Berkshire Hills Reports Record Earnings for 2013; Board Change; Annual Meeting Date Set; Dividend Declared

Berkshire Hills Reports Record Earnings for 2013; Board Change; Annual Meeting                          Date Set; Dividend Declared  PR Newswire  PITTSFIELD, Mass., Jan. 27, 2014  PITTSFIELD, Mass., Jan. 27, 2014 /PRNewswire/ --Berkshire Hills Bancorp, Inc. (NYSE: BHLB) reported record net income totaling $41 million in 2013, an increase of 24% compared to $33 million in the prior year. Earnings per share increased by 11% to $1.65 and included the impact of shares issued in 2012 for bank acquisitions. Core earnings increased to a record $47 million in 2013 primarily due to the benefit of growth in New York and Eastern Massachusetts. Core earnings exclude net non-core charges for acquisitions, restructuring, and systems conversions. Core earnings per share totaled $1.87 in 2013, compared to $1.98 in the prior year.  (Logo: http://photos.prnewswire.com/prnh/20120131/NE44966LOGO )  For the fourth quarter of 2013, Berkshire reported net income of $10.5 million ($0.42 per share), an increase of 13% over $9.3 million ($0.38 per share) in the fourth quarter of 2012. Core earnings totaled $10.0 million ($0.40 per share) compared to $13.2 million ($0.54 per share) in 2012. Year over year fourth quarter mortgage banking fees decreased by $5.4 million due to the decline in refinancing volumes driven by higher mortgage interest rates compared to the record low rates seen in the second half of 2012.  FOURTH QUARTER FINANCIAL HIGHLIGHTS    o16% annualized loan growth   o14% annualized growth in total commercial loans   o3% decrease in core non-interest expense compared to prior quarter   o7% decrease in core non-interest expense compared to second quarter   o0.53% non-performing assets/total assets   o0.31% net loan charge-offs/average loans  CEO Michael Daly stated, "We produced record revenue and earnings in 2013 due to ongoing expansion in our New England and New York footprint. Loan growth was strong in all major categories in recent quarters and our goal is to produce further market share gains in 2014. Fee revenues increased in the final months of the year and we further reduced operating expenses through our restructuring strategies. We remain closely focused on the revenue and efficiency opportunities that we see for positive operating leverage based on the benefit of our expanded footprint and upgraded systems."  Mr. Daly continued, "We enter 2014 with further initiatives to build on our progress. We recently completed the acquisition of 20 New York branches from Bank of America. We welcomed more than 65,000 new customers, deepening our presence in the communities between Albany and Syracuse. The Bank opened a new office in Loudonville, New York this month as part of our ongoing organic expansion. The Bank has also expanded our brand awareness across our footprint through strategic media partnerships. We will continue to be flexible and judicious in managing our growth with the objective of reliable and attractive returns to investors seeking a quality investment in these uncertain financial markets."  BOARD CHANGE  Berkshire also announced that Richard J. Murphy has been appointed to the Board of Directors, replacing Geno Auriemma, effective January 23, 2014. Mr. Murphy serves as Vice President and General Manager of the Tri-City ValleyCats, a minor league baseball team based in Troy, New York. With over 25 years of experience in professional sports management, Mr. Murphy brings to the Board a strong financial acumen, a solid background in brand and marketing, and close ties to the Albany, NY community.  While Mr. Auriemma is stepping down from the Board, he will continue to serve as a spokesperson for Berkshire Bank. As Board Chairman, Mr. Daly stated, "The Board thanks Mr. Auriemma for his significant contribution to expanding the America's Most Exciting Bank brand in Connecticut and we are pleased to be continuing that relationship. We also congratulate him on his reappointment as the head coach of the U.S. Women's National BasketballTeam and we wish him much success in his current season at the University of Connecticut."  ANNUAL MEETING DATE SET  The Board of Directors voted that the Annual Meeting of Shareholders shall be held on May 8, 2014 at the Crowne Plaza Hotel, One West Street, Pittsfield, Massachusetts at 10:00 a.m. The date of March 13, 2014 was established as the record date for the determination of the shareholders entitled to notice of, and to vote at, the Annual Meeting.  DIVIDEND DECLARED  The Board of Directors voted to declare a cash dividend of $0.18 per share to shareholders of record at the close of business on February 13, 2014, payable on February 27, 2014. This dividend equates to a 2.8% annualized yield based on the $25.97 average closing price of Berkshire's common stock during the fourth quarter of 2013.  NEW YORK BRANCH ACQUISITION  On January 17, 2014, Berkshire acquired approximately $450 million in deposits from Bank of America, together with related assets, including approximately $4 million in loans. Berkshire expects to use the proceeds to pay down certain borrowings and to purchase investment securities. As part of this transaction, Berkshire acquired 20 branches in Central New York, two of which were consolidated as part of the transaction.  FINANCIAL CONDITION  Berkshire increased its total assets by $223 million (4%) to $5.7 billion in the most recent quarter due to growth in loans and investment securities funded by borrowings. For the year, total assets increased by 7%. At year-end, measures of asset quality, liquidity, and capital remained within targets. As of December 31, 2013, tangible book value per share increased to $16.27 and total book value per share grew to $27.08.  