Berkshire Hills Bancorp, Inc., Reports Third Quarter 2002 Earnings.Business Editors PITTSFIELD Pittsfield, city (1990 pop. 48,622), seat of Berkshire co., W Mass., between mountain ranges, on branches of the Housatonic River; inc. as a town 1761, as a city 1889. The city is the metropolis of the Berkshire resort area. , Mass.--(BUSINESS WIRE)--Oct. 23, 2002 Berkshire Hills Berkshire Hills (bûrk`shər, –shĭr), mountainous region of wooded hills with many small lakes and streams, W Mass. The Berkshires are a southern extension of the Green Mts. Bancorp, Inc. (the "Company"), (AMEX AMEX See: American Stock Exchange : BHL BHL Bleeding-Heart Liberal BHL Battle Handover Line BHL Breath Hydrogen Level BHL Biohazard Level BHL Bottom of Heated Length BHL Bachelor of Hebrew Letters/Literature BHL Bilateral Hilar Lymphadenomegaly BHL Back-Hoe Loader ), the holding company for Berkshire Berkshire (bärk`shĭr, –shər, bûrk`–) or Berks (bärks, bûrks), former county, S central England. Bank (the "Bank"), reported net income of $2.2 million for the third quarter of 2002 as compared to $2.6 million for the same quarter of 2001. The decrease in net income was primarily due to a $315,000 decrease in license sales and other fees generated by EastPoint Technologies LLC's operations. EastPoint Technologies LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control is a software and data processing data processing or information processing, operations (e.g., handling, merging, sorting, and computing) performed upon data in accordance with strictly defined procedures, such as recording and summarizing the financial transactions of a provider for financial institutions that is majority owned by the Company's wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. Berkshire Hills Technology, Inc. Last year's third quarter figure was bolstered bol·ster n. A long narrow pillow or cushion. tr.v. bol·stered, bol·ster·ing, bol·sters 1. To support or prop up with or as if with a long narrow pillow or cushion. 2. by a $1.1 million one time incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. licensing fee. Basic and diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of for the quarter ended September September: see month. 30, 2002 were $0.42 and $0.38, respectively, compared to $0.42 and $0.40, respectively, for the third quarter of 2001. The Company's book value per share at September 30, 2002, December December: see month. 31, 2001, and September 30, 2001 was $21.75, $21.68, and $21.21, respectively. Dividend Declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. Berkshire Hills also reported that the Board of Directors declared a quarterly cash dividend of $0.12 per share. The dividend is payable on November November: see month. 22, 2002 to stockholders of record at the close of business on November 7, 2002. Financial Condition Total assets at September 30, 2002 were $1.07 billion compared to $1.03 billion at December 31, 2001, an increase of $35.9 million. Total loans decreased $16.3 million to $786.7 million at September 30, 2002 from $803.0 million at December 31, 2001. As planned, consumer loans declined $30.1 million over the first three quarters of 2002 as the Company discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: the origination Origination The process through which a mortgage lender creates a mortgage secured by some amount of the mortgagor's real property. Notes: Also known as loan origination, everyone must go through the origination process when securing a mortgage for a piece of real of sub-prime automobile automobile, self-propelled vehicle used for travel on land. The term is commonly applied to a four-wheeled vehicle designed to carry two to six passengers and a limited amount of cargo, as contrasted with a truck, which is designed primarily for the transportation of loans and allowed its existing sub-prime automobile loans to pay down. In addition, commercial construction loans declined $9.5 million as completed projects converted to permanent financing Permanent financing Long-term financing using either debt or equity. permanent financing The long-term financing that supports a long-term asset. . As a result, commercial real estate loans increased $21.5 million since December 31, 2001. Securities, including Federal Home Loan Bank and Savings Bank savings bank, financial institution that, until recently, performed only the following functions: receiving savings deposits of individuals, investing them, and providing a modest return to its depositors in