1
FOR IMMEDIATE RELEASE
BERKSHIRE HILLS BANCORP, INC. REPORTS RECORD EARNINGS, WITH A 30%
INCREASE IN 2004 EARNINGS FROM CONTINUING OPERATIONS
DIVIDEND DECLARED AND ANNUAL MEETING DATE SET
PITTSFIELD, MA - January 26, 2005 - Berkshire Hills Bancorp, Inc. (AMEX: BHL),
the holding company for Berkshire Bank (the "Bank"), today reported record
earnings from continuing operations of $2.08 per diluted share for the year
2004, an increase of 30% over prior year results. Net income from continuing
operations totaled $11.9 million for year 2004, compared to $9.2 million for
2003. Including the loss from discontinued operations of EastPoint Technologies,
LLC, which was sold in June, net income for the year 2004 was a record $11.5
million, compared to $9.0 million for 2003.
The Company also reported net income from continuing operations of $3.2 million
for the fourth quarter of 2004, compared to $3.0 million for the prior quarter
and $2.6 million for the fourth quarter of 2003. Earnings from continuing
operations were $.55 per diluted share for the fourth quarter of 2004, an
increase of 20%, compared to the same period last year.
Commenting on the Company's performance, Michael P. Daly, President and Chief
Executive Officer stated, "Our performance in 2004 benefited from a $2.8 million
increase in net interest income, resulting from growth in loans and investments.
Total service fee income increased by 10% in 2004, while non-interest expense
growth was limited to 3%. These results reflect programs for excellence in
customer service and operations that have become part of Berkshire Bank's
culture. Net income increased each quarter in 2004, and we exceeded our
expectations for growth and profitability for the year. Our ongoing focus on
asset quality resulted in nonperforming assets declining to a comparatively low
0.1% of total assets at year-end."
Mr. Daly concluded, "Our pursuit of value-enhancing strategies led to
significant accomplishments during 2004. We sold our EastPoint Technologies, LLC
investment in June, eliminating its operating costs and enhancing our technology
opportunities. We continued our expansion into New York state with the
acquisition of a branch in October, and we continued to build our wealth
management business with the acquisition of Berkshire Financial Planning in
December. Of course, our most exciting event was our announcement in December
that we had entered into a definitive agreement to acquire Woronoco Bancorp,
Inc., which will create a $2.0 billion company. The combined institution will be
a formidable commercial and community banking franchise, with significant
non-interest income potential, management synergies and solid asset quality. It
will serve customers through a network of 22 full-service branches in western
Massachusetts and New York."
Dividend Declared
The Board of Directors declared a quarterly cash dividend of $.12 per share,
payable on February 22, 2005 to stockholders of record at the close of business
on February 7, 2005.
Annual Meeting
The Company also announced that its 2005 Annual Meeting of Stockholders will be
held on May 5, 2005 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 17, 2005. The
Company intends to distribute proxy solicitation materials on or about April 1,
2005.
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Fourth Quarter Highlights
o Total commercial real estate loans increased $6 million, or 2%, from
September 30, 2004.
o Residential land development and construction loans increased $3 million,
or 23%, from September 30, 2004.
o Consumer loans increased $6 million, or 4%, from September 30, 2004.
o Transaction accounts (demand deposits and NOW accounts) increased $10
million, or 5%, from September 30, 2004.
o Service fee income increased $172,000, or 14%, as compared to the quarter
ended September 30, 2004.
The following table represents a reconciliation of GAAP net income to income
from continuing operations and to core net income and EPS. In determining its
core net income and earnings per share, the Company excludes net security gains
and losses and those items it believes to be non-recurring.
4Q2004 FY 2004
- -------------------------------------------------------------------------------------------------------------
(In thousands, except earnings per share)
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
NET INCOME -GAAP $3,177 $11,509
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Plus: Non-recurring loss from discontinued operations (1) - 431
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
NET INCOME - CONTINUING OPERATIONS 3,177 11,940
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Less: Gain on sale of securities, net (2) 265 953
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
NET INCOME-CORE $2,912 $10,987
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Earnings per diluted share - GAAP $0.55 $2.01
- -------------------------------------------------------------------------------------------------------------
Earnings per diluted share - continuing operations $0.55 $2.08
- -------------------------------------------------------------------------------------------------------------
Earnings per diluted share - core $0.51 $1.92
- -------------------------------------------------------------------------------------------------------------
Average diluted shares outstanding 5,725 5,731
- -------------------------------------------------------------------------------------------------------------
(1) Represents the operating loss and loss on the sale of the assets of
EastPoint Technologies, LLC, tax effected using a tax rate of 34.0%.
