BERKSHIRE HILLS BANCORP, INC. 
By PITTSFIELD, Mass., Jan. 31, 2012 /PRNewswire/ -- Berkshire Hills Bancorp, Inc. (NASDAQ: BHLB) reported fourth quarter 2011 core earnings per share totaling $0.44, increasing by 57% compared to $0.28 in the fourth quarter of 2010. This increase resulted from ongoing organic growth together with the benefit of the acquisitions of Rome Bancorp and Legacy Bancorp. Fourth quarter GAAP net income included merger related expenses, together with income from discontinued operations. These non-core items together equated to a net charge of $0.04 per share and resulted in GAAP net income of $0.40 per share, compared to $0.26 per share in the fourth quarter of 2010.
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For the full year, core earnings per share increased by 53% to $1.56 in 2011, compared to $1.02 in 2010. GAAP net earnings per share totaled $0.98 for the year 2011 compared to $1.00 in 2010.
FOURTH QUARTER FINANCIAL HIGHLIGHTS (Revenue and expense comparisons are to the prior year fourth quarter, unless otherwise noted. Fourth quarter results in 2011 include the operations of Legacy Bancorp and Rome Bancorp, which were acquired earlier in 2011.)
-- 57% increase in core earnings per share
-- 7% organic annualized growth in total commercial loans
-- 8% organic annualized deposit growth
-- 3.61% net interest margin, improved from 3.30% in the fourth quarter of
2010
-- 0.66% non-performing assets/total assets
-- 0.27% annualized net loan charge-offs/average loans
-- 0.93% core ROA (0.85% GAAP ROA)
-- 59% efficiency ratio
Berkshire President and CEO, Michael P. Daly, stated, "We continued our strong organic growth in targeted areas through year-end, resulting in 11% annualized core EPS growth for the fourth quarter, compared to the linked quarter. We converted the Legacy core system in November, and will have the full benefit of these additional cost saves beginning in 2012. Our merger integrations are now completed, allowing us to focus on revenue enhancements going forward. We brought in our core operating expenses below budget, and our return on assets and efficiency continue to improve as we benefit from the positive operating leverage of revenue growth and disciplined expense management."
Mr. Daly continued, "For the year, we achieved 53% accretion in core earnings per share. We also accreted tangible book value per share, despite the impact of two bank acquisitions. Tangible book value per share ended the year at $15.61, while total book value per share ended the year at $26.20. Our asset quality metrics remain favorable and our capital ratios improved during the year. In the fourth quarter, we announced the recruitment of a seasoned commercial lending team to anchor our Westborough Massachusetts commercial office. Through this initiative and our pending acquisition of The Connecticut Bank and Trust Company (CBT), we are positioned to expand our presence in our central and eastern New England markets. CBT's performance continues to be within our expectations and we look forward to the planned financial and market benefits of this pending acquisition. We are focused on executing on these growth initiatives as we continue to target a $2.00 core EPS run rate by the end of 2012."
DIVIDEND DECLARED
The Board of Directors voted to declare a cash dividend of $0.17 per share to shareholders of record at the close of business on February 16, 2012, payable on March 1, 2012. The dividend was increased in the prior quarter by 6% from the previous $0.16 per share level. This dividend equates to a 3.4% annualized yield based on the $20.11 average closing price of Berkshire's common stock in the fourth quarter of 2011.
ANNUAL MEETING DATE SET
The Board of Directors has voted that the Annual Meeting of Shareholders shall be held on May 10, 2012 at the Crowne Plaza Hotel, One West Street, Pittsfield, Massachusetts at 10:00 a.m. The date of March 15, 2012 was established as the record date for the determination of the shareholders entitled to notice of, and to vote at, the Annual Meeting.
BRANCH DIVESTITURES
In order to minimize potential anti-competitive effects of the Legacy acquisition, Berkshire agreed to sell four Legacy Berkshire County branches in conjunction with the Legacy merger agreement. These branches were sold in the fourth quarter of 2011 and Berkshire received a 6% deposit premium totaling $8.9 million and paid a $1.1 million ($0.14 per share) distribution to former Legacy shareholders for a portion of these proceeds pursuant to the Legacy merger agreement. This divestiture included $148 million in deposits, along with certain loans, premises, equipment, and other assets. Berkshire recognized pre-tax income of $5.0 million and net income of $1.1 million related to this sale, which is included in income from discontinued operations in the most recent quarter.
Additionally, Berkshire made a separate determination to divest the deposits of four former Legacy New York branches, including three office facilities, that were not within its financial performance objectives. Berkshire entered into an agreement to sell these branches, with total year-end deposits of $55 million, for a 2.5% deposit premium. These branches were designated as discontinued operations in Berkshire's financial statements at year-end 2011. This divestiture was completed in January 2012 and is not expected to have a material effect on 2012 income.
During the third and fourth quarters of 2011, the operations related to the above eight branches were classified as discontinued operations. They operated at a net loss of $5 thousand in the third quarter and $161 thousand in the fourth quarter, including divestiture related costs and before the net gain on the Berkshire County branches. The balance sheet at September 30, 2011 included all eight branches as discontinued operations, and the year-end balance sheet included the four New York branches as discontinued operations.
FINANCIAL CONDITION
Changes in financial condition in 2011 included the impact of the acquisition of Rome Bancorp on April 1 and the acquisition of Legacy Bancorp on July 21, less the branch divestiture noted above. Due to the branch divestiture, total assets decreased by 3% to $4.0 billion in the fourth quarter. Including the benefit of the bank acquisitions, total assets increased by 38% for the year 2011.
