1
BERKSHIRE HILLS BANCORP REPORTS 18% INCREASE IN SECOND QUARTER
CORE INCOME, WITH 48% ANNUALIZED COMMERCIAL LOAN GROWTH
ANNOUNCES INTENTION TO OPEN TWO ADDITIONAL NEW YORK BRANCHES
PITTSFIELD, MA - July 25, 2006 - Berkshire Hills Bancorp, Inc. (the "Company")
(NASDAQ: BHLB), the holding company for Berkshire Bank (the "Bank"), today
reported an 18% increase in second quarter core income to $4.1 million in 2006,
compared to $3.5 million in 2005. Core earnings growth reflected the benefits of
the acquisition of Woronoco Bancorp in June 2005 and organic growth.
Second quarter 2006 income excluded any revenue related to dividends from the
Federal Home Loan Bank of Boston ("the FHLBB") due to a timing change in the
FHLBB dividend declaration schedule. Such revenue would normally have been about
$400 thousand ($0.03 per diluted share after tax). The FHLBB has announced that
it expects to declare two dividends in the third quarter, with a catch-up for
the delayed dividend. However, this catch-up has not yet been declared and could
be eliminated by proposed regulations. All FHLBB dividends are subject to a
number of factors, including FHLBB earnings.
Second quarter GAAP net income was $4.5 million in 2006 compared to a net loss
of $4.6 million in the second quarter of 2005. The 2005 loss was due primarily
to an $8.7 million non-cash charge related to the termination of the Employee
Stock Ownership Program, along with Woronoco merger and systems conversion
related expenses. Second quarter GAAP earnings per diluted share totaled $0.51
in 2006, compared to a loss of $0.74 in 2005. Second quarter core diluted
earnings per share totaled $0.47 in 2006, compared to $0.53 in 2005, decreasing
primarily due to the issuance of shares in connection with the Woronoco
acquisition.
For the first six months of 2006, core income increased by 33% to $8.6 million
compared to $6.5 million in the same period of 2005. Core earnings per diluted
share measured $0.98 and $1.05 for these periods, respectively. Six month GAAP
net income was $9.3 million in 2006 ($1.06 per diluted share), compared to a net
loss of $1.4 million ($0.23 per diluted share) for the same period in 2005.
Changes between the six month periods resulted principally from the same factors
that affected earnings for the second quarter, described above, including the
FHLBB dividend change.
Second quarter and recent highlights include:
o 48% annualized growth in total commercial loans
o 28% annualized growth in total loans
o 22% annualized increase linked quarter in combined deposit and wealth
management fees
o 6% annualized increase in total deposits, excluding brokered deposit
runoff
o 1% annualized increase linked quarter in core non-interest expense
o Opened full-service branches in the New York towns of Delmar, East
Greenbush, and Guilderland.
o Received regulatory approvals for new full-service branches in the
New York towns of Halfmoon and Colonie, and filed regulatory
applications for new full-service branches in Glenville and
Guilderland.
Michael P. Daly, President and Chief Executive Officer, stated, "We had an
exceptional quarter for loan growth in all three of our regional markets. We
achieved a 28% annualized increase in total loans, including 48% annualized
growth in total commercial loans. We also made excellent progress with our New
York branch expansion efforts, opening three new branches and announcing plans
for an additional two branches. We successfully hired additional sales staff to
develop business in our expanded markets. All of these efforts are consistent
with our strategic plan as we evolve into a regional bank.
2
For the first half of the year, we achieved 19% annualized loan growth and 14%
annualized deposit growth. To mitigate the impact of a tighter margin due to
increased deposit competition, we have held our total core non-interest expenses
steady for the last two quarters, despite higher costs associated with new
branches in New York. We were pleased to be recognized by the Boston Globe for
the fifth consecutive year as one of the top performing publicly traded
companies in Massachusetts."
Mr. Daly continued, "The major elements of our first half earnings generally
came in as we expected. For the second half, we feel that the margin pressures
that we are seeing will continue, and we expect to take a more selective
approach to managing our growth. This will result in more modest near-term
growth in our earnings, compared to our earlier expectations, while we also
continue to invest in growing our New York branches. We will discuss our
guidance further in our conference call on July 26."
DIVIDEND DECLARATION
- --------------------
On June 30, 2006, the Company announced that the Board of Directors had declared
a quarterly cash dividend of $0.14 per share, payable on August 24, 2006, to
stockholders of record at the close of business on August 10, 2006.
