Berkshire Hills Reports 63% Increase in First Quarter Earnings; Dividend Declared
BOSTON, April 23, 2018 /PRNewswire/ -- Berkshire Hills Bancorp, Inc. (NYSE: BHLB) reported first quarter 2018 net income of $25 million, which was a 63% increase over 2017 first quarter results of $15 million. This reflected the ongoing benefit of the Company's growth and expansion, together with the benefit of a lower federal tax rate resulting from federal tax reform near the end of 2017.
FIRST QUARTER FINANCIAL HIGHLIGHTS (income statement comparisons are year over year and balance sheet growth is compared to prior quarter-end):
- $0.55 GAAP EPS
- $0.65 Core EPS
- 13% increase in net revenue
- 30% increase in loan and deposit related fee income
- 4% annualized loan growth; 3% annualized C&I loan growth
- 3% increase in average deposits
- 3.36% net interest margin
- 59.5% efficiency ratio
- 0.27% non-performing assets/assets
- 0.17% net loan charge-offs/average loans
CEO Michael Daly stated, "We had a solid start to the year, delivering ongoing growth while integrating our new Commerce operations. With the benefit of greater efficiency, GAAP return on assets improved to 0.88% and core return on assets improved to 1.04%. We expect continued momentum in the second quarter where GAAP return on assets will improve to over 1.00% and core return on assets will improve to over 1.10%. We formally opened our new Boston corporate headquarters, which also serves as a regional hub for Greater Boston relationship teams. We added additional bankers both in Boston and in the Princeton, NJ area. We also opened a new branch in Simsbury, CT, which uses a combination of virtual teller technology and MyBanker relationship professionals to provide enhanced customer support and product availability."
DIVIDEND DECLARED
The Board of Directors declared a quarterly cash dividend of $0.22 per common share to shareholders of record at the close of business on May 10, 2018, payable on May 24, 2018. The dividend equates to a 2.3% annualized yield based on the $37.88 average closing price of Berkshire Hills Bancorp common stock during the first quarter. The Board also declared a quarterly cash dividend of $0.44 per share for the preferred stock issued in conjunction with the Commerce acquisition, with the same record and payment dates as above. The quarterly common and preferred dividends were increased in the prior quarter by 5%.
FINANCIAL CONDITION
Total assets ended the first quarter of 2018 at $11.5 billion. Both commercial loans and residential mortgages contributed to the 4% annualized increase in total loans. Period-end deposit balances are impacted by daily fluctuations related to payroll processing. Average deposits increased by 3% compared to the prior quarter. Asset quality metrics remained strong. Delinquency metrics increased due to one commercial credit which is expected to remain accruing and is in the process of collection. Metrics related to capital, liquidity, and book value per share were generally stable compared to the start of the year.
RESULTS OF OPERATIONS
First quarter revenue and expense included the full quarter impact of the Commerce operations acquired on October 13, 2017. 2018 first quarter net income totaled $25 million, which was a 63% increase over 2017 first quarter results of $15 million. Earnings per share increased by 25% to $0.55, including the impact of additional shares issued in 2017. First quarter core earnings per share improved by 18% to $0.65 per share in 2018 compared $0.55 in 2017. The measure of core earnings per share excludes amounts viewed as not related to normalized operations. In the most recent quarter these were primarily related to the integration of the Commerce operations.
Quarterly net revenue totaled $115 million in the most recent quarter, and included the impact of lower mortgage banking fees, which was partially offset by seasonal gains in wealth and insurance fee income compared to the prior quarter. The net interest margin decreased to 3.36% from 3.50% in the prior quarter. The contribution from purchased loan accretion decreased by 0.08%. Additionally, the contribution of taxable equivalent securities yields decreased by 0.05% as a result of lower federal income taxes. The cost of funds increased due to change in deposit mix and higher deposit and borrowings funding costs as a result of increases in short term market interest rates. The first quarter loan loss provision was $5.6 million and exceeded the net loan charge-offs recorded during the period.
Total first quarter non-interest expense decreased by 15% compared to the prior quarter, primarily due to lower non-core Commerce merger charges. Total core expense increased by 1% including a full quarter of the new Commerce operations. The efficiency ratio measured 59.5%, including the benefit of expense reductions in mortgage banking. Total full-time equivalent staff measured 1,941 positions at quarter-end, compared to 1,992 positions at the start of the year. The first quarter effective income tax rate was 22% in 2018 compared to 30% in 2017, reflecting the benefit of federal income tax reform which became effective in 2018.
INVESTOR CONFERENCE CALL
Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Tuesday, April 24, 2018 to discuss the results for the quarter and provide guidance about expected future results. Participants are encouraged to pre-register for the conference call using the following link: http://dpregister.com/10118850. 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 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 1, 2018 by dialing 877-344-7529 and entering access number 10118850. The webcast will be available on Berkshire's website for an extended period of time.
