1
BERKSHIRE HILLS BANCORP REPORTS 11% GROWTH IN CORE EARNINGS,
TO A RECORD $5.0 MILLION FOR THE FIRST QUARTER OF 2007,
REPORTING $0.56 PER SHARE FOR BOTH CORE AND GAAP EARNINGS,
WITH 25% GROWTH IN TOTAL NET REVENUE
SOLID BUSINESS MOMENTUM CONTINUES
NON-INTEREST INCOME MORE THAN DOUBLES
INSURANCE FEES MORE THAN QUADRUPLE
ASSET QUALITY REMAINS WELL CONTROLLED
DIVIDEND DECLARED
PITTSFIELD, MA - April 24, 2007 - Berkshire Hills Bancorp, Inc. (the "Company")
(NASDAQ: BHLB), the holding company for Berkshire Bank (the "Bank"), reported
first quarter 2007 core income of $5.0 million ($0.56 per diluted share), an
increase of 11% from $4.5 million ($0.51 per diluted share) in the first quarter
of 2006. Earnings in the most recent quarter included after-tax charges of $0.06
per share related to the New York de novo branch program, which the Company
views as an investment in franchise expansion. First quarter GAAP net income was
$4.9 million ($0.56 per diluted share) in 2007 compared to $4.8 million ($0.55
per diluted share) in 2006.
First quarter financial highlights include the following (income comparisons are
to prior year first quarter):
o 450% increase in insurance fee income
o 21% increase in other fee income
o 12% annualized commercial loan growth
o 7% annualized total loan growth
o 7% annualized deposit growth excluding managed run-off of brokered
time deposits (3% annualized growth in total deposits)
o 4% increase in net interest income
o Nonperforming loans were 0.39% of assets, compared to 0.35% at
year-end 2006
o Annualized net charge-offs were 0.11% of average loans for the quarter
Michael P. Daly, President and Chief Executive Officer, stated, "We started the
year with a clean, solid first quarter - continuing our strong growth momentum
and producing a 25% increase in total net revenue. Insurance fees more than
quadrupled due to our insurance agency acquisitions in the fourth quarter. This
more than doubled our non-interest income, boosting non-interest income to 35%
of total net revenue. This is an important milestone as we diversify our revenue
sources, defend against a persistent inverted yield curve, and increase the
product mix that we offer in our markets. Balance sheet growth was ongoing, led
by 12% annualized growth in commercial loans, which resulted in 7% annualized
growth of total loans. Deposits also grew by 7%, exclusive of managed run-off of
brokered time deposits. Year-over-year first quarter average transaction
deposits increased by 1%, and net interest income increased by 4%. Our emphasis
on credit quality remains fundamental; we have no subprime lending programs
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and our annualized loan charge-off rate remained low at 0.11% in the first
quarter of 2007."
Mr. Daly continued, "We unveiled our new branding as "America's Most Exciting
Bank"SM in the first quarter, and we are encouraged by the initial response to
our vision of creating an engaging and exciting financial services environment.
We opened three new branches in our New York region during the quarter. With the
imminent opening of an additional branch, we will now have ten branches
operating in this promising market. Our total branch count will be 31, an
increase of 15% from the beginning of the year. Our net income includes
after-tax expenses of $0.06 per share related to the de novo branch program,
which we view as an investment in franchise expansion. During the first quarter,
we announced that Kevin P. Riley will become our Executive Vice President and
Chief Financial Officer, effective August 1. Kevin was previously Executive Vice
President and Chief Financial Officer of KeyBank National Association, KeyCorp's
flagship community bank. We also announced important leadership appointments in
Commercial Banking, Retail Banking, and Consumer Lending. Our expanded
leadership team is focused on delivering the strong, quality earnings growth
that we announced in our 2007 guidance."
DIVIDEND DECLARATION
- --------------------
The Board of Directors declared a quarterly cash dividend of $0.14 per share to
be distributed to stockholders of record at the close of business on May 4,
2007, and payable on or about May 18, 2007.
FINANCIAL CONDITION
- -------------------
Total assets increased at a 5% annualized rate to $2.17 billion during the first
quarter of 2007. Total loans increased by $31 million (7% annualized) to $1.73
billion, including growth in most categories. Loan growth was led by commercial
mortgages, which increased by $23 million (16% annualized). A $6 million (16%
annualized) decrease in home equity and other consumer loans was related in part
to the expiration of certain introductory rate offerings. The Company introduced
a home equity line campaign in the first quarter to promote growth in home
equity borrowings.