BRANCH EXPANSION
- ----------------
The Bank is also announcing today that it has applied for regulatory approvals
to open branches at 262 Saratoga Road, Glenville, New York and at Town Center
Plaza, 1704 Western Avenue, Guilderland, New York. Both locations are former
bank branches that were closed due to post-merger consolidations. These two new
branches will bring to ten the total number of full-service branches that the
Bank has so far named in New York. They bring the total number of operating and
announced Berkshire Bank branches to 31, compared to 24 offices which were
operating at the beginning of this year.
FINANCIAL CONDITION
- -------------------
Total assets were $2.1 billion at June 30, 2006, increasing at an 18% annualized
rate during the quarter. Total loans increased by $102 million during the second
quarter, growing at a 28% annualized rate to $1.55 billion. Annualized loan
growth was 19% for the first half of the year. While most categories of loans
increased, second quarter growth was strongest in commercial loans, including a
$27 million increase in commercial construction loans and a $32 million increase
in commercial business loans. Double digit commercial loan growth was recorded
in all three of the Bank's regional markets.
Asset quality remained favorable during the most recent quarter, with annualized
net charge-offs measuring 0.04% of average loans and quarter-end nonperforming
assets measuring 0.04% of total assets. Delinquent loans remained under 0.50% of
total loans at mid-year.
Total deposits increased by $13 million to $1.46 billion during the second
quarter. Second quarter annualized deposit growth was 6%, excluding brokered
deposit run-off. Total deposits increased at a 14% annualized rate for the first
half of the year. The Bank's new branches did not open until near the end of the
second quarter, and the deposit market has become more competitive due to higher
prevailing interest rates. Borrowings increased by $76 million to provide
additional funding for the strong loan growth. The ratio of tangible
stockholders' equity/assets decreased to 7.3% from 7.6% due to loan growth,
while total equity/assets decreased to 11.6% from 12.0%.
2
3
RESULTS OF OPERATIONS
- ---------------------
Most major categories of income and expense increased in 2006 compared to 2005,
primarily due to the acquisition of Woronoco Bancorp in June 2005, plus the
benefit of organic growth. Results in 2005 also included non-core charges
related to the termination of the Employee Stock Ownership Plan and merger and
systems conversion expenses related to the Woronoco acquisition.
Second quarter net income decreased compared to the prior quarter, primarily due
to the delay in the FHLBB dividend and to seasonal insurance fees in the first
quarter related to contingent annual commissions. On a seasonally adjusted
basis, and adjusting for the anticipated FHLBB dividend, core earnings would
have increased at an 11% annual rate compared to the prior quarter.
Net interest income decreased by $150 thousand in the second quarter of 2006,
compared to the prior quarter, due to the delayed FHLBB dividend. The net
interest margin declined by 11 basis points to 3.16% from 3.27%, with the FHLBB
dividend accounting for 8 basis points of the decline and tighter deposit costs
accounting for most of the remaining 3 basis points. The flat yield curve has
also contributed to margin pressures. Much of the strong loan growth was
recorded in the second half of the quarter, with the full benefit to be
recognized beginning in the third quarter.
Linked quarter non-interest income decreased by $181 thousand primarily due to
the $327 thousand seasonal decrease in insurance commissions reflecting the fact
that annual contingent revenues are normally recorded in the first quarter. The
major fee income categories of deposit and wealth management fees together
increased by $113 thousand (22% annualized) reflecting the Company's ongoing
business expansion.
Core non-interest expense increased by $28 thousand (1% annualized) compared to
the linked quarter, reflecting spending controls which mostly offset the higher
costs of new branches. Non-interest expense included $470 thousand in charges
related to new branches in the most recent quarter, an increase of $240 thousand
from the linked quarter. Total non-interest expense included $385 thousand of
non-core charges related to nonrecurring contract terminations and merger
related charges. The effective tax rate improved to 31.2% from 32.9% due to tax
credits on community development investments. Results for the second quarter of
2006 also included $359 thousand of pretax income from discontinued operations
from the sale of the Company's data processing subsidiary in June, 2004.
CONFERENCE CALL AND EARNINGS GUIDANCE
- -------------------------------------
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 Wednesday, July 26, 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 July 26, 2006 at 1:00 p.m. (ET)
through August 4, 2006 at 11:59 p.m. (ET) by dialing 1-877-660-6853 and using
Account #286 and Conference ID #205656 (both numbers are needed to access the
replay).
The conference call will focus on a discussion of the Company's performance in
the most recent quarter. Additionally, management will provide revised earnings
guidance for the second half of the year.