Total loans were $3.0 billion at year-end 2011, unchanged during the third quarter and up 38% for the year, including 2% organic growth plus the benefit of the bank acquisitions. Berkshire has focused on originations of higher margin commercial loans, which grew at a 7% organic annualized rate in the fourth quarter and at a 6% organic rate for the year. This growth was in commercial business loans, which grew by 11% in the fourth quarter and at a 29% organic rate for the year, including the benefit of Berkshire's asset based lending group. Berkshire also expects to benefit from the recruitment of an established commercial lending team announced in December, which will operate from the Company's new Westborough office serving the commercial middle market in central and eastern Massachusetts. In the current low rate environment, the Company continued to sell a significant portion of fixed rate residential mortgage originations, and the mortgage portfolio was flat for the year on an organic basis before the benefit of bank acquisitions. The low mortgage rate environment and economic conditions constrained demand for home equity loans, contributing to a 13% organic decline in consumer loan balances for the year.
Asset performance metrics remained favorable throughout the year and at year-end. Non-performing assets were 0.66% of total assets at year-end, compared to 0.59% at the start of the year. Annualized net loan charge-offs measured 0.27% of average loans for the fourth quarter and for the full year. Accruing delinquent loans improved to 0.89% of total loans during the quarter.
Total deposits were $3.1 billion at year-end 2011, increasing at an 8% annualized organic rate in the fourth quarter and 10% organically for the full year, and up 41% in total for the year including the benefit of the bank acquisitions. Full year organic deposit growth benefited from a 15% organic increase in transaction accounts, including a 22% increase in demand deposit balances reflecting ongoing organic retail and commercial account growth. Money market account growth also contributed to total deposit growth, including the benefit of institutional balance growth and ongoing promotional offerings during the year.
Total outstanding common shares increased by 50% to 21.1 million in 2011 due to shares issued as merger consideration. Tangible book value per share increased to $15.61 at year-end 2011. Total book value per share decreased to $26.20, reflecting current market prices assigned to new shares issued as merger consideration. The ratio of tangible equity/assets increased to 8.8% at year-end 2011 compared to 8.0% at the start of the year.
RESULTS OF OPERATIONS
The fourth quarter of 2011 was the first full quarterly period to include the benefit in continuing operations of both the Legacy and Rome operations. Most categories of income and expense increased in the fourth quarter and for the year 2011 compared to 2010 due to the benefit of these mergers. Most core profitability measurements improved including the benefit of these mergers, together with positive operating leverage resulting from organic revenue growth and disciplined expense management. Earnings per share reflect the impact of the additional shares issued for these acquisitions.
Fourth quarter core earnings of $9.3 million increased by 135% in 2011, compared to 2010, and core earnings per share increased by 57% to $0.44 (including the impact of the newly issued shares). The core return on assets increased to 0.93% from 0.56%, and the GAAP ROA improved to 0.85% from 0.51%. The core return on tangible equity improved to 11.6% in the most recent quarter, while the return on total equity improved to 6.2%.
Fourth quarter total net revenue increased by 45% to $40 million in 2011 due to the benefit of the bank acquisitions and organic growth. Net interest income increased by 55% and fee income increased by 18%. The acquired banks had fewer fee income sources compared to Berkshire. The net interest margin improved to 3.61% in the fourth quarter of 2011, compared to 3.30% in the same quarter of 2010. This improvement reflected the fair valued margins of acquired banks, together with the continuing benefit of disciplined pricing of loans and deposits. The benefit of checking account growth has contributed to the ongoing improvement in the Company's funding costs. As expected, the net interest margin decreased from 3.74% in the prior quarter due to the benefit last quarter from the prepayment of discounted loans.
The fourth quarter provision for loan losses totaled $2.3 million in 2011, compared to $2.0 million in 2010. The Company benefited from continuing favorable loan charge-offs and higher loan recoveries in the most recent quarter. The loan loss allowance measured 1.10% of total loans at year-end 2011. Under current accounting standards, loans acquired through the bank mergers were booked at their $823 million fair value, with no initial related allowance.
Fourth quarter and annual results included non-core activity related to the mergers and discontinued operations. Non-core income is summarized on pages F-9 and F-10. Fourth quarter core income was $9.3 million, compared to net income of $8.5 million. Non-core adjustments to GAAP income (after-tax) included $1.7 million for non-recurring items and ($0.9) million for discontinued operations. For the year 2011, core income was $27.9 million, compared to net income of $17.6 million. Net non-core adjustments were $11.2 million for non-recurring items and ($0.9) million for discontinued operations. Substantially all of the non-recurring items were merger related. The full year tax rate on these items was 37%, resulting in a 53% fourth quarter tax rate when merger analysis was completed at year-end. The tax rate on discontinued operations was 80% due to the non-deductibility of goodwill for income tax purposes in determining the taxable gain on divestiture.
Fourth quarter non-interest expense totaled $29.5 million. By year-end, Berkshire had completed substantially all of its targeted cost saves related to these mergers. This progress is reflected in the efficiency ratio, which improved to 59% in the fourth quarter of 2011. Results have benefited from lower industry premiums for FDIC insurance expense and have reflected additional charges in 2011 related to the liquidation of foreclosed real estate. The tax rate on core earnings measured 24% for the year, resulting in a 22% rate for the fourth quarter.
NOTE ON ACCOUNTING CORRECTION
Based on a review of its tax credit investment limited partnership interests in the second quarter, Berkshire determined that its net income had been understated by an immaterial amount in prior periods. These interests primarily relate to low income housing, community development, and solar energy related investments. The Company has corrected its accounting for these interests, including adjustments to non-interest income to reflect book losses in these interests, which are more than offset by the reduction of income tax expense resulting from federal income tax credits. The enclosed financial statements include the impact of these immaterial corrections to current and prior period financial information presented.
CONFERENCE CALL
Berkshire will conduct a conference call/webcast at 10:00 A.M. eastern time on Wednesday, February 1, 2012 to discuss the results for the quarter and guidance about expected future results. Participants should dial-in to the call a few minutes before it begins. Information about the conference call follows:
Dial-in: 866-843-0890
Elite Entry
Number: 8957349
www.berkshirebank.com (investor relations
Webcast: link)
A telephone replay of the call will be available through February 8, 2012 by calling 877-344-7529 and entering access code: 10008299. The webcast and a podcast will be available at Berkshire's website above for an extended period of time.
