Berkshire Hills Reports 16% Increase in Second Quarter Core EPS; Dividend Declared

Jul 22, 2015, 16:10 ET from Berkshire Hills Bancorp, Inc.

PITTSFIELD, Mass., July 22, 2015 /PRNewswire/ -- Berkshire Hills Bancorp, Inc. (NYSE: BHLB) reported $0.51 in core earnings per share in the second quarter of 2015, which was a 16% increase over second quarter results in the prior year.  Profit growth reflects positive operating leverage from ongoing business development.  Second quarter core EPS also increased at an 8% annualized rate compared to the prior quarter.  GAAP EPS totaled $0.35 in the most recent quarter and reflected net non-core charges primarily related to the Hampden Bancorp acquisition, which was completed on April 17. 

SECOND QUARTER FINANCIAL HIGHLIGHTS (comparisons are to prior quarter unless otherwise stated):

  • 8% annualized increase in core earnings per share
  • 13% increase in commercial loans (8% annualized organic)
  • 13% increase in deposits (10% annualized organic)
  • 14% increase in fee income
  • 61.5% efficiency ratio
  • 0.05% improvement in core ROA to 0.81% (0.56% GAAP ROA)
  • 0.27% non-performing assets/assets
  • 0.27% net loan charge-offs/average loans

CEO Michael Daly stated, "We had a good second quarter in organic business development across our regions and business lines.  Commercial loan activity remained strong and deposits grew nicely after the slower winter quarter.  Loan and deposit fee income also advanced and mortgage banking revenues remained elevated."

"I'm proud of our recent achievements in building Berkshire's franchise.  The acquisition of Hampden Bancorp was completed in April and was followed by a seamless systems conversion in June.  We announced an agreement to acquire Firestone Financial, a commercial specialty lender in Eastern Massachusetts, and have moved expeditiously towards our goal of completing this attractive acquisition in August."

Mr. Daly concluded, "The benefit of our positive operating leverage was demonstrated by improvement in our profitability and efficiency metrics in the second quarter.  Our net interest margin continued to improve and is expected to benefit from the planned Firestone acquisition in the third quarter.  In addition to improving bottom line results, we introduced Apple Pay™ convenience to our customers, and our employees participated in the biggest Week of Community Service in our Company's history.   We continue to benefit from heightened recognition in our markets as a preferred partner, combining local focus with strong regional resources."

DIVIDEND DECLARED

The Board of Directors voted to declare a cash dividend of $0.19 per share to shareholders of record at the close of business on August 6, 2015, payable on August 20, 2015.  This dividend equates to a 2.7% annualized yield based on the $27.92 average closing price of Berkshire's common stock during the second quarter. 

FINANCIAL CONDITION

Total assets increased by $948 million, or 14%, to $7.5 billion in the second quarter.  This includes approximately $700 million added by the Hampden acquisition, which resulted in increases in most categories of assets and liabilities.  Capital ratios improved and were enhanced by the equity issued for this acquisition.  Liquidity ratios improved due to the strong deposit growth during the quarter. 

Total commercial loans increased at an 8% organic annualized rate in the second quarter.  This growth reflected ongoing strong originations offset in part by targeted reductions in lower margin accounts.  Total loans grew at a 5% annualized organic rate including mortgage growth less the impact of an ongoing repositioning of the auto loan portfolio.    

Asset quality metrics remained favorable.  Annualized net loan charge-offs measured 0.27% of average loans for the quarter.   Quarter-end non-performing assets decreased to 0.27% of total assets and accruing delinquent loans decreased to 0.41% of total loans.  The loan loss allowance measured 0.70% of total loans.  Pursuant to accounting principles, no loan loss allowance was required for the $493 million in acquired Hampden loans, which were 9% of midyear loans.

Annualized organic deposit growth measured 10% in the second quarter, rebounding from slower growth in the winter quarter.  This growth included targeted promotions of money market and time deposits, along with higher brokered balances.  The ratio of loans/deposits was 99% at midyear, compared to 101% at the start of the year.  Total borrowings increased due to acquired Hampden borrowings, as well as approximately $100 million in additional borrowings which were subsequently repaid from excess cash on July 1, 2015.

Midyear tangible book value per share stood at $17.16, and was little changed from $17.19 at the start of the year despite the goodwill recorded for Hampden.  Total book value per share measured $28.02 at midyear. The $9 million accumulated other comprehensive income outstanding at the beginning of the quarter was eliminated due to lower bond prices following the recent rise in long term interest rates.  This noncash unrealized change reduced book value per share by approximately $0.32 but had no impact on the Company's regulatory capital.  The Company issued approximately 4.2 million net shares for the Hampden acquisition.