(2) Tax effected using a tax rate of 32.0%.
Financial Condition
Year-end total assets of $1.31 billion were unchanged from the prior quarter-end
and increased by $92 million, or 8%, from the prior year-end due to growth in
loans and investment securities.
Loans totaling $828 million at year-end 2004 increased by $10 million, or 1%,
and by $36 million, or 5%, from the prior quarter-end and year-end,
respectively. During the year, loan growth was concentrated in total commercial
real estate loans, which increased by $54 million, or 26%. Consumer loans
increased by
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$28 million, or 18% for the year. Residential mortgages decreased by $30
million, or 11%, in 2004 due to the securitization of $39 million in the first
quarter.
Investment securities totaled $414 million at year-end 2004, decreasing by $19
million, or 4%, in the most recent quarter, and increasing by $55 million, or
15%, for the full year. Securities growth in 2004 included the $39 million
securitization of residential mortgages in the first quarter. During October,
the Company sold $11 million of securitized loans. Proceeds were used to
purchase $10 million of bank owned life insurance.
Total deposits at year-end 2004 were $846 million, decreasing by $7 million, or
1%, during the most recent quarter and increasing by $16 million, or 2%, for the
full year. The fourth quarter decrease included a $10 million decline in the
balance of certificates of deposit primarily related to a change in municipal
balances. The increase for the year was primarily due to a $22 million increase
in core deposit balances (total deposits excluding certificates), which grew by
4% to $531 million at year-end. Contributing to this growth were increases of
$13 million, or 7%, in transaction accounts and $17 million, or 12%, in money
market accounts. Deposit growth included the benefit of the $8 million Oriskany
Falls branch purchase in October.
Federal Home Loan Bank advances totaled $328 million at year-end 2004,
increasing by $3 million, or 1%, in the most recent quarter and by $76 million,
or 30%, for the year. This increase funded the organic loan growth achieved
during the year, and reflected the advantage of lower borrowing costs relative
to the cost of certificates of deposit during much of the year.
Tangible book value per share was $21.19, $20.89, and $19.13 at year-end 2004,
the prior quarter-end, and the prior year-end, respectively. This value
increased by 11% for the year 2004, primarily due to the benefit of retained
earnings. The ratio of stockholders' equity to total assets measured 10.06%,
9.81%, and 10.11% at the same dates.
Asset Quality
Non-performing loans were $1.2 million, or 0.14% of total loans at year-end
2004, which was improved from 0.33% at the prior quarter-end and 0.40% at the
prior year-end. This improvement included the benefit of the sale of the largest
non-performing commercial loan relationship, which had a $1.3 million balance.
Net loan charge-offs totaled $480,000 for the fourth quarter of 2004, compared
to $221,000 and $903,000 in the prior quarter and the fourth quarter of 2003,
respectively. Net charge-offs increased compared to the trailing quarter
primarily due to the sale of the largest non-performing commercial loan
relationship.
The allowance for loan losses totaled $9.3 million, representing 1.13% of total
loans at year-end 2004, compared to $9.4 million, or 1.15% of total loans, and
$9.0 million, or 1.13% of total loans, at the prior quarter-end and year-end,
respectively. In the most recent quarter, the effect of loan growth on the
allowance was significantly offset by the reduction of problem assets, including
the sale of the largest non-performing commercial loan relationship.
Results of Operations
The return on average stockholders' equity increased to 9.72% in the fourth
quarter of 2004, compared to 9.71% and to 8.49% in the prior quarter and fourth
quarter of 2003, respectively. The return on average assets increased to 0.97%
from 0.92% and 0.86% for the same periods. The efficiency ratio also improved to
60.80% from 61.60% and 62.86% for the same periods. These improvements primarily
resulted from
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growth in net interest income and service fee income, together with a reduction
in the ratio of non-interest expense to average assets during the year.
Net interest income was $10.2 million in the fourth quarter of 2004, a decrease
of $43,000 compared to the prior quarter and an increase of $455,000 compared to
the fourth quarter of 2003. The net interest margin of 3.29% was unchanged from
the prior quarter and decreased from 3.42% in the fourth quarter of 2003. The
net interest margin would have increased to about 3.32% in the most recent
quarter except for the shift from interest income to non-interest income related
to the purchase of bank owned life insurance. The decrease from the prior year
was due to the impact of a lower rate environment in 2004 and the execution of
strategies in 2003, such as the increased emphasis on floating rate and
adjustable rate loans, to better position the Bank for a potential rise in
interest rates.
