Berkshire Hills Reports Record Quarterly and Annual Core Earnings; Dividend Announced; Annual Meeting Set

PITTSFIELD, Mass., Jan. 28, 2013 /PRNewswire/ -- Berkshire Hills Bancorp, Inc. (NYSE: BHLB) reported record core earnings of $13.2 million for the fourth quarter and $44.2 million for the year 2012.  Berkshire produced $0.54 in core earnings per share during the quarter, which was a 23% improvement over the prior year fourth quarter and a 4% increase over the third quarter of 2012.  For the full year 2012, Berkshire reported $1.98 in core earnings per share, which was a 29% increase over 2011 core results of $1.54Berkshire has posted three years of consecutive quarterly core earnings growth due to ongoing business expansion and improved profitability. 

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Operations in the last two years have benefited from acquisitions, including Beacon Federal Bancorp which was acquired on October 19, 2012.  GAAP earnings include the impact of net non-core charges for mergers and systems conversions.  GAAP net income totaled $9.3 million ($0.38 per share) for the fourth quarter and a record $33.2 million ($1.49 per share) for the full year in 2012. 

FOURTH QUARTER FINANCIAL HIGHLIGHTS

  • 14% increase in total assets to $5.3 billion, compared to the prior quarter
  • 23% increase in core earnings per share, compared to fourth quarter of 2011
  • 4% increase in core earnings per share, compared to the prior quarter
  • 20% revenue growth, compared to the prior quarter
  • 3.67% net interest margin
  • 13% annualized organic non-maturity deposit growth
  • 10% organic demand deposit growth
  • 0.52% non-performing assets/total assets
  • 0.28% annualized net loan charge-offs/average loans
  • 1.02% core ROA (0.72% GAAP ROA)
  • 8.2% core ROE (5.8% GAAP ROE)

Berkshire Chairman and CEO Michael P. Daly stated, "The success of our business initiatives produced record core earnings and a double digit total stock return for our shareholders in 2012.  We maintained strong organic growth while successfully integrating our bank acquisitions in Northern Connecticut and Central New York, and expanding our lending in Eastern Massachusetts.  Our fourth quarter net interest margin increased and our core return on equity rose above 8%.  With these achievements, we raised our quarterly dividend to the highest level in our history."

Mr. Daly continued, "We have produced these results through positive core operating leverage based on disciplined growth.  We achieved 49% year over year revenue growth in the fourth quarter.  Our total assets reached $5.3 billion, placing us among the 100 largest exchange traded banks in the U.S.  This scale has enabled ongoing infrastructure investment in products and services which we deliver with a responsive local focus in our regions.  We have a competitive advantage that we expect will result in sustainable market share growth delivered with increased efficiency and profitability."

Mr. Daly concluded, "We augmented our balance sheet strength in 2012 while improving our capital efficiency.  Our performance oriented team is focused on the drivers of customer preference and shareholder returns.  We recently set out ambitious three year goals to maintain our market and financial momentum, including double digit metrics for annual growth in per share core earnings and core return on shareholder equity by the end of the plan period.   We are dedicated to delivering on the potential of this franchise and on the promise of our brand and culture as America's Most Exciting Bank®."

DIVIDEND DECLARED

The Board of Directors voted to declare a cash dividend of $0.18 per share to shareholders of record at the close of business on February 14, 2013, payable on February 28, 2013. The dividend was increased in the prior quarter by 6% from the previous $0.17 per share level. This dividend equates to a 3.1% annualized yield based on the $23.03 average closing price of Berkshire's common stock in the fourth quarter of 2012.

ANNUAL MEETING DATE SET

The Board of Directors has voted that the Annual Meeting of Shareholders shall be held on May 9, 2013 at the Crowne Plaza Hotel, One West Street, Pittsfield, Massachusetts at 10:00 a.m. The date of March 14, 2013 was established as the record date for the determination of the shareholders entitled to notice of, and to vote at, the Annual Meeting.

FINANCIAL CONDITION

Assets totaled $5.3 billion at year-end 2012, including $0.8 billion from the Beacon acquisition in October.   For the year 2012, total assets grew by $1.3 billion (33%) from $4.0 billion including the benefit of organic growth together with acquisitions.  Overall measures of asset quality, capital, and liquidity remained strong throughout the year.  Total shares outstanding increased in 2012 by 4 million (19%) to approximately 25.1 million shares primarily as a result of merger consideration. 

For the year, organic loan growth was $156 million (5%), reflecting growth in commercial business loans and residential mortgages.  Including merger impacts, total loan growth was 35% for the year and 17% for the fourth quarter.  Most fourth quarter residential mortgage originations were sold to the secondary market in the low rate environment, and selected commercial loans outstanding were reduced as the Company rebalanced the portfolio composition while absorbing merger related growth. 

Berkshire continues to employ its capital to support the credit needs of its markets and generate shareholder returns.  Organic commercial business loan growth totaled $101 million (25%) for the year.  Berkshire is building business loan volume in its markets as it targets banking relationships with middle market customers who need a full range of products and services provided by a responsive local banking partner.  Berkshire also expanded its small business lending program to facilitate lending across its footprint.  Commercial business loans increased to $600 million during the year, comprising 30% of all commercial loans and 15% of total loans at year-end.

