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Press Release

Berkshire Hills Reports First Quarter Results; Dividends Declared; Board Authorizes 2.4 Million Share Repurchase Program

Company Release - 4/29/2019 4:10 PM ET

BOSTON, April 29, 2019 /PRNewswire/ -- Berkshire Hills Bancorp, Inc. (NYSE: BHLB) reported GAAP net income of $24 million, or $0.51 per share, in the first quarter of 2019.  The non-GAAP measure of core earnings totaled $28 million, or $0.60 per share.  Non-core expenses were primarily composed of merger and restructuring charges.

(PRNewsfoto/Berkshire Hills Bancorp, Inc.)

FIRST QUARTER FINANCIAL HIGHLIGHTS (balance sheet metrics are compared to prior quarter-end):

  • $0.51 GAAP EPS; $0.60 Core EPS
  • 59.5% efficiency ratio
  • 98% loans/deposits, improved from 101%
  • 13.0% equity/assets, improved from 12.7%
  • 0.15% net loan charge-offs/average loans
  • 0.26% non-performing assets/assets

CEO Richard Marotta stated, "We brought in the first quarter of 2019 on plan and initiated a process of refocusing our operations on profitable customer relationship business.  Our focus is also on driving efficiencies while supporting key market objectives.  The results of this work will unfold over the year as we target to support our profitability in light of lower purchased loan accretion from past bank acquisitions.  Our goal in accomplishing this is to create a platform for growth in per share earnings and profitability following this year of transition.  Part of this shift was our decision during the quarter to pursue the sale of the national mortgage banking operations of our First Choice Loan Services, Inc. subsidiary.   This team has a long track record and national recognition that we believe will be attractive to a partner with complementary scale and presence in the evolving mortgage business.  We will continue to offer competitive residential mortgage lending within our regional footprint through our Berkshire Bank Home Lending team."

Mr. Marotta continued, "We're moving along well with our planned acquisition of SI Financial Group, which was approved by their shareholders earlier this month.  This acquisition is on track to be completed during the second quarter.  We're pleased to be working well with the Savings Institute team on our integration plans, including a systems conversion targeted in October.  During the quarter, we completed the consolidation of six existing Berkshire branches with minimal customer relationship impact expected as a result of our other strong delivery channels including other nearby branches, our MyBanker platform, and our digital channels.  I'm also pleased to announce that our Board recently formed a Corporate Responsibility and Culture Committee, which will oversee our important initiatives including diversity and inclusion in our workforce.   I'm proud of the work of our teams which is summarized in our first annual Corporate Social Responsibility Report, which is available on our web site at ir.berkshirebank.com."

DIVIDEND INCREASED

The Board of Directors approved a quarterly cash dividend of $0.23 per common share to shareholders of record at the close of business on May 9, 2019, payable on May 23, 2019.  The dividend equates to a 3.4% annualized yield based on the $27.24 closing price of Berkshire Hills Bancorp stock at the end of the quarter.  Effective on the same dates, the Board also approved a quarterly cash dividend on preferred stock totaling $0.46 per share.  The Board had approved a 5% increase in the common and preferred dividend following the start of the year.

STOCK REPURCHASE AUTHORIZATION

The Board authorized the repurchase of 2.4 million common shares for the period expiring on March 31, 2020.  This replaces the Company's existing unused 500,000 share repurchase authorization.  Berkshire CFO Jamie Moses stated "We're focused on the profitability metrics that drive shareholder value and plan to adjust our balance sheet and capital allocation opportunistically based on our strategic plan and to support shareholder value."  The authorization does not constitute a commitment to repurchase shares and share repurchases are subject to regulatory approval, as well as market and other conditions.  This authorization is equivalent to approximately 4.7% of Berkshire's outstanding shares including 5.7 million shares expected to be issued as merger consideration for the SI Financial Group acquisition.  Under the authorization, stock repurchases may be made through open market purchases, block trades, privately negotiated transactions, or pursuant to a trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission. 

DISCONTINUED OPERATIONS

For financial reporting purposes, the national mortgage banking operations of First Choice Loan Services, Inc. ("FCLS") have been classified as discontinued while the Company pursues the sale of these operations in 2019.  FCLS continues to serve its markets while this sale is being pursued.  Amounts and balances related to these operations have been separately classified in the accompanying unaudited statements of income and financial condition.  The operations of FCLS have been reported as discontinued operations retrospectively for all periods presented.  Revenue and expense shown in the unaudited statement of income exclude amounts related to FCLS.   Discontinued operations are not viewed as part of the Company's normalized operations and have been classified as non-core.  FCLS mortgage loans held for sale and related borrowings have also been classified as discontinued operations.