The $425,000 provision for loan losses in the most recent quarter increased by
$60,000, or 16%, compared to the prior quarter. The provision increased from the
fourth quarter of 2003, when a credit of $225,000 was recorded due to a
reduction in the loan loss allowance related to the sale of sub-prime automobile
loans.
Non-interest income was $2.2 million in the fourth quarter of 2004, an increase
of $472,000, or 27%, compared to the prior quarter and an increase of $1.5
million, or 214%, compared to the fourth quarter of 2003. All major service fee
categories increased in the most recent quarter compared to both of the prior
periods. The largest fee increase was in wealth management service fees, which
increased by 31% compared to the fourth quarter of 2003; total assets under
management increased by 19% to $358 million at year-end 2004, compared to $302
million at the prior year-end. The category of other non-interest income also
increased due to higher income earned on cash surrender value related to the
purchase of additional bank owned life insurance in October 2004. In the fourth
quarter of 2003, non-interest income totaled an unusually low $700,000 due
primarily to a $2.1 million loss recorded on the sale of assets, primarily
related to the aforementioned sale of sub-prime automobile loans.
Non-interest expense was $7.3 million in the fourth quarter of 2004, an increase
of $119,000 or 2%, compared to the prior quarter and an increase of $394,000, or
6%, compared to the fourth quarter of 2003. The increase compared to the prior
quarter was primarily due to higher marketing and advertising expenses related
to increased promotional activities. The increase compared to the prior year was
due to salaries and benefits, including merit, bonus and pension components.
This increase was partially offset by a $348,000 decrease in professional
service expense and problem loan related expense following the asset sales and
securitizations near the end of 2003. The efficiency ratio improved to 60.80% in
the fourth quarter of 2004, compared to 61.60% in the prior quarter and to
62.86% in the fourth quarter of 2003 due to higher earning assets and service
fee income.
The effective income tax rate was 32.0% in the most recent quarter, compared to
32.0% in the prior quarter and to 29.9% in the fourth quarter of 2003. Results
from continuing operations exclude the loss from discontinued operations
following the sale of the Company's 60% interest in EastPoint Technologies, LLC
in June 2004. These results include a $75,000 loss recorded on the sale.
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, January 27, 2005. Persons
wishing to access the conference call may do so by dialing 1-877-407-8035.
Replays of the conference call will be available beginning January 27, 2005 at
1:00 P.M. (ET) through February 3, 2005 at 4:00 P.M. (ET) by dialing
1-877-660-6853 and using Account #1628 and Conference ID#132928 (both numbers
are needed to access the call).
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
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based in western Massachusetts. The Bank is headquartered in Pittsfield,
Massachusetts with 11 branch offices serving communities throughout Berkshire
County, and a representative office and one branch office in New York. The Bank
is committed to continue operation as an independent bank, delivering
exceptional customer service and a broad array of competitively priced retail
and commercial products to its customers. For more information on Berkshire
Hills Bancorp, Inc., visit www.berkshirebank.com or call 413-443-5601.
---------------------
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.
Forward-looking statements also include, with limitation, those statements
relating to the anticipated effects of the Company's proposed merger with
Woronoco Bancorp. The following factors, among others, could cause the actual
results of the merger to differ materially from expectations: the ability of the
companies to obtain the required shareholder or regulatory approvals of the
merger; the imposition of any regulatory conditions or requirements on the
merger; the ability of the companies to consummate the merger; Berkshire's
ability to successfully integrate Woronoco Bancorp following the merger,
including integration of the data processing system and retention of key
personnel; a materially adverse change in the financial condition, operations,
or projected or actual earnings of either company; the ability to fully realize
the expected cost savings and revenue enhancements; the ability to realize the
expected cost savings and revenues on a timely basis; and any material change in
the local markets in which each company operates.
