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Berkshire Hills Reports 43 Cents Third Quarter Core EPS, Loan Growth, and Core Expense Reduction; Dividend Declared



Berkshire Hills Reports 43 Cents Third Quarter Core EPS, Loan Growth, and Core
                     Expense Reduction; Dividend Declared

PR Newswire

PITTSFIELD, Mass., Oct. 28, 2013

PITTSFIELD, Mass., Oct. 28, 2013 /PRNewswire/ -- Berkshire Hills Bancorp, Inc.
(NYSE: BHLB) reported that, for the first nine months of the year, core income
increased by 18% to $36.7 million from $31.0 million due to the benefit of
organic and acquisition growth initiatives.  Nine month core earnings per
share increased by 3% to $1.47 from $1.43.  The benefit of business expansion
has more than offset pricing pressures in the low interest rate environment. 

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

Third quarter core earnings totaled $10.7 million in 2013 compared to $11.4
million in 2012.  The widely publicized reduction in residential mortgage
refinancing demand led to a $0.10 per share after-tax reduction in mortgage
banking fees.  As a result, third quarter core earnings per share decreased to
$0.43 in 2013, compared to $0.52 in the third quarter of 2012.   Results in
the most recent quarter included 16% annualized loan growth and a 4% reduction
in core non-interest expense, compared to the linked quarter, reflecting
Berkshire's recent initiatives in response to the mortgage changes. 

Nine month GAAP net income increased to $30.6 million in 2013 from $23.9
million in 2012.   These amounts include net non-core charges primarily
related to mergers, systems integration, and restructuring expenses.  They
also include a third quarter 2013 net non-core credit adjustment posted as an
out-of-period correction to recognize prior period interest income on loans
acquired in bank acquisitions, net of related taxes and a variable
compensation adjustment.  Nine month GAAP net income increased to $1.22 per
share in 2013 from $1.10 in 2012.  Third quarter GAAP net income was $8.1
million and $10.0 million in 2013 and 2012, while third quarter GAAP earnings
per share were $0.33 and $0.46 per share, respectively.   Non-core charges in
the most recent quarter were primarily due to restructuring charges intended
to reduce ongoing operating expenses and improve future profitability.

THIRD QUARTER FINANCIAL HIGHLIGHTS

  o 16% annualized increase in commercial business loans and in total loans
  o 8% annualized increase in total commercial loans
  o 7% annualized increase in total deposits
  o 16% annualized increase in demand deposits
  o 3.93% net interest margin
  o 4% decrease in core non-interest expense compared to prior quarter
  o 0.58% non-performing assets/total assets
  o 0.32% net loan charge-offs/average loans

CEO Michael Daly stated, "We had a good quarter and our business expansion
initiatives have driven year-to-date earnings growth despite the headwinds
resulting from the interest rate environment.  At the beginning of the third
quarter, we took action to further consolidate the benefits from our
expansion.  We renewed loan growth while trimming core expenses, achieving
near-term core earnings and profitability targets."

Mr. Daly continued, "We expect to accomplish our long term objectives through
market share growth in our New England and New York footprint. We've attracted
a strong team and assembled the infrastructure to enable us to be the
preferred provider of financial solutions.  Recently, George Bacigalupo was
promoted to the position of EVP – Commercial Banking.  George is an
accomplished regional commercial banking executive serving middle market
businesses.  Our commercial market managers produced strong loan growth in the
quarter and business development prospects remain encouraging for the months
ahead."

Mr. Daly concluded, "We are restructuring targeted operations to drive
additional efficiencies arising from expansion and infrastructure investment. 
Non-core restructuring charges were recorded during the quarter, enabling us
to lower ongoing operating expenses as demonstrated by our third quarter
results.  In addition, there has been good progress towards completing the
purchase of 20 New York branches from Bank of America in January.  We are
targeting overall positive operating leverage in 2014 based on revenue growth
and efficiency goals."

DIVIDEND DECLARED

The Board of Directors voted to declare a cash dividend of $0.18 per share to
shareholders of record at the close of business on November 14, 2013, payable
on November 27, 2013. This dividend equates to a 2.7% annualized yield based
on the $26.21 average closing price of Berkshire's common stock during the
third quarter of 2013.   

NOTE ON ACCOUNTING CORRECTION

During the most recent quarter, the Company recorded a correction to recognize
$2.2 million of prior period revenue that was primarily related to interest
income earned on loans acquired in bank acquisitions, together with an income
tax adjustment.  This included $0.9 million in additional revenue for the
first half of 2013, with the remainder representing revenue which was not
previously recorded in 2011 and 2012.  After evaluating the quantitative and
qualitative aspects of these adjustments, the Company concluded that prior
period statements were not materially misstated, and therefore no restatement
was required and no revision was necessary in the disclosure of the level and
trend of earnings. The Company classified this revenue as non-core in its
determination of core earnings.

FINANCIAL CONDITION

Berkshire increased its earning assets by $227 million (5%) in the most recent
quarter including growth of $153 million (16% annualized) in total loans, with
growth registered in most major loan categories.  Loan growth was funded in
part with a $67 million increase (7% annualized) in deposits, and Berkshire
made progress towards its goal of completing the purchase of more than $600
million in deposits from Bank of America in January.   Measures of asset
quality, liquidity, and capital remained within targets and the Company
continued to maintain an asset sensitive interest rate risk profile.  Tangible
book value per share increased to $16.08 and total book value per share grew
to $26.98.

