Berkshire Hills Reports 78% Growth in Third Quarter Net Income; Dividend Declared

Oct 20, 2010, 16:20 ET from Berkshire Hills Bancorp

PITTSFIELD, Mass., Oct. 20 /PRNewswire-FirstCall/ -- Berkshire Hills Bancorp (Nasdaq: BHLB) reported net income of $3.4 million, or $0.25 per share, in the third quarter of 2010.  This was a 78% increase over third quarter 2009 results of $1.9 million, or $0.14 per share, and included the benefit of positive operating leverage from strong revenue growth.  For the first nine months of the year, Berkshire's net income increased by 25% to $10.2 million in 2010 from $8.1 million in 2009.  Earnings per share for the first nine months more than doubled to $0.73 in 2010 from $0.32 in 2009 due to the impact in 2009 of retiring government preferred stock.

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THIRD QUARTER FINANCIAL HIGHLIGHTS (revenue and expense comparisons are to prior year third quarter, unless otherwise noted)

  • 15% growth in net interest income
  • 9% growth in total net revenue
  • 15% annualized growth in total commercial loans
  • 7% annualized growth in total loans
  • 6% annualized growth in total deposits.
  • 3.30% net interest margin, compared to 2.96% in the prior year third quarter and to 3.25% in the second quarter of 2010
  • 0.69% non-performing assets to total assets
  • 0.40% annualized net loan charge-offs/average loans

Michael P. Daly, President and Chief Executive Officer, stated, "We produced another solid quarter and exceeded our expectations in all major categories as we continue to build positive earnings momentum.  Our Commercial lending teams continued to attract quality loan relationships and we maintained a strong pace of deposit growth with disciplined pricing that resulted in solid margin expansion.  All of our major asset quality metrics are favorable and despite an uncertain national economy we expect that our asset quality metrics will continue to compare favorably based on current trends."

Mr. Daly continued, "Last week we announced a definitive agreement to acquire Rome Bancorp, which operates five branches serving central New York, with access to Utica and proximity to Syracuse.  The Route 90 corridor in New York is a logical expansion for our New York region, which will grow to 17 out of a total of 47 Berkshire Bank branches with this merger and our new branch openings.  We were pleased that Rome chose to partner with us and recognized the attractive potential for accelerated earnings growth and shareholder value in this combination.  We are planning to complete this transaction in the first quarter of 2011.  We will continue to pursue opportunities for both strong organic growth and growth through partnerships that deliver solid benefits to all of our constituencies."

Mr. Daly added, "Senior Vice President Tom Barney who helped build a well-regarded and profitable wealth management business at Berkshire has decided to retire from his leadership duties and he will continue in a consultancy role.  I am most grateful for his service and contributions to our success.  I am pleased to announce the promotion of Charles Leach to Senior Vice President and Chief Investment Officer.  Charles has been with us for three years after joining us from TD Banknorth and has provided steady investment management throughout the market swings of the last few years.  I am also pleased to announce that Scott Schiff has accepted the position of Senior Vice President in Wealth Management.  Scott specializes in outstanding client service and relationship development and comes to us from Legacy Banks where his most recent position was Vice President and Director of Sales. We look forward to the opportunities we have to further develop this important business line in all of our regional markets through their combined leadership."

DIVIDEND DECLARED

The Board of Directors maintained the cash dividend on Berkshire's common stock, declaring a dividend of $0.16 per share to stockholders of record at the close of business on November 4, 2010 and payable on November 18, 2010.  

FINANCIAL CONDITION

Total assets increased at a 7% annualized rate in the third quarter to $2.8 billion at quarter-end due to growth in loans and securities.  This growth was funded by increases in deposits and borrowings.   Liquidity remained strong, with loans/deposits remaining at 99%.  

The strong commercial loan growth in the third quarter brought year-to-date annualized growth to 11% for commercial loans and to 6% for total loans.  Berkshire continues to adhere to strong underwriting and pricing disciplines as it captures larger market share with high grade loan originations in all of its commercial lending areas.  This growth has offset the impact of lower demand from some of the Bank's traditional borrowers as well as planned reductions associated with our risk management strategies.  Loan growth has also been supported by the strong contribution from Berkshire's new Asset Based Lending Group, which has expanded and diversified our lending geography and industry exposure with strong and established new commercial relationships that are well known to our seasoned lending team.  The Company's consumer lending also remains strong, with $165 million in residential mortgage originations and $36 million in new home equity credit bookings for the year-to-date   Berkshire continues to sell most of its fixed rate mortgages to federal agencies in order to minimize interest rate risk in the current low rate environment.

As of quarter-end, all major asset performance indicators remained at comparatively favorable levels in accordance with the Company's plan at the start of the year.  Non-performing assets decreased slightly to 0.69% of total assets and accruing delinquent loans were 0.31% of total loans at quarter-end.  Annualized net loan charge-offs decreased to 0.40% of average loans in the third quarter, bringing the year-to-date annualized charge-off rate down to 0.43%.  Berkshire maintains strict and decisive workout processes while the overall portfolio risk characteristics are steadily improving as a result of the Company's disciplined underwriting standards.