FINANCIAL CONDITION

Total assets were unchanged at $12.2 billion in the first quarter.  Total loans decreased by 1% as lending operations were targeted toward higher profitability customer relationship strategies.  The Company has ceased originating indirect auto loans and as a result is targeted to have less future reliance on higher cost wholesale funds as the existing portfolio seasons and is paid down.  Total deposits increased by 2%, half of which was due to daily fluctuations of payroll deposits which ended the period at $562 million, compared to $467 million at the start of the period.  Excluding payroll impacts, most of the growth was in time deposits.   Liquidity, capital, and asset quality metrics improved compared to the prior quarter.  Book value per common share increased by 1.4% to $33.75 and the non-GAAP measure of tangible book value per common share improved by 2.4% to $21.66.  Pursuant to the adoption of new accounting requirements, approximately $80 million has been recorded to other assets and other liabilities related to assets in use through lease arrangements.  

RESULTS OF OPERATIONS

GAAP earnings were $0.51 per share in the most recent quarter, compared to $0.31 in the prior quarter and to $0.55 in the first quarter of 2018.  Results in all periods were affected by significant non-core charges.  Core results in prior periods have been retrospectively adjusted to exclude national mortgage banking operations.  The $0.09 per share in after-tax net non-core items in the most recent quarter included approximately $0.04 in unrealized securities gains, $0.01 in loss from discontinued operations, $0.03 in merger charges, and $0.09 in restructuring and other charges.

Core earnings per share were $0.60 in the most recent quarter, decreasing quarter-over-quarter and year-over-year primarily due to the impact of lower purchased loan accretion.  The per share after-tax contribution from accretion decreased by $0.11 quarter-over-quarter and by $0.03 year-over-year.   Due to the seasoning of the acquired loan portfolio, the benefit of this accretion is expected to be lower in 2019 compared to 2018.  The Company's current strategic review is intended to offset this impact through balance sheet adjustments, line of business review, expense reductions, and capital management.  The return on equity measured 6.0% in the most recent quarter.  The non-GAAP measure of core return on tangible common equity was 11.4% in the most recent quarter. 

The net interest margin was 3.17% in the most recent quarter, including a contribution of 0.05% from purchased loan accretion.  Measured before accretion, the margin was 3.12%, which was up 0.01% over the prior quarter.  Most yields and costs rose quarter-over quarter due to the 0.25% increase in the target Fed Funds rate in the fourth quarter of 2018, including a 0.12% increase in deposit costs. 

Fee income increased by $1 million quarter-over-quarter due to higher SBA loan sale gains, including gains on fourth quarter loans which could not be sold during the federal government shutdown.  National mortgage banking revenue had been the largest source of fee income in recent years.  Fee income has been retrospectively adjusted to exclude these revenues, which has reduced the revenue contribution from non-interest income.   The fourth quarter loan loss  provision exceeded net charge-offs and the ratio of the loan loss allowance to loans increased to 0.69% from 0.68%.

GAAP non-interest expense decreased quarter-over-quarter, due to lower non-core expenses.  The efficiency ratio measured 59.5% in the most recent quarter.  Branch consolidations completed in the first quarter are expected to contribute to improved efficiency in future periods.  Excluding FCLS, full time equivalent staff totaled 1,457 positions at first quarter-end, compared to 1,485 at the start of the quarter.  This 2% reduction was due to various efficiency initiatives undertaken during the quarter.  FCLS full time equivalent staff totaled 431 positions at quarter-end.  The effective income tax rate measured 22% in the first quarter of 2019.

STRATEGIC REVIEW

Before the conference call, the Company will post a slide presentation summarizing its strategic review on its web site at ir.berkshirebank.com.

INVESTOR CONFERENCE CALL

Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Tuesday, April 30, 2019 to discuss the results for the quarter, the results of its strategic review, and guidance about expected future results. Participants are encouraged to pre-register for the conference call using the following link:  dpregister.com/10130208.  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 the Company's website at 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 Tuesday, May 07, 2019 by dialing 877-344-7529 and entering access number 10130208.  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, a premier regional bank distinguished by its local responsiveness and engagement.  With corporate headquarters in Boston, the Company operates in six Northeastern states, with $12.2 billion in assets and 109 banking offices.  Berkshire has a pending agreement to acquire SI Financial Group, Inc., the parent of Savings Institute Bank & Trust Company, a $1.6 billion bank with 23 branches in eastern Connecticut and southern Rhode Island.

