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Berkshire Hills Announces Second Quarter Results

Berkshire Hills Bancorp (BHLB) reported second quarter 2009 net income of $2.3 million. The Company’s 2009 second quarter earnings per share totaled $0.24 before an FDIC special assessment and preferred stock dividends. The FDIC levied a special industry assessment which totaled $1.3 million for Berkshire, or $0.06 per share after-tax.

During the most recent quarter, Berkshire recorded a $3.0 million deemed dividend related to the repayment of its preferred stock to the U.S. Treasury. The deemed dividend, together with cash preferred stock dividends and accretion, reduced earnings available to common shareholders by $0.26 per share. After these charges of $0.06 per share for the FDIC assessment and $0.26 per share for preferred dividends, GAAP earnings per common share were ($0.08). The one-time deemed dividend had no impact on cash or on stockholders’ equity.

FINANCIAL HIGHLIGHTS

  • Strong growth in targeted loans and deposits
    • 12% annualized second quarter commercial loan growth
    • 3% annualized second quarter deposit growth; 13% annualized first half growth
    • 16% second quarter growth in commercial checking account balances
  • Continuing solid loan performance
    • 0.42% nonperforming assets/assets and 0.66% accruing delinquent loans/loans at midyear
    • 0.45% annualized net charge-offs to average loans in second quarter
  • Further expense reductions - 5% decrease in second quarter non-interest expense before FDIC insurance expense (7% increase including FDIC), compared to 2008 second quarter
  • Strong capital from common stock raise – 15% common equity to assets

Michael P. Daly, President and Chief Executive Officer, stated, “We made solid progress in building our business in the second quarter and are optimistic about our prospects for sustained growth as we gain share from national competitors. Annualized commercial loan growth moved into double digits, with substantial contributions from our new team in New York; we had another solid quarter of deposit growth, while managing our deposit pricing to minimize the pressure on our net interest margin; and new business generation accelerated in our integrated wealth management and insurance services. Before FDIC insurance expense, we further reduced core non-interest expense, resuming the downward trend in linked quarter core expense begun a year ago. We are positioning our Company for higher earnings when economic conditions normalize. Additionally, our recent loan and securities growth occurred near the end of the second quarter and is expected to benefit net interest income beginning in the third quarter.”

Mr. Daly continued, “We successfully issued $32 million in common stock through a public offering in May, following a successful nearly $40 million offering last October. Our strong capital and liquidity position us to be able to participate in expansion opportunities where we feel that the pricing and fit are appropriate. Our New England and New York markets are expected to provide attractive investment opportunities as we pursue growth as the largest locally headquartered regional bank.”

DIVIDEND DECLARED

The Board of Directors maintained the cash dividend on our common stock, declaring a dividend of $0.16 per share to stockholders of record at the close of business on August 6, 2009 and payable on August 20, 2009.

GLOBE 100 AWARD

Berkshire was named in May to the "Globe 100" list of top performing public companies in Massachusetts. The annual Boston Globe survey identifies the best businesses based on growth of revenues, profitability, return on shareholder equity, and size. This is the ninth year in a row that Berkshire has received this recognition, and Berkshire’s ranking was the highest among the local/regional banks which were named. Mr. Daly stated, “We had record earnings in 2008, with 21% growth in revenues and a 64% increase in earnings. This earned us a spot in the top 50 companies named by the Globe. We have a dedicated team of professionals who are delivering the promise of America’s Most Exciting BankSM to our customers and communities.”

FINANCIAL CONDITION

Total assets were $2.7 billion at June 30, 2009 which was little changed from the prior quarter and prior year-end. After accumulating short-term investments resulting from first quarter deposit growth, in the second quarter the Company used this liquidity to increase investment securities and pay-down borrowings. Loans declined slightly in both periods due to run-off of auto loans and residential mortgages. Total equity was flat for the first six months, with income and common stock offering proceeds offsetting the repayment of preferred stock.

Short term investments declined to $36 million at mid-year from $113 million at the end of the first quarter. Some of these proceeds were invested in high grade short duration debt securities, bringing total investment securities to $370 million from $344 million during the second quarter.

Total commercial loans increased at a 12% annualized rate in the second quarter of 2009, and at a 4% annualized rate for the first half of the year. Growth was concentrated in commercial real estate loans, which increased by $28 million for the first half of the year. Home equity line outstandings increased by $27 million in the first half of the year due primarily to new originations. Berkshire originates conforming home equity lines to a maximum LTV of 80%. Growth in commercial loans and home equity loans partially offset declines in auto loans and residential mortgages. Auto loans decreased by $32 million to $101 million in the first half of the year due to the planned run-off of the indirect auto portfolio. Residential mortgage loans decreased in the first half of 2009 due to a high volume of refinancings as a result of low fixed rates. Berkshire originated a total of $140 million in residential mortgages in the first half of the year; most of this volume was fixed rate mortgages which were sold to federal agencies.

Nonperforming assets decreased to 0.42% of assets at quarter-end, compared to 0.47% at the start of the quarter and 0.48% at the beginning of the year. Performing delinquent loans increased modestly due primarily to higher commercial loan delinquencies. Performing delinquent loans measured 0.66% of total loans at midyear, compared to 0.46% at the start of the quarter and 0.51% at the beginning of the year. Annualized net loan charge-offs measured 0.45% in the second quarter and 0.48% for the first half of the year. The loan loss allowance remained flat at 1.16% of total loans during the quarter.