BACKGROUND
Berkshire Hills Bancorp is the parent of Berkshire Bank - America's Most Exciting Bank®. The Company has approximately $11.5 billion in assets and 114 full service branches in Massachusetts, New York, Connecticut, Vermont, New Jersey, and Pennsylvania providing personal and business banking, insurance, and wealth management services. The Company also offers mortgages and specialized commercial lending services in targeted national markets.
FORWARD LOOKING STATEMENTS
This document contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. There are several factors that could cause actual results to differ significantly from expectations described in the forward-looking statements. For a discussion of such factors, please see Berkshire's most recent reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission and available on the SEC's website at www.sec.gov. Berkshire does not undertake any obligation to update forward-looking statements.
NON-GAAP FINANCIAL MEASURES
This document contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles ("GAAP"). These non-GAAP measures provide supplemental perspectives on operating results, performance trends, and financial condition. They are not a substitute for GAAP measures; they should be read and used in conjunction with the Company's GAAP financial information. A reconciliation of non-GAAP financial measures to GAAP measures is included on 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, and restructuring costs. Securities gains/losses include unrealized gains/losses on equity securities beginning in the first quarter of 2018. Charges related to merger and acquisition activity consist primarily of severance/benefit related expenses, contract termination costs, systems conversion costs, variable compensation expenses, and professional fees. These charges in 2017 and 2018 are primarily related to business combinations with First Choice Bank and Commerce Bancshares Corp. Restructuring costs generally consist of costs and losses associated with the disposition of assets and liabilities and lease terminations, including costs related to branch sales. Additionally, the Company recorded charges for hedge terminations in the first quarter of 2017 and legal settlement costs during the year.
Non-core adjustments are presented net of an adjustment for income tax expense. This adjustment is determined as the difference between the GAAP tax rate and the effective tax rate applicable to core income. The efficiency ratio is adjusted for non-core revenue and expense items and for tax preference items. The Company also calculates measures related to tangible equity, which adjust equity (and assets where applicable) to exclude intangible assets due to the importance of these measures to the investment community.
CONTACTS
Investor Relations Contact
Allison O'Rourke; Executive Vice President, Investor Relations Officer; 413-236-3149
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 (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, 2018 2017 (3) 2017 2017 2017 PER SHARE DATA Net earnings/(loss), diluted $ 0.55 $ (0.06) $ 0.57 $ 0.53 $ 0.44 Core earnings, diluted (1) 0.65 0.58 0.59 0.58 0.55 Total book value per common share 32.12 32.14 31.78 31.37 30.77 Tangible book value per common share (1) 19.86 19.83 21.38 20.96 18.97 Market price at period end 37.95 36.60 38.75 35.15 36.05 Dividends per common share 0.22 0.21 0.21 0.21 0.21 Dividends per preferred share 0.44 0.42 - - - PERFORMANCE RATIOS (4) Return on assets 0.88% (0.10)% 0.95% 0.84% 0.68% Core return on assets (1) 1.04 0.94 0.98 0.92 0.85 Return on equity 6.69 (0.77) 7.26 6.80 5.71 Core return on equity (1) 7.92 7.16 7.47 7.45 7.17 Core return on tangible common equity (1) 13.43 11.90 11.42 11.96 12.05 Net interest margin, fully taxable equivalent (FTE) (5) 3.36 3.50 3.36 3.36 3.33 Fee income/Net