BACKGROUND
Berkshire Hills Bancorp is the parent of Berkshire Bank - America's Most Exciting Bank(SM). The Company has $4 billion in assets and 59 full service branch offices in Massachusetts, New York, and Vermont providing personal and business banking, insurance, and wealth management services. Berkshire Bank provides 100% deposit insurance protection for all deposit accounts, regardless of amount, based on a combination of FDIC insurance and the Depositors Insurance Fund (DIF). Berkshire has a pending agreement to acquire CBT - The Connecticut Bank and Trust Company headquartered in Hartford, Connecticut. For more information, visit www.berkshirebank.com or call 800-773-5601.
FORWARD LOOKING STATEMENTS
This document may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. There are several factors that could cause actual results to differ significantly from expectations described in the forward-looking statements. For a discussion of such factors, please see Berkshire's most recent reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission and available on the SEC's website at www.sec.gov. Berkshire does not undertake any obligation to update forward-looking statements made in this document.
This document also may contain forward-looking statements about the proposed merger of Berkshire and CBT. Certain factors that could cause actual results to differ materially from expected results include delays in completing the merger, difficulties in achieving cost savings from the merger or in achieving such cost savings within the expected time frame, difficulties in integrating Berkshire and CBT, increased competitive pressures, changes in the interest rate environment, changes in general economic conditions, legislative and regulatory changes that adversely affect the business in which Berkshire and CBT are engaged, changes in the securities markets and other risks and uncertainties disclosed from time to time in documents that Berkshire files with the Securities and Exchange Commission.
ADDITIONAL INFORMATION FOR SHAREHOLDERS
The proposed merger transaction with CBT will be submitted to CBT stockholders for their consideration. Berkshire will file with the SEC a Registration Statement on Form S-4 that will include a Proxy Statement of CBT and a Prospectus of Berkshire, as well as other relevant documents concerning the proposed transaction with the SEC. Stockholders of CBT are urged to read the Registration Statement and the Proxy Statement/Prospectus when it becomes available and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information. You will be able to obtain a free copy of the Registration Statement, Proxy Statement/Prospectus, as well as other filings containing information about Berkshire and CBT at the SEC's Internet site (www.sec.gov) and at CBT's Internet site (www.thecbt.com).
Berkshire and CBT and certain of their directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of CBT in connection with the proposed merger. Information about the directors and executive officers of Berkshire is set forth in the proxy statement, dated March 24, 2011, for Berkshire's 2011 annual meeting of stockholders, as filed with the SEC on Schedule 14A. Information about the directors and executive officers of CBT is set forth in the proxy statement, dated April 18, 2011, for CBT's 2011 annual meeting of stockholders, which is available at CBT's Internet site. Additional information regarding the interests of such participants and other persons who may be deemed participants in the transaction may be obtained by reading the Proxy Statement/Prospectus when it becomes available.
NON-GAAP FINANCIAL MEASURES
This document contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles ("GAAP"). These non-GAAP measures provide supplemental perspectives on operating results, performance trends, and financial condition. They are not a substitute for GAAP measures; they should be read and used in conjunction with the Company's GAAP financial information. A reconciliation of non-GAAP financial measures to GAAP measures is included in the accompanying financial tables. In all cases, it should be understood that non-GAAP per share measures do not depict amounts that accrue directly to the benefit of shareholders. The Company utilizes the non-GAAP measure of core earnings in evaluating operating trends, including components for core revenue and expense. These measures exclude amounts which the Company views as unrelated to its normalized operations, including merger costs and restructuring costs. Similarly, the efficiency ratio is also adjusted for these non-core items. 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 adjustments in 2010 and 2011 are primarily related to expense charges related to the Rome and Legacy mergers. 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 and core systems conversion costs. Tax adjustments are based on an analysis of tax accruals for core income and for GAAP income, with the net difference included with non-core items and reflecting the timing impacts of tax expense estimates. Core revenue, expense, and income measures in the fourth quarter also exclude results related to discontinued operations, including divestiture income and related tax expense.
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED BALANCE SHEETS - UNAUDITED
---------------------------------------
December 31, September 30, December 31,
------------ ------------- ------------
(In thousands) 2011 2011 2010
-------------- ---- ---- ----
Assets
Cash and due from banks $46,713 $40,070 $24,643
Short-term investments 28,646 94,428 19,497
Trading security 17,395 17,501 16,155
Securities available for
sale, at fair value 419,756 395,546 310,242
Securities held to maturity,
at amortized cost 58,912 58,262 56,436
Federal Home Loan Bank stock
and other restricted
securities 37,118 37,148 23,120
------
Total securities 533,181 508,457 405,953
Loans held for sale 1,455 475 1,043
Residential mortgages 1,018,664 1,045,363 644,973
Commercial mortgages 1,142,985 1,158,140 925,573
Commercial business loans 423,548 382,159 286,087
Consumer loans 371,373 368,898 285,529
-------------- ------- ------- -------
Total loans 2,956,570 2,954,560 2,142,162
Less: Allowance for loan
losses (32,444) (32,181) (31,898)
------------------------ ------- ------- -------
Net loans 2,924,126 2,922,379 2,110,264
Premises and equipment, net 60,829 58,652 38,546
Other real estate owned 1,900 2,200 3,386
Goodwill 202,390 202,100 161,725
Other intangible assets 21,547 22,288 11,354
Cash surrender value of bank-
owned life insurance 75,009 74,381 46,085
Other assets 81,207 98,737 58,907
Assets from discontinued
operations 5,131 63,033 -
------------------------
Total assets $3,982,134 $4,087,200 $2,881,403
------------ ---------- ---------- ----------
Liabilities and stockholders'
equity
Demand deposits $447,460 $434,719 $297,502
NOW deposits 272,204 269,668 212,143
Money market deposits 1,055,306 896,004 716,078
Savings deposits 350,517 450,976 237,594
---------------- ------- ------- -------
Total non-maturity deposits 2,125,487 2,051,367 1,463,317
Time deposits 976,080 986,979 741,124
Total deposits 3,101,567 3,038,346 2,204,441
Borrowings 221,938 221,996 244,837
Junior subordinated
debentures 15,464 15,464 15,464
------------------- ------ ------ ------
Total borrowings 237,402 237,460 260,301
Other liabilities 34,012 54,382 28,014
Liabilities from discontinued
operations 55,112 210,319 -
----------------------------- ------ ------- ---
Total liabilities 3,428,093 3,540,507 2,492,756
Total common stockholders'
equity 554,041 546,693 388,647
-------------------------- ------- ------- -------
Total stockholders' equity 554,041 546,693 388,647
Total liabilities and
stockholders' equity $3,982,134 $4,087,200 $2,881,403
--------------------- ---------- ---------- ----------
(1) The Company acquired Rome Bancorp Inc. ("Rome") on April 1, 2011
with total assets of $322 million.
