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Press Release

Berkshire Hills Reports Second Quarter Results; Dividend Declared

Company Release - 7/23/2019 4:15 PM ET

BOSTON, July 23, 2019 /PRNewswire/ -- Berkshire Hills Bancorp, Inc. (NYSE: BHLB) reported GAAP net income of $25 million, or $0.52 per share, in the second quarter of 2019.  The non-GAAP measure of core earnings totaled $32 million, or $0.65 per share.  Net non-core charges were primarily related to the acquisition of Willimantic, CT based SI Financial Group, Inc. on May 17, 2019 and are net of discontinued operations.  GAAP EPS increased by 2% compared to the prior quarter, while core EPS increased by 8% due to the benefits of the Company's initiatives. 

(PRNewsfoto/Berkshire Hills Bancorp, Inc.)

SECOND QUARTER FINANCIAL HIGHLIGHTS (income statement metrics are compared to the prior quarter):

  • 2% increase in GAAP EPS; 8% increase in core EPS
  • 2% increase in net revenue from continuing operations
  • 3.19% net interest margin
  • 56.4% efficiency ratio, improved from 59.5%
  • 0.14% net loan charge-offs/average loans
  • 0.27% non-performing assets/assets

CEO Richard Marotta stated, "Our teams had a good quarter and contributed to improving the profitability of our operations based on revenue driven positive operating leverage.  Several critical initiatives were accomplished in the most recent quarter.  We completed the acquisition of SI Financial Group, which added the Savings Institute operations consisting of 23 branches and $1.7 billion in total assets in eastern Connecticut and Rhode Island.  This was completed on time and on plan, including the issuance of 5.7 million Berkshire shares as merger consideration.  The systems conversion remains targeted for early in the fourth quarter."

Mr. Marotta continued, "We completed our strategic review and moved forward on several fronts.  Our commercial aircraft portfolio is in the process of being sold, and our FCLS national mortgage banking operations are being marketed for sale.  We're seeing the benefits of our efficiency initiatives, and we're also investing in targeted areas, including our growing SBA lending team.   Repurchases of common stock have begun under our recent 2.4 million share repurchase authorization."

Mr. Marotta concluded with comments about recent governance and culture initiatives.  "We were pleased to add three new Board members in June:  Baye Adofo-Wilson, Rheo Brouillard, and William Hughes.  They represent our newer markets, enhance our diversity, and add new expertise in technology and community development finance.  Longtime community organizer and activist, Malia Lazu, was appointed as EVP/Chief Experience and Culture Officer, and SVP Jacqueline Courtwright was promoted to Chief Human Resources Officer.  In May, the Bank announced its Be FIRST values program, including initiatives for new community storefronts based around our MyBanker program, a new community deposit and loan product, and enhanced diversity and inclusion programs for employee recruitment and development.   In June, over 90% of our employees joined together in our fourth annual Xtraordinary Day of Service, donating more than 6,000 hours of service at 37 projects throughout our footprint.  Berkshire Bank was recently named as the winner of the 2019 North American Employee Engagement Award for Social Responsibility."

DIVIDEND DECLARED

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 August 8, 2019, payable on August 22, 2019.  The dividend equates to a 3.1% annualized yield based on the $29.85 average closing price of Berkshire Hills Bancorp during the second quarter of 2019.  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.

ACQUISITION OF SI FINANCIAL GROUP

Berkshire completed the acquisition of SI Financial Group ("SIFI") on May 17, 2019.  At the acquisition date, SIFI had assets with a gross fair value totaling $1.7 billion and a net fair value of $140 million net of liabilities.  Berkshire recorded $176 million in total merger consideration, consisting primarily of the issuance of 5.69 million Berkshire common shares.   Goodwill was recorded in the amount of $35 million, and the core deposit intangible was recorded at $18 million.  For the first quarter of 2019, SIFI reported $57 million in annualized revenue and $39 million in annualized operating expense.  For that period, it recorded a 3.00% net interest margin, with a 4.35% loan yield and a 1.29% interest-bearing deposit cost.  Most Berkshire consolidated balance sheet and income statement categories increased as a result of the merger.

Berkshire targets to achieve cost savings related efficiencies totaling approximately $12 million, or 30% of SIFI annualized non-interest expense.  The Company continues to expect that it will remain within its target of approximately $23 million in total after-tax transaction costs.  Including all purchase accounting and targeted transaction costs the Company estimates that the transaction will be approximately $0.45 dilutive to tangible book value per share.  Projected dilution per share is less than originally anticipated due to changes in market conditions affecting purchase accounting. 

