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NYSE: BHLB

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As of November 16, 2018 3:58 PM ET

Press Release

Berkshire Hills Reports 40% Increase in Third Quarter Earnings; Dividends Declared

Company Release - 10/17/2018 4:10 PM ET

BOSTON, Oct. 17, 2018 /PRNewswire/ -- Berkshire Hills Bancorp, Inc. (NYSE: BHLB) reported third quarter 2018 net income of $32 million, a 40% increase over $23 million in the third quarter of 2017 due primarily to the benefit of business growth including expansion in Greater Boston through acquisition and business development. 

(PRNewsfoto/Berkshire Hills Bancorp, Inc.)

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

  • $0.70 GAAP EPS and Non-GAAP Core EPS
  • 6% annualized commercial loan growth
  • 3.32% net interest margin
  • 57.2% efficiency ratio
  • 1.08% ROA
  • 0.19% net loan charge-offs/average loans
  • 0.30% non-performing assets/assets

CEO Michael Daly stated, "Our third quarter earnings came in as expected.   Quarterly loan related fees reached a record high, supported by strong SBA lending activity and other commercial lending related fees.  We once again moved up in the annual SBA rankings, breaking into the top 30 nationally based on dollar volume.  Our profitability and efficiency have also improved over last year due to the positive operating leverage from our increased business scale and diversified revenues.  We're seeing good growth in our Greater Boston and Mid-Atlantic markets, and steady business activity across the rest of our franchise.  The Bank was recognized in the quarter by a United Nations IMPACT2030 Innovation Award for our support of volunteerism.  This was our first full quarter following the completed integration of acquired operations and our teams are coordinating across our markets to engage our customers with our unique brand and culture promise."

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 November 8, 2018, payable on November 21, 2018.  The dividend equates to a 2.1% annualized yield based on the $41.57 average closing price of Berkshire Hills Bancorp common stock during the third 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 increased in the third quarter by $128 million, or 4% annualized, to $12.0 billion.  Loan growth resulted from a 6% annualized increase in commercial loans and 19% annualized growth in residential mortgages.   Average deposits increased over the prior quarter; period-end deposits decreased due to a $75 million decrease in payroll deposits, which fluctuate daily.  The deposit mix shifted towards time deposits reflecting the impact of higher interest rates on customer demand.  The average cost of deposits increased by 0.13% compared to the prior quarter, and the ratio of loans/deposit increased to 102% during the quarter.  Capital measures were unchanged, with the ratio of equity/assets measuring 12.7%, while the non-GAAP measure of tangible equity/tangible assets measuring 8.5%.  During the quarter, book value per share increased to $32.84 and tangible book value per common share increased to $20.68.     

RESULTS OF OPERATIONS

Third quarter EPS increased by 23% year-over-year, propelled by higher revenues and positive operating leverage.   There were negligible net non-core items during the most recent quarter, and both GAAP EPS and the non-GAAP core EPS measure totaled $0.70.  The third quarter ROA measured 1.08%, while the efficiency ratio improved year-over-year to 57.2%.  The third quarter return on equity was 8.3%, while the non-GAAP measure of core return on tangible common equity was 13.7%.  Revenue and expense in 2018 include Commerce Bancshares Corp. operations acquired in the fourth quarter of 2017.   Most categories of revenue and expense increased year-over-year due to this acquisition. 

Third quarter net interest income increased by 24% year-over year due to growth in average earning assets.  The net interest margin measured 3.32% in the most recent quarter, compared to 3.50% in the prior quarter and to 3.36% in the third quarter of 2017.  The net interest margin includes purchased loan accretion, which varies each quarter primarily due to the impact of recoveries of purchased credit impaired loans.  This accretion contributed 0.17%, 0.25%, and 0.14% to the margin in the above quarters, respectively.  Excluding accretion, asset yields and funding costs generally trended higher in recent quarters due to the impact of Federal Reserve interest rate hikes.  Non-interest income increased by 2% year-over-year.  Growth in loan and deposit related fee income partially offset a decrease in mortgage banking revenue.  Loan related income reached a record quarterly level due to strong SBA loan originations and related sale gains, together with other commercial lending related fees.  The loan loss provision increased year-over-year, exceeding net loan charge-offs, and adding to the loan loss allowance in line with loan growth during the quarter.