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6
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Unaudited
-------------------------------
December 31, September 30, December 31,
2004 2004 2003
- -------------------------------------------------------------------------------------------------------------------------------
(In thousands)
ASSETS
Cash and due from banks $ 15,237 $ 15,908 $ 15,583
Short term investments 2,665 6,689 1,859
---------- ---------- ----------
Total cash and cash equivalents 17,902 22,597 17,442
Securities available for sale, at fair value 365,404 387,950 307,425
Securities held to maturity, at amortized cost 29,942 26,255 36,903
Federal Home Loan Bank stock, at cost 16,974 16,898 12,923
Savings Bank Life Insurance stock, at cost 2,043 2,043 2,043
Loans held for sale 1,053 571 -
Loans 828,179 817,805 792,227
Less: Allowance for loan losses (9,337) (9,392) (8,969)
---------- ---------- ----------
Net loans 818,842 808,413 783,258
Premises and equipment, net 14,780 13,389 12,626
Accrued interest receivable 5,472 5,400 5,080
Goodwill and other intangibles 7,254 5,763 10,233
Net deferred tax asset 819 1,505 1,725
Bank owned life insurance 18,200 8,004 7,721
Due from broker - 378 7,089
Other assets 11,430 11,343 14,080
---------- ---------- ----------
Total Assets $1,310,115 $1,310,509 $1,218,548
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 845,789 $ 853,115 $ 830,244
Federal Home Loan Bank advances 327,926 324,831 251,465
Loans sold with recourse - - 473
Due to broker - - 5,646
Accrued expenses and other liabilities 4,664 4,075 5,293
------ ------ ------
Total liabilities 1,178,379 1,182,021 1,093,121
---------- ---------- ----------
Minority interests - - 2,252
---------- ---------- ----------
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; 7,673,761 shares issued at December 31, 2004,
September 30, 2004 and December 31, 2003;
shares outstanding: 5,873,563 at December 31, 2004, 5,873,563
at September 30, 2004 and 5,903,082 at December 31, 2003) 77 77 77
Additional paid-in capital 77,588 77,154 75,764
Unearned compensation (7,414) (7,832) (8,507)
Retained earnings 94,996 92,469 86,276
Accumulated other comprehensive income 4,214 4,345 5,559
Treasury stock at cost (1,800,198 shares at December 31, 2004,
1,800,198 at September 30, 2004 and 1,770,679 at December 31, 2003) (37,725) (37,725) (35,994)
-------- -------- --------
Total stockholders' equity 131,736 128,488 123,175
------- -------- --------
Total Liabilities & Stockholders' Equity $1,310,115 $1,310,509 $1,218,548
========== ========== ==========
7
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
LOAN ANALYSIS
Unaudited
Quarters Ended
------------------------------------------------------------------------
DECEMBER 31, 2004 SEPTEMBER 30, 2004 DECEMBER 31, 2003
---------------------- --------------------- --------------------
Percent Percent Percent
Balance of Total Balance of Total Balance of Total
---------- -------- --------- --------- -------- ----------
(Dollars in Thousands)
Residential real estate loans
Residential one-to four-family $217,159 26% $214,100 26% $254,939 32%
Residential land development and construction 18,091 2% 14,754 2% 10,583 1%
-------- ------- -------- -------- -------- -------
Total residential real estate loans 235,250 28% 228,854 28% 265,522 33%
Commercial real estate loans
Commercial one-to four-family 15,964 2% 15,461 2% 12,552 2%
Commercial land development and construction 20,611 2% 20,560 3% 24,136 3%
Multi-family 16,380 2% 16,616 2% 15,514 2%
Other commercial real estate 207,619 25% 201,912 24% 154,244 19%
-------- ------- -------- -------- -------- -------
Total commercial real estate loans 260,574 31% 254,549 31% 206,446 26%
Commercial loans 150,879 18% 159,156 19% 166,296 21%
Consumer loans
Automobile 123,027 15% 119,787 15% 103,674 13%
Home equity loans 54,157 7% 51,465 6% 45,783 6%
Other 4,292 1% 3,994 1% 4,506 1%
-------- ------- -------- -------- -------- -------
Total consumer loans 181,476 23% 175,246 22% 153,963 20%
Total loans $828,179 100% $817,805 100% $792,227 100%
======== ======== ========
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DEPOSIT ANALYSIS