Total deposits increased by $13 million in the second quarter and $122 million in the first half. Demand deposits grew by $20 million in the second quarter, including 8% annualized growth of personal accounts. NOW account balances decreased primarily due to seasonal decreases in municipal balances. The cost of deposits decreased from 1.99% in the fourth quarter of 2008 to 1.81% in the most recent quarter, reflecting the Company’s pricing strategies and the impact of competitive market pricing floors in the current environment. During the first half of the year, proceeds from deposit growth were primarily used to reduce borrowings, which declined by $77 million over this time.

Total stockholders’ equity was $408 million at mid-year, which was unchanged from year-end 2008. During the second quarter, Berkshire raised $32 million in net proceeds from a public common stock offering and repaid $40 million in preferred stock previously issued to the U.S. Treasury. Additionally, Berkshire paid $1 million to repurchase the common stock warrant issued to the Treasury, thereby ending all involvement with financing from the Treasury. Stockholders’ equity also benefited from $6 million in net income and $6 million in comprehensive income as a result of improved securities prices. The ratio of tangible common equity to assets improved to a strong 9.2% at mid-year, while the ratio of total equity to assets measured 15.2%. Tangible book value per common share improved to $16.52 from $15.73 at the start of the year. Midyear total book value per share measured $29.29, compared to $30.33 at the start of the year.

RESULTS OF OPERATIONS

Second quarter 2009 net income was $2.3 million, compared to $5.7 million in the second quarter of 2008. For the first six months, net income was $6.2 million in 2009 compared to record earnings of $11.8 million in 2008. Major changes in the first six months included decreases of $2.5 million in net interest income and $2.1 million in fee income, together with increases of $3.0 million in FDIC insurance premiums and $2.8 million in the provision for loan losses

The year-to-year decline in net interest income was due to margin compression. The net interest margin was 2.91% in the second quarter and 3.01% in the first half of 2009, compared to 3.45% and 3.43% in the same periods of 2008, respectively. This decline was primarily due to the impact of near-zero short term interest rates, which reduced the yields on assets, while deposit costs declined less due to competitive market floors. Berkshire is maintaining modest asset interest rate sensitivity in order to benefit from anticipated future interest rate increases. Net interest income also was affected by runoff of indirect auto loans and residential mortgages. Berkshire is exiting the indirect auto loan business; residential mortgage runoff reflects the refinancing of mortgages into fixed rate mortgages sold to federal agencies. Income was also reduced by the elimination in 2009 of dividends from the Federal Home Loan Bank of Boston; these dividends totaled $0.5 million in the first half of 2008. Growth in commercial loans and securities near the end of the second quarter is expected to benefit net interest income beginning in the third quarter.

Fee income declined by $1.3 million and $2.1 million year-to-year in the second quarter and first half of 2009 compared to 2008. First half wealth management fees decreased $0.9 million mainly due to lower stock market prices on which these fees are based. Assets under management increased to $681 million in the first half of 2009 as a result of 15% annualized new business generation, and the new business pipeline was strong at mid-year. First half insurance income decreased $1.0 million, primarily reflecting lower contingency income due to changes in industry pricing conditions. Insurance fee income is seasonal, with most contingency income received in the first half of the year. Deposit and loan fee income declined slightly by $0.2 million in the first half. Non-recurring income totaled $1.2 million in 2009, primarily due to $1.0 million in fees related to the June termination of the merger agreement with CNB Financial Corp.

The loan loss provision increased by $1.1 million and $2.8 million year-to-year in the second quarter and first half. The 2009 loan loss provision exceeded net loan charge-offs, which measured an annualized 0.48% of average loans in 2009, increasing from 0.15% in the first half of 2008 primarily due to higher commercial loan charge-offs, which measured a modest 0.64% of average commercial loans in 2009. Second quarter commercial loan charge-offs included $0.6 million related to the Company’s decision to accelerate certain problem asset dispositions.

Total non-interest expense increased by $1.3 million and $1.7 million year-to-year for the second quarter and first half. This increase resulted from FDIC insurance expense increases of $2.3 million and $3.0 million respectively. Second quarter FDIC expense included a $1.3 million special industry assessment ($0.06 per share after tax). Excluding FDIC insurance expense, all other second quarter non-interest expense declined by $1.0 million (5%) in 2009 compared to 2008. The decrease was concentrated in compensation expense for both the second quarter and year-to-date. Non-core expense totaling $0.6 million in the most recent quarter included charges related to the terminated merger agreement with CNB Financial Corp, together with restructuring charges in the new Integrated Services division. The first half effective income tax rate decreased to 26% from 28% year-to-year due to lower pre-tax earnings in 2009.