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
branches serving communities throughout Western Massachusetts and Northeastern
New York. The Bank is transitioning into a regional bank and is positioning
itself as the financial institution of choice in its retail
3
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and commercial markets, delivering exceptional customer service and a broad
array of competitively priced deposit, loan, insurance, wealth management and
trust services, and investment products. For more information on Berkshire Hills
Bancorp, Inc. or Berkshire Bank, visit www.berkshirebank.com or call
800-773-5601.
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. 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.
5
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED BALANCE SHEETS - UNAUDITED
- --------------------------------------------------------------------------------------------------------------------------------
June 30, March 31, December 31,
2006 2006 2005
--------------------------------------------------------
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
Cash and due from banks $ 28,099 $ 27,426 $ 30,977
Short-term investments 956 352 110
----------- ----------- -----------
Total cash and cash equivalents 29,055 27,778 31,087
Securities available for sale, at fair value 353,322 384,629 390,876
Securities held to maturity, at amortized cost 42,524 28,846 29,908
Loans held for sale - 1,267 2,093
Total loans 1,551,112 1,448,505 1,416,449
Less: Allowance for loan losses (13,537) (13,090) (13,001)
----------- ----------- -----------
Net loans 1,537,575 1,435,415 1,403,448
Premises and equipment, net 28,005 26,226 26,236
Accrued interest receivable 8,361 8,915 8,508
Goodwill 88,544 88,123 88,092
Other intangible assets 10,556 11,040 11,524
Bank owned life insurance 19,402 19,201 19,002
Cash surrender value - other life insurance 10,418 11,262 11,503
Other assets 20,227 13,631 13,276
----------- ----------- -----------
Total assets $ 2,147,989 $ 2,056,333 $ 2,035,553
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 1,463,545 $ 1,450,554 $ 1,371,218
Borrowings 412,641 336,265 397,453
Junior subordinated debentures 15,464 15,464 15,464
Other liabilities 8,089 6,413 5,352
----------- ----------- -----------
Total liabilities 1,899,739 1,808,696 1,789,487
Total stockholders' equity 248,250 247,637 246,066
----------- ----------- -----------
Total liabilities and stockholders' equity $ 2,147,989 $ 2,056,333 $ 2,035,553
=========== =========== ===========
F-1
6
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED
- --------------------------------------------------------------------------------
LOAN ANALYSIS
June 30, 2006 March 31, 2006 December 31, 2005
-------------------- ------------------- -----------------------
Percent Percent Percent
Balance of Total Balance of Total Balance of Total
-------------------- ------------------- -----------------------
(DOLLARS IN MILLIONS)
Residential mortgages
1 - 4 Family $ 535 34 % $ 520 36 % $ 514 37 %
Construction 34 2 36 2 35 2
------- ---- ------- ---- ------- ----
Total residential mortgages 569 36 556 38 549 39
Commercial mortgages
Construction 87 6 60 4 59 4
Single and multi-family 66 4 67 5 69 5
Other commercial real estate 322 21 310 21 283 20
------- ---- ------- ---- ------- ----
Total commercial mortgages 475 31 437 30 411 29
Commercial business loans 184 12 152 11 159 11
Consumer loans
Auto 168 11 153 11 148 10
Home equity and other 155 10 151 10 149 11
------- ---- ------- ---- ------- ----
Total consumer loans 323 21 304 21 297 21
Total loans $ 1,551 100 % $ 1,449 100 % $ 1,416 100 %
======= ==== ======= ==== ======= ====
DEPOSIT ANALYSIS
June 30, 2006 March 31, 2006 December 31, 2005
-------------------- -------------------- ---------------------
Percent Percent Percent
Balance of Total Balance of Total Balance of Total
-------------------- -------------------- ---------------------
(DOLLARS IN MILLIONS)
Demand $ 188 13 % $ 169 12 % $ 180 13 %