(2) The Company acquired Legacy Bancorp Inc. ("Legacy") on July 21,
2011 with total assets of $873 million.
(3) The Company designated certain branches held for sale as
discontinued operations in the third quarter of 2011.
Eight branches were held for sale at September 30, 2011, four of
these branches were sold in the fourth quarter, and four
branches remained as discontinued operations at year-end.
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED
LOAN ANALYSIS
-------------
Organic annualized
growth %
--------
(Dollars in
millions) December 31, September 30, Impact of December 31, Fourth Year
----------- 2011 2011 Mergers and 2010 Quarter 2011
Balance Balance Divestitures Balance 2011 ----
------- ------- ------------ ------- ----
Total
residential
mortgages $1,019 $1,046 $374 $645 (10)% (0)%
Total commercial
mortgages 1,143 1,158 223 926 (5) (1)
Total commercial
business loans 424 382 56 286 44 29
---------------- --- --- --- --- --- ---
Total commercial
loans 1,567 1,540 279 1,212 7 6
Total consumer
loans 371 369 123 285 3 (13)
-------------- --- --- --- --- --- ---
Total loans $2,957 $2,955 $776 $2,142 0% 2%
----------- ------ ------ ---- ------ --- ---
DEPOSIT ANALYSIS
----------------
Organic annualized
growth %
--------
(Dollars in December 31,
millions) 2011 September 30, Impact of December 31, Fourth Year
----------- Balance 2011 Mergers and 2010 Quarter 2011
------- Balance Divestitures Balance 2011 ----
------- ------------ ------- ----
Demand $447 $435 $84 $297 11% 22%
NOW 272 269 51 212 4 4
Money market 1,055 896 65 716 27 25
Savings 351 451 225 238 (1) (6)
------- --- --- --- --- --- ---
Total non-
maturity
deposits 2,125 2,051 425 1,463 14 16
Time less than
$100,000 488 490 147 369 (2) (8)
Time $100,000 or
more 489 497 105 372 (6) 3
--- --- ---
Total time
deposits 977 987 252 741 (4) (2)
---------- --- --- --- --- --- ---
Total deposits $3,102 $3,038 $677 $2,204 8% 10%
-------------- ------ ------ ---- ------ --- ---
(1) Organic annualized growth rates are calculated on organic growth
only, which excludes the impact of mergers and divestitures.
(2) Quarterly data may not sum to annualized data due to rounding.
(3) Year-end 2011 organic growth percentages adjust for $98 million
in acquired deposits which were changed from savings accounts to
money market accounts during the fourth quarter.
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
---------------------------------------------
Three Months Ended Years Ended
December 31, December 31,
------------ ------------
(In thousands,
except per share
data) 2011 2010 2011 2010
----------------- ---- ---- ---- ----
Interest and
dividend income
Loans $35,466 $25,005 $124,398 $98,359
Securities and other 3,562 3,364 13,862 13,918
-------------------- ----- ----- ------ ------
Total interest and
dividend income 39,028 28,369 138,260 112,277
Interest expense
Deposits 5,792 6,121 23,372 26,316
Borrowings and
junior subordinated
debentures 2,101 2,153 8,368 9,014
-------------------- ----- ----- ----- -----
Total interest
expense 7,893 8,274 31,740 35,330
-------------- ----- ----- ------ ------
Net interest income 31,135 20,095 106,520 76,947
Non-interest income
Loan related fees 856 1,125 3,161 3,386
Deposit related fees 3,848 2,871 13,640 10,880
Insurance
commissions and
fees 2,145 2,150 11,088 11,136
Wealth management
fees 1,650 1,151 5,838 4,457
----------------- ----- ----- ----- -----
Total fee income 8,499 7,197 33,727 29,859
Other 330 234 (25) (108)
Gain on sale of
securities, net 8 - 14 -
Non-recurring gain (12) - 2,087 -
Total non-interest
income 8,825 7,431 35,803 29,751
------------------ ----- ----- ------ ------
Total net revenue 39,960 27,526 142,323 106,698
Provision for loan
losses 2,263 2,000 7,563 8,526
Non-interest expense
Compensation and
benefits 13,172 11,093 49,545 43,920
Occupancy and
equipment 4,063 3,043 14,927 12,029
Technology and
communications 2,464 1,519 7,457 5,733
Marketing and
professional
services 1,565 1,520 6,208 5,186
Supplies, postage
and delivery 555 453 2,061 2,088
FDIC premiums and
assessments 542 887 3,233 3,427
Other real estate
owned 153 184 2,003 311
Amortization of
intangible assets 1,314 718 4,236 3,021
Non-recurring and
merger expenses 3,678 426 19,928 447
Other 2,027 1,572 6,457 5,567
----- -----
Total non-interest
expense 29,533 21,415 116,055 81,729
------------------ ------ ------ ------- ------
Income from
continuing
operations before
income taxes 8,164 4,111 18,705 16,443
Income tax expense 606 511 2,038 2,585
------------------ --- --- ----- -----
Net income from
continuing
operations 7,558 3,600 16,667 13,858
Income from
discontinued
operations before
income taxes
(including gain on
disposal of $4,962) 4,692 - 4,684 -
Income tax benefit (3,773) - (3,770) -
------------------ ------ --- ------ ---
Net income from
discontinued
operations 919 - 914 -
---
Net income $8,477 $3,600 $17,581 $13,858
---------- ------ ------ ------- -------
Basic earnings per
share:
Continuing
operations $0.36 $0.26 $0.93 $1.00
Discontinued
operations 0.04 - 0.05 -
Total $0.40 $0.26 $0.98 $1.00
----- ----- ----- ----- -----
Diluted earnings per
share:
Continuing
operations $0.36 $0.26 $0.93 $1.00
Discontinued
operations 0.04 - 0.05 -
Total $0.40 $0.26 $0.98 $1.00
----- ----- ----- ----- -----
Weighted average
shares outstanding:
Basic 20,930 13,890 17,885 13,862
Diluted 21,043 13,934 17,952 13,896
(1) The Company acquired Rome on April 1, 2011, and the income
statement includes Rome operations from that date.