CONFERENCE CALL

Berkshire will conduct a conference call/webcast at 10:00 A.M. eastern time on Wednesday, July 22, 2009 to discuss this news release and guidance about expected future results. Please call in a few minutes prior to the scheduled time to register for the event. A copy of the presentation for this call will be available prior to the call at www.berkshirebank.com in the investor relations section. Information about the conference call follows:

Dial-in: 800-860-2442
Webcast:

www.berkshirebank.com (Investor Relations link)

A telephone replay of the call will be available through July 29, 2009 by calling 877-344-7529 and entering replay passcode: 431997. The webcast and a podcast will be available at Berkshire’s website above for an extended period of time.

BACKGROUND

Berkshire Hills Bancorp is headquartered in Pittsfield, Massachusetts. It has $2.7 billion in assets and is the parent of Berkshire Bank — America’s Most Exciting BankSM. The Company provides personal and business banking, insurance, wealth management, and investment services through 48 financial centers in western Massachusetts, northeastern New York, and southern Vermont. Berkshire Bank provides 100% deposit insurance protection, regardless of amount, based on a combination of FDIC insurance and the Depositors Insurance Fund (DIF). For more information, visit www.berkshirebank.com or call 800-773-5601.

FORWARD LOOKING STATEMENTS

Statements in this news release regarding Berkshire Hills Bancorp that are not historical facts are “forward-looking statements”. These statements reflect management’s views of future events, and involve risks and uncertainties. For a discussion of factors that could cause actual results to differ materially from expectations, see “Forward Looking Statements” in the Company’s 2008 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which are available at the Securities and Exchange Commission’s Internet website (www.sec.gov) and to which reference is hereby made. Actual future results may differ significantly from results discussed in these forward-looking statements, and undue reliance should not be placed on such statements. Except as required by law, the Company assumes no obligation to update any forward-looking statements.

NON-GAAP FINANCIAL MEASURES

This news release contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles (“GAAP”). These non-GAAP measures provide supplemental perspectives on operating results, performance trends, and financial condition. They are not a substitute for GAAP measures; they should be read and used in conjunction with the Company’s GAAP financial information. A reconciliation of non-GAAP financial measures to GAAP measures is included in the accompanying financial tables. In all cases, it should be understood that non-GAAP per share measures do not depict amounts that accrue directly to the benefit of shareholders. The Company utilizes the non-GAAP measure of core earnings in evaluating operating trends, including components for core revenue and expense. These measures exclude amounts which the Company views as unrelated to its normalized operations, including merger costs and restructuring costs. Similarly, the efficiency ratio is also adjusted for these non-core items. Additionally, the Company adjusts core income to exclude amortization of intangibles to arrive at a measure of the underlying operating cash return for the benefit of stockholders. The Company also adjusts certain equity related measures to exclude intangible assets due to the importance of these measures to the investment community. In the first quarter of 2009, the Company adjusted core earnings per share and core return on tangible common equity to be net of preferred stock dividends. These measures were not adjusted in this manner in the second quarter of 2009. The second quarter deemed dividend was a nonrecurring non-cash charge with no impact on stockholders’ equity and did not reflect a core economic event in the Company’s view. Additionally, the Company held cash at near-zero interest rates in the second quarter while it awaited the approval of the U.S. Treasury to repay the preferred stock. Accordingly, the preferred stock cash dividend and accretion charges were viewed by the Company as non-core one-time charges against income available to common stockholders related to the process of repaying the preferred stock.

BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED BALANCE SHEETS - UNAUDITED
June 30, March 31, December 31,
(In thousands) 2009 2009 2008
Assets
Total cash and cash equivalents $ 30,746 $ 22,887 $ 26,582
Fed funds sold & short-term investments 36,037 113,225 18,216
Trading security 16,247 17,565 18,144
Securities available for sale, at fair value 303,546 274,879 274,380
Securities held to maturity, at amortized cost 26,851 27,972 25,872
Federal Home Loan Bank stock and other restricted securities 23,120 23,120 23,120
Total Securities 369,764 343,536 341,516
Loans held for sale 8,901 5,276 1,768
Residential mortgages 627,958 651,507 677,254
Commercial mortgages 833,598 797,363 805,456
Commercial business loans 172,341 179,765 178,934
Consumer loans 334,882 340,743 345,508
Total loans 1,968,779 1,969,378 2,007,152
Less: Allowance for loan losses (22,917 ) (22,903 ) (22,908 )
Net loans 1,945,862 1,946,475 1,984,244
Premises and equipment, net 36,197 37,029 37,448
Goodwill 161,725 161,725 161,178
Other intangible assets 15,987 16,820 17,652
Cash surrender value of life insurance policies 36,267 35,964 35,668
Other assets 39,600 41,414 42,457
Total assets $ 2,681,086 $ 2,724,351 $ 2,666,729
Liabilities and stockholders' equity
Demand deposits $ 257,133 $ 237,619 $ 233,040
NOW deposits 176,238 199,236 190,828
Money market deposits 506,100 505,937 448,238
Savings deposits 209,232 212,687 211,156
Total non-maturity deposits 1,148,703 1,155,479 1,083,262
Time deposits 802,691 782,601 746,318
Total deposits 1,951,394 1,938,080 1,829,580
Borrowings 281,860 327,160 359,157
Junior subordinated debentures 15,464 15,464 15,464
Derivative liabilities 13,838 22,485 24,068
Due to broker - - 19,895
Other liabilities 10,980 8,344 10,140
Total liabilities 2,273,536 2,311,533 2,258,304
Total preferred stockholders' equity - 36,959 36,822
Total common stockholders' equity 407,550 375,859 371,603
Total stockholders' equity 407,550 412,818 408,425
Total liabilities and stockholders' equity $ 2,681,086 $ 2,724,351 $ 2,666,729
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED

LOAN ANALYSIS

June 30, 2009 March 31, 2009 December 31, 2008
(Dollars in millions) Balance

Quarterly
Annualized
Growth %

Balance

Quarterly
Annualized
Growth %

Balance
Residential mortgages:
Total residential mortgages $ 628 (14 ) 651 (16 ) 677
Commercial mortgages:
Construction 135 9 132 6 130
Single and multi-family 67 6 66 (23 ) 70
Other commercial mortgages 632 22 599 (4 ) 605
Total commercial mortgages 834 19 797 (4 ) 805
Commercial business loans 172 (18 ) 180 2 179
Total commercial loans 1,006 12 977 (3 ) 984
Consumer loans:
Auto 101 (52 ) 116 (52 ) 133
Home equity and other 234 16 225 23 213
Total consumer loans 335 (7 ) 341 (6 ) 346
Total loans $ 1,969 - % $ 1,969 (8 ) % $ 2,007

DEPOSIT ANALYSIS

June 30, 2009 March 31, 2009 December 31, 2008
(Dollars in millions) Balance

Quarterly
Annualized
Growth %

Balance

Quarterly
Annualized
Growth %

Balance
Demand $ 257 34 % $ 237 7 % $ 233
NOW 176 (46 ) 199 17 191
Money market 506 - 506 53 448
Savings 209 (8 ) 213 4 211
Total non-maturity deposits 1,148 (2 ) 1,155 27 1,083
Time less than $100,000 403 2 401 6 395
Time $100,000 or more 400 19 382 36 351
Total time deposits 803 10 783 20 746
Total deposits $ 1,951 3 % $ 1,938 24 % $ 1,829
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
Three Months Ended Six Months Ended
June 30, June 30,
(In thousands, except per share data) 2009 2008 2009 2008
Interest and dividend income
Loans $ 25,370 $ 29,823 $ 51,802 $ 61,146
Securities and other 3,395 3,011 6,843 6,211
Total interest and dividend income 28,765 32,834 58,645 67,357
Interest expense
Deposits 8,677 10,521 17,150 22,809
Borrowings and junior subordinated debentures 3,364 3,666 7,060 7,607
Total interest expense 12,041 14,187 24,210 30,416
Net interest income 16,724 18,647 34,435 36,941
Non-interest income
Insurance commissions and fees 3,274 3,694 7,843 8,840
Deposit service fees 2,443 2,486 4,679 4,641
Wealth management fees 1,113 1,567 2,302 3,195
Loan service and interest rate swap fees (136 ) 228 255 465
Total fee income 6,694 7,975 15,079 17,141
Other 468 562 820 880
Gain (loss) on sale of securities, net 3 (26 ) 1 (26 )
Other non-recurring income 1,240 - 1,177 (12 )
Total non-interest income 8,405 8,511 17,077 17,983
Total net revenue 25,129 27,158 51,512 54,924
Provision for loan losses 2,200 1,105 4,700 1,930
Non-interest expense
Salaries and employee benefits 8,902 9,842 18,254 19,498
Occupancy and equipment 2,859 2,774 5,987 5,742
Marketing, data processing, and professional services 2,233 2,127 4,323 3,986
FDIC premium and special assessment 2,387 54 3,079 108
Other non-recurring expense 601 683 601 683
Amortization of intangible assets 833 1,019 1,666 2,103
Other 2,163 2,133 4,521 4,586
Total non-interest expense 19,978 18,632 38,431 36,706
Income before income taxes 2,951 7,421 8,381 16,288
Income tax expense 620 1,708 2,167 4,526
Net income $ 2,331 $ 5,713 $ 6,214 $ 11,762
Less: Cumulative preferred stock dividend and accretion 393 - 1,030 -
Less: Deemed dividend resulting from preferred stock repayment 2,954 - 2,954 -
Net income available to common stockholders $ (1,016 ) $ 5,713 $ 2,230 $ 11,762
Basic earnings per common share $ (0.08 ) $ 0.55 $ 0.18 $ 1.14
Diluted earnings per common share $ (0.08 ) $ 0.55 $ 0.18 $ 1.13
Weighted average common shares outstanding
Basic 12,946 10,302 12,556 10,344
Diluted 12,946 10,384 12,593 10,420
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
Quarters Ended
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
(In thousands, except per share data) 2009 2009 2008 2008 2008
Interest and dividend income
Loans $ 25,370 $ 26,432 $ 29,343 $ 30,078 $ 29,823
Securities and other 3,395 3,448 3,419 3,014 3,011
Total interest and dividend income 28,765 29,880 32,762 33,092 32,834
Interest expense
Deposits 8,677 8,473 9,248 9,676 10,521
Borrowings and junior subordinated debentures 3,364 3,696 4,044 4,087 3,666
Total interest expense 12,041 12,169 13,292 13,763 14,187
Net interest income 16,724 17,711 19,470 19,329 18,647
Non-interest income
Insurance commissions and fees 3,274 4,569 2,139 2,640 3,694
Deposit service fees 2,443 2,236 2,623 2,518 2,486
Wealth management fees 1,113 1,189 1,171 1,338 1,567