interest and fee income 25.51 25.91 29.96 32.23 30.04 Efficiency ratio (1) 59.54 57.43 59.28 61.72 61.94 GROWTH (Year-to-date) Total commercial loans (annualized) 1% 38% 9% 13% 15% Total loans (annualized) 4 27 8 10 6 Total deposits (annualized) (3) 32 3 3 2 Total net revenues (compared to prior year) 13 41 37 40 39 Earnings per share (compared to prior year) 25 (25) (2) (8) (15) Core earnings per share (compared to prior year)(1) 18 4 4 5 2 FINANCIAL DATA (in millions) Total assets $ 11,519 $ 11,571 $ 9,767 $ 9,627 $ 9,298 Total earning assets 10,442 10,509 8,944 8,807 8,486 Total securities 1,932 1,899 1,824 1,773 1,714 Total loans 8,376 8,299 6,947 6,864 6,656 Allowance for loan losses 54 52 49 47 46 Total intangible assets 556 558 420 421 422 Total deposits 8,683 8,750 6,790 6,715 6,656 Total shareholders' equity 1,498 1,496 1,285 1,268 1,100 Net income/(loss) 25.2 (2.8) 22.9 19.7 15.5 Core income (1) 29.9 26.3 23.6 21.6 19.4 ASSET QUALITY AND CONDITION RATIOS Net charge-offs (current quarter annualized)/average loans 0.17% 0.17% 0.19% 0.20% 0.20% Total non-performing assets/total assets 0.27 0.21 0.23 0.25 0.27 Allowance for loan losses/total loans 0.64 0.62 0.71 0.69 0.69 Loans/deposits 96 95 102 102 100 Shareholders' equity to total assets 13.00 12.93 13.15 13.17 11.83 Tangible shareholders' equity to tangible assets (1) 8.59 8.52 9.25 9.20 7.64
(1) | Non-GAAP financial measure. Core measurements are non-GAAP financial measures that are adjusted to exclude net non-core charges primarily |
(2) | Reconciliations of non-GAAP financial measures, including all references to core and tangible amounts, appear on page F-9. |
(3) | The Company acquired Commerce Bancshares Corp., the parent of Commerce Bank & Trust Company, on October 13, 2017. |
(4) | All performance ratios are annualized and are based on average balance sheet amounts, where applicable. |
(5) | Fully taxable equivalent considers the impact of tax advantaged investment securities and loans. |
BERKSHIRE HILLS BANCORP, INC. | |||
CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-2) | |||
March 31, | December 31, | ||
(in thousands) | 2018 | 2017 | |
Assets | |||
Cash and due from banks | $ 88,193 | $ 91,122 | |
Short-term investments | 35,694 | 157,641 | |
Total cash and short-term investments | 123,887 | 248,763 | |
Trading security | 11,795 | 12,277 | |
Securities available for sale, at fair value | 1,460,660 | 1,426,099 | |
Securities held to maturity, at amortized cost | 395,337 | 397,103 | |
Federal Home Loan Bank stock and other restricted securities | 64,038 | 63,085 | |
Total securities | 1,931,830 | 1,898,564 | |
Loans held for sale, at fair value | 98,440 | 153,620 | |
Commercial real estate | 3,266,737 | 3,264,742 | |
Commercial and industrial loans | 1,818,974 | 1,803,939 | |
Residential mortgages | 2,181,807 | 2,102,807 | |
Consumer loans | 1,108,899 | 1,127,850 | |
Total loans | 8,376,417 | 8,299,338 | |
Less: Allowance for loan losses | (53,859) | (51,834) | |
Net loans | 8,322,558 | 8,247,504 | |
Premises and equipment, net | 111,237 | 109,352 | |
Other real estate owned | - | - | |
Goodwill | 519,128 | 519,287 | |
Other intangible assets | 37,085 | 38,296 | |
Cash surrender value of bank-owned life insurance | 192,379 | 191,221 | |
Deferred tax asset, net | 51,679 | 47,061 | |
Other assets | 131,024 | 117,083 | |
Total assets | $ 11,519,247 | $ 11,570,751 | |
Liabilities and shareholders' equity | |||
Demand deposits | $ 1,575,243 | $ 1,606,656 | |
NOW and other deposits | 715,581 | 734,558 | |
Money market deposits | 2,749,763 | 2,776,157 | |
Savings deposits | 756,711 | 741,954 | |
Time deposits | 2,885,969 | 2,890,205 | |
Total deposits | 8,683,267 | 8,749,530 | |
Senior borrowings | 1,125,860 | 1,047,736 | |
Subordinated borrowings | 89,384 | 89,339 | |
Total borrowings | 1,215,244 | 1,137,075 | |
Other liabilities | 123,079 | 187,882 | |