(2) The Company acquired Legacy on July 21, 2011, and the income
statement includes Legacy operations from that date.
(3) Discontinued operations are described in Note 3 on Page F-1.
Income from discontinued operations includes operating losses in the
third and fourth quarters (including divestiture costs), and the
gain on the sale of four branches in the fourth quarter, net of
taxes.
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
---------------------------------------------
Quarters Ended
--------------
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(In thousands, except
per share data) 2011 2011 2011 2011 2010
--------------------- ---- ---- ---- ---- ----
Interest and dividend
income
Loans $35,466 $35,719 $28,607 $24,606 $25,005
Securities and other 3,562 3,547 3,446 3,307 3,364
-------------------- ----- ----- ----- ----- -----
Total interest and
dividend income 39,028 39,266 32,053 27,913 28,369
Interest expense
Deposits 5,792 6,097 5,768 5,715 6,121
Borrowings and junior
subordinated
debentures 2,101 2,131 2,084 2,052 2,153
--------------------- ----- ----- ----- ----- -----
Total interest
expense 7,893 8,228 7,852 7,767 8,274
-------------- ----- ----- ----- ----- -----
Net interest income 31,135 31,038 24,201 20,146 20,095
Non-interest income
Loan related fees 856 934 780 591 1,125
Deposit related fees 3,848 3,885 3,366 2,541 2,871
Insurance commissions
and fees 2,145 2,431 2,782 3,730 2,150
Wealth management
fees 1,650 1,607 1,389 1,192 1,051
----------------- ----- ----- ----- ----- -----
Total fee income 8,499 8,857 8,317 8,054 7,197
Other 330 (158) (277) 80 234
Gain on sale of
securities, net 8 - 6 - -
Non-recurring gain (12) 1,975 124 - -
Total non-interest
income 8,825 10,674 8,170 8,134 7,431
------------------ ----- ------ ----- ----- -----
Total net revenue 39,960 41,712 32,371 28,280 27,526
Provision for loan
losses 2,263 2,200 1,500 1,600 2,000
Non-interest expense
Compensation and
benefits 13,172 13,195 12,027 11,151 11,093
Occupancy and
equipment 4,063 3,883 3,546 3,435 3,043
Technology and
communications 2,464 1,996 1,531 1,466 1,519
Marketing and
professional
services 1,565 1,873 1,557 1,213 1,520
Supplies, postage and
delivery 555 545 507 454 453
FDIC premiums and
assessments 542 923 741 1,027 887
Other real estate
owned 153 541 700 609 184
Amortization of
intangible assets 1,314 1,271 935 716 718
Non-recurring and
merger expenses 3,678 9,091 5,451 1,708 426
Other 2,027 1,392 1,628 1,410 1,572
----- -----
Total non-interest
expense 29,533 34,710 28,623 23,189 21,415
------------------ ------ ------ ------ ------ ------
Income from
continuing
operations before
income taxes 8,164 4,802 2,248 3,491 4,111
Income tax expense 606 405 371 656 511
------------------ --- --- --- --- ---
Net income from
continuing
operations 7,558 4,397 1,877 2,835 3,600
Income from
discontinued
operations before
income taxes 4,692 (8) - - -
(including gain on
disposal of $4,962)
Income tax benefit (3,773) 3 - - -
------------------ ------ --- --- --- ---
Net income from
discontinued
operations 919 (5) - - -
--- --- ---
Net income $8,477 $4,392 $1,877 $2,835 $3,600
---------- ------ ------ ------ ------ ------
Basic earnings per
share:
Continuing operations $0.36 $0.22 $0.11 $0.20 $0.26
Discontinued
operations 0.04 - - - -
Total $0.40 $0.22 $0.11 $0.20 $0.26
----- ----- ----- ----- ----- -----
Diluted earnings per
share:
Continuing operations $0.36 $0.22 $0.11 $0.20 $0.26
Discontinued
operations 0.04 - - - -
Total $0.40 $0.22 $0.11 $0.20 $0.26
----- ----- ----- ----- ----- -----
Weighted average
shares outstanding:
Basic 20,930 20,009 16,580 13,943 13,890
Diluted 21,043 20,105 16,601 13,981 13,934
(1) See notes on Page F-3
BERKSHIRE HILLS BANCORP, INC.