NOW 137 9 148 10 149 11
Money market 274 19 284 20 245 18
Savings 207 14 216 15 222 16
------- ---- ------- ---- ------- ----
Total non-maturity (core) deposits 806 55 817 57 796 58
Time less than 100 thousand 355 24 342 23 308 23
Time 100 thousand or more 253 17 235 16 210 15
Brokered time 50 4 57 4 57 4
------- ---- ------- ---- ------- ----
Total time deposits 658 45 634 43 575 42
Total deposits $ 1,464 100 % $ 1,451 100 % $ 1,371 100 %
======= ==== ======= ==== ======= ====
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BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
- ---------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
------------------------ -------------------------
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
------------------------ -------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
INTEREST AND DIVIDEND INCOME
Loans $ 24,017 $ 15,226 $ 46,373 $ 27,142
Securities 4,180 4,100 8,877 8,210
Short-term investments 15 22 32 38
-------- -------- -------- --------
Total interest and dividend income 28,212 19,348 55,282 35,390
-------- -------- -------- --------
INTEREST EXPENSE
Deposits 9,843 4,318 18,599 7,691
Borrowings 3,911 3,522 7,617 6,159
-------- -------- -------- --------
Total interest expense 13,754 7,840 26,216 13,850
-------- -------- -------- --------
NET INTEREST INCOME 14,458 11,508 29,066 21,540
PROVISION FOR LOAN LOSSES 600 300 890 793
-------- -------- -------- --------
Net interest income after provision for loan losses 13,858 11,208 28,176 20,747
-------- -------- -------- --------
NON-INTEREST INCOME
Deposit fees 1,383 1,033 2,669 1,648
Wealth management fees 772 663 1,528 1,333
Insurance fees 581 175 1,489 207
Loan fees 125 198 351 372
Increase in cash surrender value of life insurance 247 200 540 403
Gain on sale of securities, net 529 1,388 1,026 1,817
Gain on sale of loans and securitized loans, net - 162 - 751
Other 273 97 397 125
-------- -------- -------- --------
Total non-interest income 3,910 3,916 8,000 6,656
-------- -------- -------- --------
NON-INTEREST EXPENSE
Salaries and benefits 5,758 4,485 11,411 8,820
Occupancy and equipment 1,822 1,212 3,753 2,352
Data processing and telecommunications 813 635 1,697 1,127
Professional services 432 363 935 838
Marketing and advertising 350 200 593 361
Foreclosed real estate and other loans, net 105 218 137 312
Amortization of intangible assets 478 156 956 186
Other recurring non-interest expense 1,495 1,162 2,995 1,972
Termination of Employee Stock Ownership Plan - 8,667 - 8,667
Other non-recurring expense 385 963 385 963
-------- -------- -------- --------
Total non-interest expense 11,638 18,061 22,862 25,598
-------- -------- -------- --------
Income (loss) from continuing operations before income taxes 6,130 (2,937) 13,314 1,805
Income tax expense 1,888 1,671 4,254 3,161
-------- -------- -------- --------
Net income (loss) from continuing operations 4,242 (4,608) 9,060 (1,356)
======== ======== ======== ========
Income from discontinued operations before income taxes 359 - 359 -
Income tax expense 138 - 138 -
-------- -------- -------- --------
Net income from discontinued operations 221 - 221 -
======== ======== ======== ========
NET INCOME (LOSS) $ 4,463 $ (4,608) $ 9,281 $ (1,356)
======== ======== ======== ========
Earnings (loss) per share
Basic $ 0.52 $ (0.74) $ 1.09 $ (0.23)
Diluted $ 0.51 $ (0.74) $ 1.06 $ (0.23)
Average shares outstanding
Basic 8,512 6,257 8,492 5,782
Diluted 8,760 6,257 8,758 5,782
F-3
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BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
- ------------------------------------------------------------------------------------------------------------------------------------
Quarters Ended
-------------------------------------------------------------------
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 2006 2006 2005 2005 2005
-------------------------------------------------------------------
INTEREST AND DIVIDEND INCOME
