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Berkshire Hills Reports 34% Second Quarter Core EPS Growth; Dividend Declared

LOGO. (PRNewsFoto/Berkshire Hills Bancorp, Inc.) (PRNewsFoto/)

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Berkshire Hills Bancorp

Jul 24, 2012, 04:10 ET

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PITTSFIELD, Mass., July 24, 2012 /PRNewswire/ -- Berkshire Hills Bancorp, Inc. (NASDAQ: BHLB) reported $0.47 in second quarter core earnings per share, a 34% increase over second quarter 2011 core earnings of $0.35 per share.  For the first half of the year, Berkshire reported $0.92 in core earnings per share in 2012, which was a 40% increase over 2011 first half core results of $0.66 per share.  This growth resulted from positive operating leverage related to ongoing business expansion.  Earnings in both years were also affected by net non-core charges which were primarily merger related.  Including non-core charges, second quarter GAAP earnings per share totaled $0.37 in 2012, compared to $0.11 in 2011.  For the first half of the year, GAAP earnings per share totaled $0.65 in 2012, compared to $0.31 in 2011.

(Logo:  http://photos.prnewswire.com/prnh/20120131/NE44966LOGO )

SECOND QUARTER FINANCIAL HIGHLIGHTS

  • 34% increase in core earnings per share, compared to second quarter of 2011
  • 4% increase in core earnings per share, compared to the prior quarter
  • 12% increase in total assets
  • 16% revenue growth, compared to the prior quarter
  • 9% annualized organic commercial loan growth
  • 5% annualized organic growth in non-maturity deposits
  • 3.70% net interest margin
  • 0.60% non-performing assets/total assets
  • 0.25% annualized net loan charge-offs/average loans
  • 0.94% core ROA (0.73% GAAP ROA)
  • 59% efficiency ratio

Berkshire President and CEO, Michael P. Daly, stated, "Our earnings momentum remains strong due to our growth initiatives and financial disciplines.  This has generated positive operating leverage from higher revenue and controlled expense management.  We produced 14% organic loan growth and 6% organic deposit growth in the first half of the year, which contributed to the 16% increase in our second quarter revenue.  We carefully managed our business mix to improve our profitability as reflected in our key metrics.  We are generating tangible equity from core operations at a $2.12 annualized per share pace as we generate capital to provide shareholder return and to support ongoing growth and expansion.  We are on plan to achieve the earnings and profitability growth that we have targeted for the year."

Mr. Daly continued, "During the second quarter, we completed the acquisition of CBT – The Connecticut Bank and Trust Company and added the operations of Greenpark Mortgage.  These partnerships were completed on time and on plan, and we are moving forward with our integration plans.  On May 31, we announced our agreement to acquire Beacon Federal Bancorp headquartered in East Syracuse, New York.  We expect to complete this merger in the fourth quarter of this year.  This acquisition is expected to produce $0.22 in core EPS accretion in 2013.  It complements our growing business volumes from the teams we have recruited in Central and Eastern Massachusetts and from our new branches in the Albany area, including new offices in Colonie and North Greenbush, and a relocation in Delmar.  Berkshire was recently named among the Globe 100 list of the top-performing companies in Massachusetts published by the Boston Globe.  We were also named among the U.S. Top 100 in the 2012 Investor Perception Survey published by IR Magazine in association with Bloomberg.  We're proud that our active community involvement included nearly $700 thousand in philanthropic contributions from our foundations in the first half of 2012.  Our team is delivering solid results for all of our constituencies as we strengthen our franchise in our four state market area."

DIVIDEND DECLARED

The Board of Directors voted to declare a cash dividend of $0.17 per share to shareholders of record at the close of business on August 9, 2012, payable on August 23, 2012.  This dividend provides a 3.1% yield based on the $22.06 average closing price of Berkshire's common stock during the second quarter of 2012.

FINANCIAL CONDITION

Berkshire maintained positive organic growth momentum in targeted business lines in the second quarter, while managing other balances in connection with the acquisitions of CBT – The Connecticut Bank and Trust Company on April 20, 2012 and the operations of Greenpark Mortgage on April 30, 2012.  Total assets increased by 12% to $4.5 billion from $4.0 billion during the quarter, including approximately $0.3 billion related to CBT and $0.1 billion related to Greenpark.  Most major categories of assets, liabilities, and equity increased as a result of these acquisitions.  Including the acquired balances, overall measures of asset quality, capital, and liquidity remained strong. 

Total loans increased by $327 million (11%) during the second quarter, including $207 million acquired with CBT.  Organic commercial loan growth was $37 million (9% annualized) primarily due to growth in commercial business loans, including asset based loans.  Berkshire continues to build business volume in Central Massachusetts and New York where it has been expanding its lending offices and branches.  Including the new Greenpark operations, residential mortgage originations increased and secondary market mortgage sales also grew.  The Bank added a managed volume to the mortgage portfolio while continuing to maintain an asset sensitive interest rate risk profile.  Total loans increased at a 14% organic growth rate for the first half of the year.