Organic residential mortgage loan growth totaled $125 million (12%) for the year, including the benefit of Berkshire's expanded Eastern Massachusetts mortgage lending team.  Berkshire's mortgage loan originations exceeded $1.1 billion in 2012, responding to strong demand related to improved housing market conditions and low mortgage interest rates.  With the Beacon acquisition, total consumer loans outstanding grew by $282 million (77%) in the fourth quarter.  Beacon's strong consumer lending operations are expected to be a significant new source of loan production for Berkshire as merger integration is accomplished in 2013.

Asset quality metrics remained favorable throughout the year and at year-end.  Non-performing assets were 0.52% of year-end assets.  Fourth quarter annualized net loan charge-offs were 0.28% of average loans  Year-end accruing delinquent loans were 1.11% of loans, increasing modestly from 0.89% at the start of the year including the impact of acquired banks.  The loan loss allowance increased by 2% during the year, while decreasing in comparison to total loans due to the impact of acquired loans recorded at net fair value, which comprised 34% of total year-end loans. 

For the year, organic deposit growth totaled $166 million (5%) primarily due to an increase in low cost transaction account balances.  This was principally in demand deposit balances which posted 27% organic growth for the year, with the largest increase coming in the fourth quarter.  Demand deposits are the focus of relationship based business development for retail and business accounts.  Total commercial deposits increased to $1.3 billion at year-end, providing nearly a third of total deposit funds.  Reflecting customer liquidity preference in the current low rate environment, ongoing transfers of maturing time deposits combined with strong account growth to produce 8% organic savings deposit growth and 7% organic money market account growth for the year.  During the fourth quarter, Berkshire opened additional New York branches in Slingerlands and Wilton, continuing its de novo branch expansion in the greater Albany market where it now has 17 total branch offices.

Total year-end shareholders' equity increased to $666 million in 2012, including $90 million recorded for bank merger equity consideration.  Year-end tangible book value per share increased to $15.56, as capital generation more than offset the impact of merger intangibles resulting from the accretive earnings streams acquired.  Total book value per share increased to $26.53 due mainly to retained earnings.  Berkshire utilized subordinated debt as a significant source of merger consideration in order to take advantage of attractive fixed rate capital available in the low rate environment.  This resulted in the more efficient utilization of equity capital.  Tangible equity/assets remained strong at 7.8% at year-end, compared to 8.7% at the start of the year. 

RESULTS OF OPERATIONS

Berkshire posted strong core growth in revenue, earnings, and earnings per share for the fourth quarter and the year in 2012.  Core profitability improved as a result of the positive operating leverage attributable to revenue growth and disciplined expense management.  Berkshire is achieving these results while bearing the costs of maintaining its asset sensitive interest rate risk profile and absorbing the charges related to its branch and team expansion, and its investment in technology and other infrastructure.  The fourth quarter was the first quarter to include the combined operations of the year's acquisitions, and year-to-year increases include the impact of 2011 acquisitions. 

The fourth quarter core return on equity was 8.2%.  GAAP net income in most periods also reflected non-core charges which were primarily merger related, together with systems conversion costs.  The reconciliation of net income and core income is shown on table F-9 of the financial tables.  Non-core charges in the most recent quarter were primarily related to the Beacon merger.  For the year, non-core charges were within the range of management expectations.  The Company does not view these non-core items as a component of its ongoing operating costs.  Including the impact of non-core items, the fourth quarter GAAP return on equity was 5.8%. 

Berkshire's total fourth quarter net revenue increased by $10.1 million to $59.6 million compared to the linked quarter.  Higher revenues included the benefit of Beacon operations, which produced $6.6 million in revenue for the comparable period in the prior quarter (based on the number of days that Beacon was owned in the fourth quarter).  Fourth quarter revenues also included $1.4 million in net securities gains primarily on Beacon stock held by Berkshire on the merger date.  Excluding the non-core securities gains, core revenues were $58.2 million or $9.54 per share annualized in the most recent quarter.  This is a 26% increase from $7.59 in the fourth quarter of 2011, demonstrating the top line accretive benefit to shareholders from acquisition activities and organic growth. 

The net interest margin improved to 3.67% in the most recent quarter, compared to 3.50% in the prior quarter and to 3.61% in the fourth quarter of 2011.  The total fourth quarter net benefit from loan purchase accounting accretion was $3.2 million compared to $1.1 million in the prior quarter.  This increase contributed 0.18% to the fourth quarter net interest margin and was primarily due to cash recoveries on a small number of acquired impaired loans.  The quarterly net interest margin has varied throughout the year based on the impact of loan prepayments and recoveries on deferred balances and purchase accounting entries.  The cost of deposits decreased to 0.59% in the fourth quarter compared to 0.66% in the prior quarter.  This included the benefit of demand deposit growth, together with the Beacon deposits.  Berkshire continues to maintain its asset sensitive interest rate risk profile in order to enhance its long-term earnings. 