Residential mortgages $ 7,290 $ 7,055 $ 7,142 $ 7,101 $ 4,444
Commercial mortgages 8,218 7,625 7,001 6,673 4,977
Commercial business loans 3,250 2,815 2,865 2,884 2,505
Consumer loans 5,259 4,861 4,812 4,491 3,300
-------- -------- -------- -------- --------
Total interest on loans 24,017 22,356 21,820 21,149 15,226
Securities 4,180 4,697 4,679 4,628 4,100
Short-term investments 15 17 13 62 22
-------- -------- -------- -------- --------
Total interest and dividend income 28,212 27,070 26,512 25,839 19,348
-------- -------- -------- -------- --------
INTEREST EXPENSE
Deposits 9,843 8,756 7,359 5,979 4,318
Borrowings 3,911 3,706 4,116 4,806 3,522
-------- -------- -------- -------- --------
Total interest expense 13,754 12,462 11,475 10,785 7,840
-------- -------- -------- -------- --------
NET INTEREST INCOME 14,458 14,608 15,037 15,054 11,508
PROVISION FOR LOAN LOSSES 600 290 315 204 300
-------- -------- -------- -------- --------
Net interest income after provision for loan losses 13,858 14,318 14,722 14,850 11,208
-------- -------- -------- -------- --------
NON-INTEREST INCOME
Deposit fees 1,383 1,286 1,452 1,439 1,033
Wealth management fees 772 756 729 680 663
Insurance fees 581 908 664 472 175
Loan fees 125 226 189 179 198
Increase in cash surrender value of life insurance 247 293 244 245 200
Gain on sale of securities, net 529 497 882 832 1,388
Gain on sale of loans and securitized loans, net - - - 22 162
Other 273 125 137 86 97
-------- -------- -------- -------- --------
Total non-interest income 3,910 4,091 4,297 3,955 3,916
-------- -------- -------- -------- --------
NON-INTEREST EXPENSE
Salaries and benefits 5,758 5,653 5,758 5,699 4,485
Occupancy and equipment 1,822 1,931 1,799 1,655 1,212
Data processing and telecommunications 813 884 875 736 635
Professional services 432 503 471 590 363
Marketing and advertising 350 243 355 372 200
Foreclosed real estate and other loans, net 105 32 187 241 218
Amortization of intangible assets 478 478 481 481 156
Other recurring non-interest expense 1,495 1,501 1,354 998 1,162
Termination of Employee Stock Ownership Plan - - 168 - 8,667
Other non-recurring expense 385 - 352 828 963
-------- -------- -------- -------- --------
Total non-interest expense 11,638 11,225 11,800 11,600 18,061
-------- -------- -------- -------- --------
Income (loss) from continuing operations before income taxes 6,130 7,184 7,219 7,205 (2,937)
Income tax expense 1,888 2,366 2,381 2,459 1,671
-------- -------- -------- -------- --------
Net income (loss) from continuing operations 4,242 4,818 4,838 4,746 (4,608)
======== ======== ======== ======== ========
Income from discontinued operations before income taxes 359 - - - -
Income tax expense 138 - - - -
-------- -------- -------- -------- --------
Net income from discontinued operations 221 - - - -
======== ======== ======== ======== ========
NET INCOME (LOSS) $ 4,463 $ 4,818 $ 4,838 $ 4,746 $(4,608)
======== ======== ======== ======== ========
Earnings (loss) per share
Basic $ 0.52 $ 0.57 $ 0.57 $ 0.56 $ (0.74)
Diluted $ 0.51 $ 0.55 $ 0.55 $ 0.54 $ (0.74)
Average shares outstanding
Basic 8,512 8,476 8,420 8,456 6,257
Diluted 8,760 8,755 8,813 8,856 6,257
Dividends per share $ 0.14 $ 0.14 $ 0.14 $ 0.14 $ 0.12
F-4
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BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
ASSET QUALITY ANALYSIS
- ------------------------------------------------------------------------------------------------------------------------------------
At or for the Quarters Ended
-------------------------------------------------------------------------
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
2006 2006 2005 2005 2005
-------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
NON-PERFORMING ASSETS
Nonaccruing loans:
Residential mortgages $ 234 $ 289 $ 360 $ 393 $ 663
Commercial mortgages - - 127 130 209
Commercial business loans 405 480 553 876 613
Consumer loans 133 139 146 161 107
-------- -------- -------- -------- --------