Loan service and interest rate swap fees (136 ) 391 203 561 228
Total fee income 6,694 8,385 6,136 7,057 7,975
Other 468 352 241 174 562
Gain (loss) on sale of securities, net 3 (2 ) - 4 (26 )
Other non-recurring income 1,240 (63 ) - - -
Total non-interest income 8,405 8,672 6,377 7,235 8,511
Total net revenue 25,129 26,383 25,847 26,564 27,158
Provision for loan losses 2,200 2,500 1,400 1,250 1,105
Non-interest expense
Salaries and employee benefits 8,902 9,352 8,988 9,796 9,842
Occupancy and equipment 2,859 3,128 2,736 2,760 2,774
Marketing, data processing, and professional services 2,233 2,090 1,803 2,003 2,127
FDIC premium and special assessment 2,387 692 535 118 54
Other non-recurring expense 601 - - - 683
Amortization of intangible assets 833 833 838 889 1,019
Other 2,163 2,358 2,356 2,171 2,133
Total non-interest expense 19,978 18,453 17,256 17,737 18,632
Income before income taxes 2,951 5,430 7,191 7,577 7,421
Income tax expense 620 1,547 1,985 2,301 1,708
Net income $ 2,331 $ 3,883 $ 5,206 $ 5,276 $ 5,713
Less: Cumulative preferred stock dividend and accretion 393 637 - - -
Less: Deemed dividend resulting from preferred stock repayment 2,954 - - - -
Net income available to common stockholders $ (1,016 ) $ 3,246 $ 5,206 $ 5,276 $ 5,713
Basic earnings per common share $ (0.08 ) $ 0.27 $ 0.44 $ 0.51 $ 0.55
Diluted earnings per common share $ (0.08 ) $ 0.27 $ 0.44 $ 0.51 $ 0.55
Weighted average common shares outstanding
Basic 12,946 12,164 11,804 10,303 10,302
Diluted 12,946 12,247 11,892 10,400 10,384
BERKSHIRE HILLS BANCORP AND SUBSIDIARIES
ASSET QUALITY ANALYSIS
At or for the Quarters Ended
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
(Dollars in thousands) 2009 2009 2008 2008 2008
NON-PERFORMING ASSETS
Non-accruing loans:
Residential mortgages $ 2,396 $ 2,740 $ 1,646 $ 1,315 $ 763
Commercial mortgages 6,087 7,276 7,738 6,178 5,329
Commercial business loans 1,442 1,861 1,921 2,210 3,103
Consumer loans 1,326 587 866 650 577
Total non-accruing loans 11,251 12,464 12,171 10,353 9,772
Other real estate owned 130 371 498 941 1,050
Total non-performing assets $ 11,381 $ 12,835 $ 12,669 $ 11,294 $ 10,822
Total non-accruing loans/total loans 0.57 % 0.63 % 0.61 % 0.52 % 0.49 %
Total non-performing assets/total assets 0.42 % 0.47 % 0.48 % 0.44 % 0.42 %
PROVISION AND ALLOWANCE FOR LOAN LOSSES
Balance at beginning of period $ 22,903 $ 22,908 $ 22,886 $ 22,581 $ 22,130
Charged-off loans (2,291 ) (2,643 ) (1,474 ) (1,331 ) (754 )
Recoveries on charged-off loans 105 138 96 386 100
Net loans charged-off (2,186 ) (2,505 ) (1,378 ) (945 ) (654 )
Provision for loan losses 2,200 2,500 1,400 1,250 1,105
Balance at end of period $ 22,917 $ 22,903 $ 22,908 $ 22,886 $ 22,581
Allowance for loan losses/non-accruing loans 204 % 184 % 188 % 221 % 231 %
Allowance for loan losses/total loans 1.16 % 1.16 % 1.14 % 1.15 % 1.14 %
NET LOAN CHARGE-OFFS
Residential mortgages $ (27 ) $ (117 ) $ - $ (119 ) $ -
Commercial mortgages (755 ) (1,448 ) (900 ) (63 ) (131 )
Commercial business loans (795 ) (150 ) (10 ) (265 ) (121 )
Consumer loans (609 ) (790 ) (468 ) (498 ) (402 )
Total, net $ (2,186 ) $ (2,505 ) $ (1,378 ) $ (945 ) $ (654 )
Net charge-offs (annualized)/average loans 0.45 % 0.51 % 0.27 % 0.19 % 0.13 %
Net charge-offs (YTD annualized)/average loans 0.48 % 0.51 % 0.19 % 0.16 % 0.15 %
DELINQUENT LOANS/TOTAL LOANS
30-89 Days delinquent 0.63 % 0.45 % 0.46 % 0.45 % 0.33 %
90+ Days delinquent and still accruing 0.03 % 0.01 % 0.05 % 0.03 % 0.04 %
Total accruing delinquent loans 0.66 % 0.46 % 0.51 % 0.48 % 0.37 %
Non-accruing loans 0.57 % 0.63 % 0.61 % 0.52 % 0.49 %
Total delinquent loans 1.23 % 1.09 % 1.12 % 1.00 % 0.86 %
BERKSHIRE HILLS BANCORP AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
At or for the Quarters Ended
June 30, Mar. 31, Dec. 31, Sep. 30, June 30,
2009 2009 2008 2008 2008
PERFORMANCE RATIOS
Core return on tangible assets 0.45 % 0.77 % 0.98 % 1.03 % 1.16 %
Return on total assets 0.35 0.59 0.79 0.82 0.91
Core return on tangible common equity 5.23 8.54 12.70 15.85 17.89
Return on total common equity 2.38 3.52 5.62 6.26 6.89
Net interest margin, fully taxable equivalent 2.91 3.11 3.41 3.48 3.45
Core tangible non-interest income to tangible assets 1.15 1.42 1.04 1.21 1.47
