1
BERKSHIRE HILLS BANCORP, INC. REPORTS CORE EPS GROWTH
DECLARES QUARTERLY CASH DIVIDEND
Receives Regulatory Approvals for 2 New York Branches
PITTSFIELD, MA--January 26, 2006--Berkshire Hills Bancorp, Inc. (NASDAQ:
BHLB), the holding company for Berkshire Bank ("the Bank"), today reported $2.11
in core earnings per diluted share for the year 2005, a 10% increase compared to
$1.92 for the year 2004. Core earnings totaled $15.8 million in the year 2005,
increasing by 44% primarily due to the acquisition of Woronoco Bancorp, Inc. on
June 1, 2005. Core earnings per share growth was less than core earnings growth,
primarily due to the issuance of shares for the acquisition.
The Company reported GAAP net income of $8.2 million ($1.10 per diluted share)
for the year 2005, including an $8.8 million non-cash charge related to the
termination of the Bank's Employee Stock Ownership Plan (ESOP). This charge did
not reduce stockholders' equity. GAAP net income for the year 2004 was $11.5
million ($2.01 per diluted share).
The Company also reported core earnings for the fourth quarter of 2005 were $4.6
million ($0.52 per diluted share), compared to $2.9 million ($0.51 per diluted
share) in the same quarter of 2004. Fourth quarter 2005 GAAP net income totaled
$4.8 million ($0.55 per diluted share), compared to $3.2 million ($0.55 per
diluted share) in the fourth quarter of 2004.
Fourth quarter financial highlights (compared to prior quarter) include:
-- The net interest margin increased to 3.36%, the highest quarterly
level in 2005.
-- Annualized deposit growth was 10% (excluding brokered deposits) and
commercial loan growth was 8%.
-- Total fee income increased by 10%.
Commenting on the Company's performance, Michael P. Daly, President and Chief
Executive Officer of the Company and the Bank, stated, "Our strong performance
in 2005 was due to both organic growth and strategic acquisitions. The Company's
improved profitability also reflects our increased efficiency and continuing
strong asset quality. We bolstered our efficiency with 37% cost saves in the
Woronoco acquisition, which compared favorably to our 30% original target. The
most recent quarter was the first quarter after our integration of Woronoco. Our
emphasis was on developing the structure for accelerated organic growth in our
major markets, which we announced at our investor conference last month, as we
transition from a community to a regional bank. We recruited leadership to
launch this effort in New York and expect to complete recruitment for our
leadership team in Pioneer Valley. We also added a Chief Credit/Risk Officer to
our senior management team. Furthermore, we completed the acquisition of two
insurance agencies, improving our position as the premier insurance provider in
our Massachusetts markets, and we intend to consummate additional insurance
acquisitions in our major markets."
DIVIDEND DECLARED
The Board of Directors declared a quarterly cash dividend of $0.14 per share,
payable on February 21, 2006, to stockholders of record at the close of business
on February 6, 2006.
NEW YORK EXPANSION
The Company also announced additional plans for its expansion in New York with
its receipt of regulatory approvals to open Bank branches in Delmar and
Guilderland. The Company expects to open these new branches as well as the
previously announced East Greenbush branch in the second quarter of 2006.
Announcements will be made later of the opening dates for these branches.
2
CORE NET INCOME
The following table represents a reconciliation of GAAP net income to
core net income and earnings per share.
4Q2005 3Q2005 4Q2004 FY2005 FY2004
(In thousands, except earnings per share)
-------- -------- -------- -------- --------
Net income - GAAP $4,838 $4,746 $3,177 $ 8,226 $11,509
Less: Gain on sale of
securities, net 592 541 265 2,313 953
Plus: Non-recurring loss
from discontinued
operations - - - - 431
Plus: ESOP termination
expense 113 - - 8,492 -
Plus: Merger and
conversion expense 236 538 - 1,400 -
Net income - core $4,595 $4,743 $2,912 $15,805 $10,987
Earnings per diluted share
- GAAP $0.55 $0.54 $0.55 $1.10 $2.01
Earnings per diluted share
- core $0.52 $0.54 $0.51 $2.11 $1.92
Average diluted shares
outstanding 8,813 8,856 5,725 7,503 5,731
Note: All adjustments to arrive at core net income are stated net of
taxes.
FINANCIAL CONDITION
Total assets were $2.0 billion at December 31, 2005, up from $1.3 billion at
year-end 2004. The increase included approximately $850 million in assets
related to the Woronoco acquisition, and is net of a reduction of $243 million
in loans and securities under a de-leveraging plan executed in conjunction with
the acquisition. Most categories of assets and liabilities increased primarily
due to the acquisition of Woronoco and secondarily to organic growth. Total
assets at the end of the fourth quarter were relatively unchanged from the prior
quarter-end.