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 page F-9 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, restructuring costs, and discontinued operations.  Merger costs consist primarily of severance/benefit related expenses, contract termination costs, systems conversion costs, variable compensation expenses, and professional fees.  Merger costs in 2018 and 2019 are primarily related to the acquisitions of Commerce Bancshares Corp. and SI Financial Group (pending).  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.  Restructuring costs also include severance and consulting expenses related to the Company's strategic review.   Discontinued operations are the Company's national mortgage banking operations for which the Company is pursuing sale opportunities.

In 2018, the Company recorded $8 million in charges related to the restructuring of banking systems vendor relationships.  The Company recorded a $3 million cost for the pending settlement of an existing legal proceeding with a plaintiff claiming to be representing a class of depositors.  Non-core charges in 2018 also included a $1.5 million net charge related to the CEO transition. 

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
Erin E. Duggan; Investor Relations Manager; 413-236-3773

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)

 

BERKSHIRE HILLS BANCORP, INC.

SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED - (F-1)





At or for the Quarters Ended (2)





March 31,


Dec. 31,


Sept. 30,


June 30,


March 31,






2019


2018


2018


2018


2018

















PER SHARE DATA













Net earnings per common share, diluted

$          0.51


$          0.31


$          0.70


$          0.74


$          0.55




Core earnings per common share, diluted (1)

0.60


0.69


0.72


0.73


0.65




Total book value per common share

33.75


33.30


32.84


32.49


32.12




Tangible book value per common share (1)

21.66


21.15


20.68


20.28


19.86




Market price at period end

27.24


26.97


40.70


40.60


37.95




Dividends per common share

0.23


0.22


0.22


0.22


0.22




Dividends per preferred share

0.46


0.44


0.44


0.44


0.44

















PERFORMANCE RATIOS (3)













Return on assets

0.78

%

0.47

%

1.08

%

1.17

%

0.88

%



Core return on assets (1)

0.92


1.07


1.12


1.18


1.06




Return on equity

5.97


3.61


8.27


8.88


6.69




Core return on equity (1)

7.00


8.09


8.49


8.81


7.95




Core return on tangible common equity (1)

11.44


13.21


14.02


14.68


13.48




Net interest margin, fully taxable equivalent (FTE) (4)(5)

3.17


3.41


3.32


3.50


3.36




Fee income/Net interest and fee income from continuing operations

17.56


15.59


18.06


17.21


18.03




Efficiency ratio (1)

59.54


54.88


52.20


52.42


55.10

















GROWTH (Year-to-date)













Total commercial loans (annualized)

(3)

%

6

%

5

%

5

%

1

%



Total loans (annualized)

(4)


9


10


10


4




Total deposits (annualized)

8


3


0


2


(3)




Total net revenues from continuing operations (compared to prior year)

3


17


22


21


16




Earnings per common share (compared to prior year) 

(7)


65


28


33


25




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

(8)


32


37


36


28

















FINANCIAL DATA (in millions)













Total assets


$      12,173


$      12,212


$      12,030


$      11,902


$      11,519




Total earning assets

11,039


11,140


10,957


10,827


10,442




Total securities

1,881


1,919


1,918


1,920


1,932




Total loans


8,947


9,043


8,905


8,710


8,376




Allowance for loan losses

62


61


58


56


54




Total intangible assets

551


552


553


555


556




Total deposits


9,166


8,982


8,766


8,839


8,683




Total shareholders' equity

1,577


1,553


1,532


1,516


1,498




Net income


23.6


14.3


32.2


34.0


25.2




Core income (1)

27.7


32.0


33.1


33.8


30.0




Purchased loan accretion

1.3


8.2


4.5


6.9


3.4

















ASSET QUALITY AND CONDITION RATIOS 













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

0.15

%

0.17

%

0.19

%

0.21

%

0.17

%



Total non-performing assets/total assets

0.26


0.28


0.30


0.20


0.27




Allowance for loan losses/total loans

0.69


0.68


0.66


0.64


0.64




Loans/deposits

98


101


102


99


96




Shareholders' equity to total assets

12.95


12.72


12.74


12.74


13.00




Tangible shareholders' equity to tangible assets (1)

8.83


8.59


8.53


8.47


8.59

















(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 page F-9 for reconciliations of non-GAAP financial measures.







