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NYSE: BHLB

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As of August 16, 2018 Close

Press Release

Berkshire Hills Reports 73% Increase in Second Quarter Earnings; Dividends Declared

Company Release - 7/18/2018 4:10 PM ET

BOSTON, July 18, 2018 /PRNewswire/ -- Berkshire Hills Bancorp, Inc. (NYSE: BHLB) reported second quarter 2018 net income of $34 million, which was a 73% increase over 2017 second quarter net income of $20 million.  This primarily reflected the benefit of Berkshire's Greater Boston expansion through acquisition and business development, resulting in higher market share, increased efficiency, and record profitability.

(PRNewsfoto/Berkshire Hills Bancorp, Inc.)

SECOND QUARTER FINANCIAL HIGHLIGHTS (income statement comparisons are year over year and balance sheet growth is compared to prior quarter-end):

  • $0.74 EPS
  • 9% annualized commercial loan growth
  • 7% annualized deposit growth
  • 18% increase in net revenue
  • 19% increase in loan and deposit fee income
  • 3.50% net interest margin
  • 56.4% efficiency ratio
  • 1.17% ROA
  • 0.21% net loan charge-offs/average loans
  • 0.20% non-performing assets/assets

CEO Michael Daly stated, "We achieved record quarterly return on assets, with income increasing by 35% over the prior quarter.  Commercial loans grew strongly and our new Boston corporate headquarters teams are receiving good response to our expanded presence in Greater Boston.  Our revenue growth and disciplined expense management produced record quarterly earnings per share, positive operating leverage, and improved returns on equity."

Mr. Daly continued, "The integration of acquired operations was completed within plan in the second quarter and several company-wide initiatives have been accelerated to support the expansion of our deposit product set and delivery channels.   Our annual Xtraordinary Day of Service in June tackled 74 community projects across our markets, totaling nearly 7,000 volunteer hours and 92% of our workforce.  Our Foundation announced the appointment of a Corporate Social Responsibility (CSR) Officer to expand our multiple community engagement activities and implement an all-encompassing CSR strategy.  Our strengthened financial condition was recognized with an A- bank deposit rating assigned by the KBRA Bond Rating Agency.  Berkshire's stock was added to the S&P 600 SmallCapR index during the quarter; this index tracks U.S. small cap companies and is included in the S&P Composite 1500R index, facilitating an expanded market for our stock."

DIVIDENDS DECLARED

The Board of Directors declared a quarterly cash dividend of $0.22 per common share to shareholders of record at the close of business on August 9, 2018, payable on August 23, 2018.  The dividend equates to a 2.2% annualized yield based on the $39.47 average closing price of Berkshire Hills Bancorp common stock during the second quarter.  The Board also declared a quarterly cash dividend of $0.44 per share of preferred stock, with the same record and payment dates as above.  The quarterly common and preferred dividends were increased by 5% in the first quarter of the year. 

FINANCIAL CONDITION

Total assets measured $11.9 billion at midyear 2018.  Second quarter loan growth included a 9% annualized increase in commercial loans, with increased originations in Greater Boston, as well as asset based lending growth across the franchise.   Residential mortgage growth included the impact of seasonally higher mortgage originations.  The 7% annualized increase in total deposits included higher growth of transaction accounts.  Asset quality, liquidity, and capital metrics remained strong at midyear.  Non-performing assets decreased compared to the prior quarter and to the second quarter of 2017.  During the quarter, book value per share increased to $32.49 and tangible book value per common share increased to $20.27.

RESULTS OF OPERATIONS

Revenue and expense in 2018 include Commerce Bancshares Corp. operations acquired in the fourth quarter of 2017.   Most categories of revenue and expense increased due to this acquisition.  Berkshire has completed the integration of these operations and by midyear 2018 had accomplished its objectives for merger-related efficiencies, which included cost saves originally targeted at 20%, or approximately $8 million per year.

Second quarter EPS increased by 40% year-over-year and by 35% quarter-over-quarter, including the impact of shares issued for the Commerce acquisition.  There were negligible net non-core items during the most recent quarter, and both GAAP EPS and the non-GAAP core EPS measure totaled $0.74.  Both of these measures were record quarterly results.  Core EPS increased by 28% year-over-year and by 14% quarter-over-quarter. This improvement included the EPS accretion from the Company's investment in expanded operations, including the Commerce acquisition. 

Second quarter revenue increased by 18% year-over-year and by 5% compared to the prior quarter.   This revenue growth contributed to an improvement in the efficiency ratio to 56.4%.  The return on assets increased to a record 1.17%.   The return on equity improved to 8.9% and the non-GAAP measure of core return on tangible common equity improved to 14.8%.  This is a measure of the Company's internal generation of capital to support growth and dividends. 