Third quarter non-interest expense decreased from the prior quarter including lower mortgage banking related expense and completion of Commerce related cost savings.   Total full-time equivalent staff decreased to 1,970 positions at quarter-end from 1,992 positions at the start of the year.   The third quarter effective income tax rate was 21% in 2018 compared to 24% in 2017, including 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, October 18, 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/10125042.  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.  Additionally, participants may 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 join the Berkshire Hills Bancorp (BHLB) earnings call.  A telephone replay of the call will be available through Thursday, October 25, 2018 by dialing 877-344-7529 and entering access number 10125042.  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 $12.0 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)





Sept. 30,


June 30,


March 31,


Dec. 31,


Sept. 30,






2018


2018


2018


2017 (3)


2017

















PER SHARE DATA













Net earnings/(loss) per common share, diluted

$          0.70


$          0.74


$          0.55


$        (0.06)


$          0.57




Core earnings per common share, diluted (1)

0.70


0.74


0.65


0.58


0.59




Total book value per common share

32.84


32.49


32.12


32.14


31.78




Tangible book value per common share (1)

20.68


20.28


19.86


19.83


21.38




Market price at period end

40.70


40.60


37.95


36.60


38.75




Dividends per common share

0.22


0.22


0.22


0.21


0.21




Dividends per preferred share

0.44


0.44


0.44


0.42


-

















PERFORMANCE RATIOS (4)













Return on assets

1.08

%

1.17

%

0.88

%

(0.10)

%

0.95

%



Core return on assets (1)

1.08


1.17


1.04


0.94


0.98




Return on equity

8.27


8.88


6.69


(0.77)


7.26




Core return on equity (1)

8.28


8.89


7.92


7.16


7.47




Core return on tangible common equity (1)

13.67


14.82


13.43


11.90


11.42




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

3.32


3.50


3.36


3.50


3.36




Fee income/Net interest and fee income

24.33


24.25


25.51


25.91


29.96




Efficiency ratio (1)

57.15


56.37


59.54


57.43


59.28

















GROWTH (Year-to-date)













Total commercial loans (annualized)

5

%

5

%

1

%

38

%

9

%



Total loans (annualized)

10


10


4


27


8




Total deposits (annualized)

0


2


(3)


32


3




Total net revenues (compared to prior year)

16


16


13


41


37




Earnings per common share (compared to prior year) 

28


33


25


(25)


(2)




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

22


24


18


4


4

















FINANCIAL DATA (in millions)













Total assets


$      12,030


$      11,902


$      11,519


$      11,571


$        9,767




Total earning assets

10,957


10,827


10,442


10,509


8,944




Total securities

1,918


1,920


1,932


1,899


1,824




Total loans


8,905


8,710


8,376


8,299


6,947




Allowance for loan losses

58


56


54


52


49




Total intangible assets

553


555


556


558


420




Total deposits


8,766


8,839


8,683


8,750


6,790




Total shareholders' equity

1,532


1,516


1,498


1,496


1,285




Net income/(loss)

32.2


34.0


25.2


(2.8)


22.9




Core income (1)

32.2


34.1


29.9


26.3


23.6

















ASSET QUALITY AND CONDITION RATIOS 













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

0.19

%

0.21

%

0.17

%

0.17

%

0.19

%



Total non-performing assets/total assets

0.30


0.20


0.27


0.21


0.23




Allowance for loan losses/total loans

0.66


0.64


0.64


0.62


0.71




Loans/deposits

102


99


96


95


102




Shareholders' equity to total assets

12.74


12.74


13.00


12.93


13.15




Tangible shareholders' equity to tangible assets (1)

8.53


8.47


8.59


8.52


9.25

















(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)


September 30,


June 30,


December 31,


(in thousands)