Earning asset growth included the benefit of ongoing business development as
well as targeted asset purchases, primarily consisting of medium duration
government agency mortgage backed securities.  Run-off of commercial real
estate related loans decreased and total commercial mortgage loans increased
at a 4% annualized rate.  Commercial business loans continued to grow
strongly, increasing at a 16% annualized rate for the quarter and 15%
year-to-date.  As a result, total loan growth turned positive for the
year-to-date.  A significant portion of residential mortgage production was
retained in the portfolio, benefiting from promotion of 10/1 adjustable rate
mortgages as an alternative to higher cost 30-year fixed rate mortgages. 
Consumer loans advanced at a 21% annualized rate in the quarter, mostly due to
higher originations of prime indirect automobile loans by Berkshire's Syracuse
based consumer lending team.  Based on quarter-end lending pipelines, the
Company expects to produce further net loan growth during the remainder of the
year.

Asset quality metrics remained favorable in the most recent quarter. 
Quarterly annualized net loan charge-offs measured 0.32% of average loans. 
Quarter-end non-performing assets were 0.58% of total assets, compared to
0.52% at the start of the year.  Accruing delinquent loans were 0.71% of total
loans after nine months, compared to 1.11% at the start of the year.  The loan
loss allowance measured 0.83% of total loans at both of the above dates.

The 7% annualized third quarter increase in total deposits included 16%
annualized growth in demand deposits and 19% annualized growth in money market
balances.  Due to short term promotions, the cost of deposits increased
slightly to 0.55% from 0.52% in the prior quarter.  Deposit growth included a
$49 million increase in commercial deposits, including the benefit of ongoing
commercial relationship expansion.  Total borrowings increased by $149 million
as short term funds were used to support earning asset growth pending the
completion of the deposit acquisition.  The loan/deposit ratio measured 104%
at quarter-end.  Berkshire improved the utilization of its capital to support
higher earning assets, with the result that the ratio of tangible
equity/assets stood at 7.7% at quarter-end, compared to 8.1% at the start of
the quarter.   The ratio of total equity/assets stood at 12.4% and 12.9% at
these dates, respectively. 

RESULTS OF OPERATIONS

Berkshire posted year-over-year growth in net revenue totaling 17% in the
third quarter and 24% for the first nine months of the year due primarily to
its organic and acquisition growth strategies.  Most categories of income and
expense increased year-over-year including the impact of acquisitions.  Core
earnings increased by 18% for the first nine months with the benefit of
overall business expansion.  Berkshire achieved these results while bearing
the costs of maintaining its asset sensitive interest rate risk profile,
absorbing charges related to its branch and team expansion, and investing in
technology and other infrastructure.  GAAP earnings include the impact of net
non-core charges related to mergers, systems conversion, restructuring, and
securities gains.  The reconciliation of net income and core income, together
with related financial measures, is shown on tables F-9 and F-10 of the
financial tables.  The core return on assets measured 0.81% in the most recent
quarter while the GAAP return on assets measured 0.61% after the non-core
items.  The core return on tangible equity measured 11.2% during the quarter,
while the GAAP return on equity measured 4.7%.

Compared to the linked quarter, Berkshire's third quarter net revenue
increased by 2%.  Core net revenue decreased by 1% due to lower mortgage
banking fee revenue.  Net interest income increased by 12% while non-interest
income declined by 22%, including a decrease in realized equity securities
gains.

Average earning assets increased by 2% in the most recent quarter.  Most of
the growth came later in the quarter, resulting in a 5% increase in period-end
balances.  In addition to earning asset growth, net interest income benefited
from an improvement in the net interest margin to 3.93%.  Net interest income
during the quarter included $8.5 million in purchased loan accounting
accretion, including $4.8 million related to recoveries on acquired impaired
loans and $2.2 million related to the out-of-period accounting adjustment. 
Excluding purchased loan accounting accretion, the net interest margin
measured 3.21% during the quarter, compared to 3.34% in the prior quarter due
to the ongoing impact of the low interest rate environment on earning asset
yields and changes in the asset mix. 

Non-interest income decreased to $12.1 million in the third quarter of 2013,
compared to $15.6 million in the linked quarter.  This included a $1.7 million
decrease in mortgage banking fees and a $1.3 million decrease in other loan
fees related primarily to loan sales in the earlier quarter.  The decrease in
mortgage banking revenue resulted from lower refinancing demand, tighter
margins on secondary market activity, and higher retention of adjustable rate
mortgages in the mortgage portfolio. 

The third quarter provision for loan losses increased to $3.2 million in 2013
from $2.7 million in the linked quarter and from $2.5 million in the third
quarter of 2012.  Net loan charge-offs totaled $3.2 million, $2.7 million, and
$2.3 million for these periods, respectively.  There were no significant
changes in the Company's charge-off metrics, which remain low compared to long
term industry standards.  Following the loan loss provision, the loan loss
allowance remained unchanged at $33.2 million during the most recent quarter
and for the first nine months of the year. 

Third quarter core non-interest expense decreased by $1.4 million (4%)
compared to the linked quarter due to cost saving initiatives that were
undertaken in the third quarter.  Most major categories of expense declined. 
Full time equivalent staff decreased by 7% to 948 from 1,014 during the
quarter.  Compensation expense did not fully reflect the declining run rate
during the quarter, and this was offset by higher variable compensation
related to increased business production and the increased prior period
revenue recognition.