The net interest margin improved to 3.50% in the most recent quarter, from 3.36% in the prior quarter.  The contribution from purchased loan accretion improved to 0.25% from 0.13% due to a higher level of recoveries related to purchased credit impaired loans.  Asset yields and funding costs both increased including the impact of higher short term interest rates.   Loan and deposit fees increased by 5% over the prior quarter.   Mortgage banking revenue was unchanged, as a seasonal volume increase was offset by narrower margins due to industry conditions.  The loan loss provision increased, exceeding net loan charge-offs, and adding to the loan loss allowance in line with loan growth. 

Second quarter non-interest expense decreased from the prior quarter due to lower merger related charges.  Excluding non-core items, non-interest expense was flat, contributing to positive operating leverage and benefiting from merger cost saves and operating expense disciplines.  Total full-time equivalent staff measured 2,004 positions at midyear, compared to 1,992 positions at the start of the year.   The second quarter effective income tax rate was 20% in 2018 compared to 29% in 2017, reflecting the benefit of federal income tax reform which became effective in 2018.    

INVESTOR CONFERENCE CALL

Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Thursday, July 19, 2018 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/10121614. 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. The BHLB earnings call will also be automatically scheduled as an event in the participant's Outlook calendar.  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. Those parties who do not have internet access or are otherwise unable to pre-register for this event, may still participate at the above time by dialing 1-844-792-3726 and asking the Operator to be joined to the Berkshire Hills Bancorp (BHLB) earnings call. A telephone replay of the call will be available through Thursday, July 26, 2018 by dialing 877-344-7529 and entering access number 10121614. 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 has approximately $11.9 billion in assets and 115 full service branches in Massachusetts, New York, Connecticut, Vermont, New Jersey, and Pennsylvania providing personal and business banking, insurance, and wealth management services. The Company also offers mortgages and specialized commercial lending services in targeted national markets.

FORWARD LOOKING STATEMENTS

This document contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. There are several factors that could cause actual results to differ significantly from expectations described in the forward-looking statements. For a discussion of such factors, please see Berkshire's most recent reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission and available on the SEC's website at www.sec.gov. Berkshire does not undertake any obligation to update forward-looking statements.

NON-GAAP FINANCIAL MEASURES

This document contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles ("GAAP").  These non-GAAP measures provide supplemental perspectives on operating results, performance trends, and financial condition.  They are not a substitute for GAAP measures; they should be read and used in conjunction with the Company's GAAP financial information.  A reconciliation of non-GAAP financial measures to GAAP measures is included 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 primarily include securities gains/losses, merger costs, and restructuring costs.  Securities gains/losses include unrealized gains/losses on equity securities beginning in the first quarter of 2018. 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 in 2017 and 2018 are primarily related to the business combinations with First Choice Bank and Commerce Bancshares Corp.  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.  Additionally, the Company recorded charges for hedge terminations in the first quarter of 2017 and legal settlement costs during the year. 

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. 

CONTACTS
Investor Relations Contact
James M. Moses, Senior Executive Vice President & CFO; 413-236-3379

Media Contact
Elizabeth Mach; Senior 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 Operations  (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 
and Supplementary Data (Five Quarter Trend)

F-10

Reconciliation of Non-GAAP Financial Measures
and Supplementary Data (Year-to-Date)

 

 

BERKSHIRE HILLS BANCORP, INC.

SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED - (F-1)





At or for the Quarters Ended (2)





June 30,


March 31,


Dec. 31,


Sept. 30,


June 30,






2018


2018


2017 (3)


2017


2017

















PER SHARE DATA













Net earnings/(loss), diluted

$          0.74


$          0.55


$        (0.06)


$          0.57


$         0.53




Core earnings, diluted (1)

0.74


0.65


0.58


0.59


0.58




Total book value per common share

32.49


32.12


32.14


31.78


31.37




Tangible book value per common share (1)

20.28


19.86


19.83


21.38


20.96




Market price at period end

40.60


37.95


36.60


38.75


35.15




Dividends per common share

0.22


0.22


0.21


0.21


0.21




Dividends per preferred share

0.44


0.44


0.42


-


-

















PERFORMANCE RATIOS (4)













Return on assets

1.17%


0.88%


(0.10)%


0.95%


0.84%




Core return on assets (1)

1.17


1.04


0.94


0.98


0.92




Return on equity

8.88


6.69


(0.77)


7.26


6.80




Core return on equity (1)

8.89


7.92


7.16


7.47


7.45




Core return on tangible common equity (1)

14.82


13.43


11.90


11.42


11.96




Net interest margin, fully taxable equivalent (FTE) (5)

3.50


3.36


3.50


3.36


3.36




Fee income/Net interest and fee income

24.25


25.51


25.91


29.96


32.23




Efficiency ratio (1)

56.37


59.54


57.43


59.28


61.72

















GROWTH (Year-to-date)













Total commercial loans (annualized)

5%


1%


38%


9%


13%




Total loans (annualized)

10


4


27


8


10




Total deposits (annualized)

2


(3)


32


3


3




Total net revenues (compared to prior year)

