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[BERKSHIRE HILLS BANCORP, INC. LETTERHEAD]
BERKSHIRE HILLS REPORTS $0.49 THIRD QUARTER CORE EPS
TOTAL ASSETS CLIMB TO $2.5 BILLION FOLLOWING VERMONT ACQUISITION
BALANCE SHEET STRENGTHENED BY DELEVERAGING
PITTSFIELD, MA - October 29, 2007 - Berkshire Hills Bancorp (NASDAQ: BHLB),
parent of Berkshire Bank, reported 2007 third quarter core income of $4.4
million ($0.49 per share). Core income increased by $0.01 per share before
one-time items and Berkshire's investment in new branches. Third quarter core
2006 income was $4.7 million ($0.54 per share). Last year's results included a
$0.03 per share one-time catch-up dividend received from the Federal Home Loan
Bank of Boston (FHLBB). Berkshire's investment in de novo branches increased
expenses by $0.03 per share to $0.07 per share in this year's third quarter,
compared to $0.04 per share in 2006 (all per share numbers are after-tax).
Berkshire's GAAP third quarter net income totaled $0.9 million ($0.10 per share)
in 2007, compared to a loss of $2.1 million ($0.25 per share) in 2006. The most
recent quarter included after-tax non-core charges of $3.5 million ($0.38 per
share) related to a balance sheet deleveraging and integration costs in
association with the Factory Point Bancorp acquisition, together with expense
restructure costs. In the third quarter of 2006, results included after-tax
non-core charges of $7.1 million ($0.82 per share), including $3.6 million
($0.42 per share) for an adjustment of the loan loss allowance and $3.5 million
($0.40 per share) related to a balance sheet repositioning.
THIRD QUARTER HIGHLIGHTS INCLUDE:
o COMPLETED ACQUISITION OF FACTORY POINT BANCORP IN MANCHESTER CENTER,
VERMONT ON SEPTEMBER 21, ADDING 7 BRANCHES, BRINGING TOTAL OFFICES TO
48 LOCATIONS IN 3 STATES
o 11% ANNUALIZED ORGANIC GROWTH IN TRANSACTION DEPOSIT ACCOUNT BALANCES
o 9% LINKED QUARTER ORGANIC GROWTH IN BANK FEE INCOME (EXCLUDING
SEASONAL INSURANCE FEES AND FEES FROM FACTORY POINT)
o NET INTEREST MARGIN INCREASED TO 3.20% FROM 3.15% IN THE LINKED QUARTER
o 5% ANNUALIZED ORGANIC LOAN GROWTH
For the first nine months of 2007, Berkshire reported a 5% increase in core
income to $14.0 million ($1.57 per share), compared to $13.3 million ($1.52 per
share) in the first nine months of 2006. The benefit from acquired insurance
agencies and organic growth has more than offset the $0.11 per share increase in
Berkshire's investment in de novo branch costs (after-tax). Nine month GAAP net
income increased by 46% in 2007, totaling $10.5 million ($1.17 per share),
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compared to $7.2 million ($0.82 per share) in 2006. Nine month results in both
years were affected by the third quarter non-core items discussed previously.
Michael P. Daly, President and Chief Executive Officer, stated, "Berkshire had a
solid third quarter. Our year-to-date core EPS increased 3% due to our growth
initiatives. Our net interest margin increased during the quarter, benefiting
from a focused pricing culture. We anticipate future benefit from the recent
reduction in interest rates by the Federal Reserve Bank. Our primary bank
revenue drivers of loan growth, transaction deposit growth, and fee income
growth all contributed to our progress in the third quarter and for the
year-to-date. Excluding seasonal insurance fees, we generated positive
sequential operating leverage through a combination of revenue growth and
expense reductions."
Remarking further, Mr. Daly said, "We were very pleased to complete the
acquisition of Factory Point Bancorp of Manchester Center, Vermont on September
21 on schedule. The 7 branches of Factory Point in Southern Vermont have brought
us to a total of 48 banking and insurance offices located in Massachusetts, New
York, and Vermont. This acquisition brought us to $2.5 billion in total assets,
and our market capitalization on the merger date exceeded $340 million. We feel
very comfortable that we will achieve our 25% cost save goal with this
acquisition, and we are pleased with our integration progress and the excitement
of our Southern Vermont team. We also reported after-tax non-core charges of
$0.38 per share resulting from our merger and the associated restructuring of
our balance sheet, along with an expense restructure. These actions improve the
capital and liquidity ratios of our combined bank, and reduce our interest rate
risk. They are expected to benefit our future net interest income, net interest
margin, and efficiency ratio. We also expect to exceed the $0.04 annual EPS
accretion we targeted for the Factory Point acquisition. Taken together, these
actions improve our outlook for quality earnings growth supported by a stronger
balance sheet."
Mr. Daly continued, "In last year's third quarter, we recorded an increase in
the loan loss allowance due to our assessment that benign credit conditions had
ended. We feel that our conclusion was borne out by economic events since that
time, although we also feel that our local markets have been sheltered from the
excesses we are now seeing in other markets. While we have seen some increases
in delinquencies and nonperforming loans, these primarily consist of a small
number of commercial loans. We feel that our credit disciplines are working to
contain loan losses. Neither Berkshire nor Factory Point have operated subprime
lending programs or purchased investment securities backed by subprime
mortgages. We wrote-down our largest nonperforming loan by $1.5 million during
the quarter. After the Factory Point acquisition, we ended the quarter with our
allowance at 1.14% of total loans, which is unchanged from the start of the
year. We have moderated our loan growth this year as we maintain our risk
management focus in this softer economic environment."
Mr. Daly concluded, "We also strengthened our executive team during the quarter.
We have been very impressed with the quality of the Factory Point operation, and
we were quite pleased that its President, Guy Boyer, has agreed to join our
management team. Guy's extensive knowledge of our markets will be an asset to
our overall business development. We announced in March that Kevin Riley was
named Chief Financial Officer; Kevin officially started on August 1 and our
earnings are already benefiting from his efforts. John Millet, previously
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SVP/Controller, was promoted to Chief Operating Officer of Berkshire Insurance
Group where he can help manage the growth and integration of this important
business segment. In September, we were pleased to welcome Stephen Souky, CPA as
Vice President and Controller. Steve brings considerable experience from his
previous position as SVP Finance at NBT Bancorp. We feel that we have assembled
an exceptional executive team to take us to higher levels of performance and
market success as a regional bank. Additionally, we recently welcomed Factory
Point Director, Susan M. Hill, as a Director of Berkshire. Susan is a CPA and we
are pleased that she will contribute her perspective and expertise to our
governance."