(2)

Reconciliations of non-GAAP financial measures, including all references to core and tangible amounts, appear on page F-9.







(3)

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









(4)

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










(5)

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: 0.05%, 0.30%, 0.17%, 0.25%, 0.13%.







 

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-2)


March 31,


December 31,


(in thousands)

2019


2018


Assets





Cash and due from banks

$              98,689


$                100,972


Short-term investments

68,930


82,217


Total cash and short-term investments

167,619


183,189







Trading security

11,164


11,212


Marketable equity securities, at fair value

59,121


56,638


Securities available for sale, at fair value

1,386,768


1,399,647


Securities held to maturity, at amortized cost

369,331


373,763


Federal Home Loan Bank stock and other restricted securities

54,624


77,344


Total securities

1,881,008


1,918,604







Loans held for sale, at fair value

4,773


2,183







Commercial real estate loans

3,388,139


3,400,221


Commercial and industrial loans

1,957,339


1,980,046


Residential mortgages

2,544,824


2,566,424


Consumer loans

1,057,193


1,096,562


Total loans

8,947,495


9,043,253


Less: Allowance for loan losses

(62,038)


(61,469)


Net loans

8,885,457


8,981,784







Premises and equipment, net

105,651


106,500


Other real estate owned

-


-


Goodwill 

518,325


518,325


Other intangible assets

32,219


33,418


Cash surrender value of bank-owned life insurance

191,768


190,609


Deferred tax asset, net

38,783


42,434


Other assets

182,720


120,926


Assets from discontinued operations

165,078


114,259


Total assets 

$       12,173,401


$           12,212,231







Liabilities and shareholders' equity





Demand deposits

$         1,526,584


$             1,603,019


NOW and other deposits

820,177


1,122,321


Money market deposits

2,743,448


2,245,195


Savings deposits

731,711


724,129


Time deposits

3,344,495


3,287,717


Total deposits

9,166,415


8,982,381







Senior borrowings

995,271


1,345,467


Subordinated borrowings

89,562


89,518


Total borrowings

1,084,833


1,434,985







Other liabilities 

204,725


149,519


Liabilities from discontinued operations

140,423


92,428


Total liabilities

10,596,396


10,659,313







Preferred shareholders' equity

40,633


40,633


Common shareholders' equity

1,536,372


1,512,285


Total shareholders' equity

1,577,005


1,552,918


Total liabilities and shareholders' equity

$       12,173,401


$           12,212,231







Net common shares outstanding 

45,522


45,417


 

BERKSHIRE HILLS BANCORP, INC.

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

LOAN ANALYSIS























Annualized Growth % 

(in millions)


March 31, 2019
Balance


December 31, 2018
Balance


Quarter ended
March 31, 2019










Total commercial real estate


$                      3,388


$                       3,400


(1)

%

Commercial and industrial loans 


1,957


1,980


(5)


Total commercial loans 


5,345


5,380


(3)










Total residential mortgages


2,545


2,566


(3)










Home equity 


365


377


(13)


Auto and other


692


720


(16)


Total consumer loans


1,057


1,097


(15)


Total loans


$                      8,947


$                       9,043


(4)

%

















































DEPOSIT ANALYSIS














Annualized Growth % 

(in millions)


March 31, 2019
Balance


December 31, 2018
Balance


Quarter ended
March 31, 2019


Demand


$                      1,527


$                       1,603


(19)

%

NOW and other


820


1,122


(108)


Money market


2,743


2,245


89


Savings


732


724


4


Time deposits


3,344


3,288


7


Total deposits 


$                      9,166


$                       8,982


8

%

 

BERKSHIRE HILLS BANCORP, INC.


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



Three Months Ended



March 31,


(in thousands, except per share data)

2019


2018


Interest and dividend income from continuing operations    





Loans

$         105,651


$           91,741


Securities and other    

15,458


14,405


Total interest and dividend income    

121,109


106,146


Interest expense from continuing operations 





Deposits

26,622


15,325


Borrowings

9,028


6,064


Total interest expense    

35,650


21,389


Net interest income from continuing operations

85,459


84,757


Non-interest income from continuing operations 





Mortgage banking originations

46


138


Loan related income

6,003


4,819


Deposit related fees

6,858


8,066


Insurance commissions and fees    

2,853


3,025


Wealth management fees    

2,441


2,597


Total fee income    

18,201


18,645


Other

970


1,268


Securities gains/(losses), net     

2,551


(1,502)