RESULTS OF OPERATIONS

Most categories of revenue and expense increased in the most recent quarter including the impact of the added operations of Hampden Bancorp as of April 17.  Compared to the prior quarter, total core revenue increased by 16% and total core non-interest expense increased by 11%.  The Hampden acquisition was not estimated to be accretive to core EPS until after most planned cost saves are achieved in the second half of the year.  Including the benefit of the Hampden merger, profitability metrics improved, and Berkshire's core ROA and core ROE increased compared to the prior quarter and to the second quarter of 2014.  The core return on tangible equity increased to 12.3%.  The second quarter efficiency ratio was 61.5% which was also an improvement over the prior quarter and year over year.  The Company recorded $0.16 per share in net non-core charges in the most recent quarter; these charges were primarily related to Hampden merger costs.  GAAP EPS totaled $0.35 per share including the impact of these charges, and the GAAP ROE was 5.1%. 

Net interest income increased by $7.1 million, or 16%, compared to the prior quarter.  The net interest margin improved to 3.30% from 3.18% for these periods.  Net interest income included $2.2 million in purchased loan accretion primarily from recoveries on the collection of credit impaired loans in prior bank acquisitions.  Excluding purchased loan accretion, the margin improved to 3.16% in the most recent quarter compared to 3.15% in the prior quarter, including the benefit of higher loan yields and lower deposit costs. 

Fee income increased quarter over quarter by $1.9 million, or 14%.  Fee income included strong organic growth in loan related fees, including revenues on interest rate swaps and seasoned loan sale gains.  Mortgage banking revenues remained elevated due to improved market conditions this year and deposit related fees increased from the slower winter quarter.  Non-core securities gains totaled $2.4 million primarily due to the income recognized on Hampden shares previously owned by Berkshire. 

The loan loss provision totaled $4.2 million compared to $3.9 million in the prior quarter and exceeded net charge-offs in each of these quarters.   Core non-interest expense totaled $45.3 million.  At 2.52% of average assets, this ratio was little changed from the prior quarter.  Core non-interest expense growth of $4.6 million included Hampden operating costs, along with higher costs related to the increase in impaired loan recoveries and loan related revenue.  Expense growth also included additional investment in developing fee business lines to support future revenue growth.  GAAP non-interest expense totaled $54.0 million in the second quarter compared to $45.1 million in the prior quarter, including $8.7 million and $4.4 million in non-core expenses in the two periods, respectively.  Total full time equivalent staff increased by 6% to 1,153 including the Hampden team.  With its combined strategies of revenue growth and expense management, Berkshire operated with an improved efficiency ratio measuring 61.5% in the most recent quarter.  The Company had 93 ongoing branches as of midyear and in 2015 has consolidated seven branches and entered an agreement to sell its Tennessee branch in the second half of the year.

Berkshire's income tax rate on core income was 17% in the most recent quarter, compared to 8% in the prior quarter.  This includes the impact of the higher income from the Hampden operations, and the lower proportional benefit of tax-advantaged investments.  Berkshire's tax rate on GAAP income was 10% in the most recent quarter and reflected the tax benefit related to non-core Hampden merger related charges.

CONFERENCE CALL

Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Thursday, July 23, 2015 to discuss the results for the quarter and provide guidance about expected future results. Participants should dial-in to the call 10-15 minutes before it begins. Information about the conference call follows:

Live Dial-in:        888-317-6003; access number: 6453365 Webcast:          ir.berkshirebank.com Replay:             877-344-7529; access number: 10068292

A telephone replay of the call will be available through Friday, July 31, 2015. 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®. Berkshire has $7.5 billion in assets and 93 ongoing full-service branch offices in Massachusetts, New York, Connecticut, and Vermont providing personal and business banking, insurance, and wealth management services.  Berkshire has a pending agreement to acquire Firestone Financial Corp., a commercial specialty finance company with $190 million in assets, located in Needham, Massachusetts.

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.

ADDITIONAL INFORMATION FOR STOCKHOLDERS

In connection with the proposed merger with Firestone Financial Corp., Berkshire has filed with the Securities and Exchange Commission ("SEC") a Registration Statement on Form S-4 that includes a Proxy Statement of Firestone and a Prospectus of Berkshire, as well as other relevant documents concerning the proposed merger. Investors and stockholders are urged to read the Registration Statement and the Proxy Statement/Prospectus regarding the proposed merger and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information. A free copy of the Registration Statement and Proxy Statement/Prospectus, as well as other filings containing information about Berkshire and Firestone, when they become available, may be obtained at the SEC's Internet site (www.sec.gov). Copies of the Registration Statement and Proxy Statement/Prospectus and the filings that will be incorporated by reference therein may also be obtained, free of charge, from Berkshire's website at ir.berkshirebank.com or by contacting Berkshire Investor Relations at 413-236-3149.