FINANCIAL CONDITION

Total assets were $13.7 billion at midyear 2019, increasing by $1.5 billion, or 12%, during the quarter and including the SIFI merger.  Investment securities increased by $24 million, or 1%.  The SIFI merger added $143 million and there were $119 million in net reductions as a result of the Company's strategic review, along with the integration of the SIFI securities.  Total loans increased in the second quarter by $1.0 billion, or 11%, to $9.9 billion including $1.3 billion in SIFI loans.  The $178 million portfolio of commercial aircraft loans was designated as held-for-sale.  The Company expects to complete the sale of these loans in the third quarter.  Total loans decreased organically in the quarter and year-to-date.  This reflects the Company's strategic review and emphasis on adjusting the level and mix of assets to improve capital returns and to integrate the acquired SIFI portfolio.  Total deposits increased by $1.4 billion, or 15%, in the second quarter to $10.6 billion including $1.3 billion in SIFI deposits.  Payroll related balances decreased by $82 million to $480 million in the second quarter.  Deposits increased organically before changes related to SIFI and payroll accounts.  Ratio metrics of capital, liquidity, and asset quality improved modestly during the most recent quarter.  The SIFI loans were recorded at a $42 million (or 3.1%) discount to gross carrying value, including a $31 million credit discount and an $11 million interest rate discount.  Near quarter-end, the Company initiated purchases of common stock under its recently approved 2.4 million share repurchase program.  The Company repurchased 110 thousand shares in the second quarter and repurchases are expected to continue.   Book value per common share increased by 1% to $34.05 from $33.75 in the most recent quarter, and the non-GAAP measure of tangible book value per common share increased by 3% to $22.25 from $21.66, more than offsetting the dilution from the acquisition.     

RESULTS OF OPERATIONS

GAAP earnings were $0.52 per share in the most recent quarter, compared to $0.51 in the prior quarter.  Results in the second quarter were reduced by non-core charges related to the SIFI acquisition, restructuring charges, and discontinued operations.  

The non-GAAP measure of core earnings totaled $0.65 per share in the most recent quarter, increasing by 8% from $0.60 in the prior quarter.  Revenue driven positive operating leverage contributed to improving core profitability.  This reflected initial benefits from the SIFI acquisition and the Company's strategic initiatives.  The return on equity measured 6.1% in the most recent quarter, and the non-GAAP metric of core return on tangible common equity measured 12.2%.

Compared to the prior quarter, total net revenue from continuing operations increased by $2 million, or 2%, and the non-GAAP measure of core revenue increased by $4 million, or 4%.  The net interest margin was 3.19% in the most recent quarter, increasing by 0.02% from the prior quarter, including the benefit of higher accretion related to the SIFI acquisition.   Fee income was down 3% from the prior quarter due to lower loan related revenue.  Non-interest income decreased due to higher tax credit amortization charges which were more than offset by the benefit to income tax expense from tax credits received on projects completed during the quarter.    

Non-interest expense increased quarter-over-quarter including the acquired SIFI operations and higher merger related charges.  Compared to the prior quarter, non- interest expense increased by $5 million, or 6%, while the non-GAAP measure of core expense increased by $400 thousand, or 1%.  The efficiency ratio improved to 56% from 60%.  Excluding SIFI and the FCLS operations, full time equivalent staff decreased to 1,391 at midyear, compared to 1,485 at the start of the year.  FCLS staff totaled 416 at midyear, compared to 432 at the start of the year.  Staff in the acquired SIFI operations totaled 230 at midyear.  The effective income tax rate decreased to 18% in the most recent quarter from 22% in the prior quarter due to higher tax credit benefits resulting from tax credit investment projects that came into service during the quarter.  Net of the related amortization charges to non-interest income previously mentioned, these projects contributed $0.01 to earnings per share during the quarter.

The FCLS national mortgage banking operations contributed $0.03 in non-core EPS during the most recent quarter, as industry business volumes improved following the decrease in long term interest rates that developed during the quarter.  These operations generated $15 million in fee revenue, which was an increase of 56% quarter-over-quarter and 47% year-over-year due to improved market conditions.  The Company generated $719 million in held-for-sale residential mortgages in the most recent quarter, compared to $398 million in the prior quarter and to $626 million in the second quarter of 2018.  Due to the decision to sell the FCLS operations, they are accounted for as discontinued in the financial statements, and most references to revenue and expense refer to continuing operations and exclude FCLS revenue and expense.

INVESTOR CONFERENCE CALL AND INVESTOR PRESENTATION

Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Wednesday, July 24, 2019 to discuss the results for the quarter and provide guidance about expected future results.  Prior to the call, the Company will post a presentation at its website with updates on its strategic initiatives.   Participants are encouraged to pre-register for the conference call using the following link:  http://dpregister.com/10133134.  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 Wednesday, July 31, 2019 by dialing 877-344-7529 and entering access number 10133134.  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 seven Northeastern states, with approximately $13.7 billion in assets and 132 banking offices.  Berkshire Bank is recognized for its entrepreneurial approach, relationship customer experience, and distinctive culture embracing and celebrating the diversity of all customers, employees and, suppliers.