Unaudited
Quarters Ended
--------------------------------------------------------------------------
DECEMBER 31, 2004 SEPTEMBER 30, 2004 DECEMBER 31, 2003
--------------------- ---------------------- ----------------------
Percent Percent Percent
Balance of Total Balance of Total Balance of Total
--------- -------- --------- --------- --------- ---------
(Dollars in Thousands)
Demand deposits $ 110,129 13% $104,204 12% $ 102,788 12%
NOW accounts 100,709 12% 96,945 11% 94,606 11%
Savings accounts 163,264 19% 166,720 20% 171,603 21%
Money market accounts 156,412 19% 160,423 19% 139,897 17%
-------- --- -------- --- --------- ---
Total core accounts 530,514 63% 528,292 62% 508,894 61%
Certificates of deposit 315,275 37% 324,823 38% 321,350 39%
-------- -------- ---------
Total deposits $ 845,789 100% $853,115 100% $ 830,244 100%
========= ======== =========
9
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Unaudited
-----------------------------------------------------------------
Three Months Ended Twelve Months Ended
----------------------------- ----------------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
2004 2003 2004 2003
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except earnings per share)
INTEREST AND DIVIDEND INCOME
Loans $ 11,519 $ 11,434 $ 43,766 $ 47,683
Debt securities 3,984 2,761 16,100 7,560
Equity securities dividends 289 209 1,176 956
Short-term investments 15 6 39 109
-------- -------- -------- ----------
TOTAL INTEREST AND DIVIDEND INCOME 15,807 14,410 61,081 56,308
-------- -------- -------- ----------
INTEREST EXPENSE
Deposits 3,183 3,148 12,393 13,862
Borrowings 2,425 1,518 8,331 4,880
-------- -------- -------- ----------
TOTAL INTEREST EXPENSE 5,608 4,666 20,724 18,742
-------- -------- -------- ----------
NET INTEREST INCOME 10,199 9,744 40,357 37,566
PROVISION (CREDIT) FOR LOAN LOSSES 425 (225) 1,565 1,460
-------- -------- -------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 9,774 9,969 38,792 36,106
-------- -------- -------- ----------
NON-INTEREST INCOME
Customer service fees 609 557 2,347 2,300
Wealth management service fees 688 527 2,523 2,090
Loan servicing fees 129 49 374 386
Gain on sale of securities, net 390 1,564 1,402 3,077
Gain (loss) on sale of loans, and securitized loans, net 81 (2,094) 166 (1,854)
Loss on impairment of other assets - (206) - (206)
Other non-interest income 301 303 952 655
-------- -------- -------- ----------
TOTAL NON-INTEREST INCOME 2,198 700 7,764 6,448
-------- -------- -------- ----------
NON-INTEREST EXPENSE
Salaries and benefits 4,195 3,589 16,882 16,166
Occupancy and equipment 1,055 942 4,085 3,800
Marketing and advertising 357 299 991 678
Data processing 381 284 1,411 1,204
Professional services 326 485 1,552 1,227
Foreclosed real estate and other loans, net 118 307 522 1,047
Other non-interest expense 868 1,000 3,534 4,121
-------- -------- -------- ----------
TOTAL NON-INTEREST EXPENSE 7,300 6,906 28,977 28,243
-------- -------- -------- ----------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 4,672 3,763 17,579 14,311
Provision for income taxes 1,495 1,124 5,639 5,161
-------- -------- -------- ----------
INCOME FROM CONTINUING OPERATIONS 3,177 2,639 11,940 9,150
-------- -------- -------- ----------
Loss from discontinued operations - (73) (653) (282)
Income tax benefit - (25) (222) (97)
-------- -------- -------- ----------
NET LOSS FROM DISCONTINUED OPERATIONS - (48) (431) (185)
-------- -------- -------- ----------
NET INCOME $ 3,177 $ 2,591 $ 11,509 $ 8,965
======== ======== ======== ==========
Earnings per share
Basic $ 0.60 $ 0.50 $ 2.18 $ 1.70
Diluted $ 0.55 $ 0.45 $ 2.01 $ 1.57
Weighted average shares outstanding
Basic 5,281 5,222 5,284 5,266
Diluted 5,725 5,717 5,731 5,703
10
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Unaudited
Quarters Ended
-----------------------------------------------------------------------
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
2004 2004 2004 2004 2003
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except earnings per share)
INTEREST AND DIVIDEND INCOME