2018


2018


2017


Assets







Cash and due from banks

$              93,038


$          90,964


$          91,122


Short-term investments

42,696


48,093


157,641


Total cash and short-term investments

135,734


139,057


248,763









Trading security

11,179


11,483


12,277


Marketable equity securities, at fair value

59,734


59,726


45,185


Securities available for sale, at fair value

1,391,373


1,393,250


1,380,914


Securities held to maturity, at amortized cost

379,404


379,905


397,103


Federal Home Loan Bank stock and other restricted securities

76,184


75,530


63,085


Total securities

1,917,874


1,919,894


1,898,564









Loans held for sale, at fair value

91,639


149,182


153,620









Commercial real estate loans

3,371,773


3,319,323


3,264,742


Commercial and industrial loans

1,902,228


1,875,118


1,803,939


Residential mortgages

2,509,324


2,397,192


2,102,807


Consumer loans

1,121,188


1,118,333


1,127,850


Total loans

8,904,513


8,709,966


8,299,338


Less: Allowance for loan losses

(58,457)


(55,925)


(51,834)


Net loans

8,846,056


8,654,041


8,247,504









Premises and equipment, net

111,130


112,217


109,352


Other real estate owned

-


-


-


Goodwill 

518,325


519,128


519,287


Other intangible assets

34,620


35,838


38,296


Cash surrender value of bank-owned life insurance

194,369


193,121


191,221


Deferred tax asset, net

56,708


53,679


47,061


Other assets

123,604


125,806


117,083


Total assets 

$       12,030,059


$   11,901,963


$   11,570,751









Liabilities and shareholders' equity







Demand deposits

$         1,563,845


$     1,553,039


$     1,606,656


NOW and other deposits

844,210


858,014


734,558


Money market deposits

2,447,184


2,619,943


2,776,157


Savings deposits

737,682


747,722


741,954


Time deposits

3,173,180


3,060,034


2,890,205


Total deposits

8,766,101


8,838,752


8,749,530









Senior borrowings

1,450,653


1,274,342


1,047,736


Subordinated borrowings

89,473


89,429


89,339


Total borrowings

1,540,126


1,363,771


1,137,075









Other liabilities 

191,517


183,199


187,882


Total liabilities

10,497,744


10,385,722


10,074,487









Preferred shareholders' equity

40,633


40,633


40,633


Common shareholders' equity

1,491,682


1,475,608


1,455,631


Total shareholders' equity

1,532,315


1,516,241


1,496,264


Total liabilities and shareholders' equity

$       12,030,059


$   11,901,963


$   11,570,751









Net common shares outstanding 

45,420


45,420


45,290









 

 

BERKSHIRE HILLS BANCORP, INC.

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

LOAN ANALYSIS

































Annualized Growth % 

(in millions)


September 30, 2018
Balance


June 30, 2018
Balance


December 31, 2017
Balance


Quarter ended
September 30, 2018


Year to Date  


























Commercial real estate - construction


$                         374


$                         406


$                          354


(31)

%

8

%

Commercial real estate - other


2,998


2,915


2,910


11


4


Total commercial real estate


3,372


3,319


3,264


6


4


Commercial and industrial loans 


1,902


1,875


1,804


6


7


Total commercial loans 


5,274


5,195


5,068


6


5














Total residential mortgages


2,510


2,397


2,103


19


26














Home equity 


389


393


410


(4)


(7)


Auto and other


732


725


718


4


3


Total consumer loans


1,121


1,118


1,128


1


(1)


Total loans


$                      8,905


$                      8,710


$                       8,299


9

%

10

%









































































DEPOSIT ANALYSIS




















Annualized Growth % 

(in millions)


September 30, 2018
Balance


June 30, 2018
Balance


December 31, 2017
Balance


Quarter ended
September 30, 2018


Year to Date


Demand


$                      1,564


$                      1,553


$                       1,606


3

%

(3)

%

NOW and other


844


858


735


(7)


20


Money market


2,447


2,620


2,776


(26)