the form of interest. Life Insurance stock, rose $35.9 million to $182.7 million at September 30, 2002 from $146.8 at December 31, 2001. Consumer loan charge-offs, net of recoveries, totaled $1.2 million in the quarter as compared to $849,000 in the same quarter last year. These charges are a direct result of a more aggressive policy regarding the charge-off Eliminate or write off. The term charge-off is used to describe the process of removing from the records of a company something that was once regarded as an asset but has subsequently become worthless. of automobile loans that was implemented in the fourth quarter of 2001, whereby all automobile loans that were 120 days or more past due, except for customers who are in bankruptcy proceedings bankruptcy proceedings n. the bankruptcy procedure is: a) filing a petition (voluntary or involuntary) to declare a debtor person or business bankrupt, or, under Chapter 11 or 13, to allow reorganization or refinancing under a plan to meet the debts of the party , were charged off. Foreclosed real estate totaled $2.0 million at September 30, 2002 versus zero at December 31, 2001, as the Company took possession of one commercial property in the first quarter. The allowance for loan losses totaled $10.7 million, or 1.36% of total loans at September 30, 2002 versus $11.0 million, or 1.37% of total loans at December 31, 2001. Deposits increased $32.0 million to $774.7 million at September 30, 2002 from $742.7 at December 31, 2001. Deposit growth has been strong in all deposit categories since December 31, 2001. Certificates of deposit and savings accounts Savings Account A deposit account intended for funds that are expected to stay in for the short term. A savings account offers lower returns than the market rates. Notes: increased $19.9 million from December 31, 2001 and demand deposit accounts increased $2.1 million. Money market and NOW accounts increased $10.0 million. Borrowings from the Federal Home Loan Bank of Boston Boston, town, England Boston, town (1991 pop. 26,495), E central England, on the Witham River. Boston's fame as a port dates from the 13th cent., when it was a Hanseatic port trading wool and wine. Having recovered from a decline in the 18th and 19th cent. increased $13.0 million to $146.9 million at September 30, 2002 as the Company looked to extend maturities and take advantage of low cost funds. During the third quarter of 2002, the Company continued its fifth 5% stock repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. program purchasing 28,200 shares at a cost of $618,000. The Company has repurchased 311,613 shares at a cost of $6.9 million in 2002. Due primarily to the stock repurchases, a $5.0 million decrease in accumulated other comprehensive income In 1997 the Financial Accounting Standards Board issued a Statement on Financial Accounting Standards entitled “Comprehensive Income”. This statement required all income statement items to be reported either as a regular item in the income statement and or a special item as resulting from this year's decline in equity prices and $2.1 million of dividends paid to shareholders, stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. declined to $132.9 million at September 30, 2002 from $139.3 at December 31, 2001. Partially offsetting these decreases was net income of $6.1 million earned in the first nine months of the year. Results of Operations Net income totaled $2.2 million in the third quarter of 2002 as compared to $2.6 million in the third quarter last year. Net interest income, after the provision for loan losses, decreased $179,000 to $9.5 million as net interest income decreased $74,000 and provision for loan losses increased $105,000. The provision for loan losses increased from the same quarter of 2001 as amounts accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. for increased delinquencies in the sub-prime automobile portion of the indirect automobile loan portfolio more than offset a decrease in sub-prime automobile loan balances. However, the provision of $1.1 million in the third quarter of 2002 was less than the first quarter's $1.5 million and the second quarter's $1.3 million, reflecting a continued reduction in sub-prime automobile loans. Net interest margin equaled 4.21% for the third quarter of 2002 compared to 4.36% over the same period in 2001. Net interest margin decreased as customer funds deposited into certificate of deposit accounts and the proceeds from loan payments were invested in