Annualized deposit growth was 6% in the third quarter and for the first nine months of the year.  Personal checking account balances were up 11% over the last twelve months, reflecting the Bank's expansion and continued focus on relationship products.  Berkshire's new Private Banking Group, located in Springfield, has contributed $33 million to deposit growth in 2010.  Berkshire opened its 11th New York office in September, adding its second Albany branch, and has plans to open a new branch located in Latham in the coming months.  

RESULTS OF OPERATIONS

The 78% year-to-year increase in third quarter net income to $3.4 million in 2010 was primarily due to higher net interest income and a lower loan loss provision.  The 25% improvement in nine month results also reflected these factors.  Loan growth and margin improvement have been the key contributors to net interest income growth.  Net interest income has increased sequentially in each of the last four quarters.  The lower loan loss provisions reflect the resolution of problem and potential problem loan situations as a result of Berkshire's loan quality initiatives.  By combining revenue growth and minimizing expense growth compared to the prior quarter, Berkshire has maintained the positive momentum of improved operating leverage.  As a result, despite the normal seasonal decline of $1.0 million in insurance contingency revenues, Berkshire's third quarter net income was up slightly from the second quarter of 2010.

Total core revenue increased by 9% for the third quarter and by 7% for the first nine months of the year in 2010 compared to 2009.  The 15% growth in third quarter net interest income included the benefit of 3% growth in average earning assets and an improvement in the net interest margin to 3.30% from 2.96%.  The margin improvement primarily reflected lower funding costs and included the benefit of borrowing hedge restructurings and lower deposit costs.  The net interest margin has improved sequentially in each of the last four quarters.  Third quarter fee income was down 4% from year-to-year due to lower wealth management fees.  For the first nine months of the year, fee income was up 3% as strong banking related revenue gains for deposit, loan, and interest rate swap revenues offset lower insurance contingency revenues.  Of note, third quarter checking fee income was up 7% over the prior year, including the benefit of ongoing growth in Berkshire's business volumes.  This included a 6% increase in overdraft fee income despite the impact of the implementation during the quarter of the new Regulation E affecting industry overdraft service charge procedures.  

Reflecting the current favorable asset quality measures, the third quarter loan loss provision decreased in the third quarter of 2010 compared to 2009, which also resulted in a decrease in the provision for the first nine months of the year.  The third quarter loan loss provision was $2.0 million, while quarterly net loan charge-offs were also $2.0 million.  The loan loss allowance has remained flat in 2010, with the ratio of the allowance to total loans decreasing slightly to 1.55% at September 30, 2010 from 1.62% at the start of the year.  Total non-accruing loans decreased by 58% during the first nine months of 2010, and the ratio of the allowance to non-accruing loans increased to 194% from 82% during this period.

As a result of business growth, total non-interest expense was up 6% in the third quarter and 5% for the first nine months of 2010 compared to 2009.  Berkshire has added the asset based lending and private banking business units and has opened new branches, all of which are initially operating at losses as new revenues are built.  Due to the previously noted growth in total core operating revenues, Berkshire has produced positive operating leverage which has contributed to net income growth and to an improvement in the efficiency ratio.  For the year-to-date, compensation related expense increases have also included the restoration of incentive compensation and a decrease in compensation costs charged against non-interest income related to loan sales.  Nine month non-interest expense in 2009 also included non-core items and a $1.3 million special FDIC insurance assessment.  In 2010, the effective income tax rate was 24% for both the third quarter and first nine months of the year.  The effective tax rate in 2009 was unusually low due to an income tax benefit recorded in the third quarter reflecting the nine month impact of a reduction in anticipated taxable income for the year.  

CONFERENCE CALL

Berkshire will conduct a conference call/webcast at 10:00 A.M. eastern time on Thursday, October 21, 2010 to discuss the results for the quarter and guidance about expected future results.  Berkshire will also discuss its recently announced merger agreement with Rome Bancorp, Inc.

Information about the conference call follows:

Dial-in: 877-317-6789

Webcast: www.berkshirebank.com (investor relations link)

A telephone replay of the call will be available through October 28, 2010 by calling 877-344-7529 and entering conference number: 444853.   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).  The Company has $2.8 billion in assets and 41 full service financial centers in Massachusetts, New York, and Vermont.  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.

Rome Bancorp, Inc. is a publicly held, one-bank holding company whose wholly-owned subsidiary, The Rome Savings Bank, maintains its corporate offices in Rome, New York.  Rome Bancorp, Inc. is incorporated in the state of Delaware. The Rome Savings Bank, regulated by the Office of Thrift Supervision, operates five full-service community banking offices in Rome, Lee, and New Hartford, New York.  Rome's assets totaled $330 million as of June 30, 2010.  Rome's primary lines of business include residential real estate lending, small business loan and deposit services, as well as a variety of consumer loan and deposit services.