Total liabilities | 10,021,590 | 10,074,487 | |
Total preferred shareholders' equity | 40,633 | 40,633 | |
Total common shareholders' equity | 1,457,024 | 1,455,631 | |
Total shareholders' equity | 1,497,657 | 1,496,264 | |
Total liabilities and shareholders' equity | $ 11,519,247 | $ 11,570,751 | |
Net common shares outstanding | 45,360 | 45,290 | |
BERKSHIRE HILLS BANCORP, INC. | ||||||
CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED - (F-3) | ||||||
LOAN ANALYSIS | ||||||
Annualized Growth % | ||||||
(in millions) | March 31, 2018 | December 31, 2017 | Quarter ended | |||
Commercial real estate - construction | $ 347 | $ 354 | (8)% | |||
Commercial real estate - other | 2,920 | 2,910 | 1 | |||
Total commercial real estate | 3,267 | 3,264 | 0 | |||
Commercial and industrial loans | 1,819 | 1,804 | 3 | |||
Total commercial loans | 5,086 | 5,068 | 1 | |||
Total residential mortgages | 2,181 | 2,103 | 15 | |||
Home equity | 400 | 410 | (10) | |||
Auto and other | 709 | 718 | (5) | |||
Total consumer loans | 1,109 | 1,128 | (7) | |||
Total loans | $ 8,376 | $ 8,299 | 4% | |||
DEPOSIT ANALYSIS | ||||||
Annualized Growth % | ||||||
(in millions) | March 31, 2018 | December 31, 2017 | Quarter ended | |||
Demand | $ 1,575 | $ 1,606 | (8)% | |||
NOW and other | 715 | 735 | (11) | |||
Money market | 2,750 | 2,776 | (4) | |||
Savings | 757 | 742 | 8 | |||
Time deposits | 2,886 | 2,890 | (1) | |||
Total deposits | $ 8,683 | $ 8,749 | (3)% | |||
BERKSHIRE HILLS BANCORP, INC. | |||
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED - (F-4) | |||
Three Months Ended | |||
March 31, | |||
(in thousands, except per share data) | 2018 | 2017 | |
Interest and dividend income | |||
Loans | $ 92,835 | $ 68,943 | |
Securities and other | 14,405 | 11,766 | |
Total interest and dividend income | 107,240 | 80,709 | |
Interest expense | |||
Deposits | 15,325 | 9,098 | |
Borrowings | 6,445 | 4,725 | |
Total interest expense | 21,770 | 13,823 | |
Net interest income | 85,470 | 66,886 | |
Non-interest income | |||
Mortgage banking originations | 10,147 | 12,678 | |
Loan related income | 5,438 | 4,179 | |
Deposit related fees | 8,066 | 6,204 | |
Insurance commissions and fees | 3,025 | 3,136 | |
Wealth management fees | 2,597 | 2,526 | |
Total fee income | 29,273 | 28,723 | |
Other | 1,268 | 93 | |
Securities (losses)/gains, net | (1,502) | 12,570 | |
Gain on sale of business operations and assets, net | 481 | - | |
Loss on termination of hedges | - | (6,629) | |
Total non-interest income | 29,520 | 34,757 | |
Total net revenue | 114,990 | 101,643 | |
Provision for loan losses | 5,575 | 5,095 | |
Non-interest expense | |||
Compensation and benefits | 42,184 | 36,119 | |
Occupancy and equipment | 10,082 | 9,026 | |
Technology and communications | 6,830 | 6,087 | |
Marketing and promotion | 2,612 | 1,999 | |
Professional services | 2,053 | 2,451 | |
FDIC premiums and assessments | 1,195 | 1,298 | |
Other real estate owned and foreclosures | 67 | 28 | |
Amortization of intangible assets | 1,268 | 801 | |
Merger, restructuring and other expense | 5,093 | 11,682 | |
Other | 5,485 | 4,835 | |
Total non-interest expense | 76,869 | 74,326 | |
Income before income taxes | 32,546 | 22,222 | |
Income tax expense | 7,298 | 6,762 | |
Net income | $ 25,248 | $ 15,460 | |
Preferred stock dividend | 230 | - | |
Income available to common shareholders | $ 25,018 | $ 15,460 | |
Earnings per common share: | |||
Basic | $ 0.55 | $ 0.44 | |
Diluted | $ 0.55 | $ 0.44 | |
Weighted average shares outstanding: | |||
Basic | 45,966 | 35,280 | |
Diluted | 46,200 | 35,452 | |
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) | 2018 | 2017 | 2017 | 2017 | 2017 | ||||
Interest and dividend income | |||||||||
Loans | $ 92,835 | $ 91,149 | $ 76,024 | $ 71,983 | $ 68,943 | ||||
Securities and other | 14,405 | 14,674 | 13,036 | 12,683 | 11,766 | ||||