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, 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.  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 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

Cassandra Giovanni; Corporate Communications Manager; 860-428-9561

 

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 (1)





June 30,


March 31,


Dec. 31,


Sept. 30,


June 30,






2019 (2)


2019


2018


2018


2018

















PER SHARE DATA













Net earnings per common share, diluted

$          0.52


$          0.51


$          0.31


$          0.70


$          0.74




Core earnings per common share, diluted (3)

0.65


0.60


0.69


0.72


0.73




Total book value per common share

34.05


33.75


33.30


32.84


32.49




Tangible book value per common share (3)

22.25


21.66


21.15


20.68


20.28




Market price at period end

31.39


27.24


26.97


40.70


40.60




Dividends per common share

0.23


0.23


0.22


0.22


0.22




Dividends per preferred share

0.46


0.46


0.44


0.44


0.44

















PERFORMANCE RATIOS (4)













Return on assets

0.79

%

0.78

%

0.47

%

1.08

%

1.17

%



Core return on assets (3)

1.01


0.92


1.07


1.12


1.18




Return on equity

6.07


5.97


3.61


8.27


8.88




Core return on equity (3)

7.67


7.00


8.09


8.49


8.81




Core return on tangible common equity (3)

12.21


11.44


13.21


14.02


14.68




Net interest margin, fully taxable equivalent (FTE) (5)(6)

3.19


3.17


3.41


3.32


3.50




Fee income/Net interest and fee income from continuing operations

16.20


17.56


15.59


18.06


17.21




Efficiency ratio (3)

56.41


59.54


54.88


52.20


52.42

















GROWTH (Year-to-date)













Total commercial loans (organic, annualized)

(10)

%

(3)

%

6

%

5

%

5

%



Total loans (organic, annualized)

(9)


(4)


9


10


10




Total deposits (organic, annualized)

6


8


3


0


2




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

1


3


17


22


21




Earnings per common share (compared to prior year) 

(20)


(7)


65


28


33




Core earnings per common share (compared to prior year)(3)

(9)


(8)


32


37


36

















FINANCIAL DATA (in millions)













Total assets


$      13,653


$      12,173


$      12,212


$      12,030


$      11,902




Total earning assets

12,343


11,039


11,140


10,957


10,827




Total securities

1,905


1,881


1,919


1,918


1,920




Total loans


9,942


8,947


9,043


8,905


8,710




Allowance for loan losses

62


62


61


58


56




Total intangible assets

603


551


552


553


555




Total deposits


10,566


9,166


8,982


8,766


8,839




Total shareholders' equity

1,779


1,577


1,553


1,532


1,516




Net income


25.4


23.6


14.3


32.2


34.0




Core income (3)

32.1


27.7


32.0


33.1


33.8




Purchase accounting accretion

3.2


1.3


8.2


4.6


7.3

















ASSET QUALITY AND CONDITION RATIOS 













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

0.14

%

0.15

%

0.17

%

0.19

%

0.21

%



Total non-performing assets/total assets

0.27


0.26


0.28


0.30


0.20




Allowance for loan losses/total loans

0.63


0.69


0.68


0.66


0.64




Loans/deposits

94


98


101


102


99




Shareholders' equity to total assets

13.03


12.95


12.72


12.74


12.74




Tangible shareholders' equity to tangible assets (3)

9.01


8.83


8.59


8.53


8.47































(1)

Reconciliations of non-GAAP financial measures, including all references to core and tangible amounts, appear on pages F-9 and F-10.


(2)

The Company acquired SI Financial Group, Inc. on May 17, 2019.












(3)

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.


(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.



(6)

The effect of purchase accounting accretion for loans, time deposits, and borrowings 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: 0.11%, 0.05%, 0.30%, 0.17%, 0.27%.


 

 

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-2)


June 30,


March 31,


December 31,


(in thousands)

2019


2019


2018


Assets







Cash and due from banks

$            100,588


$              98,689


$                100,972


Short-term investments

128,718


68,930


82,217


Total cash and short-term investments

229,306


167,619


183,189









Trading security

11,210


11,164


11,212


Marketable equity securities, at fair value

59,121


59,121


56,638


Securities available for sale, at fair value

1,410,535


1,386,768


1,399,647


Securities held to maturity, at amortized cost

364,463


369,331


373,763


Federal Home Loan Bank stock and other restricted securities

59,356


54,624


77,344


Total securities

1,904,685


1,881,008


1,918,604









Loans held for sale

184,810


4,773


2,183









Commercial real estate loans

4,005,347


3,388,139


3,400,221


Commercial and industrial loans

1,987,297


1,957,339


1,980,046


Residential mortgages

2,882,380


2,544,824


2,566,424


Consumer loans

1,066,804


1,057,193


1,096,562


Total loans

9,941,828


8,947,495


9,043,253


Less: Allowance for loan losses

(62,156)


(62,038)


(61,469)