Total loans increased by $157 million (16% annualized) in the fourth quarter, including double digit annualized growth in all major categories. Berkshire's loan growth accelerated in the second half of the year, reflecting higher originations and a decline in runoff after the yield curve steepened in mid-year. For the full year, loan growth was approximately 5% in total and in most major categories. Growth of 15% in commercial business loans included contributions from new commercial banking teams recruited in Hartford, Syracuse, and Eastern Massachusetts. In the latter market, Berkshire consolidated its commercial banking team into a new regional headquarters located on Route 128 in Burlington, and moved its Westborough regional team into a well located new commercial office. During the year, Berkshire added a commercial leasing team and new leadership for its expanded small business lending program. Berkshire also recruited additional mortgage loan originations leadership and expanded its automobile lending operations across its footprint under the direction of its Syracuse consumer lending team from the acquired Beacon Federal Bank.  Berkshire increased its investment securities by $81 million in the fourth quarter, following a slightly larger increase in the prior quarter due to improved securities market conditions. Investments have been concentrated in medium term U.S. agency mortgage backed instruments. Berkshire is further increasing its portfolio with agency mortgage backed securities in conjunction with the New York branch acquisition subsequent to year-end.  Asset quality metrics remained favorable at year-end. Annualized net loan charge-offs measured 0.31% of average loans in the final quarter and 0.29% for the year. Year-end non-performing assets were 0.53% of total assets, compared to 0.52% at the start of the year. Accruing delinquent loans decreased to 0.73% of total loans from 1.11% during the year. The loan loss allowance measured 0.80% of total loans at year-end, compared to 0.83% at the start of the year. Approximately 24% of year-end loans were balances recorded at fair value in recent bank acquisitions.  Total non-maturity deposits increased by $29 million (4% annualized) in the fourth quarter, while time account balances decreased by $62 million (23% annualized) as higher yielding time accounts matured. For the year, deposits decreased by $252 million (6%) due to the outplacement of non-relationship acquired balances and certain higher costing commercial balances primarily in the second quarter. These changes were in anticipation of the New York branch purchase announced mid-year, which resulted in approximately a $450 million increase in deposits shortly after year-end. The loan/deposit ratio measured 109% at year-end, and the pro-forma loan/deposit ratio was estimated at approximately 97% including the benefit of these acquired branches. Total borrowings increased by $234 million in the fourth quarter to support the growth in earning assets. Proceeds from the acquired deposits were planned to be used in part to repay certain borrowings.  Total equity increased by $5 million during the fourth quarter and $11 million for the full year, including the benefit of retained earnings and net of stock repurchases earlier in the year. The ratio of total equity/assets decreased to 12.0% from 12.6% during the year due to the 7% increase in total assets in 2013. The ratio of tangible equity/assets decreased to 7.5% from 7.8% during the year.  RESULTS OF OPERATIONS  Berkshire posted record revenue and earnings for the year due to expansion from organic and acquisition growth strategies, including team recruitment, de novo branch expansion, and business combinations. Most categories of revenue and expense increased as a result of this expansion. GAAP earnings include the impact of net non-core charges for acquisitions, restructuring, and systems conversions. The reconciliation of net income and core income, together with related financial measures, is shown on financial tables F-9 and F-10. In the fourth quarter, the return on assets measured 0.77% and the return on equity measured 6.18%, with minor impact from non-core items.  Berkshire's fourth quarter net revenue decreased by $4.1 million (7%) year over year. This was primarily due to the $5.4 million decrease in mortgage banking fees from record volumes last year before rates increased near mid-year 2013. Compared to the prior quarter, total net revenue decreased by $2.4 million (4%) as lower net interest income was partially offset by higher securities gains.  Net interest income includes purchased loan accretion related to loans acquired in business combinations. Purchased loan accretion totaled $2.4 million in the most recent quarter, compared to $8.5 million in the prior quarter; prior quarter results included elevated recoveries of purchased impaired loans together with an out-of-period accounting adjustment. The net interest margin was 3.26% in the fourth quarter compared to 3.93% in the prior quarter. Excluding purchased loan accretion, the net interest margin was 3.07% and 3.21% in these two quarters, respectively, due to lower earning asset yields in the most recent quarter. The income impact of the margin change was partially offset by the 5% increase in average earning assets compared to the prior quarter.  Total fee income increased at a 6% annualized rate in the fourth quarter compared to the linked quarter, including double digit annualized growth in several major categories. Net securities gains increased to $3.4 million from $0.4 million due to the realization of gains on certain bank equity securities as a result of improved market conditions.  The allowance for loan losses increased slightly to $33.3 million from $33.2 million during the year. The provision for loan losses also increased in 2013 to $11.4 million from $9.6 million in the prior year. Total net loan charge-offs increased to $11.3 million from $8.8 million primarily due to portfolio growth. In the most recent quarter, the provision was $3.1 million and net charge-offs were $3.0 million.  Fourth quarter core non-interest expense decreased by 3% from the linked quarter and by 7% from the second quarter of 2013 due to the restructuring program initiated shortly after mid-year. Most major categories of core expense decreased after mid-year. Full time equivalent employees totaled 939 at year-end. Total fourth quarter GAAP non-interest expense decreased by 16% year over year and 13% compared to the linked quarter including the impact of lower non-core charges. The effective income tax rate was 31% for the most recent quarter and 29% for the full year 2013.  