Gain on sale of business operations and assets, net

-


481


Total non-interest income      

21,722


18,892


Total net revenue from continuing operations

107,181


103,649


Provision for loan losses   

4,001


5,575


Non-interest expense from continuing operations





Compensation and benefits

33,500


33,847


Occupancy and equipment     

9,446


9,192


Technology and communications

6,257


6,484


Marketing and promotion     

1,267


1,222


Professional services

2,275


1,696


FDIC premiums and assessments

1,639


1,195


Other real estate owned and foreclosures

2


67


Amortization of intangible assets     

1,200


1,268


Merger, restructuring and other expense 

7,015


5,093


Other

9,390


5,302


Total non-interest expense     

71,991


65,366







Income from continuing operations before income taxes       

$           31,189


$           32,708


Income tax expense

6,917


7,337


Net income from continuing operations

$           24,272


$           25,371







(Loss) from discontinued operations before income taxes

$              (854)


$              (162)


Income tax (benefit)

(217)


(39)


Net (loss) from discontinued operations

$              (637)


$              (123)







Net income

$           23,635


$           25,248


Preferred stock dividend

240


230


Income available to common shareholders

$           23,395


$           25,018







Basic earnings per common share:





Continuing Operations

$               0.52


$               0.55


Discontinued Operations

(0.01)


-


Total

$               0.51


$               0.55







Diluted earnings per common share:





Continuing Operations

$               0.52


$               0.55


Discontinued Operations

(0.01)


-


Total

$               0.51


$               0.55







Weighted average shares outstanding:      





Basic

46,113


45,966


Diluted

46,261


46,200







 

BERKSHIRE HILLS BANCORP, INC.

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




March 31,


Dec. 31,


Sept. 30,


June 30,


March 31,


(in thousands, except per share data)

2019


2018


2018


2018


2018


Interest and dividend income from continuing operations    










Loans

$      105,651


$      111,576


$      102,651


$      100,254


$        91,741


Securities and other    

15,458


15,119


14,918


15,230


14,405


Total interest and dividend income    

121,109


126,695


117,569


115,484


106,146


Interest expense from continuing operations











Deposits

26,622


23,811


21,460


17,768


15,325


Borrowings

9,028


10,118


7,724


7,424


6,064


Total interest expense    

35,650


33,929


29,184


25,192


21,389


Net interest income from continuing operations

85,459


92,766


88,385


90,292


84,757


Non-interest income from continuing operations











Mortgage banking originations

46


148


15


334


138


Loan related income

6,003


5,087


7,246


6,003


4,819


Deposit related fees

6,858


7,131


7,004


7,605


8,066


Insurance commissions and fees    

2,853


2,479


2,930


2,549


3,025


Wealth management fees    

2,441


2,287


2,283


2,280


2,597


Total fee income    

18,201


17,132


19,478


18,771


18,645


Other

970


1,666


468


155


1,268


Securities gains/(losses), net     

2,551


(3,023)


88


718


(1,502)


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

-


-


-


(21)


481


Total non-interest income      

21,722


15,775


20,034


19,623


18,892


Total net revenue from continuing operations

107,181


108,541


108,419


109,915


103,649


Provision for loan losses   

4,001


6,716


6,628


6,532


5,575


Non-interest expense from continuing operations











Compensation and benefits

33,500


34,927


31,746


33,499


33,847


Occupancy and equipment     

9,446


9,366


9,145


9,224


9,192


Technology and communications

6,257


6,103


7,507


7,053


6,484


Marketing and promotion  

1,267


1,224


1,167


1,084


1,222


Professional services

2,275


3,302


1,481


864


1,696


FDIC premiums and assessments

1,639


1,488


1,640


1,411


1,195


Other real estate owned and foreclosures

2


1


(1)


1


67


Amortization of intangible assets     

1,200


1,202


1,218


1,246


1,268


Merger, restructuring and other expense 

7,015


16,006


198


847


5,093


Other

9,390


6,754


5,526


6,298


5,302


Total non-interest expense     

71,991


80,373


59,627


61,527


65,366













Income from continuing operations before income taxes

$        31,189


$        21,452


$        42,164


$        41,856


$        32,708


Income tax expense 

6,917


4,384


9,095


8,145


7,337


Net income from continuing operations

$        24,272


$        17,068


$        33,069


$        33,711


$        25,371













(Loss)/Income from discontinued operations before income taxes

$            (854)


$         (3,884)


$         (1,147)


$             426


$            (162)


Income tax (benefit)/expense

(217)


(1,075)


(305)


106


(39)