Asset quality remained well controlled during the quarter. The Company does not
offer subprime lending programs. The average FICO scores on its consumer auto
loans have increased in each of the last four quarters, reaching an average of
728 in the first quarter of 2007. The annualized rate of net loan charge-offs
was low at 0.11% during the quarter. Total nonperforming assets increased
slightly during the quarter to 0.39% of total assets from 0.35% at year-end
2006. Nonperforming assets totaled $8.5 million, and included one $6.0 million
commercial relationship, which is in bankruptcy. All other nonperforming assets
were only 0.12% of total assets at quarter-end. Loans delinquent 30 - 90 days
remained low at 0.28% of total loans at quarter-end, compared to 0.26% of total
loans at year-end 2006. The loan loss allowance remained flat at 1.14% of total
loans. The allowance included a $1.0 million impaired loan reserve on the above
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mentioned nonperforming commercial relationship; this reserve was increased by
$500 thousand during the quarter. The Company had no foreclosed real estate at
March 31, 2007.
Total deposits increased by $13 million to $1.54 billion during the first
quarter of 2007. Excluding $13 million of planned run-off of brokered time
deposits, total deposits increased by $26 million (7% annualized). Deposit
growth included an increase of $14 million (51% annualized) to $122 million in
the de novo New York branch program. Excluding the brokered time deposit runoff,
Massachusetts deposits increased by $12 million (4% annualized). Balances of
non-maturity accounts were flat during the quarter, with funds shifting into
money market accounts from other non-maturity accounts. Growth in time deposits
provided the overall deposit growth, with in-market time deposits increasing by
$25 million (15% annualized) and more than offsetting the planned decline in
brokered time deposits. Total borrowings increased by $7 million (8% annualized)
to $352 million to provide supplemental funds for loan growth.
Stockholders' equity increased by $5 million (8% annualized) to $263 million due
primarily to the benefit of retained earnings. Tangible book value per share
increased at an 11% annualized rate to $16.13, while total book value per share
increased at a 3% annualized rate to $29.87. The ratio of tangible equity to
assets increased during the quarter to 6.92% from 6.75%, while the ratio of
total equity to assets increased to 12.10% from 12.01%. The Company repurchased
11,000 shares of common stock during the first quarter.
RESULTS OF OPERATIONS
- ---------------------
First quarter core income increased by $500 thousand (11%) to $5.0 million in
2007 compared to $4.5 million in 2006. First quarter net income increased by
$124 thousand (3%) from year-to-year. The increase in core income reflected the
benefit of positive operating leverage, with a $4.7 million increase in net
revenue, compared to a $4.2 million increase in non-interest expense. The
increase in net revenue included a $582 thousand (4%) increase in net interest
income, accompanied by a $4.6 million (143%) increase in fee income due
primarily to insurance fee growth. Net income in 2006 included $333 thousand in
net non-core income related to securities gains. The core return on tangible
equity increased to 15.4% from 12.6%, while the net return on equity was
unchanged at 7.6%. The return on assets decreased slightly to 0.92% in 2007 from
0.94% in 2006.
The 4% increase in net interest income was due to 5% growth in average earning
assets in the first quarter of 2007, compared to the same quarter of 2006. The
net interest margin decreased as expected to 3.24% from 3.27% for these periods
due primarily to time account repricings, along with the ongoing impact of the
shifting of funds into higher yielding money market and time accounts. The
Company is promoting lower cost transaction accounts to help offset margin
pressures and to provide increased cross-selling opportunities. The Company is
also promoting money market accounts to provide more relationship benefits
compared to time accounts. The net interest margin in the
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most recent quarter also included a negative impact of about 0.07% due to the
cost of borrowings to finance the insurance agency acquisitions in the fourth
quarter of 2006. The margin benefited from the securities restructuring at the
beginning of the same quarter.
Total first quarter non-interest income increased by $4.1 million (101%) to $8.2
million in 2007 compared to $4.1 million in 2006. This increase was primarily
due to a $4.1 million (450%) increase in insurance fee revenue, following the
acquisition of five affiliated insurance agencies in the fourth quarter of 2006.
Insurance revenues are seasonally weighted towards the first half of the year,
primarily due to contingency revenues which are received in the first and second
quarters. All other fee revenues increased by $474 thousand (21%) reflecting
growth in all areas. Deposit service fee growth of 18% included the benefit of
new fee based convenience services implemented in the fourth quarter of 2006.
Wealth management fee growth of 22% resulted primarily from growth in assets
under management, which increased at a 13% annualized rate during the quarter to
$510 million at quarter-end.
The first quarter provision for loan losses totaled $750 thousand in 2007,
compared to $290 thousand in 2006. This reflected a $267 thousand increase in
net charge-offs, along with higher reserving ratios initiated in the third
quarter of 2006. The first quarter loan loss provision of $750 thousand measured
160% of net charge-offs during the quarter.