FORWARD LOOKING STATEMENTS

This news release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 about the proposed merger of Berkshire and Rome. These statements include statements regarding the anticipated closing date of the transaction and anticipated future results. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words like "believe," "expect," "anticipate," "estimate," and "intend" or future or conditional verbs such as "will," "would," "should," "could" or "may." Certain factors that could cause actual results to differ materially from expected results include delays in completing the merger, difficulties in achieving cost savings from the merger or in achieving such cost savings within the expected time frame, difficulties in integrating Berkshire and Rome, increased competitive pressures, changes in the interest rate environment, changes in general economic conditions, legislative and regulatory changes that adversely affect the business in which Berkshire and Rome are engaged, changes in the securities markets and other risks and uncertainties disclosed from time to time in documents that Berkshire files with the Securities and Exchange Commission.

ADDITIONAL INFORMATION FOR STOCKHOLDERS

The proposed transaction with Rome Bancorp, Inc. will be submitted to Rome stockholders for their consideration. Berkshire will file with the SEC a Registration Statement on Form S-4 that will include a Proxy Statement of Rome and a Prospectus of Berkshire, as well as other relevant documents concerning the proposed transaction with the SEC. Stockholders of Rome are urged to read the Registration Statement and the Proxy Statement/Prospectus when it becomes available and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information. You will be able to obtain a free copy of the Registration Statement, Proxy Statement/Prospectus, as well as other filings containing information about Berkshire and Rome at the SEC's Internet site (http://www.sec.gov).

Berkshire and Rome and certain of their directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of Rome in connection with the proposed merger. Information about the directors and executive officers of Berkshire is set forth in the proxy statement, dated March 26, 2010, for Berkshire's 2010 annual meeting of stockholders, as filed with the SEC on Schedule 14A.  Information about the directors and executive officers of Rome is set forth in the proxy statement, dated April 1, 2010, for Rome's 2010 annual meeting of stockholders, as filed with the SEC on Schedule 14A. Additional information regarding the interests of such participants and other persons who may be deemed participants in the transaction may be obtained by reading the Proxy Statement/Prospectus when it becomes available.  Free copies of this document may be obtained as described in the above 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 and restructuring costs.  Similarly, the efficiency ratio is also adjusted for these non-core items.  Additionally, the Company adjusts core income to exclude amortization of intangibles to arrive at a measure of the underlying operating cash return for the benefit of shareholders.  The Company also adjusts certain equity related measures to exclude intangible assets due to the importance of these measures to the investment community.  In the first quarter of 2009, the Company adjusted core earnings per share and core return on tangible common equity to be net of preferred stock dividends.  These measures were not adjusted in this manner in the second quarter of 2009.  The second quarter deemed dividend was a nonrecurring non-cash charge with no impact on stockholders' equity and did not reflect a core economic event in the Company's view.   Additionally, the Company held cash at near-zero interest rates in the second quarter while it awaited the approval of the U.S. Treasury to repay the preferred stock.  Accordingly, the preferred stock cash dividend and accretion charges were viewed by the Company as non-core one-time charges against income available to common stockholders related to the process of repaying the preferred stock.  Other significant non-GAAP adjustments in 2009 related to a terminated merger agreement, borrowings prepayments, and the termination of an interest rate swap.

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS - UNAUDITED

September 30,

June 30,

December 31,

(In thousands)

2010

2010

2009

Assets

Cash and due from banks

$         26,817

$      27,931

$        25,770

Short-term investments

11,565

14,317

6,838

Trading security

17,398

16,914

15,880

Securities available for sale, at fair value

315,213

296,206

324,345

Securities held to maturity, at amortized cost

57,476

58,618

57,621

Federal Home Loan Bank stock and other restricted securities

23,120

23,120

23,120

Total securities

413,207

394,858

420,966

Loans held for sale

3,445

3,156

4,146

Residential mortgages

638,829

638,439

609,007

Commercial mortgages

895,519

890,494

851,828

Commercial business loans

226,625

191,277

186,044

Consumer loans

293,136

299,771

314,779

Total loans

2,054,109

2,019,981

1,961,658

Less: Allowance for loan losses

(31,836)

(31,848)

(31,816)

Net loans

2,022,273

1,988,133

1,929,842

Premises and equipment, net

37,858

37,914

37,390

Other real estate owned

2,900

2,900

30

Goodwill

161,725

161,725

161,725

Other intangible assets

12,072

12,840

14,375

Cash surrender value of bank-owned life insurance

38,170

35,270

36,904

Other assets

68,407

68,484

62,438

Total assets

$    2,798,439

$ 2,747,528

$   2,700,424

Liabilities and stockholders' equity

Demand deposits

$       278,165

$    276,149

$      276,587

NOW deposits

213,734

187,401

197,176

Money market deposits

609,255

605,529

532,840

Savings deposits

220,564

217,977

208,597

Total non-maturity deposits

1,321,718

1,287,056

1,215,200

Time deposits

747,029

753,115

771,562

Total deposits

2,068,747

2,040,171

1,986,762

Borrowings

293,812

269,817

291,204

Junior subordinated debentures

15,464

15,464

15,464

Total borrowings

309,276

285,281

306,668

Other liabilities

37,501

37,449

22,413

Total liabilities

2,415,524

2,362,901

2,315,843

Total stockholders' equity

382,915

384,627

384,581

Total liabilities and stockholders' equity

$    2,798,439

$ 2,747,528

$   2,700,424

F-1

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED

LOAN ANALYSIS

September 30, 2010

June 30, 2010

December 31, 2009

Annualized Growth %

(Dollars in millions)