Net loans

9,879,672


8,885,457


8,981,784









Premises and equipment, net

121,619


105,651


106,500


Other real estate owned

154


-


-


Goodwill 

553,796


518,325


518,325


Other intangible assets

48,724


32,219


33,418


Cash surrender value of bank-owned life insurance

227,458


191,768


190,609


Deferred tax asset, net

51,118


38,783


42,434


Other assets

238,951


182,720


120,926


Assets from discontinued operations

212,745


165,078


114,259


Total assets 

$       13,653,038


$       12,173,401


$           12,212,231









Liabilities and shareholders' equity







Demand deposits

$         1,827,016


$         1,526,584


$             1,603,019


NOW and other deposits

997,685


820,177


1,122,321


Money market deposits

2,811,158


2,743,448


2,245,195


Savings deposits

848,699


731,711


724,129


Time deposits

4,081,398


3,344,495


3,287,717


Total deposits

10,565,956


9,166,415


8,982,381









Senior borrowings

904,814


1,120,189


1,428,298


Subordinated borrowings

96,927


89,562


89,518


Total borrowings

1,001,741


1,209,751


1,517,816









Other liabilities 

280,155


204,725


149,519


Liabilities from discontinued operations

26,256


15,505


9,597


Total liabilities

11,874,108


10,596,396


10,659,313









Preferred shareholders' equity

40,633


40,633


40,633


Common shareholders' equity

1,738,297


1,536,372


1,512,285


Total shareholders' equity

1,778,930


1,577,005


1,552,918


Total liabilities and shareholders' equity

$       13,653,038


$       12,173,401


$           12,212,231









Net common shares outstanding 

51,045


45,522


45,417


 

 

BERKSHIRE HILLS BANCORP, INC.


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


LOAN ANALYSIS










































Organic Annualized Growth %(1)


(in millions)


June 30, 2019
Balance


Acquired Savings
Institute Balances (2)


March 31, 2019
Balance


December 31, 2018
Balance


Quarter ended
June 30, 2019


Year to Date  


















Total commercial real estate


$                      4,006


$                         624


$                      3,388


$                       3,400


(1)

%

(1)

%


Commercial and industrial loans 


1,987


244


1,957


1,980


(44)


(24)



Total commercial loans 


5,993


868


5,345


5,380


(17)


(10)


















Total residential mortgages


2,882


375


2,545


2,566


(6)


(5)


















Home equity 


404


58


365


377


(21)


(16)



Auto and other


663


2


692


720


(18)


(16)



Total consumer loans


1,067


60


1,057


1,097


(19)


(16)



Total loans


$                      9,942


$                      1,303


$                      8,947


$                       9,043


(14)

%

(9)

%


(1) Non-GAAP financial measure.













(2) The acquired balances for Savings Institute are as of May 17, 2019.







































































DEPOSIT ANALYSIS


























Organic Annualized Growth % (1)


(in millions)


June 30, 2019
Balance


Acquired Savings
Institute Balances (2)


March 31, 2019
Balance


December 31, 2018
Balance


Quarter ended
June 30, 2019


Year to Date



Demand


$                      1,827


$                         258


$                      1,527


$                       1,603


11

%

(4)

%


NOW and other


998


138


820


1,122


20


(47)



Money market


2,811


190


2,743


2,245


(18)


34



Savings


849


164


732


724


(26)


(11)



Time deposits


4,081


585


3,344


3,288


18


13



Total deposits 


$                    10,566


$                      1,335


$                      9,166


$                       8,982


3

%

6

%


(1) Non-GAAP financial measure.













(2) The acquired balances for Savings Institute are as of May 17, 2019.










 

 

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)

2019


2018


2019


2018

Interest and dividend income from continuing operations    








Loans

$         113,990


$         100,254


$           219,641


$            191,995

Securities and other    

15,248


15,230


30,706


29,635

Total interest and dividend income    

129,238


115,484


250,347


221,630

Interest expense from continuing operations 








Deposits

28,273


17,768


54,895


33,093

Borrowings

9,370


7,424


18,398


13,488

Total interest expense    

37,643


25,192


73,293


46,581

Net interest income from continuing operations

91,595


90,292


177,054


175,049

Non-interest income from continuing operations 








Mortgage banking originations

278


334


324


472

Loan related income

4,822


6,003


10,825


10,822

Deposit related fees

7,525


7,605


14,383


15,671

Insurance commissions and fees    

2,738


2,549


5,591


5,574

Wealth management fees    

2,348


2,280


4,789


4,877

Total fee income    

17,711


18,771


35,912


37,416

Other

(216)


155


754


1,423

Securities gains/(losses), net     

17


718


2,568


(784)

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

-


(21)


