BERKSHIRE HILLS BANCORP, INC. PITTSFIELD, Mass., Oct. 24, 2016 /PRNewswire/ -- Berkshire Hills Bancorp, Inc. (NYSE: BHLB) reported an 8% improvement in third quarter GAAP earnings of $0.53 per share in 2016 compared to $0.49 in 2015. Profits increased due to revenue growth from business expansion, together with the benefit of higher efficiency. Core earnings is a non-GAAP measure excluding non-core items consisting primarily of merger and restructuring costs. Third quarter core earnings per share increased to $0.57 per share from $0.54. Compared to the prior quarter, GAAP earnings per share increased by $0.01 and core EPS was up $0.03.
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THIRD QUARTER FINANCIAL HIGHLIGHTS (comparisons are to prior quarter unless otherwise stated):
-- 7% increase in net revenue
-- 6% annualized commercial loan growth
-- 7% annualized deposit growth
-- 17% increase in fee income
-- 3.25% net interest margin (fully taxable equivalent)
-- 57.9% efficiency ratio (non-GAAP financial measure)
-- 0.26% non-performing assets/assets
-- 0.20% net loan charge-offs/average loans
CEO Michael Daly stated, "Our business strategies are producing solid top and bottom line results. Loans and deposits grew well in the third quarter. Our specialty lending teams are generating more revenue, including our Philadelphia area SBA lending group, which added to fee income. Our SBA volume is expanding across our footprint, achieving the number one spot for SBA 7(a) Loan Program originations in Connecticut for the first time. We made progress with our new Boston Congress Street branch and expect to be open for business there early next year. We are also moving forward towards completing our First Choice Bank acquisition in Princeton, New Jersey. Our strategies are building our business and earnings power, and I'm optimistic about the further progress we expect to see over the next year."
DIVIDEND DECLARED
The Board of Directors voted to declare a cash dividend of $0.20 per share to shareholders of record at the close of business on November 10, 2016, payable on November 23, 2016. The dividend equates to a 2.9% annualized yield based on the $27.29 average closing price of Berkshire's common stock during the third quarter.
FINANCIAL CONDITION
The 3% annualized growth in total loans was driven by 6% annualized commercial loan growth in the third quarter, with growth concentrated in New York and Connecticut. The 7% annualized deposit increase was led by growth in demand deposits, including growth in commercial balances. The Company completed the sale of two outlying branches in the third quarter and is in the process of consolidating another three branches, which is targeted for completion shortly after year-end. Due to the strong deposit growth, the ratio of loans/deposits improved to 105%. The benefit of retained earnings increased the ratio of equity/assets to 11.8% and the ratio of tangible equity/assets to 7.7%. Book value per share increased at a 4% annualized rate to $29.97, while tangible book value per share grew at a 7% annualized rate to $18.78. Tangible equity/assets and tangible book value are non-GAAP financial measures. Problem assets and net loan charge-offs remained comparatively low.
RESULTS OF OPERATIONS
Higher earnings reflected positive operating leverage driven by 7% revenue growth quarter over quarter. The third quarter GAAP return on assets remained unchanged at 0.82%, while the core return on assets advanced to 0.88%. GAAP return on equity improved to 7.3% and the core return on tangible equity increased to 13.0%. The efficiency ratio improved to 57.9%. Total net income increased by $0.4 million, or 3%, to $16.4 million quarter over quarter.
The $4.9 million revenue growth over the prior quarter was driven by a 17% increase in fee income, together with a 1% increase in net interest income. Loan fee revenues increased by $2.2 million to $5.1 million, including $1.0 million in SBA loan sale gains from the 44 Business Capital team, together with higher revenue from interest rate swaps. Additionally, mortgage banking revenue increased to $1.9 million due to the strong customer demand and market pricing conditions.
The $0.5 million increase in net interest income was due to the 3% increase in average loans compared to the linked quarter. The net interest margin decreased to 3.25% from 3.31% for these periods. The yield on earning assets decreased by 0.03% due to ongoing market yield compression. Purchased loan accretion totaled $2.2 million, compared to $2.0 million in the prior quarter. Funding costs increased including the impact of forward interest rate swaps which became active as scheduled and are now completely active.
Third quarter non-interest expense totaled $48.8 million and increased by $2.6 million, or 6%, compared to the prior quarter. This included a $1.5 million increase in compensation expense and a $1.3 million increase in non-core expense. Compensation increased primarily due to revenue growth, including commissions tied to fee revenues. Full time equivalent staff decreased to 1,208 positions at quarter-end, compared to 1,222 positions at midyear. Non-core expense totaled $2.2 million in the third quarter and included merger and restructuring costs. Non-core expense is a non-GAAP measure that excludes costs not viewed as related to normalized operations. The tax rate measured 30% in the most recent quarter, and earnings per share included a $0.01 net benefit from income tax investment projects, compared to $0.03 in the prior quarter.