DIVIDEND DECLARED
- -----------------
The Board of Directors declared a quarterly cash dividend of $0.15 per share.
The dividend will be payable to stockholders of record at the close of business
on November 8, 2007, and will be distributed on or about November 22, 2007. In
the second quarter of 2007, Berkshire increased the quarterly cash dividend by
7% from $0.14 per share.
FACTORY POINT ACQUISITION
- -------------------------
On September 21, 2007, Berkshire completed the acquisition of Factory Point
Bancorp, adding seven branches in Southern Vermont, and increasing the total
number of bank and insurance offices to 48 locations in Massachusetts, New York,
and Vermont. Concurrent with this merger, Factory Point National Bank of
Manchester Center was merged into Berkshire Bank. This acquisition was completed
on schedule, and was funded with 80% stock and 20% cash. Total merger
consideration was $79 million, including $16 million in cash and $61 million in
stock based on the issuance of 1.91 million shares of common stock recorded at
$32.03 per share, as well as the assumption of stock options valued at $2
million. Total direct merger costs of $4 million (net of taxes) were recorded as
goodwill.
Assets acquired totaled $391 million and liabilities acquired totaled $306
million. Goodwill totaling $53 million was recorded for this acquisition and is
not expected to be deductible for tax purposes. A $7 million core deposit
premium intangible asset was recorded and will be amortized on an accelerated
basis over eight years. The merger integration is proceeding well and the
Company expects to achieve its goal of 25% cost savings by the end of 2007. The
Company also expects to exceed the $0.04 targeted annual EPS accretion and to
achieve double digit medium term cash return on equity (before amortization
expense) based on future revenue growth. Acquired earnings are expected to
provide surplus capital available for potential stock repurchases and other
capital uses.
BALANCE SHEET DELEVERAGING
- --------------------------
In conjunction with the completion of the Factory Point acquisition, Berkshire
sold assets totaling $82 million as part of a deleveraging program. The total
loss recorded on the deleveraging was $3.8 million. This deleveraging was
designed to improve the capital and liquidity ratios of the combined bank, and
to reduce interest rate sensitivity by liquidating certain longer duration
assets. The assets sold had an estimated duration of 5.1 years and an average
book yield of 4.9%. Assets sold consisted of $32 million of mortgage backed
securities and $50
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million of residential mortgages; these assets were all prime conventional
mortgage related products. All sale proceeds were used to pay down FHLBB
borrowings, including $48 million of callable borrowings with an average
maturity of about 2 years and an average cost of about 5.7%. The remaining
borrowings paid off were overnight borrowings. This deleveraging will also
benefit earnings, including an estimated 10 basis point initial increase in the
net interest margin, and first year incremental net interest income of
approximately $350 thousand.
Additionally, approximately $35 million of longer duration Factory Point
securities were liquidated, including approximately $25 million of municipal
securities and $10 million of other debt securities. Approximately $10 million
were sold prior to the merger date, with the remainder sold shortly after that
date. These securities were marked to market as of the acquisition date, and
they were sold for an amount that approximated this value. Accordingly, there
was no significant income impact recorded for Berkshire related to the sale of
these Factory Point securities. Proceeds from these securities sales were being
reinvested in short term mortgage backed securities at quarter-end.
Despite the deleveraging, total investment securities increased by $13 million
during the quarter due to the addition of $68 million of acquired Factory Point
securities, consisting mostly of conventional government agency and mortgage
backed securities, and municipal bonds. Total borrowings included $34 million in
acquired Factory Point borrowings. Total borrowings were also impacted by
borrowings totaling $15 million which were used by Berkshire to fund cash
consideration paid in the acquisition.
FINANCIAL CONDITION
- -------------------
Most major categories of assets and liabilities increased in the third quarter
primarily due to the Factory Point acquisition. Loans, investments, and
borrowings were also affected by the deleveraging. Total assets increased by
$302 million to $2.47 billion at quarter-end from $2.17 billion at mid-year.
Total loans increased to $1.94 billion from $1.73 billion. Linked quarter
organic loan growth totaled $23 million (5% annualized). This organic growth
included $22 million (14% annualized) in residential mortgages and $12 million
(37% annualized) in commercial construction loans. Linked quarter organic growth
also included $3 million (3% annualized) in consumer loans, while all other
commercial loans decreased by $14 million (9% annualized). Berkshire expanded
its prime residential mortgage lending, and commercial construction loan growth
primarily reflected seasonal funding of construction commitments. The decrease
in all other commercial loans primarily reflected selective runoff targeted by
the Company.
Nonperforming assets measured 0.48% of total assets at quarter-end, compared to
0.42% at the prior quarter-end. Performing delinquent loans were 0.71% of total
loans at quarter-end, compared to 0.36% at the prior quarter-end. This primarily
related to an increase in 30 day delinquent commercial loans. Third quarter net
loan charge-offs totaled $1.9 million which increased from $0.6 million in the
prior quarter. This included a $1.5 million write-down on the Company's largest
nonperforming loan, a commercial business loan, which was reduced to $4.7
million after the write-down. This charge reflected a decrease in estimated
collateral values for this credit, which is in bankruptcy. The Company had
previously established a $1.0 million
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reserve on this loan. The annualized year-to-date rate of net loan charge-offs
was 0.23%. The ratio of the loan loss allowance to total loans increased to
1.14% at quarter-end from 1.11% at the start of the quarter. This ratio included
the impact from the completion of the Factory Point acquisition, and also
benefited from the sale of $50 million of residential mortgages in the balance
sheet deleveraging.