-


460

Total non-interest income      

17,512


19,623


39,234


38,515

Total net revenue from continuing operations

109,107


109,915


216,288


213,564

Provision for loan losses   

3,467


6,532


7,468


12,107

Non-interest expense from continuing operations








Compensation and benefits

34,779


33,499


68,279


67,346

Occupancy and equipment     

9,449


9,224


18,895


18,416

Technology and communications

6,715


7,053


12,972


13,537

Marketing and promotion     

1,155


1,084


2,422


2,306

Professional services

3,953


864


6,228


2,560

FDIC premiums and assessments

1,751


1,411


3,390


2,606

Other real estate owned and foreclosures

(2)


1


-


68

Amortization of intangible assets     

1,475


1,246


2,675


2,514

Merger, restructuring and other expense 

11,155


847


18,170


5,940

Other

6,138


6,298


15,528


11,600

Total non-interest expense     

76,568


61,527


148,559


126,893









Income from continuing operations before income taxes       

$           29,072


$           41,856


$             60,261


$              74,564

Income tax expense

5,118


8,145


12,035


15,482

Net income from continuing operations

$           23,954


$           33,711


$             48,226


$              59,082









Income from discontinued operations before income taxes

$             2,082


$                426


$               1,228


$                   264

Income tax expense

588


106


371


67

Net income from discontinued operations

$             1,494


$                320


$                  857


$                   197









Net income

$           25,448


$           34,031


$             49,083


$              59,279

Preferred stock dividend

240


229


480


459

Income available to common shareholders

$           25,208


$           33,802


$             48,603


$              58,820









Basic earnings per common share:








Continuing Operations

$               0.49


$               0.73


$                 1.01


$                  1.29

Discontinued Operations

0.03


0.01


0.02


-

Total

$               0.52


$               0.74


$                 1.03


$                  1.29









Diluted earnings per common share:








Continuing Operations

$               0.49


$               0.73


$                 1.01


$                  1.28

Discontinued Operations

0.03


0.01


0.02


-

Total

$               0.52


$               0.74


$                 1.03


$                  1.28









Weighted average shares outstanding:      








Basic

48,961


46,032


47,550


45,999

Diluted

49,114


46,215


47,700


46,206









 

 

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)

2019


2019


2018


2018


2018


Interest and dividend income from continuing operations    











Loans

$      113,990


$      105,651


$      111,576


$      102,651


$      100,254


Securities and other    

15,248


15,458


15,119


14,918


15,230


Total interest and dividend income    

129,238


121,109


126,695


117,569


115,484


Interest expense from continuing operations











Deposits

28,273


26,622


23,811


21,460


17,768


Borrowings

9,370


9,028


10,118


7,724


7,424


Total interest expense    

37,643


35,650


33,929


29,184


25,192


Net interest income from continuing operations

91,595


85,459


92,766


88,385


90,292


Non-interest income from continuing operations











Mortgage banking originations

278


46


148


15


334


Loan related income

4,822


6,003


5,087


7,246


6,003


Deposit related fees

7,525


6,858


7,131


7,004


7,605


Insurance commissions and fees    

2,738


2,853


2,479


2,930


2,549


Wealth management fees    

2,348


2,441


2,287


2,283


2,280


Total fee income    

17,711


18,201


17,132


19,478


18,771


Other

(216)


970


1,666


468


155


Securities gains/(losses), net     

17


2,551


(3,023)


88


718


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

-


-


-


-


(21)


Total non-interest income      

17,512


21,722


15,775


20,034


19,623


Total net revenue from continuing operations

109,107


107,181


108,541


108,419


109,915


Provision for loan losses   

3,467


4,001


6,716


6,628


6,532


Non-interest expense from continuing operations











Compensation and benefits

34,779


33,500


34,927


31,746


33,499


Occupancy and equipment     

9,449


9,446


9,366


9,145


9,224


Technology and communications

6,715


6,257


6,103


7,507


7,053


Marketing and promotion  

1,155


1,267


1,224


1,167


1,084


Professional services

3,953


2,275


3,302


1,481


864


FDIC premiums and assessments

1,751


1,639


1,488


1,640


1,411


Other real estate owned and foreclosures

(2)


2


1


(1)


1


Amortization of intangible assets     

1,475


1,200


1,202


1,218


1,246


Merger, restructuring and other expense 

11,155


7,015


16,006


198


847


Other

6,138


9,390


6,754


5,526


6,298


Total non-interest expense     

76,568


71,991


80,373


59,627


61,527













Income from continuing operations before income taxes

$        29,072


$        31,189


$        21,452


$        42,164


$        41,856


Income tax expense 

5,118


6,917


4,384


9,095


8,145


Net income from continuing operations

$        23,954


$        24,272


$        17,068


$        33,069


$        33,711













Income/(loss) from discontinued operations before income taxes

$          2,082


$            (854)


$         (3,884)


$         (1,147)


$             426


Income tax expense/(benefit)

588


(217)


(1,075)


(305)


106


Net income/(loss) from discontinued operations

$          1,494


$            (637)


$         (2,809)


$            (842)