Second quarter asset quality metrics remained favorable.  At midyear, non-performing assets were 0.60% of total assets, compared to 0.65% at the start of the year.  Annualized net loan charge-offs measured 0.25% of average loans for the second quarter and 0.24% for the first half of the year.  Accruing delinquent loans were 0.90% of total loans at midyear, compared to 0.89% at the start of the year.  Under accounting standards for business combinations, the CBT loan loss allowance was not transferred to Berkshire along with the CBT loans.  Estimated losses inherent in CBT's loan portfolio were recorded as charges against the fair value of CBT loans on the merger date.  As a result, the ratio of the allowance to total loans decreased to 0.98% from 1.07% during the most recent quarter.  The ratio of the allowance to nonperforming loans measured 126% at quarter-end.

Berkshire managed its funding sources to lessen the interest costs related to acquisitions, while also continuing ongoing promotions related to organic expansion. Total deposits increased by $226 million (7%) during the second quarter, including $211 million acquired with CBT.   Berkshire posted 5% annualized organic growth in non-maturity account balances in the most recent quarter, with 9% annualized growth for the first half of the year.  Berkshire continues to promote lower cost relationship oriented accounts in all of its markets, along with commercial deposits associated with its increased originations of commercial business loans and small business loans.  The Company managed an organic decrease in time accounts in the most recent quarter as higher cost certificate accounts rolled off.  Low cost overnight borrowings were utilized to fund organic loan growth and the increase in mortgage loans held for sale related to the acquired Greenpark operations.

Berkshire issued 965 thousand shares for the CBT acquisition at an average value of $22.80 based on the closing price of Berkshire's stock prior to the acquisition.  Total shareholders' equity increased by $26 million primarily due to the benefit of this stock issuance.  Total intangible assets increased by $18 million as a result of the accounting for business combinations related to CBT and Greenpark.  Tangible book value per share was $15.49 at midyear compared to $15.60 at the start of the year, including the merger related impacts.  From its second quarter core operations, Berkshire generated $2.12 per share annualized in tangible common equity based on its core earnings and the amortization of intangible assets.   Total book value per share was $26.31 at midyear, compared to $26.17 at the start of the year.  The ratio of tangible equity/assets decreased to 8.0% from 8.8% during the first half of the year including the impact of the CBT and Greenpark acquisitions.  The ratio of total equity/assets was 12.9% and 13.9% at midyear and the start of the year, respectively.

RESULTS OF OPERATIONS

Berkshire posted strong core growth in revenue, earnings, and earnings per share for the second quarter and first half of the year.  Most core profitability measures also increased as a result of the positive operating leverage produced by the revenue growth.  Core return on assets was 0.94% in the second quarter, while the core return on equity improved to 7.1%.  Net income reflected non-core charges which were primarily merger related.  Including non-core items, the second quarter return on assets and return on equity were 0.73% and 5.6% respectively.

Second quarter results in 2012 included the operations of CBT and Greenpark since the dates of their acquisitions, together with the per share impact of shares issued in the CBT acquisition.  Most categories of income and expense increased due to these acquisitions, and year-to-year increases include the impact of the Rome and Legacy acquisitions in 2011.  As a result, the following discussion primarily compares the second quarter of 2012 to the prior quarter. 

Total net revenue increased by $6.4 million (16%) in the second quarter of 2012, compared to the prior quarter.  Revenue included the contribution from CBT, which produced $2.1 million in revenue for a comparable period in the prior quarter.  Revenue also included $2.4 million in revenue related to the acquired Greenpark operations.  Total revenue per share increased by 12% to $8.68 annualized.   Revenue growth included 13% growth in net interest income and 25% growth in non-interest income.  The growth in net interest income included the benefit of higher average earning assets and an increase in the net interest margin to 3.70% from 3.62% in the prior quarter.  As previously noted, Berkshire managed its funding to reduce interest costs; the cost of funds decreased to 0.82% in the second quarter from 0.89% in the prior quarter.  The yield on earning assets included the benefit of prepayments on accretable commercial loan yield.  Non-interest income included a $2.2 million increase in loan related revenue due to the contribution of the new Greenpark operations, which are stated net of direct costs of loan originations.  Non-interest income contributed 26% of total net revenue in the most recent quarter, compared to 24% in the prior quarter.  Berkshire is pursuing the development of fee income sources to diversify revenues and increase wallet share in its markets.  The second quarter provision for loan losses increased to $2.3 million from $2.0 million in the prior quarter.  Net loan charge-offs totaled $2.0 million and $1.8 million in these periods, respectively. 