Non-maturity deposits grew by $10 million (5% annualized) from organic growth,
led by transaction deposits, which grew at an 11% annualized organic growth
rate. This reflected account growth in de novo branches, and Berkshire's
strategy of promoting checking accounts. Additionally, Berkshire has emphasized
savings and money market account promotions, and has reduced promotion of
higher-costing time deposits. Due to run-off of these higher costing deposits,
total deposits decreased at a 2% annualized organic rate in the third quarter,
and the average cost of deposits decreased by 0.03% compared to the linked
quarter.
Stockholders' equity increased due to the issuance of shares for the Factory
Point acquisition. Goodwill increased by $56 million, including $53 million
related to the Factory Point acquisition, and $3 million related to contingent
payables for insurance agencies acquired in 2006. Total book value per share
increased to $30.82 from $30.12, while tangible book value per share decreased
to $13.79 from $16.40. The ratio of total equity to assets increased to 13.4%
from 12.3%, including the benefit of the new shares issued and the balance sheet
deleveraging. The ratio of tangible equity to assets decreased to 6.5% from
7.1%.
RESULTS OF OPERATIONS
- ---------------------
Most major categories of income and expense increased in the third quarter,
including the benefit of the Factory Point acquisition, which contributed
approximately $0.02 per share to earnings for the quarter. Core earnings
declined by $0.03 per share from the linked quarter, due to a seasonal $0.07 per
share decline in insurance segment revenues (after tax), which was partially
offset by a $0.02 contribution from Factory Point operations. Non-interest
expense related to the investment in the de novo branch program was $0.07 per
share after tax for each of the last two quarters, compared to $0.04 per share
in the third quarter of 2006. GAAP earnings declined by $0.42 per share from the
linked quarter due primarily to the previously mentioned non-core charges.
Year-to-year third quarter net interest income decreased by $0.1 million due to
the $0.4 million catch-up FHLBB dividend received in 2006. Adjusting for the
catch-up FHLBB dividend, net interest income increased year-to-year by $0.3
million (2%). The net interest margin increased to 3.20% in the most recent
quarter from 3.15% in the linked quarter, and decreased slightly from 3.22%
compared to the third quarter of 2006. The linked quarter increase in the margin
included the benefit of revised deposit strategies and the higher margin from
Factory Point.
Year-to-year third quarter fee income increased by $2.8 million (92%) primarily
due to a $2.0 million increase in insurance fees related to new insurance
agencies acquired in the fourth quarter of 2006. Banking fee income increased by
$0.8 million (32%) due to organic growth and new checking account convenience
services introduced in the fourth quarter of 2006. Insurance fees decreased
seasonally by $1.1 million in the most recent quarter compared to the linked
quarter, while banking fees increased by $0.4 million, including a $0.3 million
increase in loan
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fees and $0.1 million in Factory Point fee income. Total wealth management
assets increased during the quarter to $783 million, including about $230
million in assets previously managed by Factory Point. Assets under management
increased 59% from year-end 2006.
Third quarter non-interest expense increased year-to-year by $5.2 million,
including $1.6 million in non-core charges. Total core expense increased by $3.6
million (32%), including the impact of the insurance agency acquisitions, higher
de novo branch costs, and organic growth. Linked quarter core non-interest
expense decreased by $120 thousand (3% annualized) due to lower compensation
expense. The Company initiated an expense reduction program in the third
quarter, and recorded $0.5 million of non-core restructuring charges, net of
$0.5 million in expense recovery credits. Non-core merger integration charges
totaled $1.1 million. No income tax expense was recorded in the most recent
quarter, as tax-exempt municipal bond and life insurance revenues exceeded
pre-tax income due to the non-core charges recorded.
CONFERENCE CALL
- ---------------
Berkshire will conduct a conference call at 10:00 A.M. eastern time on Tuesday,
October 30, 2007. President and Chief Executive Officer Michael P. Daly and
Executive Vice President and Chief Financial Officer Kevin P. Riley will discuss
highlights of the Company's third 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
Replay Access Codes: Account #286; Conference ID #257323
(Both are needed to access the Replay)
Replay Dates: October 30, 2007 at 1:00 P.M. (ET) through
November 5, 2007 at 11:59 P.M. (ET)
Webcast replay: www.berkshirebank.com
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 Riley 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 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, Northeastern New York and Southern Vermont. The Bank is
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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 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.
Forward-looking statements can be identified by the fact that they do not relate
strictly to historical or current facts. They often include words like
"believe," "expect," "anticipate," "estimate," and "intend" or future or
conditional verbs such as "will," "would," "should," "could" or "may." 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. 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.
This news release also contains certain forward-looking statements about the
merger of Berkshire Hills Bancorp and Factory Point Bancorp. These statements
include anticipated future operating results. Certain factors that could cause
actual results to differ materially from expected results include delays,
difficulties in achieving cost savings from the merger or in achieving such cost
savings within the expected time frame, difficulties in integrating Berkshire
Hills Bancorp and Factory Point, increased competitive pressures, changes in the
interest rate environment, changes in general economic conditions, legislative
and regulatory changes that adversely affect the business in which Berkshire
Hills Bancorp is engaged, changes in the securities markets and other risks and
uncertainties disclosed from time to time in documents that Berkshire Hills
Bancorp files with the Securities and Exchange Commission.
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
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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. During the third
quarter of 2007, the Company identified charges in conjunction with the
acquisition of Factory Point Bancorp as non-core in the computation of core
earnings. These charges included indirect merger costs and balance sheet
deleveraging costs. Additionally, expense restructuring costs were deemed as
non-core.