Loans totaled $1.42 billion at December 31, 2005, increasing by $588 million
(71%) from year-end 2004. Loan growth included $528 million related to the
Woronoco acquisition, consisting primarily of residential first and second
mortgages. Excluding the impact of the loans acquired through the Woronoco
acquisition and $4 million in third quarter loan sales, total loans increased by
$64 million in 2005, growing at an 8% annual rate. In the fourth quarter, total
loans were relatively unchanged. Annualized commercial loan growth of 8% was
offset by runoff in the residential mortgage and consumer loan portfolios.
Investment securities totaled $421 million at year-end, increasing by $6 million
(2%) compared to year-end 2004. The impact of the purchased Woronoco securities
was offset by the de-leveraging program, the sale of $46 million in securities
to provide funds for the acquisition, and ongoing amortization during the year.
Total investment securities decreased by 1% during the most recent quarter, due
to sales and runoff. During the year, the Company emphasized the origination of
higher-yielding loans and utilized cash flows from securities to help fund this
growth.
Deposits totaled $1.37 billion at year-end, increasing by $525 million (62%)
from year-end 2004. Deposit growth included $443 million related to the Woronoco
acquisition. Excluding the impact of the acquired Woronoco deposits, total
deposits increased by $82 million for the year, growing at a 10% rate. Total
deposits, excluding brokered time deposits, increased at a 10% annualized rate
during the most recent quarter. Deposit growth in the Company's New York
branches totaled $33 million for the year and $11 million for the quarter,
accounting for about 40% and 35% of the total organic deposit growth for these
periods, respectively. Borrowings also increased during the year due to the
acquisition but decreased in the most recent quarter due to deposit growth.
Stockholders' equity totaled $246 million at year-end 2005, increasing by $114
million, or 87%, from year-end 2004. Consideration for the Woronoco acquisition
included the issuance of 2.93 million common shares valued at $108 million, with
an additional $4 million credit to equity for the value of outstanding Woronoco
stock options. The ESOP termination did not reduce stockholders' equity because
the related charge to earnings was offset by credits to unearned compensation
and additional paid-in capital. These credits also offset the $5 million impact
of the transfer of 146,971 shares of treasury stock, which represented full
payment of the ESOP loan. The contribution of net income to stockholders' equity
was mostly offset by dividends, additional treasury stock purchases, and a
decrease in accumulated other comprehensive income due to lower securities
prices.
Goodwill increased to $88 million and identifiable intangible assets increased
to $12 million due to the Woronoco acquisition. As a result, tangible book value
per share was $17.15 at December 31, 2005, compared to $21.19 at year-end 2004.
The ratio of tangible equity to tangible assets was 7.56% at year-end 2005, down
from 9.55% at year-end 2004 due to acquisition goodwill. The ratio of equity to
assets increased to 12.1% from 10.1% for these respective dates due to the
issuance of shares related to the Woronoco acquisition.
During 2005, the Company repurchased 221,000 common shares, totaling $7.52
million, at an average share price of $34.00. Repurchases in the most recent
quarter totaled 14,500 shares at a $32.03 average price. Additionally, treasury
shares include 146,971 shares allocated by the ESOP for the repayment of its
loan at the time of termination. Also during the year, the Company paid total
cash dividends of $3.71 million. The quarterly cash dividend paid was increased
from $0.12 per share to $0.14 per share, a 17% increase, beginning in the third
quarter.
3
ASSET QUALITY
Asset quality indicators remained favorable throughout 2005. The loans added
through the Woronoco acquisition were primarily concentrated in comparatively
low risk residential mortgage and home equity loans. The rate of net loan
charge-offs to total average loans remained comparatively low at 0.08% for the
year 2005. Additionally, the ratio of non-performing assets to total assets
declined to 0.06% at year-end 2005, compared to 0.09% at year-end 2004. The
year-end 2005 allowance for loan losses measured 0.92% of total loans, and the
ratio of the allowance to non-performing loans remained strong at 1096% at
year-end 2005, compared to 811% at year-end 2004.
RESULTS OF OPERATIONS
All major categories of income and expense increased in 2005 primarily due to
the acquisition of Woronoco Bancorp on June 1, 2005. Core earnings per share
reflects the ongoing business operations of the Company and includes the impact
of shares issued in conjunction with the Woronoco acquisition. Core earnings per
share increased by 2% and 10% for the fourth quarter and year in 2005,
respectively, compared to 2004. In addition to the benefits of the Woronoco
merger, these increases reflected the benefit of organic loan and deposit growth
recorded by the Company over this period. The improvements also reflected the
benefit of higher service fee income, including wealth management service fees,
as well as the benefit of controlled expense growth and gains on the sale of
securitized loans.
Major items that created a difference between core earnings and net income were
ESOP termination charges, merger/conversion charges, and net securities gains.
The ESOP termination was a one-time event in 2005. Merger and conversion expense
consisted primarily of costs related to systems conversions, interim systems,
and operations integrations, as well as the cost of interim Woronoco staff
retained through the conversion dates. Net securities gains primarily
represented gains on equity sales as the Company adjusted its position to
decrease exposure to equity market fluctuations.