PARTICIPANTS IN SOLICITATION

Berkshire and Firestone and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of Firestone in connection with the proposed merger. Information about the directors and executive officers of Berkshire is set forth in the proxy statement for Berkshire's 2015 annual meeting of stockholders, as filed with the SEC on the Schedule 14A on April 1, 2015; in the Form 8-K filed April 28, 2015, and in the Form 8-K filed on May 7, 2015. Information about the directors and executive officers of Firestone is set forth in the Proxy Statement/Prospectus filed with the SEC by Berkshire on Form S-4/A on June 29, 2015.  Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction and a description of their direct and indirect interests, by security holdings or otherwise, may be obtained by reading other relevant documents regarding the proposed merger filed with the SEC, as they become available. Free copies of these documents may be obtained as described in the preceding paragraph.

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 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 amounts which the Company views as unrelated to its normalized operations, including securities gains/losses, losses recorded for hedge terminations, merger costs, restructuring costs, systems conversion costs, and out-of-period adjustments.  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.  Charges related to merger and acquisition activity consist primarily of severance/benefit related expenses, contract termination costs, and professional fees.  Systems conversion costs relate primarily to the Company's core systems conversion and related systems conversions costs.   Restructuring costs primarily consist of costs and losses associated with the disposition of assets.   In the most recent quarter, the Company reported organic growth of loans and deposits, which excluded the balances of accounts acquired in the Hampden acquisition.

CONTACTS

Investor Relations Contact Allison O'Rourke; Senior Vice President, Investor Relations Officer; 413-236-3149

Media Contact Elizabeth Mach; Vice President, Marketing Officer; 413-445-8390

 

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-1)

June 30,

March 31,

December 31,

(In thousands)

2015

2015

2014

Assets

Cash and due from banks

$            177,858

$              43,089

$              54,179

Short-term investments

27,660

19,125

17,575

Total cash and short-term investments

205,518

62,214

71,754

Trading security

14,378

14,970

14,909

Securities available for sale, at fair value

1,204,756

1,099,656

1,091,818

Securities held to maturity, at amortized cost

86,994

42,818

43,347

Federal Home Loan Bank stock and other restricted securities

73,212

58,734

55,720

Total securities

1,379,340

1,216,178

1,205,794

Loans held for sale, at fair value

48,514

29,305

19,493

Residential mortgages

1,637,356

1,473,239

1,496,204

Commercial real estate

1,907,237

1,672,099

1,611,567

Commercial and industrial loans

921,190

826,815

804,366

Consumer loans

818,831

756,510

768,463

Total loans

5,284,614

4,728,663

4,680,600

Less: Allowance for loan losses

(37,197)

(36,286)

(35,662)

Net loans

5,247,417

4,692,377

4,644,938

Premises and equipment, net

87,519

85,053

87,279

Other real estate owned

674

1,444

2,049

Goodwill 

308,043

264,742

264,742

Other intangible assets

12,473

10,627

11,528

Cash surrender value of bank-owned life insurance

123,536

105,302

104,588

Deferred tax asset, net

39,565

26,828

28,776

Other assets

66,148

77,169

61,090

Total assets (1)

$         7,518,747

$         6,571,239

$         6,502,031

Liabilities and stockholders' equity

Demand deposits

$         1,012,003

$            892,225

$            869,302

NOW deposits

458,570

436,458

426,108

Money market deposits

1,477,770

1,372,924

1,407,179

Savings deposits

621,909

512,607

496,344

Time deposits

1,751,924

1,505,469

1,455,746

Total deposits

5,322,176

4,719,683

4,654,679

Senior borrowings

1,176,484

956,118

962,576

Subordinated borrowings

89,782

89,765

89,747

Total borrowings

1,266,266

1,045,883

1,052,323

Other liabilities 

103,154

89,443

85,742

Total liabilities

6,691,596

5,855,009

5,792,744

Total stockholders' equity

827,151

716,230

709,287

Total liabilities and stockholders' equity

$         7,518,747

$         6,571,239

$         6,502,031

Net shares outstanding 

29,521

25,253

25,183

(1) The Company acquired Hampden Bancorp, Inc. ("Hampden") on April 17, 2015 with total assets of $0.7 billion.

 

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED - (F-2)

LOAN ANALYSIS

Organic Annualized Growth %

(in millions)

June 30, 2015 Balance

Acquired Hampden Balance

March 31, 2015 Balance

Dec. 31, 2014 Balance

Quarter ended June 30, 2015

Year to date

Total residential mortgages

$         1,638

$            130

$         1,473

$         1,496

10

%

2

%

Commercial real estate

1,907

240

1,672

1,612

(1)

7

Commercial and industrial loans

921

41

827

804

26

19

Total commercial loans

2,828

281

2,499

2,416

8

11

Home equity 

351

35

318

319

(1)

(1)

Auto and other

468

47

439

450

(17)

(13)

Total consumer loans

819

82

757

769

(10)

(8)

Total loans

$         5,285

$            493

$         4,729

$         4,681

5

%

5

%

DEPOSIT ANALYSIS

Organic Annualized Growth %

(in millions)