Second quarter non-interest expense totaled $34.2 million, including $4.1 million in non-core charges.  Core non-interest expense totaled $30.1 million, which was an increase of $3.8 million (14%) over the prior quarter.  This includes the impact of the core CBT operating expenses, which totaled $2.0 million for a comparable period in the prior quarter, along with expenses related to the Greenpark operations.  Berkshire is proceeding with its plans to achieve 35% cost savings related to the CBT merger, which are expected to be fully realized in upcoming quarters.  The efficiency ratio remained unchanged at 59% during the most recent quarter, while the Company absorbed the costs of infrastructure development, de novo branches opened in New York, and other costs related to its strategic initiatives.  The second quarter non-core expenses totaled $2.2 million after tax and were primarily due to transaction costs and other charges related to the CBT merger.  The income tax rate for continuing operations was 27% in the second quarter, compared to 26% in the prior quarter. 

CONFERENCE CALL

Berkshire will conduct a conference call/webcast at 10:00 A.M. eastern time on Wednesday, July 25, 2012 to discuss the results for the quarter and 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: 866-843-0890
Elite Entry Number: 5288558
Webcast:  www.berkshirebank.com (investor relations link)

A telephone replay of the call will be available through August 1, 2012 by calling 877-344-7529 and entering access code: 10015785. 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(SM).  Berkshire has $4.5 billion in assets and 68 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).  For more information, visit www.berkshirebank.com or call 800-773-5601. 

Berkshire has a pending agreement to acquire Beacon Federal Bancorp which, through its bank subsidiary, Beacon Federal, offers banking and related financial services to both individual and commercial customers. Beacon is headquartered with a full-service branch in East Syracuse, New York, along with six other full-service branches in East Syracuse, Marcy and Rome, New York, Smartt and Smyrna, Tennessee, and Chelmsford, Massachusetts. Beacon's stock trades under the symbol "BFED" and, at March 31, 2012, Beacon reported assets totaling $1.0 billion.  For more information, visit www.beaconfederal.com or call 888-256-3800.

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.gov.  Berkshire does not undertake any obligation to update forward-looking statements made in this document.

ADDITIONAL INFORMATION FOR STOCKHOLDERS

In connection with the proposed merger, Berkshire has filed with the Securities and Exchange Commission ("SEC") a Registration Statement on Form S-4 that includes a Proxy Statement of Beacon and a Prospectus of Berkshire, as well as other relevant documents concerning the proposed transaction. Stockholders are urged to read the Registration Statement and the Proxy Statement/Prospectus regarding the merger, as well as any amendments or supplements to those documents, because they will contain important information. A free copy of the Proxy Statement/Prospectus, as well as other filings containing information about Berkshire Hills and Beacon, may be obtained at the SEC's Internet site (http://www.sec.gov). You will also be able to obtain these documents, free of charge, from Berkshire Hills Bancorp at www.berkshirebank.com  under the tab "Investor Relations" or from Beacon Federal Bancorp by accessing Beacon's website at www.beaconfederal.com and selecting the "Investor Relations" link.

Berkshire and Beacon and certain of their directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of Beacon Bancorp in connection with the proposed merger. Information about the directors and executive officers of Berkshire Hills Bancorp is set forth in the proxy statement for Berkshire Hills Bancorp's 2012 annual meeting of stockholders, as filed with the SEC on Schedule 14A on March 30, 2012. Information about the directors and executive officers of Beacon is set forth in the proxy statement for Beacon Federal Bancorp's 2012 annual meeting of stockholders, as filed with the SEC on Schedule 14A on April 16, 2012. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the Proxy Statement/Prospectus regarding the proposed merger when it becomes available. Free copies of this document may be obtained as described in the preceding paragraph.

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.

BERKSHIRE HILLS BANCORP, INC.


CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-1)






June 30,

March 31,

December 31,



(In thousands)

2012

2012

2011



Assets






Cash and due from banks

$              44,696

$               34,117

$             46,713



Short-term investments

21,790

11,186

28,646









Trading security

17,365

16,847

17,395



Securities available for sale, at fair value

471,368

423,580

419,756



Securities held to maturity, at amortized cost

41,822

59,533

58,912



Federal Home Loan Bank stock and other restricted securities

37,174

35,282

37,118



Total securities

567,729

535,242

533,181









Loans held for sale

59,280

-

1,455









Residential mortgages

1,193,447

1,100,663

1,020,435



Commercial mortgages

1,281,058

1,147,455

1,156,241



Commercial business loans

519,684

429,627

410,292



Consumer loans

371,430

361,255

369,602



Total loans

3,365,619

3,039,000

2,956,570



Less: Allowance for loan losses

(32,868)

(32,657)

(32,444)