ASSET QUALITY ANALYSIS
----------------------
At or for the Quarters Ended
----------------------------
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(Dollars
in
thousands) 2011 2011 2011 2011 2010
---------- ---- ---- ---- ---- ----
NON-PERFORMING
ASSETS
Non-accruing loans:
Residential
mortgages $7,010 $4,750 $2,811 $1,529 $2,174
Commercial
mortgages 14,280 13,721 9,600 9,510 9,488
Commercial
business
loans 990 1,399 1,764 1,507 1,305
Consumer
loans 1,954 1,834 862 763 745
-------- ----- ----- --- --- ---
Total
non-
accruing
loans 24,234 21,704 15,037 13,309 13,712
Other
real
estate
owned 1,900 2,200 1,700 2,400 3,386
------- ----- ----- ----- ----- -----
Total
non-
performing
assets $26,134 $23,904 $16,737 $15,709 $17,098
----------- ------- ------- ------- ------- -------
Total
non-
accruing
loans/
total
loans 0.82% 0.72% 0.61% 0.62% 0.64%
Total
non-
performing
assets/
total
assets 0.66% 0.58% 0.52% 0.54% 0.59%
PROVISION AND ALLOWANCE FOR LOAN
LOSSES
Balance
at
beginning
of
period $32,181 $31,919 $31,898 $31,898 $31,836
Charged-
off
loans (2,313) (2,061) (1,564) (1,758) (2,216)
Recoveries
on
charged-
off
loans 313 123 85 158 278
---------- --- --- --- --- ---
Net
loans
charged-
off (2,000) (1,938) (1,479) (1,600) (1,938)
Provision
for
loan
losses 2,263 2,200 1,500 1,600 2,000
---------
Balance
at end
of
period $32,444 $32,181 $31,919 $31,898 $31,898
------- ------- ------- ------- ------- -------
Allowance
for
loan
losses/
total
loans 1.10% 1.07% 1.30% 1.49% 1.49%
Allowance
for
loan
losses/
non-
accruing
loans 134% 148% 212% 240% 233%
NET LOAN CHARGE-
OFFS
Residential
mortgages $(449) $(292) $(225) $(124) $(173)
Commercial
mortgages (1,198) (1,099) (597) (963) (811)
Commercial
business
loans (244) (463) (435) (222) (733)
Home
equity (90) 7 (68) (79) (42)
Other
consumer (19) (91) (154) (212) (179)
---------
Total,
net $(2,000) $(1,938) $(1,479) $(1,600) $(1,938)
------ ------- ------- ------- ------- -------
Net
charge-
offs
(QTD
annualized)/average
loans 0.27% 0.27% 0.24% 0.30% 0.37%
Net
charge-
offs
(YTD
annualized)/average
loans 0.27% 0.27% 0.27% 0.30% 0.42%
DELINQUENT AND NON-ACCRUING LOANS/
TOTAL LOANS
30-89
Days
delinquent 0.55% 0.79% 0.50% 0.59% 0.26%
90+
Days
delinquent
and
still
accruing 0.34% 0.22% 0.12% 0.11% 0.05%
----------- ---- ---- ---- ---- ----
Total
accruing
delinquent
loans 0.89% 1.01% 0.62% 0.70% 0.31%
Non-
accruing
loans 0.82% 0.72% 0.61% 0.62% 0.64%
Total
delinquent
and
non-
accruing
loans 1.71% 1.73% 1.23% 1.32% 0.95%
----------- ---- ---- ---- ---- ----
(1) The above schedule includes balances associated with
discontinued operations.
BERKSHIRE HILLS BANCORP, INC.
SELECTED FINANCIAL HIGHLIGHTS
-----------------------------
At or for the Quarters Ended
----------------------------
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
2011 2011 2011 2011 2010
---- ---- ---- ---- ----
PERFORMANCE
RATIOS
Core return on
assets 0.93% 0.89% 0.72% 0.59% 0.56%
Return on total
assets 0.85 0.45 0.23 0.39 0.51
Core return on
equity 6.74 6.50 5.15 4.31 4.08
Return on total
equity 6.16 3.31 1.67 2.89 3.72
Net interest
margin, fully
taxable
equivalent 3.61 3.74 3.52 3.30 3.30
Non-interest
income to assets 0.89 1.11 1.02 1.13 1.05
Non-interest
income to net
revenue 22.08 25.44 25.24 28.76 26.28
Non-interest
expense to
assets 2.97 3.65 3.56 3.22 3.03
Efficiency ratio 59.44 59.62 66.22 71.03 70.82
GROWTH
Total commercial
loans, year-to-
date
(annualized) 29% 38% 20% -% 17%
Total loans,
year-to-date
(annualized) 38 54 29 - 9
Total deposits,
year-to-date
(annualized) 41 63 26 7 11
Total net
revenues, year-
to-date,
compared to
prior year 33 28 15 6 17
Earnings per
share, year-to-
date, compared
to prior year (2) (26) (37) (17) N/M
Core earnings per
share, year-to-
date, compared
to prior year 57 50 33 25 N/M
FINANCIAL DATA
(In millions)
Total assets $3,982 $4,087 $3,226 $2,886 $2,881
Total loans 2,957 3,003 2,452 2,145 2,142
Allowance for
loan losses 32 32 32 32 32
Total intangible
assets 224 233 193 172 173
Total deposits 3,102 3,249 2,486 2,241 2,204
Total
stockholders'
equity 554 547 445 391 389
Total core income 9.3 8.6 5.8 4.2 3.9
Total net income 8.5 4.4 1.9 2.8 3.6
ASSET QUALITY
RATIOS
Net charge-offs
(current quarter
annualized)/average
loans 0.27% 0.27% 0.24% 0.30% 0.37%
Non-performing
assets/total
assets 0.66 0.58 0.52 0.54 0.59
Allowance for
loan losses/
total loans 1.10 1.07 1.30 1.49 1.49
Allowance for
loan losses/
non-accruing
loans 134 148 212 240 233
PER SHARE DATA
Core earnings,
diluted $0.44 $0.43 $0.35 $0.30 $0.28
Net earnings,
diluted 0.40 0.22 0.11 0.20 0.26
Tangible book
value 15.61 14.86 15.07 15.52 15.31
Total book value 26.20 25.87 26.61 27.69 27.61
Market price at
period end 22.19 18.47 22.39 20.83 22.11
Dividends 0.17 0.16 0.16 0.16 0.16
CAPITAL RATIOS
Stockholders'
equity to total
assets 13.91% 13.38% 13.80% 13.54% 13.49%
Tangible
stockholders'
equity to
tangible assets 8.78 8.15 8.31 8.07 7.96
N/M - Not Meaningful
(1) Reconciliation of Non-GAAP financial measures, including all
references to core and tangible amounts, appear on pages F-9 & F-
10.