Residential mortgage $ 2,967 $ 2,869 $ 2,567 $ 2,986 $ 3,793
Commercial real estate 3,761 3,630 3,389 3,225 2,969
Commercial 2,216 2,204 2,135 2,226 2,312
Indirect auto loans 1,752 1,695 1,589 1,610 1,665
Other consumer 823 733 697 692 695
-------- ------- ------- ------- -------
Total interest on loans 11,519 11,131 10,377 10,739 11,434
Securities 4,118 4,289 4,296 4,060 2,905
Federal Home Loan Bank 155 120 63 175 65
Short-term investments 15 6 1 16 6
-------- ------- ------- ------- -------
TOTAL INTEREST AND DIVIDEND INCOME 15,807 15,546 14,737 14,990 14,410
-------- ------- ------- ------- -------
INTEREST EXPENSE
Deposits 3,183 3,097 3,026 3,088 3,148
Borrowings 2,425 2,207 1,959 1,740 1,518
-------- ------- ------- ------- -------
TOTAL INTEREST EXPENSE 5,608 5,304 4,985 4,828 4,666
-------- ------- ------- ------- -------
NET INTEREST INCOME 10,199 10,242 9,752 10,162 9,744
PROVISION (CREDIT) FOR LOAN LOSSES 425 365 425 350 (225)
-------- ------- ------- ------- -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 9,774 9,877 9,327 9,812 9,969
-------- ------- ------- ------- -------
NON-INTEREST INCOME
Customer service fees 609 580 634 524 557
Wealth management service fees 688 611 648 577 527
Loan servicing fees 129 63 103 79 49
Gain on sale of securities, net 390 310 377 325 1,564
Gain (loss) on sale of loans, and securitized loans, net 81 - (6) 90 (2,094)
Loss on impairment of other assets - - - - (206)
Other non-interest income 301 162 209 280 303
-------- ------- ------- ------- -------
TOTAL NON-INTEREST INCOME 2,198 1,726 1,965 1,875 700
-------- ------- ------- ------- -------
NON-INTEREST EXPENSE
Salaries and benefits 4,195 4,195 3,890 4,603 3,589
Occupancy and equipment 1,055 997 975 1,059 942
Marketing and advertising 357 207 270 157 299
Data processing 381 305 331 394 284
Professional services 326 442 357 428 485
Foreclosed real estate and other loans, net 118 150 171 83 307
Other non-interest expense 868 885 939 839 1,000
-------- ------- ------- ------- -------
TOTAL NON-INTEREST EXPENSE 7,300 7,181 6,933 7,563 6,906
-------- ------- ------- ------- -------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 4,672 4,422 4,359 4,124 3,763
Provision for income taxes 1,495 1,415 1,402 1,325 1,124
-------- ------- ------- ------- -------
INCOME FROM CONTINUING OPERATIONS 3,177 3,007 2,957 2,799 2,639
-------- ------- ------- ------- -------
Loss from discontinued operations - - (386) (267) (73)
Income tax benefit - - (131) (91) (25)
-------- ------- ------- ------- -------
NET LOSS FROM DISCONTINUED OPERATIONS - - (255) (176) (48)
-------- ------- ------- ------- -------
NET INCOME $ 3,177 $ 3,007 $ 2,702 $ 2,623 $ 2,591
======== ======= ======= ======= =======
Earnings per share
Basic $ 0.60 $ 0.57 $ 0.51 $ 0.50 $ 0.50
Diluted $ 0.55 $ 0.53 $ 0.47 $ 0.46 $ 0.45
Weighted average shares outstanding
Basic 5,281 5,270 5,292 5,285 5,222
Diluted 5,725 5,721 5,725 5,757 5,717
11
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
Unaudited
At or For the Quarters Ended
- ------------------------------------------------------------------------------------------------------------------------------------
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
NON-PERFORMING ASSETS 2004 2004 2004 2004 2003
- ------------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
Non-accrual loans:
Residential mortgage $ 327 $ 332 $ 266 $ 341 $ 348
Commercial real estate 147 614 934 484 496
Commercial 523 1,463 1,609 1,738 1,887
Indirect automobile loans 154 297 350 395 451
Other consumer 1 8 11 14 17
-------- -------- -------- -------- --------
Total non-accrual loans $ 1,152 $ 2,714 $ 3,170 $ 2,972 $ 3,199
Real estate owned ("REO") - - 25 25 -
Total non-performing assets $ 1,152 $ 2,714 $ 3,195 $ 2,997 $ 3,199
Non-performing loans as a percentage of total loans 0.14% 0.33% 0.40% 0.39% 0.40%
Non-performing assets as a percentage of total loans
and REO 0.14% 0.33% 0.40% 0.39% 0.40%
Non-performing assets to total assets 0.09% 0.21% 0.25% 0.24% 0.26%
- ------------------------------------------------------------------------------------------------------------------------------------