CONFERENCE CALL  Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Tuesday, January 28, 2014 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:   4858232 Webcast: berkshirebank.com (investor relations link)  A telephone replay of the call will be available through Wednesday, February 5, 2014 by calling 877-344-7529 and entering conference number: 10038874. The webcast 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^®. Including New York branches acquired in January, the Company has approximately $6.0 billion in assets and 92 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 second half of 2013, 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. Non-core items recorded in the third quarter of 2013 also included the after-tax impact of an 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)                                December 31,    September 30,   December 31, (In thousands)                 2013            2013            2012 Assets Cash and due from banks        $         $         $                                      56,841         61,149         63,382 Short-term investments         18,698          15,710          34,862 Total cash and short-term      75,539          76,859          98,244 investments Trading security               14,840          15,330          16,893 Securities available for sale, 760,048         684,716         466,169 at fair value Securities held to maturity,   44,921          46,925          51,024 at amortized cost Federal Home Loan Bank stock and other restricted           50,282          42,342          39,785 securities Total securities               870,091         789,313         573,871 Loans held for sale            15,840          27,064          85,368 Residential mortgages          1,384,274       1,313,609       1,324,251 Commercial mortgages           1,417,120       1,366,104       1,413,544 Commercial business loans      687,293         668,983         600,126 Consumer loans                 691,836         675,147         650,733 Total loans                    4,180,523       4,023,843       3,988,654 Less: Allowance for loan       (33,323)        (33,248)        (33,208) losses Net loans                      4,147,200       3,990,595       3,955,446 Premises and equipment, net    84,459          83,136          86,461 Other real estate owned        2,758           3,561           1,929 Goodwill                      256,871         256,871         255,199 Other intangible assets        13,791          15,030          19,059 Cash surrender value of        101,530         100,299         88,198 bank-owned life insurance Deferred tax asset             50,711          61,617          57,729 Other assets                   54,009          45,911          75,305 Total assets                   $           $           $                                    5,672,799       5,450,256       5,296,809 Liabilities and stockholders' equity Demand deposits                $          $          $                                     677,917        669,878        673,921 NOW deposits                   353,612         352,762         379,880 Money market deposits          1,383,856       1,357,201       1,439,632 Savings deposits               431,496         438,135         436,387 Total non-maturity deposits    2,846,881       2,817,976       2,929,820 Time deposits                  1,001,648       1,064,049       1,170,589 Total deposits                 3,848,529       3,882,025       4,100,409 Senior borrowings              974,428         740,022         358,471 Subordinated notes             89,679          89,663          89,617 Total borrowings               1,064,107       829,685         448,088 Other liabilities             82,101          65,351          81,047 Total liabilities              4,994,737       4,777,061       4,629,544 Total stockholders' equity     678,062         673,195         667,265 Total liabilities and          $           $           $     stockholders' equity           5,672,799       5,450,256       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,     Dec. 31,     Quarter    Year (Dollars in       Dec. 31, 2013   2013          2012         ended      to millions)         Balance         Balance       Balance      December   date                                                              31, 2013 Total             $         $        $      residential                                22     %   5    % mortgages         1,384            1,314    1,324 Commercial mortgages: Construction      139             105           168          132        (17) Single and        128             132           124          (10)       4 multi-family Commercial real   1,150           1,129         1,122        7          2 estate Total commercial  1,417           1,366         1,414        15         0 mortgages Total commercial  688             669           600          12         15 business loans Total commercial  2,105           2,035         2,014        14         5 loans Consumer loans: Home equity      307             304           325          4          (6) Other             385             371           326          16         18 Total consumer    692             675           651          10         6 loans                   $         $        $      Total loans                                16     %   5    %                   4,181            4,024    3,989 DEPOSIT ANALYSIS                                                              Annualized growth                                                              %                                   Sept. 30,     Dec. 31,     Quarter    Year (Dollars in       Dec. 31, 2013   2013          2012         ended      to millions)         Balance         Balance       Balance      December   date                                                              31, 2013                   $         $        $      Demand                                    5      %   1    %                     678             670    674 NOW               354             353           380          1          (7) Money market      1,384           1,357         1,440        8          (4) Savings           431             438           436          (6)        (1) Total non-maturity      2,847           2,818         2,930        4          (3) deposits Total time        1,002           1,064         1,170        (23)       (14) deposits                   $         $        $      Total deposits                             (3)    %   (6)  %                   3,849            3,882    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        