Core earnings of $4.6 million were slightly lower than GAAP net income of $4.8
million in the most recent quarter because securities gains exceeded non-core
charges. For the year 2005, core earnings of $15.8 million were 92% higher than
GAAP net income of $8.2 million due mainly to the non-core ESOP termination
expense.
The Company's core return on tangible assets measured 1.02% in the fourth
quarter of 2005. This exceeded the 0.96% GAAP return on assets primarily due to
the non-cash impact of the amortization of intangibles. The core return on
tangible equity measured 13.5% in the fourth quarter of 2005. Analysis of equity
net of intangibles is common in the industry due to the impact of merger
transactions. Primarily due to the goodwill associated with the Woronoco
acquisition, this measure exceeded the GAAP return on equity of 7.9% for this
period. The efficiency ratio measured 57.1% for this most recent quarter.
Berkshire's net interest margin increased to 3.36% in the fourth quarter of
2005, compared to 3.31% in the third quarter and 3.26% in the second quarter.
The Company has benefited from the Bank's positive sensitivity to higher
interest rates, its deposit and loan pricing strategies, and the de-leveraging
program. The Company has emphasized low cost transaction accounts in its deposit
promotions. Due to a 2% decrease in average earning assets, net interest income
did not change significantly in the fourth quarter of 2005, compared to the
third quarter.
The Company's non-interest income totaled $4.3 million in the most recent
quarter, compared to $4.0 million in the previous quarter. Total service fee
income increased by $264 thousand (10%) in the most recent quarter, compared to
the prior quarter, including the benefit of higher insurance revenues. Net
securities gains were $882 thousand and $832 thousand in these two quarters,
respectively. Excluding these gains, the ratio of core non-interest income to
average assets improved to 0.67% from 0.60% in these quarters. Including these
gains, the GAAP ratio of non-interest income to average assets increased to
0.85% from 0.77% in these quarters.
Non-interest expense totaled $11.8 million in the fourth quarter of 2005,
compared to $11.6 million in the prior quarter, including a non-core $168
thousand ESOP termination charge. The ratio of core tangible non-interest
expense to average assets was 2.13% and 1.99% in these two quarters,
respectively. Fourth quarter expenses included incentive related compensation
and $383 thousand in costs of recently opened New York branches and expanded
commercial lending, up from $190 thousand in the prior quarter. The GAAP ratio
of non-interest expense to average assets measured 2.32% and 2.25% in these
quarters, respectively. The effective tax rate measured 33.0% in the fourth
quarter of 2005, compared to 34.1% in the third quarter.
CONFERENCE CALL
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. (EST) on Friday, January 27, 2006. 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, 2006 at 1:00 p.m.
(EST) through February 2, 2006 at 11:59 p.m. (EST) by dialing 1-877-660-6853 and
using Account #286 and Conference ID#184282 (both numbers are needed to access
the replay).
4
BACKGROUND
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 the largest banking institution based in Western
Massachusetts. The Bank is headquartered in Pittsfield, Massachusetts with
branch offices serving communities throughout Western Massachusetts and
Northeastern New York. The Bank is committed to operating as an independent
super-community 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. or Berkshire Bank, visit
www.berkshirebank.com or call 413-443-5601.
FORWARD-LOOKING STATEMENTS
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; the quality or composition of the
loan and investment portfolios; and the achievement of anticipated future
earnings benefits from recent acquisitions. Additionally, other risks and
uncertainties 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 and undue reliance should not be placed on such statements. The
Company assumes no obligation to update any forward-looking statements.
NON-GAAP FINANCIAL MEASURES
This press release contains certain non-GAAP financial measures in addition to
results presented in accordance with Generally Accepted Accounting Principles
(GAAP). The Company's management uses certain non-GAAP measures for operational
and investment decisions and believes that these measures are among several
useful measures for understanding its operating results, performance trends, and
financial condition. These measures should not be construed as 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 and elsewhere in
this release.