Balance

Balance

Balance

Quarter ended Sept. 30, 2010

Year to date

Total residential mortgages

$                       639

$             638

$                      609

0

%

7

%

Commercial mortgages:

Construction

115

108

111

26

5

Single and multi-family

81

81

81

-

1

Commercial real estate

700

701

660

(1)

8

Total commercial mortgages

896

890

852

3

7

Commercial business loans:

Asset based lending

68

23

-

783

N/M

Other commercial business loans

158

169

186

(26)

(20)

Total commercial business loans

226

192

186

71

29

Total commercial loans

1,122

1,082

1,038

15

11

Consumer loans:

Auto

44

53

75

(68)

(55)

Home equity and other

249

247

240

3

5

Total consumer loans

293

300

315

(9)

(9)

Total loans

$                    2,054

$          2,020

$                   1,962

7

%

6

%

DEPOSIT ANALYSIS

September 30, 2010

June 30, 2010

December 31, 2009

Annualized Growth %

(Dollars in millions)

Balance

Balance

Balance

Quarter ended Sept. 30, 2010

Year to date

Demand

$                       278

$             276

$                      277

3

%

0

%

NOW

214

187

197

58

12

Money market

609

606

533

2

19

Savings

221

218

208

6

8

Total non-maturity deposits

1,322

1,287

1,215

11

12

Time less than $100,000

376

381

382

(5)

(2)

Time $100,000 or more

371

372

390

(1)

(7)

Total time deposits

747

753

772

(3)

(4)

Total deposits

$                    2,069

$          2,040

$                   1,987

6

%

6

%

N/M - Not Meaningful

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

F-2

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED

Three Months Ended

Nine Months Ended

September 30,

September 30,

(In thousands, except per share data)

2010

2009

2010

2009

Interest and dividend income    

Loans

$ 24,917

$ 25,034

$ 73,354

$ 76,836

Securities and other    

3,546

3,426

10,554

10,269

Total interest and dividend income    

28,463

28,460

83,908

87,105

Interest expense

Deposits

6,512

8,045

20,195

25,195

Borrowings and junior subordinated debentures

2,267

3,250

6,861

10,310

Total interest expense    

8,779

11,295

27,056

35,505

Net interest income

19,684

17,165

56,852

51,600

Non-interest income

Deposit, loan and interest rate swap fees

3,279

3,286

10,270

8,220

Insurance commissions and fees    

2,316

2,337

8,986

10,180

Wealth management fees    

1,090

1,369

3,406

3,671

Total fee income    

6,685

6,992

22,662

22,071

Other

230

272

714

1,092

Loss on sale of securities, net    

-

(5)

-

(4)

Non-recurring income

-

1

-

1,178

Total non-interest income      

6,915

7,260

23,376

24,337

Total net revenue

26,599

24,425

80,228

75,937

Provision for loan losses  

2,000

4,300

6,526

9,000

Non-interest expense

Compensation and benefits

10,870

9,757

32,827

28,011

Occupancy and equipment    

2,988

2,674

8,986

8,661

Technology and communications

1,458

1,371

4,214

4,026

Marketing and professional services    

1,253

1,446

3,666

3,648

Supplies, postage and delivery

520

702

1,635

2,087

FDIC premiums and assessments

893

669

2,540

3,748

Other real estate owned

100

15

127

177

Amortization of intangible assets    

768

833

2,304

2,499

Non-recurring expenses    

-

-

21

601

Other

1,244

1,477

3,994

3,917

Total non-interest expense    

20,094

18,944

60,314

57,375

Income before income taxes      

4,505

1,181

13,388

9,562

Income tax expense (benefit)

1,081

(741)

3,220

1,426

Net income

$   3,424

$   1,922

$ 10,168

$   8,136

Less: Cumulative preferred stock dividend and accretion

-

-

-

1,030

Less: Deemed dividend from preferred stock repayment

-

-

-

2,954

Net income available to common stockholders

$   3,424

$   1,922

$ 10,168

$   4,152

Basic earnings per common share

$     0.25

$     0.14

$     0.73

$     0.32

Diluted earnings per common share

$     0.25

$     0.14

$     0.73

$     0.32

Weighted average common shares outstanding      

Basic

13,865

13,806

13,852

12,977

Diluted

13,893

13,857

13,883

13,145

F-3

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED

Quarters Ended

Sept. 30,

June 30,

Mar. 31,

Dec. 31,

Sept. 30,

(In thousands, except per share data)