Net loans

3,332,751

3,006,343

2,924,126









Premises and equipment, net

68,569

61,661

60,139



Other real estate owned

827

439

1,900



Goodwill 

220,360

202,397

202,391



Other intangible assets

19,505

19,662

20,973



Cash surrender value of bank-owned life insurance

76,290

75,652

75,009



Other assets

95,926

82,628

91,309



Assets from discontinued operations

-

-

5,362



Total assets

$         4,507,723

$          4,029,327

$        3,991,204









Liabilities and stockholders' equity






Demand deposits

$            535,472

$             450,497

$           447,414



NOW deposits

298,236

294,411

272,204



Money market deposits

1,158,562

1,089,742

1,055,306



Savings deposits

371,668

365,289

350,517



Total non-maturity deposits

2,363,938

2,199,939

2,125,441



Time deposits

1,045,767

984,228

975,734



Total deposits

3,409,705

3,184,167

3,101,175









Borrowings

452,527

236,240

221,938



Junior subordinated debentures

15,464

15,464

15,464



Total borrowings

467,991

251,704

237,402









Other liabilities 

46,757

36,622

43,758



Liabilities from discontinued operations

-

-

55,504



Total liabilities

3,924,453

3,472,493

3,437,839









Total stockholders' equity

583,270

556,834

553,365









Total liabilities and stockholders' equity

$         4,507,723

$          4,029,327

$        3,991,204









(1) At year end 2011, four 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.







BERKSHIRE HILLS BANCORP, INC.

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


LOAN ANALYSIS























Organic annualized growth %

(Dollars in millions)


June 30,
 2012
Balance


Impact of CBT Merger Balance


March 31,
 2012
Balance


December 31,
2011
Balance


Quarter ended
June 30, 2012

Year to date
















Total residential mortgages


$               1,194


$                      7


$               1,101


$               1,020


31

%

33

%

Total commercial loans


1,801


187


1,577


1,567


9


6


Total consumer loans


371


13


361


370


(3)


(6)


Total loans


$               3,366


$                  207


$               3,039


$               2,957


16

%

14

%





























DEPOSIT ANALYSIS























Organic annualized growth %

(Dollars in millions)


June 30,
 2012
Balance


Impact of CBT Merger Balance


March 31,
 2012
Balance


December 31,
2011
Balance


Quarter ended
June 30, 2012

Year to date


Demand/NOW


$                  834


$                    77


$                  745


$                  719


6

%

11

%

Money market


1,158


60


1,090


1,055


3


8


Savings


372


2


365


351


5


11


Total non-maturity deposits


2,364


139


2,200


2,125


5


9
















Total time deposits


1,046


72


984


976


(4)


(0)


Total deposits


$               3,410


$                  211


$               3,184


$               3,101


2

%

6

%















(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


Six Months Ended


June 30,


June 30,

(In thousands, except per share data)

2012


2011


2012


2011

Interest and dividend income    








Loans

$        38,787


$        28,607


$        73,838


$        53,213

Securities and other    

3,869


3,446


7,490


6,753

Total interest and dividend income    

42,656


32,053


81,328


59,966

Interest expense








Deposits

5,482


5,768


10,984


11,483

Borrowings and junior subordinated debentures

2,121


2,084


4,146


4,136

Total interest expense    

7,603


7,852


15,130


15,619

Net interest income

35,053


24,201


66,198


44,347

Non-interest income








Loan related fees

3,524


780


4,897


1,371

Deposit related fees

3,963


3,366


7,463


5,907

Insurance commissions and fees    

2,768


2,782


5,514


6,512

Wealth management fees    

1,757


1,389


3,657


2,581

Total fee income    

12,012


8,317


21,531


16,371

Other

269


(277)


510


(197)

Gain on sale of securities, net    

7


6


7


6

Non-recurring gain

-


124


42


124

Total non-interest income      

12,288


8,170


22,090


16,304

Total net revenue

47,341


32,371


88,288


60,651

Provision for loan losses   

2,250


1,500


4,250


3,100

Non-interest expense








Compensation and benefits

15,638


12,027


29,227


23,178

Occupancy and equipment     

4,490


3,546


8,885


6,981

Technology and communications

2,258


1,531


4,216


2,997

Marketing and promotion     

778


341


1,129


622

Professional services

1,493


1,216


2,858


2,148

FDIC premiums and assessments

870


741


1,551


1,768

Other real estate owned and foreclosures

(6)


700


173


1,309

Amortization of intangible assets     

1,357


935


2,668


1,651

Nonrecurring and merger related expenses     

4,085


5,451


8,308


7,159

Other

3,221


2,135


5,363


3,999

Total non-interest expense     

34,184


28,623


64,378


51,812









Income from continuing operations before income taxes       

10,907


2,248


19,660


5,739

Income tax expense

2,921


371


5,193


1,027

Net income from continuing operations

7,986


1,877


14,467


4,712

Loss from discontinued operations before income taxes








     (including gain on disposal of $63)

-


-


(261)


-

Income tax expense

-


-


376


-

Net loss from discontinued operations

-


-


(637)


-

Net income 

$          7,986


$          1,877


$        13,830


$          4,712









Basic and diluted earnings per share:








Continuing operations

$            0.37


$            0.11


$            0.68


$            0.31

Discontinued operations

-


-


(0.03)


-

Total basic and diluted earnings per share

$            0.37


$            0.11


$            0.65


$            0.31









Weighted average shares outstanding:      








Basic

21,742


16,580


21,349


15,269

Diluted

21,806


16,601


21,434


15,299

















(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.