(16)


Savings


738


748


742


(5)


(1)


Time deposits


3,173


3,060


2,890


15


13


Total deposits 


$                      8,766


$                      8,839


$                       8,749


(3)

%

0

%













 

 

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)

2018


2017


2018


2017

Interest and dividend income    








Loans

$         104,273


$           76,024


$           298,757


$            216,950

Securities and other    

14,918


13,036


44,553


37,485

Total interest and dividend income    

119,191


89,060


343,310


254,435

Interest expense








Deposits

21,460


10,984


54,553


30,053

Borrowings

8,390


6,078


22,825


15,953

Total interest expense    

29,850


17,062


77,378


46,006

Net interest income

89,341


71,998


265,932


208,429

Non-interest income








Mortgage banking originations

8,971


13,374


29,313


42,333

Loan related income

7,537


6,081


19,524


15,535

Deposit related fees

7,004


6,445


22,675


19,294

Insurance commissions and fees    

2,930


2,581


8,504


8,305

Wealth management fees    

2,283


2,315


7,160


7,127

Total fee income    

28,725


30,796


87,176


92,594

Other

468


(2,255)


1,891


(2,438)

Securities gains/(losses), net     

88


(1)


(696)


12,568

Gain on sale of business operations and assets, net

-


296


460


296

(Loss) on termination of hedges

-


-


-


(6,629)

Total non-interest income      

29,281


28,836


88,831


96,391

Total net revenue

118,622


100,834


354,763


304,820

Provision for loan losses   

6,628


4,900


18,735


14,884

Non-interest expense








Compensation and benefits

39,923


37,643


123,241


110,759

Occupancy and equipment     

10,144


8,267


30,456


25,971

Technology and communications

7,949


6,644


22,138


19,614

Marketing and promotion     

1,484


2,128


6,465


7,304

Professional services

1,867


2,247


5,059


6,888

FDIC premiums and assessments

1,640


1,651


4,246


4,537

Other real estate owned and foreclosures

(1)


(23)


67


35

Amortization of intangible assets     

1,218


739


3,732


2,310

Merger, restructuring and other expense 

198


1,420


6,138


16,005

Other

6,555


5,104


18,641


16,246

Total non-interest expense     

70,977


65,820


220,183


209,669









Income before income taxes       

41,017


30,114


115,845


80,267

Income tax expense

8,790


7,211


24,339


22,210

Net income 

$           32,227


$           22,903


$             91,506


$              58,057

Preferred stock dividend

230


-


689


-

Income available to common shareholders

$           31,997


$           22,903


$             90,817


$              58,057









Earnings per common share:








Basic

$               0.70


$               0.57


$                 1.99


$                  1.55

Diluted

$               0.70


$               0.57


$                 1.98


$                  1.54









Weighted average shares outstanding:      








Basic

46,030


39,984


46,009


37,547

Diluted

46,263


40,145


46,226


37,708









 

 

BERKSHIRE HILLS BANCORP, INC.

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




Sept. 30,


June 30,


March 31,


Dec. 31,


Sept. 30,


(in thousands, except per share data)

2018


2018


2018


2017


2017


Interest and dividend income    











Loans

$      104,273


$      101,649


$        92,835


$        91,149


$        76,024


Securities and other    

14,918


15,230


14,405


14,674


13,036


Total interest and dividend income    

119,191


116,879


107,240


105,823


89,060


Interest expense











Deposits

21,460


17,768


15,325


13,802


10,984


Borrowings

8,390


7,990


6,445


5,655


6,078


Total interest expense    

29,850


25,758


21,770


19,457


17,062


Net interest income

89,341


91,121


85,470


86,366


71,998


Non-interest income











Mortgage banking originations

8,971


10,195


10,147


11,918


13,374


Loan related income

7,537


6,549


5,438


5,866


6,081


Deposit related fees

7,004


7,605


8,066


7,871


6,445


Insurance commissions and fees    

2,930


2,549


3,025


2,284


2,581


Wealth management fees    

2,283


2,280


2,597


2,268


2,315


Total fee income    

28,725


29,178


29,273


30,207


30,796


Other

468


155


1,268


(939)