Total interest and dividend income | 107,240 | 105,823 | 89,060 | 84,666 | 80,709 | ||||
Interest expense | |||||||||
Deposits | 15,325 | 13,802 | 10,984 | 9,971 | 9,098 | ||||
Borrowings | 6,445 | 5,655 | 6,078 | 5,150 | 4,725 | ||||
Total interest expense | 21,770 | 19,457 | 17,062 | 15,121 | 13,823 | ||||
Net interest income | 85,470 | 86,366 | 71,998 | 69,545 | 66,886 | ||||
Non-interest income | |||||||||
Mortgage banking originations | 10,147 | 11,918 | 13,374 | 16,281 | 12,678 | ||||
Loan related income | 5,438 | 5,866 | 6,081 | 5,275 | 4,179 | ||||
Deposit related fees | 8,066 | 7,871 | 6,445 | 6,645 | 6,204 | ||||
Insurance commissions and fees | 3,025 | 2,284 | 2,581 | 2,588 | 3,136 | ||||
Wealth management fees | 2,597 | 2,268 | 2,315 | 2,286 | 2,526 | ||||
Total fee income | 29,273 | 30,207 | 30,796 | 33,075 | 28,723 | ||||
Other | 1,268 | (939) | (2,255) | (276) | 93 | ||||
Securities (losses)/gains, net | (1,502) | 30 | (1) | (1) | 12,570 | ||||
Gain on sale of business operations and assets, net | 481 | - | 296 | - | - | ||||
Loss on termination of hedges | - | - | - | - | (6,629) | ||||
Total non-interest income | 29,520 | 29,298 | 28,836 | 32,798 | 34,757 | ||||
Total net revenue | 114,990 | 115,664 | 100,834 | 102,343 | 101,643 | ||||
Provision for loan losses | 5,575 | 6,141 | 4,900 | 4,889 | 5,095 | ||||
Non-interest expense | |||||||||
Compensation and benefits | 42,184 | 42,220 | 37,643 | 36,997 | 36,119 | ||||
Occupancy and equipment | 10,082 | 9,451 | 8,267 | 8,678 | 9,026 | ||||
Technology and communications | 6,830 | 6,286 | 6,644 | 6,883 | 6,087 | ||||
Marketing and promotion | 2,612 | 4,573 | 2,128 | 3,177 | 1,999 | ||||
Professional services | 2,053 | 2,277 | 2,247 | 2,190 | 2,451 | ||||
FDIC premiums and assessments | 1,195 | 1,920 | 1,651 | 1,588 | 1,298 | ||||
Other real estate owned and foreclosures | 67 | 9 | (23) | 30 | 28 | ||||
Amortization of intangible assets | 1,268 | 1,183 | 739 | 770 | 801 | ||||
Merger, restructuring and other expense | 5,093 | 15,553 | 1,420 | 2,903 | 11,682 | ||||
Other | 5,485 | 6,569 | 5,104 | 6,307 | 4,835 | ||||
Total non-interest expense | 76,869 | 90,041 | 65,820 | 69,523 | 74,326 | ||||
Income before income taxes | 32,546 | 19,482 | 30,114 | 27,931 | 22,222 | ||||
Income tax expense | 7,298 | 22,292 | 7,211 | 8,237 | 6,762 | ||||
Net income/(loss) | $ 25,248 | $ (2,810) | $ 22,903 | $ 19,694 | $ 15,460 | ||||
Preferred stock dividend | 230 | 219 | - | - | - | ||||
Income/(loss) available to common shareholders | $ 25,018 | $ (3,029) | $ 22,903 | $ 19,694 | $ 15,460 | ||||
Earnings/(loss) per common share: | |||||||||
Basic | $ 0.55 | $ (0.06) | $ 0.57 | $ 0.53 | $ 0.44 | ||||
Diluted | $ 0.55 | $ (0.06) | $ 0.57 | $ 0.53 | $ 0.44 | ||||
Weighted average shares outstanding: | |||||||||
Basic | 45,966 | 45,122 | 39,984 | 37,324 | 35,280 | ||||
Diluted | 46,200 | 45,122 | 40,145 | 37,474 | 35,452 | ||||
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, | ||||||
2018 | 2017 | 2017 | 2017 | 2017 | ||||||
Earning assets | ||||||||||
Loans: | ||||||||||
Commercial real estate | 4.76% | 4.73% | 4.64% | 4.41% | 4.58% | |||||
Commercial and industrial loans | 5.19 | 5.25 | 5.09 | 5.30 | 4.86 | |||||
Residential mortgages | 3.56 | 3.76 | 3.68 | 3.62 | 3.56 | |||||
Consumer loans | 4.01 | 3.94 | 3.88 | 3.81 | 3.62 | |||||
Total loans | 4.45 | 4.47 | 4.33 | 4.25 | 4.19 | |||||
Securities | 3.26 | 3.55 | 3.43 | 3.45 | 3.38 | |||||
Short-term investments and loans held for sale | 3.43 | 2.90 | 3.40 | 3.07 | 2.40 | |||||
Total earning assets | 4.21 | 4.27 | 4.13 | 4.07 | 4.00 | |||||
Funding liabilities | ||||||||||
Deposits: | ||||||||||
NOW and other | 0.28 | 0.25 | 0.26 | 0.23 | 0.22 | |||||
Money market | 0.73 | 0.66 | 0.57 | 0.54 | 0.52 | |||||
Savings | 0.14 | 0.14 | 0.14 | 0.14 | 0.13 | |||||
Time | 1.40 | 1.25 | 1.20 | 1.13 | 1.08 | |||||