BERKSHIRE HILLS BANCORP, INC.

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




Quarters Ended


June 30,


Mar. 31,


Dec. 31,


Sept. 30,


June 30,


(In thousands, except per share data)

2012


2012


2011


2011


2011


Interest and dividend income    











Loans

$      38,787


$      35,051


$      35,466


$      35,719


$      28,607


Securities and other    

3,869


3,621


3,562


3,547


3,446


Total interest and dividend income    

42,656


38,672


39,028


39,266


32,053


Interest expense











Deposits

5,482


5,502


5,792


6,097


5,768


Borrowings and junior subordinated debentures

2,121


2,025


2,101


2,131


2,084


Total interest expense    

7,603


7,527


7,893


8,228


7,852


Net interest income

35,053


31,145


31,135


31,038


24,201


Non-interest income











Loan related fees

3,524


1,373


856


934


780


Deposit related fees

3,963


3,500


3,848


3,885


3,366


Insurance commissions and fees    

2,768


2,746


2,145


2,431


2,782


Wealth management fees    

1,757


1,900


1,650


1,607


1,389


Total fee income    

12,012


9,519


8,499


8,857


8,317


Other

269


241


318


(158)


(277)


Gain on sale of securities, net     

7


-


8


-


6


Non-recurring gain

-


42


-


1,975


124


Total non-interest income      

12,288


9,802


8,825


10,674


8,170


Total net revenue

47,341


40,947


39,960


41,712


32,371


Provision for loan losses   

2,250


2,000


2,263


2,200


1,500


Non-interest expense











Compensation and benefits

15,638


13,589


13,172


13,195


12,027


Occupancy and equipment     

4,490


4,395


4,063


3,883


3,546


Technology and communications

2,258


1,958


2,464


1,996


1,531


Marketing and promotion  

778


351


419


498


341


Professional services

1,493


1,365


1,146


1,375


1,216


FDIC premiums and assessments

870


681


542


923


741


Other real estate owned and foreclosures

(6)


179


153


541


700


Amortization of intangible assets     

1,357


1,311


1,314


1,271


935


Nonrecurring and merger related expenses     

4,085


4,223


3,678


9,091


5,451


Other

3,221


2,142


2,579


1,937


2,135


Total non-interest expense     

34,184


30,194


29,530


34,710


28,623













Income from continuing operations before income taxes       

10,907


8,753


8,167


4,802


2,248


Income tax expense 

2,921


2,272


609


405


371


Net income from continuing operations

7,986


6,481


7,558


4,397


1,877


(Loss) gain from discontinued operations before income taxes 











       (including gain on disposals)

-


(261)


4,692


(8)


-


Income tax expense (benefit)

-


376


3,773


(3)


-


Net (loss) gain from discontinued operations

-


(637)


919


(5)


-


Net income 

$        7,986


$        5,844


$        8,477


$        4,392


$        1,877
























Basic and diluted earnings per share:











Continuing operations

$          0.37


$          0.31


$          0.36


$          0.22


$          0.11


Discontinued operations

-


(0.03)


0.04


-


-


Total basic and diluted earnings per share

$          0.37


$          0.28


$          0.40


$          0.22


$          0.11













Weighted average shares outstanding:      











Basic

21,742


20,955


20,930


20,009


16,580


Diluted

21,806


21,062


21,043


20,105


16,601













(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




June 30,


Mar. 31,


Dec. 31,


Sept. 30,


June 30,


(Dollars in thousands)



2012


2012


2011


2011


2011


NON-PERFORMING ASSETS













Non-accruing loans:













Residential mortgages



$            8,525


$            8,281


$        7,010


$        4,750


$        2,811


Commercial mortgages



15,336


12,151


14,280


13,721


9,600


Commercial business loans



1,047


1,029


990


1,399


1,764


Consumer loans



1,209


1,411


1,954


1,834


862


Total non-accruing loans



26,117


22,872


24,234


21,704


15,037


Other real estate owned



827


439


1,900


2,200


1,700


Total non-performing assets



$          26,944


$          23,311


$      26,134


$      23,904


$      16,737















Total non-accruing loans/total loans



0.78%


0.75%


0.82%


0.72%


0.61%


Total non-performing assets/total assets



0.60%


0.58%


0.65%


0.58%


0.52%















PROVISION AND ALLOWANCE FOR LOAN LOSSES











Balance at beginning of period



$          32,657


$          32,444


$      32,181


$      31,919


$      31,898


Charged-off loans



(2,102)