Non-interest income to assets 1.26 1.32 0.97 1.13 1.36
Core tangible non-interest expense to tangible assets 2.97 2.86 2.68 2.82 2.91
Non-interest expense to assets 2.99 2.80 2.62 2.76 2.97
Efficiency ratio 75.85 65.23 62.24 62.18 61.08
GROWTH
Total loans, year-to-date (annualized) (4 ) % (8 ) % 3 % 3 % 4 %
Total deposits, year-to-date (annualized) 13 24 - 1 (1 )
Total revenues, year-to-year YTD (6 ) (5 ) 21 29 21
FINANCIAL DATA (In millions)
Total assets $ 2,681 $ 2,724 $ 2,667 $ 2,566 $ 2,547
Total loans 1,969 1,969 2,007 1,922 1,978
Total intangible assets 178 179 179 180 181
Total deposits 1,951 1,938 1,830 1,837 1,811
Total stockholders' equity 408 413 408 333 330
Total common stockholders' equity 408 376 372 333 330
Total core income 2.0 3.9 5.2 5.3 5.7
Total net income 2.3 3.9 5.2 5.3 5.7
ASSET QUALITY RATIOS
Net charge-offs (annualized)/average loans 0.45 % 0.51 % 0.27 % 0.19 % 0.13 %
Non-performing assets/total assets 0.42 0.47 0.48 0.44 0.42
Loan loss allowance/total loans 1.16 1.16 1.14 1.15 1.14
Loan loss allowance/nonperforming loans 2.04 x 1.84 x 1.88 x 2.21 x 2.31 x
PER COMMON SHARE DATA
Core earnings, diluted $ 0.15 $ 0.27 $ 0.44 $ 0.51 $ 0.55
Net earnings, diluted (0.08 ) 0.27 0.44 0.51 0.55
Tangible common book value 16.52 16.02 15.73 14.58 14.36
Total common book value 29.29 30.54 30.33 31.71 31.78
Market price at period end 20.78 22.92 30.86 32.00 23.65
Dividends 0.16 0.16 0.16 0.16 0.16
CAPITAL RATIOS
Common stockholders' equity to total assets 15.20 % 13.80 % 13.82 % 12.97 % 12.96 %
Tangible common stockholders' equity to tangible assets 9.18 7.74 7.62 6.41 6.30
Stockholders' equity to total assets 15.20 15.15 15.32 12.97 12.96
Tangible stockholders' equity to tangible assets 9.18 9.20 9.23 6.41 6.30
(1 ) Reconciliations of Non-GAAP financial measures, including all references to core and tangible amounts, appear on page F-9.
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 AND SUBSIDIARIES
AVERAGE BALANCES
Quarters Ended
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
(In thousands) 2009 2009 2008 2008 2008
Assets
Loans
Residential mortgages $ 637,232 $ 675,905 $ 679,000 $ 672,363 $ 665,407
Commercial mortgages 810,421 804,109 808,308 787,543 745,727
Commercial business loans 173,486 173,055 185,434 192,065 196,962
Consumer loans 338,506 343,296 343,894 346,068 354,321
Total loans 1,959,645 1,996,365 2,016,636 1,998,039 1,962,417
Securities 346,274 335,414 304,466 266,720 260,046
Fed funds sold & short-term investments 73,874 49,966 15,345 4,384 12,633
Total earning assets 2,379,793 2,381,745 2,336,447 2,269,143 2,235,096
Goodwill & other intangible assets 178,164 178,711 179,187 180,387 181,705
Other assets 125,446 113,471 105,097 105,937 105,109
Total assets $ 2,683,403 $ 2,673,927 $ 2,620,731 $ 2,555,467 $ 2,521,910
Liabilities and stockholders' equity
Deposits
NOW $ 187,174 $ 193,038 $ 196,326 $ 193,192 $ 202,747
Money market 483,302 462,518 453,977 447,184 491,945
Savings 210,678 213,074 220,565 221,746 212,680
Time 795,155 762,940 746,913 734,195 705,305
Total interest-bearing deposits 1,676,309 1,631,570 1,617,781 1,596,317 1,612,677
Borrowings and debentures 310,323 365,833 382,015 380,453 343,816
Total interest-bearing liabilities 1,986,632 1,997,403 1,999,796 1,976,770 1,956,493
Non-interest-bearing demand deposits 251,565 232,480 229,175 232,762 221,471
Other liabilities 30,146 32,960 17,566 10,804 10,780
Total liabilities 2,268,343 2,262,843 2,246,537 2,220,336 2,188,744
Total stockholders' common equity 392,321 374,207 368,991 335,131 333,166
Total stockholders' preferred equity 22,739 36,877 5,203 - -
Total stockholders' equity 415,060 411,084 374,194 335,131 333,166
Total liabilities and stockholders' equity $ 2,683,403 $ 2,673,927 $ 2,620,731 $ 2,555,467 $ 2,521,910
Supplementary data
Total non-maturity deposits $ 1,132,719 $ 1,101,110 $ 1,100,043 $ 1,094,884 $ 1,128,843
Total deposits 1,927,874 1,864,050 1,846,956 1,829,079 1,834,148
Fully taxable equivalent income adj. 562 566 532 532 532
(1) Average balances for securities available-for-sale are based on amortized cost.
BERKSHIRE HILLS BANCORP AND SUBSIDIARIES
AVERAGE YIELDS (Fully Taxable Equivalent - Annualized)