short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. securities. In the quarter, non-interest income decreased $346,000 to $3.3 million from $3.6 million last year. This year's ongoing revenues at EastPoint Technologies largely offset a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. incremental licensing fee of $1.1 million in the third quarter of 2001. However, operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. remained stable, increasing only $15,000 from last year's figures. For the nine months ended September 30, 2002, net income equaled $6.1 million versus $7.2 million compared to the same period last year. Net interest income totaled $31.7 million for the first three quarters of 2002, an increase of $529,000 from $31.2 million from last year. The provision for loan losses increased $1.3 million to $3.9 million, to provide for an increased level of delinquencies in the sub-prime automobile portfolio along with increased balances in the commercial loan portfolio. Net interest income, after the provision for loan losses, totaled $27.8 million, a $721,000 decrease from $28.5 million for the first nine months last year. Net interest margin was 4.32% for the nine months ended September 30, 2002 compared to 4.31% over the same period last year. Noninterest income totaled $9.1 million for the first three quarters of 2002, an increase of $2.9 million from $6.2 million last year. Substantially all of this increase was related to the operations of EastPoint Technologies. Excluding the various fees of EastPoint, noninterest income increased $71,000 from the same nine months last year. Operating expenses totaled $27.9 million for the nine months ended September 30, 2002, an increase of $3.9 million from $24.0 million for the same period last year. As was the case with noninterest income, virtually all of the increase is the direct result of the operations of EastPoint. Excluding EastPoint's operations, noninterest expenses equaled $22.1 million, an increase of $52,000 from last year. Berkshire Hills established a real estate investment trust (REIT REIT See: Real Estate Investment Trust REIT See real estate investment trust (REIT). ) in the second quarter of 2001. As a result of its operations, the Company was able to reduce its tax obligations by an estimated $205,000 in the third quarter of 2002 and $346,000 for the first nine months of 2002. Similarly, for the year ended December 31, 2001, it is estimated the operations of the REIT reduced the Company's net tax liability by $494,000. Recently, the Massachusetts Massachusetts (măsəch  `sĭts), most populous of the New England states of the NE United States. Department of Revenue has
questioned the applicability of allowing a deduction deduction, in logic, form of inference such that the conclusion must be true if the premises are true. For example, if we know that all men have two legs and that John is a man, it is then logical to deduce that John has two legs. on dividends
upstreamed from a bank- established REIT to a parent company. While the
ultimate resolution of the matter is uncertain and no assurances can be
made that such deductions will be deemed to be appropriate for state tax
purposes, the Company believes the deductions it has taken to date are
appropriate and thus has not taken any provision in its financial
statements for any amounts that the Department of Revenue may assess in
the future.Established in 1846, Berkshire Bank is one of Massachusetts' oldest and largest independent banks and is the largest banking institution based in Western Massachusetts. The Bank is headquartered in Pittsfield, Massachusetts "Pittsfield" redirects here. For other places named Pittsfield, see Pittsfield (disambiguation). Pittsfield is the largest city and county seat of Berkshire County, Massachusetts, United States. with 11 branch offices serving communities throughout Berkshire County. The Bank is committed to continuing to operate as an independent bank, delivering exceptional customer service and a broad array of competitively priced retail and commercial products to customers. Statements contained in this news release, which are not historical facts, are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. as that term is defined in the Private Securities Legislation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those currently anticipated due to a number of factors, which include, but are not limited to, factors discussed in documents filed by the Company with the Securities and Exchange Commission from time to time.