Fourth quarter fee income totaled $15.8 million, increasing by $1.9 million over the prior quarter.  This was primarily due to the benefit of Beacon operations, which produced $1.2 million in fee income in the comparable period of the prior quarter.  Berkshire's fee income in the second half of 2012 has benefited from higher mortgage origination revenues related to increased refinancing demand in the current low rate environment.  Net mortgage origination revenue totaled $5.9 million in the fourth quarter, compared to $4.3 million in the prior quarter.  Fourth quarter insurance revenues increased compared to the prior year primarily due to a managed change in seasonal contingency income.  Near-record quarterly wealth management revenue was achieved in the fourth quarter due to organic growth and improved market conditions.

The fourth quarter provision for loans losses increased to $2.8 million from $2.5 million in the prior quarter.  Net loan charge-offs totaled $2.7 million and $2.3 million in these periods, respectively.  There were no significant changes in the Bank's favorable charge-off metrics or in the metrics related to the loan loss allowance, which increased by $0.1 million to $33.2 million during the quarter.

Fourth quarter core non-interest expense totaled $36.8 million, increasing by $6.8 million from the prior quarter.  This included the impact of the Beacon operations which generated $4.3 million in non-interest expense in the comparable period of the prior quarter.  As Berkshire completes the integration of Beacon operations in 2013, it expects to achieve annual net Beacon related cost savings of $5.5 million based on a 30% gross cost saving target.  The efficiency ratio measured 59.7% in the most recent quarter, increasing from the prior quarter as the Company absorbed additional variable costs related to expansion and integration in anticipation of further efficiency gains in 2013.  Fourth quarter non-recurring and merger related expense totaled $7.5 million and was primarily a result of Beacon merger related expense.  The core effective income tax rate was 29% in the fourth quarter and 30% for the year 2012.  The GAAP effective income tax rate on continuing operations was 25% and 28% for the same periods, respectively, reflecting the higher proportionate benefit of tax preference items on GAAP earnings net of non-core merger charges.

NOTE ON ACCOUNTING CORRECTION

Based on a review of its lease agreements in the most recent quarter, the Company determined that its net income had been overstated by an immaterial amount in prior periods.  The expense recorded for leases with contractual cost escalators has been corrected to reflect a level cost over the contractual lease period, rather than based on the actual current period cost which was previously recorded.  As a result, non-interest expense has been increased, and income tax expense has been decreased based on the tax rate effective for this correction.  This correction was posted to 2012 income in the most recent quarter and to 2011 annual income; it was immaterial to prior quarterly results. Related adjustments have been made to the balance sheets presented for retained earnings, other liabilities, and the tax asset. 

CONFERENCE CALL

Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Tuesday, January 29, 2013 to discuss the results for the quarter and provide guidance about expected future results.  Participants should dial-in to the call a few minutes before it begins.  Information about the conference call follows:

Dial-in:           

888-317-6003

Elite Entry Number:       

8255026

Webcast:                    

berkshirebank.com (investor relations link)

A telephone replay of the call will be available through Tuesday, February 5, 2013 by calling 877-344-7529 and entering conference number: 10023105.  The webcast and a podcast will be available at Berkshire's website above for an extended period of time. 

BACKGROUND

Berkshire Hills Bancorp is the parent of Berkshire Bank – America's Most Exciting Bank®. The Company has approximately $5.3 billion in assets and 75 full service branch offices in Massachusetts, New York, Connecticut, and Vermont providing personal and business banking, insurance, and wealth management services.  Berkshire Bank provides 100% deposit insurance protection for all deposit accounts, regardless of amount, based on a combination of FDIC insurance and the Depositors Insurance Fund (DIF). 

FORWARD LOOKING STATEMENTS

This document may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.  There are several factors that could cause actual results to differ significantly from expectations described in the forward-looking statements. For a discussion of such factors, please see Berkshire's most recent reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission and available on the SEC's website at www.sec.govBerkshire does not undertake any obligation to update forward-looking statements made in this document.

NON-GAAP FINANCIAL MEASURES

This document contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles ("GAAP").  These non-GAAP measures provide supplemental perspectives on operating results, performance trends, and financial condition.  They are not 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.  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, including components for core revenue and expense.  These measures exclude amounts which the Company views as unrelated to its normalized operations, including merger costs, restructuring costs, and systems conversion costs.  Similarly, the efficiency ratio is also adjusted for these non-core items and for tax preference items.  The Company also adjusts certain equity related measures to exclude intangible assets due to the importance of these measures to the investment community.  Non-GAAP expense adjustments are primarily related to charges related to merger and acquisition activity.  These charges consist primarily of severance/benefit related expenses, contract termination costs, and professional fees.  There are additionally non-GAAP adjustments related to non-recurring securities gains, discontinued operations, the disposition of excess properties, and core systems conversion costs.  Tax adjustments are based on an analysis of tax accruals for core income and for GAAP income, with the net difference included with non-core items and reflecting the timing impacts of tax expense estimates.