CONFERENCE CALL
Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Tuesday, October 25, 2016 to discuss the results for the quarter and provide guidance about expected future results. Participants are encouraged to pre-register for the conference call using the following link: http://dpregister.com/10093590. Callers who pre-register will be given dial-in instructions and a unique PIN to gain immediate access to the call. Participants may pre-register at any time prior to the call, and will immediately receive simple instructions via email. Participants may also reach the registration link and access the webcast by logging in through the investor section of Berkshire's website at http://ir.berkshirebank.com. Parties who do not have internet access or are otherwise unable to pre-register can still participate at the above time by dialing 1-844-792-3726 and asking the Operator to join them to the Berkshire Hills Bancorp (BHLB) earnings call. A telephone replay of the call will be available through Tuesday, November 1, 2016 by dialing 877-344-7529 and entering access number 10093590. The webcast will be available on Berkshire's website for an extended period of time.
BACKGROUND
Berkshire Hills Bancorp is the parent of Berkshire Bank - America's Most Exciting Bank®. The Company, recognized for its entrepreneurial approach and distinctive culture, has approximately $7.9 billion in assets and 91 full service branch offices in Massachusetts, New York, Connecticut, and Vermont providing personal and business banking, insurance, and wealth management services. The Company has a pending agreement to acquire First Choice Bank, a $1.1 billion bank with eight branches in the Princeton, New Jersey area and a national mortgage originations subsidiary. For more information, visit www.berkshirebank.com.
FORWARD LOOKING STATEMENTS
This document contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. There are several factors that could cause actual results to differ significantly from expectations described in the forward-looking statements. For a discussion of such factors, please see Berkshire's most recent reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission and available on the SEC's website at www.sec.gov. Berkshire does not undertake any obligation to update forward-looking statements.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
In connection with the proposed merger, Berkshire has filed with the Securities and Exchange Commission ("SEC") a Registration Statement on Form S-4 that includes a Proxy Statement of First Choice and a Prospectus of Berkshire, as well as other relevant documents concerning the proposed merger. Investors and stockholders are urged to read the Registration Statement and the Proxy Statement/Prospectus regarding the proposed merger 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. A free copy of the Registration Statement and Proxy Statement/Prospectus, as well as other filings containing information about Berkshire and First Choice, may be obtained at the SEC's Internet site (www.sec.gov). Copies of the Registration Statement and Proxy Statement/Prospectus and the filings that will be incorporated by reference therein may also be obtained, free of charge, from Berkshire's website at ir.berkshirebank.com or by contacting Berkshire Investor Relations at 413-236-3149 or by contacting Lisa Tuccillo at First Choice at 609-503-4828.
PARTICIPANTS IN SOLICITATION
Berkshire and First Choice and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of First Choice in connection with the proposed merger. Information about the directors and executive officers of Berkshire is set forth in the proxy statement for Berkshire's 2016 annual meeting of stockholders, as filed with the SEC on a Schedule 14A on March 24, 2016. Information about the directors and executive officers of First Choice will be set forth in the Proxy Statement/Prospectus. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction and a description of their direct and indirect interests, by security holdings or otherwise, may be obtained by reading the Proxy Statement/Prospectus and other relevant documents regarding the proposed merger to be filed with the SEC (when they become available). Free copies of these documents may be obtained as described in the preceding paragraph.
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 on pages F-9 and F-10 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 items which the Company does not view as related to its normalized operations. These items include securities gains/losses, merger costs, restructuring costs, and systems conversion costs. Non-core adjustments are presented net of an adjustment for income tax expense. This adjustment is determined as the difference between the GAAP tax rate and the effective tax rate applicable to core income. The efficiency ratio is adjusted for non-core revenue and expense items and for tax preference items. The Company also calculates measures related to tangible equity, which adjust equity (and assets where applicable) to exclude intangible assets due to the importance of these measures to the investment community. Charges related to merger and acquisition activity consist primarily of severance/benefit related expenses, contract termination costs, systems conversion costs, variable compensation expenses, and professional fees. These charges are related to the following business combinations: First Choice (pending), 44 Business Capital, Hampden Bancorp, and Firestone Financial. Restructuring costs generally consist of costs and losses associated with the disposition of assets and liabilities and lease terminations, including costs related to branch sales. The Company's disclosures of organic growth of loans in 2016 are adjusted for the acquisition of the business operations related to 44 Business Capital.
CONTACTS
Investor Relations Contact
Allison O'Rourke; Executive Vice President, Investor Relations Officer; 413-236-3149
Media Contact
Elizabeth Mach; First Vice President, Marketing Officer; 413-445-8390
TABLE
INDEX CONSOLIDATED UNAUDITED FINANCIAL
SCHEDULES
----- ---------------------------------
F-1 Selected Financial Highlights
F-2 Balance Sheets
F-3 Loan and Deposit Analysis
F-4 Statements of Income
F-5 Statements of Income (Five Quarter
Trend)
F-6 Average Yields and Costs
F-7 Average Balances
F-8 Asset Quality Analysis
F-9 Reconciliation of Non-GAAP Financial
Measures (Five Quarter Trend) and
Supplementary Data
F-10 Reconciliation of Non-GAAP Financial
Measures (Year-to-Date) and
Supplementary Data
BERKSHIRE HILLS BANCORP, INC.
SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED - (F-1)
------------------------------------------------
At or for the Quarters Ended (1)(2)
----------------------------------
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
2016 2016 (3) 2016 2015 2015
---- ------- ---- ---- ----
PER SHARE DATA
Net earnings, diluted $0.53 $0.52 $0.52 $0.52 $0.49
Core earnings, diluted (4) 0.57 0.54 0.54 0.54 0.54
Total book value 29.97 29.64 29.18 28.64 28.48
Tangible book value (4) 18.78 18.44 18.44 17.84 17.61
Market price at period end 27.71 26.92 26.89 29.11 27.54
Dividends 0.20 0.20 0.20 0.19 0.19
PERFORMANCE RATIOS (5)
Return on assets 0.82% 0.82% 0.82% 0.82% 0.78%
Core return on assets (4) 0.88 0.85 0.85 0.85 0.86
Return on equity 7.29 7.17 7.19 7.34 6.90
Core return on equity (4) 7.75 7.42 7.40 7.58 7.58
Core return on tangible equity (4) 12.99 12.45 12.20 12.68 12.78
Net interest margin, fully taxable
equivalent (FTE) (6) 3.25 3.31 3.33 3.35 3.37
Net interest margin (FTE), excluding
purchased loan accretion (4) 3.13 3.20 3.21 3.22 3.22
Fee income/Net interest and fee income 23.81 21.16 21.04 19.62 19.38
Efficiency ratio (4) 57.90 58.71 59.86 60.56 60.35
GROWTH (Year-to-date)
Total commercial loans, (annualized) 9% 11% 6% 29% 37%
Total loans, (annualized) 7 10 0 22 28
Total deposits, (annualized) 4 2 0 20 24
Total net revenues, (compared to prior year) 13 14 26 18 19
Earnings per share, (compared to prior year) 31 48 49 27 34
Core earnings per share, (compared to prior
year) 6 5 8 16 17
FINANCIAL DATA (In millions)
Total assets $7,931 $8,044 $7,808 $7,832 $7,804
Total earning assets 7,229 7,327 7,142 7,140 7,130
Total investments 1,162 1,304 1,399 1,402 1,439
Total loans 6,047 6,000 5,727 5,725 5,665
Allowance for loan losses 43 41 40 39 38
Total intangible assets 348 349 334 335 337
Total deposits 5,750 5,657 5,584 5,589 5,507
Total shareholders' equity 933 923 906 887 882
Net income 16.4 16.0 16.0 16.0 14.7
Core income (4) 17.4 16.5 16.5 16.5 16.2
ASSET QUALITY AND CONDITION RATIOS
Net charge-offs (current quarter
annualized)/average loans 0.20% 0.22% 0.23% 0.25% 0.26%
Allowance for loan losses/total loans 0.71 0.69 0.70 0.69 0.67
Loans/deposits 105 106 103 102 103
Shareholders' equity to total assets 11.76 11.48 11.60 11.33 11.30
Tangible shareholders' equity to tangible
assets (4) 7.70 7.46 7.66 7.37 7.30
(1) Core measurements are non-GAAP financial measures that are adjusted to exclude net non-core charges primarily related to
acquisitions and
restructuring activities.
(2) Reconciliations of non-GAAP financial measures, including all references to core and tangible amounts, appear on pages F-9
and F-10.
(3) The Company acquired certain assets and operations related to 44 Business Capital on April
29, 2016.
(4) Non-GAAP financial measure. See F-9 and F-10 for reconciliations of non-GAAP financial
measures.
(5) All performance ratios are annualized and are based on average balance sheet amounts, where
applicable.
(6) Fully taxable equivalent considers the impact of tax advantaged investment
securities and loans.
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-2)
----------------------------------------------
September 30, June 30, December 31,
------------- -------- ------------
(In thousands) 2016 2016 (1) 2015
------------- ---- ------- ----
Assets
Cash and due from banks $61,107 $58,332 $72,918
Short-term investments 8,178 16,247 30,644
Total cash and short-
term investments 69,285 74,579 103,562
Trading security 14,149 14,479 14,189
Securities available for
sale, at fair value 946,853 1,073,370 1,154,457
Securities held to
maturity, at amortized
cost 131,467 132,010 131,652
Federal Home Loan Bank
stock and other
restricted securities 61,277 68,242 71,018
Total securities 1,153,746 1,288,101 1,371,316
Loans held for sale, at
fair value 20,471 22,450 13,191
Commercial real estate 2,327,044 2,237,582 2,059,767
Commercial and
industrial loans 994,874 1,034,559 1,048,263
Residential mortgages 1,818,111 1,843,600 1,815,035
Consumer loans 906,975 884,560 802,171
-------------- ------- ------- -------
Total loans 6,047,004 6,000,301 5,725,236
Less: Allowance for loan
losses (43,105) (41,397) (39,308)
------------------------ ------- ------- -------
Net loans 6,003,899 5,958,904 5,685,928
Premises and equipment,
net 85,794 86,274 88,072
Other real estate owned 80 595 1,725
Goodwill 339,975 339,929 323,943
Other intangible assets 8,308 9,057 10,664
Cash surrender value of
bank-owned life
insurance 127,880 127,000 125,233
Deferred tax asset, net 34,616 32,945 42,526
Other assets 87,107 103,825 64,926
------------
Total assets $7,931,161 $8,043,659 $7,831,086
------------ ---------- ---------- ----------
Liabilities and shareholders' equity
Demand deposits $1,113,733 $1,050,220 $1,081,860
NOW deposits 476,189 489,734 510,807
Money market deposits 1,469,075 1,415,041 1,408,107
Savings deposits 607,868 611,627 601,761
Time deposits 2,082,889 2,090,102 1,986,600
Total deposits 5,749,754 5,656,724 5,589,135
Senior borrowings 1,048,914 1,231,164 1,174,335
Subordinated borrowings 89,116 89,072 88,983
----------------------- ------ ------ ------
Total borrowings 1,138,030 1,320,236 1,263,318
Other liabilities 110,784 143,279 91,444
----------------- ------- ------- ------
Total liabilities 6,998,568 7,120,239 6,943,897
Total common
shareholders' equity 932,593 923,420 887,189
---------------------
Total liabilities and
shareholders' equity $7,931,161 $8,043,659 $7,831,086
--------------------- ---------- ---------- ----------
Net shares outstanding 31,122 31,156 30,974
---------------------- ------ ------ ------
(1) The Company acquired certain assets and operations related to 44 Business Capital on April 29, 2016.