PROVISION (CREDIT) AND ALLOWANCE FOR LOAN LOSSES
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at beginning of period $ 9,392 $ 9,248 $ 8,952 $ 8,969 $10,097
Charge-offs (737) (447) (390) (628) (1,074)
Recoveries 257 226 261 261 171
-------- -------- -------- -------- --------
Net loan charge-offs (480) (221) (129) (367) (903)
Provision (credit) for loan losses 425 365 425 350 (225)
-------- -------- -------- -------- --------
Balance at end of period $ 9,337 $ 9,392 $ 9,248 $ 8,952 $ 8,969
======== ======== ======== ======== ========
Allowance for loan losses as a percentage of
non-performing loans 810.50% 346.06% 291.74% 301.21% 280.37%
Allowance for loan losses as a percentage of total loans 1.13% 1.15% 1.16% 1.18% 1.13%
- ------------------------------------------------------------------------------------------------------------------------------------
NET LOAN (CHARGE-OFFS) RECOVERIES
- ------------------------------------------------------------------------------------------------------------------------------------
Residential mortgage $ - $ - $ - $ - $ -
Commercial real estate (137) - - - -
Commercial loans (164) (7) 23 96 (110)
Consumer loans (primarily automobile loans) (179) (214) (152) (463) (793)
-------- -------- -------- -------- --------
Total $ (480) $ (221) $ (129) $ (367) $ (903)
======== ======== ======== ======== ========
Net charge-offs as a percentage of total loans 0.06% 0.03% 0.02% 0.05% 0.11%
- ------------------------------------------------------------------------------------------------------------------------------------
AVERAGE FICO SCORES OF CONSUMER LOANS 705 702 699 695 691
- ------------------------------------------------------------------------------------------------------------------------------------
12
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL RATIOS
Unaudited
At or for the quarters ended
- ------------------------------------------------------------------------------------------------------------------------------------
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
2004 2004 2004 2004 2003
-------- --------- -------- -------- ---------
Performance Ratios (Annualized):
Return on average assets 0.97 % 0.92 % 0.84 % 0.84 % 0.86 %
Return on average stockholders' equity 9.72 9.71 8.40 8.39 8.49
Return on average tangible stockholders' equity 10.18 10.18 8.69 9.14 9.27
Net interest margin 3.29 3.29 3.19 3.44 3.42 (1)
Non-interest income to average assets (2) 0.67 (3) 0.53 (3) 0.61 (3) 0.60 (3) 0.23 (4)
Non-interest expense to average assets (5) 2.22 2.20 2.15 2.42 2.29 (6)
Average earning assets to average assets 94.51 95.59 94.64 94.46 94.28
Efficiency ratio (7) 60.80 61.60 61.14 64.58 62.86 (8)
Capital ratios (Percent)
Stockholders' equity to total assets 10.06 9.81 9.42 10.12 10.11
Tier I capital to average adjusted assets 9.14 9.09 8.98 8.89 8.97
Tier I capital to risk weighted assets 12.86 12.90 12.77 12.71 12.59
Total capital to risk weighted assets 14.22 14.29 14.15 14.15 14.08
Other data
Book value per share $ 22.43 $ 21.87 $ 20.79 $ 21.54 $ 20.86
Tangible book value per share 21.19 20.89 19.81 19.82 19.13
Stock price (9):
High 38.01 39.14 37.10 38.61 37.40
Low 35.40 35.01 32.69 34.46 33.55
Close 37.15 36.95 37.10 34.90 36.20
- -------------------------------------------
(1) Excluding the forfeiture of $245,000 in interest income upon the sale of
sub-prime automobile loans in December 2003, the net interest margin would
have been 3.50%.
(2) Excludes non-interest income from discontinued operations.
(3) Excluding the gain on the sale of securities of $390,000, $310,000,
$377,000 and $325,000 in the quarters ended December 2004, September 2004,
June 2004 and March 2004, respectively, the ratios would have been 0.55%,
0.44%, 0.49%, and 0.50% , respectively.
(4) 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 0.51%.
(5) Excludes non-interest expense from discontinued operations.
(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 2.41%.
(7) 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. The ratio excludes
discontinued operations.
(8) 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.
(9) Based on daily closing prices.