CONTACTS

Investor Relations Contact
David Gonci; Investor Relations Officer; 413-281-1973

Media Contact
Lori Gazzillo; AVP, Community Relations; 413-822-1695

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-1)




December 31,

September 30,

December 31,


(In thousands)

2012

2012

2011


Assets





Cash and due from banks

$           63,382

$             48,214

$          46,713


Short-term investments

34,862

33,834

28,646


Total cash and short-term investments

98,244

82,048

75,359







Trading security

16,893

17,237

17,395


Securities available for sale, at fair value

466,169

467,444

419,756


Securities held to maturity, at amortized cost

51,024

51,156

58,912


Federal Home Loan Bank stock and other restricted securities

39,785

37,135

37,118


Total securities

573,871

572,972

533,181







Loans held for sale

85,368

114,698

1,455







Residential mortgages

1,324,251

1,226,022

1,020,435


Commercial mortgages

1,413,544

1,255,172

1,156,241


Commercial business loans

600,126

568,781

410,292


Consumer loans

650,733

368,417

369,602


Total loans

3,988,654

3,418,392

2,956,570


Less: Allowance for loan losses

(33,208)

(33,090)

(32,444)


Net loans

3,955,446

3,385,302

2,924,126







Premises and equipment, net

86,461

70,707

60,139


Other real estate owned

1,929

1,399

1,900


Goodwill 

255,199

220,688

202,391


Other intangible assets

19,059

17,991

20,973


Cash surrender value of bank-owned life insurance

88,198

76,904

75,009


Other assets

131,313

92,578

92,362


Assets from discontinued operations

-

-

5,362


Total assets

$      5,295,088

$       4,635,287

$    3,992,257







Liabilities and stockholders' equity





Demand deposits

$         673,921

$          560,452

$        447,414


NOW deposits

379,880

296,219

272,204


Money market deposits

1,388,514

1,183,247

1,055,306


Savings deposits

487,505

381,604

350,517


Total non-maturity deposits

2,929,820

2,421,522

2,125,441


Time deposits

1,170,589

1,028,286

975,734


Total deposits

4,100,409

3,449,808

3,101,175







Senior borrowings

358,471

447,246

221,938


Subordinated notes

89,617

89,602

15,464


Total borrowings

448,088

536,848

237,402







Other liabilities 

81,047

59,267

46,368


Liabilities from discontinued operations

-

-

55,504


Total liabilities

4,629,544

4,045,923

3,440,449







Total stockholders' equity

665,544

589,364

551,808







Total liabilities and stockholders' equity

$      5,295,088

$       4,635,287

$    3,992,257







(1) At year end 2011, four former Legacy New York branches were held for sale as discontinued operations and sold as of January 20, 2012.

(2) The Company acquired The Connecticut Bank and Trust Company ("CBT") on April 20, 2012 with total assets of $0.3 billion.


(3) The Company purchased certain assets and assumed certain limited liabilities of Greenpark Mortgage Corporation ("Greenpark") on April 30, 2012 with total assets of $0.1 billion.

(4) The Company acquired Beacon Federal Bancorp ("Beacon") on October 19, 2012 with total assets of $0.8 billion.


BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED - (F-2)


LOAN ANALYSIS



























Organic annualized growth %

(Dollars in millions)


Dec. 31,
 2012
Balance


Acquired Beacon Balance


Sept. 30,
 2012
Balance


Acquired CBT     Balance


Dec. 31,
2011
Balance


Quarter end

Dec. 31, 2012

Year to date


















Total residential mortgages


$            1,324


$            169


$            1,226


$             10


$            1,020


(23)

%

12

%

















Commercial mortgages:
















Construction


168


9


156


12


124


7


18


Single and multi-family


124


50


91


18


106


(76)


(47)


Commercial real estate


1,122


114


1,008


99


926


(0)


(2)


Total commercial mortgages


1,414


173


1,255


129


1,156


(5)


(4)


















Total commercial business loans

600


33


569


55


411


(1)


25












.






Total commercial loans


2,014


206


1,824


184


1,567


(4)


4


















Consumer loans:
















Home equity 


325


33


302


8


298


(13)


(5)


Other


326


258


66


8


72


14


(16)


Total consumer loans


651


291


368


16


370


(9)


(7)


Total loans


$            3,989


$            666


$            3,418


$           210


$            2,957


(11)

%

5

%

































DEPOSIT ANALYSIS



























Organic annualized growth %

(Dollars in millions)


Dec. 31,
 2012
Balance


Acquired Beacon Balance


Sept. 30,
 2012
Balance


Acquired CBT     Balance


Dec. 31,
2011
Balance


Quarter end

Dec. 31, 2012

Year to date


Demand


$               674


$              56


$               561


$             51


$               447


41

%

27

%

NOW


380


65


296


26


272


26


6


Money market


1,388


201


1,182


60


1,055


2


7


Savings


488


107


382


2


351


(1)


8


Total non-maturity deposits


2,930


429


2,421


139


2,125


13


11


















Total time deposits


1,170


195


1,028


72


976


(20)


(7)


Total deposits


$            4,100


$            624


$            3,449


$           211


$            3,101


3

%

5

%

















(1)  Organic annualized growth rates are calculated on organic growth only, which excludes the impact of mergers and divestitures.  