First quarter non-interest expense increased by $4.2 million (37%) in 2007
compared to 2006. This increase reflected the acquisition of insurance agencies
in the fourth quarter of 2006, along with the higher carrying costs related to
the opening of six new branches since the beginning of 2006. This increase was
more than offset by the benefit of positive operating leverage related to higher
revenues previously noted. The efficiency ratio increased as expected to 61.1%
from 57.5% due to the impact of different operating margins in the acquired
insurance businesses. First quarter 2007 non-interest expense included
nonrecurring charges totaling $153 thousand on the sale of swaps related to
brokered time deposits. First quarter costs of the de novo branch program in New
York totaled $837 thousand in 2007, compared to $230 thousand in 2006. These
costs equated to $0.06 per share in 2007 and are viewed by the Company as an
investment in franchise growth. The first quarter effective tax rate decreased
to 32% in 2007 from 32.9% in 2006, and was consistent with the rate in the
linked quarter.
CONFERENCE CALL
- ---------------
The Company will conduct a conference call at 10:00 A.M. eastern time on
Wednesday, April 25, 2007. President and Chief Executive Officer Michael P. Daly
and Interim Chief Financial Officer John S. Millet will discuss highlights of
the Company's first quarter financial results, along with guidance about
expected financial results. Information about the conference call follows:
Dial-in: 1-877-407-8035
Replay Dial-in: 1-877-660-6853
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Replay Access Codes: Account #286; Conference ID #236317
(Both are needed to access the Replay)
Replay Dates: April 25, 2007 at 1:00 P.M. (ET) through
May 4, 2007 at 11:59 P.M. (ET)
All interested parties are welcome to access the conference call and are
requested to call in a few minutes prior to 10:00 A.M. (ET) to register for the
event. After the presentation by Messrs. Daly and Millet there will be an
opportunity for questions and answers.
Live access to the call on a listen only basis will also be available on the
internet at the Company's website at www.berkshirebank.com by clicking on the
---------------------
Investor Relations link and then selecting the Webcast link on the Corporate
Profile page. A replay of the call will also be available at the website for an
extended period of time.
BACKGROUND
- ----------
Berkshire Hills Bancorp, Inc. is the holding company for Berkshire Bank -
America's Most Exciting BankSM. 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, 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. In addition, the following factors, among others, could
cause actual results to differ materially from the anticipated results or other
expectations expressed in the forward-looking statements: adverse governmental
or regulatory policies may be enacted; the risks associated with continued
diversification of assets and adverse changes to credit quality; and
difficulties associated with achieving expected future financial results.
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.
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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. In all cases, it should be understood that non-GAAP
per share measures do not depict amounts that accrue directly to the benefit of
shareholders. The Company utilizes the non-GAAP measure of core earnings in
evaluating operating trends during the current fiscal period, and compared to
the prior fiscal period. The core earnings measure is not intended to substitute
for GAAP net income, but is an additional measure that the Company uses and
believes is useful for understanding its operating results. During the third
quarter of 2006, the Company identified charges related to the balance sheet
repositioning and to the loan loss allowance adjustment as non-core in the
computation of core earnings. The Company views these charges as infrequent and
not specifically related to the Company's operating activities during the year.
CONTACTS
- --------
Michael P. Daly,
President and Chief Executive Officer
413-236-3194
John S. Millet,
Senior Vice President, Interim Chief Financial Officer, and Treasurer
413-236-3252
Page 6
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BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED BALANCE SHEETS - UNAUDITED
- ----------------------------------------------------------------------------------------------------------
March 31, December 31,
- ----------------------------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT SHARE DATA) 2007 2006
- ----------------------------------------------------------------------------------------------------------
ASSETS
Total cash and cash equivalents $ 27,567 $ 30,985
Securities available for sale, at fair value 191,454 194,206
Securities held to maturity, at amortized cost 38,152 39,968
Residential mortgages 608,004 599,273
Commercial mortgages 590,362 567,074
Commercial business loans 188,256 189,758
Consumer loans 343,438 342,882
- ----------------------------------------------------------------------------------------------------------
Total loans 1,730,060 1,698,987
Less: Allowance for loan losses (19,652) (19,370)
- ----------------------------------------------------------------------------------------------------------
Net loans 1,710,408 1,679,617
Premises and equipment, net 30,576 29,130
Goodwill 104,923 104,531