Total GAAP non-interest expense increased to $42.8 million from $37.9 million
in the linked quarter due to $6.5 million of non-recurring charges in the most
recent quarter, including $1.0 million related to the upcoming acquisition of
Bank of America branches, $2.4 million in severance costs, and $2.8 million
related to facilities restructuring costs.  The latter charge related to nine
properties that are being closed or consolidated.  Two branches are being
consolidated in the fourth quarter, and for the year, Berkshire will have
consolidated five branch offices (7% of the total) to achieve greater
efficiency following its acquisitions.  The Company continues to evaluate
restructuring opportunities in order to improve efficiency.  The efficiency
ratio improved to 61.0% in the most recent quarter.  The effective income tax
rate was 32.6% in the most recent quarter, which was generally in line with
the Company's expectations.

CONFERENCE CALL

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

Dial-in:                     888-317-6003
Elite Entry Number:          8416293
Webcast:                     berkshirebank.com (investor relations link)

A telephone replay of the call will be available through Wednesday, November
6, 2013 by calling 877-344-7529 and entering conference number: 10034938.  The
webcast and a podcast will be available at Berkshire's website above for an
extended period.  A PDF version of this release is available at Berkshire's
Investor Relations web site.

BACKGROUND

Berkshire Hills Bancorp is the parent of Berkshire Bank – America's Most
Exciting Bank^®. The Company has approximately $5.5 billion in assets and 74
full service branch offices in Massachusetts, New York, Connecticut, and
Vermont providing personal and business banking, insurance, and wealth
management services. 

FORWARD LOOKING STATEMENTS

This document contains 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.

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.  In the most recent period, non-core restructuring
charges are related to severance costs as a result of management and staffing
changes, along with facilities costs related to excess facilities where the
bank is exiting its occupancy and investment.  As discussed previously,
non-core items recorded in the third quarter of 2013 also included the
after-tax impact of the out-of-period accounting adjustment, along with an
adjustment of variable compensation based on the additional revenue
recognition.

CONTACTS
Investor Relations Contact
Allison O'Rourke; Vice President - Investor Relations; 413-236-3149

Media Contact
Ray Smith, Assistant Vice President – Marketing; 413-236-3756

BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-1)
                               September 30,   June 30,        December 31,
(In thousands)                 2013            2013            2012
Assets
Cash and due from banks        $               $               $            
                                61,149          56,623          63,382
Short-term investments         15,710          23,482          34,862
Total cash and short-term      76,859          80,105          98,244
investments
Trading security               15,330          15,566          16,893
Securities available for sale, 684,716         568,268         466,169
at fair value
Securities held to maturity,   46,925          49,604          51,024
at amortized cost
Federal Home Loan Bank stock
and other restricted           42,342          37,667          39,785
securities
Total securities               789,313         671,105         573,871
Loans held for sale            27,064          64,101          85,368
Residential mortgages          1,313,609       1,232,488       1,324,251
Commercial mortgages           1,366,104       1,352,913       1,413,544
Commercial business loans      668,983         643,924         600,126
Consumer loans                 675,147         641,350         650,733
Total loans                    4,023,843       3,870,675       3,988,654
Less: Allowance for loan       (33,248)        (33,248)        (33,208)
losses
Net loans                      3,990,595       3,837,427       3,955,446
Premises and equipment, net    83,136          88,644          86,461
Other real estate owned        3,561           2,713           1,929
Goodwill                       256,871         256,118         255,199
Other intangible assets        15,030          16,337          19,059
Cash surrender value of        100,299         89,592          88,198
bank-owned life insurance
Deferred tax asset             61,617          60,410          57,729
Other assets                   45,911          57,579          75,305
Total assets                   $               $               $        
                               5,450,256       5,224,131       5,296,809
Liabilities and stockholders'
equity
Demand deposits                $               $               $          
                                669,878         644,059         673,921
NOW deposits                   352,762         356,695         379,880
Money market deposits          1,357,201       1,295,771       1,439,632
Savings deposits               438,135         444,586         436,387
Total non-maturity deposits    2,817,976       2,741,111       2,929,820
Time deposits                  1,064,049       1,074,112       1,170,589
Total deposits                 3,882,025       3,815,223       4,100,409
Senior borrowings              740,022         590,826         358,471
Subordinated notes             89,663          89,647          89,617
Total borrowings               829,685         680,473         448,088
Other liabilities              65,351          55,465          81,047
Total liabilities              4,777,061       4,551,161       4,629,544
Total stockholders' equity     673,195         672,970         667,265
Total liabilities and          $               $               $        
stockholders' equity           5,450,256       5,224,131       5,296,809
(1) Certain reclassifications have been made to prior year balances to conform
to the current year presentation.