Tangible assets are total assets less total intangible assets.
(2) All performance ratios are annualized and are based on average
balance sheet amounts, where applicable.
(3) See notes on other tables regarding classification of
discontinued operations.
BERKSHIRE HILLS BANCORP, INC.
AVERAGE BALANCES
----------------
Quarters Ended
--------------
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(In thousands) 2011 2011 2011 2011 2010
---- ---- ---- ---- ----
Assets
Loans:
Residential
mortgages $1,039,025 $1,004,950 $802,460 $651,059 $639,470
Commercial
mortgages 1,156,155 1,140,691 973,557 929,564 901,434
Commercial
business
loans 403,376 383,059 333,700 283,747 251,229
Consumer loans 376,385 376,754 311,057 281,069 288,782
-------------- ------- ------- ------- ------- -------
Total loans 2,974,941 2,905,454 2,420,774 2,145,439 2,080,915
Securities 515,128 474,435 405,670 403,549 411,207
Short-term
investments 20,748 34,293 4,688 12,035 13,658
------------ ------ ------ ----- ------ ------
Total earning
assets 3,510,817 3,414,182 2,831,132 2,561,023 2,505,780
Goodwill and
other
intangible
assets 230,864 229,594 196,292 172,653 173,386
Other assets 235,353 226,757 186,785 142,789 147,365
------------ ------- ------- ------- ------- -------
Total assets $3,977,034 $3,870,533 $3,214,209 $2,876,465 $2,826,531
------------ ---------- ---------- ---------- ---------- ----------
Liabilities
and
stockholders'
equity
Deposits:
NOW $274,041 $256,662 $229,980 $215,191 $210,487
Money market 953,162 853,128 778,055 746,366 635,745
Savings 446,672 476,230 317,232 234,838 232,494
Time 1,028,817 1,029,555 809,768 737,551 741,921
---- --------- --------- ------- ------- -------
Total
interest-
bearing
deposits 2,702,692 2,615,575 2,135,035 1,933,946 1,820,647
Borrowings and
debentures 248,611 253,018 269,665 229,878 292,416
-------------- ------- ------- ------- ------- -------
Total
interest-
bearing
liabilities 2,951,303 2,868,593 2,404,700 2,163,824 2,113,063
Non-interest-
bearing
demand
deposits 448,952 432,381 334,171 293,895 289,786
Other
liabilities 26,087 38,431 25,268 26,862 36,490
------------ ------ ------ ------ ------ ------
Total
liabilities 3,426,342 3,339,405 2,764,139 2,484,581 2,439,339
Total
stockholders'
equity 550,692 531,128 450,070 391,884 387,192
Total
liabilities
and
stockholders'
equity $3,977,034 $3,870,533 $3,214,209 $2,876,465 $2,826,531
-------------- ---------- ---------- ---------- ---------- ----------
Supplementary
data
Total non-
maturity
deposits $2,122,827 $2,018,401 $1,659,438 $1,490,290 $1,368,512
Total deposits 3,151,644 3,047,956 2,469,206 2,227,841 2,110,433
Fully taxable
equivalent
income adj. 674 673 675 679 716
(1) Average balances for securities available-for-sale are based on
amortized cost. Total loans include non-accruing loans.
(2) The above schedule does not reclassify balances associated with
discontinued operations, which are reclassified from period end
balances on the balance sheet.
(3) The above schedule includes balances associated with discontinued
operations.
BERKSHIRE HILLS BANCORP, INC.
AVERAGE YIELDS (Fully Taxable Equivalent - Annualized)
-------------------------------------------------------
Quarters Ended
--------------
Sept. Mar. Dec.
Dec. 31, 30, June 30, 31, 31,
2011 2011 2011 2011 2010
---- ---- ---- ---- ----
Earning assets
Loans:
Residential mortgages 4.68% 4.82% 4.97% 5.04% 5.01%
Commercial mortgages 5.17 5.44 4.74 4.68 4.91
Commercial business
loans 4.44 4.78 4.89 4.69 4.83
Consumer loans 4.03 4.17 3.97 3.63 3.72
Total loans 4.74 4.97 4.74 4.65 4.77
Securities 3.26 3.53 4.07 4.01 3.94
Short-term investments 0.14 0.03 0.19 0.13 0.11
Total earning assets 4.49 4.72 4.64 4.53 4.60
Funding liabilities
Deposits:
NOW 0.39 0.49 0.31 0.33 0.35
Money Market 0.62 0.66 0.69 0.75 0.85
Savings 0.19 0.18 0.26 0.31 0.26
Time 1.52 1.67 2.00 2.19 2.36
Total interest-bearing
deposits 0.87 0.95 1.08 1.20 1.33
Borrowings and
debentures 3.35 3.34 3.10 3.62 2.92
Total interest-bearing
liabilities 1.06 1.16 1.31 1.46 1.55
Net interest spread 3.43 3.56 3.33 3.07 3.05
Net interest margin 3.61 3.74 3.52 3.30 3.30
Cost of funds 0.92 1.01 1.15 1.28 1.37
Cost of deposits 0.73 0.82 0.94 1.04 1.15
(1) Average balances and yields for securities are based on amortized
cost.
(2) Cost of funds includes all deposits and borrowings.
(3) The above schedule includes yields associated with discontinued
operations, although the related income is excluded from income from
continuing operations on the income statement.