Years Ended                             December 31,              December 31, (In thousands, except per   2013         2012         2013         2012 share data) Interest and dividend income Loans                       $         $         $          $                               43,566      47,601      186,115     160,936 Securities and other    5,093        3,887        17,626       15,003 Total interest and dividend 48,659       51,488       203,741      175,939 income Interest expense Deposits                    5,166        5,870        20,859       22,482 Borrowings and subordinated 3,651        3,653        14,130       10,069 debentures Total interest expense  8,817        9,523        34,989       32,551 Net interest income         39,842       41,965       168,752      143,388 Non-interest income Loan related fees           1,578        1,162        8,247        5,152 Mortgage banking fees       445          5,850        5,235        12,403 Deposit related fees        4,717        4,355        18,340       15,593 Insurance commissions and   2,143        2,565        10,020       10,821 fees Wealth management fees  2,212        1,865        8,683        7,296 Total fee income        11,095       15,797       50,525       51,265 Other                       1,227        421          2,949        1,306 Gain on sale of securities, 3,392        293          4,758        300 net Non-recurring gain          -            1,142        -            1,185 Total non-interest          15,714       17,653       58,232       54,056 income Total net revenue           55,556       59,618       226,984      197,444 Provision for loan          3,100        2,840        11,378       9,590 losses Non-interest expense Compensation and benefits   16,736       18,862       71,134       64,081 Occupancy and               5,421        5,985        22,540       19,469 equipment Technology and              3,169        2,949        12,944       9,467 communications Marketing and               765          483          2,596        2,031 promotion Professional services       1,558        1,600        6,569        5,785 FDIC premiums and           899          919          3,473        3,377 assessments Other real estate owned and 255          66           700          281 foreclosures Amortization of intangible  1,239        1,357        5,268        5,339 assets Merger, restructuring and conversion related          2,493        7,497        14,848       18,019 expenses Other                       4,622        4,548        17,287       12,957 Total non-interest          37,157       44,266       157,359      140,806 expense Income from continuing operations before income    15,299       12,512       58,247       47,048 taxes Income tax expense          4,762        3,183        17,104       13,223 Net income from continuing  10,537       9,329        41,143       33,825 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                 $         $        $         $                                10,537      9,329       41,143      33,188 Basic earnings per share: Continuing operations       $       $       $       $                                  0.43        0.39        1.66        1.52 Discontinued operations     -            -            -            (0.03) Total basic earnings per    $       $       $       $      share                       0.43        0.39        1.66        1.49 Diluted earnings per share: Continuing operations       $       $       $       $                                  0.42        0.38        1.65        1.52 Discontinued operations     -            -            -            (0.03) Total diluted earnings per  $       $       $       $      share                       0.42        0.38        1.65        1.49 Weighted average shares outstanding: Basic                       24,701       24,165       24,802       22,201 Diluted                     24,857       24,396       24,965       22,329      BERKSHIRE HILLS BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED - (F-4)                         Quarters Ended                         Dec. 31,   Sept. 30,  June 30,   Mar. 31,   Dec. 31, (In thousands, except   2013       2013       2013       2013       2012 per share data) Interest and dividend income Loans                   $        $        $        $        $                           43,566    50,025    45,443    47,081    47,601 Securities and          5,093      4,479      4,254      3,800      3,887 other Total interest and      48,659     54,504     49,697     50,881     51,488 dividend income Interest expense Deposits                5,166      5,278      5,052      5,363      5,870 Borrowings and          3,651      3,357      3,541      3,581      3,653 subordinated debentures Total interest          8,817      8,635      8,593      8,944      9,523 expense Net interest income     39,842     45,869     41,104     41,937     41,965 Non-interest income Loan related fees       1,578      1,308      2,644      2,717      1,162 Mortgage banking fees   445        444        2,129      2,217      5,850 Deposit related fees    4,717      4,559      4,805      4,259      4,355 Insurance commissions   2,143      2,473      2,407      2,997      2,565 and fees Wealth management       2,212      2,137      2,070      2,264      1,865 fees Total fee income    11,095     10,921     14,055     14,454     15,797 Other                   1,227      832        546        344        421 Gain on sale of         3,392      361        1,005      -          293 securities, net Non-recurring gain      -          -          -          -          1,142 Total non-interest      15,714     12,114     15,606     14,798     17,653 income Total net revenue       55,556     57,983     56,710     56,735     59,618 Provision for loan      3,100      3,178      2,700      2,400      2,840 losses Non-interest expense Compensation and        16,736     18,506     18,151     17,741     18,862 benefits Occupancy and           5,421      5,614      5,737      5,768      5,985 equipment Technology and          3,169      3,304      3,480      2,991      2,949 communications Marketing and           765        590        603        638        483 promotion Professional services   1,558      1,757      1,764      1,490      1,600 FDIC premiums and       899        856        890        