 

BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED - (F-2)
LOAN ANALYSIS
                                                           Annualized growth %
                      Sept. 30,    June 30,     Dec. 31,   Quarter     Year
(Dollars in           2013         2013         2012       ended       to
millions)             Balance      Balance      Balance    September   date
                                                           30, 2013
Total residential     $            $            $        
mortgages                 1,314        1,233               26      %   (1)   %
                                                1,324
Commercial
mortgages:
Construction          105          128          168        (74)        (50)
Single and            132          129          124        9           8
multi-family
Commercial real       1,129        1,096        1,122      12          1
estate
Total commercial      1,366        1,353        1,414      4           (4)
mortgages
Total commercial      669          644          600        16          15
business loans
Total commercial      2,035        1,997        2,014      8           1
loans
Consumer loans:
Home equity           304          310          325        (9)         (9)
Other                 371          331          326        48          18
Total consumer loans  675          641          651        21          5
                      $            $            $        
Total loans               4,024        3,871               16      %   1     %
                                                3,989
DEPOSIT ANALYSIS
                                                           Annualized growth %
                      Sept. 30,    June 30,     Dec. 31,   Quarter     Year
(Dollars in           2013         2013         2012       ended       to
millions)             Balance      Balance      Balance    September   date
                                                           30, 2013
                      $            $            $        
Demand                       670          644              16      %   (1)   %
                                                 674
NOW                   353          357          380        (4)         (9)
Money market          1,357        1,296        1,440      19          (8)
Savings               438          444          436        (5)         1
Total non-maturity    2,818        2,741        2,930      11          (5)
deposits
Total time deposits   1,064        1,074        1,170      (4)         (12)
                      $            $            $        
Total deposits            3,882        3,815               7       %   (7)   %
                                                4,100
(1)  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        Nine Months Ended
                            September 30,             September 30,
(In thousands, except per   2013         2012         2013         2012
share data)
Interest and dividend
income    
Loans                       $            $            $            $    
                             50,025       39,497       142,549      113,335
Securities and other        4,479        3,626        12,533       11,116
Total interest and dividend 54,504       43,123       155,082      124,451
income    
Interest expense
Deposits                    5,278        5,628        15,693       16,612
Borrowings and subordinated 3,357        2,270        10,479       6,416
debentures
Total interest expense      8,635        7,898        26,172       23,028
Net interest income         45,869       35,225       128,910      101,423
Non-interest income
Loan related fees           1,308        1,340        6,669        3,990
Mortgage banking fees       444          4,306        4,790        6,553
Deposit related fees        4,559        3,775        13,623       11,238
Insurance commissions and   2,473        2,742        7,877        8,256
fees    
Wealth management fees      2,137        1,774        6,471        5,431
Total fee income            10,921       13,937       39,430       35,468
Other                       832          375          1,722        885
Gain on sale of securities, 361          -            1,366        7
net    
Non-recurring gain          -            1            -            43
Total non-interest          12,114       14,313       42,518       36,403
income      
Total net revenue           57,983       49,538       171,428      137,826
Provision for loan          3,178        2,500        8,278        6,750
losses   
Non-interest expense
Compensation and benefits   18,506       15,992       54,398       45,219
Occupancy and               5,614        4,599        17,119       13,484
equipment     
Technology and              3,304        2,302        9,775        6,518
communications
Marketing and               590          419          1,831        1,548
promotion     
Professional services       1,757        1,327        5,011        4,185
FDIC premiums and           856          907          2,574        2,458
assessments
Other real estate owned and 138          42           445          215
foreclosures
Amortization of intangible  1,307        1,314        4,029        3,982
assets     
Non-recurring and merger    6,516        2,214        12,355       10,522
related expenses     
Other                       4,196        3,046        12,665       8,409
Total non-interest          42,784       32,162       120,202      96,540
expense     
Income from continuing
operations before income    12,021       14,876       42,948       34,536
taxes       
Income tax expense          3,917        4,847        12,342       10,040
Net income from continuing  8,104        10,029       30,606       24,496
operations
Loss from discontinued
operations before income
taxes 
     (including gain on     -            -            -            (261)
disposals of $63)
Income tax expense          -            -            -            376
Net loss from discontinued  -            -            -            (637)
operations
Net income                  $            $            $            $      
                             8,104        10,029       30,606       23,859
Basic earnings per share:
Continuing operations       $            $            $            $          
                             0.33         0.46         1.23         1.14
Discontinued operations     -            -            -            (0.03)
Total basic earnings per    $            $            $            $          
share                        0.33         0.46         1.23         1.11
Diluted earnings per share:
Continuing operations       $            $            $            $          
                             0.33         0.46         1.22         1.13
Discontinued operations     -            -            -            (0.03)
Total diluted earnings per  $            $            $            $          
share                        0.33         0.46         1.22         1.10
Weighted average shares
outstanding:      
Basic                       24,748       21,921       24,835       21,541
Diluted                     24,873       22,031       25,001       21,635

 

BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED - (F-4)
                          Quarters Ended
                          Sept. 30,    June 30,   Mar. 31,  Dec. 31,  Sept.
                                                                      30,
(In thousands, except per 2013         2013       2013      2012      2012
share data)
Interest and dividend
income    
Loans                     $            $          $         $         $    
                           50,025       45,443     47,081    47,601    39,497
Securities and other      4,479        4,254      3,800     3,887     3,626
Total interest and        54,504       49,697     50,881    51,488    43,123
dividend income    
Interest expense
Deposits                  5,278        5,052      5,363     5,870     5,628
Borrowings and            3,357        3,541      3,581     3,653     2,270
subordinated debentures
Total interest            8,635        8,593      8,944     9,523     7,898
expense    
Net interest income       45,869       41,104     41,937    41,965    35,225
Non-interest income
Loan related fees         1,308        2,644      2,717     1,162     1,340
Mortgage banking fees     444          2,129      2,217     5,850     4,306
Deposit related fees      4,559        4,805      4,259     4,355     3,775
Insurance commissions and 2,473        2,407      2,997     2,565     2,742
fees    
Wealth management         2,137        2,070      2,264     1,865     1,774
fees    
Total fee income          10,921       14,055     14,454    15,797    13,937
Other                     832          546        344       421       375
Gain on sale of           361          1,005      -         1,435     -
securities, net     
Non-recurring gain        -            -          -         -         1
Total non-interest        12,114       15,606     14,798    17,653    14,313
income      
Total net revenue         57,983       56,710     56,735    59,618    49,538
Provision for loan        3,178        2,700      2,400     2,840     2,500
losses   
Non-interest expense
Compensation and benefits 18,506       18,151     17,741    18,862    15,992
Occupancy and             5,614        5,737      5,768     5,985     4,599
equipment     
Technology and            3,304        3,480      2,991     2,949     2,302
communications
Marketing and promotion   590          603        638       483       419
Professional services     1,757        1,764      1,490     1,600     1,327
FDIC premiums and         856          890        828       919       907
assessments
Other real estate owned   138          284        23        66        42
and foreclosures
Amortization of           1,307        1,345      1,377     1,357     1,314
intangible assets     
Non-recurring and merger  6,516        775        5,064     7,497     2,214
related expenses     
Other                     4,196        4,906      3,563     4,548     3,046
Total non-interest        42,784       37,935     39,483    44,266    32,162
expense     
Income from continuing
operations before income  12,021       16,075     14,852    12,512    14,876
taxes       
Income tax expense        3,917        4,038      4,387     3,183     4,847
Net income                $            $          $         $         $    
                           8,104        12,037     10,465    9,329     10,029
Basic earnings per share:
Continuing operations     $            $          $         $         $      
                           0.33         0.49         0.42      0.39      0.46
Discontinued operations   -            -          -         -         -
Total basic earnings per  $            $          $         $         $      
share                      0.33         0.49         0.42      0.39      0.46
Diluted earnings per
share:
Continuing operations     $            $          $         $         $      
                           0.33         0.48         0.42      0.38      0.46
Discontinued operations   -            -          -         -         -
Total diluted earnings    $            $          $         $         $      
per share                  0.33         0.48         0.42      0.38      0.46
Weighted average shares
outstanding:      
Basic                     24,748       24,779     24,927    24,165    21,921
Diluted                   24,873       24,956     25,136    24,396    22,031
(1) The Company acquired Beacon Federal Bancorp on October 19, 2012. The
income statements include operations of the acquired institution as of that
date.

 

BERKSHIRE HILLS BANCORP, INC.
ASSET QUALITY ANALYSIS - (F-5)
                           At or for the Quarters Ended
                           Sept. 30,  June 30,  Mar. 31,  Dec. 31,  Sept. 30,
(Dollars in thousands)     2013       2013      2013      2012      2012
NON-PERFORMING ASSETS
Non-accruing loans:
                           $          $         $         $         $      
Residential mortgages         8,487      5,945             7,466     8,440
                                                8,818
Commercial mortgages       13,800     14,948    12,396    12,617    13,552
Commercial business        2,753      3,481     3,519     3,681     2,024
loans
Consumer loans             3,227      2,405     2,325     1,748     1,823
Total non-accruing loans   28,267     26,779    27,058    25,512    25,839
Other real estate owned    3,561      2,713     2,513     1,929     1,399
Total non-performing       $          $         $         $         $    
assets                      31,828     29,492              27,441    27,238
                                                29,571
Total non-accruing         0.70%      0.69%     0.70%     0.64%     0.76%
loans/total loans
Total non-performing       0.58%      0.56%     0.56%     0.52%     0.59%
assets/total assets
PROVISION AND ALLOWANCE
FOR LOAN LOSSES
Balance at beginning of    $          $         $         $         $    
period                      33,248     33,263              33,090    32,868
                                                33,208
Charged-off loans          (3,417)    (3,457)   (2,501)   (3,073)   (2,353)
Recoveries on              239        742       156       351       75
charged-off loans
Net loans charged-off      (3,178)    (2,715)   (2,345)   (2,722)   (2,278)
Provision for loan         3,178      2,700     2,400     2,840     2,500
losses
                           $          $         $         $         $    
Balance at end of period    33,248     33,248              33,208    33,090
                                                33,263
Allowance for loan         0.83%      0.86%     0.86%     0.83%     0.97%
losses/total loans
Allowance for loan
losses/non-accruing        118%       124%      123%      130%      128%
loans
NET LOAN CHARGE-OFFS
                           $          $         $         $         $        
Residential mortgages          (351)                       (1,034)  (243)
                                       (852)     (260)
Commercial mortgages       (1,480)    (1,283)   (952)     (893)     (1,790)
Commercial business        (940)      (93)      (631)     (496)     (99)
loans
Home equity                (174)      (121)     (199)     (22)      (90)
Other consumer             (233)      (366)     (303)     (277)     (56)
                           $          $         $         $         $    
Total, net                  (3,178)                        (2,722)   (2,278)
                                      (2,715)   (2,345)
Net charge-offs (QTD
annualized)/average        0.32%      0.27%     0.23%     0.28%     0.27%
loans 
Net charge-offs (YTD
annualized)/average        0.28%      0.26%     0.23%     0.26%     0.25%
loans 
DELINQUENT AND NON-ACCRUING
LOANS/TOTAL LOANS
30-89 Days delinquent      0.42%      0.70%     0.61%     0.63%     0.62%
90+ Days delinquent and    0.29%      0.40%     0.47%     0.48%     0.38%
still accruing
Total accruing             0.71%      1.10%     1.08%     1.11%     1.00%
delinquent loans
Non-accruing loans         0.70%      0.69%     0.70%     0.64%     0.76%
Total delinquent and       1.41%      1.79%     1.78%     1.75%     1.76%
non-accruing loans