NEWS CONTACT: Wayne F. Patenaude
Senior Vice President, Treasurer
and Chief Financial Officer
413-236-3195
5
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
Unaudited
-----------------------------------
Dec. 31, Sept. 30, Dec. 31,
2005 2005 2004
----------- ----------- -----------
(In thousands)
Assets
Cash and due from banks $ 30,977 $ 30,335 $ 15,237
Short-term investments 110 1,177 2,665
----------- ----------- -----------
Total cash and cash
equivalents 31,087 31,512 17,902
----------- ----------- -----------
Securities available-for-sale,
at fair value 390,876 398,937 384,421
Securities held-to-maturity, at
amortized cost 29,908 26,951 29,942
Loans held for sale 2,093 1,852 1,053
Total loans 1,416,449 1,412,109 828,179
Less: Allowance for loan losses (13,001) (13,123) (9,337)
----------- ----------- -----------
Net loans 1,403,448 1,398,986 818,842
----------- ----------- -----------
Premises and equipment, net 26,236 26,547 14,780
Accrued interest receivable 8,508 8,177 5,472
Goodwill 88,092 87,791 6,782
Identifiable intangible assets 11,524 11,951 472
Bank owned life insurance 19,002 18,800 18,200
Cash surrender value - other
life insurance 11,503 11,431 5,862
Other assets 13,276 10,156 6,387
----------- ----------- -----------
Total assets $2,035,553 $2,033,091 $1,310,115
=========== =========== ===========
Liabilities and Stockholders'
Equity
Deposits $1,371,218 $1,347,751 $ 845,789
Borrowings 397,453 421,074 327,926
Trust preferred indebtedness 15,464 15,464 -
Accrued expenses and other
liabilities 5,352 3,165 4,664
----------- ----------- -----------
Total liabilities 1,789,487 1,787,454 1,178,379
----------- ----------- -----------
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; 10,600,472 shares
issued at December 31, 2005,
10,600,472 at September 30, 2005,
and 7,673,761 at December 31, 2004;
shares outstanding: 8,539,868 at
December 31, 2005; 8,563,515 at
September 30, 2005, and 5,873,563
at December 31, 2004) 106 106 77
Additional paid-in capital 198,667 198,744 77,588
Unearned compensation (1,435) (1,788) (7,414)
Retained earnings 99,429 95,811 94,996
Accumulated other comprehensive
income (2,239) 400 4,214
Treasury stock at cost
(2,060,604 shares at
December 31, 2005, 2,036,957
at September 30, 2005, and
1,800,198 at December 31, 2004) (48,462) (47,636) (37,725)
----------- ----------- -----------
Total stockholders'
equity 246,066 245,637 131,736
----------- ----------- -----------
Total liabilities and
stockholders' equity $2,035,553 $2,033,091 $1,310,115
=========== =========== ===========
6
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
LOAN ANALYSIS
Unaudited
------------------------------------------------
December 31, September 30, December 31,
2005 2005 2004
--------------- --------------- ---------------
Percent Percent Percent
of of of
Balance Total Balance Total Balance Total
------- ------- ------- ------- ------- -------
(Dollars in millions)
Residential real
estate loans:
Residential one-
to four-family $ 514 37 % $ 517 37 % $ 217 26 %
Residential land
development and
construction 35 2 34 2 18 2
------- ------- ------- ------- ------- -------
Total
residential
real estate
loans 549 39 551 39 235 28
Commercial real estate
loans:
Commercial one-to
four-family 20 1 21 1 16 2
Commercial land
development and
construction 59 4 51 4 21 3
Multi-family 49 3 47 3 16 2
Other commercial
real estate 283 20 279 20 208 25
------- ------- ------- ------- ------- -------
Total
commercial
real estate
loans 411 28 398 28 261 32
Commercial business
loans 159 11 161 11 151 18
Consumer loans:
Automobile 148 11 150 11 123 15
Home equity and
other loans 149 11 152 11 58 7
------- ------- ------- ------- ------- -------
Total consumer
loans 297 22 302 22 181 22
------- ------- ------- ------- ------- -------
Total loans $1,416 100 % $1,412 100 % $ 828 100 %
======= ======= ======= ======= ======= =======
DEPOSIT ANALYSIS
Unaudited
------------------------------------------------
December 31, September 30, December 31,
2005 2005 2004
-----------------------------------------------
Percent Percent Percent
of of of
Balance Total Balance Total Balance Total
------- ------- ------- ------- ------- -------
(Dollars in millions)
Demand deposit accounts $ 180 13 % $ 178 13 % $ 110 13 %
NOW accounts 149 11 145 11 101 12
Money market accounts 245 18 241 18 156 19
Savings accounts 222 16 231 17 163 19
------- ------- ------- ------- ------- -------
Total core accounts 796 58 795 59 530 63
Certificates of
deposit - regular 517 38 487 36 315 37
Certificates of
deposit - brokered 58 4 66 5 - -
------- ------- ------- ------- ------- -------
Total
certificates of
deposit 575 42 553 41 315 37
Total deposits $1,371 100 % $1,348 100 % $ 845 100 %
======= ======= ======= ======= ======= =======
7
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,
2005 2004 2005 2004
-------- -------- -------- --------
(In thousands, except earnings per share)
Interest and dividend income