Total nonaccruing loans $ 772 $ 908 $ 1,186 $ 1,560 $ 1,592
Real estate owned 105 - - - -
-------- -------- -------- -------- --------
Total nonperforming assets $ 877 $ 908 $ 1,186 $ 1,560 $ 1,592
======== ======== ======== ======== ========
Total nonperforming loans/total loans 0.05% 0.06% 0.08% 0.11% 0.11%
Total nonperforming assets/total assets 0.04% 0.04% 0.06% 0.08% 0.08%
PROVISION AND ALLOWANCE FOR LOAN LOSSES
Balance at beginning of period $ 13,090 $ 13,001 $ 13,123 $ 13,044 $ 9,645
Charged-off loans (364) (331) (538) (284) (391)
Recoveries on charged-off loans 211 130 101 159 169
-------- -------- -------- -------- --------
Net loans charged-off (153) (201) (437) (125) (222)
Allowance attributed to loans acquired by merger - - - - 3,321
Provision for loan losses 600 290 315 204 300
-------- -------- -------- -------- --------
Balance at end of period $ 13,537 $ 13,090 $ 13,001 $ 13,123 $ 13,044
======== ======== ======== ======== ========
Allowance for loan losses/nonperforming loans 1753% 1442% 1096% 841% 819%
Allowance for loan losses/total loans 0.87% 0.90% 0.92% 0.93% 0.92%
NET LOAN (CHARGE-OFFS) RECOVERIES
Residential mortgages $ (27) $ - $ - $ - $ -
Commercial mortgages - - - - -
Commercial business loans 5 3 (268) 4 (109)
Consumer loans (131) (204) (169) (129) (113)
-------- -------- -------- -------- --------
Total net $ (153) $ (201) $ (437) $ (125) $ (222)
======== ======== ======== ======== ========
Net charge-offs (annualized)/average loans 0.04% 0.06% 0.12% 0.04% 0.08%
AVERAGE FICO SCORES OF CONSUMER
AUTOMOBILE LOANS 721 719 716 715 711
F-5
10
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
At or for the Quarters Ended
--------------------------------------------------------------------------
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
2006 2006 2005 2005 2005
--------------------------------------------------------------------------
PER SHARE DATA
Core earnings, diluted $ 0.47 $ 0.51 $ 0.52 $ 0.54 $ 0.53
Net earnings (loss), diluted 0.51 0.55 0.55 0.54 (0.74)
Tangible book value 17.30 17.26 17.15 17.04 16.56
Total book value 28.79 28.79 28.81 28.68 28.45
Market price at period end 35.48 34.94 33.50 34.00 33.32
PERFORMANCE RATIOS
Core return on tangible assets 0.89 % 0.98 % 1.02% 1.04 % 0.94%
Return (loss) on total assets 0.85 0.94 0.96 0.92 (1.19)
Core return on tangible equity 11.41 12.63 13.49 14.47 11.42
Return (loss) on total equity 7.00 7.64 7.89 7.90 (11.26)
Net interest margin, fully taxable equivalent 3.16 3.27 3.36 3.31 3.26
Core tangible non-interest income to assets 0.68 0.74 0.71 0.64 0.66
Non-interest income to assets 0.75 0.80 0.85 0.77 1.00
Core tangible non-interest expense to assets 2.17 2.21 2.24 2.10 2.17
Non-interest expense to assets 2.23 2.20 2.32 2.25 4.62
Efficiency ratio 58.73 57.48 57.00 55.17 57.65
ASSET QUALITY RATIOS
Net charge-offs (annualized)/average loans 0.04 % 0.06 % 0.12 % 0.04 % 0.08 %
Non-performing assets/total assets 0.04 0.04 0.06 0.08 0.08
Loan loss allowance/total loans 0.87 0.90 0.92 0.93 0.92
Loan loss allowance/nonperforming loans 17.53 x 14.42 x 10.96 x 8.41 x 8.19 x
CAPITAL RATIOS
Stockholders' equity to total assets 11.56 % 12.04 % 12.09 % 12.08 % 11.80 %
Tangible stockholders' equity to tangible assets 7.28 7.59 7.56 7.55 7.25
ANNUALIZED YEAR-TO-DATE GROWTH
Total loans 19 % 9 % 71 % 94 % 142 %
Total deposits 14 23 62 79 109
FINANCIAL DATA (IN MILLIONS)
Total assets $ 2,148 $ 2,056 $ 2,036 $ 2,033 $ 2,067
Total loans 1,551 1,449 1,416 1,412 1,416
Total intangible assets 99 99 100 100 102
Total deposits 1,464 1,451 1,371 1,348 1,306
Total stockholders' equity 248 248 246 246 244
Total core income 4.1 4.5 4.6 4.7 3.5
Total net income (loss) 4.5 4.8 4.8 4.7 (4.6)
- -----------------------------------------------------
(1) All performance ratios are annualized and are based on average balance
sheet amounts, where applicable.
(2) Data for the second quarter of 2006 has no revenue for Federal Home Loan
Bank dividends due to a change in the dividend declaration schedule.