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED - (F-3)
LOAN ANALYSIS
-------------
Organic Annualized Growth % (1)
------------------------------
(in millions) September 30, 2016 June 30, 2016 December 31, 2015 Quarter ended Year to Date
Balance Balance Balance September 30, 2016
------- ------- ------- ------------------
Commercial real estate - construction $242 $249 $254 (11)% (6)%
Commercial real estate - other 2,085 1,989 1,806 19 18
------------------------------ ----- ----- ----- --- ---
Total commercial real estate (2) 2,327 2,238 2,060 16 15
Commercial and industrial loans 995 1,034 1,048 (15) (7)
------------------------------- --- ----- ----- --- ---
Total commercial loans 3,322 3,272 3,108 6 8
Total residential mortgages 1,818 1,844 1,815 (6) 0
Home equity 358 360 361 (2) (1)
Auto and other 549 524 441 19 33
-------------- --- --- --- --- ---
Total consumer loans 907 884 802 10 17
-------------------- --- --- --- --- ---
Total loans $6,047 $6,000 $5,725 3% 7%
----------- ------ ------ ------ --- ---
(1) Non-GAAP financial measure.
(2) Total commercial real estate loans include $37 million in loans acquired as part of the acquisition of certain assets and operations
related to
44 Business Capital; however, the year to date organic annualized growth excludes these acquired loans.
DEPOSIT ANALYSIS
----------------
Annualized Growth %
------------------
(in millions) September 30, 2016 June 30, 2016 December 31, 2015 Quarter ended Year to Date
Balance Balance Balance September 30, 2016
------- ------- ------- ------------------
Demand $1,114 $1,050 $1,082 24% 4%
NOW 476 490 511 (11) (9)
Money market 1,469 1,415 1,408 15 6
Savings 608 612 601 (3) 2
------- --- --- --- --- ---
Total non-maturity deposits 3,667 3,567 3,602 11 2
Total time deposits 2,083 2,090 1,987 (1) 6
------------------- ----- ----- ----- --- ---
Total deposits $5,750 $5,657 $5,589 7% 4%
-------------- ------ ------ ------ --- ---
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED - (F-4)
----------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
(In thousands, except per share data) 2016 2015 2016 2015
------------------------------------ ---- ---- ---- ----
Interest and dividend income
Loans $61,571 $56,343 $179,716 $152,292
Securities and other 8,940 9,109 28,289 26,314
-------------------- ----- ----- ------ ------
Total interest and dividend income 70,511 65,452 208,005 178,606
Interest expense
Deposits 7,790 6,046 22,327 16,287
Borrowings 4,750 2,435 12,569 7,218
---------- ----- ----- ------ -----
Total interest expense 12,540 8,481 34,896 23,505
---------------------- ------ ----- ------ ------
Net interest income 57,971 56,971 173,109 155,101
Non-interest income
Loan related income 5,102 1,537 11,046 5,603
Mortgage banking income 1,862 693 4,018 3,492
Deposit related fees 6,278 6,549 18,678 18,668
Insurance commissions and fees 2,601 2,544 8,154 7,997
Wealth management fees 2,269 2,376 7,006 7,376
---------------------- ----- ----- ----- -----
Total fee income 18,112 13,699 48,902 43,136
Other 188 (1,050) (440) (3,563)
Securities gains, net 78 49 101 2,467
Gain on branch sales, net 563 - 563 -
Total non-interest income 18,941 12,698 49,126 42,040
------------------------- ------ ------ ------ ------
Total net revenue 76,912 69,669 222,235 197,141
Provision for loan losses 4,734 4,240 13,262 12,295
Non-interest expense
Compensation and benefits 26,119 25,237 76,497 71,551
Occupancy and equipment 6,650 6,827 19,900 21,178
Technology and communications 4,902 4,645 14,573 12,328
Marketing and promotion 671 781 2,081 2,294
Professional services 1,744 1,053 4,533 3,700
FDIC premiums and assessments 1,208 1,157 3,644 3,429
Other real estate owned and foreclosures 46 298 702 800
Amortization of intangible assets 749 887 2,355 2,722
Merger, restructuring and conversion expense 2,170 3,361 3,828 16,493
Other 4,585 5,132 14,099 14,056
----- ----- ----- ------ ------
Total non-interest expense 48,844 49,378 142,212 148,551
-------------------------- ------ ------ ------- -------
Income before income taxes 23,334 16,051 66,761 36,295
Income tax expense 6,953 1,350 18,422 2,791
------------------ ----- ----- ------ -----
Net income $16,381 $14,701 $48,339 $33,504
---------- ------- ------- ------- -------
Earnings per share:
Basic $0.53 $0.49 $1.58 $1.21
Diluted $0.53 $0.49 $1.57 $1.20
Weighted average shares outstanding:
Basic 30,621 29,893 30,584 27,685
Diluted 30,811 30,069 30,757 27,847
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME (5 Quarter Trend) - UNAUDITED - (F-5)
----------------------------------------------------------------------
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
(In thousands, except per share data) 2016 2016 2016 2015 2015
------------------------------------ ---- ---- ---- ---- ----
Interest and dividend income
Loans $61,571 $59,703 $58,442 $59,055 $56,343
Securities and other 8,940 9,315 10,034 9,369 9,109
-------------------- ----- ----- ------ ----- -----
Total interest and dividend income 70,511 69,018 68,476 68,424 65,452
Interest expense
Deposits 7,790 7,378 7,159 6,661 6,046
Borrowings 4,750 4,199 3,620 3,015 2,435
---------- ----- ----- ----- ----- -----
Total interest expense 12,540 11,577 10,779 9,676 8,481
---------------------- ------ ------ ------ ----- -----
Net interest income 57,971 57,441 57,697 58,748 56,971
Non-interest income
Loan related income 5,102 2,898 3,046 2,707 1,537
Mortgage banking income 1,862 1,335 821 641 693
Deposit related fees 6,278 6,291 6,109 6,416 6,549
Insurance commissions and fees 2,601 2,660 2,893 2,254 2,544
Wealth management fees 2,269 2,235 2,502 2,326 2,376
---------------------- ----- ----- ----- ----- -----
Total fee income 18,112 15,419 15,371 14,344 13,699
Other 188 (851) 223 (1,739) (1,050)
Securities gains, net 78 (13) 36 (357) 49
Gain on branch sales, net 563 - - - -
Total non-interest income 18,941 14,555 15,630 12,248 12,698
------------------------- ------ ------ ------ ------ ------
Total net revenue 76,912 71,996 73,327 70,996 69,669
Provision for loan losses 4,734 4,522 4,006 4,431 4,240
Non-interest expense
Compensation and benefits 26,119 24,664 25,714 25,819 25,237
Occupancy and equipment 6,650 6,560 6,690 7,308 6,827
Technology and communications 4,902 4,814 4,857 4,553 4,645
Marketing and promotion 671 737 673 1,012 781
Professional services 1,744 1,509 1,280 1,472 1,053
FDIC premiums and assessments 1,208 1,203 1,233 1,220 1,157
Other real estate owned and foreclosures 46 393 263 33 298
Amortization of intangible assets 749 787 819 841 887
Merger, restructuring and conversion expense 2,170 878 780 1,118 3,361
Other 4,585 4,723 4,791 4,903 5,132
-----
Total non-interest expense 48,844 46,268 47,100 48,279 49,378
-------------------------- ------ ------ ------ ------ ------
Income before income taxes 23,334 21,206 22,221 18,286 16,051
Income tax expense 6,953 5,249 6,220 2,273 1,350
------------------ ----- ----- ----- ----- -----
Net income $16,381 $15,957 $16,001 $16,013 $14,701
---------- ------- ------- ------- ------- -------
Earnings per share:
Basic $0.53 $0.52 $0.52 $0.53 $0.49
Diluted $0.53 $0.52 $0.52 $0.52 $0.49
Weighted average shares outstanding:
Basic 30,621 30,605 30,511 30,500 29,893
Diluted 30,811 30,765 30,688 30,694 30,069
BERKSHIRE HILLS BANCORP, INC.
AVERAGE YIELDS AND COSTS (Fully Taxable Equivalent - Annualized) - UNAUDITED - (F-6)
-----------------------------------------------------------------------------------
Quarters Ended
--------------
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
2016 2016 2016 2015 2015
---- ---- ---- ---- ----
Earning assets
Loans:
Commercial real estate 4.28% 4.45% 4.18% 4.17% 4.47%
Commercial and industrial loans 5.15 4.93 5.04 5.51 4.79
Residential mortgages 3.60 3.63 3.86 3.72 3.74
Consumer loans 3.41 3.40 3.44 3.30 3.29
Total loans 4.10 4.14 4.13 4.15 4.14
Securities 3.26 3.28 3.26 2.96 2.92
Short-term investments and loans held for sale 1.69 1.29 0.91 0.89 1.34
Total earning assets 3.94 3.97 3.93 3.89 3.87
Funding liabilities
Deposits:
NOW 0.12 0.13 0.13 0.14 0.14
Money market 0.46 0.47 0.49 0.45 0.42
Savings 0.12 0.11 0.13 0.14 0.15
Time 1.10 1.06 0.99 0.93 0.90
Total interest-bearing deposits 0.67 0.65 0.63 0.59 0.55
Borrowings 1.53 1.38 1.19 0.96 0.81
Total interest-bearing liabilities 0.85 0.81 0.75 0.67 0.61
Net interest spread 3.09 3.16 3.18 3.22 3.26
Net interest margin 3.25 3.31 3.33 3.35 3.37
Cost of funds (1) 0.72 0.68 0.64 0.56 0.51
Cost of deposits (2) 0.54 0.53 0.51 0.48 0.45
(1) Cost of funds includes all deposits and borrowings.
