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

Jul 24, 2012, 16:10 ET from Berkshire Hills Bancorp

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.

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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.govBerkshire 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,