(1,923)


(2,313)


(2,061)


(1,564)


Recoveries on charged-off loans



63


136


313


123


85


Net loans charged-off



(2,039)


(1,787)


(2,000)


(1,938)


(1,479)


Provision for loan losses



2,250


2,000


2,263


2,200


1,500


Balance at end of period



$          32,868


$          32,657


$      32,444


$      32,181


$      31,919















Allowance for loan losses/total loans



0.98%


1.07%


1.10%


1.07%


1.30%


Allowance for loan losses/non-accruing loans



126%


143%


134%


148%


212%















NET LOAN CHARGE-OFFS













Residential mortgages



$             (886)


$             (381)


$         (449)


$         (292)


$         (225)


Commercial mortgages



(378)


(1,116)


(1,198)


(1,099)


(597)


Commercial business loans



(2)


(3)


(244)


(463)


(435)


Home equity 



(707)


(247)


(90)


7


(68)


Other consumer



(66)


(40)


(19)


(91)


(154)


Total, net



$          (2,039)


$          (1,787)


$      (2,000)


$      (1,938)


$      (1,479)















Net charge-offs (QTD annualized)/average loans 


0.25%


0.24%


0.27%


0.27%


0.24%


Net charge-offs (YTD annualized)/average loans 


0.24%


0.24%


0.27%


0.27%


0.27%















DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS










30-89 Days delinquent



0.41%


0.55%


0.55%


0.79%


0.50%


90+ Days delinquent and still accruing



0.49%


0.40%


0.34%


0.22%


0.12%


Total accruing delinquent loans



0.90%


0.95%


0.89%


1.01%


0.62%


Non-accruing loans



0.78%


0.75%


0.82%


0.72%


0.61%


Total delinquent and non-accruing loans



1.68%


1.70%


1.71%


1.73%


1.23%















(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




June 30,


Mar. 31,


Dec. 31,


Sept. 30,


June 30,





2012


2012


2011


2011


2011















PER SHARE DATA












Core earnings, diluted

$        0.47


$         0.45


$         0.44


$          0.43


$        0.35



Net earnings, diluted

0.37


0.28


0.40


0.22


0.11



Tangible book value

15.49


15.81


15.60


14.86


15.07



Total book value

26.31


26.28


26.17


25.87


26.61



Market price at period end

22.00


22.92


22.19


18.47


22.39



Dividends

0.17


0.17


0.17


0.16


0.16














PERFORMANCE RATIOS












Core return on assets

0.94

%

0.94

%

0.93

%

0.89

%

0.72

%


Return on assets

0.73


0.59


0.85


0.45


0.23



Core return on equity

7.13


6.80


6.74


6.50


5.15



Return on equity

5.58


4.23


6.16


3.31


1.67



Net interest margin, fully taxable equivalent

3.70


3.62


3.61


3.74


3.52



Fee income/Net interest and fee income

25.52


23.44


21.44


22.20


25.58



Efficiency ratio 

59.29


59.27


59.44


59.62


66.22














GROWTH












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

30

%

3

%

29

%

38

%

20

%


Total loans, year-to-date (annualized)

27


11


38


54


29



Total deposits, year-to-date (annualized)

16


11


41


63


26



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

45


43


33


28


15



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

110


40


(2)


(26)


(37)



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

39


50


53


50


33














FINANCIAL DATA   (In millions)












Total assets

$      4,508


$       4,029


$       3,991


$        4,087


$      3,226



Total loans

3,366


3,039


2,957


3,003


2,452



Allowance for loan losses

33


33


32


32


32



Total intangible assets

240


222


223


233


193



Total deposits

3,410


3,184


3,101


3,249


2,486



Total stockholders' equity

583


557


553


547


445



Total core income 

10.2


9.4


9.3


8.6


5.8



Total net income

8.0


5.8


8.5


4.4


1.9














ASSET QUALITY RATIOS












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

0.25

%

0.24

%

0.27

%

0.27

%

0.24

%


Non-performing assets/total assets

0.60


0.58


0.65


0.58


0.52



Allowance for loan losses/total loans

0.98


1.07


1.10


1.07


1.30



Allowance for loan losses/non-accruing loans

126


143


134


148


212














CAPITAL RATIOS












Stockholders' equity to total assets

12.94

%

13.82

%

13.86

%

13.38

%

13.80

%


Tangible stockholders' equity to tangible assets

8.04


8.80


8.76


8.15


8.31


























(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


June 30, 


Mar. 31, 


Dec. 31, 


Sept. 30, 


June 30, 

(In thousands)