Net (loss)/income from discontinued operations

$            (637)


$         (2,809)


$            (842)


$             320


$            (123)













Net income

$        23,635


$        14,259


$        32,227


$        34,031


$        25,248


Preferred stock dividend

240


229


230


229


230


Income available to common shareholders

$        23,395


$        14,030


$        31,997


$        33,802


$        25,018
























Basic earnings per common share:











Continuing Operations

$            0.52


$            0.37


$            0.72


$            0.73


$            0.55


Discontinued Operations

(0.01)


(0.06)


(0.02)


0.01


-


Total

$            0.51


$            0.31


$            0.70


$            0.74


$            0.55













Diluted earnings per common share:











Continuing Operations

$            0.52


$            0.37


$            0.72


$            0.73


$            0.55


Discontinued Operations

(0.01)


(0.06)


(0.02)


0.01


-


Total

$            0.51


$            0.31


$            0.70


$            0.74


$            0.55













Weighted average shares outstanding:      











Basic

46,113


46,061


46,030


46,032


45,966


Diluted

46,261


46,240


46,263


46,215


46,200
























 

BERKSHIRE HILLS BANCORP, INC.

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



Quarters Ended



March 31,


Dec. 31,


Sept. 30,


June 30,


March 31,




2019


2018


2018


2018


2018














Earning assets 












Loans:












Commercial real estate


4.91

%

5.40

%

4.67

%

5.08

%

4.76

%

Commercial and industrial loans


5.83


5.97


6.22


5.73


5.19


Residential mortgages


3.74


3.72


3.66


3.72


3.56


Consumer loans


4.45


4.52


4.27


4.13


4.01


Total loans


4.73


4.94


4.66


4.73


4.45


Securities


3.52


3.38


3.36


3.47


3.26


Short-term investments and loans held for sale


3.59


3.74


3.82


3.86


3.43


Total earning assets


4.49


4.64


4.41


4.48


4.21














Funding liabilities












Deposits:












NOW and other


0.65


0.59


0.58


0.44


0.28


Money market


1.23


1.10


0.92


0.88


0.73


Savings


0.18


0.16


0.15


0.14


0.14


Time


2.07


1.93


1.76


1.54


1.40


Total interest-bearing deposits


1.44


1.31


1.18


1.02


0.90


Borrowings


3.02


2.67


2.42


2.29


2.02


Total interest-bearing liabilities


1.67


1.55


1.38


1.23


1.08














Net interest spread


2.82


3.09


3.03


3.25


3.13


Net interest margin


3.17


3.41


3.32


3.50


3.36














Cost of funds (1)


1.42


1.31


1.16


1.03


0.90


Cost of deposits 


1.19


1.07


0.96


0.83


0.73














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










 

BERKSHIRE HILLS BANCORP, INC.

AVERAGE BALANCES - UNAUDITED - (F-7)


Quarters Ended


March 31, 


Dec. 31, 


Sept. 30, 


June 30, 


March 31, 


(in thousands)

2019


2018


2018


2018


2018


Assets











Loans











Commercial real estate

$            3,377,902


$            3,373,936


$            3,331,097


$            3,316,482


$            3,250,861


Commercial and industrial loans

1,986,792


1,921,361


1,824,369


1,773,722


1,811,433


Residential mortgages

2,556,299


2,539,592


2,459,943


2,268,886


2,138,544


Consumer loans

1,079,583


1,112,433


1,120,942


1,113,089


1,114,586


Total loans (1) 

9,000,576


8,947,322


8,736,351


8,472,179


8,315,424


Securities (2)

1,895,768


1,933,891


1,928,851


1,931,104


1,933,002


Short-term investments and loans held for sale

67,367


51,827


47,752


36,136


45,600


Total earning assets (4)