(2,255)


Securities gains/(losses), net     

88


718


(1,502)


30


(1)


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

-


(21)


481


-


296


(Loss) on termination of hedges

-


-


-


-


-


Total non-interest income      

29,281


30,030


29,520


29,298


28,836


Total net revenue

118,622


121,151


114,990


115,664


100,834


Provision for loan losses   

6,628


6,532


5,575


6,141


4,900


Non-interest expense











Compensation and benefits

39,923


41,134


42,184


42,220


37,643


Occupancy and equipment     

10,144


10,230


10,082


9,451


8,267


Technology and communications

7,949


7,359


6,830


6,286


6,644


Marketing and promotion  

1,484


2,369


2,612


4,573


2,128


Professional services

1,867


1,139


2,053


2,277


2,247


FDIC premiums and assessments

1,640


1,411


1,195


1,920


1,651


Other real estate owned and foreclosures

(1)


1


67


9


(23)


Amortization of intangible assets     

1,218


1,246


1,268


1,183


739


Merger, restructuring and other expense 

198


847


5,093


15,553


1,420


Other

6,555


6,601


5,485


6,569


5,104


Total non-interest expense     

70,977


72,337


76,869


90,041


65,820













Income before income taxes

41,017


42,282


32,546


19,482


30,114


Income tax expense 

8,790


8,251


7,298


22,292


7,211


Net income/(loss)

$        32,227


$        34,031


$        25,248


$         (2,810)


$        22,903


Preferred stock dividend

230


229


230


219


-


Income/(loss) available to common shareholders

$        31,997


$        33,802


$        25,018


$         (3,029)


$        22,903
























Earnings/(loss) per common share:











Basic 

$            0.70


$            0.74


$            0.55


$           (0.06)


$            0.57


Diluted 

$            0.70


$            0.74


$            0.55


$           (0.06)


$            0.57













Weighted average shares outstanding:      











Basic

46,030


46,032


45,966


45,122


39,984


Diluted

46,263


46,215


46,200


45,122


40,145
























 

 

 

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,




2018


2018


2018


2017


2017














Earning assets 












Loans:












Commercial real estate


4.67

%

5.08

%

4.76

%

4.73

%

4.64

%

Commercial and industrial loans


6.22


5.73


5.19


5.25


5.09


Residential mortgages


3.66


3.72


3.56


3.76


3.68


Consumer loans


4.27


4.13


4.01


3.94


3.88


Total loans


4.66


4.73


4.45


4.47


4.33


Securities


3.36


3.47


3.26


3.55


3.43


Short-term investments and loans held for sale


3.82


3.86


3.43


2.90


3.40


Total earning assets


4.41


4.48


4.21


4.27


4.13














Funding liabilities












Deposits:












NOW and other


0.58


0.44


0.28


0.25


0.26


Money market


0.92


0.88


0.73


0.66


0.57


Savings


0.15


0.14


0.14


0.14


0.14


Time


1.76


1.54


1.40


1.25


1.20


Total interest-bearing deposits


1.18


1.02


0.90


0.82


0.78


Borrowings


2.42


2.29


2.02


1.81


1.65


Total interest-bearing liabilities


1.38


1.23


1.08


0.97


0.96














Net interest spread


3.03


3.25


3.13


3.30


3.17


Net interest margin (1)


3.32


3.50


3.36


3.50


3.36














Cost of funds (2)


1.16


1.03


0.90


0.81


0.82


Cost of deposits 


0.96


0.83


0.73


0.66


0.64














(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:  0.17%, 0.25%, 0.13%, 0.21%, 0.14%. 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


Sept. 30, 


June 30, 


March 31, 


Dec. 31, 


Sept. 30, 


(in thousands)