Total interest-bearing deposits | 0.90 | 0.82 | 0.78 | 0.73 | 0.69 | |||||
Borrowings | 2.02 | 1.81 | 1.65 | 1.46 | 1.38 | |||||
Total interest-bearing liabilities | 1.08 | 0.97 | 0.96 | 0.88 | 0.83 | |||||
Net interest spread | 3.13 | 3.30 | 3.17 | 3.19 | 3.17 | |||||
Net interest margin (1) | 3.36 | 3.50 | 3.36 | 3.36 | 3.33 | |||||
Cost of funds (2) | 0.90 | 0.81 | 0.82 | 0.75 | 0.70 | |||||
Cost of deposits | 0.73 | 0.66 | 0.64 | 0.60 | 0.56 | |||||
(1) | The effect of purchased loan accretion on the quarterly net interest margin was an increase in all quarters, which is |
(2) | 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) | 2018 | 2017 | 2017 | 2017 | 2017 | ||||
Assets | |||||||||
Loans | |||||||||
Commercial real estate | $ 3,250,861 | $ 3,161,902 | $ 2,669,558 | $ 2,691,804 | $ 2,631,281 | ||||
Commercial and industrial loans | 1,811,433 | 1,645,719 | 1,183,980 | 1,130,384 | 1,072,716 | ||||
Residential mortgages | 2,138,544 | 2,081,548 | 1,977,538 | 1,871,329 | 1,906,457 | ||||
Consumer loans | 1,114,586 | 1,123,683 | 1,030,032 | 996,488 | 978,683 | ||||
Total loans (1) | 8,315,424 | 8,012,852 | 6,861,108 | 6,690,005 | 6,589,137 | ||||
Securities (2) | 1,933,002 | 1,921,724 | 1,779,379 | 1,701,443 | 1,625,769 | ||||
Short-term investments and loans held for sale | 139,161 | 146,101 | 167,724 | 148,276 | 118,537 | ||||
Total earning assets | 10,387,587 | 10,080,677 | 8,808,211 | 8,539,724 | 8,333,443 | ||||
Goodwill and other intangible assets | 557,321 | 533,157 | 420,853 | 421,601 | 422,331 | ||||
Other assets | 521,745 | 516,802 | 402,188 | 369,317 | 388,211 | ||||
Total assets | $ 11,466,653 | $ 11,130,636 | $ 9,631,252 | $ 9,330,642 | $ 9,143,985 | ||||
Liabilities and shareholders' equity | |||||||||
Deposits | |||||||||
NOW and other | $ 712,181 | $ 702,353 | $ 570,864 | $ 572,688 | $ 574,799 | ||||
Money market | 2,518,920 | 2,371,203 | 1,768,108 | 1,794,693 | 1,804,738 | ||||
Savings | 743,944 | 733,157 | 669,690 | 667,863 | 648,839 | ||||
Time | 2,913,512 | 2,906,423 | 2,587,702 | 2,472,990 | 2,351,183 | ||||
Total interest-bearing deposits | 6,888,557 | 6,713,136 | 5,596,364 | 5,508,234 | 5,379,559 | ||||
Borrowings | 1,275,173 | 1,229,781 | 1,445,700 | 1,398,653 | 1,374,620 | ||||
Total interest-bearing liabilities | 8,163,730 | 7,942,917 | 7,042,064 | 6,906,887 | 6,754,179 | ||||
Non-interest-bearing demand deposits | 1,656,260 | 1,591,431 | 1,196,451 | 1,155,533 | 1,178,790 | ||||
Other liabilities | 137,976 | 127,562 | 131,003 | 110,367 | 128,573 | ||||
Total liabilities | 9,957,966 | 9,661,910 | 8,369,518 | 8,172,787 | 8,061,542 | ||||
Total preferred shareholders' equity | 40,633 | 34,892 | - | - | - | ||||
Total common shareholders' equity | 1,468,054 | 1,433,834 | 1,261,734 | 1,157,855 | 1,082,443 | ||||
Total shareholders' equity | 1,508,687 | 1,468,726 | 1,261,734 | 1,157,855 | 1,082,443 | ||||
Total liabilities and shareholders' equity | $ 11,466,653 | $ 11,130,636 | $ 9,631,252 | $ 9,330,642 | $ 9,143,985 | ||||
Supplementary data | |||||||||
Total average non-maturity deposits | $ 5,631,305 | $ 5,398,144 | $ 4,205,113 | $ 4,190,777 | $ 4,207,166 | ||||
Total average deposits | 8,544,817 | 8,304,567 | 6,792,815 | 6,663,767 | 6,558,349 | ||||
Fully taxable equivalent income adjustment | 1,820 | 3,122 | 2,950 | 2,644 | 2,511 | ||||
Purchased loan accretion | 3,433 | 5,507 | 3,066 | 2,550 | 3,687 | ||||
Total average tangible equity (3) | 951,366 | 935,569 | 840,881 | 736,254 | 660,112 | ||||
(1) | Total loans include non-accruing loans. |
(2) | Average balances for securities available-for-sale are based on amortized cost. |
(3) | See page F-9 for details on the calculation of total average tangible equity. |
BERKSHIRE HILLS BANCORP, INC. | ||||||||||
ASSET QUALITY ANALYSIS - UNAUDITED - (F-8) | ||||||||||
At or for the Quarters Ended | ||||||||||