10,963,711


10,933,040


10,712,954


10,439,419


10,294,026


Goodwill and other intangible assets

550,966


552,206


554,359


554,591


557,321


Other assets

557,442


494,377


501,739


486,616


505,046


Assets from discontinued operations

115,721


101,464


141,443


130,392


110,260


Total assets

$          12,187,840


$          12,081,087


$          11,910,495


$          11,611,018


$          11,466,653













Liabilities and shareholders' equity











Deposits 











NOW and other

$               963,043


$               920,225


$               844,888


$               819,166


$               712,181


Money market

2,378,496


2,339,699


2,348,516


2,524,713


2,518,920


Savings

736,707


728,853


740,765


749,995


743,944


Time

3,429,375


3,229,521


3,274,518


2,878,846


2,913,512


Total interest-bearing deposits

7,507,621


7,218,298


7,208,687


6,972,720


6,888,557


Borrowings

1,273,167


1,495,673


1,255,182


1,281,398


1,191,838


Total interest-bearing liabilities

8,780,788


8,713,971


8,463,869


8,254,118


8,080,395


Non-interest-bearing demand deposits

1,538,767


1,579,013


1,635,564


1,619,470


1,656,260


Other liabilities 

192,119


127,370


132,521


89,933


126,949


Liabilities from discontinued operations

92,629


79,659


120,612


114,046


94,362


Total liabilities

10,604,303


10,500,013


10,352,566


10,077,567


9,957,966













Preferred shareholders' equity

40,633


40,633


40,633


40,633


40,633


Common shareholders' equity

1,542,904


1,540,441


1,517,296


1,492,818


1,468,054


Total shareholders' equity

1,583,537


1,581,074


1,557,929


1,533,451


1,508,687


Total liabilities and shareholders' equity

$          12,187,840


$          12,081,087


$          11,910,495


$          11,611,018


$          11,466,653
























Supplementary data











Total average non-maturity deposits

$            5,617,013


$            5,567,790


$            5,569,733


$            5,713,344


$            5,631,305


Total average deposits 

9,046,388


8,797,311


8,844,251


8,592,190


8,544,817


Fully taxable equivalent income adjustment

1,809


1,763


1,807


2,033


1,820


Purchased loan accretion

1,320


8,247


4,548


6,881


3,433


Total average tangible equity (3)

1,032,571


1,028,868


1,003,570


978,860


951,366













(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.








(4) Excludes discontinued operations for presentation purposes. Performance ratios are calculated including the impact of discontinued operations. 


 

BERKSHIRE HILLS BANCORP, INC.

ASSET QUALITY ANALYSIS - UNAUDITED - (F-8)



At or for the Quarters Ended



March 31,


Dec. 31,


Sept. 30,


June 30,


March 31,


(in thousands)


2019


2018


2018


2018


2018


NON-PERFORMING ASSETS












Non-accruing loans:












Commercial real estate


$          18,513


$          20,372


$          22,639


$          10,338


$          10,084


Commercial and industrial loans


5,614


6,003


4,914


4,029


7,430


Residential mortgages


2,341


2,217


2,683


3,196


5,777


Consumer loans


4,038


3,834


4,401


5,466


5,996


Total non-accruing loans


30,506


32,426


34,637


23,029


29,287


Other real estate owned


-


-


-


-


-


Repossessed assets


742


1,209


1,069


1,241


1,241


Total non-performing assets


$          31,248


$          33,635


$          35,706


$          24,270


$          30,528














Total non-accruing loans/total loans


0.34%


0.36%


0.39%


0.26%


0.35%


Total non-performing assets/total assets


0.26%


0.28%


0.30%


0.20%


0.27%














PROVISION AND ALLOWANCE FOR LOAN LOSSES











Balance at beginning of period


$          61,469


$          58,457


$          55,925


$          53,859


$          51,834


Charged-off loans


(4,579)


(4,029)


(4,471)


(5,714)


(3,791)


Recoveries on charged-off loans


1,147


325


375


1,248


241


Net loans charged-off


(3,432)


(3,704)


(4,096)


(4,466)


(3,550)


Provision for loan losses


4,001


6,716


6,628


6,532


5,575


Balance at end of period


$          62,038


$          61,469


$          58,457


$          55,925


$          53,859














Allowance for loan losses/total loans


0.69%


0.68%


0.66%


0.64%


0.64%


Allowance for loan losses/non-accruing loans


203%


190%


169%


243%


184%














NET LOAN CHARGE-OFFS












Commercial real estate


$             (752)


$          (1,357)


$          (3,074)


$          (2,079)


$             (817)


Commercial and industrial loans


(1,580)


(1,538)


(189)


(1,193)


(972)


Residential mortgages


(95)


(108)


61


(632)


(406)


Home equity 


(257)


(116)


(242)


108


(588)


Auto and other consumer


(748)


(585)


(652)


(670)


(767)


Total, net


$          (3,432)


$          (3,704)


$          (4,096)


$          (4,466)


$          (3,550)














Net charge-offs (QTD annualized)/average loans 

0.15%


0.17%


0.19%


0.21%


0.17%


Net charge-offs (YTD annualized)/average loans 

0.15%


0.18%


0.19%


0.19%


0.17%














DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS










30-89 Days delinquent


0.22%


0.27%


0.38%


0.22%


0.39%


90+ Days delinquent and still accruing


0.23%


0.22%


0.22%


0.40%


0.23%


Total accruing delinquent loans


0.45%


0.49%


0.60%


0.62%


0.62%


Non-accruing loans


0.34%


0.36%


0.39%


0.26%


0.35%


Total delinquent and non-accruing loans


0.79%


0.85%


0.99%


0.88%


0.97%


 

BERKSHIRE HILLS BANCORP, INC.