June 30, 2015 Balance

Acquired Hampden Balance

March 31, 2015 Balance

Dec. 31, 2014 Balance

Quarter ended June 30, 2015

Year to date

Demand

$         1,012

$              97

$            892

$            869

10

%

11

%

NOW

458

51

436

426

(27)

(9)

Money market

1,478

62

1,373

1,407

13

1

Savings

622

120

513

497

(8)

2

Total non-maturity deposits

3,570

330

3,214

3,199

3

3

Total time deposits

1,752

154

1,506

1,456

24

20

Total deposits

$         5,322

$            484

$         4,720

$         4,655

10

%

8

%

 

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED - (F-3)

Three Months Ended

Six Months Ended

June, 30

June 30,

(In thousands, except per share data)

2015

2014

2015

2014

Interest and dividend income    

Loans

$           51,504

$           42,309

$           95,949

$           84,803

Securities and other    

8,899

8,866

17,205

16,167

Total interest and dividend income    

60,403

51,175

113,154

100,970

Interest expense

Deposits

5,292

4,478

10,241

9,199

Borrowings

2,474

2,368

4,783

4,676

Total interest expense    

7,766

6,846

15,024

13,875

Net interest income

52,637

44,329

98,130

87,095

Non-interest income

Loan related income

2,783

1,846

4,066

3,094

Mortgage banking income

1,546

691

2,799

1,063

Deposit related fees

6,442

6,610

12,119

12,049

Insurance commissions and fees    

2,486

2,460

5,453

5,509

Wealth management fees    

2,397

2,294

5,000

4,843

Total fee income    

15,654

13,901

29,437

26,558

Other

(1,258)

402

(2,513)

926

Securities gains, net     

2,384

203

2,418

237

Loss on termination of hedges

-

-

-

(8,792)

Total non-interest income      

16,780

14,506

29,342

18,929

Total net revenue

69,417

58,835

127,472

106,024

Provision for loan losses   

4,204

3,989

8,055

7,385

Non-interest expense

Compensation and benefits

24,503

20,279

46,314

40,138

Occupancy and equipment     

7,243

6,656

14,351

13,470

Technology and communications

4,090

3,800

7,683

7,578

Marketing and promotion     

800

621

1,513

1,142

Professional services

1,375

1,024

2,647

2,176

FDIC premiums and assessments

1,143

1,029

2,272

2,038

Other real estate owned and foreclosures

251

33

502

556

Amortization of intangible assets     

934

1,274

1,835

2,580

Merger, restructuring and conversion expense (1)    

8,711

190

13,132

6,491

Other

4,975

4,357

8,924

8,454

Total non-interest expense     

54,025

39,263

99,173

84,623

Income before income taxes       

11,188

15,583

20,244

14,016

Income tax expense

1,144

4,119

1,441

3,658

Net income 

$           10,044

$           11,464

$           18,803

$           10,358

Earnings per share:

Basic

$               0.35

$               0.46

$               0.71

$               0.42

Diluted

$               0.35

$               0.46

$               0.70

$               0.42

Weighted average shares outstanding:      

Basic

28,301

24,715

26,557

24,707

Diluted

28,461

24,809

26,713

24,821

(1) Merger, restructuring and conversion expenses include Hampden acquisition and branch acquisition related expenses and restructuring expenses.

 

BERKSHIRE HILLS BANCORP, INC.

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

Quarters Ended

June 30,

March 31,

Dec. 31,

Sept. 30,

June 30,

(In thousands, except per share data)

2015

2015

2014

2014

2014

Interest and dividend income    

Loans

$      51,504

$      44,445

$      45,706

$      43,958

$      42,309

Securities and other    

8,899

8,306

8,310

8,098

8,866

Total interest and dividend income    

60,403

52,751

54,016

52,056

51,175

Interest expense

Deposits

5,292

4,949

5,109

4,877

4,478

Borrowings

2,474

2,309

2,260

2,230

2,368

Total interest expense    

7,766

7,258

7,369

7,107

6,846

Net interest income

52,637

45,493

46,647

44,949

44,329

Non-interest income

Loan related income

2,783

1,283

1,763

1,471

1,846

Mortgage banking income

1,546

1,253

504

994

691

Deposit related fees

6,442

5,677

6,137

6,449

6,610

Insurance commissions and fees    

2,486

2,967

2,223

2,632

2,460

Wealth management fees    

2,397

2,603

2,373

2,330

2,294

Total fee income    

15,654

13,783

13,000

13,876

13,901

Other

(1,258)

(1,255)