BERKSHIRE HILLS BANCORP, INC.
SELECTED FINANCIAL HIGHLIGHTS - (F-6)
                               At or for the Quarters Ended
                               Sept.     June      Mar.      Dec.    Sept.
                               30,       30,       31,       31,     30,
                               2013      2013      2013      2012    2012
 PER SHARE DATA
                               $         $         $         $       $      
     Core earnings, diluted                                           0.52
                               0.43      0.48      0.54      0.54
     Net earnings, diluted     0.33      0.48      0.42      0.38    0.46
     Tangible book value       16.08     15.96     15.87     15.63   15.86
     Total book value          26.98     26.82     26.68     26.53   26.60
     Market price at period    25.11     27.76     25.54     23.86   22.88
     end
     Dividends                 0.18      0.18      0.18      0.18    0.17
 PERFORMANCE RATIOS
     Core return on assets     0.81   %  0.92   %  1.03   %  1.02  % 1.00    %
     Return on assets          0.61      0.93      0.80      0.72    0.88
     Core return on equity     6.29      7.13      8.10      8.32    7.81
     Core return on tangible   11.18     12.84     14.57     15.24   14.17
     equity
     Return on equity          4.74      7.21      6.28      5.86    6.89
     Net interest margin,      3.93      3.63      3.73      3.67    3.50
     fully taxable equivalent
     Fee income/Net interest   19.23     25.48     25.63     27.35   28.35
     and fee income
     Efficiency ratio          60.98     63.05     57.14     59.68   56.54
 GROWTH
     Total commercial loans,   1      %  (2)    %  0      %  29    % 22      %
     year-to-date (annualized)
     Total loans, year-to-date 1         (6)       (10)      35      21
     (annualized)
     Total deposits,           (7)       (14)      0         30      12
     year-to-date (annualized)
     Total net revenues,
     year-to-date, compared to 24        28        39        39      34
     prior year
     Earnings per share,
     year-to-date, compared to 11        40        50        62      106
     prior year
     Core earnings per share,
     year-to-date, compared to 3         11        20        29      30
     prior year
 FINANCIAL DATA   (In
 millions)
                               $         $         $         $       $    
     Total assets                                                     4,634
                               5,450     5,224     5,245     5,297
     Total earning assets      4,856     4,629     4,646     4,683   4,140
     Total loans               4,024     3,871     3,889     3,989   3,418
     Allowance for loan losses 33        33        33        33      33
     Total intangible assets   272       272       273       274     239
     Total deposits            3,882     3,815     4,101     4,100   3,450
     Total stockholders'       673       673       674       667     591
     equity
     Total core income         10.7      11.9      13.5      13.2    11.4
     Total net income          8.1       12.0      10.5      9.3     10.0
 ASSET QUALITY RATIOS
     Net charge-offs (current
     quarter                   0.32   %  0.27   %  0.23   %  0.28  % 0.27    %
     annualized)/average loans
     Allowance for loan        0.83      0.86      0.86      0.83    0.97
     losses/total loans
 CAPITAL RATIOS
     Stockholders' equity to   12.35  %  12.88  %  12.85  %  12.60 % 12.75   %
     total assets
     Tangible stockholders'    7.74      8.10      8.06      7.82    8.01
     equity to tangible assets
 (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.

 

BERKSHIRE HILLS BANCORP, INC.
AVERAGE BALANCES - (F-7)
                     Quarters Ended
                     Sept. 30,   June 30,    Mar. 31,    Dec. 31,    Sept. 30, 
(In thousands)       2013        2013        2013        2012        2012
Assets
Loans:
Residential          $           $           $           $           $      
mortgages             1,247,661   1,218,192   1,290,989   1,340,375   1,207,635
Commercial mortgages 1,353,923   1,381,755   1,406,628   1,404,515   1,276,909
Commercial business  647,939     627,591     601,695     580,436     545,988
loans
Consumer loans       651,565     634,715     644,674     598,802     368,795
Total loans          3,901,088   3,862,253   3,943,986   3,924,128   3,399,327
Securities           735,307     655,396     591,304     572,268     559,116
Short-term
investments and      60,820      90,680      98,160      126,378     115,835
loans held for sale
Total earning assets 4,697,215   4,608,329   4,633,450   4,622,774   4,074,278
Goodwill and other   271,670     272,421     273,428     267,588     239,186
intangible assets
Other assets         317,722     317,856     333,485     312,665     258,246
Total assets         $           $           $           $           $      
                      5,286,607   5,198,606   5,240,363   5,203,027   4,571,710
Liabilities and
stockholders' equity
Deposits:
NOW                  $           $           $           $           $        
                       345,682     358,255     368,392     355,366     291,158
Money market         1,329,591   1,358,590   1,477,497   1,404,113   1,170,840
Savings              442,408     449,296     441,547     422,447     376,064
Time                 1,064,199   1,087,357   1,148,345   1,161,175   1,039,301
Total
interest-bearing     3,181,880   3,253,498   3,435,781   3,343,101   2,877,363
deposits
Borrowings and notes 708,798     574,822     423,739     519,831     531,076
Total
interest-bearing     3,890,678   3,828,320   3,859,520   3,862,932   3,408,439
liabilities
Non-interest-bearing 658,568     636,469     645,923     635,044     537,466
demand deposits
Other liabilities    52,874      65,568      68,509      68,475      43,047
Total liabilities    4,602,120   4,530,357   4,573,952   4,566,451   3,988,952
Total stockholders'  684,487     668,249     666,411     636,576     582,758
equity
Total liabilities    $           $           $           $           $      
and stockholders'     5,286,607   5,198,606   5,240,363   5,203,027   4,571,710
equity
Supplementary data
Total non-maturity   $           $           $           $           $      
deposits              2,776,249   2,802,610   2,933,359   2,816,970   2,375,528
Total deposits       3,840,448   3,889,967   4,081,704   3,978,145   3,414,829
Fully taxable
equivalent income    652         644         629         667         623
adjustment
Total average        412,817     395,828     392,983     368,988     343,572
tangible equity 
(1) Average balances for securities available-for-sale are based on amortized
cost.  Total loans include non-accruing loans.
(2) Total average tangible equity results from the subtraction of average
goodwill and other intangible assets from total average stockholders' equity.