(2) The average cost of deposits includes the deposits held for sale.
BERKSHIRE HILLS BANCORP, INC.
AVERAGE BALANCES - UNAUDITED - (F-7)
-----------------------------------
Quarters Ended
--------------
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
(In thousands) 2016 2016 2016 2015 2015
---- ---- ---- ---- ----
Assets
Loans
Commercial real estate $2,260,482 $2,173,539 $2,079,001 $2,034,917 $1,948,753
Commercial and industrial loans 1,009,581 1,047,866 1,027,257 1,033,081 998,782
Residential mortgages 1,839,364 1,759,193 1,798,034 1,790,334 1,664,505
Consumer loans 900,432 844,759 807,888 807,768 813,986
-------------- ------- ------- ------- ------- -------
Total loans (1) (2) 6,009,859 5,825,357 5,712,180 5,666,100 5,426,026
Securities (3) 1,197,760 1,247,357 1,342,590 1,368,505 1,353,818
Short-term investments and loans held for sale 40,259 41,449 56,042 51,241 51,832
---------------------------------------------- ------ ------ ------ ------ ------
Total earning assets 7,247,878 7,114,163 7,110,812 7,085,846 6,831,676
Goodwill and other intangible assets 349,059 344,832 333,948 335,440 330,084
Other assets 360,182 349,816 346,327 342,902 379,319
------------ ------- ------- ------- ------- -------
Total assets $7,957,119 $7,808,811 $7,791,087 $7,764,188 $7,541,079
------------ ---------- ---------- ---------- ---------- ----------
Liabilities and shareholders' equity
Deposits (4)
NOW $474,650 $492,901 $484,334 $491,445 $475,433
Money market 1,448,108 1,403,629 1,417,068 1,455,267 1,474,389
Savings 608,365 612,261 602,414 604,215 615,410
Time 2,095,269 2,047,020 2,063,712 1,958,394 1,795,156
---- --------- --------- --------- --------- ---------
Total interest-bearing deposits 4,626,392 4,555,811 4,567,528 4,509,321 4,360,388
Borrowings 1,235,065 1,223,629 1,222,288 1,256,287 1,198,455
---------- --------- --------- --------- --------- ---------
Total interest-bearing liabilities 5,861,457 5,779,440 5,789,816 5,765,608 5,558,843
Non-interest-bearing demand deposits 1,084,786 1,032,951 1,026,447 1,033,844 1,010,613
Other liabilities 111,743 105,948 84,042 91,877 119,322
----------------- ------- ------- ------ ------ -------
Total liabilities 7,057,986 6,918,339 6,900,305 6,891,329 6,688,778
Total shareholders' equity 899,133 890,472 890,782 872,859 852,301
Total liabilities and shareholders' equity $7,957,119 $7,808,811 $7,791,087 $7,764,188 $7,541,079
------------------------------------------ ---------- ---------- ---------- ---------- ----------
Supplementary data
Total non-maturity deposits (4) $3,615,909 $3,541,742 $3,530,263 $3,584,771 $3,575,845
Total deposits (4) 5,711,178 5,588,762 5,593,975 5,543,165 5,371,001
Fully taxable equivalent income adjustment 1,200 1,180 1,134 1,108 1,131
Total average tangible equity (5) 550,074 545,640 556,834 537,419 522,217
(1) Total loans include non-accruing loans.
(2) The average balances of loans include the loans associated with the two branches in New York that are for sale and presented under loans
held for sale on the consolidated balance sheet.
(3) Average balances for securities available-for-sale are based on amortized cost.
(4) The average balances of deposits include the deposits held for sale presented under other liabilities on the consolidated balance sheet.
(5) See page F-9.
BERKSHIRE HILLS BANCORP, INC.