CONTACTS
- --------
Kevin P. Riley,
Executive Vice President and Chief Financial Officer
413-236-3195
David H. Gonci
Corporate Finance Officer
413-281-1973
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BERKSHIRE HILLS BANCORP
CONSOLIDATED BALANCE SHEETS - UNAUDITED
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September 30, June 30, December 31,
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(IN THOUSANDS) 2007 2007 2006
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ASSETS
Total cash and cash equivalents $ 33,882 $ 25,913 $ 30,985
Securities available for sale, at fair value 194,374 184,122 194,206
Securities held to maturity, at amortized cost 41,978 39,642 39,968
Residential mortgages 658,594 618,442 599,273
Commercial mortgages 694,650 594,974 567,074
Commercial business loans 203,594 172,299 189,758
Consumer loans 381,688 344,527 342,882
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Total loans 1,938,526 1,730,242 1,698,987
Less: Allowance for loan losses (22,108) (19,151) (19,370)
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Net loans 1,916,418 1,711,091 1,679,617
Premises and equipment, net 38,578 31,537 29,130
Goodwill 161,296 105,051 104,531
Other intangible assets 21,876 15,474 16,810
Cash surrender value of life insurance policies 35,027 30,836 30,338
Other assets 28,633 25,966 24,057
- ----------------------------------------------------------------------------------------------------------------------
Total assets $ 2,472,062 $ 2,169,632 $ 2,149,642
- ----------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand deposits $ 228,731 $ 178,673 $ 178,109
NOW deposits 207,326 134,978 153,087
Money market deposits 388,251 323,838 297,155
Savings deposits 212,065 195,439 202,213
- ----------------------------------------------------------------------------------------------------------------------
Total non-maturity deposits 1,036,373 832,928 830,564
Brokered time deposits 26,578 29,098 41,741
Other time deposits 733,193 666,488 649,633
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Total time deposits 759,771 695,586 691,374
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Total deposits 1,796,144 1,528,514 1,521,938
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Borrowings 316,095 353,083 345,005
Junior subordinated debentures 15,464 15,464 15,464
Other liabilities 13,713 6,219 9,074
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Total liabilities 2,141,416 1,903,280 1,891,481
Total stockholders' equity 330,646 266,352 258,161
- ----------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 2,472,062 $ 2,169,632 $ 2,149,642
- ----------------------------------------------------------------------------------------------------------------------
F-1
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BERKSHIRE HILLS BANCORP
CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED
- ------------------------------------------------------------------------------------------------------------------------------------
LOAN ANALYSIS
-------------
September 30, June 30, December 31,
2007 2007 2006
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(DOLLARS IN MILLIONS) (1) Acq. (2) Organic (2) Organic
FAPB Total w/o annualized annualized
Balance Balance FAPB growth rate Balance growth rate Balance
- ------------------------------------------------------------------------------------------------------------------------------------
Residential mortgages:
1 - 4 Family $ 612 $ 64 $ 548 14 % $ 578 3 % $ 567
Construction 47 5 42 20 40 71 32
- ------------------------------------------------------------------------------------------------------------------------------------
Total residential mortgages 659 69 590 14 618 7 599
Commercial mortgages:
Construction 147 6 141 37 129 (9) 130
Single and multi-family 62 - 62 - 62 (24) 65
Other commercial mortgages 487 91 396 (8) 404 12 372
- ------------------------------------------------------------------------------------------------------------------------------------
Total commercial mortgages 696 97 599 3 595 3 567
Commercial business loans 204 39 166 (14) 172 (36) 190
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Total commercial loans 900 136 765 (1) 767 (6) 757
Consumer loans:
Auto 208 5 203 (2) 204 4 196
Home equity and other 172 27 145 11 141 - 147
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Total consumer loans 380 32 348 3 345 2 343
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Total loans $ 1,939 $ 237 $ 1,703 5 % $ 1,730 - % $ 1,699
- ------------------------------------------------------------------------------------------------------------------------------------
DEPOSIT ANALYSIS
----------------
September 30, June 30, December 31,
2007 2007 2006
-----------------------------------------------------------------------------------------------
(DOLLARS IN MILLIONS) (1) Acq. (2) Organic (2) Organic
FAPB Total w/o annualized annualized
Balance Balance FAPB growth rate Balance growth rate Balance
- ------------------------------------------------------------------------------------------------------------------------------------
Demand $ 229 $ 46 $ 183 9 % $ 179 9 % $ 178
NOW 207 67 140 15 135 (33) 153
Money market 388 64 324 - 324 17 297
Savings 212 16 196 2 195 (6) 202
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Total non-maturity deposits 1,036 193 843 5 833 1 830
Time less than $100,000 424 54 370 (6) 376 (5) 370
Time $100,000 or more 309 27 282 (12) 291 (4) 280
Brokered time 27 - 27 (28) 29 - 42
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Total time deposits 760 81 679 (10) 696 (5) 692
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Total deposits $ 1,796 $ 274 $ 1,522 (2) % $ 1,529 (2) % $ 1,522
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(1) Acquired Factory Point Bancorp, Inc. ("FAPB") loans and deposits at
September 21, 2007.
(2) September 30, 2007 organic annualized growth rate is calculated on organic
growth only, which excludes the FAPB acquired balances and $50 million in
residential mortgage loans sold during September. The annualized growth
rates for September and June were both compared to prior quarter ends.