16


13


41


37


40




Earnings per share (compared to prior year) 

33


25


(25)


(2)


(8)




Core earnings per share (compared to prior year)(1)

24


18


4


4


5

















FINANCIAL DATA (in millions)













Total assets


$      11,902


$      11,519


$      11,571


$        9,767


$       9,627




Total earning assets

10,827


10,442


10,509


8,944


8,807




Total securities

1,920


1,932


1,899


1,824


1,773




Total loans


8,710


8,376


8,299


6,947


6,864




Allowance for loan losses

56


54


52


49


47




Total intangible assets

555


556


558


420


421




Total deposits


8,839


8,683


8,750


6,790


6,715




Total shareholders' equity

1,516


1,498


1,496


1,285


1,268




Net income/(loss)

34.0


25.2


(2.8)


22.9


19.7




Core income (1)

34.1


29.9


26.3


23.6


21.6

















ASSET QUALITY AND CONDITION RATIOS 













Net charge-offs (current quarter annualized)/average loans

0.21%


0.17%


0.17%


0.19%


0.20%




Total non-performing assets/total assets

0.20


0.27


0.21


0.23


0.25




Allowance for loan losses/total loans

0.64


0.64


0.62


0.71


0.69




Loans/deposits

99


96


95


102


102




Shareholders' equity to total assets

12.74


13.00


12.93


13.15


13.17




Tangible shareholders' equity to tangible assets (1)

8.47


8.59


8.52


9.25


9.20

















(1)

Non-GAAP financial measure. Core measurements are non-GAAP financial measures that are adjusted to exclude net non-core charges primarily related to acquisitions and restructuring activities. See pages F-9 and F-10 for reconciliations of non-GAAP financial measures.


(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 Commerce Bancshares Corp., the parent of Commerce Bank & Trust Company, on October 13, 2017. 


(4)

All performance ratios are annualized and are based on average balance sheet amounts, where applicable.


(5)

Fully taxable equivalent considers the impact of tax advantaged investment securities and loans.

 

 

 

 BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-2)


June 30,


March 31,


December 31,


(in thousands)

2018


2018


2017


Assets







Cash and due from banks

$              90,964


$          88,193


$          91,122


Short-term investments

48,093


35,694


157,641


Total cash and short-term investments

139,057


123,887


248,763









Trading security

11,483


11,795


12,277


Marketable equity securities, at fair value

59,726


59,261


45,185


Securities available for sale, at fair value

1,393,250


1,401,399


1,380,914


Securities held to maturity, at amortized cost

379,905


395,337


397,103


Federal Home Loan Bank stock and other restricted securities

75,530


64,038


63,085


Total securities

1,919,894


1,931,830


1,898,564









Loans held for sale, at fair value

149,182


98,440


153,620









Commercial real estate

3,220,702


3,266,737


3,264,742


Commercial and industrial loans

1,973,739


1,818,974


1,803,939


Residential mortgages

2,397,192


2,181,807


2,102,807


Consumer loans

1,118,333


1,108,899


1,127,850


Total loans

8,709,966


8,376,417


8,299,338


Less: Allowance for loan losses

(55,925)


(53,859)


(51,834)


Net loans

8,654,041


8,322,558


8,247,504









Premises and equipment, net

112,217


111,237


109,352


Other real estate owned

-


-


-


Goodwill 

519,128


519,128


519,287


Other intangible assets

35,838


37,085


38,296


Cash surrender value of bank-owned life insurance

193,121


192,379


191,221


Deferred tax asset, net

53,679


51,679


47,061


Other assets

125,806


131,024


117,083


Total assets 

$       11,901,963


$   11,519,247


$   11,570,751









Liabilities and shareholders' equity







Demand deposits

$         1,553,039


$     1,575,243


$     1,606,656


NOW and other deposits

858,014


715,581


734,558


Money market deposits

2,619,943


2,749,763


2,776,157


Savings deposits

747,722


756,711


741,954


Time deposits

3,060,034


2,885,969


2,890,205


Total deposits

8,838,752


8,683,267


8,749,530









Senior borrowings

1,274,342


1,125,860


1,047,736


Subordinated borrowings

89,429


89,384


89,339


Total borrowings

1,363,771


1,215,244


1,137,075









Other liabilities 

183,199


123,079


187,882


Total liabilities

10,385,722


10,021,590


10,074,487









Total preferred shareholders' equity

40,633


40,633


40,633


Total common shareholders' equity

1,475,608


1,457,024


1,455,631


Total shareholders' equity

1,516,241


1,497,657


1,496,264


Total liabilities and shareholders' equity

$       11,901,963


$   11,519,247


$   11,570,751









Net common shares outstanding 

45,420


45,360


45,290


 

 

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED - (F-3)

LOAN ANALYSIS

































Annualized Growth % 

(in millions)