F-6
11
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCES
- ----------------------------------------------------------------------------------------------------------------------------
Quarters Ended
--------------------------------------------------------------------------------
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
2006 2006 2005 2005 2005
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(IN THOUSANDS)
Assets
Loans
Residential mortgages $ 561,444 $ 554,833 $ 554,328 $ 561,048 $ 352,776
Commercial mortgages 450,283 427,891 398,867 396,212 314,778
Commercial business loans 161,618 152,970 159,741 165,414 154,405
Consumer loans 312,813 298,020 298,917 300,347 225,540
---------- ---------- ---------- ---------- ----------
Total loans 1,486,158 1,433,714 1,411,853 1,423,021 1,047,499
Securities 408,542 418,744 425,237 435,853 393,962
Short-term investments 744 1,561 538 7,028 1,873
---------- ---------- ---------- ---------- ----------
Total earning assets 1,895,444 1,854,019 1,837,628 1,865,902 1,443,334
Intangible assets 98,944 99,318 99,862 100,955 38,879
Other assets 94,805 90,412 94,608 98,394 81,732
---------- ---------- ---------- ---------- ----------
Total assets $2,089,193 $2,043,749 $2,032,098 $2,065,251 $1,563,945
========== ========== ========== ========== ==========
Liabilities and stockholders' equity
Deposits
NOW $ 140,103 $ 141,364 $ 143,120 $ 135,638 $ 112,775
Money market 284,447 269,685 251,462 241,088 183,273
Savings 208,345 217,475 226,267 240,396 192,250
Time 643,398 611,324 558,963 515,120 384,443
---------- ---------- ---------- ---------- ----------
Total interest-bearing deposits 1,276,293 1,239,848 1,179,812 1,132,242 872,741
Borrowings 380,131 380,019 424,293 499,877 387,208
---------- ---------- ---------- ---------- ----------
Total interest-bearing liabilities 1,656,424 1,619,867 1,604,105 1,632,119 1,259,949
Non-interest-bearing demand deposits 171,787 168,478 175,025 185,183 129,700
Other liabilities 6,456 5,099 6,661 6,409 9,579
---------- ---------- ---------- ---------- ----------
Total liabilities 1,834,667 1,793,444 1,785,791 1,823,711 1,399,228
Stockholders' equity 254,526 250,305 246,307 241,540 164,717
---------- ---------- ---------- ---------- ----------
Total liabilities and equity $2,089,193 $2,043,749 $2,032,098 $2,065,251 $ 1,563,945
========== ========== ========== ========== ==========
Supplementary data
Total core deposits $ 804,682 $ 797,002 $ 795,874 $ 802,305 $ 617,998
Total deposits 1,448,080 1,408,326 1,354,837 1,317,425 1,002,441
- -------------------------------------------------------------------
(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.
F-7
12
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
AVERAGE YIELDS (Fully Taxable Equivalent - Annualized)
- -------------------------------------------------------------------------------------------------------------------
Quarters Ended
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June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
2006 2006 2005 2005 2005
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Earning assets
Loans
Residential mortgages 5.19 % 5.09 % 5.15 % 5.06 % 5.04 %
Commercial mortgages 7.32 7.23 6.96 6.68 6.34
Commercial business loans 8.07 7.46 7.12 6.92 6.51
Consumer loans 6.74 6.61 6.39 5.93 5.87
Total loans 6.46 6.21 6.15 5.91 5.83
Securities 4.59 4.96 4.87 4.69 4.40
Short-term investments 4.94 4.45 3.96 3.50 2.91
Total earning assets 6.07 5.99 5.83 5.60 5.44
Funding liabilities
Deposits
NOW 1.02 1.01 0.65 0.42 0.18
Money Market 3.36 3.12 2.61 2.07 1.98
Savings 0.78 0.76 0.77 0.86 1.03
Time 4.17 3.92 3.57 3.12 2.99
Total interest-bearing deposits 3.09 2.86 2.47 2.10 1.98
Borrowings 4.13 3.96 3.85 3.81 3.65
Total interest-bearing liabilities 3.33 3.12 2.84 2.62 2.50
Net interest spread 2.74 2.87 2.99 2.98 2.94
Net interest margin 3.16 3.27 3.36 3.31 3.26
Cost of funds 3.02 2.83 2.56 2.35 2.24
- -------------------------------------------------------------------------------
(1) Average balances and yields for securities available-for-sale are based on
amortized cost.
(2) Cost of funds includes all deposits and borrowings.
(3) Data for the second quarter of 2006 has no revenue for Federal Home Loan
Bank dividends due to a change in the dividend declaration schedule.