ASSET QUALITY ANALYSIS - UNAUDITED - (F-8)
-----------------------------------------
At or for the Quarters Ended
----------------------------
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
(in thousands) 2016 2016 2016 2015 2015
------------- ---- ---- ---- ---- ----
NON-PERFORMING ASSETS
Non-accruing loans:
Commercial real estate $6,295 $4,808 $5,001 $4,882 $5,693
Commercial and industrial loans 6,714 7,590 7,480 8,259 8,092
Residential mortgages 4,374 4,882 4,732 3,966 4,565
Consumer loans 3,281 3,376 3,588 3,768 3,386
-------------- ----- ----- ----- ----- -----
Total non-accruing loans 20,664 20,656 20,801 20,875 21,736
Other real estate owned 80 595 1,440 1,725 2,487
----------------------- --- --- ----- ----- -----
Total non-performing assets $20,744 $21,251 $22,241 $22,600 $24,223
--------------------------- ------- ------- ------- ------- -------
Total non-accruing loans/total loans 0.34% 0.34% 0.36% 0.36% 0.38%
Total non-performing assets/total assets 0.26% 0.26% 0.28% 0.29% 0.31%
PROVISION AND ALLOWANCE FOR LOAN LOSSES
Balance at beginning of period $41,397 $40,055 $39,308 $38,180 $37,197
Charged-off loans (3,441) (3,393) (3,704) (3,538) (3,542)
Recoveries on charged-off loans 415 213 445 235 285
------------------------------- --- --- --- --- ---
Net loans charged-off (3,026) (3,180) (3,259) (3,303) (3,257)
Provision for loan losses 4,734 4,522 4,006 4,431 4,240
------------------------- ----- ----- ----- ----- -----
Balance at end of period $43,105 $41,397 $40,055 $39,308 $38,180
------------------------ ------- ------- ------- ------- -------
Allowance for loan losses/total loans 0.71% 0.69% 0.70% 0.69% 0.67%
Allowance for loan losses/non-accruing loans 209% 200% 193% 188% 176%
NET LOAN CHARGE-OFFS
Commercial real estate $(547) $(534) $(1,043) $(1,152) $(1,343)
Commercial and industrial loans (1,610) (1,720) (847) (1,056) (1,098)
Residential mortgages (452) (568) (774) (633) (354)
Home equity (65) (164) (221) (118) (135)
Auto and other consumer (352) (194) (374) (344) (327)
----------------------- ---- ---- ---- ---- ----
Total, net $(3,026) $(3,180) $(3,259) $(3,303) $(3,257)
---------- ------- ------- ------- ------- -------
Net charge-offs (QTD annualized)/average loans 0.20% 0.22% 0.23% 0.25% 0.26%
Net charge-offs (YTD annualized)/average loans 0.22% 0.22% 0.23% 0.25% 0.26%
DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS
30-89 Days delinquent 0.25% 0.25% 0.26% 0.34% 0.37%
90+ Days delinquent and still accruing 0.09% 0.08% 0.07% 0.09% 0.10%
-------------------------------------- ---- ---- ---- ---- ----
Total accruing delinquent loans 0.34% 0.33% 0.33% 0.43% 0.47%
Non-accruing loans 0.34% 0.34% 0.36% 0.36% 0.38%
Total delinquent and non-accruing loans 0.68% 0.67% 0.69% 0.79% 0.85%
--------------------------------------- ---- ---- ---- ---- ----
BERKSHIRE HILLS BANCORP, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA- UNAUDITED - (F-9)
--------------------------------------------------------------------------------------
At or for the Quarters Ended
----------------------------
Sept. 30, June 30, March 31, Dec. 31, Sept. 30,
(in thousands) 2016 2016 2016 2015 2015
------------- ---- ---- ---- ---- ----
Net income $16,381 $15,957 $16,001 $16,013 $14,701
Adj: Net securities (gains) losses (78) 13 (36) 357 (49)
Adj: Net gain on sale of branches (563) - - - -
Adj: Merger and acquisition expense 1,453 701 527 1,230 2,987
Adj: Restructuring expense 717 177 253 (112) 374
Adj: Income taxes (492) (334) (256) (959) (1,862)
Total core income (A) $17,418 $16,514 $16,489 $16,529 $16,151
----------------- --- ------- ------- ------- ------- -------
Total revenue $76,912 $71,996 $73,327 $70,996 $69,669
Adj: Net securities (gains) losses (78) 13 (36) 357 (49)
Adj: Net gain on branch sales (563) - - - -
Total core revenue (B) $76,271 $72,009 $73,291 $71,353 $69,620
------------------ --- ------- ------- ------- ------- -------
Total non-interest expense $48,844 $46,268 $47,100 $48,279 $49,378
Less: Total non-core expense (see above) (2,170) (878) (780) (1,118) (3,361)
Core non-interest expense (C) $46,674 $45,390 $46,320 $47,161 $46,017
------------------------- --- ------- ------- ------- ------- -------
(in millions, except per share data)
Total average assets (D) $7,957 $7,809 $7,791 $7,764 $7,541
Total average shareholders' equity (E) 899 890 891 873 852
Total average tangible shareholders' equity (F) 550 546 557 537 522
Total tangible shareholders' equity, period-end (1) (G) 584 574 572 553 545
Total tangible assets, period-end (1) (H) 7,583 7,695 7,474 7,497 7,468
Total common shares outstanding, period-end (thousands) (I) 31,122 31,156 31,039 30,974 30,949
Average diluted shares outstanding (thousands) (J) 30,811 30,765 30,688 30,694 30,069
Core earnings per share, diluted (A/J) $0.57 $0.54 $0.54 $0.54 $0.54
Tangible book value per share, period-end (G/I) 18.78 18.44 18.44 17.84 17.61
Total tangible shareholders' equity/total tangible assets (G)/(H) 7.70 7.46 7.66 7.37 7.30
Performance ratios (2)
GAAP return on assets 0.82% 0.82% 0.82% 0.82% 0.78%
Core return on assets (A/D) 0.88 0.85 0.85 0.85 0.86
GAAP return on equity 7.29 7.17 7.19 7.34 6.90
Core return on equity (A/E) 7.75 7.42 7.40 7.58 7.58
Core return on tangible equity (3) (A/F) 12.99 12.45 12.20 12.68 12.78
Efficiency ratio (4)(5) (C-M)/(B+K+N) 57.90 58.71 59.86 60.56 60.35
Net interest margin 3.25 3.31 3.33 3.35 3.37
Supplementary data (in thousands)
Tax benefit on tax-credit investments (6) (K) $1,852 $2,777 $1,588 $4,029 $4,029
Non-interest income charge on tax-credit investments (7) (L) (1,525) (1,938) (1,101) (2,851) (2,851)
Net income on tax-credit investments (K+L) 327 839 487 1,178 1,178
Intangible amortization (M) 749 787 819 841 887
Fully taxable equivalent income adjustment (N) 1,200 1,180 1,134 1,108 1,131
(1) Total tangible shareholders' equity is computed by taking total shareholders' equity less the intangible assets at period-end.