Loans $21,820 $11,519 $70,103 $43,766
Debt securities 4,135 3,984 15,711 16,100
Equity securities dividends 544 289 1,806 1,176
Short-term investments 13 15 112 39
-------- -------- -------- --------
Total interest and
dividend income 26,512 15,807 87,732 61,081
-------- -------- -------- --------
Interest expense
Deposits 7,359 3,183 21,048 12,393
Borrowings 4,116 2,425 15,067 8,331
-------- -------- -------- --------
Total interest expense 11,475 5,608 36,115 20,724
-------- -------- -------- --------
Net interest income 15,037 10,199 51,617 40,357
Provision for loan losses 315 425 1,313 1,565
-------- -------- -------- --------
Net interest income after
provision for loan losses 14,722 9,774 50,304 38,792
-------- -------- -------- --------
Non-interest income
Customer service fees 1,452 609 4,539 2,347
Wealth management service fees 729 714 2,742 2,670
Insurance fees 664 1 1,343 27
Loan service fees 189 129 749 374
Increase in cash surrender
value of life insurance 244 196 893 639
Gain on sales of securities,
net 882 390 3,532 1,402
Gain on sale of loans, and
securitized loans, net - 81 773 166
Other non-interest income 137 78 352 139
-------- -------- -------- --------
Total non-interest income 4,297 2,198 14,923 7,764
-------- -------- -------- --------
Non-interest expense
Salaries and employee benefits 5,758 4,195 20,281 16,882
Termination of Employee Stock
Ownership Plan 168 - 8,836 -
Occupancy and equipment 1,799 1,055 5,798 4,085
Marketing and advertising 355 357 1,088 991
Data processing 571 381 1,894 1,411
Professional services 471 326 1,899 1,552
Foreclosed real estate and
repossessed assets, net 187 118 743 522
Merger and conversion expense 352 - 2,142 -
Amortization of intangible
assets 481 2 1,140 98
Other non-interest expense 1,658 866 5,177 3,436
-------- -------- -------- --------
Total non-interest expense 11,800 7,300 48,998 28,977
-------- -------- -------- --------
Income from continuing
operations before income taxes 7,219 4,672 16,229 17,579
Provision for income taxes 2,381 1,495 8,003 5,639
-------- -------- -------- --------
Income from continuing
operations 4,838 3,177 8,226 11,940
-------- -------- -------- --------
Loss from discontinued
operations - - - (653)
Income tax benefit - - - (222)
-------- -------- -------- --------
Net loss from discontinued
operations - - - (431)
-------- -------- -------- --------
Net income $4,838 $ 3,177 $ 8,226 $11,509
======== ======== ======== ========
Earnings per share
Basic $0.57 $0.60 $1.16 $2.18
Diluted $0.55 $0.55 $1.10 $2.01
Weighted average shares
outstanding
Basic 8,420 5,281 7,122 5,284
Diluted 8,813 5,725 7,503 5,731
8
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
Unaudited
Quarters Ended
------------------------------------------
Dec.31, Sept.30, June 30, Mar.31, Dec.31,
2005 2005 2005 2005 2004
--------- ------- -------- ------- -------
(In thousands, except earnings per share)
Interest and dividend income
Residential mortgage $7,142 $7,101 $ 4,444 $3,059 $2,967
Commercial real estate 7,001 6,673 4,977 4,044 3,761
Commercial business
loans 2,865 2,884 2,505 2,222 2,216
Auto loans 2,256 2,274 1,991 1,806 1,863
Other consumer 2,556 2,217 1,309 785 712
--------- ------- -------- ------- -------
Total interest on
loans 21,820 21,149 15,226 11,916 11,519
Securities 4,679 4,628 4,100 4,110 4,273
Short-term investments 13 62 22 11 15
--------- ------- -------- ------- -------
Total interest and
dividend income 26,512 25,839 19,348 16,037 15,807
--------- ------- -------- ------- -------
Interest expense
Deposits 7,359 5,979 4,318 3,373 3,183
Borrowings 4,116 4,806 3,522 2,637 2,425
--------- ------- -------- ------- -------
Total interest expense 11,475 10,785 7,840 6,010 5,608
--------- ------- -------- ------- -------
Net interest income 15,037 15,054 11,508 10,027 10,199
Provision for loan losses 315 204 300 493 425
--------- ------- -------- ------- -------
Net interest income after
provision for loan losses 14,722 14,850 11,208 9,534 9,774
--------- ------- -------- ------- -------
Non-interest income
Customer service fees 1,452 1,439 1,033 616 609
Wealth management
service fees 729 680 663 670 714
Insurance fees 664 472 175 32 1
Loan service fees 189 179 198 174 129
Increase in cash
surrender value of life
insurance 244 245 200 203 196
Gain on sale of
securities, net 882 832 1,388 429 390
Gain on sale of loans,
and securitized loans,
net - 22 162 588 81
Other non-interest
income 137 86 97 32 78
--------- ------- -------- ------- -------
Total non-interest
income 4,297 3,955 3,916 2,744 2,198
--------- ------- -------- ------- -------
Non-interest expense
Salaries and benefits 5,758 5,699 4,485 4,335 4,195
Termination of Employee
Stock Ownership Plan 168 - 8,667 - -
Occupancy and equipment 1,799 1,655 1,212 1,140 1,055
Marketing and
advertising 355 372 200 161 357
Data processing 571 518 454 347 381
Professional services 471 590 363 423 326
Foreclosed real estate
and other loans, net 187 241 218 94 118