 

BERKSHIRE HILLS BANCORP, INC.
AVERAGE YIELDS  (Fully Taxable Equivalent - Annualized) - (F-8)
                                     Quarters Ended
                                     Sept. 30,    June   Mar.   Dec.   Sept.
                                                  30,    31,    31,    30,
                                     2013         2013   2013   2012   2012
Earning assets
Loans:
Residential mortgages                3.99       % 4.19 % 4.04 % 4.00 % 4.28  %
Commercial loans                     5.86         4.93   5.24   5.29   4.85
Consumer loans                       4.39         4.78   4.94   4.56   3.97
Total loans                          5.02         4.67   4.75   4.73   4.62
Securities                           2.77         3.00   3.04   3.17   3.02
Short-term investments and loans     4.05         2.02   1.83   2.86   2.15
held for sale
Total earning assets                 4.66         4.38   4.51   4.49   4.27
Funding liabilities
Deposits:
NOW                                  0.18         0.26   0.29   0.35   0.28
Money market                         0.44         0.39   0.39   0.43   0.47
Savings                              0.16         0.17   0.18   0.20   0.18
Time                                 1.29         1.23   1.23   1.31   1.48
Total interest-bearing deposits      0.66         0.62   0.63   0.70   0.78
Borrowings and notes                 1.88         2.47   3.43   2.80   1.70
Total interest-bearing liabilities   0.88         0.90   0.94   0.98   0.92
Net interest spread                  3.78         3.48   3.57   3.51   3.35
Net interest margin                  3.93         3.63   3.73   3.67   3.50
Cost of funds                        0.75         0.77   0.81   0.84   0.80
Cost of deposits                     0.55         0.52   0.53   0.59   0.66
(1) Cost of funds includes all deposits and
borrowings.

 

BERKSHIRE HILLS BANCORP, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES - (F-9)
                                                             At or for the Quarters Ended
                                                             Sept.     June      Mar.      Dec.      Sept.
                                                             30,       30,       31,       31,       30, 
(Dollars in thousands)                                       2013      2013      2013      2012      2012
Net income                                                   $         $         $         $         $    
                                                             8,104     12,037    10,465    9,329     10,029
Adj: Gain on sale of securities, net                         (361)     (1,005)   -         (1,435)   -
Adj:  Other non-recurring gain                               -         -         -         -         (1)
Plus: Non-recurring and merger related expense               6,516     775       5,064     7,497     2,214
Adj: Out of period interest revenue adjustment               (2,222)   -         -         -         -
Adj: Variable compensation adjustment (5)                    500       -         -         -         -
Adj:  Income taxes                                           (1,788)   93        (2,042)   (2,147)   (859)
Total core income                                      (A)   $         $         $         $         $    
                                                             10,749    11,900    13,487    13,244    11,383
Total non-interest income                                    $         $         $         $         $    
                                                             12,114    15,606    14,798    17,653    14,313
Adj: Gain on sale of securities, net                         (361)     (1,005)   -         (1,435)   -
Adj:  Other non-recurring gain                               -         -         -         -         (1)
Total core non-interest income                               11,753    14,601    14,798    16,218    14,312
Net interest income                                          45,869    41,104    41,937    41,965    35,225
Adj: Out of period interest revenue adjustment               (2,222)   -         -         -         -
Total core revenue                                           $         $         $         $         $    
                                                             55,400    55,705    56,735    58,183    49,537
Total non-interest expense                                   $         $         $         $         $    
                                                             42,784    37,935    39,483    44,266    32,162
Less: Non-recurring and merger related expense               (6,516)   (775)     (5,064)   (7,497)   (2,214)
Adj: Variable compensation adjustment (5)                    (500)     -         -         -         -
Core non-interest                                            35,768    37,160    34,419    36,769    29,948
expense                                    
Less: Amortization of intangible assets                      (1,307)   (1,345)   (1,377)   (1,357)   (1,314)
Total core tangible non-interest expense                     $         $         $         $         $    
                                                             34,461    35,815    33,042    35,412    28,634
(Dollars in millions, except per share data)
Total average                                          (B)   $         $         $         $         $      
assets                                                       5,287     5,199     5,240     5,203     4,572
Total average stockholders'                            (C)   684       668       666       637       583
equity                         
Total average tangible stockholders'                   (D)   413       396       393       369       344
equity                         
Total stockholders' equity, period-end                       673       673       674       667       591
Less:  Intangible assets, period-end                         (272)     (272)     (273)     (274)     (239)
Total tangible stockholders' equity, period-end        (E)   $         $         $         $         $      
                                                                401       401       401       393       352
Total shares outstanding, period-end                   (F)   24,952    25,096    25,254    25,148    22,213
(thousands)               
Average diluted shares outstanding (thousands)         (G)   24,873    24,956    25,136    24,396    22,031
Core earnings per share, diluted                       (A/G) $         $         $         $         $      
                                                               0.43      0.48      0.54      0.54      0.52
Tangible book value per share, period-end              (E/F) $         $         $         $         $      
                                                             16.08     15.96     15.87     15.63     15.86
Core return (annualized) on assets                     (A/B) 0.81    % 0.92    % 1.03    % 1.02    % 1.00    %
Core return (annualized) on equity                     (A/C) 6.29      7.13      8.10      8.32      7.81
Core return (annualized) on tangible equity (4)        (A/D) 11.18     12.84     14.57     15.24     14.17
Efficiency ratio (1)                                         60.98     63.05     57.14     59.68     56.54
Supplementary data
Tax credit benefit of tax shelter investments                $         $         $         $         $      
                                                                458       458       458       483       483
(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 the out-of-period adjustment recorded in the
third quarter of 2013 and rounding.
(4) Core return on tangible equity is computed by dividing the total core income adjusted for the
tax-affected amortization of intangible assets, assuming a 40% marginal rate, by tangible equity.
(5) Variable compensation adjustment based on additional revenue following the out-of-period adjustment
recorded in the third quarter of 2013.