June 30, 2018
Balance


March 31, 2018
Balance


December 31, 2017
Balance


Quarter ended
June 30, 2018


Year to Date  


























Commercial real estate - construction


$                         295


$                                347


$                          354


(60)%


(33)%


Commercial real estate - other


2,926


2,920


2,910


1


1


Total commercial real estate


3,221


3,267


3,264


(6)


(3)


Commercial and industrial loans 


1,974


1,819


1,804


34


19


Total commercial loans 


5,195


5,086


5,068


9


5














Total residential mortgages


2,397


2,181


2,103


40


28














Home equity 


393


400


410


(7)


(8)


Auto and other


725


709


718


9


2


Total consumer loans


1,118


1,109


1,128


3


(2)


Total loans


$                      8,710


$                             8,376


$                       8,299


16%


10%










































































DEPOSIT ANALYSIS




















Annualized Growth % 

(in millions)


June 30, 2018
Balance


March 31, 2018
Balance


December 31, 2017
Balance


Quarter ended
June 30, 2018


Year to Date


Demand


$                      1,553


$                             1,575


$                       1,606


(6)%


(7)%


NOW and other


858


715


735


80


33


Money market


2,620


2,750


2,776


(19)


(11)


Savings


748


757


742


(5)


2


Time deposits


3,060


2,886


2,890


24


12


Total deposits 


$                      8,839


$                             8,683


$                       8,749


7%


2%


 

 

 

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED - (F-4)


Three Months Ended


Six Months Ended


June 30,


June 30,

(in thousands, except per share data)

2018


2017


2018


2017

Interest and dividend income    








Loans

$         101,649


$           71,983


$           194,484


$            140,926

Securities and other    

15,230


12,683


29,635


24,449

Total interest and dividend income    

116,879


84,666


224,119


165,375

Interest expense








Deposits

17,768


9,971


33,093


19,069

Borrowings

7,990


5,150


14,435


9,875

Total interest expense    

25,758


15,121


47,528


28,944

Net interest income

91,121


69,545


176,591


136,431

Non-interest income








Mortgage banking originations

10,195


16,281


20,342


28,959

Loan related income

6,549


5,275


11,987


9,454

Deposit related fees

7,605


6,645


15,671


12,849

Insurance commissions and fees    

2,549


2,588


5,574


5,724

Wealth management fees    

2,280


2,286


4,877


4,812

Total fee income    

29,178


33,075


58,451


61,798

Other

155


(276)


1,423


(183)

Securities gains/(losses), net     

718


(1)


(784)


12,569

(Loss)/gain on sale of business operations and assets, net

(21)


-


460


-

(Loss) on termination of hedges

-


-


-


(6,629)

Total non-interest income      

30,030


32,798


59,550


67,555

Total net revenue

121,151


102,343


236,141


203,986

Provision for loan losses   

6,532


4,889


12,107


9,984

Non-interest expense








Compensation and benefits

41,134


36,997


83,318


73,116

Occupancy and equipment     

10,230


8,678


20,312


17,704

Technology and communications

7,359


6,883


14,189


12,970

Marketing and promotion     

2,369


3,177


4,981


5,176

Professional services

1,139


2,190


3,192


4,641

FDIC premiums and assessments

1,411


1,588


2,606


2,886

Other real estate owned and foreclosures

1


30


68


58

Amortization of intangible assets     

1,246


770


2,514


1,571

Merger, restructuring and other expense 

847


2,903


5,940


14,585

Other

6,601


6,307


12,086


11,142

Total non-interest expense     

72,337


69,523


149,206


143,849









Income before income taxes       

42,282


27,931


74,828


50,153

Income tax expense

8,251


8,237


15,549


14,999

Net income 

$           34,031


$           19,694


$             59,279


$              35,154

Preferred stock dividend

229


-


459


-

Income available to common shareholders

$           33,802


$           19,694


$             58,820


$              35,154









Earnings per common share:








Basic

$               0.74


$               0.53


$                 1.29


$                  0.97

Diluted

$               0.74


$               0.53


$                 1.28


$                  0.96









Weighted average shares outstanding:      








Basic

46,032


37,324


45,999


36,305

Diluted

46,215


37,474


46,206


36,466









 

 

 

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (5 Quarter Trend) - UNAUDITED - (F-5)




June 30,


March 31,


Dec. 31,


Sept. 30,


June 30,


(in thousands, except per share data)

2018


2018


2017


2017


2017


Interest and dividend income    











Loans

$      101,649


$        92,835


$        91,149


$        76,024


$        71,983


Securities and other    

15,230


14,405


14,674


13,036


12,683


Total interest and dividend income    

116,879


107,240


105,823


89,060


84,666


Interest expense











Deposits

17,768


15,325


13,802


10,984


9,971


Borrowings

7,990


6,445


5,655


6,078


5,150


Total interest expense    

25,758


21,770


19,457


17,062


15,121


Net interest income

91,121


85,470


86,366


71,998


69,545


Non-interest income











Mortgage banking originations

10,195


10,147


11,918


13,374


16,281


Loan related income

6,549


5,438


5,866


6,081


5,275


Deposit related fees

7,605


8,066


7,871


6,445


6,645


Insurance commissions and fees    

2,549


3,025


2,284


2,581


2,588


Wealth management fees    

2,280


2,597


2,268


2,315


2,286


Total fee income    

29,178


29,273


30,207


30,796


33,075


Other

155


1,268


(939)