F-8
13
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
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At or for the Quarters Ended For six months ended
---------------------------------------------------------- --------------------
June 30, Mar. 31, Dec. 31, Sept. 30, June 30, June 30, June 30,
2006 2006 2005 2005 2005 2006 2005
- ------------------------------------------------------------------------------------------------------------- --------------------
(DOLLARS IN THOUSANDS)
Net income $ 4,463 $ 4,818 $ 4,838 $ 4,746 $(4,608) $ 9,281 $(1,356)
Less: Gain on sale of securities, net (529) (497) (882) (832) (1,388) (1,026) (1,817)
Less: income from discontinued operations (359) - - - - (359) -
Plus: Termination of ESOP - - 168 - 8,667 - 8,667
Plus: Other nonrecurring expense 385 - 352 828 963 385 963
Adj: Income taxes 166 164 119 1 (139) 330 11
------- ------- ------- ------- ------- ------- -------
Core income (A) 4,126 4,485 4,595 4,743 3,495 8,611 6,468
Plus: Amort. Intang. Assets (net of taxes) 320 320 322 322 105 640 125
------- ------- ------- ------- ------- ------- -------
Tangible core income (B) $ 4,446 $ 4,805 $ 4,917 $ 5,065 $ 3,600 $ 9,251 $ 6,593
======= ======= ======= ======= ======= ======= =======
Total non-interest income $ 3,910 $ 4,091 $ 4,297 $ 3,955 $ 3,916 $ 8,001 $ 6,660
Less: Gain on sale of securities, net (529) (497) (882) (832) (1,388) (1,026) (1,817)
------- ------- ------- ------- ------- ------- -------
Total core non-interest income (C) $ 3,381 $ 3,594 $ 3,415 $ 3,123 $ 2,528 $ 6,975 $ 4,843
======= ======= ======= ======= ======= ======= =======
Total non-interest expense $11,638 $11,225 $11,800 $11,600 $18,061 $22,863 $25,597
Less: Termination of ESOP - - (168) - (8,667) - (8,667)
Less: Other non-recurring expense (385) - (352) (828) (963) (385) (963)
------- ------- ------- ------- ------- ------- -------
Core non-interest expense 11,253 11,225 11,280 10,772 8,431 22,478 15,967
Less: Amortization of intangible assets (478) (478) (481) (481) (156) (956) (186)
------- ------- ------- ------- ------- ------- -------
Total core tangible non-interest expense (D) $10,775 $10,747 $10,799 $10,291 $ 8,275 $21,522 $15,781
======= ======= ======= ======= ======= ======= =======
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
Total average assets $ 2,089 $ 2,044 $ 2,032 $ 2,065 $ 1,564 $ 2,066 $ 1,438
Less: Average intangible assets (99) (99) (100) (101) (39) (99) (23)
------- ------- ------- ------- ------- ------- -------
Total average tangible assets (E) $ 1,990 $ 1,944 $ 1,932 $ 1,964 $ 1,525 $ 1,967 $ 1,415
======= ======= ======= ======= ======= ======= =======
Total average stockholders' equity $ 255 $ 250 $ 246 $ 242 $ 165 $ 252 $ 149
Less: Average intangible assets (99) (99) (100) (101) (39) (99) (23)
------- ------- ------- ------- ------- ------- -------
Total average tangible stockholders' equity (F) $ 156 $ 151 $ 146 $ 141 $ 126 $ 153 $ 126
======= ======= ======= ======= ======= ======= =======
Total stockholders' equity, period-end $ 248 $ 248 $ 246 $ 246 $ 244 $ 248 $ 244
Less: Intangible assets, period-end (99) (99) (100) (100) (102) (99) (102)
------- ------- ------- ------- ------- ------- -------
Total tangible stockholders' equity, period-end (G) $ 149 $ 149 $ 146 $ 146 $ 142 $ 149 $ 142
======= ======= ======= ======= ======= ======= =======
Total shares outstanding, period-end (thousands)(H) 8,622 8,601 8,540 8,564 8,594 8,622 8,594
Average diluted shares outstanding (thousands) (I) 8,760 8,755 8,813 8,856 6,257 8,758 5,782
Core earnings per share (A/I) $ 0.47 $ 0.51 $ 0.52 $ 0.54 $ 0.53 $ 0.98 $ 1.05
Tangible book value per share (G/H) $ 17.30 $ 17.32 $ 17.15 $ 17.04 $ 16.56 $ 17.30 $ 16.56
Core return on tangible assets (B/E) 0.89 % 0.98 % 1.02 % 1.04 % 0.94 % 0.94 % 0.93 %
Core return on tangible equity (B/F) 11.41 12.63 13.49 14.47 11.42 12.02 10.46
Core tangible non-interest income to assets (C/E) 0.68 0.74 0.71 0.64 0.66 0.71 0.68
Core tangible non-interest exp to assets (D/E) 2.17 2.21 2.24 2.10 2.17 2.19 2.24
Efficiency ratio 58.73 57.48 57.00 55.17 57.65 58.10 58.61
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.
Ratios are annualized and based on average balance sheet amounts, where
applicable.
Contact: Berkshire Hills Bancorp, Inc.
Wayne F. Patenaude, 413-236-3195
Senior Vice President, Treasurer
and Chief Financial Officer
F-9