F-2
11
BERKSHIRE HILLS BANCORP
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
- ----------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
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(IN THOUSANDS, EXCEPT PER SHARE DATA) 2007 2006 2007 2006
- ----------------------------------------------------------------------------------------------- -------------------------------
INTEREST AND DIVIDEND INCOME
Loans $ 29,719 $ 26,388 $ 87,393 $ 72,761
Securities and other 2,912 5,000 8,702 13,909
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Total interest and dividend income 32,631 31,388 96,095 86,670
INTEREST EXPENSE
Deposits 12,581 10,766 36,849 29,365
Borrowings and junior subordinated debentures 4,571 5,019 13,539 12,636
- ----------------------------------------------------------------------------------------------------------------------------------
Total interest expense 17,152 15,785 50,388 42,001
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NET INTEREST INCOME 15,479 15,603 45,707 44,669
NON-INTEREST INCOME
Insurance commissions and fees 2,661 623 11,438 2,112
Deposit service fees 1,825 1,334 5,127 4,003
Wealth management fees 1,044 882 2,931 2,410
Loan service fees 324 209 681 560
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Total fee income 5,854 3,048 20,177 9,085
Other 433 248 1,160 1,186
Loss on sale of securities, net (672) (5,080) (591) (4,054)
Loss on prepayment of borrowings, net (1,180) - (1,180) -
Loss on sale of loans, net (1,991) - (1,991) -
- ----------------------------------------------------------------------------------------------------------------------------------
Total non-interest income 2,444 (1,784) 17,575 6,217
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TOTAL NET REVENUE 17,923 13,819 63,282 50,886
PROVISION FOR LOAN LOSSES 390 6,185 1,240 7,075
NON-INTEREST EXPENSE
Salaries and employee benefits 7,891 6,001 24,632 17,412
Occupancy and equipment 2,418 1,885 7,289 5,638
Marketing, data processing, and professional services 2,260 1,632 6,323 4,857
Non-recurring expense 1,606 - 1,758 385
Amortization of intangible assets 684 478 2,008 1,434
Other 1,730 1,357 5,092 4,490
- ----------------------------------------------------------------------------------------------------------------------------------
Total non-interest expense 16,589 11,353 47,102 34,216
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations before income taxes 944 (3,719) 14,940 9,595
Income tax expense (benefit) - (1,466) 4,478 2,788
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) FROM CONTINUING OPERATIONS 944 (2,253) 10,462 6,807
Income from discontinued operations before income taxes - 217 - 576
Income tax expense - 84 - 222
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCOME FROM DISCONTINUED OPERATIONS - 133 - 354
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 944 $ (2,120) $ 10,462 $ 7,161
- ----------------------------------------------------------------------------------------------------------------------------------
BASIC EARNINGS (LOSS) PER SHARE
Continuing operations $ 0.11 $ (0.26) $ 1.19 $ 0.80
Discontinued operations - 0.01 - 0.04
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 0.11 $ (0.25) $ 1.19 $ 0.84
- ----------------------------------------------------------------------------------------------------------------------------------
DILUTED EARNINGS (LOSS) PER SHARE
Continuing operations $ 0.10 $ (0.26) $ 1.17 $ 0.78
Discontinued operations - 0.01 - 0.04
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 0.10 $ (0.25) $ 1.17 $ 0.82
- ----------------------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding
Basic 8,922 8,557 8,774 8,516
Diluted 9,045 8,557 8,921 8,776
F-3
12
BERKSHIRE HILLS BANCORP
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED
- ------------------------------------------------------------------------------------------------------------------------------------
Quarters Ended
- ------------------------------------------------------------------------------------------------------------------------------------
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
(IN THOUSANDS, EXCEPT PER SHARE DATA) 2007 2007 2007 2006 2006
- ------------------------------------------------------------------------------------------------------------------------------------
INTEREST AND DIVIDEND INCOME
Loans $ 29,719 $ 29,152 $ 28,522 $ 28,076 $ 26,388
Securities and other 2,912 2,842 2,948 3,305 5,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest and dividend income 32,631 31,994 31,470 31,381 31,388
INTEREST EXPENSE
Deposits 12,581 12,318 11,949 11,679 10,766
Borrowings and junior subordinated debentures 4,571 4,638 4,331 4,131 5,019
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest expense 17,152 16,956 16,280 15,810 15,785
- ------------------------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME 15,479 15,038 15,190 15,571 15,603
Non-interest income
Insurance commissions and fees 2,661 3,786 4,991 1,645 623
Deposit service fees 1,825 1,788 1,514 1,800 1,334
Wealth management fees 1,044 968 919 877 882
Loan service fees 324 48 309 132 209
- ------------------------------------------------------------------------------------------------------------------------------------
Total fee income 5,854 6,590 7,733 4,454 3,048
Other 433 303 423 453 248
(Loss) gain on sale of securities, net (672) - 81 924 (5,080)
Loss on prepayment of borrowings, net (1,180) - - - -
Loss on sale of loans, net (1,991) - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total non-interest income 2,444 6,893 8,237 5,831 (1,784)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL NET REVENUE 17,923 21,931 23,427 21,402 13,819
PROVISION FOR LOAN LOSSES 390 100 750 785 6,185
Non-interest expense
Salaries and employee benefits 7,891 8,230 8,511 7,296 6,001
Occupancy and equipment 2,418 2,385 2,486 2,061 1,885
Marketing, data processing, and professional services 2,260 2,116 1,947 1,791 1,632
Non-recurring expense 1,606 - 153 1,125 -
Amortization of intangible assets 684 662 662 601 478
Other 1,730 1,710 1,650 1,778 1,357
- ------------------------------------------------------------------------------------------------------------------------------------
Total non-interest expense 16,589 15,103 15,409 14,652 11,353
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations before income taxes 944 6,728 7,268 5,965 (3,719)
Income tax expense (benefit) - 2,152 2,326 1,880 (1,466)
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) FROM CONTINUING OPERATIONS 944 4,576 4,942 4,085 (2,253)
Income from discontinued operations before income taxes - - - 29 217
Income tax expense - - - 11 84
- ------------------------------------------------------------------------------------------------------------------------------------
Net income from discontinued operations - - - 18 133
- ------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 944 $ 4,576 $ 4,942 $ 4,103 $ (2,120)