(2,255)


(276)


Securities gains/(losses), net     

718


(1,502)


30


(1)


(1)


(Loss)/gain on sale of business operations and assets, net

(21)


481


-


296


-


(Loss) on termination of hedges

-


-


-


-


-


Total non-interest income      

30,030


29,520


29,298


28,836


32,798


Total net revenue

121,151


114,990


115,664


100,834


102,343


Provision for loan losses   

6,532


5,575


6,141


4,900


4,889


Non-interest expense











Compensation and benefits

41,134


42,184


42,220


37,643


36,997


Occupancy and equipment     

10,230


10,082


9,451


8,267


8,678


Technology and communications

7,359


6,830


6,286


6,644


6,883


Marketing and promotion  

2,369


2,612


4,573


2,128


3,177


Professional services

1,139


2,053


2,277


2,247


2,190


FDIC premiums and assessments

1,411


1,195


1,920


1,651


1,588


Other real estate owned and foreclosures

1


67


9


(23)


30


Amortization of intangible assets     

1,246


1,268


1,183


739


770


Merger, restructuring and other expense 

847


5,093


15,553


1,420


2,903


Other

6,601


5,485


6,569


5,104


6,307


Total non-interest expense     

72,337


76,869


90,041


65,820


69,523













Income before income taxes

42,282


32,546


19,482


30,114


27,931


Income tax expense 

8,251


7,298


22,292


7,211


8,237


Net income/(loss)

$        34,031


$        25,248


$         (2,810)


$        22,903


$        19,694


Preferred stock dividend

229


230


219


-


-


Income/(loss) available to common shareholders

$        33,802


$        25,018


$         (3,029)


$        22,903


$        19,694
























Earnings/(loss) per common share:











Basic 

$            0.74


$            0.55


$           (0.06)


$            0.57


$            0.53


Diluted 

$            0.74


$            0.55


$           (0.06)


$            0.57


$            0.53













Weighted average shares outstanding:      











Basic

46,032


45,966


45,122


39,984


37,324


Diluted

46,215


46,200


45,122


40,145


37,474













 

 

BERKSHIRE HILLS BANCORP, INC.

AVERAGE YIELDS AND COSTS (Fully Taxable Equivalent - Annualized) - UNAUDITED - (F-6)



Quarters Ended



June 30,


March 31,


Dec. 31,


Sept. 30,


June 30,




2018


2018


2017


2017


2017














Earning assets 












Loans:












Commercial real estate


5.24%


4.76%


4.73%


4.64%


4.41%


Commercial and industrial loans


5.43


5.19


5.25


5.09


5.30


Residential mortgages


3.72


3.56


3.76


3.68


3.62


Consumer loans


4.13


4.01


3.94


3.88


3.81


Total loans


4.73


4.45


4.47


4.33


4.25


Securities


3.47


3.26


3.55


3.43


3.45


Short-term investments and loans held for sale


3.86


3.43


2.90


3.40


3.07


Total earning assets


4.48


4.21


4.27


4.13


4.07














Funding liabilities












Deposits:












NOW and other


0.44


0.28


0.25


0.26


0.23


Money market


0.88


0.73


0.66


0.57


0.54


Savings


0.14


0.14


0.14


0.14


0.14


Time


1.54


1.40


1.25


1.20


1.13


Total interest-bearing deposits


1.02


0.90


0.82


0.78


0.73


Borrowings


2.29


2.02


1.81


1.65


1.46


Total interest-bearing liabilities


1.23


1.08


0.97


0.96


0.88














Net interest spread


3.25


3.13


3.30


3.17


3.19


Net interest margin (1)


3.50


3.36


3.50


3.36


3.36














Cost of funds (2)


1.03


0.90


0.81


0.82


0.75


Cost of deposits 


0.83


0.73


0.66


0.64


0.60














(1) The effect of purchased loan accretion on the quarterly net interest margin was an increase in all quarters, which is shown sequentially as follows beginning with the most recent quarter and ending with the earliest quarter:  0.25%, 0.13%, 0.21%, 0.14%, 0.12%. See page F-7 for purchased loan accretion.

(2) Cost of funds includes all deposits and borrowings.

 

 

BERKSHIRE HILLS BANCORP, INC.