2010

2010

2010

2009

2009

Interest and dividend income    

Loans

$ 24,917

$ 24,490

$ 23,947

$  24,869

$ 25,034

Securities and other    

3,546

3,473

3,535

3,502

3,426

Total interest and dividend income    

28,463

27,963

27,482

28,371

28,460

Interest expense

Deposits

6,512

6,787

6,896

7,419

8,045

Borrowings and junior subordinated debentures

2,267

2,305

2,289

2,956

3,250

Total interest expense    

8,779

9,092

9,185

10,375

11,295

Net interest income

19,684

18,871

18,297

17,996

17,165

Non-interest income

Deposit, loan and interest rate swap fees

3,279

3,575

3,416

2,978

3,286

Insurance commissions and fees    

2,316

3,197

3,473

1,991

2,337

Wealth management fees    

1,090

1,140

1,176

1,141

1,369

Total fee income    

6,685

7,912

8,065

6,110

6,992

Other

230

51

433

613

272

Loss on sale of securities, net    

-

-

-

-

(5)

Non-recurring (loss) income

-

-

-

(2,071)

1

Total non-interest income      

6,915

7,963

8,498

4,652

7,260

Total net revenue

26,599

26,834

26,795

22,648

24,425

Provision for loan losses  

2,000

2,200

2,326

38,730

4,300

Non-interest expense

Compensation and benefits

10,870

10,960

10,997

10,269

9,757

Occupancy and equipment    

2,988

2,963

3,035

2,953

2,674

Technology and communications

1,458

1,373

1,383

1,440

1,371

Marketing and professional services    

1,253

1,116

1,297

2,643

1,446

Supplies, postage and delivery

520

542

573

523

702

FDIC premiums and assessments

893

874

773

796

669

Other real estate owned

100

-

27

104

15

Amortization of intangible assets    

768

768

768

779

833

Non-recurring expenses    

-

-

21

-

-

Other

1,244

1,432

1,318

1,689

1,477

Total non-interest expense    

20,094

20,028

20,192

21,196

18,944

Income (loss) before income taxes

4,505

4,606

4,277

(37,278)

1,181

Income tax expense (benefit)

1,081

1,198

941

(13,075)

(741)

Net income (loss)

$   3,424

$   3,408

$   3,336

$ (24,203)

$   1,922

Basic earnings (loss) per common share

$     0.25

$     0.25

$     0.24

$     (1.75)

$     0.14

Diluted earnings (loss) per common share

$     0.25

$     0.25

$     0.24

$     (1.75)

$     0.14

Weighted average common shares outstanding      

Basic

13,865

13,856

13,829

13,817

13,806

Diluted

13,893

13,894

13,858

13,817

13,857

F-4

BERKSHIRE HILLS BANCORP, INC.

ASSET QUALITY ANALYSIS

At or for the Quarters Ended

Sept. 30,

June 30,

Mar. 31,

Dec. 31,

Sept. 30,

(Dollars in thousands)

2010

2010

2010

2009

2009

NON-PERFORMING ASSETS

Non-accruing loans:

Residential mortgages

$   2,520

$   2,251

$   3,289

$    3,304

$   2,399

Commercial mortgages

11,122

11,049

14,433

31,917

17,077

Commercial business loans

2,128

2,731

3,211

3,115

2,041

Consumer loans

616

498

672

364

1,089

Total non-accruing loans

16,386

16,529

21,605

38,700

22,606

Other real estate owned

2,900

2,900

3,250

30

130

Total non-performing assets

$ 19,286

$ 19,429

$ 24,855

$  38,730

$ 22,736

Total non-accruing loans/total loans

0.80%

0.82%

1.09%

1.97%

1.14%

Total non-performing assets/total assets

0.69%

0.71%

0.92%

1.43%

0.85%

PROVISION AND ALLOWANCE FOR LOAN LOSSES

Balance at beginning of period

$ 31,848

$ 31,829

$ 31,816

$  24,297

$ 22,917

Charged-off loans

(2,121)

(2,502)

(3,846)

(31,254)

(2,955)

Recoveries on charged-off loans

109

321

1,533

43

35

Net loans charged-off

(2,012)

(2,181)

(2,313)

(31,211)

(2,920)

Provision for loan losses

2,000

2,200

2,326

38,730

4,300

Balance at end of period

$ 31,836

$ 31,848

$ 31,829

$  31,816

$ 24,297

Allowance for loan losses/total loans

1.55%

1.58%

1.61%

1.62%

1.22%

Allowance for loan losses/non-accruing loans

194%

193%

147%

82%

107%

NET LOAN CHARGE-OFFS

Residential mortgages

$    (110)

$        32

$        56

$   (1,873)

$           -

Commercial mortgages

(740)

(1,474)

(2,584)

(23,024)

(2,348)

Commercial business loans

(946)

(485)

571

(4,864)

(72)

Auto

(202)

(237)

(275)

(491)

(443)

Home equity and other

(14)

(17)

(81)

(959)

(57)

Total, net

$ (2,012)

$ (2,181)

$ (2,313)

$ (31,211)

$ (2,920)

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

0.40%

0.44%

0.47%

6.21%

0.59%

Net charge-offs (YTD annualized)/average loans

0.43%

0.46%

0.47%

1.99%

0.52%

DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS

30-89 Days delinquent

0.28%

0.20%

0.30%

0.35%

0.34%

90+ Days delinquent and still accruing

0.03%

0.01%

0.01%

0.01%

0.08%

Total accruing delinquent loans

0.31%

0.21%

0.31%

0.36%

0.42%

Non-accruing loans

0.80%

0.82%

1.09%

1.97%

1.14%

Total delinquent and non-accruing loans

1.11%

1.03%

1.40%

2.33%

1.56%

F-5

BERKSHIRE HILLS BANCORP, INC. 