2018


2018


2018


2017


2017


Assets











Loans











Commercial real estate

$            3,331,097


$            3,316,482


$            3,250,861


$            3,161,902


$            2,669,558


Commercial and industrial loans

1,824,369


1,773,722


1,811,433


1,645,719


1,183,980


Residential mortgages

2,459,943


2,268,886


2,138,544


2,081,548


1,977,538


Consumer loans

1,120,942


1,113,089


1,114,586


1,123,683


1,030,032


Total loans (1) 

8,736,351


8,472,179


8,315,424


8,012,852


6,861,108


Securities (2)

1,928,851


1,931,104


1,933,002


1,921,724


1,779,379


Short-term investments and loans held for sale

167,187


146,190


139,161


146,101


167,724


Total earning assets

10,832,389


10,549,473


10,387,587


10,080,677


8,808,211


Goodwill and other intangible assets

554,359


554,591


557,321


533,157


420,853


Other assets

523,747


506,954


521,745


516,802


402,188


Total assets

$          11,910,495


$          11,611,018


$          11,466,653


$          11,130,636


$            9,631,252













Liabilities and shareholders' equity











Deposits 











NOW and other

$               844,888


$               819,166


$               712,181


$               702,353


$               570,864


Money market

2,348,516


2,524,713


2,518,920


2,371,203


1,768,108


Savings

740,765


749,995


743,944


733,157


669,690


Time

3,274,518


2,878,846


2,913,512


2,906,423


2,587,702


Total interest-bearing deposits

7,208,687


6,972,720


6,888,557


6,713,136


5,596,364


Borrowings

1,363,914


1,382,794


1,275,173


1,229,781


1,445,700


Total interest-bearing liabilities

8,572,601


8,355,514


8,163,730


7,942,917


7,042,064


Non-interest-bearing demand deposits

1,635,564


1,619,470


1,656,260


1,591,431


1,196,451


Other liabilities 

144,401


102,583


137,976


127,562


131,003


Total liabilities

10,352,566


10,077,567


9,957,966


9,661,910


8,369,518













Preferred shareholders' equity

40,633


40,633


40,633


34,892


-


Common shareholders' equity

1,517,296


1,492,818


1,468,054


1,433,834


1,261,734


Total shareholders' equity

1,557,929


1,533,451


1,508,687


1,468,726


1,261,734


Total liabilities and shareholders' equity

$          11,910,495


$          11,611,018


$          11,466,653


$          11,130,636


$            9,631,252
























Supplementary data











Total average non-maturity deposits

$            5,569,733


$            5,713,344


$            5,631,305


$            5,398,144


$            4,205,113


Total average deposits 

8,844,251


8,592,190


8,544,817


8,304,567


6,792,815


Fully taxable equivalent income adjustment

1,807


2,033


1,820


3,122


2,950


Purchased loan accretion

4,548


6,881


3,433


5,507


3,066


Total average tangible equity (3)

1,003,570


978,860


951,366


935,569


840,881













(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



Sept. 30,


June 30,


March 31,


Dec. 31,


Sept. 30,


(in thousands)


2018


2018


2018


2017


2017


NON-PERFORMING ASSETS












Non-accruing loans:












Commercial real estate


$          22,639


$          10,338


$          10,084


$            7,266


$            5,228


Commercial and industrial loans


4,914


4,029


7,430


7,311


9,681


Residential mortgages


2,683


3,196


5,777


2,883


3,092


Consumer loans


4,401


5,466


5,996


5,438


4,350


Total non-accruing loans


34,637


23,029


29,287


22,898


22,351


Other real estate owned


-


-


-


-


288


Repossessed assets


1,069


1,241


1,241


1,147


-


Total non-performing assets


$          35,706


$          24,270


$          30,528


$          24,045


$          22,639














Total non-accruing loans/total loans


0.39%


0.26%


0.35%


0.28%


0.32%


Total non-performing assets/total assets


0.30%


0.20%


0.27%


0.21%


0.23%














PROVISION AND ALLOWANCE FOR LOAN LOSSES











Balance at beginning of period


$          55,925


$          53,859


$          51,834


$          49,004


$          47,359


Charged-off loans


(4,471)