AVERAGE BALANCES - UNAUDITED - (F-7)


Quarters Ended


June 30, 


March 31, 


Dec. 31, 


Sept. 30, 


June 30, 


(in thousands)

2018


2018


2017


2017


2017


Assets











Loans











Commercial real estate

$            3,217,862


$            3,250,861


$            3,161,902


$            2,669,558


$            2,691,804


Commercial and industrial loans

1,872,342


1,811,433


1,645,719


1,183,980


1,130,384


Residential mortgages

2,268,886


2,138,544


2,081,548


1,977,538


1,871,329


Consumer loans

1,113,089


1,114,586


1,123,683


1,030,032


996,488


Total loans (1) 

8,472,179


8,315,424


8,012,852


6,861,108


6,690,005


Securities (2)

1,931,104


1,933,002


1,921,724


1,779,379


1,701,443


Short-term investments and loans held for sale

146,190


139,161


146,101


167,724


148,276


Total earning assets

10,549,473


10,387,587


10,080,677


8,808,211


8,539,724


Goodwill and other intangible assets

554,591


557,321


533,157


420,853


421,601


Other assets

506,954


521,745


516,802


402,188


369,317


Total assets

$          11,611,018


$          11,466,653


$          11,130,636


$            9,631,252


$            9,330,642













Liabilities and shareholders' equity











Deposits 











NOW and other

$               819,166


$               712,181


$               702,353


$               570,864


$               572,688


Money market

2,524,713


2,518,920


2,371,203


1,768,108


1,794,693


Savings

749,995


743,944


733,157


669,690


667,863


Time

2,878,846


2,913,512


2,906,423


2,587,702


2,472,990


Total interest-bearing deposits

6,972,720


6,888,557


6,713,136


5,596,364


5,508,234


Borrowings

1,382,794


1,275,173


1,229,781


1,445,700


1,398,653


Total interest-bearing liabilities

8,355,514


8,163,730


7,942,917


7,042,064


6,906,887


Non-interest-bearing demand deposits

1,619,470


1,656,260


1,591,431


1,196,451


1,155,533


Other liabilities 

102,583


137,976


127,562


131,003


110,367


Total liabilities

10,077,567


9,957,966


9,661,910


8,369,518


8,172,787













Total preferred shareholders' equity

40,633


40,633


34,892


-


-


Total common shareholders' equity

1,492,818


1,468,054


1,433,834


1,261,734


1,157,855


Total shareholders' equity

1,533,451


1,508,687


1,468,726


1,261,734


1,157,855


Total liabilities and shareholders' equity

$          11,611,018


$          11,466,653


$          11,130,636


$            9,631,252


$            9,330,642
























Supplementary data











Total average non-maturity deposits

$            5,713,344


$            5,631,305


$            5,398,144


$            4,205,113


$            4,190,777


Total average deposits 

8,592,190


8,544,817


8,304,567


6,792,815


6,663,767


Fully taxable equivalent income adjustment

2,033


1,820


3,122


2,950


2,644


Purchased loan accretion

6,881


3,433


5,507


3,066


2,550


Total average tangible equity (3)

978,860


951,366


935,569


840,881


736,254













(1) Total loans include non-accruing loans.







(2) Average balances for securities available-for-sale are based on amortized cost.





(3) See page F-9 for details on the calculation of total average tangible equity.





 

BERKSHIRE HILLS BANCORP, INC.

ASSET QUALITY ANALYSIS - UNAUDITED - (F-8)



At or for the Quarters Ended



June 30,


March 31,


Dec. 31,


Sept. 30,


June 30,


(in thousands)


2018


2018


2017


2017


2017


NON-PERFORMING ASSETS












Non-accruing loans:












Commercial real estate


$          10,338


$          10,084


$            7,266


$            5,228


$            7,587


Commercial and industrial loans


4,029


7,430


7,311


9,681


8,387


Residential mortgages


3,196


5,777


2,883


3,092


3,245


Consumer loans


5,466


5,996


5,438


4,350


4,977


Total non-accruing loans


23,029


29,287


22,898


22,351


24,196


Other real estate owned


-


-


-


288


279


Repossessed assets


1,241


1,241


1,147


-


-


Total non-performing assets


$          24,270


$          30,528


$          24,045


$          22,639


$          24,475














Total non-accruing loans/total loans


0.26%


0.35%


0.28%


0.32%


0.35%


Total non-performing assets/total assets


0.20%


0.27%


0.21%


0.23%


0.25%














PROVISION AND ALLOWANCE FOR LOAN LOSSES











Balance at beginning of period


$          53,859


$          51,834


$          49,004


$          47,359


$          45,804


Charged-off loans


(5,714)


(3,791)


(3,734)


(3,796)


(3,431)


Recoveries on charged-off loans


1,248


241


423


541


97


Net loans charged-off


(4,466)


(3,550)


(3,311)


(3,255)


(3,334)


Provision for loan losses


6,532


5,575


6,141


4,900


4,889


Balance at end of period


$          55,925


$          53,859


$          51,834


$          49,004


$          47,359














Allowance for loan losses/total loans


0.64%


0.64%


0.62%


0.71%


0.69%


Allowance for loan losses/non-accruing loans


243%


184%


226%


219%


196%














NET LOAN CHARGE-OFFS












Commercial real estate


$          (2,079)