 SELECTED FINANCIAL HIGHLIGHTS

At or for the Quarters Ended

Sept. 30,

June 30,

Mar. 31,

Dec. 31,

Sept. 30,

2010

2010

2010

2009

2009

PERFORMANCE RATIOS

Core return on tangible assets

0.65

%

0.66

%

0.66

%

(3.49)

%

      0.44

%

Return on total assets

0.49

0.50

0.50

(3.55)

      0.29

Core return on tangible common equity

7.84

7.84

7.76

(37.31)

      4.70

Return on total common equity

3.53

3.51

3.44

(23.26)

      1.86

Net interest margin, fully taxable equivalent

3.30

3.25

3.24

3.05

      2.96

Non-interest income to assets

1.00

1.17

1.27

0.68

      1.08

Non-interest income to net revenue

26.00

29.68

31.71

20.54

    29.72

Non-interest expense to assets

2.90

2.95

3.02

3.11

      2.82

Efficiency ratio

70.77

69.97

70.71

80.61

    72.49

GROWTH

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

11

%

9

%

-

%

5

%

           7

%

Total loans, year-to-date (annualized)

6

6

4

(2)

         (1)

Total deposits, year-to-date (annualized)

6

5

10

9

         10

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

6

4

2

(8)

         (7)

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

128

172

(11)

N/M

       (81)

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

78

64

(11)

N/M

       (73)

FINANCIAL DATA   (In millions)

Total assets

$  2,798

$ 2,748

$ 2,705

$ 2,700

$  2,681

Total loans

2,054

2,020

1,981

1,962

    1,986

Allowance for loan losses

32

32

32

32

         24

Total intangible assets

174

175

175

176

       177

Total deposits

2,069

2,040

2,037

1,987

    1,967

Total common stockholders' equity

383

385

385

385

410

Total core income (loss)

3.4

3.4

3.3

(23.0)

1.9

Total net income (loss)

3.4

3.4

3.3

(24.2)

        1.9

ASSET QUALITY RATIOS

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

0.40

%

0.44

%

0.47

%

6.21

%

      0.59

%

Non-performing assets/total assets

0.69

0.71

0.92

1.43

      0.85

Allowance for loan losses/total loans

1.55

1.58

1.61

1.62

      1.22

Allowance for loan losses/non-accruing loans

194

193

147

82

       107

PER COMMON SHARE DATA

Core earnings (loss), diluted

$    0.25

$   0.25

$   0.24

$ (1.66)

$    0.14

Net earnings (loss), diluted

0.25

0.25

0.24

(1.75)

      0.14

Tangible common book value

14.89

14.96

14.97

14.98

    16.76

Total common book value

27.28

27.40

27.47

27.64

    29.46

Market price at period end

18.96

19.48

18.33

20.68

    21.94

Dividends

0.16

0.16

0.16

0.16

      0.16

CAPITAL RATIOS

Common stockholders' equity to total assets

13.68

%

14.00

%

14.24

%

14.24

%

    15.31

%

Tangible common stockholders' equity to tangible assets

7.96

8.16

8.30

8.26

      9.32

N/M - Not Meaningful

(1)  Reconciliation of Non-GAAP financial measures, including all references to core and tangible amounts, appear on page 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.  

F-6

BERKSHIRE HILLS BANCORP, INC.

AVERAGE BALANCES

Quarters Ended

Sept. 30,

June 30,

Mar. 31,

Dec 31,

Sept. 30,

(In thousands)

2010

2010

2010

2009

2009

Assets

Loans:

Residential mortgages

$    633,846

$    636,009

$    614,561

$    620,105

$    621,632

Commercial mortgages

892,124

877,638

855,828

869,087

832,716

Commercial business loans

212,697

180,830

170,322

186,898

177,720

Consumer loans

296,827

302,928

311,409

319,087

329,177

Total loans

2,035,494

1,997,405

1,952,120

1,995,177

1,961,245

Securities

402,604

407,696

411,957

407,144

384,204

Short-term investments

13,865

10,505

7,420

14,293

30,956

Total earning assets

2,451,963

2,415,606

2,371,497

2,416,614

2,376,405

Goodwill and other intangible assets

174,124

174,887

175,711

176,482

177,233

Other assets

141,868

129,665

129,872

112,159

115,223

Total assets

$ 2,767,955

$ 2,720,158

$ 2,677,080

$ 2,705,255

$ 2,668,861

Liabilities and stockholders' equity

Deposits:

NOW

$    195,433

$    196,387

$    194,928

$    192,693

$    179,837

Money market

612,106

598,007

542,185

540,539

511,191

Savings

219,701

221,196

223,722

212,402

213,016

Time

749,234

748,248

757,752

768,415

781,732

Total interest-bearing deposits

1,776,474

1,763,838

1,718,587

1,714,049

1,685,776

Borrowings and debentures

288,467

266,860

280,102

272,997

287,812

Total interest-bearing liabilities

2,064,941

2,030,698

1,998,689

1,987,046

1,973,588

Non-interest-bearing demand deposits

280,628

275,883

270,064

279,495

261,592

Other liabilities

34,158

25,148

20,494

25,972

23,716

Total liabilities

2,379,727

2,331,729

2,289,247

2,292,513

2,258,896

Total stockholders' common equity

388,228

388,429

387,833

412,742

409,965

Total liabilities and stockholders' equity

$ 2,767,955

$ 2,720,158

$ 2,677,080

$ 2,705,255

$ 2,668,861

Supplementary data

Total non-maturity deposits

$ 1,307,868

$ 1,291,473

$ 1,230,899

$ 1,225,129

$ 1,165,636

Total deposits

2,057,102

2,039,721

1,988,651

1,993,544

1,947,368

Fully taxable equivalent income adj.

709

693

646

609

555

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

F-7

BERKSHIRE HILLS BANCORP, INC.

AVERAGE YIELDS  (Fully Taxable Equivalent - Annualized)

Quarters Ended

Sept. 30,

June 30,

Mar. 31,

Dec. 31,

Sept. 30,

2010

2010

2010

2009

2009

Earning assets

Loans:

Residential mortgages

5.17

%

5.26

%

5.31

%

5.32

%

5.38

%

Commercial mortgages

4.74

4.96

4.94

4.87

5.02

Commercial business loans

5.86

4.99

4.88

5.30

5.53

Consumer loans

3.83

3.93

4.04

4.20

4.33

Total loans

4.86

4.90

4.91

4.95

5.06

Securities

4.19

4.09

4.06

4.01

4.11

Short-term investments

0.15

0.10

0.20

0.15

0.24

Total earning assets

4.72

4.75

4.75

4.76

4.84

Funding liabilities

Deposits:

NOW

0.32

0.35

0.39

0.40

0.36

Money Market

0.87

0.98

1.02

1.08

1.25

Savings

0.22

0.25

0.32

0.30

0.31

Time

2.59

2.68

2.71

2.88

3.10

Total interest-bearing deposits

1.45

1.54

1.61

1.72

1.89

Borrowings and debentures

3.12

3.46

3.27

4.30

4.48

Total interest-bearing liabilities

1.69

1.79

1.84

2.07

2.27

Net interest spread

3.03

2.96

2.91

2.69

2.57

Net interest margin

3.30

3.25

3.24

3.05

2.96

Cost of funds

1.48

1.58

1.62

1.82

2.00

Cost of deposits

1.26

1.33

1.39

1.48

1.64

(1) Average balances and yields for securities available-for-sale are based on amortized cost.

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

F-8

BERKSHIRE HILLS BANCORP, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

At or for the Quarters Ended

Sept. 30,

June 30,

Mar. 31,

Dec. 31,

Sept. 30,

(Dollars in thousands)

2010

2010

2010

2009

2009

Net income (loss)

$   3,424

$   3,408

$   3,336

$ (24,203)

$   1,922

Adj: Loss on sale of securities, net

-

-

-

-

            5

Adj:  Other non-recurring income

-

-

-

-

          (1)

Adj: Loss on prepayment of borrowings, net

-

-

-

2,071

             -

Plus: Other non-recurring expense

-

-

21

-

             -

Adj:  Income taxes

-

-

(9)

(866)

          (2)

Total core income (loss)

(A)

$   3,424

$   3,408

$   3,348

$ (22,998)

$   1,924

Plus: Amortization of intangible assets

768

768

768

779

        833

Total tangible core income (loss)

(B)

$   4,192

$   4,176

$   4,116

$ (22,219)

$   2,757

Total non-interest income

$   6,915

$   7,963

$   8,498

$    4,652

$   7,260

Adj: Loss on sale of securities, net

-

-

-

-

            5

Adj: Non-recurring gain (loss)

-

-

-

2,071

          (1)

Total core non-interest income                      

6,915

7,963

8,498

6,723

     7,264

Net interest income

19,684

18,871

18,297

17,996

   17,165

Total core revenue

$ 26,599

$ 26,834

$ 26,795

$  24,719

$ 24,429

Total non-interest expense

$ 20,094

$ 20,028

$ 20,192

$  21,196

$ 18,944

Less: Non-recurring expense

-

-

(21)

-

             -

Core non-interest expense                                    

20,094

20,028

20,171

21,196

   18,944

Less: Amortization of intangible assets

(768)

(768)

(768)

(779)

      (833)

Total core tangible non-interest expense            

$ 19,326

$ 19,260

$ 19,403

$  20,417

$ 18,111

(Dollars in millions, except per share data)

Total average assets                                                

$   2,768

$   2,720

$   2,677

$    2,705

$   2,669

Less:  Average intangible assets

(174)