- ------------------------------------------------------------------------------------------------------------------------------------
Basic earnings (loss) per share
Continuing operations $ 0.11 $ 0.52 $ 0.57 $ 0.48 $ (0.26)
Discontinued operations - - - - 0.01
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 0.11 $ 0.52 $ 0.57 $ 0.48 $ (0.25)
- ------------------------------------------------------------------------------------------------------------------------------------
DILUTED EARNINGS (LOSS) PER SHARE
Continuing operations $ 0.10 $ 0.52 $ 0.56 $ 0.47 $ (0.26)
Discontinued operations - - - - 0.01
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 0.10 $ 0.52 $ 0.56 $ 0.47 $ (0.25)
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding
Basic 8,922 8,732 8,662 8,599 8,557
Diluted 9,045 8,875 8,842 8,823 8,557
F-4
13
BERKSHIRE HILLS BANCORP AND SUBSIDIARIES
ASSET QUALITY ANALYSIS
- ------------------------------------------------------------------------------------------------------------------------------------
At or for the Quarters Ended
- ------------------------------------------------------------------------------------------------------------------------------------
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
(DOLLARS IN THOUSANDS) 2007 2007 2007 2006 2006
- ------------------------------------------------------------------------------------------------------------------------------------
NON-PERFORMING ASSETS
Nonaccruing loans:
Residential mortgages $ 623 $ 533 $ 22 $ 15 $ 238
Commercial mortgages 4,977 1,580 1,346 308 2,427
Commercial business loans 5,553 6,816 7,049 7,203 2,445
Consumer loans 274 210 124 66 122
- ------------------------------------------------------------------------------------------------------------------------------------
Total nonaccruing loans 11,427 9,139 8,541 7,592 5,232
Real estate owned 348 - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total nonperforming assets $ 11,775 $ 9,139 $ 8,541 $ 7,592 $ 5,232
- ------------------------------------------------------------------------------------------------------------------------------------
Total nonperforming loans/total loans 0.59% 0.53% 0.49% 0.45% 0.32%
Total nonperforming assets/total assets 0.48% 0.42% 0.39% 0.35% 0.24%
PROVISION AND ALLOWANCE FOR LOAN LOSSES
Balance at beginning of period $ 19,151 $ 19,652 $ 19,370 $ 19,154 $ 13,537
Charged-off loans (1,954) (678) (627) (754) (327)
Recoveries on charged-off loans 68 77 159 185 184
- ------------------------------------------------------------------------------------------------------------------------------------
Net loans charged-off (1,886) (601) (468) (569) (143)
Transfer of commitment reserve - - - - (425)
Acquired allowance 4,453 - - - -
Provision for loan losses 390 100 750 785 6,185
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at end of period $ 22,108 $ 19,151 $ 19,652 $ 19,370 $ 19,154
- ------------------------------------------------------------------------------------------------------------------------------------
Allowance for loan losses/nonperforming loans 193% 210% 230% 255% 366%
Allowance for loan losses/total loans 1.14% 1.11% 1.14% 1.14% 1.18%
NET LOAN CHARGE-OFFS
Residential mortgages $ - $ - $ - $ - $ -
Commercial mortgages - - - - -
Commercial business loans (1,497) (406) (251) (420) (6)
Consumer loans (389) (195) (217) (149) (137)
- ------------------------------------------------------------------------------------------------------------------------------------
Total net $ (1,886) $ (601) $ (468) $ (569) $ (143)
- ------------------------------------------------------------------------------------------------------------------------------------
Net charge-offs (YTD annualized)/average loans 0.23% 0.12% 0.11% 0.07% 0.04%
AVERAGE FICO SCORES OF CONSUMER
AUTOMOBILE LOANS 729 730 728 726 724
DELINQUENT LOANS / TOTAL LOANS
Performing loans (30 days or more delinquent) 0.71% 0.36% 0.38% 0.26% 0.29%
Nonperforming loans 0.59% 0.53% 0.49% 0.45% 0.32%
- ------------------------------------------------------------------------------------------------------------------------------------
Total delinquent loans 1.30% 0.89% 0.87% 0.71% 0.61%
- ------------------------------------------------------------------------------------------------------------------------------------
F-5
14
BERKSHIRE HILLS BANCORP AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------------------------
At or for the Quarters Ended
--------------------------------------------------------------------------
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
2007 2007 2007 2006 2006
--------------------------------------------------------------------------
PERFORMANCE RATIOS
Core return on tangible assets 0.93 % 0.97 % 1.07 % 0.91 % 0.97 %
Return (loss) on total assets 0.18 0.84 0.92 0.77 (0.37)
Core return on tangible equity 13.04 13.75 15.40 12.97 12.68
Return (loss) on total equity 1.44 6.86 7.57 6.38 (3.15)
Net interest margin, fully taxable equivalent 3.20 3.15 3.24 3.31 3.22
Core tangible non-interest income to assets 1.21 1.33 1.60 0.97 0.63
Non-interest income to assets 0.44 1.26 1.53 1.09 (0.33)
Core tangible non-interest expense to assets 2.74 2.80 2.87 2.54 2.09
Non-interest expense to assets 3.00 2.76 2.86 2.73 2.08
Efficiency ratio 64.13 64.27 61.07 61.42 55.92
ANNUALIZED YEAR-TO-DATE GROWTH
Total loans 4 % - % 7 % 20 % 20 %
Total deposits - (2) 3 11 11
FINANCIAL DATA (IN MILLIONS)
Total assets $ 2,472 $ 2,170 $ 2,175 $ 2,150 $ 2,205
Total loans 1,939 1,730 1,730 1,699 1,633
Total intangible assets 183 121 121 121 99
Total deposits 1,796 1,529 1,535 1,522 1,488
Total stockholders' equity 331 266 263 258 255
Total core income 4.4 4.6 5.0 4.2 4.7
Total net income (loss) 0.9 4.6 4.9 4.1 (2.1)
ASSET QUALITY RATIOS
Net charge-offs YTD annualized/average loans 0.23 % 0.12 % 0.11 % 0.07 % 0.04 %
Non-performing assets/total assets 0.48 0.42 0.39 0.35 0.24
Loan loss allowance/total loans 1.14 1.11 1.14 1.14 1.18
Loan loss allowance/nonperforming loans 1.93 x 2.10 x 2.30 x 2.55 x 3.66 x
PER SHARE DATA
Core earnings, diluted $ 0.49 $ 0.52 $ 0.56 $ 0.48 $ 0.54
Net earnings (loss), diluted 0.10 0.52 0.56 0.47 (0.25)
Tangible book value 13.79 16.40 16.13 15.70 17.96
Total book value 30.82 30.12 29.87 29.63 29.31
Market price at period end 30.23 31.51 33.65 33.46 35.59
CAPITAL RATIOS
Stockholders' equity to total assets 13.38 % 12.28 % 12.10 % 12.01 % 11.55 %
Tangible stockholders' equity to tangible assets 6.47 7.08 6.92 6.75 7.41
- -------------------------------------------------------------------------------------------------------------------------------
(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.
(3) September 30, 2007 annualized year-to-date growth is calculated on organic
growth only, which excludes the FAPB acquired balances and $50 million in
residential mortgage loans sold during September.