$             (817)


$             (881)


$          (1,425)


$          (1,474)


Commercial and industrial loans


(1,193)


(972)


(960)


(573)


(625)


Residential mortgages


(632)


(406)


(759)


130


(337)


Home equity 


108


(588)


(123)


(634)


(268)


Auto and other consumer


(670)


(767)


(588)


(753)


(630)


Total, net


$          (4,466)


$          (3,550)


$          (3,311)


$          (3,255)


$          (3,334)














Net charge-offs (QTD annualized)/average loans 

0.21%


0.17%


0.17%


0.19%


0.20%


Net charge-offs (YTD annualized)/average loans 

0.19%


0.17%


0.19%


0.20%


0.20%














DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS










30-89 Days delinquent


0.22%


0.39%


0.35%


0.25%


0.23%


90+ Days delinquent and still accruing


0.40%


0.23%


0.20%


0.17%


0.12%


Total accruing delinquent loans


0.62%


0.62%


0.55%


0.42%


0.35%


Non-accruing loans


0.26%


0.35%


0.28%


0.32%


0.35%


Total delinquent and non-accruing loans


0.88%


0.97%


0.83%


0.74%


0.70%


 

 

BERKSHIRE HILLS BANCORP, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA- UNAUDITED - (F-9)



At or for the Quarters Ended



June 30,


March 31,


Dec. 31,


Sept. 30,


June 30,


(in thousands)


2018


2018


2017


2017


2017


Net income/(loss)


$       34,031


$       25,248


$       (2,810)


$       22,903


$    19,694


Adj: Net securities (gains)/losses (1)


(718)


1,502


(30)


1


1


Adj: Net losses/(gains) on sale of business operations and assets

21


(481)


-


(296)


-


Adj: Merger and acquisition expense


847


5,093


15,553


1,110


2,266


Adj: Restructuring expense and other expense


-


-


-


310


637


Adj: Employee and community investment


-


-


3,400


-


-


Adj: Deferred tax asset impairment


-


-


18,145


-


-


Adj: Income taxes


(105)


(1,481)


(7,963)


(474)


(1,039)


Total core income (2)

(A)

$       34,076


$       29,881


$       26,295


$       23,554


$    21,559














Total revenue 


$     121,151


$     114,990


$     115,664


$     100,834


$  102,343


Adj: Net securities (gains)/losses (1)


(718)


1,502


(30)


1


1


Adj: Net losses/(gains) on sale of business operations and assets

21


(481)


-


(296)


-


Total core revenue (2)

(B)

$     120,454


$     116,011


$     115,634


$     100,539


$  102,344














Total non-interest expense


$       72,337


$       76,869


$       90,041


$       65,820


$    69,523


Less: Merger, restructuring and other expense (see above)


(847)


(5,093)


(15,553)


(1,420)


(2,903)


Less: Employee and community investment


-


-


(3,400)


-


-


Core non-interest expense (2)                                    

(C)

$       71,490


$       71,776


$       71,088


$       64,400


$    66,620














(in millions, except per share data)












Total average assets                                                

(D)

$       11,611


$       11,467


$       11,131


$         9,631


$      9,331


Total average shareholders' equity                         

(E)

1,533


1,509


1,469


1,262


1,158


Total average tangible shareholders' equity (2)                        

(F)

979


951


936


841


736


Total average tangible common shareholders' equity (2)                        

(G)

938


911


901


841


736


Total tangible shareholders' equity, period-end (2)(3)

(H)

961


941


939


864


847


Total tangible common shareholders' equity, period-end (2)(3)

(I)

921


901


898


864


847


Total tangible assets, period-end (2)(3)

(J)

11,347


10,963


11,013


9,346


9,206














Total common shares outstanding, period-end (thousands)               

(K)

45,420


45,360


45,290


40,424


40,428


Average diluted shares outstanding (thousands)

(L)

46,215


46,200


45,383


40,145


37,474














Core earnings per share, diluted(2)

(A/L)

$           0.74


$           0.65


$           0.58


$           0.59


$        0.58


Tangible book value per common share, period-end (2)

(I/K)

20.28


19.86


19.83


21.38


20.96


Total tangible shareholders' equity/total tangible assets (2)

(H)/(J)

8.47


8.59


8.53


9.25


9.20














Performance ratios (4)












GAAP return on assets


1.17%


0.88


(0.10)%


0.95%


0.84%


Core return on assets (2)

(A/D)

1.17


1.04


0.94


0.98


0.92


GAAP return on equity 


8.88


6.69


(0.77)


7.26


6.80


Core return on equity (2)

(A/E)

8.89


7.92


7.16


7.47


7.45


Core return on tangible common equity (2)(5)

(A+O)/(G)

14.82


13.43


11.90


11.42


11.96


Efficiency ratio (2)(6)                                                                                