$             320













Net income

$        25,448


$        23,635


$        14,259


$        32,227


$        34,031


Preferred stock dividend

240


240


229


230


229


Income available to common shareholders

$        25,208


$        23,395


$        14,030


$        31,997


$        33,802
























Basic earnings per common share:











Continuing Operations

$            0.49


$            0.52


$            0.37


$            0.72


$            0.73


Discontinued Operations

0.03


(0.01)


(0.06)


(0.02)


0.01


Total

$            0.52


$            0.51


$            0.31


$            0.70


$            0.74













Diluted earnings per common share:











Continuing Operations

$            0.49


$            0.52


$            0.37


$            0.72


$            0.73


Discontinued Operations

0.03


(0.01)


(0.06)


(0.02)


0.01


Total

$            0.52


$            0.51


$            0.31


$            0.70


$            0.74













Weighted average shares outstanding:      











Basic

48,961


46,113


46,061


46,030


46,032


Diluted

49,114


46,261


46,240


46,263


46,215
























 

 

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,




2019


2019


2018


2018


2018














Earning assets 












Loans:












Commercial real estate


5.01

%

4.91

%

5.40

%

4.67

%

5.08

%

Commercial and industrial loans


5.79


5.83


5.97


6.22


5.73


Residential mortgages


3.74


3.74


3.72


3.66


3.72


Consumer loans


4.52


4.45


4.52


4.27


4.13


Total loans


4.76


4.73


4.94


4.66


4.73


Securities


3.38


3.46


3.34


3.32


3.45


Short-term investments and loans held for sale


3.37


3.59


3.74


3.82


3.86


Total earning assets


4.51


4.49


4.64


4.41


4.48














Funding liabilities












Deposits:












NOW and other


0.66


0.65


0.59


0.58


0.44


Money market


1.27


1.23


1.10


0.92


0.88


Savings


0.15


0.18


0.16


0.15


0.14


Time


2.06


2.07


1.93


1.76


1.54


Total interest-bearing deposits


1.44


1.44


1.31


1.18


1.02


Borrowings


2.92


2.85


2.67


2.42


2.29


Total interest-bearing liabilities


1.66


1.65


1.55


1.38


1.23














Net interest spread


2.85


2.84


3.09


3.03


3.25


Net interest margin


3.19


3.17


3.41


3.32


3.50














Cost of funds (1)


1.41


1.41


1.31


1.16


1.03


Cost of deposits 


1.18


1.19


1.07


0.96


0.83














(1) 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)

2019


2019


2018


2018


2018


Assets











Loans











Commercial real estate

$            3,716,130


$            3,377,902


$            3,373,936


$            3,331,097


$            3,316,482


Commercial and industrial loans

2,056,384


1,986,792


1,921,361


1,824,369


1,773,722


Residential mortgages

2,711,348


2,556,299


2,539,592


2,459,943


2,268,886


Consumer loans

1,064,579


1,079,583


1,112,433


1,120,942


1,113,089


Total loans (1) 

9,548,441


9,000,576


8,947,322


8,736,351


8,472,179


Securities (2)

1,893,298


1,895,768


1,933,891


1,928,851


1,931,104


Short-term investments and loans held for sale

117,029


67,367


51,827


47,752


36,136


Total earning assets (3)

11,558,768


10,963,711


10,933,040


10,712,954


10,439,419


Goodwill and other intangible assets

555,606


550,966


552,206


554,359


554,591


Other assets

593,917


557,442


494,377


501,739


486,616


Assets from discontinued operations

192,466


115,721


101,464


141,443


130,392


Total assets

$          12,900,757


$          12,187,840


$          12,081,087


$          11,910,495


$          11,611,018













Liabilities and shareholders' equity











Deposits 











NOW and other

$            1,053,335


$               963,043


$               920,225


$               844,888


$               819,166


Money market

2,474,071


2,378,496


2,339,699


2,348,516


2,524,713


Savings

780,797


736,707


728,853


740,765


749,995


Time

3,593,022


3,429,375


3,229,521


3,274,518


2,878,846


Total interest-bearing deposits

7,901,225


7,507,621


7,218,298


7,208,687


6,972,720


Borrowings

1,415,614


1,351,834


1,566,478


1,363,914


1,382,794


Total interest-bearing liabilities

9,316,839


8,859,455


8,784,776


8,572,601


8,355,514


Non-interest-bearing demand deposits

1,673,560


1,538,767


1,579,013


1,635,564


1,619,470


Other liabilities 

215,704


192,119


127,370


132,521


89,933


Liabilities from discontinued operations

18,434


13,962


8,854


11,880


12,650


Total liabilities

11,224,537


10,604,303


10,500,013


10,352,566


10,077,567













Preferred shareholders' equity

40,633


40,633


40,633


40,633


40,633


Common shareholders' equity

1,635,587


1,542,904


1,540,441


1,517,296


1,492,818


Total shareholders' equity

1,676,220


1,583,537


1,581,074


1,557,929


1,533,451


Total liabilities and shareholders' equity

$          12,900,757


$          12,187,840


$          12,081,087


$          11,910,495


$          11,611,018
























Supplementary data











Total average non-maturity deposits

$            5,981,763


$            5,617,013


$            5,567,790


$            5,569,733


$            5,713,344


Total average deposits 

9,574,785


9,046,388


8,797,311


8,844,251


8,592,190


Fully taxable equivalent income adjustment

1,882


1,809


1,763


1,807


2,033


Total average tangible equity (4)

1,120,614


1,032,571


1,028,868


1,003,570


978,860













(1) Total loans include non-accruing loans.