F-6
15
BERKSHIRE HILLS BANCORP AND SUBSIDIARIES
AVERAGE BALANCES
- ------------------------------------------------------------------------------------------------------------------------------------
Quarters Ended
----------------------------------------------------------------------------------------
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
(IN THOUSANDS) 2007 2007 2007 2006 2006
----------------------------------------------------------------------------------------
ASSETS
Loans
Residential mortgages $ 634,374 $ 612,289 $ 603,858 $ 592,016 $ 576,105
Commercial mortgages 608,891 593,134 577,645 547,096 496,428
Commercial business loans 171,334 191,967 188,194 187,997 185,573
Consumer loans 349,311 344,069 340,563 341,311 327,746
- ------------------------------------------------------------------------------------------------------------------------------------
Total loans 1,763,910 1,741,459 1,710,260 1,668,420 1,585,852
Securities 224,207 228,471 231,035 259,838 398,915
Short-term investments 4,511 5,232 1,915 16,343 1,017
- ------------------------------------------------------------------------------------------------------------------------------------
Total earning assets 1,992,628 1,975,162 1,943,210 1,944,601 1,985,784
Intangible assets 126,797 120,698 121,059 115,580 98,793
Other assets 93,165 91,320 91,298 88,125 98,307
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 2,212,590 $ 2,187,180 $ 2,155,567 $ 2,148,306 $ 2,182,884
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
NOW $ 141,529 $ 140,089 $ 142,403 $ 138,293 $ 131,687
Money market 329,943 309,675 294,015 299,927 283,194
Savings 198,372 195,551 199,517 204,104 212,706
Time 701,062 703,595 702,554 686,818 664,207
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing deposits 1,370,906 1,348,910 1,338,489 1,329,142 1,291,794
Borrowings and debentures 374,537 386,044 375,730 371,201 445,494
- ------------------------------------------------------------------------------------------------------------------------------------
Total interest-bearing liabilities 1,745,443 1,734,954 1,714,219 1,700,343 1,737,288
Non-interest-bearing demand deposits 186,654 178,356 170,819 178,756 178,535
Other liabilities 4,298 7,359 8,456 10,511 8,221
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 1,936,395 1,920,669 1,893,494 1,889,610 1,924,044
Stockholders' equity 276,195 266,511 262,073 258,696 258,840
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 2,212,590 $ 2,187,180 $ 2,155,567 $ 2,148,306 $ 2,182,884
- ------------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTARY DATA
Total non-maturity deposits $ 856,498 $ 823,671 $ 806,754 $ 821,080 $ 806,122
Total deposits 1,557,560 1,527,266 1,509,308 1,507,898 1,470,329
Fully taxable equivalent income adj. 533 540 553 566 548
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Average balances for securities available-for-sale are based on amortized
cost.
F-7
16
BERKSHIRE HILLS BANCORP AND SUBSIDIARIES
AVERAGE YIELDS (FULLY TAXABLE EQUIVALENT - ANNUALIZED)
- ---------------------------------------------------------------------------------------------------------------------
Quarters Ended
--------------------------------------------------------------------------------
Sept. 30, June 30, Mar. 31, Dec. 31, Sept.30,
2007 2007 2007 2006 2006
--------------------------------------------------------------------------------
Earning assets
Loans
Residential mortgages 5.35 % 5.36 % 5.29 % 5.29 % 5.24 %
Commercial mortgages 7.49 7.55 7.47 7.57 7.37
Commercial business loans 8.06 7.81 8.09 7.98 8.31
Consumer loans 7.03 6.98 6.97 7.01 6.94
Total loans 6.68 6.71 6.76 6.68 6.58
Securities 6.15 5.92 6.06 5.64 5.55
Short-term investments 5.25 5.25 5.25 5.25 5.25
Total earning assets 6.70 6.63 6.63 6.52 6.38
Funding liabilities
Deposits
NOW 1.40 1.50 1.54 1.23 0.98
Money Market 3.67 3.73 3.63 3.61 3.51
Savings 1.17 1.08 1.06 1.03 1.02
Time 4.69 4.78 4.77 4.62 4.41
Total interest-bearing deposits 3.64 3.66 3.62 3.49 3.31
Borrowings and debentures 4.84 4.82 4.67 4.42 4.47
Total interest-bearing liabilities 3.90 3.92 3.85 3.69 3.60
Net interest spread 2.80 2.71 2.78 2.83 2.78
Net interest margin 3.20 3.15 3.24 3.31 3.22
Cost of funds 3.52 3.55 3.50 3.34 3.27
- ---------------------------------------------------------------------------------------------------------------------
(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
17
BERKSHIRE HILLS BANCORP AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
- ------------------------------------------------------------------------------------------------------------------------------
At or for the Quarters Ended
- ------------------------------------------------------------------------------------------------------------------------------
Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
(DOLLARS IN THOUSANDS) 2007 2007 2007 2006 2006
- ------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 944 $ 4,576 $ 4,942 $ 4,103 $ (2,120)
Adj: Loss (gain) on sale of securities, net 672 - (81) (924) 5,080
Adj: Loss on prepayment of borrowings, net 1,180 - - - -
Adj: Loss on sale of loans, net 1,991 - - - -
Less: Income from discontinued operations - - - (29) (217)
Plus: Loan loss allowance pool adjustment - - - - 5,512
Plus: Other non-recurring expense 1,606 - 153 1,125 -
Adj: Income taxes (1,995) - (29) (57) (3,525)
- ------------------------------------------------------------------------------------------------------------------------------
Core income (A) 4,398 4,576 4,985 4,218 4,730
Plus: Amort. intangible assets (net of taxes) 458 444 444 403 320
- ------------------------------------------------------------------------------------------------------------------------------
Tangible core income (B) $ 4,856 $ 5,020 $ 5,429 $ 4,621 $ 5,050
- ------------------------------------------------------------------------------------------------------------------------------
Total non-interest income $ 2,444 $ 6,893 $ 8,237 $ 5,831 $ (1,784)
Adj: Loss (gain) on sale of securities, net 672 - (81) (924) 5,080
Adj: Loss on prepayment of borrowings, net 1,180 - - - -
Adj: Loss on sale of loans, net 1,991 - - - -
- ------------------------------------------------------------------------------------------------------------------------------
Total core non-interest income (C) 6,287 6,893 8,156 4,907 3,296
Net interest income 15,479 15,038 15,190 15,571 15,603
- ------------------------------------------------------------------------------------------------------------------------------
Total core revenue (D) $ 21,766 $ 21,931 $ 23,346 $ 20,478 $ 18,899
- ------------------------------------------------------------------------------------------------------------------------------
Total non-interest expense $ 16,589 $ 15,103 $ 15,409 $ 14,652 $ 11,353
Less: Other non-recurring expense (1,606) - (153) (1,125) -
- ------------------------------------------------------------------------------------------------------------------------------