828        919 assessments Other real estate owned 255        138        284        23         66 and foreclosures Amortization of         1,239      1,307      1,345      1,377      1,357 intangible assets Merger, restructuring and conversion related  2,493      6,516      775        5,064      7,497 expenses Other                   4,622      4,196      4,906      3,563      4,548 Total non-interest      37,157     42,784     37,935     39,483     44,266 expense Income from continuing operations before       15,299     12,021     16,075     14,852     12,512 income taxes Income tax expense     4,762      3,917      4,038      4,387      3,183 Net income             $        $       $        $        $                            10,537    8,104     12,037    10,465    9,329 Basic earnings per share: Continuing operations   $      $      $      $      $                             0.43      0.33      0.49      0.42      0.39 Discontinued operations -          -          -          -          - Total basic earnings    $      $      $      $      $     per share               0.43      0.33      0.49      0.42      0.39 Diluted earnings per share: Continuing operations   $      $      $      $      $                             0.42      0.33      0.48      0.42      0.38 Discontinued operations -          -          -          -          - Total diluted earnings  $      $      $      $      $     per share               0.42      0.33      0.48      0.42      0.38 Weighted average shares outstanding: Basic                   24,701     24,748     24,779     24,927     24,165 Diluted                 24,857     24,873     24,956     25,136     24,396 (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                            Dec. 31,   Sept.     June 30,  Mar. 31,   Dec. 31,                                       30, (Dollars in thousands)     2013       2013      2013      2013       2012 NON-PERFORMING ASSETS Non-accruing loans:                            $      $      $      $      $    Residential mortgages       7,867    8,487                                                                     5,945     8,818     7,466 Commercial mortgages       13,739     13,800    14,948    12,396     12,617 Commercial business        2,356      2,753     3,481     3,519      3,681 loans Consumer loans             3,493      3,227     2,405     2,325      1,748 Total non-accruing loans   27,455     28,267    26,779    27,058     25,512 Other real estate owned    2,758      3,561     2,713     2,513      1,929 Total non-performing       $      $      $      $      $    assets                     30,213    31,828            29,571                                                    29,492               27,441 Total non-accruing         0.66%      0.70%     0.69%     0.70%      0.64% loans/total loans Total non-performing       0.53%      0.58%     0.56%     0.56%      0.52% assets/total assets PROVISION AND ALLOWANCE FOR LOAN LOSSES Balance at beginning of    $      $      $      $      $    period                     33,248    33,248            33,208                                                    33,263               33,090 Charged-off loans          (3,462)    (3,417)   (3,457)   (2,501)    (3,073) Recoveries on              437        239       742       156        351 charged-off loans Net loans charged-off      (3,025)    (3,178)   (2,715)   (2,345)    (2,722) Provision for loan         3,100      3,178     2,700     2,400      2,840 losses                            $      $      $      $      $    Balance at end of period   33,323    33,248            33,263                                                    33,248               33,208 Allowance for loan         0.80%      0.83%     0.86%     0.86%      0.83% losses/total loans Allowance for loan losses/non-accruing        121%       118%      124%      123%       130% loans NET LOAN CHARGE-OFFS                            $      $      $      $      $    Residential mortgages        (564)                                                                 (351)    (852)    (260)      (1,034) Commercial mortgages       (763)      (1,480)   (1,283)   (952)      (893) Commercial business        (1,042)    (940)     (93)      (631)      (496) loans Home equity               45         (174)     (121)     (199)      (22) Other consumer             (701)      (233)     (366)     (303)      (277)                            $      $      $      $      $    Total, net                 (3,025)                                                                      (3,178)   (2,715)   (2,345)   (2,722) Net charge-offs (QTD annualized)/average        0.31%      0.32%     0.27%     0.23%      0.28% loans Net charge-offs (YTD annualized)/average        0.29%      0.28%     0.26%     0.23%      0.26% loans DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS 30-89 Days delinquent      0.51%      0.42%     0.70%     0.61%      0.63% 90+ Days delinquent and    0.22%      0.29%     0.40%     0.47%      0.48% still accruing Total accruing             0.73%      0.71%     1.10%     1.08%      1.11% delinquent loans Non-accruing loans         0.66%      0.70%     0.69%     0.70%      0.64% Total delinquent and       1.39%      1.41%     1.79%     1.78%      1.75% non-accruing loans    BERKSHIRE HILLS BANCORP, INC. SELECTED FINANCIAL HIGHLIGHTS - (F-6)                                  At or for the Quarters Ended                                  Dec.      Sept.     June    Mar.    