Other intangible assets 16,142 16,810
Cash surrender value of life insurance policies 30,579 30,338
Other assets 24,772 24,057
- ----------------------------------------------------------------------------------------------------------
Total assets $ 2,174,573 $ 2,149,642
==========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits $ 174,887 $ 178,109
NOW deposits 146,679 153,087
Money market deposits 311,365 297,155
Savings deposits 198,262 202,213
- ----------------------------------------------------------------------------------------------------------
Total non-maturity deposits 831,193 830,564
Brokered time deposits 29,186 41,741
Other time deposits 675,233 649,633
- ----------------------------------------------------------------------------------------------------------
Total time deposits 704,419 691,374
- ----------------------------------------------------------------------------------------------------------
Total deposits 1,535,612 1,521,938
- ----------------------------------------------------------------------------------------------------------
Borrowings 351,638 345,005
Junior subordinated debentures 15,464 15,464
Other liabilities 8,772 9,074
- ----------------------------------------------------------------------------------------------------------
Total liabilities 1,911,486 1,891,481
Total stockholders' equity 263,087 258,161
- ----------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 2,174,573 $ 2,149,642
==========================================================================================================
F-1
8
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED
- ---------------------------------------------------------------------------------------------------------------------
LOAN ANALYSIS
-------------
Mar. 31, 2007 Dec. 31, 2006 Annualized %
(DOLLARS IN MILLIONS) Balance Balance $ Change $ Change
- ---------------------------------------------------------------------------------------------------------------------
Residential mortgages:
1 - 4 Family $ 574 $ 567 $ 7 5 %
Construction 34 32 2 25
- ---------------------------------------------------------------------------------------------------------------------
Total residential mortgages 608 599 9 6
Commercial mortgages:
Construction 132 130 2 6
Single and multi-family 66 65 1 6
Other commercial mortgages 392 372 20 22
- ---------------------------------------------------------------------------------------------------------------------
Total commercial mortgages 590 567 23 16
Commercial business loans 189 190 (1) (2)
- ---------------------------------------------------------------------------------------------------------------------
Total commercial loans 779 757 22 12
Consumer loans:
Auto 202 196 6 12
Home equity and other 141 147 (6) (16)
- ---------------------------------------------------------------------------------------------------------------------
Total consumer loans 343 343 - 0
- ---------------------------------------------------------------------------------------------------------------------
Total loans $ 1,730 $ 1,699 $ 31 7 %
=====================================================================================================================
DEPOSIT ANALYSIS
----------------
Mar. 31, 2007 Dec. 31, 2006 Annualized %
(DOLLARS IN MILLIONS) Balance Balance $ Change Change
- ---------------------------------------------------------------------------------------------------------------------
Demand $ 175 $ 178 $ (3) (7)%
NOW 147 153 (6) (16)
Money market 311 297 14 19
Savings 198 202 (4) (8)
- ---------------------------------------------------------------------------------------------------------------------
Total non-maturity deposits 831 830 1 0
Time less than $100,000 381 370 11 12
Time $100,000 or more 294 280 14 20
Brokered time 29 42 (13) (124)
- ---------------------------------------------------------------------------------------------------------------------
Total time deposits 704 692 12 7
- ---------------------------------------------------------------------------------------------------------------------
Total deposits $ 1,535 $ 1,522 $ 13 3 %
=====================================================================================================================
F-2
9
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
- --------------------------------------------------------------------------------------------------
Three Months Ended
March 31,
- --------------------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA) 2007 2006
- --------------------------------------------------------------------------------------------------
INTEREST AND DIVIDEND INCOME
Loans $ 28,522 $ 22,356
Securities and other 2,948 4,714
- --------------------------------------------------------------------------------------------------
Total interest and dividend income 31,470 27,070
INTEREST EXPENSE
Deposits 11,949 8,756
Borrowings and junior subordinated debentures 4,331 3,706
- --------------------------------------------------------------------------------------------------
Total interest expense 16,280 12,462
- --------------------------------------------------------------------------------------------------
NET INTEREST INCOME 15,190 14,608
NON-INTEREST INCOME
Insurance commissions and fees 4,991 908
Deposit service fees 1,514 1,286
Wealth management fees 919 756
Loan service fees 309 226
- --------------------------------------------------------------------------------------------------