(2)  Quarterly data may not sum to annualized data due to rounding.

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED - (F-3)







Three Months Ended


Years Ended


December 31,


December 31,

(In thousands, except per share data)

2012


2011


2012


2011

Interest and dividend income    








Loans

$     47,601


$     35,466


$   160,936


$   124,398

Securities and other    

3,887


3,562


15,003


13,862

Total interest and dividend income    

51,488


39,028


175,939


138,260

Interest expense








Deposits

5,870


5,792


22,482


23,372

Borrowings and subordinated debentures

3,653


2,101


10,069


8,368

Total interest expense    

9,523


7,893


32,551


31,740

Net interest income

41,965


31,135


143,388


106,520

Non-interest income








Loan related fees

7,012


856


17,555


3,160

Deposit related fees

4,355


3,848


15,593


13,641

Insurance commissions and fees    

2,565


2,145


10,821


11,088

Wealth management fees    

1,865


1,650


7,296


5,838

Total fee income    

15,797


8,499


51,265


33,727

Other

421


318


1,306


(37)

Gain on sale of securities, net    

1,435


8


1,442


14

Non-recurring (loss) gain

-


-


43


2,099

Total non-interest income      

17,653


8,825


54,056


35,803

Total net revenue

59,618


39,960


197,444


142,323

Provision for loan losses   

2,840


2,263


9,590


7,563

Non-interest expense








Compensation and benefits

18,862


13,172


64,081


49,545

Occupancy and equipment     

5,985


4,063


19,469


15,317

Technology and communications

2,949


2,464


9,467


7,457

Marketing and promotion     

483


419


2,031


1,539

Professional services

1,600


1,146


5,785


4,669

FDIC premiums and assessments

919


542


3,377


3,205

Other real estate owned and foreclosures

66


153


281


2,003

Amortization of intangible assets     

1,357


1,314


5,339


4,236

Non-recurring and merger related expenses     

7,497


3,678


18,019


19,928

Other

4,548


2,579


12,957


8,543

Total non-interest expense     

44,266


29,530


140,806


116,442









Income from continuing operations before income taxes       

12,512


8,167


47,048


18,318

Income tax expense

3,183


609


13,223


1,884

Net income from continuing operations

9,329


7,558


33,825


16,434

(Loss) gain from discontinued operations before income taxes 








     (including gain on disposals $4,962 in 2011 and $63 in 2012)

-


4,692


(261)


4,684

Income tax expense

-


3,773


376


3,770

Net (loss) gain from discontinued operations

-


919


(637)


914

Net income 

$       9,329


$       8,477


$     33,188


$     17,348









Basic earnings per share:








Continuing operations

$          0.39


$          0.36


$          1.52


$          0.92

Discontinued operations

-


0.04


(0.03)


0.05

Total basic earnings per share

$          0.39


$          0.40


$          1.49


$          0.97









Diluted earnings per share:








Continuing operations

$          0.38


$          0.36


$          1.52


$          0.92

Discontinued operations

-


0.04


(0.03)


0.05

Total diluted earnings per share

$          0.38


$          0.40


$          1.49


$          0.97









Weighted average shares outstanding:      








Basic

24,165


20,930


22,201


17,885

Diluted

24,396


21,043


22,329


17,952

















(1) The Company acquired Rome Bancorp on April 1, 2011.  The income statement includes operations from that date. 

(2) The Company acquired Legacy Bancorp on July 21, 2011.  The income statement includes operations from that date. 

(3) The Company acquired CBT on April 20, 2012. The income statement includes operations from that date.

(4) The Company purchased certain assets and assumed certain limited liabilities of Greenpark on April 30, 2012.  The income statement includes operations from that date.

(5) The Company acquired Beacon Federal Bancorp on October 19, 2012. The income statement includes operations from that date.

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED - (F-4)




Quarters Ended


Dec. 31,


Sept. 30,


June 30,


Mar. 31,


Dec. 31,


(In thousands, except per share data)