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






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


(4) 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)


2019


2019


2018


2018


2018


NON-PERFORMING ASSETS












Non-accruing loans:












Commercial real estate


$          19,366


$          18,513


$          20,372


$          22,639


$          10,338


Commercial and industrial loans


9,256


5,614


6,003


4,914


4,029


Residential mortgages


3,579


2,341


2,217


2,683


3,196


Consumer loans


3,570


4,038


3,834


4,401


5,466


Total non-accruing loans


35,771


30,506


32,426


34,637


23,029


Other real estate owned


154


-


-


-


-


Repossessed assets


874


742


1,209


1,069


1,241


Total non-performing assets


$          36,799


$          31,248


$          33,635


$          35,706


$          24,270














Total non-accruing loans/total loans


0.36%


0.34%


0.36%


0.39%


0.26%


Total non-performing assets/total assets


0.27%


0.26%


0.28%


0.30%


0.20%














PROVISION AND ALLOWANCE FOR LOAN LOSSES











Balance at beginning of period


$          62,038


$          61,469


$          58,457


$          55,925


$          53,859


Charged-off loans


(3,966)


(4,579)


(4,029)


(4,471)


(5,714)


Recoveries on charged-off loans


617


1,147


325


375


1,248


Net loans charged-off


(3,349)


(3,432)


(3,704)


(4,096)


(4,466)


Provision for loan losses


3,467


4,001


6,716


6,628


6,532


Balance at end of period


$          62,156


$          62,038


$          61,469


$          58,457


$          55,925














Allowance for loan losses/total loans


0.63%


0.69%


0.68%


0.66%


0.64%


Allowance for loan losses/non-accruing loans


174%


203%


190%


169%


243%














NET LOAN CHARGE-OFFS












Commercial real estate


$          (1,235)


$             (752)


$          (1,357)


$          (3,074)


$          (2,079)


Commercial and industrial loans


(995)


(1,580)


(1,538)


(189)


(1,193)


Residential mortgages


(139)


(95)


(108)


61


(632)


Home equity 


(300)


(257)


(116)


(242)


108


Auto and other consumer


(680)


(748)


(585)


(652)


(670)


Total, net


$          (3,349)


$          (3,432)


$          (3,704)


$          (4,096)


$          (4,466)














Net charge-offs (QTD annualized)/average loans 

0.14%


0.15%


0.17%


0.19%


0.21%


Net charge-offs (YTD annualized)/average loans 

0.15%


0.15%


0.18%


0.19%


0.19%














DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS










30-89 Days delinquent


0.20%


0.22%


0.27%


0.38%


0.22%


90+ Days delinquent and still accruing


0.28%


0.23%


0.22%


0.22%


0.40%


Total accruing delinquent loans


0.48%


0.45%


0.49%


0.60%


0.62%


Non-accruing loans


0.36%


0.34%


0.36%


0.39%


0.26%


Total delinquent and non-accruing loans


0.84%


0.79%


0.85%


0.99%


0.88%


 

 

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)


2019


2019


2018


2018


2018


Net income


$       25,448


$       23,635


$       14,259


$       32,227


$       34,031


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


(17)


(2,551)


3,023


(88)


(718)


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

-


-


-


-


21


Adj: Merger and acquisition expense


9,711


1,609


2,792


198


847


Adj: Restructuring expense and other expense


1,444


5,406


1,822


-


-


Adj: Legal settlements


-


-


3,000


-


-


Adj: Systems vendor restructuring costs


-


-


8,379


-


-


Adj: (Income)/loss from discontinued operations before income taxes

(2,082)


854


3,884


1,147


(426)


Adj: Income taxes


(2,385)


(1,223)


(5,185)


(397)


-


Total core income (2)

(A)

$       32,119


$       27,730


$       31,974


$       33,087


$       33,755














Total revenue from continuing operations


$     109,107


$     107,181


$     108,541


$     108,419


$     109,915


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


(17)


(2,551)


3,023


(88)


(718)


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

-


-


-


-


21


Total core revenue (2)

(B)

$     109,090


$     104,630


$     111,564


$     108,331


$     109,218














Total non-interest expense from continuing operations


$       76,568


$       71,991


$       80,373


$       59,627


$       61,527


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


(11,155)


(7,015)


(4,614)


(198)


(847)