BERKSHIRE HILLS BANCORP, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
---------------------------------------------
At or for the Quarters Ended
----------------------------
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
(Dollars in
thousands) 2011 2011 2011 2011 2010
----------- ---- ---- ---- ---- ----
Net income $8,477 $4,392 $1,877 $2,835 $3,600
Adj: Gain on
sale of
securities, net (8) - (6) - -
Adj: Other non-
recurring loss
(gain) 12 (1,975) (124) - -
Plus: Non-
recurring and
merger expenses 3,678 9,091 5,451 1,708 426
Adj: Income
taxes (1,947) (2,884) (1,400) (316) (78)
Less: pre-tax
income from
discontinued
operations (4,692) 8 - - -
Plus: income
taxes from
discontinued
operations 3,773 (3) - - -
Total core
income (A) $9,293 $8,629 $5,798 $4,227 $3,948
---------- --- ------ ------ ------ ------ ------
Total non-
interest income $8,825 $10,766 $8,170 $8,009 $7,431
Adj: Gain on
sale of
securities, net (8) - (6) - -
Adj: All other
non-recurring
loss (gain) 12 (1,975) (124) - -
--------------- --- ------ ---- --- ---
Total core non-
interest income 8,829 8,791 8,040 8,009 7,431
Net interest
income 31,135 31,551 24,201 20,146 20,095
------------
Total core
revenue $39,964 $40,342 $32,241 $28,155 $27,526
---------- ------- ------- ------- ------- -------
Total non-
interest
expense $29,533 $35,320 $28,623 $23,189 $21,415
Less: Non-
recurring and
merger expenses (3,678) (9,091) (5,451) (1,708) (426)
----------------
Core non-
interest
expense 25,855 26,229 23,172 21,481 20,989
Less:
Amortization of
intangible
assets (1,314) (1,382) (935) (716) (718)
----------------
Total core
tangible non-
interest
expense $24,541 $24,847 $22,237 $20,765 $20,271
-------------- ------- ------- ------- ------- -------
(Dollars in
millions,
except per
share data)
Total average
assets (B) $3,977 $3,871 $3,214 $2,876 $2,827
Total average
stockholders'
equity (C) 551 531 450 392 387
Total
stockholders'
equity, period-
end 554 547 445 391 389
Less:
Intangible
assets, period-
end (224) (233) (193) (172) (173)
---------------- ---- ---- ---- ---- ----
Total tangible
stockholders'
equity, period-
end (D) 330 314 252 219 216
---------------- --- --- --- --- --- ---
Total shares
outstanding,
period-end
(thousands) (E) 21,147 21,134 16,721 14,115 14,076
Average diluted
shares
outstanding
(thousands) (F) 21,043 20,105 16,601 13,981 13,934
Core earnings
per share, (A/
diluted F) $0.44 $0.43 $0.35 $0.30 $0.28
Core earnings
per share, (D/
diluted E) $15.61 $14.86 $15.07 $15.52 $15.35
Core return
(annualized) on (A/
assets B) 0.93% 0.89% 0.72% 0.59% 0.56%
Core return
(annualized) on (A/
equity C) 6.74 6.50 5.15 4.31 4.08
Efficiency ratio
(1) 59.44 59.62 66.22 71.03 70.91
(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
rounding. branches remained as discontinued operations at year-
end.
(4) Fourth quarter non-GAAP measures exclude results of discontinued
operations. Third quarter includes discontinued operations
which were immaterial to core net income.
BERKSHIRE HILLS BANCORP, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
---------------------------------------------
At or for the Years Ended
-------------------------
December 31, December 31,
(Dollars in thousands) 2011 2010
---------------------- ---- ----
Net income (loss) $17,581 $13,858
Adj: Gain on sale of securities, net (14) -
Adj: Non-recurring income (2,087) -
Plus: All other non-recurring and
merger expenses 19,928 447
Adj: Income taxes (6,547) (87)
Plus: pre-tax income from
discontinued operations (4,684) -
Less: income taxes from discontinued
operations 3,770 -
------------------------------------ ----- ---
Total core income (A) $27,947 $14,218
Plus: Amortization of intangible
assets 4,236 3,021
-----
Total tangible core income $32,183 $17,239
-------------------------- ------- -------
Total non-interest income $35,803 $29,751
Adj: Gain on sale of securities, net (14) -
Adj: Non-recurring income (2,087) -
------------------------- ------ ---
Total core non-interest income 33,702 29,751
Net interest income 106,520 76,947
------------------- -------
Total core revenue $140,222 $106,698
------------------ -------- --------
Total non-interest expense $116,055 $81,729
Less: Non-recurring and merger expense (19,928) (447)
-------------------------------------- ------- ----
Core non-interest expense 96,127 81,282
Less: Amortization of intangible
assets (4,236) (3,021)
--------------------------------
Total core tangible non-interest
expense $91,981 $78,261
-------------------------------- ------- -------
(Dollars in millions, except per share
data)
Total average assets (B) $3,485 $2,748
Total average stockholders' equity (C) $481 $388
Total stockholders' equity, period-end $554 $389
Less: Intangible assets, period-end (224) (173)
----------------------------------- ---- ----
Total tangible stockholders' equity,
period-end (D) $330 $216
------------------------------------ --- ---- ----
Total common shares outstanding,
period-end (thousands) (E) 21,147 14,076
Average diluted common shares
outstanding (thousands) (F) 17,952 13,896
Core earnings per common share,
diluted (A/F) $1.56 $1.02
Tangible book value per common share,
period-end (D/E) $15.61 $15.35
Core return (annualized) on assets (A/B) 0.80% 0.52%
Core return (annualized) on equity (A/C) 5.81 3.66
Efficiency ratio (1) 63.23 70.59
(1) Efficiency ratio is computed by dividing total core 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 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 rounding.
CONTACTS
Investor Relations Contact
David H. Gonci
Investor Relations Officer
413-281-1973
Media Contact
Lori Gazzillo
AVP, Community Relations
413-822-1695
SOURCE Berkshire Hills Bancorp, Inc.