Total fee income 7,733 3,176
Other 423 418
Gain on sale of securities, net 81 497
- --------------------------------------------------------------------------------------------------
Total non-interest income 8,237 4,091
- --------------------------------------------------------------------------------------------------
TOTAL NET REVENUE 23,427 18,699
PROVISION FOR LOAN LOSSES 750 290
NON-INTEREST EXPENSE
Salaries and employee benefits 8,511 5,653
Occupancy and equipment 2,486 1,931
Marketing, data processing, and professional services 1,947 1,630
Non-recurring expense 153 -
Amortization of intangible assets 662 478
Other 1,650 1,533
- --------------------------------------------------------------------------------------------------
Total non-interest expense 15,409 11,225
Income before income taxes 7,268 7,184
Income tax expense 2,326 2,366
- --------------------------------------------------------------------------------------------------
NET INCOME $ 4,942 $ 4,818
- --------------------------------------------------------------------------------------------------
Basic earnings per share $ 0.57 $ 0.57
- --------------------------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE $ 0.56 $ 0.55
- --------------------------------------------------------------------------------------------------
Weighted average shares outstanding
Basic 8,662 8,476
Diluted 8,841 8,755
F-3
10
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
- ----------------------------------------------------------------------------------------------------------------------------------
Quarters Ended
- ----------------------------------------------------------------------------------------------------------------------------------
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 2007 2006 2006 2006 2006
- ----------------------------------------------------------------------------------------------------------------------------------
INTEREST AND DIVIDEND INCOME
Loans $ 28,522 $ 28,076 $ 26,388 $ 24,017 $ 22,356
Securities and other 2,948 3,305 5,000 4,195 4,714
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest and dividend income 31,470 31,381 31,388 28,212 27,070
INTEREST EXPENSE
Deposits 11,949 11,679 10,766 9,843 8,756
Borrowings and junior subordinated debentures 4,331 4,131 5,019 3,911 3,706
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest expense 16,280 15,810 15,785 13,754 12,462
- ----------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 15,190 15,571 15,603 14,458 14,608
Non-interest income
Insurance commissions and fees 4,991 1,645 623 581 908
Deposit service fees 1,514 1,800 1,334 1,383 1,286
Wealth management fees 919 877 882 772 756
Loan service fees 309 132 209 125 226
- ----------------------------------------------------------------------------------------------------------------------------------
Total fee income 7,733 4,454 3,048 2,861 3,176
Other 423 453 248 520 418
Gain (loss) on sale of securities, net 81 924 (5,080) 529 497
- ----------------------------------------------------------------------------------------------------------------------------------
Total non-interest income 8,237 5,831 (1,784) 3,910 4,091
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL NET REVENUE 23,427 21,402 13,819 18,368 18,699
Provision for loan losses 750 785 6,185 600 290
Non-interest expense
Salaries and employee benefits 8,511 7,296 6,001 5,758 5,653
Occupancy and equipment 2,486 2,061 1,885 1,822 1,931
Marketing, data processing, and professional services 1,947 1,791 1,632 1,595 1,630
Non-recurring expense 153 1,125 - 385 -
Amortization of intangible assets 662 601 478 478 478
Other 1,650 1,778 1,357 1,600 1,533
- ----------------------------------------------------------------------------------------------------------------------------------
Total non-interest expense 15,409 14,652 11,353 11,638 11,225
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations before income taxes 7,268 5,965 (3,719) 6,130 7,184
Income tax expense (benefit) 2,326 1,880 (1,466) 1,888 2,366
NET INCOME (LOSS) FROM CONTINUING OPERATIONS 4,942 4,085 (2,253) 4,242 4,818
Income from discontinued operations before income taxes - 29 217 359 -
Income tax expense - 11 84 138 -
==================================================================================================================================
Net income from discontinued operations - 18 133 221 -
- ----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 4,942 $ 4,103 $ (2,120) $ 4,463 $ 4,818
==================================================================================================================================
Basic earnings (loss) per share
Continuing operations $ 0.57 $ 0.48 $ (0.26) $ 0.50 $ 0.57
Discontinued operations - - 0.01 0.02 -
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 0.57 $ 0.48 $ (0.25) $ 0.52 $ 0.57
- ----------------------------------------------------------------------------------------------------------------------------------
DILUTED EARNINGS (LOSS) PER SHARE
Continuing operations $ 0.56 $ 0.47 $ (0.26) $ 0.48 $ 0.55
Discontinued operations - - 0.01 0.03 -
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 0.56 $ 0.47 $ (0.25) $ 0.51 $ 0.55
- ----------------------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding
Basic 8,662 8,599 8,557 8,512 8,476
Diluted 8,841 8,823 8,557 8,760 8,755
F-4
11
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
ASSET QUALITY ANALYSIS