2012


2012


2011


2011


2011

Assets










Loans:










Residential mortgages

$      1,167,007


$      1,057,903


$      1,039,025


$      1,004,950


$       802,460

Commercial mortgages

1,250,741


1,153,690


1,166,989


1,140,691


973,557

Commercial business loans

490,983


412,237


392,542


383,059


333,700

Consumer loans

375,179


366,035


376,385


376,754


311,057

Total loans

3,283,910


2,989,865


2,974,941


2,905,454


2,420,774

Securities

549,479


525,109


515,128


474,435


405,670

Short-term investments and loans held for sale

47,302


15,107


20,748


34,293


4,688

Total earning assets

3,880,691


3,530,081


3,510,817


3,414,182


2,831,132

Goodwill and other intangible assets

235,961


223,930


230,864


229,594


196,292

Other assets

235,623


235,909


247,376


226,757


186,785

Total assets

$      4,352,275


$      3,989,920


$      3,989,057


$      3,870,533


$    3,214,209











Liabilities and stockholders' equity










Deposits:










NOW

$         297,431


$         272,239


$         274,041


$         256,662


$       229,980

Money market

1,136,161


1,084,948


953,162


853,128


778,055

Savings

370,182


359,859


446,672


476,230


317,232

Time

1,038,662


983,696


1,028,817


1,029,555


809,768

Total interest-bearing deposits

2,842,436


2,700,742


2,702,692


2,615,575


2,135,035

Borrowings and debentures

398,650


257,389


248,611


253,018


269,665

Total interest-bearing liabilities

3,241,086


2,958,131


2,951,303


2,868,593


2,404,700

Non-interest-bearing demand deposits

498,972


439,015


448,952


432,381


334,171

Other liabilities 

39,665


40,039


38,110


38,431


25,268

Total liabilities

3,779,723


3,437,185


3,438,365


3,339,405


2,764,139











Total stockholders' equity

572,552


552,735


550,692


531,128


450,070











Total liabilities and stockholders' equity

$      4,352,275


$      3,989,920


$      3,989,057


$      3,870,533


$    3,214,209





















Supplementary data










Total non-maturity deposits

$      2,302,746


$      2,156,061


$      2,122,827


$      2,018,401


$    1,659,438

Total deposits

3,341,408


3,139,757


3,151,644


3,047,956


2,469,206

Fully taxable equivalent income adj.

638


669


674


673


675





















(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



June 30,


Mar. 31,


Dec. 31,


Sept. 30,


June 30,




2012


2012


2011


2011


2011















Earning assets












Loans:












Residential mortgages

4.64

%

4.63

%

4.68

%

4.82

%

4.97

%


Commercial loans

5.00


4.89


4.98


5.27


4.78



Consumer loans

3.93


3.98


4.03


4.17


3.97



Total loans

4.75


4.72


4.74


4.97


4.74



Securities

3.30


3.29


3.26


3.53


4.07



Short-term investments and loans held for sale

0.06


0.07


0.14


0.03


0.19



Total earning assets

4.49


4.48


4.49


4.72


4.64















Funding liabilities












Deposits:












NOW

0.30


0.26


0.39


0.49


0.31



Money Market

0.49


0.55


0.62


0.66


0.69



Savings

0.18


0.20


0.19


0.18


0.26



Time

1.44


1.51


1.52


1.67


2.00



Total interest-bearing deposits

0.78


0.82


0.87


0.95


1.08



Borrowings and debentures

2.14


3.16


3.35


3.34


3.10



Total interest-bearing liabilities

0.95


1.02


1.06


1.16


1.31















Net interest spread

3.54


3.46


3.43


3.56


3.33



Net interest margin

3.70


3.62


3.61


3.74


3.52















Cost of funds

0.82


0.89


0.92


1.01


1.15



Cost of deposits

0.66


0.71


0.73


0.82


0.94















(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




June 30, 


Mar. 31, 


Dec. 31, 


Sept. 30, 


June 30, 


(Dollars in thousands)


2012


2012


2011


2011


2011


Net income 


$       7,986


$       5,844


$       8,477


$       4,392


$       1,877


Adj: Gain on sale of securities, net


(7)


-


(8)


-


(6)


Adj:  Other non-recurring gain


-


(42)


-


(1,975)


(124)


Plus: Nonrecurring and merger related expense


4,085


4,223


3,678


9,091


5,451


Adj:  Income taxes


(1,853)


(1,255)


(1,947)


(2,884)


(1,400)


Adj: Net income (loss) from discontinued operations

-


637


(919)


5


-


Total core income

(A)

$     10,211


$       9,407


$       9,281


$       8,629


$       5,798














Total non-interest income


$     12,288


$       9,878


$       8,825


$     10,766


$       8,170


Adj: Gain on sale of securities, net


(7)


-


(8)