2012


2012


2012


2012


2011


Interest and dividend income    











Loans

$   47,601


$    39,497


$   38,787


$   35,051


$   35,466


Securities and other    

3,887


3,626


3,869


3,621


3,562


Total interest and dividend income    

51,488


43,123


42,656


38,672


39,028


Interest expense











Deposits

5,870


5,628


5,482


5,502


5,792


Borrowings and subordinated debentures

3,653


2,270


2,121


2,025


2,101


Total interest expense    

9,523


7,898


7,603


7,527


7,893


Net interest income

41,965


35,225


35,053


31,145


31,135


Non-interest income











Loan related fees

7,012


5,646


3,524


1,373


856


Deposit related fees

4,355


3,775


3,963


3,500


3,848


Insurance commissions and fees    

2,565


2,742


2,768


2,746


2,145


Wealth management fees    

1,865


1,774


1,757


1,900


1,650


Total fee income    

15,797


13,937


12,012


9,519


8,499


Other

421


375


269


241


318


Gain on sale of securities, net     

1,435


-


7


-


8


Non-recurring (loss) gain

-


1


-


42


-


Total non-interest income      

17,653


14,313


12,288


9,802


8,825


Total net revenue

59,618


49,538


47,341


40,947


39,960


Provision for loan losses   

2,840


2,500


2,250


2,000


2,263


Non-interest expense











Compensation and benefits

18,862


15,992


15,638


13,589


13,172


Occupancy and equipment     

5,985


4,599


4,490


4,395


4,063


Technology and communications

2,949


2,302


2,258


1,958


2,464


Marketing and promotion  

483


419


778


351


419


Professional services

1,600


1,327


1,493


1,365


1,146


FDIC premiums and assessments

919


907


870


681


542


Other real estate owned and foreclosures

66


42


(6)


179


153


Amortization of intangible assets     

1,357


1,314


1,357


1,311


1,314


Non-recurring and merger related expenses     

7,497


2,214


4,085


4,223


3,678


Other

4,548


3,046


3,221


2,142


2,579


Total non-interest expense     

44,266


32,162


34,184


30,194


29,530













Income from continuing operations before income taxes       

12,512


14,876


10,907


8,753


8,167


Income tax expense 

3,183


4,847


2,921


2,272


609


Net income from continuing operations

9,329


10,029


7,986


6,481


7,558


(Loss) gain from discontinued operations before income taxes 











     (including gain on disposals $4,962 in 2011 and $63 in 2012)

-


-


-


(261)


4,692


Income tax expense (benefit)

-


-


-


376


3,773


Net (loss) gain from discontinued operations

-


-


-


(637)


919


Net income 

$     9,329


$    10,029


$     7,986


$     5,844


$     8,477













Basic earnings per share:











Continuing operations

$        0.39


$        0.46


$        0.37


$        0.31


$        0.36


Discontinued operations

-


-


-


(0.03)


0.04


Total basic earnings per share

$        0.39


$        0.46


$        0.37


$        0.28


$        0.40













Diluted earnings per share:











Continuing operations

$        0.38


$        0.46


$        0.37


$        0.31


$        0.36


Discontinued operations

-


-


-


(0.03)


0.04


Total diluted earnings per share

$        0.38


$        0.46


$        0.37


$        0.28


$        0.40













Weighted average shares outstanding:      











Basic

24,165


21,921


21,742


20,955


20,930


Diluted

24,396


22,031


21,806


21,062


21,043













(1) See notes on pages F-1 and F-3 regarding merger, acquisitions and divestiture.






BERKSHIRE HILLS BANCORP, INC.

ASSET QUALITY ANALYSIS - (F-5)
















At or for the Quarters Ended




Dec. 31,


Sept. 30,


June 30,


Mar. 31,


Dec. 31,

(Dollars in thousands)



2012


2012


2012


2012


2011

NON-PERFORMING ASSETS












Non-accruing loans:












Residential mortgages



$           7,466


$          8,440


$     8,525


$     8,281


$     7,010

Commercial mortgages



12,617


13,552


15,336


12,151


14,280

Commercial business loans



3,681


2,024


1,047


1,029


990

Consumer loans



1,748


1,823


1,209


1,411


1,954

Total non-accruing loans



25,512


25,839


26,117


22,872


24,234

Other real estate owned



1,929


1,399


827


439


1,900

Total non-performing assets



$        27,441


$       27,238


$   26,944


$   23,311


$   26,134













Total non-accruing loans/total loans



0.64%


0.76%


0.78%


0.75%


0.82%

Total non-performing assets/total assets



0.52%


0.59%


0.60%


0.58%


0.65%













PROVISION AND ALLOWANCE FOR LOAN LOSSES










Balance at beginning of period



$        33,090


$       32,868


$   32,657


$   32,444


$   32,181

Charged-off loans



(3,073)


(2,353)


(2,102)


(1,923)


(2,313)

Recoveries on charged-off loans



351


75


63


136


313

Net loans charged-off



(2,722)


(2,278)


(2,039)


(1,787)


(2,000)

Provision for loan losses



2,840


2,500


2,250


2,000


2,263

Balance at end of period



$        33,208


$       33,090


$   32,868


$   32,657


$   32,444













Allowance for loan losses/total loans



0.83%


0.97%


0.98%


1.07%


1.10%

Allowance for loan losses/non-accruing loans



130%


128%


126%


143%


134%













NET LOAN CHARGE-OFFS












Residential mortgages



$         (1,034)


$           (243)


$       (886)


$       (381)


$       (449)

Commercial mortgages



(893)


(1,790)


(378)


(1,116)


(1,198)

Commercial business loans



(496)


(99)


(2)


(3)


(244)

Home equity 



(22)


(90)


(707)