- -------------------------------------------------------------------------------------------------------------------------------
At or for the Quarters Ended
- -------------------------------------------------------------------------------------------------------------------------------
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(DOLLARS IN THOUSANDS) 2007 2006 2006 2006 2006
- -------------------------------------------------------------------------------------------------------------------------------
NON-PERFORMING ASSETS
Nonaccruing loans:
Residential mortgages $ 22 $ 15 $ 238 $ 234 $ 289
Commercial mortgages 1,346 308 2,427 - -
Commercial business loans 7,049 7,203 2,445 405 480
Consumer loans 124 66 122 133 139
- -------------------------------------------------------------------------------------------------------------------------------
Total nonaccruing loans 8,541 7,592 5,232 772 908
Real estate owned - - - 105 -
- -------------------------------------------------------------------------------------------------------------------------------
Total nonperforming assets $ 8,541 $ 7,592 $ 5,232 $ 877 $ 908
===============================================================================================================================
Total nonperforming loans/total loans 0.49% 0.45% 0.32% 0.05% 0.06%
Total nonperforming assets/total assets 0.39% 0.35% 0.24% 0.04% 0.04%
PROVISION AND ALLOWANCE FOR LOAN LOSSES
Balance at beginning of period $ 19,370 $ 19,154 $ 13,537 $ 13,090 $ 13,001
Charged-off loans (627) (754) (327) (364) (331)
Recoveries on charged-off loans 159 185 184 211 130
- -------------------------------------------------------------------------------------------------------------------------------
Net loans charged-off (468) (569) (143) (153) (201)
Transfer of commitment reserve - - (425) - -
Provision for loan losses 750 785 6,185 600 290
- -------------------------------------------------------------------------------------------------------------------------------
Balance at end of period $ 19,652 $ 19,370 $ 19,154 $ 13,537 $ 13,090
===============================================================================================================================
Allowance for loan losses/nonperforming loans 230% 255% 366% 1753% 1442%
Allowance for loan losses/total loans 1.14% 1.14% 1.18% 0.87% 0.90%
NET LOAN (CHARGE-OFFS) RECOVERIES
Residential mortgages $ - $ - $ - $ (27) $ -
Commercial mortgages - - - - -
Commercial business loans (251) (420) (6) 5 3
Consumer loans (217) (149) (137) (131) (204)
- -------------------------------------------------------------------------------------------------------------------------------
Total net $ (468) $ (569) $ (143) $ (153) $ (201)
===============================================================================================================================
Net charge-offs (annualized)/average loans 0.11% 0.14% 0.04% 0.04% 0.06%
AVERAGE FICO SCORES OF CONSUMER
AUTOMOBILE LOANS 728 726 724 721 719
DELINQUENT LOANS (30-90 DAYS)/TOTAL LOANS 0.28% 0.26% 0.29% 0.40% 0.27%
F-5
12
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
At or for the Quarters Ended
- ------------------------------------------------------------------------------------------------------------------------------------
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
2007 2006 2006 2006 2006
- ------------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE RATIOS
Core return on tangible assets 1.07% 0.91 % 0.97% 0.89 % 0.98%
Return (loss) on total assets 0.92 0.77 (0.37) 0.85 0.94
Core return on tangible equity 15.40 12.97 12.68 11.41 12.63
Return (loss) on total equity 7.57 6.38 (3.15) 7.00 7.64
Net interest margin, fully taxable equivalent 3.24 3.31 3.22 3.16 3.27
Core tangible non-interest income to assets 1.60 0.97 0.63 0.68 0.74
Non-interest income to assets 1.53 1.09 (0.33) 0.75 0.80
Core tangible non-interest expense to assets 2.87 2.54 2.09 2.17 2.21
Non-interest expense to assets 2.86 2.73 2.08 2.23 2.20
Efficiency ratio 61.07 61.42 55.92 58.73 57.48
YEAR-TO-YEAR GROWTH
Total loans 7 % 20 % 20 % 19 % 9 %
Total deposits 3 11 11 14 23
FINANCIAL DATA (IN MILLIONS)
Total assets $ 2,175 $ 2,150 $ 2,205 $ 2,148 $ 2,056
Total loans 1,730 1,699 1,633 1,555 1,453
Total intangible assets 121 121 99 99 99
Total deposits 1,535 1,522 1,488 1,464 1,451
Total stockholders' equity 263 258 255 248 248
Total core income 5.0 4.2 4.7 4.1 4.5
Total net income (loss) 4.9 4.1 (2.1) 4.5 4.8
ASSET QUALITY RATIOS
Net charge-offs (annualized)/average loans 0.11 % 0.14 % 0.04 % 0.04 % 0.06 %
Non-performing assets/total assets 0.39 0.35 0.24 0.04 0.04
Loan loss allowance/total loans 1.14 1.14 1.18 0.87 0.90
Loan loss allowance/nonperforming loans 2.30 x 2.55 x 3.66 x 17.53 x 14.42 x
PER SHARE DATA
Core earnings, diluted $ 0.56 $ 0.48 $ 0.54 $ 0.47 $ 0.51
Net earnings (loss), diluted 0.56 0.47 (0.25) 0.51 0.55
Tangible book value 16.13 15.70 17.96 17.30 17.26
Total book value 29.87 29.63 29.31 28.79 28.79
Market price at period end 33.65 33.46 35.59 35.48 34.94
CAPITAL RATIOS
Stockholders' equity to total assets 12.10 % 12.01 % 11.55 % 11.56 % 12.04 %
Tangible stockholders' equity to tangible assets 6.92 6.75 7.41 7.28 7.59
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(1) Reconciliations of Non-GAAP financial measures, including all references to
core and tangible amounts, appear on page F-9. Tangible assets are total
assets less total intangible assets.