Core non-interest expense (E) 14,983 15,103 15,256 13,527 11,353
Less: Amortization of intangible assets (684) (662) (662) (601) (478)
- ------------------------------------------------------------------------------------------------------------------------------
Total core tangible non-interest expense (F) $ 14,299 $ 14,441 $ 14,594 $ 12,926 $ 10,875
- ------------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
Total average assets $ 2,213 $ 2,187 $ 2,156 $ 2,148 $ 2,183
Less: Average intangible assets (127) (121) (121) (116) (99)
- ------------------------------------------------------------------------------------------------------------------------------
Total average tangible assets (G) $ 2,086 $ 2,066 $ 2,035 $ 2,032 $ 2,084
- ------------------------------------------------------------------------------------------------------------------------------
Total average stockholders' equity $ 276 $ 267 $ 262 $ 259 $ 259
Less: Average intangible assets (127) (121) (121) (116) (99)
- ------------------------------------------------------------------------------------------------------------------------------
Total average tangible stockholders' equity (H) $ 149 $ 146 $ 141 $ 143 $ 160
- ------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity, period-end $ 331 $ 266 $ 263 $ 258 $ 255
Less: Intangible assets, period-end (183) (121) (121) (121) (99)
- ------------------------------------------------------------------------------------------------------------------------------
Total tangible stockholders' equity, period-end (I) $ 148 $ 145 $ 142 $ 137 $ 156
- ------------------------------------------------------------------------------------------------------------------------------
Total shares outstanding, period-end (thousands) (J) 10,729 8,842 8,807 8,713 8,689
Average diluted shares outstanding (THOUSANDS) (K) 9,045 8,875 8,842 8,823 8,557
Core earnings per share (A/K) $ 0.49 $ 0.52 $ 0.56 $ 0.48 $ 0.54
Tangible book value per share (I/J) $ 13.79 $ 16.40 $ 16.13 $ 15.70 $ 17.96
Core return on tangible assets (B/G) 0.93 % 0.97 1.07 % 0.91 % 0.97 %
Core return on tangible equity (B/H) 13.04 13.75 15.40 12.97 12.68
Core tangible non-interest income to assets (C/G) 1.21 1.33 1.60 0.97 0.63
Core tangible non-interest exp to assets (F/G) 2.74 2.80 2.87 2.54 2.09
Efficiency ratio 64.13 64.27 61.07 61.42 55.92
- ------------------------------------------------------------------------------------------------------------------------------
(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
18
BERKSHIRE HILLS BANCORP AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
- -------------------------------------------------------------------------------------------------------------
For Nine Months Ended
- -----------------------------------------------------------------------------------------------------------
September 30,
(DOLLARS IN THOUSANDS) 2007 2006
- -----------------------------------------------------------------------------------------------------------
Net income (loss) $ 10,462 $ 7,161
Adj: Loss (gain) on sale of securities, net 591 4,054
Adj: Loss on prepayment of borrowings, net 1,180 -
Adj: Loss on sale of loans, net 1,991 -
Less: Income from discontinued operations - (576)
Plus: Loan loss allowance pool adjustment - 5,512
Plus: Other non-recurring expense 1,758 385
Adj: Income taxes (2,023) (3,195)
- -----------------------------------------------------------------------------------------------------------
Core income (A) 13,959 13,341
Plus: Amort. intangible assets (net of taxes) 1,346 961
- -----------------------------------------------------------------------------------------------------------
Tangible core income (B) $ 15,305 $ 14,302
- -----------------------------------------------------------------------------------------------------------
Total non-interest income 17,574 $ 6,217
Adj: Loss (gain) on sale of securities, net 591 4,054
Adj: Loss on prepayment of borrowings, net 1,180 -
Adj: Loss on sale of loans, net 1,991 -
- -----------------------------------------------------------------------------------------------------------
Total core non-interest income (C) 21,336 10,271
Net interest income 45,707 44,669
- -----------------------------------------------------------------------------------------------------------
Total core revenue (D) $ 67,043 $ 54,940
- -----------------------------------------------------------------------------------------------------------
Total non-interest expense $ 47,101 $ 34,216
Less: Other non-recurring expense (1,758) (385)
- -----------------------------------------------------------------------------------------------------------
Core non-interest expense (E) 45,343 33,831
Less: Amortization of intangible assets (2,008) (1,434)
- -----------------------------------------------------------------------------------------------------------
Total core tangible non-interest expense (F) $ 43,335 $ 32,397
- -----------------------------------------------------------------------------------------------------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
Total average assets $ 2,175 $ 2,105
Less: Average intangible assets (121) (99)
- -----------------------------------------------------------------------------------------------------------
Total average tangible assets (G) $ 2,054 $ 2,006
- -----------------------------------------------------------------------------------------------------------
Total average stockholders' equity $ 264 $ 254
Less: Average intangible assets (121) (99)
- -----------------------------------------------------------------------------------------------------------
Total average tangible stockholders' equity (H) $ 143 $ 155
- -----------------------------------------------------------------------------------------------------------
Total stockholders' equity, period-end $ 331 $ 255
Less: Intangible assets, period-end (183) (99)
- -----------------------------------------------------------------------------------------------------------
Total tangible stockholders' equity, period-end (I) $ 148 $ 156
- -----------------------------------------------------------------------------------------------------------
Total shares outstanding, period-end (THOUSANDS) (J) 10,729 8,689
Average diluted shares outstanding (THOUSANDS) (K) 8,921 8,776
Core earnings per share (A/K) $ 1.57 $ 1.52
Tangible book value per share (I/J) $ 13.79 $ 17.96
Core return on tangible assets (B/G)% 0.99 % 0.95 %
Core return on tangible equity (B/H) 14.30 12.26
Core tangible non-interest income to assets (C/G) 1.39 0.68
Core tangible non-interest exp to assets (F/G) 2.81 2.15
Efficiency ratio 63.10 57.35
- -----------------------------------------------------------------------------------------------------------
(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) Quarterly data may not sum to year-to-date data due to rounding.
F-10