Total tangible assets is computed by taking total assets less the intangible assets at period-end.
(2) Ratios are annualized and based on average balance sheet amounts, where applicable. Quarterly data may not sum to year-to-date data due
to rounding.
(3) Core return on tangible equity is computed by dividing the total core income adjusted for the tax-effected amortization of intangible assets,
assuming a 40% marginal rate, by tangible equity.
(4) Non-GAAP financial measure.
(5) 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 to provide important information regarding its operational efficiency.
(6) The tax benefit is the direct reduction to the income tax provision due to tax credits and deductions generated from investments in historic
rehabilitation, low-income housing, new market projects, and renewable energy projects.
(7) The non-interest income charge is the reduction to the tax-advantaged investments, which are incurred as the tax credits are generated.
BERKSHIRE HILLS BANCORP, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA - UNAUDITED - (F-10)
----------------------------------------------------------------------------------------
At or for Nine Months Ended
---------------------------
Sept. 30, Sept. 30,
(Dollars in thousands) 2016 2015
--------------------- ---- ----
Net income $48,339 $33,504
Adj: Net securities (gains) (101) (2,467)
Adj: Net gain on sale of branches (563) -
Adj: Merger and acquisition expenses 2,681 11,927
Adj: Restructuring expense 1,147 4,566
Adj: Income taxes (1,082) (4,449)
Total core income (A) $50,421 $43,081
----------------- --- ------- -------
Total revenue 222,235 197,141
Adj: Net securities (gains) losses (101) (2,467)
Adj: Net gain on branch sales (563) -
Total core revenue (B) $221,571 $194,674
------------------ --- -------- --------
Total non-interest expense $142,212 $148,551
Less: Total non-core expense (see above) (3,828) (16,493)
Core non-interest expense (C) $138,384 $132,058
------------------------- --- -------- --------
(Dollars in millions, except per share data)
Total average assets (D) $7,852 $7,078
Total average shareholders' equity (E) 893 783
Total average tangible shareholders' equity (F) 551 480
Total tangible shareholders' equity, period-end (1) (G) 584 545
Total tangible assets, period-end (1) (H) 7,583 7,468
Total common shares outstanding, period-end (thousands) (I) 31,122 30,949
Average diluted shares outstanding (thousands) (J) 30,757 27,847
Core earnings per common share, diluted (A/J) $1.64 $1.55
Tangible book value per common share, period-end (G/I) 18.78 17.61
Total tangible shareholders' equity/total tangible assets (G/H) 7.70 7.30
Performance ratios (2)
GAAP return on assets 0.82% 0.63%
Core return on assets (A/D) 0.86 0.81
GAAP return on equity 7.21 5.71
Core return on equity (A/E) 7.53 7.34
Core return on tangible equity (3) (A/F) 12.55 12.43
Efficiency ratio (4)(5) (C-M) / (B+K+N) 58.81 61.63
Net interest margin 3.30 3.29
Supplementary data
Tax benefit on tax-credit investments (6) (K) $6,217 $12,098
Non-interest income charge on tax-credit investments (7) (L) (4,564) (8,554)
Net income on tax-credit investments (K+L) 1,653 3,543
Intangible amortization (M) 2,355 2,722
Fully taxable equivalent income adjustment (N) 3,514 3,088
(1) Total tangible shareholders' equity is computed by taking total shareholders' equity less the intangible assets at period-end.
Total tangible assets is computed by taking total assets less the intangible assets at
period-end.
(2) Ratios are annualized and based on average balance sheet amounts, where applicable. Quarterly data may not sum to year-to-date data
due to rounding.
(3) Core return on tangible equity is computed by dividing the total core income adjusted for the tax-effected amortization of
intangible assets, assuming a 40% marginal rate, by tangible equity.
(4) Non-GAAP financial measure.
(5) 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 to provide important information regarding its operational efficiency.
(6) The tax benefit is the direct reduction to the income tax provision due to tax credits and deductions generated from investments in
historic rehabilitation, low-income housing, new market projects, and renewable energy.
(7) The non-interest income charge is the reduction to the tax-advantaged investments, which are incurred as the tax credits are generated.
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SOURCE Berkshire Hills Bancorp, Inc.