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Unaudited
September 30, December 31,
2002 2001
In thousands
ASSETS
Cash and due from banks $24,320 $22,652
Short term investments 35,109 19,471
Total cash and cash equivalents 59,429 42,123
Securities available for sale,
at fair value 131,147 104,446
Securities held to maturity,
at amortized cost 42,040 33,263
Federal Home Loan Bank stock, at cost 7,440 7,027
Savings Bank Life Insurance
stock, at cost 2,043 2,043
Loans 786,687 800,414
Loans held for sale, at lower
of cost or fair value -- 2,540
Allowance for loan losses (10,676) (11,034)
Net loans 776,011 791,920
Premises and equipment, net 13,478 14,213
Foreclosed real estate 2,000 --
Accrued interest receivable 5,479 5,873
Goodwill and other intangibles 10,068 10,592
Other assets 17,507 19,201
TOTAL ASSETS $1,066,642 $1,030,701
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $774,721 $742,729
Federal Home Loan Bank advances 146,947 133,964
Securities sold under
agreements to repurchase 1,250 1,890
Net deferred tax liability 1,878 4,573
Accrued expenses and other liabilities 6,080 5,099
Total Liabilities 930,876 888,255
Minority Interests 2,823 3,123
Stockholders' Equity:
Preferred stock ($.01 par value;
1,000,000 shares authorized; none
issued or outstanding) -- --
Common stock ( $.01 par value:
26,000,000 shares authorized; shares
issued: 7,673,761 at September 30, 2002
and December 31, 2001; shares
outstanding: 6,113,527 at September 30,
2002 and 6,425,140 at December 31, 2001) 77 77
Additional paid-in capital 74,524 74,146
Unearned compensation (9,927) (11,101)
Retained earnings 84,652 80,657
Accumulated other comprehensive income 13,821 18,836
Treasury stock, at cost (1,560,234
shares at September 30, 2002 and
1,248,621 shares at December 31, 2001) (30,204) (23,292)
Total stockholders' equity 132,943 139,323
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $1,066,642 $1,030,701
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
Unaudited
September 30, 2002 December 31, 2001
Percent Percent
Loan Analysis Balance of Total Balance of Total
Dollars in Thousands
Real estate loans
Residential 1-4 family $226,525 28.81% $229,432 28.57%
Residential land
development
and construction 7,434 0.94% 3,585 0.45%
Commercial one-to
four-family 10,768 1.37% 11,517 1.43%
Commercial real estate 106,074 13.48% 84,538 10.53%
Commercial land
development
and construction 9,832 1.25% 19,351 2.41%
Multi-family 14,973 1.90% 13,183 1.64%
Total real estate
loans 375,606 47.75% 361,606 45.03%
Commercial loans 170,130 21.62% 170,305 21.21%
Consumer loans
Automobile 187,025 23.78% 216,026 26.90%
Home Equity Loans 38,645 4.91% 34,439 4.30%
Other 15,281 1.94% 20,578 2.56%
Total consumer loans 240,951 30.63% 271,043 33.76%
Total loans 786,687 802,954
Less: Allowance for
loan losses (10,676) 1.36% (11,034) 1.37%
Loans, net $776,011 $791,920
Deposit Analysis Percent Percent
Balance of Total Balance of Total
Dollars in Thousands
Demand Deposits $84,829 10.95% $82,758 11.14%
NOW Accounts 84,208 10.87% 80,970 10.90%
Savings Accounts 158,510 20.46% 151,565 20.41%
Money Market Accounts 117,002 15.10% 110,199 14.84%
Term Certificates 330,172 42.62% 317,237 42.71%
Total Deposits $774,721 $742,729
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Unaudited Unaudited
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
(In thousands, except per share amounts)
INTEREST AND DIVIDEND INCOME
Bond interest $ 1,368 $ 1,286 $ 3,940 $ 4,250
Stock dividends 411 393 1,031 1,143
Short term