(5,714)


(3,791)


(3,734)


(3,796)


Recoveries on charged-off loans


375


1,248


241


423


541


Net loans charged-off


(4,096)


(4,466)


(3,550)


(3,311)


(3,255)


Provision for loan losses


6,628


6,532


5,575


6,141


4,900


Balance at end of period


$          58,457


$          55,925


$          53,859


$          51,834


$          49,004














Allowance for loan losses/total loans


0.66%


0.64%


0.64%


0.62%


0.71%


Allowance for loan losses/non-accruing loans


169%


243%


184%


226%


219%














NET LOAN CHARGE-OFFS












Commercial real estate


$          (3,074)


$          (2,079)


$             (817)


$             (881)


$          (1,425)


Commercial and industrial loans


(189)


(1,193)


(972)


(960)


(573)


Residential mortgages


61


(632)


(406)


(759)


130


Home equity 


(242)


108


(588)


(123)


(634)


Auto and other consumer


(652)


(670)


(767)


(588)


(753)


Total, net


$          (4,096)


$          (4,466)


$          (3,550)


$          (3,311)


$          (3,255)














Net charge-offs (QTD annualized)/average loans 

0.19%


0.21%


0.17%


0.17%


0.19%


Net charge-offs (YTD annualized)/average loans 

0.19%


0.19%


0.17%


0.19%


0.20%














DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS










30-89 Days delinquent


0.38%


0.22%


0.39%


0.35%


0.25%


90+ Days delinquent and still accruing


0.22%


0.40%


0.23%


0.20%


0.17%


Total accruing delinquent loans


0.60%


0.62%


0.62%


0.55%


0.42%


Non-accruing loans


0.39%


0.26%


0.35%


0.28%


0.32%


Total delinquent and non-accruing loans


0.99%


0.88%


0.97%


0.83%


0.74%














 

 

 

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)


2018


2018


2018


2017


2017


Net income/(loss)


$       32,227


$       34,031


$       25,248


$       (2,810)


$       22,903


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


(88)


(718)


1,502


(30)


1


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

-


21


(481)


-


(296)


Adj: Merger and acquisition expense


198


847


5,093


15,553


1,110


Adj: Restructuring expense and other expense


-


-


-


-


310


Adj: Employee and community investment


-


-


-


3,400


-


Adj: Deferred tax asset impairment


-


-


-


18,145


-


Adj: Income taxes


(92)


(105)


(1,481)


(7,963)


(474)


Total core income (2)

(A)

$       32,245


$       34,076


$       29,881


$       26,295


$       23,554














Total revenue 


$     118,622


$     121,151


$     114,990


$     115,664


$     100,834


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


(88)


(718)


1,502


(30)


1


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

-


21


(481)


-


(296)


Total core revenue (2)

(B)

$     118,534


$     120,454


$     116,011


$     115,634


$     100,539














Total non-interest expense


$       70,977


$       72,337


$       76,869


$       90,041


$       65,820


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


(198)


(847)


(5,093)


(15,553)


(1,420)


Less: Employee and community investment


-


-


-


(3,400)


-


Core non-interest expense (2)                                    

(C)

$       70,779


$       71,490


$       71,776


$       71,088


$       64,400














(in millions, except per share data)












Total average assets                                                

(D)

$       11,910


$       11,611


$       11,467


$       11,131


$         9,631


Total average shareholders' equity                         

(E)

1,558


1,533


1,509


1,469


1,262


Total average tangible shareholders' equity (2)                        

(F)

1,004


979


951


936


841


Total average tangible common shareholders' equity (2)                        

(G)

963


938


911


901


841


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

(H)

979


961


941


939


864


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

(I)

939


921


901


898


864


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

(J)

11,477


11,347


10,963


11,013


9,346














Total common shares outstanding, period-end (thousands)               

(K)

45,420


45,420


45,360


45,290


40,424


Average diluted shares outstanding (thousands)

(L)

46,263


46,215


46,200


45,383


40,145














Core earnings per common share, diluted(2)