March 31, | Dec. 31, | Sept. 30, | June 30, | March 31, | ||||||
(in thousands) | 2018 | 2017 | 2017 | 2017 | 2017 | |||||
NON-PERFORMING ASSETS | ||||||||||
Non-accruing loans: | ||||||||||
Commercial real estate | $ 10,084 | $ 7,266 | $ 5,228 | $ 7,587 | $ 7,718 | |||||
Commercial and industrial loans | 7,430 | 7,311 | 9,681 | 8,387 | 8,327 | |||||
Residential mortgages | 5,777 | 2,883 | 3,092 | 3,245 | 3,971 | |||||
Consumer loans | 5,996 | 5,438 | 4,350 | 4,977 | 5,109 | |||||
Total non-accruing loans | 29,287 | 22,898 | 22,351 | 24,196 | 25,125 | |||||
Other real estate owned | - | - | 288 | 279 | 71 | |||||
Repossessed assets | 1,241 | 1,147 | - | - | - | |||||
Total non-performing assets | $ 30,528 | $ 24,045 | $ 22,639 | $ 24,475 | $ 25,196 | |||||
Total non-accruing loans/total loans | 0.35% | 0.28% | 0.32% | 0.35% | 0.38% | |||||
Total non-performing assets/total assets | 0.27% | 0.21% | 0.23% | 0.25% | 0.27% | |||||
PROVISION AND ALLOWANCE FOR LOAN LOSSES | ||||||||||
Balance at beginning of period | $ 51,834 | $ 49,004 | $ 47,359 | $ 45,804 | $ 43,998 | |||||
Charged-off loans | (3,791) | (3,734) | (3,796) | (3,431) | (3,623) | |||||
Recoveries on charged-off loans | 241 | 423 | 541 | 97 | 334 | |||||
Net loans charged-off | (3,550) | (3,311) | (3,255) | (3,334) | (3,289) | |||||
Provision for loan losses | 5,575 | 6,141 | 4,900 | 4,889 | 5,095 | |||||
Balance at end of period | $ 53,859 | $ 51,834 | $ 49,004 | $ 47,359 | $ 45,804 | |||||
Allowance for loan losses/total loans | 0.64% | 0.62% | 0.71% | 0.69% | 0.69% | |||||
Allowance for loan losses/non-accruing loans | 184% | 226% | 219% | 196% | 182% | |||||
NET LOAN CHARGE-OFFS | ||||||||||
Commercial real estate | $ (817) | $ (881) | $ (1,425) | $ (1,474) | $ (633) | |||||
Commercial and industrial loans | (972) | (960) | (573) | (625) | (1,634) | |||||
Residential mortgages | (406) | (759) | 130 | (337) | (324) | |||||
Home equity | (588) | (123) | (634) | (268) | (95) | |||||
Auto and other consumer | (767) | (588) | (753) | (630) | (603) | |||||
Total, net | $ (3,550) | $ (3,311) | $ (3,255) | $ (3,334) | $ (3,289) | |||||
Net charge-offs (QTD annualized)/average loans | 0.17% | 0.17% | 0.19% | 0.20% | 0.20% | |||||
Net charge-offs (YTD annualized)/average loans | 0.17% | 0.19% | 0.20% | 0.20% | 0.20% | |||||
DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS | ||||||||||
30-89 Days delinquent | 0.39% | 0.35% | 0.25% | 0.23% | 0.24% | |||||
90+ Days delinquent and still accruing | 0.23% | 0.20% | 0.17% | 0.12% | 0.16% | |||||
Total accruing delinquent loans | 0.62% | 0.55% | 0.42% | 0.35% | 0.40% | |||||
Non-accruing loans | 0.35% | 0.28% | 0.32% | 0.35% | 0.38% | |||||
Total delinquent and non-accruing loans | 0.97% | 0.83% | 0.74% | 0.70% | 0.78% | |||||
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) | 2018 | 2017 | 2017 | 2017 | 2017 | |||||
Net income/(loss) | $ 25,248 | $ (2,810) | $ 22,903 | $ 19,694 | $ 15,460 | |||||
Adj: Net securities losses/(gains) (1) | 1,502 | (30) | 1 | 1 | (12,570) | |||||
Adj: Loss on termination of hedges | - | - | - | - | 6,629 | |||||
Adj: Net (gains) on sale of business operations and assets | (481) | - | (296) | - | - | |||||
Adj: Merger and acquisition expense | 5,093 | 15,553 | 1,110 | 2,266 | 5,947 | |||||
Adj: Restructuring expense and other expense | - | - | 310 | 637 | 5,735 | |||||
Adj: Employee and community investment | - | 3,400 | - | - | - | |||||
Adj: Deferred tax asset impairment | - | 18,145 | - | - | - | |||||
Adj: Income taxes | (1,481) | (7,963) | (474) | (1,039) | (1,801) | |||||
Total core income (2) | (A) | $ 29,881 | $ 26,295 | $ 23,554 | $ 21,559 | $ 19,400 | ||||
Total revenue | $ 114,990 | $ 115,664 | $ 100,834 | $ 102,343 | $ 101,643 | |||||
Adj: Net securities losses/(gains) (1) | 1,502 | (30) | 1 | 1 | (12,570) | |||||
Adj: Net (gains) on sale of business operations | (481) | - | (296) | - | - | |||||