Dec.                                  31,       30,       30,     31,     31,                                  2013      2013      2013    2013    2012 PER SHARE DATA                                  $      $      $     $     $        Core earnings, diluted        0.40     0.43                0.54                                                      0.48    0.54     Net earnings, diluted        0.42      0.33      0.48    0.42    0.38     Tangible book value          16.27     16.08     15.96   15.87   15.63     Total book value             27.08     26.98     26.82   26.68   26.53     Market price at period end   27.27     25.11     27.76   25.54   23.86     Dividends                    0.18      0.18      0.18    0.18    0.18 PERFORMANCE RATIOS     Core return on assets        0.73    % 0.81    % 0.92  % 1.03  % 1.02    %     Return on assets             0.77      0.61      0.93    0.80    0.72     Core return on equity        5.87      6.29      7.13    8.10    8.32     Core return on tangible      10.47     11.18     12.84   14.57   15.24     equity     Return on equity             6.18      4.74      7.21    6.28    5.86     Net interest margin, fully   3.26      3.93      3.63    3.73    3.67     taxable equivalent     Fee income/Net interest and  21.78     19.23     25.48   25.63   27.35     fee income     Efficiency ratio            63.21     60.98     63.05   57.14   59.68 GROWTH     Total commercial loans,      5       % 1       % (2)   % 0     % 29      %     year-to-date (annualized)     Total loans, year-to-date    5         1         (6)     (10)    35     (annualized)     Total deposits, year-to-date (6)       (7)       (14)    0       30     (annualized)     Total net revenues,     year-to-date, compared to    15        24        28      39      39     prior year     Earnings per share,     year-to-date, compared to    11        11        40      50      62     prior year     Core earnings per share,     year-to-date, compared to    (6)       3         11      20      29     prior year FINANCIAL DATA (In millions)                                  $      $      $     $     $       Total assets                 5,673     5,450                   5,297                                                      5,224   5,245     Total earning assets         5,085     4,856     4,629   4,646   4,683     Total loans                  4,181     4,024     3,871   3,889   3,989     Allowance for loan losses    33        33        33      33      33     Total intangible assets      271       272       272     273     274     Total deposits               3,849     3,882     3,815   4,101   4,100     Total stockholders' equity   678       673       673     674     667     Total core income           10.0      10.7      11.9    13.5    13.2     Total net income             10.5      8.1       12.0    10.5    9.3 ASSET QUALITY RATIOS     Net charge-offs (current     quarter annualized)/average  0.31    % 0.32    % 0.27  % 0.23  % 0.28    %     loans     Allowance for loan           0.80      0.83      0.86    0.86    0.83     losses/total loans CAPITAL RATIOS     Stockholders' equity to      11.95   % 12.35   % 12.88 % 12.85 % 12.60   %     total assets     Tangible stockholders'       7.54      7.74      8.10    8.06    7.82     equity to tangible assets     Reconciliation of Non-GAAP financial measures, including all (1) 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                       Dec. 31,    Sept. 30,  June 30,  Mar. 31,  Dec. 31, (In thousands)        2013         2013        2013       2013       2012 Assets Loans: Residential mortgages $         $        $      $      $                          1,330,674   1,247,661  1,218,192  1,290,989  1,340,375 Commercial mortgages  1,381,628    1,353,923   1,381,755  1,406,628  1,404,515 Commercial business   673,292      647,939     627,591    601,695    580,436 loans Consumer loans        687,540      651,565     634,715    644,674    598,802 Total loans           4,073,134    3,901,088   3,862,253  3,943,986  3,924,128 Securities            813,417      735,307     655,396    591,304    572,268 Short-term investments and loans 35,438       60,820      90,680     98,160     126,378 held for sale Total earning assets  4,921,989    4,697,215   4,608,329  4,633,450  4,622,774 Goodwill and other    271,147      271,670     272,421    273,428    267,588 intangible assets Other assets          305,617      317,722     317,856    333,485    312,665 Total assets          $         $        $      $      $                          5,498,753   5,286,607  5,198,606  5,240,363  5,203,027 Liabilities and stockholders' equity Deposits:                       $       $       $      $      $     NOW                   348,600       345,682                       355,366                                                358,255   368,392 Money market          1,392,570    1,329,591   1,358,590  1,477,497  1,404,113 Savings               435,766      442,408     449,296    441,547    422,447 Time                  1,044,850    1,064,199   1,087,357  1,148,345  1,161,175 Total interest-bearing      3,221,786    3,181,880   3,253,498  3,435,781  3,343,101 deposits Borrowings and notes  857,848      708,798     574,822    423,739    519,831 Total interest-bearing      4,079,634    3,890,678   3,828,320  3,859,520  3,862,932 liabilities Non-interest-bearing  681,368      658,568     636,469    645,923    635,044 demand deposits Other liabilities    56,261       52,874      65,568     68,509     68,475 Total liabilities     4,817,263    4,602,120   4,530,357  4,573,952  4,566,451 Total stockholders'   681,490      684,487     668,249    666,411    636,576 equity Total liabilities and $         $        $      $      $    stockholders' equity  5,498,753   5,286,607  5,198,606  5,240,363  5,203,027 Supplementary data Total non-maturity    $         $        $      $      $    deposits              2,858,304   2,776,249  2,802,610  2,933,359  2,816,970 Total deposits        3,903,154    3,840,448   3,889,967  4,081,704  3,978,145 Fully taxable equivalent income     639          652         644        629        667 adjustment Total average         410,343      412,817     395,828    392,983    368,988 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                                    Dec. 31,   Sept. 30,   June   Mar.   Dec.                                                           30,    31,    31,                                    2013       2013        2013   2013   2012 Earning assets Loans: Residential mortgages              3.98     % 3.99      % 4.19 % 4.04 % 4.00 % Commercial mortgages               4.73       5.80        5.27   5.45   5.78 Commercial business loans          3.91       6.09        4.04   4.40   4.09 Consumer loans                     4.01       4.39        4.78   4.94   4.56 Total loans                        4.24       5.02        4.67   4.75   4.73 Securities                         2.80       2.77        3.00   3.04   3.17 Short-term investments and loans   1.92       4.05        2.02   1.83   2.86 held for sale Total earning assets               3.97       4.66        4.38   4.51   4.49 Funding liabilities Deposits: NOW                                0.18       0.18        0.26   0.29   0.35 Money market                       0.44       0.44        0.39   0.39   0.43 Savings                            0.16       0.16        0.17   0.18   0.20 Time                               1.25       1.29        1.23   1.23   1.31 Total interest-bearing deposits    0.64       0.66        0.62   0.63   0.70 Borrowings and notes               1.69       1.88        2.47   3.43   2.80 Total interest-bearing liabilities 0.86       0.88        0.90   0.94   0.98 Net interest spread                3.11       3.78        3.48   3.57   3.51 Net interest margin                3.26       3.93        3.63   3.73   3.67 Cost of funds                      0.73       0.75        0.77   0.81   0.84 Cost of deposits                   0.53       0.55        0.52   0.53   0.59 (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                                                              Dec.       