(247)


(90)

Other consumer



(277)


(56)


(66)


(40)


(19)

Total, net



$         (2,722)


$        (2,278)


$   (2,039)


$   (1,787)


$   (2,000)













Net charge-offs (QTD annualized)/average loans 


0.28%


0.27%


0.25%


0.24%


0.27%

Net charge-offs (YTD annualized)/average loans 


0.26%


0.25%


0.24%


0.24%


0.27%













DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS









30-89 Days delinquent



0.63%


0.62%


0.41%


0.55%


0.55%

90+ Days delinquent and still accruing



0.48%


0.38%


0.49%


0.40%


0.34%

Total accruing delinquent loans



1.11%


1.00%


0.90%


0.95%


0.89%

Non-accruing loans



0.64%


0.76%


0.78%


0.75%


0.82%

Total delinquent and non-accruing loans



1.75%


1.76%


1.68%


1.70%


1.71%













(1) Amounts related to loans and deposits of discontinued operations have not been reclassified on the above schedule, 

      although they are reclassified out of loans and deposits on the balance sheet and income statement. 



BERKSHIRE HILLS BANCORP, INC.

SELECTED FINANCIAL HIGHLIGHTS - (F-6)










At or for the Quarters Ended





Dec. 31,


Sept. 30,


June 30,


Mar. 31,


Dec. 31,






2012


2012


2012


2012


2011

















PER SHARE DATA














Core earnings, diluted


$      0.54


$       0.52


$       0.47


$       0.45


$      0.44




Net earnings, diluted


0.38


0.46


0.37


0.28


0.40




Tangible book value


15.56


15.86


15.49


15.81


15.51




Total book value


26.53


26.60


26.31


26.28


26.09




Market price at period end


23.86


22.88


22.00


22.92


22.19




Dividends


0.18


0.17


0.17


0.17


0.17

















PERFORMANCE RATIOS














Core return on assets


1.02

%

1.00

%

0.94

%

0.94

%

0.93

%



Return on assets


0.72


0.88


0.73


0.59


0.85




Core return on equity


8.23


7.81


7.13


6.80


6.74




Return on equity


5.79


6.89


5.58


4.23


6.16




Net interest margin, fully taxable equivalent


3.67


3.50


3.70


3.62


3.61




Fee income/Net interest and fee income


27.35


28.35


25.52


23.44


21.44




Efficiency ratio 


59.68


56.54


59.29


59.27


59.44

















GROWTH














Total commercial loans, year-to-date (annualized)


29

%

22

%

30

%

3

%

29

%



Total loans, year-to-date (annualized)


35


21


27


11


38




Total deposits, year-to-date (annualized)


30


12


16


11


41




Total net revenues, year-to-date, compared to prior year


39


34


45


43


33




Earnings per share, year-to-date, compared to prior year


62


106


110


40


(2)




Core earnings per share, year-to-date, compared to prior year


29


30


39


50


53

















FINANCIAL DATA   (In millions)














Total assets


$    5,294


$     4,634


$     4,508


$     4,029


$    3,992




Total loans


3,989


3,418


3,366


3,039


2,957




Allowance for loan losses


33


33


33


33


32




Total intangible assets


274


239


240


222


223




Total deposits


4,100


3,450


3,410


3,184


3,101




Total stockholders' equity


666


591


583


557


552




Total core income 


13.2


11.4


10.2


9.4


9.3




Total net income


9.3


10.0


8.0


5.8


8.5

















ASSET QUALITY RATIOS














Net charge-offs (current quarter annualized)/average loans


0.28

%

0.27

%

0.25

%

0.24

%

0.27

%



Non-performing assets/total assets


0.52


0.59


0.60


0.58


0.65




Allowance for loan losses/total loans


0.83


0.97


0.98


1.07


1.10




Allowance for loan losses/non-accruing loans


130


128


126


143


134

















CAPITAL RATIOS














Stockholders' equity to total assets


12.60

%

12.75

%

12.94

%

13.82

%

13.82

%



Tangible stockholders' equity to tangible assets


7.81


8.01


8.04


8.80


8.70
















(1) Reconciliation of Non-GAAP financial measures, including all references to core and tangible amounts, appear on pages F-9 and F-10.
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) Amounts related to loans and deposits of discontinued operations have not been reclassified on the above schedule, although they are reclassified out of loans and deposits on the balance sheet and income statement.

BERKSHIRE HILLS BANCORP, INC.