Quarters Ended
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,

2009 2009 2008 2008 2008
Earning assets
Loans
Residential mortgages 5.46 % 5.56 % 5.64 % 5.65 % 5.66 %
Commercial mortgages 5.17 5.39 6.01 6.24 6.44
Commercial business loans 5.76 5.96 5.99 6.41 6.57
Consumer loans 4.46 4.64 5.46 5.86 6.02
Total loans 5.19 5.37 5.79 5.99 6.11
Securities 4.58 4.85 5.14 5.27 5.39
Federal funds sold and
short-term investments 0.24 0.17 0.54 1.45 1.78
Total earning assets 4.94 5.18 5.67 5.89 6.00
Funding liabilities
Deposits
NOW 0.45 0.40 0.52 0.64 0.73
Money Market 1.42 1.40 1.73 1.86 2.14
Savings 0.34 0.44 0.68 0.61 0.71
Time 3.32 3.43 3.54 3.76 4.08
Total interest-bearing deposits 2.08 2.11 2.27 2.41 2.62
Borrowings and debentures 4.35 4.10 4.21 4.27 4.29
Total interest-bearing liabilities 2.43 2.47 2.64 2.77 2.91
Net interest spread 2.51 2.71 3.03 3.12 3.09
Net interest margin 2.91 3.11 3.41 3.48 3.45
Cost of funds 2.16 2.21 2.37 2.48 2.62
Cost of deposits 1.81 1.84 1.99 2.10 2.31
(1) Average balances and yields for securities available-for-sale are based on amortized cost.
(2) Cost of funds includes all deposits and borrowings.
BERKSHIRE HILLS BANCORP AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
At or for the Quarters Ended
June 30, Mar. 31, Dec. 31, Sept. 30, June 30,
(Dollars in thousands) 2009 2009 2008 2008 2008
Net income $ 2,331 $ 3,883 $ 5,206 $ 5,276 $ 5,713
Adj: Loss (gain) on sale of securities, net (3 ) 2 - (4 ) 26
Less: Merger termination fee (970 ) - - - -
Less: Other non-recurring income (270 ) 63 - - -
Plus: Merger related expenses 215 - - - -
Plus: Other non-recurring expense 386 - - - 683
Adj: Income taxes 269 (27 ) - 2 (701 )
Total core income (A) $ 1,958 $ 3,921 $ 5,206 $ 5,274 $ 5,721
Plus: Amortization of intangible assets 833 833 838 889 1,019
Total tangible core income (B) $ 2,791 $ 4,754 $ 6,044 $ 6,163 $ 6,740
Total non-interest income $ 8,405 $ 8,672 $ 6,377 $ 7,235 $ 8,511
Adj: Loss (gain) on sale of securities, net (3 ) 2 - (4 ) 26
Less: Merger termination fee (970 ) - - - -
Less: Other non-recurring income (270 ) 63 - - -
Total core non-interest income (C) 7,162 8,737 6,377 7,231 8,537
Net interest income 16,724 17,711 19,470 19,329 18,647
Total core revenue (D) $ 23,886 $ 26,448 $ 25,847 $ 26,560 $ 27,184
Total non-interest expense $ 19,978 $ 18,453 $ 17,256 $ 17,737 $ 18,632
Less: Merger related expenses (215 ) - - - -
Less: Other non-recurring expense (386 ) - - - (683 )
Core non-interest expense (E) 19,377 18,453 17,256 17,737 17,949
Less: Amortization of intangible assets (833 ) (833 ) (838 ) (889 ) (1,019 )
Total core tangible non-interest expense (F) $ 18,544 $ 17,620 $ 16,418 $ 16,848 $ 16,930
(Dollars in millions, except per share data)
Total average assets $ 2,683 $ 2,674 $ 2,621 $ 2,555 $ 2,522
Less: Average intangible assets (178 ) (179 ) (179 ) (180 ) (182 )
Total average tangible assets (G) $ 2,505 $ 2,495 $ 2,442 $ 2,375 $ 2,340
Total average stockholders' equity $ 415 $ 411 $ 374 $ 335 $ 333
Less: Average intangible assets (178 ) (179 ) (179 ) (180 ) (182 )
Total average tangible stockholders' equity 237 232 195 155 151
Less: Average preferred equity (23 ) (37 ) (6 ) - -
Total average tangible common stockholders' equity (H) $ 214 $ 195 $ 189 $ 155 $ 151
Total stockholders' equity, period-end $ 408 $ 413 $ 408 $ 335 $ 330
Less: Intangible assets, period-end (178 ) (179 ) (179 ) (180 ) (181 )
Total tangible stockholders' equity, period-end 230 234 229 155 149
Less: Preferred equity, period-end - (37 ) (37 ) - -
Total tangible common stockholders' equity, period-end (I) $ 230 $ 197 $ 192 $ 155 $ 149
Total common shares outstanding, period-end (thousands) (J) 13,916 12,306 12,253 10,493 10,385
Average diluted common shares outstanding (thousands) (K) 12,946 12,247 11,892 10,400 10,384
Core earnings per common share, diluted (1) (A/K) $ 0.15 $ 0.27 $ 0.44 $ 0.51 $ 0.55
Tangible book value per common share, period-end (I/J) $ 16.52 $ 16.02 $ 15.73 $ 14.58 $ 14.36
Core return on tangible assets (B/G) 0.45 % 0.77 % 0.98 % 1.03 % 1.16
Core return on tangible common equity (1) (B/H) 5.23 8.54 12.70 15.85 17.89
Core tangible non-interest income to tangible assets (C/G) 1.15 1.42 1.04 1.21 1.47
Core tangible non-interest expense to tangible assets (F/G) 2.97 2.86 2.68 2.82 2.91
Efficiency ratio (2) 75.85 65.23 62.24 62.18 61.08