Adj: Loss on termination of hedges | - | - | - | - | 6,629 | |||||
Total core revenue (2) | (B) | $ 116,011 | $ 115,634 | $ 100,539 | $ 102,344 | $ 95,702 | ||||
Total non-interest expense | $ 76,869 | $ 90,041 | $ 65,820 | $ 69,523 | $ 74,326 | |||||
Less: Merger, restructuring and other expense (see above) | (5,093) | (15,553) | (1,420) | (2,903) | (11,682) | |||||
Less: Employee and community investment | - | (3,400) | - | - | - | |||||
Core non-interest expense (2) | (C) | $ 71,776 | $ 71,088 | $ 64,400 | $ 66,620 | $ 62,644 | ||||
(in millions, except per share data) | ||||||||||
Total average assets | (D) | $ 11,467 | $ 11,131 | $ 9,631 | $ 9,331 | $ 9,144 | ||||
Total average shareholders' equity | (E) | 1,509 | 1,469 | 1,262 | 1,158 | 1,082 | ||||
Total average tangible shareholders' equity (2) | (F) | 951 | 936 | 841 | 736 | 660 | ||||
Total average tangible common shareholders' equity (2) | (G) | 911 | 901 | 841 | 736 | 660 | ||||
Total tangible shareholders' equity, period-end (2)(3) | (H) | 941 | 939 | 864 | 847 | 678 | ||||
Total tangible common shareholders' equity, period-end (2)(3) | (I) | 901 | 898 | 864 | 847 | 678 | ||||
Total tangible assets, period-end (2)(3) | (J) | 10,963 | 11,013 | 9,346 | 9,206 | 8,876 | ||||
Total common shares outstanding, period-end (thousands) | (K) | 45,360 | 45,290 | 40,424 | 40,428 | 35,729 | ||||
Average diluted shares outstanding (thousands) | (L) | 46,200 | 45,383 | 40,145 | 37,474 | 35,452 | ||||
Core earnings per share, diluted(2) | (A/L) | $ 0.65 | $ 0.58 | $ 0.59 | $ 0.58 | $ 0.55 | ||||
Tangible book value per common share, period-end (2) | (I/K) | 19.86 | 19.83 | 21.38 | 20.96 | 18.97 | ||||
Total tangible shareholders' equity/total tangible assets (2) | (H)/(J) | 8.59 | 8.53 | 9.25 | 9.20 | 7.64 | ||||
Performance ratios (4) | ||||||||||
GAAP return on assets | 0.88% | (0.10)% | 0.95% | 0.84% | 0.68% | |||||
Core return on assets (2) | (A/D) | 1.04 | 0.94 | 0.98 | 0.92 | 0.85 | ||||
GAAP return on equity | 6.69 | (0.77) | 7.26 | 6.80 | 5.71 | |||||
Core return on equity (2) | (A/E) | 7.92 | 7.16 | 7.47 | 7.45 | 7.17 | ||||
Core return on tangible common equity (2)(5) | (A+O)/(G) | 13.43 | 11.90 | 11.42 | 11.96 | 12.05 | ||||
Efficiency ratio (2)(6) | (C-O)/(B+M+P) | 59.54 | 57.43 | 59.28 | 61.72 | 61.94 | ||||
Net interest margin | 3.36 | 3.50 | 3.36 | 3.36 | 3.33 | |||||
Supplementary data (in thousands) | ||||||||||
Tax benefit on tax-credit investments (7) | (M) | $ 596 | $ 2,957 | $ 3,905 | $ 1,696 | $ 1,624 | ||||
Non-interest income charge on tax-credit investments (8) | (N) | (506) | (2,564) | (3,347) | (1,453) | (1,329) | ||||
Net income on tax-credit investments | (M+N) | 90 | 393 | 558 | 243 | 295 | ||||
Intangible amortization | (O) | $ 1,268 | $ 1,183 | $ 739 | $ 770 | $ 801 | ||||
Fully taxable equivalent income adjustment | (P) | 1,820 | 3,122 | 2,950 | 2,644 | 2,511 | ||||
(1) | Net securities losses/(gains) for the period ending March 31, 2018 includes the change in fair value of the Company's equity securities in compliance with the Company's adoption of ASU 2016-01. There were no non-equity securities sold during the period ending March 31, 2018. |
(2) | Non-GAAP financial measure. |
(3) | Total tangible shareholders' equity is computed by taking total shareholders' equity less the intangible assets at period-end. Total tangible assets is computed by taking total assets less the intangible assets at period-end. |
(4) | Ratios are annualized and based on average balance sheet amounts, where applicable. Quarterly data may not sum to year-to-date data due to rounding. |
(5) | Core return on tangible equity is computed by dividing the total core income adjusted for the tax-effected amortization of intangible assets, assuming a 27.32% marginal rate, 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.