13
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCES
Unaudited
Quarters Ended
--------------------------------------------------------------------------------
December 31, September 30, June 30, March 31, December 31,
2004 2004 2004 2004 2003
------------- --------------- ------------ ------------ --------------
(In thousands)
Earning assets
Short-term investments $ 2,628 $ 2,192 $ 1,031 $ 6,307 $ 2,853
Securities (1) 399,952 419,474 425,658 388,145 314,070
Federal Home Loan Bank 16,902 16,898 14,925 13,846 12,166
Loans
Residential mortgage 234,817 225,198 216,164 232,001 287,518
Commercial real estate 255,901 250,323 237,727 219,991 193,728
Commercial 153,385 160,129 159,241 163,236 167,427
Indirect auto loans 114,480 111,117 106,883 99,754 103,821
Other consumer 63,406 60,627 59,556 57,775 57,013
----------- ----------- ----------- ----------- ------------
Total loans 821,989 807,394 779,571 772,757 809,507
----------- ----------- ----------- ----------- ------------
Total earning assets 1,241,471 1,245,958 1,221,185 1,181,055 1,138,596
Other assets 72,061 57,551 69,166 69,308 69,076
----------- ----------- ----------- ----------- ------------
Total assets $ 1,313,532 $ 1,303,509 $ 1,290,351 $ 1,250,363 $ 1,207,672
----------- ----------- ----------- ----------- ------------
Funding liabilities
Deposits
Non-interest-bearing deposits $ 108,832 $ 105,257 $ 102,881 $ 97,964 $ 98,392
Savings, NOW and money market 434,562 425,562 419,222 427,388 415,486
----------- ----------- ----------- ----------- ------------
Total core deposits 543,394 530,819 522,103 525,352 513,878
Certificates of deposit 316,898 326,411 322,048 318,555 321,732
----------- ----------- ----------- ----------- ------------
Total deposits 860,292 857,230 844,151 843,907 835,610
Federal Home Loan Bank advances 318,422 318,870 310,935 274,054 236,534
Total funding liabilities 1,178,714 1,176,100 1,155,086 1,117,961 1,072,144
Other liabilities 4,019 3,540 4,619 5,229 11,249
----------- ----------- ----------- ----------- ------------
Total liabilities 1,182,733 1,179,640 1,159,705 1,123,190 1,083,393
Minority interest - - 1,977 2,130 2,261
Stockholders' Equity 130,799 123,869 128,669 125,043 122,018
----------- ----------- ----------- ----------- ------------
Total liabilities and equity $ 1,313,532 $ 1,303,509 $ 1,290,351 $ 1,250,363 $ 1,207,672
----------- ----------- ----------- ----------- ------------
(1) Average balances for securities available-for-sale are based
on amortized cost.
14
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
AVERAGE YIELDS (Annualized)
Unaudited
Quarters Ended
---------------------------------------------------------------------------------------
December 31, September 30, June 30, March 31, December 31,
2004 2004 2004 2004 2003
------------- ------------- ---------- ---------- -------------
Earning assets
Short-term investments 2.28 % 1.09 % 0.39 % 1.01 % 0.84 %
Securities (1) 4.12 4.09 4.04 4.18 3.70
Federal Home Loan Bank 3.67 2.84 1.69 5.06 2.14
Loans
Residential mortgage 5.05 5.10 4.75 5.15 5.28
Commercial real estate 5.88 5.80 5.70 5.86 6.13
Commercial 5.79 5.51 5.36 5.45 5.52
Indirect auto loans 6.12 6.10 5.95 6.46 6.41
Other consumer 5.17 4.84 4.68 4.77 4.88
Total loans 5.61 5.51 5.32 5.56 5.65
Total earning assets 5.10 4.99 4.83 5.08 5.06
Funding liabilities
Deposits
Non-interest-bearing deposits - - - - -
Savings, NOW and money market 0.86 0.79 0.79 0.80 0.78
Total core deposits 0.69 0.63 0.63 0.65 0.63
Certificates of deposit 2.84 2.77 2.73 2.80 2.90
Total deposits 1.48 1.45 1.43 1.46 1.51
Federal Home Loan Bank advances 3.05 2.77 2.52 2.54 2.57
Total funding liabilities 1.90 1.80 1.73 1.73 1.74
Net interest spread 3.20 3.19 3.10 3.35 3.32
Net interest margin 3.29 3.29 3.19 3.44 3.42
(1) Average yields for securities available-for-sale are based on
amortized cost.
- ------------------
Contact:
Berkshire Hills Bancorp, Inc.
Wayne F. Patenaude, 413-236-3195
Senior Vice President, Treasurer
and Chief Financial Officer