 

BERKSHIRE HILLS BANCORP, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES - (F-10)
                                                              At or for the Nine
                                                              Months Ended
                                                              September   September
                                                              30,         30, 
(Dollars in thousands)                                        2013        2012
                                                              $           $        
Net income                                                                     
                                                               30,606     23,859
Adj: Gain on sale of securities, net                          (1,366)     (7)
Adj:  Other non-recurring gain                                -           (43)
Plus: Non-recurring and merger related expense                12,355      10,522
Adj: Out of period interest revenue adjustment                (1,287)     -
Adj: Variable compensation adjustment (5)                     500         -
Adj: Income taxes                                             (4,116)     (3,967)
Adj: Net loss from discontinued operations                    -           637
                                                              $           $        
Total core income                                      (A)                     
                                                               36,692     31,001
                                                              $           $        
Total non-interest income                                                      
                                                               42,518     36,479
Adj: Gain on sale of securities, net                          (1,366)     (7)
Adj:  Other non-recurring gain                                -           (43)
Total core non-interest income                                41,152      36,429
Net interest income                                           128,910     101,416
Adj: Out of period interest revenue adjustment                (1,287)     -
                                                              $           $        
Total core revenue                                                           
                                                               168,775    137,845
                                                              $           $        
Total non-interest expense                                                     
                                                               120,202    96,870
Less: Non-recurring and merger related expense                (12,355)    (10,522)
Adj: Variable compensation adjustment (5)                     (500)       -
Core non-interest                                             107,347     86,348
expense                                    
Less: Amortization of intangible assets                       (4,029)     (3,989)
                                                              $           $        
Total core tangible non-interest expense                                       
                                                               103,318    82,359
(Dollars in millions, except per share data)
Total average                                                 $           $        
assets                                                 (B)                       
                                                               5,242      4,572
Total average stockholders'                                   $           $        
equity                                                 (C)                         
                                                              673          583
Total average tangible stockholders'                          $           $        
equity                                                 (D)                         
                                                              401          336
                                                              $           $        
Total stockholders' equity, period-end                                             
                                                              673          591
Less: Intangible assets, period-end                           (272)       (239)
                                                              $           $        
Total tangible stockholders' equity, period-end        (E)                         
                                                              401          352
Total common shares outstanding, period-end            (F)    24,952      22,213
(thousands)               
Average diluted common shares outstanding (thousands)  (G)    25,001      21,635
                                                              $           $        
Core earnings per common share, diluted                (A/G)                       
                                                               1.47       1.43
                                                              $           $        
Tangible book value per common share, period-end       (E/F)                     
                                                               16.08      15.86
Core return (annualized) on assets                     (A/B)  0.93      % 1.02      %
Core return (annualized) on equity                     (A/C)  7.27        8.00
Core return (annualized) on tangible equity (4)        (A/D)  13.02       13.24
Efficiency ratio (1)                                          60.04       58.30
Supplementary data
                                                              $           $        
Tax credit benefit of tax shelter investments                                    
                                                               1,374      1,493
(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 the out-of-period
adjustment recorded in the third quarter of 2013 and rounding.
(4) Core return on tangible equity is computed by dividing the total core income
adjusted for the tax-affected amortization of intangible assets, assuming a 40%
marginal rate, by tangible equity.
(5) Variable compensation adjustment based on additional revenue following the
out-of-period adjustment recorded in the third quarter of 2013.

SOURCE Berkshire Hills Bancorp, Inc.

Website: http://www.berkshirebank.com
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