Sept.     June       Mar.       Dec.                                                              31,       30,      30,       31,       31, (Dollars in thousands)                                       2013       2013      2013       2013       2012 Net income                                                  $        $      $        $        $                                                                 10,537     8,104     12,037     10,465     9,329 Adj: Gain on sale of securities and other non-recurring      (3,392)    (361)     (1,005)    -          (1,435) gain, net Adj: Merger related expenses                                 932        1,307     775        4,984      5,852 Adj: Restructuring expenses                                  1,361      5,209     -          -          - Adj: System conversion and other expenses                    200        -         -          80         1,645 Adj: Out of period interest revenue adjustment (5)          -          (2,222)   -          -          - Adj: Variable compensation adjustment (5)                    -          500       -          -          - Adj: Income taxes                                           364        (1,788)   93         (2,042)    (2,147) Total core income                                      (A)   $        $       $        $        $                                                                10,002     10,749    11,900     13,487     13,244 Total revenue                                               $        $       $        $        $                                                                55,556     57,983    56,710     56,735     59,618 Adj: Gain on sale of securities and other non-recurring      (3,392)    (361)     (1,005)    -          (1,435) gain, net Adj: Out of period interest revenue adjustment               -          (2,222)   -          -          - Total core revenue                                           $        $       $        $        $                                                                52,164     55,400    55,705     56,735     58,183 Total non-interest expense                                   $        $       $        $        $                                                                37,157     42,784    37,935     39,483     44,266 Less: Total non-core expense (see above)                     (2,493)    (6,516)   (775)      (5,064)    (7,497) Adj: Variable compensation adjustment (5)                    -          (500)     -          -          - Core non-interest                                            $        $       $        $        $   expense                  34,664     35,768    37,160     34,419     36,769 (Dollars in millions, except per share data) Total average                                          (B)   $       $      $       $       $    assets       5,499      5,287     5,199      5,240      5,203 Total average stockholders'                            (C)   681        684       668        666        637 equity Total average tangible stockholders'                   (D)   410        413       396        393        369 equity Total stockholders' equity, period-end                       678        673       673        674        667 Less: Intangible assets, period-end                         (271)      (272)     (272)      (273)      (274) Total tangible stockholders' equity, period-end     (E)   $       $      $       $       $                                                                  407      401     401      401      393 Total shares outstanding, period-end                   (F)   25,036     24,952    25,096     25,254     25,148 (thousands) Average diluted shares outstanding (thousands)         (G)   24,857     24,873    24,956     25,136     24,396 Core earnings per share, diluted                      (A/G) $       $      $       $       $                                                                  0.40      0.43     0.48      0.54      0.54 Tangible book value per share, period-end              (E/F) $       $      $       $       $                                                                 16.27      16.08     15.96      15.87      15.63 Core return (annualized) on assets                     (A/B) 0.73     % 0.81    % 0.92     % 1.03     % 1.02     % Core return (annualized) on equity                    (A/C) 5.87       6.29      7.13       8.10       8.32 Core return (annualized) on tangible equity (4)        (A/D) 10.47      11.18     12.84      14.57      15.24 Efficiency ratio (1)                                         63.21      60.98     63.05      57.14      59.68 Supplementary data Tax credit benefit of tax shelter investments                $       $      $       $       $                                                                   80     458     458      458      483 Intangible amortization                                      $        $       $        $        $                                                                (1,239)   (1,307)   (1,345)   (1,377)   (1,357) (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) In the third quarter of 2013, additional revenue was recorded following an out-of-period adjustment. Based on this additional revenue  variable compensation was also adjusted accordingly in the third quarter.        BERKSHIRE HILLS BANCORP, INC. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES - (F-10)                                                                At or for the Years                                                                Ended                                                                December   December                                                                31,       31, (Dollars in thousands)                                         2013       2012                                                                $       $    Net income                                                                                                                                                                                                         41,143     33,188 Adj: Gain on sale of securities and other                      (4,758)    (1,485) non-recurring gain, net Adj: Merger related expenses                                   7,998      12,509 Adj: Restructuring expenses                                    6,570      - Adj: System conversion and other expenses                      280        6,147 Adj: Out of period interest revenue adjustment (5)             (1,287)    - Adj: Variable compensation adjustment (5)                      500        - Adj: Income taxes                                              (3,750)    (6,114)                                                                $       $    Total core income                                     (A)                                                                                                                                                          46,696     44,245                                                                $       $    Total revenue                                                                                                                                                                                                      226,984    197,514 Adj: Gain on sale of securities and other                      (4,758)    (1,485) non-recurring gain, net Adj: Out of period interest revenue adjustment                 (1,287)    -                                                                $       $    Total core revenue                                                                                                                                                                                                  220,939    196,029                                                                $       $    Total non-interest expense                                                                                                                                                                                          157,359    141,136 Less: Total non-core expense (see above)                       (14,848)   (18,656) Adj: Variable compensation adjustment (5)                      (500)      -                                                                $       $    Core non-interest                                                         expense                                                                                               142,011    122,480 (Dollars in millions, except per share data)                                                                $       $    Total average                                          (B)                assets                                                                                    5,306      4,529 Total average stockholders'                            (C)     675        587 equity Total average tangible stockholders'                    403        344 equity                        (D) Total stockholders' equity, period-end                         678        667 Less: Intangible assets, period-end                            (271)      (274)                                                                $       $    Total tangible stockholders' equity, period-end     (E)                                                                                                                                                         407        393 Total common shares outstanding, period-end            (F)     25,036     25,148 (thousands) Average diluted common shares outstanding (thousands)  (G)     24,965     22,329                                                                $       $    Core earnings per common share, diluted               (A/G)                                                                                                                                                       1.87        1.98                                                                $       $    Tangible book value per common share, period-end       (E/F)                                                                                                                                                        16.27      15.63 Core return (annualized) on assets                     (A/B)   0.88     % 0.98     % Core return (annualized) on equity                     (A/C)   6.92       7.54 Core return (annualized) on tangible equity (4)        (A/D)   12.37      13.77 Efficiency ratio (1)                                           60.79      58.71 Supplementary data GAAP return on assets                                          0.78     % 0.73     % GAAP return on equity                                         6.09       5.66 Net interest margin                                            3.63       3.62                                                                $       $    Tax credit benefit of tax shelter investments                                                                                                                                                                       1,455      1,976                                                                $       $    Intangible amortization                                                                                                                                                                                             (5,268)   (5,346) (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) In the third quarter of 2013, additional revenue was recorded following an out-of-period adjustment. Based on this additional revenue  variable compensation was also adjusted accordingly in the third quarter. (6) Amounts related to discontinued operations have not been reclassified on the above schedule,  although they are reclassified on the balance sheet and income statement.      SOURCE Berkshire Hills Bancorp, Inc.