investment interest 121 128 326 272
Loan interest 14,551 17,289 44,282 51,831
TOTAL INTEREST AND
DIVIDEND INCOME 16,451 19,096 49,579 57,496
INTEREST EXPENSE
Interest on deposits 4,425 6,749 13,556 20,999
Interest on FHLB advances 1,463 1,703 4,307 5,077
Interest on securities
sold under agreements to
repurchase and
other borrowings 4 11 18 251
TOTAL INTEREST EXPENSE 5,892 8,463 17,881 26,327
NET INTEREST INCOME 10,559 10,633 31,698 31,169
PROVISION FOR LOAN LOSSES 1,050 945 3,875 2,625
NET INTEREST INCOME,
AFTER PROVISION 9,509 9,688 27,823 28,544
FOR LOAN LOSSES
NONINTEREST INCOME
Customer service fees 557 434 1,666 1,357
Trust department fees 411 428 1,365 1,303
Loan fees 79 235 394 486
Gain (loss) on
securities, net (29) (11) (37) 266
License maintenance
and processing fees 1,098 1,006 3,268 1,006
License sales
and other fees 1,075 1,390 1,984 1,390
Other income 69 124 450 355
TOTAL NONINTEREST INCOME 3,260 3,606 9,090 6,163
OPERATING EXPENSES
Salaries and benefits 5,411 5,063 16,261 12,665
Occupancy and equipment 1,236 1,291 3,932 3,332
Marketing and advertising 177 120 389 409
Data processing 148 424 494 864
Professional services 337 429 942 859
Office supplies 154 162 531 682
Foreclosed real estate
and other loans, net 581 604 1,821 1,840
Amortization of
other intangibles 175 196 525 445
Minority interests (43) 29 (300) 29
Other expenses 1,268 1,111 3,343 2,879
TOTAL OPERATING EXPENSES 9,444 9,429 27,938 24,004
INCOME BEFORE TAXES 3,325 3,865 8,975 10,703
Provision for
income taxes 1,081 1,258 2,917 3,511
NET INCOME $ 2,244 $ 2,607 $ 6,058 $ 7,192
Earnings per share:
Basic $ 0.42 $ 0.42 $ 1.11 $ 1.12
Diluted $ 0.38 $ 0.40 $ 1.03 $ 1.06
Weighted average
shares outstanding:
Basic 5,378 6,196 5,457 6,432
Diluted 5,850 6,568 5,907 6,755
BERKSHIRE HILLS BANCORP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL RATIOS
Unaudited Unaudited
At or for the At or for the
Three Months Ended Nine Months Ended
September 30 September 30
2002 2001 2002 2001
Dollars in Dollars in
thousands thousands
Performance Ratios (1):
Return on average assets 0.85% 1.00% 0.77% 0.93%
Return on average equity 6.53% 7.06% 5.87% 6.31%
Net interest margin as
% of average earning assets 4.21% 4.36% 4.32% 4.31%
Non-interest income to
average earning assets 1.30% 1.48% 1.24% 0.85%
Non-interest expense to
average earning assets 3.76% 3.86% 3.80% 3.32%
Asset Quality Ratios (2):
Average earning assets
to average assets 94.90% 93.61% 93.70% 93.91%
Net charged-off loans
to total loans 0.17% 0.12% 0.54% 0.24%
Non-performing loans
to total loans 0.32% 0.74% 0.32% 0.74%
Non-performing assets
to total assets 0.42% 0.58% 0.42% 0.58%
Allowance for loan losses
to non-performing loans 424.66% 179.58% 424.66% 179.58%
Allowance for loan losses
to total loans 1.36% 1.33% 1.36% 1.33%
Capital ratios (2):
Stockholders' equity
to total assets 12.46% 13.98% 12.46% 13.98%
Tier I capital
to average assets 10.44% 11.66% 10.44% 11.66%
Tier I capital to
risk weighted assets 12.98% 13.56% 12.98% 13.56%
Total capital to
risk weighted assets 15.34% 16.25% 15.34% 16.25%
Other data (2):
Non-performing loans $ 2,514 $ 6,037 $ 2,514 $ 6,037
Foreclosed real estate $ 2,000 $ - $ 2,000 $ -
Non-performing assets $ 4,514 $ 6,037 $ 4,514 $ 6,037
Efficiency ratio 68.20% 66.17% 68.43% 64.76%
Book value per share $ 21.75 $ 21.21 $ 21.75 $ 21.21
(1) Ratios are annualized for the three and nine months ended
September 30, 2002 and 2001
(2) End of period ratios and balances
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