(175)

(176)

(176)

      (177)

Total average tangible assets                              

(C)

$   2,594

$   2,545

$   2,501

$    2,529

$   2,492

Total average stockholders' equity                        

$      388

$      388

$      388

$       413

$      410

Less:  Average intangible assets

(174)

(175)

(176)

(177)

      (177)

Total average tangible common stockholders' equity

(D)

$      214

$      213

$      212

$       236

$      233

Total stockholders' equity, period-end

$      383

$      385

$      385

$       385

$      410

Less:  Intangible assets, period-end

(174)

(175)

(175)

(177)

      (177)

Total tangible stockholders' equity, period-end  

(E)

209

210

210

208

        233

Total common shares outstanding, period-end (thousands)              

(F)

14,037

14,037

14,027

13,916

   13,928

Average diluted common shares outstanding (thousands)

(G)

13,893

13,894

13,858

13,817

   13,857

Core earnings (loss) per common share, diluted

(A/G)

$     0.25

$     0.25

$     0.24

$     (1.66)

$     0.14

Tangible book value per common share, period-end

(E/F)

$   14.89

$   14.96

$   14.97

$    14.98

$   16.76

Core return (annualized) on tangible assets

(B/C)

0.65

%

0.66

%

0.66

%

(3.49)

%

       0.44

%

Core return (annualized) on tangible common equity

(B/D)

7.84

7.84

7.76

(37.31)

       4.70

Efficiency ratio (1)

70.77

69.97

70.71

80.61

     72.49

(1) Efficiency ratio is computed by dividing total tangible core non-interest expense by the sum of total net interest income on a fully taxable equivalent basis and total core non-interest income.  The Company uses this non-GAAP measure, which is used widely in the banking industry, to provide important information regarding its operational efficiency.

(2) Ratios are annualized and based on average balance sheet amounts, where applicable.

(3) Quarterly data may not sum to year-to-date data due to rounding.

F-9

BERKSHIRE HILLS BANCORP, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

At or for the Nine Months Ended

September 30,

September 30,

(Dollars in thousands)

2010

2009

Net income

$          10,168

$            8,136

Adj: Loss on sale of securities, net

-

4

Adj:  Other non-recurring income

-

(1,178)

Plus: Other non-recurring expense

21

601

Adj:  Income taxes

(9)

240

Total core income

(A)

$          10,180

$            7,803

Plus: Amortization of intangible assets

2,304

2,499

Total tangible core income

(B)

$          12,484

$          10,302

Total non-interest income

$          23,376

$          24,337

Adj: Loss on sale of securities, net

-

4

Adj: Non-recurring income

-

(1,178)

Total core non-interest income                      

23,376

23,163

Net interest income

56,852

51,600

Total core revenue

$          80,228

$          74,763

Total non-interest expense

$          60,314

$          57,375

Less:  Non-recurring expense

(21)

(601)

Core non-interest expense                                    

60,293

56,774

Less: Amortization of intangible assets

(2,304)

(2,499)

Total core tangible non-interest expense            

$          57,989

$          54,275

(Dollars in millions, except per share data)

Total average assets                                                

$            2,722

$            2,675

Less:  Average intangible assets

(175)

(178)

Total average tangible assets                              

(C)

$            2,547

$            2,497

Total average stockholders' equity                        

$               388

$               412

Less:  Average intangible assets

(175)

(178)

Total average tangible stockholders' equity          

213

234

Less: Average preferred equity

-

(20)

Total average tangible common stockholders' equity

(D)

$               213

$               214

Total stockholders' equity, period-end

$               383

$               410

Less:  Intangible assets, period-end

(174)

(177)

Total tangible stockholders' equity, period-end  

(E)

$               209

$               233

Total common shares outstanding, period-end (thousands)              

(F)

14,037

13,928

Average diluted common shares outstanding (thousands)

(G)

13,883

13,145

Core earnings per common share, diluted (1)

(A/G)

$              0.73

$              0.55

Tangible book value per common share, period-end

(E/F)

$            14.89

$            16.73

Core return (annualized) on tangible assets

(B/C)

0.65

%

0.55

%

Core return (annualized) on tangible common equity (1)

(B/D)

7.81

6.14

Efficiency ratio (2)

70.48

71.00

(1) September 30, 2009 EPS and ratios include a $637,000 reduction in core income and tangible core income for cumulative preferred stock dividend and accretion accumulated during Q1 2009. Preferred dividend charges recorded in Q2 2009 were deemed non-core due to preferred stock repayment.

(2) Efficiency ratio is computed by dividing total tangible core non-interest expense by the sum of total net interest income on a fully interest income on a fully taxable equivalent basis and total core non-interest income.  The Company uses this non-GAAP measure, which is used widely in the banking industry, to provide important information regarding its operational efficiency.

(3) Ratios are annualized and based on average balance sheet amounts, where applicable.

(4) Quarterly data may not sum to year-to-date data due to rounding.

F-10

SOURCE Berkshire Hills Bancorp



RELATED LINKS

http://www.berkshirebank.com