Less: Legal settlements


-


-


(3,000)


-


-


Less: Systems vendor restructuring costs


-


-


(8,379)


-


-


Core non-interest expense (2)                                    

(C)

$       65,413


$       64,976


$       64,380


$       59,429


$       60,680














(in millions, except per share data)












Total average assets                                                

(D)

$       12,901


$       12,188


$       12,081


$       11,910


$       11,611


Total average shareholders' equity                         

(E)

1,676


1,584


1,581


1,558


1,533


Total average tangible shareholders' equity (2)                        

(F)

1,121


1,033


1,029


1,004


979


Total average tangible common shareholders' equity (2)                        

(G)

1,080


992


988


963


938


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

(H)

1,176


1,026


1,001


979


961


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

(I)

1,136


986


961


939


921


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

(J)

13,051


11,623


11,660


11,477


11,347














Total common shares outstanding, period-end (thousands)               

(K)

51,045


45,522


45,417


45,420


45,420


Average diluted shares outstanding (thousands)

(L)

49,114


46,261


46,240


46,263


46,215














Core earnings per common share, diluted(2)

(A/L)

$           0.65


$           0.60


$           0.69


$           0.72


$           0.73


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

(I/K)

22.25


21.66


21.15


20.68


20.28


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

(H)/(J)

9.01


8.83


8.59


8.53


8.47














Performance ratios (4)












GAAP return on assets


0.79

%

0.78


0.47

%

1.08

%

1.17

%

Core return on assets (2)


1.01


0.92


1.07


1.12


1.18


GAAP return on equity 


6.07


5.97


3.61


8.27


8.88


Core return on equity (2)

(A/E)

7.67


7.00


8.09


8.49


8.81


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

(A+O)/(G)

12.21


11.44


13.21


14.02


14.68


Efficiency ratio (2)(6)                                                                                

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

56.41


59.54


54.88


52.20


52.42


Net interest margin


3.19


3.17


3.41


3.32


3.50














Supplementary data (in thousands)












Tax benefit on tax-credit investments (7)

(M)

$         2,381


$            684


$         1,787


$         1,374


$         2,119


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

(N)

(1,938)


(579)


(1,610)


(1,112)


(1,594)


Net income on tax-credit investments

(M+N)

443


105


177


262


525














Intangible amortization

(O)

$         1,475


$         1,200


$         1,202


$         1,218


$         1,246


Fully taxable equivalent income adjustment 

(P)

1,882


1,809


1,763


1,807


2,033


























(1) Net securities (gains)/losses 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. 




 

 


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)


2019


2018





Net (loss)/income 


$                   49,083


$                   59,279





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


(2,568)


784





Adj: Net (gains) on sale of business operations


-


(460)





Adj: Merger and acquisition expenses


11,320


5,940





Adj: Restructuring expense and other


6,850


-





Adj: (Income) from discontinued operations before income taxes


(1,228)


(264)





Adj: Income taxes


(3,608)


(1,520)





Total core income (2)

(A)

$                   59,849


$                   63,759














Total revenue 


$                 216,288


$                 213,564





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


(2,568)


784





Adj: Net (gains) on sale of business operations


-


(460)





Total core revenue(2)

(B)

$                 213,720


$                 213,888





Total non-interest expense


$                 148,559


$                 126,893





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


(18,170)


(5,940)





Core non-interest expense (2)                                    

(C)

$                 130,389


$                 120,953














(in millions, except per share data)









Total average assets                                                

(D)

$                   12,546


$                   11,567





Total average shareholders' equity                         

(E)

1,630


1,521





Total average tangible shareholders' equity (2)                        

(F)

1,077


965





Total average tangible common shareholders' equity (2)                        

(G)

1,036


925





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

(H)

1,176


961





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

(I)

1,136


921





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

(J)

13,051


11,347





Total common shares outstanding, period-end (thousands)               

(K)

51,045


45,420





Average diluted shares outstanding (thousands)

(L)

47,700


46,206





Core earnings per common share, diluted(2)

(A/L)

$                       1.25


$                       1.38





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

(I/K)

22.25


20.28





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

(H)/(J)

9.01


8.47














Performance ratios (4)









GAAP return on assets


0.78

%

1.03

%




Core return on assets (2)

(A/D)

0.97


1.12





GAAP return on equity 


6.02


7.79





Core return on equity (2)

(A/E)

7.34


8.38





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

(A+O)/(G)

11.84


14.13





Efficiency ratio (2)(6)                                                                               

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

57.93


53.72





Net interest margin


3.18


3.43














Supplementary data









Tax benefit on tax-credit investments (7)

(M)

$                     3,065


$                     2,715





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

(N)

(2,517)


(2,100)





Net income on tax-credit investments

(M+N)

548


615














Intangible amortization

(O)

2,675


2,514





Fully taxable equivalent income adjustment

(P)

3,691


3,853






















(1) Net securities (gains)/losses 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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