AVERAGE BALANCES - (F-7)




Quarters Ended


Dec. 31, 


Sept. 30, 


June 30, 


Mar. 31, 


Dec. 31, 

(In thousands)

2012


2012


2012


2012


2011

Assets










Loans:










Residential mortgages

$   1,340,375


$   1,207,635


$   1,167,007


$   1,057,903


$ 1,039,025

Commercial mortgages

1,404,515


1,276,909


1,250,741


1,153,690


1,166,989

Commercial business loans

580,436


545,988


490,983


412,237


392,542

Consumer loans

598,802


368,795


375,090


366,035


376,385

Total loans

3,924,128


3,399,327


3,283,821


2,989,865


2,974,941

Securities

572,268


559,116


549,479


525,109


515,128

Short-term investments and loans held for sale

126,378


115,835


47,302


15,107


20,748

Total earning assets

4,622,774


4,074,278


3,880,602


3,530,081


3,510,817

Goodwill and other intangible assets

267,588


239,186


235,961


223,930


230,864

Other assets

320,104


258,246


235,712


235,909


247,376

Total assets

$   5,210,466


$   4,571,710


$   4,352,275


$   3,989,920


$ 3,989,057











Liabilities and stockholders' equity










Deposits:










NOW

$      355,366


$      291,158


$      297,431


$      272,239


$    274,041

Money market

1,362,868


1,170,840


1,136,161


1,084,948


953,162

Savings

463,692


376,064


370,182


359,859


446,672

Time

1,161,175


1,039,301


1,038,662


983,696


1,028,817

Total interest-bearing deposits

3,343,101


2,877,363


2,842,436


2,700,742


2,702,692

Borrowings and debentures

519,831


531,076


398,650


257,389


248,611

Total interest-bearing liabilities

3,862,932


3,408,439


3,241,086


2,958,131


2,951,303

Non-interest-bearing demand deposits

635,044


537,466


498,972


439,015


448,952

Other liabilities 

68,447


43,047


39,665


40,039


38,110

Total liabilities

4,566,423


3,988,952


3,779,723


3,437,185


3,438,365











Total stockholders' equity

644,043


582,758


572,552


552,735


550,692











Total liabilities and stockholders' equity

$   5,210,466


$   4,571,710


$   4,352,275


$   3,989,920


$ 3,989,057





















Supplementary data










Total non-maturity deposits

$   2,816,970


$   2,375,528


$   2,302,746


$   2,156,061


$ 2,122,827

Total deposits

3,978,145


3,414,829


3,341,408


3,139,757


3,151,644

Fully taxable equivalent income adj.

667


623


638


669


674





















(1) Average balances for securities available-for-sale are based on amortized cost.  Total loans include non-accruing loans.

(2) Amounts related to loans and deposits of discontinued operations have not been reclassified on the above schedule, 

      although they are reclassified out of loans and deposits on the balance sheet and income statement. 

BERKSHIRE HILLS BANCORP, INC.

AVERAGE YIELDS  (Fully Taxable Equivalent - Annualized) - (F-8)













Quarters Ended


Dec. 31,


Sept. 30,


June 30,


Mar. 31,


Dec. 31,



2012


2012


2012


2012


2011













Earning assets











Loans:











Residential mortgages

4.00

%

4.28

%

4.58

%

4.63

%

4.68

%

Commercial loans

5.29


4.85


5.00


4.89


4.98


Consumer loans

4.56


3.97


3.93


3.98


4.03


Total loans

4.73


4.62


4.75


4.72


4.74


Securities

3.17


3.02


3.30


3.29


3.26


Short-term investments and loans held for sale

2.86


2.15


0.63


0.07


0.14


Total earning assets

4.49


4.27


4.49


4.48


4.49













Funding liabilities











Deposits:











NOW

0.35


0.28


0.30


0.26


0.39


Money Market

0.45


0.47


0.49


0.55


0.62


Savings

0.18


0.18


0.18


0.20


0.19


Time

1.31


1.48


1.44


1.51


1.52


Total interest-bearing deposits

0.70


0.78


0.78


0.82


0.87


Borrowings and debentures

2.80


1.70


2.14


3.16


3.35


Total interest-bearing liabilities

0.98


0.92


0.95


1.02


1.06













Net interest spread

3.51


3.35


3.54


3.46


3.43


Net interest margin

3.67


3.50


3.70


3.62


3.61













Cost of funds

0.84


0.80


0.82


0.89


0.92


Cost of deposits

0.59


0.66


0.66


0.71


0.73













(1) Cost of funds includes all deposits and borrowings.

(2) Amounts related to loans and deposits of discontinued operations have not been reclassified on the above schedule, 

      although they are reclassified out of loans and deposits on the balance sheet and income statement. 

BERKSHIRE HILLS BANCORP, INC.


RECONCILIATION OF NON-GAAP FINANCIAL MEASURES - (F-9)










At or for the Quarters Ended




Dec. 31, 


Sept. 30, 


June 30, 


Mar. 31, 


Dec. 31, 


(Dollars in thousands)


2012


2012


2012


2012


2011


Net income 


$     9,329


$   10,029


$     7,986


$     5,844


$     8,477


Adj: Gain on sale of securities, net


(1,435)


-


(7)


-


(8)


Adj:  Other non-recurring gain


-


(1)


-


(42)


-


Plus: Non-recurring and merger related expense


7,497


2,214


4,085


4,223


3,678


Adj:  Income taxes


(2,147)


(859)


(1,853)


(1,255)


(1,947)


Adj: Net loss (income) from discontinued operations


-


-


-


637


(919)


Total core income

(A)

$   13,244