1,200

520

402

Securities gains, net     

2,384

34

-

245

203

Loss on termination of hedges

-

-

-

-

-

Total non-interest income      

16,780

12,562

14,200

14,641

14,506

Total net revenue

69,417

58,055

60,847

59,590

58,835

Provision for loan losses   

4,204

3,851

3,898

3,685

3,989

Non-interest expense

Compensation and benefits

24,503

21,811

20,965

20,665

20,279

Occupancy and equipment     

7,243

7,108

6,655

6,780

6,656

Technology and communications

4,090

3,593

3,702

3,484

3,800

Marketing and promotion  

800

713

771

659

621

Professional services

1,375

1,272

1,205

830

1,024

FDIC premiums and assessments

1,143

1,129

1,083

1,163

1,029

Other real estate owned and foreclosures

251

251

232

13

33

Amortization of intangible assets     

934

901

996

1,236

1,274

Merger, restructuring and conversion expense (1)    

8,711

4,421

1,762

238

190

Other

4,975

3,949

4,305

4,619

4,357

Total non-interest expense     

54,025

45,148

41,676

39,687

39,263

Income before income taxes

11,188

9,056

15,273

16,218

15,583

Income tax expense 

1,144

297

3,875

4,230

4,119

Net income

$      10,044

$        8,759

$      11,398

$      11,988

$      11,464

Earnings per share:

Basic 

$          0.35

$          0.35

$          0.46

$          0.48

$          0.46

Diluted 

$          0.35

$          0.35

$          0.46

$          0.48

$          0.46

Weighted average shares outstanding:      

Basic

28,301

24,803

24,758

24,747

24,715

Diluted

28,461

24,955

24,912

24,861

24,809

(1) See note on Page F-3

 

BERKSHIRE HILLS BANCORP, INC.

ASSET QUALITY ANALYSIS - UNAUDITED - (F-5)

At or for the Quarters Ended

June 30,

March 31,

Dec. 31,

Sept. 30,

June 30,

(in thousands)

2015

2015

2014

2014

2014

NON-PERFORMING ASSETS

Non-accruing loans:

Residential mortgages

$         4,234

$         4,153

$         3,908

$         4,810

$         5,295

Commercial real estate

9,733

13,516

12,878

12,192

12,583

Commercial and industrial loans

3,031

1,308

1,705

2,225

4,821

Consumer loans

2,991

3,032

3,214

3,660

3,359

Total non-accruing loans

19,989

22,009

21,705

22,887

26,058

Other real estate owned

674

1,444

2,049

4,854

2,445

Total non-performing assets

$       20,663

$       23,453

$       23,754

$       27,741

$       28,503

Total non-accruing loans/total loans

0.38%

0.47%

0.46%

0.50%

0.59%

Total non-performing assets/total assets

0.27%

0.36%

0.37%

0.44%

0.45%

PROVISION AND ALLOWANCE FOR LOAN LOSSES

Balance at beginning of period

$       36,286

$       35,662

$       34,966

$       34,353

$       33,602

Charged-off loans

(4,176)

(3,432)

(3,660)

(3,360)

(3,516)

Recoveries on charged-off loans

883

205

458

288

278

Net loans charged-off

(3,293)

(3,227)

(3,202)

(3,072)

(3,238)

Provision for loan losses

4,204

3,851

3,898

3,685

3,989

Balance at end of period

$       37,197

$       36,286

$       35,662

$       34,966

$       34,353

Allowance for loan losses/total loans

0.70%

0.77%

0.76%

0.77%

0.77%

Allowance for loan losses/non-accruing loans

186%

165%

164%

153%

132%

NET LOAN CHARGE-OFFS

Residential mortgages

$          (367)

$          (299)

$          (181)

$          (394)

$          (602)

Commercial real estate

(2,461)

(2,007)

(1,810)

(1,470)

(1,028)

Commercial and industrial loans

(124)

(375)

(540)

(687)

(1,341)

Home equity 

(174)

(202)

(240)

(193)

(51)

Auto and other consumer

(167)

(344)

(431)

(328)

(216)

Total, net

$       (3,293)

$       (3,227)

$       (3,202)

$       (3,072)

$       (3,238)

Net charge-offs (QTD annualized)/average loans 

0.27%

0.28%

0.29%

0.28%

0.31%

Net charge-offs (YTD annualized)/average loans 

0.26%

0.28%

0.29%

0.29%

0.30%

DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS

30-89 Days delinquent

0.29%

0.28%

0.42%

0.32%

0.34%

90+ Days delinquent and still accruing

0.12%

0.15%

0.10%

0.12%

0.21%

Total accruing delinquent loans

0.41%

0.43%

0.52%

0.44%

0.55%

Non-accruing loans

0.38%

0.47%

0.46%

0.50%

0.59%

Total delinquent and non-accruing loans

0.79%

0.90%

0.98%

0.94%

1.14%

 

BERKSHIRE HILLS BANCORP, INC.

SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED - (F-6)

At or for the Quarters Ended (1)

June 30,

March 31,

Dec. 31,

Sept. 30,

June 30,

2015

2015

2014

2014

2014

PER SHARE DATA

Core earnings, diluted

$      0.51

$      0.50

$      0.48

$      0.46

$      0.44

Net earnings, diluted

0.35

0.35

0.46

0.48

0.46

Tangible book value

17.16

17.46

17.19

16.67

16.40

Total book value

28.02

28.36

28.17

27.69

27.49

Market price at period end

28.48

27.70

26.66

23.49

23.22

Dividends

0.19

0.19

0.18

0.18

0.18

PERFORMANCE RATIOS (2)

Core return on assets

0.81

%

0.76

%

0.75

%

0.73

%

0.71

%

Return on assets

0.56

0.54

0.71

0.77

0.75

Core return on equity

7.32

7.06

6.89

6.59

6.32

Core return on tangible equity

12.30

12.14

11.96

11.76

11.34

Return on equity

5.05

5.00

6.52

6.95

6.64

Net interest margin, fully taxable equivalent

3.30

3.18

3.23

3.20

3.26

Fee income/Net interest and fee income

22.92

23.25

21.79

23.59

23.87

Efficiency ratio 

61.51

63.27

62.46

62.89

62.96

GROWTH

Total commercial loans, year-to-date (organic annualized)

11

%

14

%

15

%

14

%

19

%

Total loans, year-to-date (organic annualized)

5

4

12

12

13

Total net revenues, year-to-date, compared to prior year

20

23

-

(3)

(7)

Core earnings per share, year-to-date

17

19

(4)

(10)

(15)

Earnings per share, year-to-date (4)

69

 N/M 

(18)

(27)

(54)

FINANCIAL DATA   (In millions)

Total assets

$    7,519

$    6,571

$    6,502

$    6,352

$    6,311

Total earning assets

6,740

5,993

5,923

5,765

5,700

Total investments

1,379

1,216

1,206

1,171

1,198

Total loans

5,285

4,729

4,681

4,553

4,450

Allowance for loan losses

37

36

36

35

34

Total intangible assets

321

275

276

277

279

Total deposits

5,322

4,720

4,655

4,563

4,479

Total stockholders' equity

827

716

709

697

690

Total core income 

14.6

12.4

12.0

11.4

10.9

Total net income

10.0

8.8

11.4

12.0

11.5

ASSET QUALITY RATIOS

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

0.27

%

0.28

%

0.29

%

0.28

%

0.31

%

Allowance for loan losses/total loans

0.70

0.77

0.78

0.77

0.77

CONDITION RATIOS

Stockholders' equity to total assets

11.00

%

10.90

%

10.91

%

10.97

%

10.94

%

Tangible stockholders' equity to tangible assets (3)

7.04

7.00

6.95

6.91

6.81

Investments to total assets

18.35

18.51

18.54

18.43

18.99

Loans/deposits

99

100

101

100

99

(1) Reconciliation of Non-GAAP financial measures, including all references to core and tangible amounts, appear on pages F-9 and F-10.

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

(3) Tangible assets are total assets less total intangible assets.

(4) N/M means not meaningful.

 

BERKSHIRE HILLS BANCORP, INC.

AVERAGE BALANCES - UNAUDITED - (F-7)

Quarters Ended

June 30, 

March 31, 

Dec. 31, 

Sept. 30, 

June 30, 

(In thousands)

2015

2015

2014

2014

2014

Assets

Loans:

Residential mortgages

$    1,562,503

$    1,469,910

$    1,468,271

$    1,412,720

$    1,379,625

Commercial real estate

1,889,306

1,646,638

1,611,343

1,579,258

1,488,462

Commercial and industrial loans

886,297

806,710

733,750

716,787

703,798

Consumer loans

821,933

765,938

782,584

763,296

729,654

Total loans (1) (5)

5,160,039

4,689,196

4,595,948

4,472,061

4,301,539

Securities (2)

1,301,918

1,176,559

1,190,182

1,169,765

1,225,646

Short-term investments and loans held for sale

72,003

55,652

54,843

39,496

28,426

Total earning assets

6,533,960

5,921,407

5,840,973

5,681,322

5,555,611

Goodwill and other intangible assets

303,780

275,732

276,645

277,775

279,024

Other assets

357,026

300,264

304,909

305,698

311,176

Total assets

$    7,194,766

$    6,497,403

$    6,422,527

$    6,264,795

$    6,145,811

Liabilities and stockholders' equity

Deposits (4):

NOW

$       460,378

$       423,474

$       415,806

$       417,802

$       425,824

Money market

1,437,428

1,408,777

1,426,722

1,405,454

1,448,624

Savings

606,231

502,412

479,988

480,036

481,790

Time

1,558,350

1,419,706

1,425,865

1,406,914

1,152,651

Total interest-bearing deposits

4,062,387

3,754,369

3,748,381

3,710,206

3,508,889

Borrowings

1,287,319

1,106,541

1,053,884

980,135

1,113,431

Total interest-bearing liabilities

5,349,706

4,860,910

4,802,265

4,690,341

4,622,320

Non-interest-bearing demand deposits

974,160

869,780

863,795

824,489

779,775

Other liabilities 

75,487

65,453

56,805

60,088

52,712

Total liabilities

6,399,353

5,796,143

5,722,865

5,574,918

5,454,807

Total stockholders' equity

795,413

701,260

699,662

689,877

691,004

Total liabilities and stockholders' equity

$    7,194,766

$    6,497,403

$    6,422,527

$    6,264,795

$    6,145,811

Supplementary data

Total non-maturity deposits (4)