(C-O)/(B+M+P)

56.37


59.54


57.43


59.28


61.72


Net interest margin


3.50


3.36


3.50


3.36


3.36














Supplementary data (in thousands)












Tax benefit on tax-credit investments (7)

(M)

$         2,119


$            596


$         2,957


$         3,905


$      1,696


Non-interest income charge on tax-credit investments (8)

(N)

(1,594)


(506)


(2,564)


(3,347)


(1,453)


Net income on tax-credit investments

(M+N)

525


90


393


558


243














Intangible amortization

(O)

$         1,246


$         1,268


$         1,183


$            739


$         770


Fully taxable equivalent income adjustment 

(P)

2,033


1,820


3,122


2,950


2,644






































(1) Net securities (gains)/losses for the periods ending March 31, 2018 and June 30, 2018 include the change in fair value of the Company's equity securities in compliance with the Company's adoption of ASU 2016-01.


(2) Non-GAAP financial measure.












(3) 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.  





(4) 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.




(5) Core return on tangible equity is computed by dividing the total core income adjusted for the tax-effected amortization of intangible assets, assuming a 27.32% marginal rate for 2018 and a 40% marginal rate for 2017, by tangible equity.




(6) 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.




(7) The tax benefit is the direct reduction to the income tax provision due to tax credits and deductions generated from investments in historic rehabilitation and low-income housing.  




(8) 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 the Six Months Ended



June 30,


June 30,


(Dollars in thousands)


2018


2017


Net income 


$                   59,279


$                   35,154


Adj: Net securities losses/(gains) (1)


784


(12,569)


Adj: Loss on termination of hedges


-


6,629


Adj: Net (gains) on sale of business operations


(460)


-


Adj: Merger and acquisition expenses


5,940


8,213


Adj: Restructuring expense and other


-


6,372


Adj: Income taxes


(1,586)


(2,840)


Total core income (2)

(A)

$                   63,957


$                   40,959








Total revenue 


$                 236,141


$                 203,986


Adj: Net securities losses/(gains) (1)


784


(12,569)


Adj: Net (gains) on sale of business operations


(460)


-


Adj: Loss on termination of hedges


-


6,629


Total core revenue(2)

(B)

$                 236,465


$                 198,046


Total non-interest expense


$                 149,206


$                 143,849


Less: Merger, restructuring and other expense (see above)


(5,940)


(14,585)


Core non-interest expense (2)                                    

(C)

$                 143,266


$                 129,264








(in millions, except per share data)






Total average assets                                                

(D)

$                   11,567


$                     9,238


Total average shareholders' equity                         

(E)

1,521


1,120


Total average tangible shareholders' equity (2)                        

(F)

965


698


Total average tangible common shareholders' equity (2)      

(G)

925


698


Total tangible shareholders' equity, period-end (2)(3)

(H)

961


847


Total tangible common shareholders' equity, period-end (2)(3)

(I)

921


847


Total tangible assets, period-end (2)(3)

(J)

11,347


9,206


Total common shares outstanding, period-end (thousands)    

(K)

45,420


40,428


Average diluted shares outstanding (thousands)

(L)

46,206


36,466


Core earnings per common share, diluted(2)

(A/L)

$                       1.38


$                       1.12


Tangible book value per common share, period-end (2)

(I/K)

20.28


20.96


Total tangible shareholders' equity/total tangible assets (2)

(H)/(J)

8.47


9.20








Performance ratios (4)






GAAP return on assets


1.03%


0.76%


Core return on assets (2)

(A/D)

1.11


0.89


GAAP return on equity 


7.79


6.28


Core return on equity (2)

(A/E)

8.41


7.31


Core return on tangible common equity (2)(5)

(A+O)/(G)

14.13


12.01


Efficiency ratio (2)(6) 

(C-O)/(B+M+P)

57.91


61.83


Net interest margin


3.43


3.35








Supplementary data






Tax benefit on tax-credit investments (7)

(M)

$                     2,715


$                     3,320


Non-interest income charge on tax-credit investments (8)

(N)

(2,100)


(2,782)


Net income on tax-credit investments

(M+N)

615


538








Intangible amortization

(O)

2,514


1,571


Fully taxable equivalent income adjustment

(P)

3,853


5,154






















(1)

Net securities losses/(gains) for the period ending June 30, 2018 includes the change in fair value of the Company's equity securities in compliance with
the Company's adoption of ASU 2016-01.


(2)

Non-GAAP financial measure.


(3)

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.


(4)

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.


(5)

Core return on tangible equity is computed by dividing the total core income adjusted for the tax-effected amortization of intangible assets, assuming a
27.32% marginal rate for 2018 and 40% marginal rate for 2017, by tangible equity.


(6)

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.


(7)

The tax benefit is the direct reduction to the income tax provision due to tax credits and deductions generated from investments in historic rehabilitation
and low-income housing.


(8)

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.

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