(A/L)

$           0.70


$           0.74


$           0.65


$           0.58


$           0.59


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

(I/K)

20.68


20.28


19.86


19.83


21.38


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

(H)/(J)

8.53


8.47


8.59


8.53


9.25














Performance ratios (4)












GAAP return on assets


1.08

%

1.17

%

0.88

%

(0.10)

%

0.95

%

Core return on assets (2)

(A/D)

1.08


1.17


1.04


0.94


0.98


GAAP return on equity 


8.27


8.88


6.69


(0.77)


7.26


Core return on equity (2)

(A/E)

8.28


8.89


7.92


7.16


7.47


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

(A+O)/(G)

13.67


14.82


13.43


11.90


11.42


Efficiency ratio (2)(6)                                                                                

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

57.15


56.37


59.54


57.43


59.28


Net interest margin


3.32


3.50


3.36


3.50


3.36














Supplementary data (in thousands)












Tax benefit on tax-credit investments (7)

(M)

$         1,374


$         2,119


$            596


$         2,957


$         3,905


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

(N)

(1,112)


(1,594)


(506)


(2,564)


(3,347)


Net income on tax-credit investments

(M+N)

262


525


90


393


558














Intangible amortization

(O)

$         1,218


$         1,246


$         1,268


$         1,183


$            739


Fully taxable equivalent income adjustment 

(P)

1,807


2,033


1,820


3,122


2,950






































(1) Net securities (gains)/losses for the periods ending March 31, 2018, June 30, 2018, and September 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 Nine Months Ended




September 30,


September 30,



(Dollars in thousands)


2018


2017



Net (loss)/income 


$                   91,506


$                   58,057



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


696


(12,568)



Adj: Loss on termination of hedges


-


6,629



Adj: Net (gains) on sale of business operations


(460)


(296)



Adj: Merger and acquisition expenses


6,138


9,323



Adj: Restructuring expense and other


-


6,682



Adj: Income taxes


(1,678)


(3,314)



Total core income (2)

(A)

$                   96,202


$                   64,513










Total revenue 


$                 354,763


$                 304,820



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


696


(12,568)



Adj: Net (gains) on sale of business operations


(460)


(296)



Adj: Loss on termination of hedges


-


6,629



Total core revenue(2)

(B)

$                 354,999


$                 298,585



Total non-interest expense


$                 220,183


$                 209,669



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


(6,138)


(16,005)



Core non-interest expense (2)                                    

(C)

$                 214,045


$                 193,664










(in millions, except per share data)







Total average assets                                                

(D)

$                   11,687


$                     9,369



Total average shareholders' equity                         

(E)

1,534


1,167



Total average tangible shareholders' equity (2)                        

(F)

978


746



Total average tangible common shareholders' equity (2)                        

(G)

937


-



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

(H)

979


864



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

(I)

939


-



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

(J)

11,477


9,346



Total common shares outstanding, period-end (thousands)               

(K)

45,420


40,424



Average diluted shares outstanding (thousands)

(L)

46,226


37,708



Core earnings per common share, diluted(2)

(A/L)

$                       2.08


$                       1.71



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

(I/K)

20.68


21.38



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

(H)/(J)

8.53


9.25










Performance ratios (4)







GAAP return on assets


1.05

%

0.83

%


Core return on assets (2)

(A/D)

1.10


0.92



GAAP return on equity 


7.96


6.63



Core return on equity (2)

(A/E)

8.36


7.37



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

(A+O)/(G)

13.97


11.78



Efficiency ratio (2)(6)                                                                               

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

57.66


60.96



Net interest margin


3.39


3.35










Supplementary data







Tax benefit on tax-credit investments (7)

(M)

$                     4,089


$                     7,225



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

(N)

(3,212)


(6,129)



Net income on tax-credit investments

(M+N)

877


1,096










Intangible amortization

(O)

3,732


2,310



Fully taxable equivalent income adjustment

(P)

5,660


8,105























(1) Net securities losses/(gains) for the period ending September 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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