Merger and conversion
expense 352 828 963 - -
Amortization of
intangible assets 481 481 156 30 2
Other non-interest
expense 1,658 1,216 1,343 1,006 866
--------- ------- -------- ------- -------
Total non-interest
expense 11,800 11,600 18,061 7,536 7,300
--------- ------- -------- ------- -------
Income (loss) before
income taxes 7,219 7,205 (2,937) 4,742 4,672
Provision for income
taxes 2,381 2,459 1,671 1,490 1,495
--------- ------- -------- ------- -------
Net income (loss) $4,838 $4,746 $(4,608) $3,252 $3,177
========= ======= ======== ======= =======
Earnings (loss) per share
Basic $0.57 $0.56 $(0.74) $0.61 $0.60
Diluted $0.55 $0.54 $(0.74) $0.57 $0.55
Weighted average shares
outstanding
Basic 8,420 8,456 6,257 5,300 5,281
Diluted 8,813 8,856 6,257 5,691 5,725
Dividends per share $0.14 $0.14 $0.12 $0.12 $0.12
9
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
- ----------------------------------------------------------------------
Unaudited
At or For the Quarters Ended
-------------------------------------------
Dec.31, Sept.30, June 30, Mar.31, Dec.31,
2005 2005 2005 2005 2004
--------- -------- -------- ------- -------
(Dollars in thousands)
- ----------------------------------------------------------------------
NON-PERFORMING ASSETS
- ----------------------------------------------------------------------
Non-accrual loans:
Residential mortgage $ 360 $ 393 $ 663 $ 298 $ 327
Commercial real estate 127 130 209 144 147
Commercial 553 876 613 832 523
Indirect automobile
loans 75 106 78 95 154
Other consumer 71 55 29 1 1
--------- -------- -------- ------- -------
Total non-accrual
loans $ 1,186 $ 1,560 $ 1,592 $1,370 $1,152
Real estate owned ("REO") - - - - -
--------- -------- -------- ------- -------
Total non-
performing assets $ 1,186 $ 1,560 $ 1,592 $1,370 $1,152
========= ======== ======== ======= =======
Non-performing loans as a
percentage of total loans 0.08% 0.11% 0.11% 0.16% 0.14%
Non-performing assets to
total assets 0.06% 0.08% 0.08% 0.11% 0.09%
- ----------------------------------------------------------------------
PROVISION AND ALLOWANCE FOR LOAN LOSSES
- ----------------------------------------------------------------------
Balance at beginning of
period $13,123 $13,044 $ 9,645 $9,337 $9,392
Charge-offs (538) (284) (391) (328) (737)
Recoveries 101 159 169 143 257
--------- -------- -------- ------- -------
Net loan charge-offs (437) (125) (222) (185) (480)
Allowance attributed to
acquired loans - - 3,321 - -
Provision for loan losses 315 204 300 493 425
--------- -------- -------- ------- -------
Balance at end of period $13,001 $13,123 $13,044 $9,645 $9,337
========= ======== ======== ======= =======
Allowance for loan losses
as a percentage of
non-performing loans 1096% 841% 819% 704% 811%
Allowance for loan losses
as a percentage of total
loans 0.92% 0.93% 0.92% 1.13% 1.13%
- ----------------------------------------------------------------------
NET LOAN (CHARGE-OFFS) RECOVERIES
- ----------------------------------------------------------------------
Residential mortgage $- $- $- $- $-
Commercial real estate - - - - (137)
Commercial loans (268) 4 (109) (4) (164)
Consumer loans (primarily
automobile loans) (169) (129) (113) (181) (179)
--------- -------- -------- ------- -------
Total $ (437) $ (125) $ (222) $ (185) $ (480)
========= ======== ======== ======= =======
Net charge-offs as a
percentage of total
average loans 0.03% 0.01% 0.02% 0.02% 0.06%
- ----------------------------------------------------------------------
AVERAGE FICO SCORES OF
CONSUMER AUTOMOBILE LOANS 716 715 711 708 705
- ----------------------------------------------------------------------
10
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,
2005 2005 2005 2005 2004
-------- ------- -------- ------- -------
PERFORMANCE RATIOS (annualized)(1)
Return (loss) on assets 0.96 % 0.92 % (1.19)% 1.00 % 0.97 %
Core return on tangible
assets 1.02 1.04 0.94 0.91 0.90
Return (loss) on
stockholders' equity 7.89 7.90 (11.26) 9.94 9.72
Core return on tangible
stockholders' equity 13.49 14.47 11.42 9.52 9.46
Net interest margin,
fully taxable equivalent 3.36 3.31 3.26 3.34 3.37
Core non-interest income
to assets 0.67 0.60 0.65 0.71 0.55
Non-interest income to
assets 0.85 0.77 1.00 0.84 0.67
Core tangible non-
interest expense to
assets 2.13 1.99 2.12 2.29 2.22
Non-interest expense to
assets 2.32 2.25 4.62 2.30 2.22
Average earning assets to
assets 90.43 90.35 92.29 94.44 94.51
Efficiency ratio 57.14 55.32 58.00 59.80 59.54
CAPITAL RATIOS
Stockholders' equity to
total assets 12.09 12.08 11.80 9.92 10.06
Tangible stockholders'
equity to tangible
assets 7.56 7.55 7.25 9.42 9.55
SHARE DATA
Book value per share $28.81 $28.68 $28.45 $22.01 $22.43
Tangible book value per
share 17.15 17.04 16.56 20.77 21.19
Stock price
High 35.57 35.20 34.90 37.64 38.01
Low 31.75 31.90 30.97 33.40 35.40
Close 33.50 34.00 33.32 33.75 37.15
(1) All performance ratios are based on average balance sheet
amounts, where applicable.