-


(6)


Adj:  Other non-recurring gain


-


(42)


-


(1,975)


(124)


Total core non-interest income                       


12,281


9,836


8,817


8,791


8,040


Net interest income


35,053


31,138


31,135


31,551


24,201


Total core revenue


$     47,334


$     40,974


$     39,952


$     40,342


$     32,241














Total non-interest expense


$     34,184


$     30,524


$     29,533


$     35,320


$     28,623


Less: Merger related expense


(4,085)


(4,223)


(3,678)


(9,091)


(5,451)


Core non-interest expense                                    


30,099


26,301


25,855


26,229


23,172


Less: Amortization of intangible assets


(1,357)


(1,318)


(1,314)


(1,382)


(935)


Total core tangible non-interest expense             


$     28,742


$     24,983


$     24,541


$     24,847


$     22,237














(Dollars in millions, except per share data)












Total average assets                                                

(B)

$       4,352


$       3,990


$       3,989


$       3,871


$       3,214


Total average stockholders' equity                         

(C)

573


553


551


531


450














Total stockholders' equity, period-end


583


557


553


547


445


Less:  Intangible assets, period-end


(240)


(222)


(223)


(233)


(193)


Total tangible stockholders' equity, period-end   

(D)

$          343


$          335


$          330


$          314


$          252














Total shares outstanding, period-end (thousands)               

(E)

22,169


21,191


21,147


21,134


16,721


Average diluted shares outstanding (thousands)

(F)

21,806


21,062


21,043


20,105


16,601














Core earnings per share, diluted 

(A/F)

$         0.47


$         0.45


$         0.44


$         0.43


$         0.35


Tangible book value per share, period-end

(D/E)

$       15.49


$       15.81


$       15.60


$       14.86


$       15.07














Core return (annualized) on assets

(A/B)

0.94

%

0.94

%

0.93

%

0.89

%

0.72

%

Core return (annualized) on equity 

(A/C)

7.13


6.80


6.74


6.50


5.15


Efficiency ratio (1)


59.29


59.27


59.44


59.62


66.22














Supplementary data












Tax credit benefit of tax shelter investments


$          505


$          505


$          664


$          664


$          664


























(1) Efficiency ratio is computed by dividing total core tangible non-interest expense by the sum of total net interest income on a fully 


      taxable equivalent basis and total core non-interest income adjusted to include tax credit benefit of tax shelter investments.  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.






(4) 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-10)










At or for the Six Months Ended




June 30, 


June 30, 


(Dollars in thousands)


2012


2011


Net income (loss)


$              13,830


$                 4,712


Adj: Gain on sale of securities, net


(7)


(6)


Adj:  Other non-recurring gain


(42)


(124)


Plus: Nonrecurring and merger related expense


8,308


7,159


Adj: Income taxes


(3,108)


(1,716)


Adj: Net income (loss) from discontinued operations


637


-


Total core income 

(A)

$              19,618


$               10,025


Plus: Amortization of intangible assets 


2,675


1,651


Total tangible core income 

(B)

$              22,293


$               11,676








Total non-interest income


$              22,166


$               16,501


Adj: Gain on sale of securities, net


(7)


(6)


Adj:  Other non-recurring gain


(42)


(124)


Total core non-interest income                       


22,117


16,371


Net interest income


66,191


44,347


Total core revenue


$              88,308


$               60,718








Total non-interest expense


$              64,708


$               51,812


Less: Merger related expense


(8,308)


(7,159)


Core non-interest expense                                    


56,400


44,653


Less: Amortization of intangible assets


(2,675)


(1,651)


Total core tangible non-interest expense             


$              53,725


$               43,002








(Dollars in millions, except per share data)






Total average assets                                                

(B)

$                4,352


$                 3,045


Total average stockholders' equity                         

(C)

$                   573


$                    421








Total stockholders' equity, period-end


$                   583


$                    445


Less: Intangible assets, period-end


(240)


(193)


Total tangible stockholders' equity, period-end   

(D)

$                   343


$                    252








Total common shares outstanding, period-end (thousands)               

(E)

22,169


16,721


Average diluted common shares outstanding (thousands)

(F)

21,434


15,299








Core earnings per common share, diluted 

(A/F)

$                  0.92


$                   0.66


Tangible book value per common share, period-end

(D/E)

$                15.47


$                 15.07








Core return (annualized) on assets

(A/B)

1.02

%

0.77

%

Core return (annualized) on equity

(A/C)

7.78


5.55


Efficiency ratio (1)


59.28


68.10














(1) Efficiency ratio is computed by dividing total core 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 adjusted to include tax credit benefit of tax shelter investments.  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.


(4) 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. 

CONTACTS

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

Media Contact
Elizabeth Mach
AVP, Marketing Officer
413-445-8390

SOURCE Berkshire Hills Bancorp

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