's dividend received deduction received
from the Bank's REIT, the ratio would have been 3.30%.
(9) Excluding the severance costs of $6.9 million, the ratio would have been 4.04%.
(10) Efficiency ratio is non-interest expenses, less non-recurring items, divided by the total of net interest income, plus
non-interest income, less securities gains, less non-recurring items.
(11) Excludes the partial reversal of retirement benefit charges of $363,000 from non-interest expenses, $2.2 million of loss
on the sale of sub-prime automobile loans, $245,000 in forfeiture of interest income associated with the sale of sub-prime
automobile loans and the loss on the impairment of other assets - repossessed vehicle inventory of $206,000.
(12) Excludes the retirement benefit charges of $800,000 and the $15,000 representing the partial reversal of a $44,000 interest
charge associated with the Bank's REIT that was recorded in the first quarter of 2003 from non-interest expenses.
(13) Excludes the $44,000 interest charge associated with the disallowance of the Bank's dividend received deduction from the
Bank's REIT.
(14) Excludes severance costs of $6.9 million from non-interest expenses, loss on the sale of sub-prime automobile loans of $10.7
million, the loss on the impairment of other assets - repossessed vehicle inventory of $1.3 million, the penalty on the
pre-payment of FHLB borrowings of $1.1 million and the impairment of securities of $326,000.
12
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE, INTEREST AND YIELD/RATE ANALYSIS
Unaudited
Quarters Ended
December 31, 2003
-----------------------------------------
Average Yield/
Balance Interest Rate(1)
-----------------------------------------------------------------------------
(In thousands)
Earning assets:
Short-term investments $ 2,853 $ 6 0.84%
Securities (2) 314,070 2,905 3.70%
Federal Home Loan Bank 12,166 65 2.14%
Loans:
Residential mortgage 287,518 3,793 5.28%
Commercial real estate 193,728 2,969 6.13%
Commercial 167,427 2,312 5.52%
Indirect auto loans 103,821 1,665 6.41%
Other consumer 57,013 695 4.88%
------------ ---------
Total loans 809,507 11,434 5.65%
------------ ---------
Total earning assets 1,138,596 $ 14,410 5.06%
=========
Other assets 69,076
------------
Total assets $ 1,207,672
------------
Funding liabilities:
Deposits:
Non-interest-bearing deposits $ 98,392
Savings, NOW and money market 415,486 814 0.78%
------------ ---------
Total core deposits 513,878 814 0.63%
Certificates of deposits 321,732 2,334 2.90%
------------ ---------
Total deposits 835,610 3,148 1.51%
------------ ---------
Borrowings:
Federal Home Loan Bank advances 236,534 1,518 2.57%
------------ ---------
Total funding liabilities 1,072,144 $ 4,666 1.74%
=========
Other liabilities 11,249
------------
Total liabilities 1,083,393
Minority Interest 2,261
Stockholders' Equity 122,018
------------
Total liabilities and equity $ 1,207,672
------------
Net interest income/spread $ 9,744 3.32%
---------
Net interest margin 3.42%
(1) Average yields earned and rates paid are annualized.
(2) Average balances and yields for securities available for sale are based on
amortized cost.
13
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE, INTEREST AND YIELD/RATE ANALYSIS
Unaudited
Quarters Ended
September 30, 2003
--------------------------------------
Average Yield/
Balance Interest Rate(1)
- --------------------------------------------------------------------------------
(In thousands)
Earning assets:
Short-term investments $ 2,626 $ 5 0.76%
Securities (2) 220,514 1,886 3.42%
Federal Home Loan Bank 8,406 59 2.81%
Loans:
Residential mortgage 324,272 4,099 5.06%
Commercial real estate 177,306 2,760 6.23%
Commercial 169,653 2,401 5.66%
Indirect auto loans 104,252 1,945 7.46%
Other consumer 54,684 703 5.14%
------------ ---------
Total loans 830,167 11,908 5.74%
------------ ---------
Total earning assets $ 1,061,713 $ 13,858 5.22%
=========
Other assets 65,993
------------
Total assets $ 1,127,706
------------
Funding liabilities:
Deposits:
Non-interest-bearing deposits $ 99,351
Savings, NOW and money market 407,451 832 0.82%
------------ ---------
Total core deposits 506,802 832 0.66%
Certificates of deposits 330,821 2,511 3.04%
------------ ---------
Total deposits 837,623 3,343 1.60%
------------ ---------
Borrowings:
Federal Home Loan Bank advances 165,011 1,206 2.92%
------------ ---------
Total funding liabilities 1,002,634 $ 4,549 1.81%
=========
Other liabilities 3,650
------------
Total liabilities 1,006,284
Minority Interest 2,279
Stockholders' Equity 119,143
------------
Total liabilities and equity $ 1,127,706
------------
Net interest income/spread $ 9,309 3.41%
---------
Net interest margin 3.51%
(1) Average yields earned and rates paid are annualized.
(2) Average balances and yields for securities available for sale are based on
amortized cost.
14
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCE, INTEREST AND YIELD/RATE ANALYSIS
Unaudited
Quarters Ended
December 31, 2002
-------------------------------------
Average Yield/
Balance Interest Rate(1)
- -----------------------------------------------------------------------------
(In thousands)
Earning assets:
Short-term investments $ 32,549 $ 130 1.60%
Securities (2) 180,131 1,721 3.82%
Federal Home Loan Bank 7,440 70 3.76%
Loans:
Residential mortgage 238,646 3,896 6.53%
Commercial real estate 150,571 2,521 6.70%
Commercial 167,895 2,559 6.10%
Indirect auto loans 160,340 2,686 6.70%
Other consumer 62,338 966 6.20%
------------ ---------
Total loans 779,790 12,628 6.48%
------------ ---------
Total earning assets 999,910 $ 14,549 5.82%
=========
Other assets 60,164
------------
Total assets $ 1,060,074
============
Funding liabilities:
Deposits:
Non-interest-bearing deposits $ 84,879
Savings, NOW and money market 373,808 1,209 1.29%
------------ --------
Total core deposits 458,687 1,209 1.05%
Certificates of deposits 329,762 3,012 3.65%
------------ --------
Total deposits 788,449 4,221 2.14%
------------ --------
Borrowings:
Federal Home Loan Bank advances 138,219 1,326 3.84%
------------ --------
Total funding liabilities 926,668 $ 5,547 2.39%
========
Other liabilities 3,024
------------
Total liabilities 929,692
Minority Interest 2,624
Stockholders' Equity 127,758
------------
Total liabilities and equity $ 1,060,074
============
Net interest income/spread $ 9,002 3.43%
========
Net interest margin 3.59%
(1) Average yields earned and rates paid are annualized.
(2) Average balances and yields for securities available for sale are based on
amortized cost.