11
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES AVERAGE BALANCES
---------------------------------------------------------------
Unaudited
Quarters Ended
----------------------------------------------------------
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
2005 2005 2005 2005 2004
----------------------------------------------------------
(In thousands)
Assets
Loans
Residential
mortgage $ 554,328 $ 561,048 $ 352,776 $ 239,755 $ 234,817
Commercial
real estate 398,867 396,212 314,778 276,417 255,901
Commercial
business 159,741 165,414 154,405 140,139 153,385
Auto loans 147,695 146,138 134,237 125,038 121,736
Other consumer 151,222 154,209 91,303 58,669 56,150
---------- ---------- ---------- ---------- ----------
Total loans 1,411,853 1,423,021 1,047,499 840,018 821,989
Securities 425,237 435,853 393,962 396,473 416,854
Short-term
investments 538 7,028 1,873 1,672 2,628
---------- ---------- ---------- ---------- ----------
Total earning
assets 1,837,628 1,865,902 1,443,334 1,238,163 1,241,471
Intangible
assets 99,862 100,955 38,879 7,254 7,256
Other assets 94,608 98,394 81,732 65,606 64,805
---------- ---------- ---------- ---------- ----------
Total assets $2,032,098 $2,065,251 $1,563,945 $1,311,023 $1,313,532
========== ========== ========== ========== ==========
Liabilities and
stockholders'
equity
Deposits
NOW $ 143,120 $ 135,638 $ 112,775 $ 94,809 $ 99,394
Money market 251,462 241,088 183,273 158,862 168,137
Savings 226,267 240,396 192,250 163,553 167,031
Certificates
of deposit 558,963 515,120 384,443 319,682 316,898
---------- ---------- ---------- ---------- ----------
Total
interest
bearing
deposits 1,179,812 1,132,242 872,741 736,906 751,460
Borrowings 424,293 499,877 387,208 330,448 318,422
---------- ---------- ---------- ---------- ----------
Total
interest
bearing
liabilities 1,604,105 1,632,119 1,259,949 1,067,354 1,069,882
Non-interest-
bearing demand
deposits 175,025 185,183 129,700 107,835 108,832
Other
liabilities 6,661 6,409 9,579 3,781 4,019
---------- ---------- ---------- ---------- ----------
Total
liabilities 1,785,791 1,823,711 1,399,228 1,178,970 1,182,733
Stockholders'
equity 246,307 241,540 164,717 132,053 130,799
---------- ---------- ---------- ---------- ----------
Total
liabilities
and equity $2,032,098 $2,065,251 $1,563,945 $1,311,023 $1,313,532
========== ========== ========== ========== ==========
Supplementary data
Total core
deposits $ 795,874 $ 802,305 $ 617,998 $ 525,059 $ 543,394
Total
deposits 1,354,837 1,317,425 1,002,441 844,741 860,292
----------------------------------------------------------
Notes:
(1) Average balances for securities available-for-sale are based
on amortized cost.
(2) Average balances reflect the acquisition of Woronoco Bancorp,
Inc. on June 1, 2005.
12
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES AVERAGE YIELDS
(Fully Taxable Equivalent - Annualized)
----------------------------------------------------------------------
Unaudited
Quarters Ended
------------------------------------------------
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
2005 2005 2005 2005 2004
--------- --------- --------- -------- --------
Earning assets
Loans
Residential mortgage 5.15 % 5.06 % 5.04 % 5.10 % 5.05 %
Commercial real
estate 6.96 6.68 6.34 5.93 5.88
Commercial 7.12 6.92 6.51 6.43 5.79
Auto loans 6.06 6.17 5.95 5.86 6.12
Other consumer 6.71 5.70 5.75 5.43 5.07
Total loans 6.15 5.91 5.83 5.73 5.61
Securities (1) 4.87 4.69 4.40 4.41 4.36
Short-term investments 3.96 3.50 2.91 2.67 2.28
Total earning
assets 5.83 5.60 5.44 5.31 5.23
Funding liabilities
Deposits
NOW 0.65 0.42 0.18 0.18 0.09
Money Market 2.61 2.07 1.98 1.62 1.32
Savings 0.77 0.86 1.03 1.00 0.80
Certificates of
deposit 3.57 3.12 2.99 2.91 2.84
Total interest
bearing deposits 2.47 2.10 1.98 1.86 1.69
Borrowings 3.85 3.81 3.65 3.24 3.05
Total interest
bearing
liabilities 2.84 2.62 2.50 2.28 2.10
Net interest spread
(FTE) 2.99 2.98 2.94 3.03 3.13
Net interest margin
(FTE) 3.36 3.31 3.26 3.34 3.37
Cost of funds (2) 2.56 2.35 2.24 2.03 1.89
- ---------------------------------------------------------------------
(1) Average balances and yields for securities available-for-sale
are based on amortized cost. Securities yields are calculated
on a fully-taxable equivalent basis.