$    3,478,197

$    3,204,443

$    3,186,311

$    3,127,781

$    3,136,013

Total deposits (4)

5,036,547

4,624,149

4,612,176

4,534,695

4,288,664

Fully taxable equivalent income adjustment

1,068

889

887

859

852

Total average tangible equity (3)

491,633

425,528

423,017

412,102

411,980

(1) Total loans include non-accruing loans.

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

(3) Total average tangible equity results from the subtraction of average goodwill and other intangible assets from total average stockholders' equity. 

(4) The average balances of deposits include the deposits held for sale presented under other liabilities on the consolidated balance sheet.

(5) The average balances of loans include the loans associated with the Tennessee branch sale presented under loans held for sale on the consolidated balance sheet.

 

BERKSHIRE HILLS BANCORP, INC.

AVERAGE YIELDS  (Fully Taxable Equivalent - Annualized) - UNAUDITED - (F-8)

Quarters Ended

June 30,

March 31,

Dec. 30,

Sept. 30,

June 30,

2015

2015

2014

2014

2014

Earning assets

Loans:

Residential mortgages

4.08

%

3.94

%

3.88

%

3.86

%

3.99

%

Commercial real estate

4.46

4.12

4.18

4.26

4.20

Commercial and industrial loans

3.64

3.70

4.22

3.79

3.82

Consumer loans

3.24

3.23

3.35

3.34

3.49

Total loans

4.02

3.86

3.96

3.91

3.96

Securities

2.99

3.10

3.00

2.98

3.13

Short-term investments and loans held for sale

1.13

1.40

1.37

1.65

1.40

Total earning assets

3.77

3.67

3.73

3.70

3.76

Funding liabilities

Deposits:

NOW

0.15

0.14

0.15

0.17

0.15

Money market

0.37

0.40

0.42

0.37

0.36

Savings

0.17

0.15

0.14

0.14

0.16

Time

0.91

0.92

0.91

0.91

0.98

Total interest-bearing deposits

0.52

0.53

0.54

0.52

0.51

Borrowings

0.77

0.85

0.85

0.90

0.85

Total interest-bearing liabilities

0.58

0.61

0.61

0.60

0.59

Net interest spread

3.19

3.06

3.12

3.10

3.17

Net interest margin

3.30

3.18

3.23

3.20

3.26

Cost of funds (1)

0.49

0.51

0.52

0.51

0.51

Cost of deposits (2)

0.42

0.43

0.44

0.43

0.42

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

(2) The average cost of deposits include the deposits held for sale. 

 

BERKSHIRE HILLS BANCORP, INC.

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

At or for the Quarters Ended

June 30,

March 31,

Dec. 31, 

Sept. 30, 

June 30, 

(in thousands)

2015

2015

2014

2014

2014

Net income

$   10,044

$     8,759

$   11,398

$   11,988

$   11,464

Adj: Securities gains

(2,384)

(34)

-

(245)

(203)

Adj: Loss on termination of hedges

-

-

-

-

-

Adj: Merger and acquisition expense

5,665

3,275

1,708

-

52

Adj: Restructuring and conversion expense

3,046

1,146

54

238

138

Adj:  Income taxes

(1,815)

(772)

(1,114)

(612)

(536)

Total core income

(A)

$   14,556

$   12,374

$   12,046

$   11,369

$   10,915

Total revenue 

$   69,417

$   58,055

$   60,847

$   59,590

$   58,835

Adj: Securities gains

(2,384)

(34)

-

(245)

(203)

Total core revenue

(B)

$   67,033

$   58,021

$   60,847

$   59,345

$   58,632

Total non-interest expense

$   54,025

$   45,148

$   41,676

$   39,687

$   39,263

Less: Total non-core expense (see above)

(8,711)

(4,421)

(1,762)

(238)

(190)

Core non-interest expense                                    

(C)

$   45,314

$   40,727

$   39,914

$   39,449

$   39,073

(in millions, except per share data)

Total average assets                                                

(D)

$     7,195

$     6,497

$     6,423

$     6,265

$     6,146

Total average stockholders' equity                         

(E)

795

701

700

690

691

Total average tangible stockholders' equity                         

(F)

492

426

423

412

412

Total tangible stockholders' equity, period-end (1)

(G)

507

441

433

420

411

Total common shares outstanding, period-end (thousands)               

(H)

29,521

25,253

25,183

25,173

25,115

Average diluted shares outstanding (thousands)