(2) All performance ratios are annualized and are based on average balance
sheet amounts, where applicable.
F-6
13
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
AVERAGE BALANCES
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Quarters Ended
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Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(IN THOUSANDS) 2007 2006 2006 2006 2006
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ASSETS
Loans
Residential mortgages $ 603,858 $ 592,016 $ 576,105 $ 561,444 $ 554,833
Commercial mortgages 577,645 547,096 496,428 450,283 427,891
Commercial business loans 188,194 187,997 185,573 161,618 152,970
Consumer loans 340,563 341,311 327,746 312,813 298,020
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Total loans 1,710,260 1,668,420 1,585,852 1,486,158 1,433,714
Securities 231,035 259,838 398,915 408,542 418,744
Short-term investments 1,915 16,343 1,017 744 1,561
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Total earning assets 1,943,210 1,944,601 1,985,784 1,895,444 1,854,019
Intangible assets 121,059 115,580 98,793 98,944 99,318
Other assets 91,298 88,125 98,307 94,805 90,412
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Total assets $ 2,155,567 $ 2,148,306 $ 2,182,884 $ 2,089,193 $ 2,043,749
===================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
NOW $ 142,403 $ 138,293 $ 131,687 $ 140,103 $ 141,364
Money market 294,015 299,927 283,194 284,447 269,685
Savings 199,517 204,104 212,706 208,345 217,475
Time 702,554 686,818 664,207 643,398 611,324
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Total interest-bearing deposits 1,338,489 1,329,142 1,291,794 1,276,293 1,239,848
Borrowings and debentures 375,730 371,201 445,494 380,131 380,019
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Total interest-bearing liabilities 1,714,219 1,700,343 1,737,288 1,656,424 1,619,867
Non-interest-bearing demand deposits 170,819 178,756 178,535 171,787 168,478
Other liabilities 8,456 10,511 8,221 6,456 5,099
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Total liabilities 1,893,494 1,889,610 1,924,044 1,834,667 1,793,444
Stockholders' equity 262,073 258,696 258,840 254,526 250,305
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Total liabilities and stockholders' equity $ 2,155,567 $ 2,148,306 $ 2,182,884 $ 2,089,193 $ 2,043,749
===================================================================================================================================
SUPPLEMENTARY DATA
Total non-maturity deposits $ 806,754 $ 821,080 $ 806,122 $ 804,682 $ 797,002
Total deposits 1,509,308 1,507,898 1,470,329 1,448,080 1,408,326
Fully taxable equivalent income adj. 553 566 548 506 494
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(1) Average balances for securities available-for-sale are based on amortized cost.
F-7
14
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
AVERAGE YIELDS (FULLY TAXABLE EQUIVALENT - ANNUALIZED)
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Quarters Ended
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Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
2007 2006 2006 2006 2006
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Earning assets
Loans
Residential mortgages 5.29 % 5.29 % 5.24 % 5.19 % 5.09 %
Commercial mortgages 7.47 7.57 7.37 7.32 7.23
Commercial business loans 8.09 7.98 8.31 8.07 7.46
Consumer loans 6.97 7.01 6.94 6.74 6.61
Total loans 6.76 6.68 6.58 6.46 6.21
Securities 6.06 5.64 5.55 4.59 4.96
Short-term investments 5.25 5.25 5.25 4.94 4.45
Total earning assets 6.63 6.52 6.38 6.07 5.99
Funding liabilities
Deposits
NOW 1.54 1.23 0.98 1.02 1.01
Money Market 3.63 3.61 3.51 3.36 3.12
Savings 1.06 1.03 1.02 0.78 0.76
Time 4.77 4.62 4.41 4.17 3.92
Total interest-bearing deposits 3.62 3.49 3.31 3.09 2.86
Borrowings and debentures 4.67 4.42 4.47 4.13 3.96
Total interest-bearing liabilities 3.85 3.69 3.60 3.33 3.12
Net interest spread 2.78 2.83 2.78 2.74 2.87
Net interest margin 3.24 3.31 3.22 3.16 3.27
Cost of funds 3.50 3.34 3.27 3.02 2.83
- -------------------------------------------------------------------------------
(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 had no revenue for Federal Home Loan
Bank dividends due to a delay in the dividend declaration schedule. Third
quarter data includes 2 such dividends, including $420,000 delayed from
the second quarter.