(1) March 31, 2009 ratios include a $637,000 reduction in core income and tangible core income related to cumulative preferred stock dividend and accretion. Preferred dividend charges recorded in Q2 were deemed non-core due to preferred stock repayment.

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

(3) Ratios are annualized and based on average balance sheet amounts, where applicable.
(4) Quarterly data may not sum to year-to-date data due to rounding.
BERKSHIRE HILLS BANCORP AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
At or for the Six Months Ended
June 30, June 30,
(Dollars in thousands) 2009 2008
Net income $ 6,214 $ 11,762
Adj: Loss (gain) on sale of securities, net (1 ) 26
Less: Merger termination fee (970 ) -
Less: Other non-recurring income (207 ) -
Plus: Merger related expenses 215 -
Plus: Other non-recurring expense 386 683
Adj: Income taxes 242 (701 )
Total core income (A) $ 5,879 $ 11,770
Plus: Amortization of intangible assets 1,666 2,103
Total tangible core income (B) $ 7,545 $ 13,873
Total non-interest income $ 17,077 $ 17,983
Adj: Loss (gain) on sale of securities, net (1 ) 26
Less: Merger termination fee (970 ) -
Less: Other non-recurring income (207 ) -
Total core non-interest income (C) 15,899 18,009
Net interest income 34,435 36,941
Total core revenue (D) $ 50,334 $ 54,950
Total non-interest expense $ 38,431 $ 36,706
Less: Merger related expenses (215 ) -
Less: Other non-recurring expense (386 ) (683 )
Core non-interest expense (E) 37,830 36,023
Less: Amortization of intangible assets (1,666 ) (2,103 )
Total core tangible non-interest expense (F) $ 36,164 $ 33,920
(Dollars in millions, except per share data)
Total average assets $ 2,679 $ 2,511
Less: Average intangible assets (178 ) (182 )
Total average tangible assets (G) $ 2,501 $ 2,329
Total average stockholders' equity $ 413 $ 331
Less: Average intangible assets (178 ) (182 )
Total average tangible stockholders' equity 235 149
Less: Average preferred equity (30 ) -
Total average tangible common stockholders' equity (H) $ 205 $ 149
Total stockholders' equity, period-end $ 410 $ 330
Less: Intangible assets, period-end (178 ) (181 )
Total tangible stockholders' equity, period-end 232 149
Less: Preferred equity, period-end (18 ) -
Total tangible common stockholders' equity, period-end (I) $ 214 $ 149
Total common shares outstanding, period-end (thousands) (J) 13,916 10,385
Average diluted common shares outstanding (thousands) (K) 12,593 10,420
Core earnings per common share, diluted (1) (A/K) $ 0.42 $ 1.13
Tangible book value per common share, period-end (I/J) $ 15.38 $ 14.36
Core return on tangible assets (B/G) 0.61 % 1.20
Core return on tangible common equity (1) (B/H) 7.11 18.52
Core tangible non-interest income to tangible assets (C/G) 1.28 1.55
Core tangible non-interest expense to tangible assets (F/G) 2.92 2.92
Efficiency ratio (2) 70.27 60.60

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

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

(3) Ratios are annualized and based on average balance sheet amounts, where applicable.
(4) Quarterly data may not sum to year-to-date data due to rounding.

Contacts:

Investor Relations Contact
Berkshire Hills Bancorp
David H. Gonci, 413-281-1973
Corporate Finance Officer
or
Media Contact
Fedelina Madrid, 413-236-3733
Vice President - Marketing

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