(I)

28,461

24,955

24,912

24,861

24,809

Core earnings per share, diluted 

(A/I)

$       0.51

$       0.50

$       0.48

$       0.46

$       0.44

Tangible book value per share, period-end

(G/H)

$     17.16

$     17.46

$     17.19

$     16.67

$     16.40

Performance ratios (2)

Core return on assets

(A/D)

0.81

%

0.76

%

0.75

%

0.73

%

0.71

%

Core return on equity 

(A/E)

7.32

7.06

6.89

6.59

6.32

Core return on tangible equity (3)

(A/F)

12.30

12.14

11.96

11.76

11.34

Efficiency ratio  

 (C-L)/(B+J+M)

61.51

63.27

62.46

62.89

62.96

Supplementary data (in thousands)

Tax benefit - tax-advantaged investments (4)

(J)

$     4,034

$     4,034

$        570

$        555

$        555

Non-interest income charge - tax-advantaged investments (5)

(K)

(2,851)

(2,851)

(417)

(417)

(417)

Net income on tax-advantaged investments

(J+K)

1,183

1,183

153

138

138

Intangible amortization

(L)

934

901

996

1,236

1,274

Fully taxable equivalent income adjustment

(M)

1,068

889

887

859

852

(1) Total tangible stockholders' equity is computed by taking total stockholders' equity less the intangible assets at period-end. 

(2) 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.

(3) Core return on tangible equity is computed by dividing the total core income adjusted for the tax-affected amortization of intangible assets, assuming a 40% marginal rate, by tangible equity.

(4) The tax benefit is the direct reduction to the income tax provision due to tax credits and deductions generated from investments in historic rehabilitation, low-income housing, new market projects, and renewable energy projects.

(5) 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 - UNAUDITED - (F-10)

As of or at Six Months Ended

June 30,

June 30,

(Dollars in thousands)

2015

2014

Net income 

$                   18,803

$                   10,358

Adj: Securities gains

(2,418)

(237)

Adj: Loss on termination of hedges

-

8,792

Adj: Merger and acquisition expenses

8,940

3,689

Adj: Restructuring and conversion expenses

4,192

2,803

Adj: Out-of-period adjustment (1) 

-

1,381

Adj: Income taxes

(2,587)

(5,459)

Total core income 

(A)

$                   26,930

$                   21,327

Total revenue 

127,472

$                 106,024

Adj: Securities gains

(2,418)

(237)

Adj: Loss on termination of hedges

-

8,792

Adj: Out-of-period adjustment (1) 

-

1,381

Total core revenue

(B)

$                 125,054

$                 115,960

Total non-interest expense

$                   99,173

$                   84,623

Less: Total non-core expense (see above)

(13,132)

(6,492)

Core non-interest expense                                    

(C)

$                   86,041

$                   78,131

(Dollars in millions, except per share data)

Total average assets                                                

(D)

$                     6,846

$                     5,999

Total average stockholders' equity                         

(E)

748

692

Total average tangible stockholders' equity                         

(F)

459

413

Total tangible stockholders' equity, period-end (2)

(G)

507

411

Total common shares outstanding, period-end (thousands)               

(H)

29,521

25,115

Average diluted shares outstanding (thousands) (3)

(I)

26,713

24,821

Core earnings per common share, diluted 

(A/I)

$                       1.01

$                       0.86

Tangible book value per common share, period-end

(G/H)

$                     17.16

$                     16.40

Performance ratios (4)

Core return on assets

(A/D)

0.79

%

0.71

%

Core return on equity

(A/E)

7.20

6.17

Core return on tangible equity (5)

(A/F)

12.23

11.09

Efficiency ratio                                                                                            

(C-L)/(B+J+M)

62.34

63.68

Supplementary data

Tax benefit - tax-advantaged investments (6)

(J)

$                     8,068

$                     1,110

Non-interest income charge - tax-advantaged investments (7)

(K)

(5,703)

(834)

Net income on tax-advantaged investments

(J+K)

2,365

276

Intangible amortization

(L)

1,835

2,580

Fully taxable equivalent income adjustment

(M)

1,957

1,570

GAAP return on assets

0.55

%

0.35

%

GAAP return on equity 

5.03

3.00

Net interest margin

3.24

3.31

(1) The out of period adjustment shown above relates to interest income earned on loans acquired in bank acquisitions. 

(2) Total tangible stockholders' equity is computed by taking total stockholders' equity less the intangible assets at period-end. 

(3) Average diluted shares computed for core earnings per share differ from GAAP average diluted shares, in the first quarter of 2014, due to the GAAP net loss compared to core net income for the period.

(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-affected amortization of intangible assets, assuming a 40% marginal rate, by tangible equity.

(6) The tax benefit is the direct reduction to the income tax provision due to tax credits and deductions generated from investments in historic rehabilitation, low-income housing, new market projects, and renewable energy projects.

(7) 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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