F-8
15
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
- -----------------------------------------------------------------------------------------------------------------------------------
At or for the Quarters Ended
- -----------------------------------------------------------------------------------------------------------------------------------
Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
(DOLLARS IN THOUSANDS) 2007 2006 2006 2006 2006
- -----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 4,942 $ 4,103 $ (2,120) $ 4,463 $ 4,818
Adj: (Gain) loss on sale of securities, net (81) (924) 5,080 (529) (497)
Less: Income from discontinued operations - (29) (217) (359) -
Plus: Loan loss allowance pool adjustment - - 5,512 - -
Plus: Other non-recurring expense 153 1,125 - 385 -
Adj: Income taxes (29) (57) (3,525) 166 164
- -----------------------------------------------------------------------------------------------------------------------------------
Core income (A) 4,985 4,218 4,730 4,126 4,485
Plus: Amort. intangible assets (net of taxes) 444 403 320 320 320
- -----------------------------------------------------------------------------------------------------------------------------------
Tangible core income (B)$ 5,429 $ 4,621 $ 5,050 $ 4,446 $ 4,805
===================================================================================================================================
Total non-interest income $ 8,237 $ 5,831 $ (1,784) $ 3,910 $ 4,091
Adj: (Gain) loss on sale of securities, net (81) (924) 5,080 (529) (497)
- -----------------------------------------------------------------------------------------------------------------------------------
Total core non-interest income (C) 8,156 4,907 3,296 3,381 3,594
Net interest income 15,190 15,571 15,603 14,458 14,608
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Total core revenue (D)$ 23,346 $ 20,478 $ 18,899 $ 17,839 $ 18,202
===================================================================================================================================
Total non-interest expense $ 15,409 $ 14,652 $ 11,353 $ 11,638 $ 11,225
Less: Other non-recurring expense (153) (1,125) - (385) -
- -----------------------------------------------------------------------------------------------------------------------------------
Core non-interest expense (E) 15,256 13,527 11,353 11,253 11,225
Less: Amortization of intangible assets (662) (601) (478) (478) (478)
- -----------------------------------------------------------------------------------------------------------------------------------
Total core tangible non-interest expense (F)$ 14,594 $ 12,926 $ 10,875 $ 10,775 $ 10,747
===================================================================================================================================
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
Total average assets $ 2,156 $ 2,148 $ 2,183 $ 2,089 $ 2,044
Less: Average intangible assets (121) (116) (99) (99) (99)
- -----------------------------------------------------------------------------------------------------------------------------------
Total average tangible assets (G)$ 2,035 $ 2,032 $ 2,084 $ 1,990 $ 1,944
===================================================================================================================================
Total average stockholders' equity $ 262 $ 259 $ 259 $ 255 $ 250
Less: Average intangible assets (121) (116) (99) (99) (99)
- -----------------------------------------------------------------------------------------------------------------------------------
Total average tangible stockholders' equity (H)$ 141 $ 143 $ 160 $ 156 $ 151
===================================================================================================================================
Total stockholders' equity, period-end $ 263 $ 258 $ 255 $ 248 $ 248
Less: Intangible assets, period-end (121) (121) (99) (99) (99)
- -----------------------------------------------------------------------------------------------------------------------------------
Total tangible stockholders' equity, period-end (I)$ 142 $ 137 $ 156 $ 149 $ 149
===================================================================================================================================
Total shares outstanding, period-end (THOUSANDS) (J) 8,807 8,713 8,689 8,622 8,601
Average diluted shares outstanding (THOUSANDS) (K) 8,841 8,823 8,557 8,760 8,755
Core earnings per share (A/K)$ 0.56 $ 0.48 $ 0.54 $ 0.47 $ 0.51
Tangible book value per share (I/J)$ 16.13 $ 15.70 $ 17.96 $ 17.30 $ 17.32
Core return on tangible assets (B/G) 1.07 % 0.91 % 0.97 % 0.89 % 0.98 %
Core return on tangible equity (B/H) 15.40 12.97 12.68 11.41 12.63
Core tangible non-interest income to assets (C/G) 1.60 0.97 0.63 0.68 0.74
Core tangible non-interest exp to assets (F/G) 2.87 2.54 2.09 2.17 2.21
Efficiency ratio 61.07 61.42 55.92 58.73 57.48
- -----------------------------------------------------------------------------------------------------------------------------------
(1) Efficiency ratio is computed by dividing total tangible core non-interest
expense by the sum of total net interest income on a fully taxable
equivalent basis and total core non-interest income. The Company uses
this non-GAAP measure, which is used widely in the banking industry, to
provide important information regarding its operational efficiency.
(2) Ratios are annualized and based on average balance sheet amounts, where
applicable.
(3) In the third quarter 2006, the average diluted shares for core income per
share totaled 8,805,000.
(4) Quarterly data may not sum to year-to-date data due to rounding.
F-9