(2) Cost of funds includes all deposits and borrowings.
13
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
- --------------------------------------------------------------------------------
Unaudited
Quarters Ended
------------------------------------------------------------------
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
2005 2005 2005 2005 2004
- --------------------------------------------------------------------------------
(Dollars in thousands)
Net income $ 4,838 $ 4,746 $ (4,608) $ 3,252 $ 3,177
Less: Gain on
sale of
securities,
net (882) (832) (1,388) (429) (390)
Plus:
Termination
of ESOP 168 - 8,667 - -
Plus: Merger
and
conversion
expense 352 828 963 - -
Adj: Income
taxes 119 1 (139) 150 125
---------- ---------- ---------- ---------- ----------
Core income
(A) 4,595 4,743 3,495 2,973 2,912
Plus: Amort.
Intang.
Assets (net
of taxes) 322 322 105 20 1
---------- ---------- ---------- ---------- ----------
Tangible core
income (B) $ 4,917 $ 5,065 $ 3,600 $ 2,993 $ 2,913
========== ========== ========== ========== ==========
Total non-
interest
income $ 4,297 $ 3,955 $ 3,916 $ 2,744 $ 2,198
Less: Gain on
sale of
securities,
net (882) (832) (1,388) (429) (390)
---------- ---------- ---------- ---------- ----------
Total core
non-interest
income (C) $ 3,415 $ 3,123 $ 2,528 $ 2,315 $ 1,808
========== ========== ========== ========== ==========
Total non-
interest
expense $ 11,800 $ 11,600 $ 18,061 $ 7,536 $ 7,300
Less:
Termination
of ESOP (168) - (8,667) - -
Less: Merger
and
conversion
expense (352) (828) (963) - -
---------- ---------- ---------- ---------- ----------
Core non-
interest
expense 11,280 10,772 8,431 7,536 7,300
Less:
Amortization
of intangible
assets (481) (481) (156) (30) (2)
---------- ---------- ---------- ---------- ----------
Total core
tangible non-
interest
expense (D) $ 10,799 $ 10,291 $ 8,275 $ 7,506 $ 7,298
========== ========== ========== ========== ==========
Total average
assets(E) $2,032,098 $2,065,251 $1,563,945 $1,311,023 $1,313,532
Less: Average
intangible
assets (99,862) (100,955) (38,879) (7,254) (7,256)
---------- ---------- ---------- ---------- ----------
Total average
tangible
assets(F) $1,932,236 $1,964,296 $1,525,066 $1,303,769 $1,306,276
========== ========== ========== ========== ==========
Total average
stockholders'
equity (G) $ 246,307 $ 241,540 $ 164,717 $ 132,053 $ 130,799
Less: Average
intangible
assets (99,862) (100,955) (38,879) (7,254) (7,256)
---------- ---------- ---------- ---------- ----------
Total average
tangible
stockholders'
equity (H) $ 146,445 $ 140,585 $ 125,838 $ 124,799 $ 123,543
========== ========== ========== ========== ==========
Total assets,
period-end $2,035,553 $2,033,091 $2,066,593 $1,294,300 $1,310,115
Less:
Intangible
assets,
period-end (99,616) (99,742) (102,167) (7,235) (7,254)
---------- ---------- ---------- ---------- ----------
Total tangible
assets,
period-end
(I) $1,935,937 $1,933,349 $1,964,426 $1,287,065 $1,302,861
========== ========== ========== ========== ==========
Total stockholders'
equity,
period-end $ 246,066 $ 245,637 $ 244,497 $ 128,426 $ 131,736
Less:
Intangible
assets,
period-end (99,616) (99,742) (102,167) (7,235) (7,254)
---------- ---------- ---------- ---------- ----------
Total tangible
stockholders'
equity,
period-end
(J) $ 146,450 $ 145,895 $ 142,330 $ 121,191 $ 124,482
========== ========== ========== ========== ==========
Total shares
outstanding,
# in
thousands(K) 8,540 8,564 8,594 5,835 5,874
Core return on
tangible
assets (B/F) 1.02% 1.04% 0.94% 0.91% 0.90%
Core return on
tangible
equity (B/H) 13.49 14.47 11.42 9.52 9.46
Core non-
interest
income to
assets (C/E) 0.67 0.60 0.65 0.71 0.55
Core tangible
non-interest
exp to assets
(D/E) 2.13 1.99 2.12 2.29 2.22
Tangible
stockholders'
equity to
tangible
assets (J/I) 7.56 7.55 7.25 9.42 9.55
Tangible book
value per
share (J/K) $17.15 $17.04 $16.56 $20.77 $21.19
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.
Note: Ratios are annualized and based on average balance sheet amounts, were
applicable.