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



At or for the Quarters Ended



March 31,


Dec. 31,


Sept. 30,


June 30,


March 31,


(in thousands)


2019


2018


2018


2018


2018


Net income


$       23,635


$       14,259


$       32,227


$       34,031


$       25,248


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


(2,551)


3,023


(88)


(718)


1,502


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

-


-


-


21


(481)


Adj: Merger and acquisition expense


1,609


2,792


198


847


5,093


Adj: Restructuring expense and other expense


5,406


1,822


-


-


-


Adj: Legal settlements


-


3,000


-


-


-


Adj: Systems vendor restructuring costs


-


8,379


-


-


-


Adj: Loss/(income) from discontinued operations before income taxes

854


3,884


1,147


(426)


162


Adj: Income taxes


(1,223)


(5,185)


(397)


-


(1,520)


Total core income (2)

(A)

$       27,730


$       31,974


$       33,087


$       33,755


$       30,004














Total revenue from continuing operations


$     107,181


$     108,541


$     108,419


$     109,915


$     103,649


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


(2,551)


3,023


(88)


(718)


1,502


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

-


-


-


21


(481)


Total core revenue (2)

(B)

$     104,630


$     111,564


$     108,331


$     109,218


$     104,670














Total non-interest expense from continuing operations


$       71,991


$       80,373


$       59,627


$       61,527


$       65,366


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


(7,015)


(4,614)


(198)


(847)


(5,093)


Less: Legal settlements


-


(3,000)


-


-


-


Less: Systems vendor restructuring costs


-


(8,379)


-


-


-


Core non-interest expense (2)                                    

(C)

$       64,976


$       64,380


$       59,429


$       60,680


$       60,273














(in millions, except per share data)












Total average assets                                                

(D)

$       12,188


$       12,081


$       11,910


$       11,611


$       11,467


Total average shareholders' equity                         

(E)

1,584


1,581


1,558


1,533


1,509


Total average tangible shareholders' equity (2)                        

(F)

1,033


1,029


1,004


979


951


Total average tangible common shareholders' equity (2)                        

(G)

992


988


963


938


911


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

(H)

1,026


1,001


979


961


941


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

(I)

986


961


939


921


901


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

(J)

11,623


11,660


11,477


11,347


10,963














Total common shares outstanding, period-end (thousands)               

(K)

45,522


45,417


45,420


45,420


45,360


Average diluted shares outstanding (thousands)

(L)

46,261


46,240


46,263


46,215


46,200














Core earnings per common share, diluted(2)

(A/L)

$           0.60


$           0.69


$           0.72


$           0.73


$           0.65


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

(I/K)

21.66


21.15


20.68


20.28


19.86


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

(H)/(J)

8.83


8.59


8.53


8.47


8.59














Performance ratios (4)












GAAP return on assets


0.78

%

0.47

%

1.08

%

1.17

%

0.88

%

Core return on assets (2)


0.92


1.07


1.12


1.18


1.06


GAAP return on equity 


5.97


3.61


8.27


8.88


6.69


Core return on equity (2)

(A/E)

7.00


8.09


8.49


8.81


7.95


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

(A+O)/(G)

11.44


13.21


14.02


14.68


13.48


Efficiency ratio (2)(6)                                        

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

59.54


54.88


52.20


52.42


55.10


Net interest margin


3.17


3.41


3.32


3.50


3.36














Supplementary data (in thousands)












Tax benefit on tax-credit investments (7)

(M)

$            684


$         1,787


$         1,374


$         2,119


$            596


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

(N)

(579)


(1,610)


(1,112)


(1,594)


(506)


Net income on tax-credit investments

(M+N)

105


177


262


525


90














Intangible amortization

(O)

$         1,200


$         1,202


$         1,218


$         1,246


$         1,268


Fully taxable equivalent income adjustment 

(P)

1,809


1,763


1,807


2,033


1,820






































(1) Net securities losses/(gains) 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% marginal rate, 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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