PITTSFIELD, Mass., April 24, 2012 /PRNewswire/ -- Berkshire Hills Bancorp, Inc. (NASDAQ: BHLB) reported $0.45 in first quarter core earnings per share, a 50% increase over first quarter 2011 core earnings of $0.30 per share. This increase resulted from ongoing business expansion together with the benefit of the acquisitions of Rome Bancorp and Legacy Bancorp. GAAP net income included nonrecurring and merger related expenses, together with income from discontinued operations. These non-core items together equated to a first quarter after-tax charge of $0.17 per share in 2012 compared to $0.10 per share in 2011. Including these non-core items, first quarter GAAP net income was $0.28 per share, compared to $0.20 per share in the first quarter of 2011.
50% increase in core earnings per share, compared to first quarter of 2011
10% annualized revenue growth, compared to linked quarter
11% annualized loan growth
11% annualized deposit growth
3.62% net interest margin
0.58% non-performing assets/total assets
0.24% annualized net loan charge-offs/average loans
0.94% core ROA (0.59% GAAP ROA)
59% efficiency ratio
Berkshire President and CEO, Michael P. Daly, stated, "We maintained strong momentum as we started the year, including a 9% annualized increase in core EPS compared to the prior quarter. We continue to have strong growth in our balance sheet, while maintaining a solid net interest margin. Our fee revenue also grew strongly during the quarter, while our focused expense discipline resulted in operating costs a little better than our expectations. Our core profitability improved and we are generating positive core operating leverage, with revenue growth exceeding expense growth. Our loan performance metrics remain favorable and improving. We are maintaining the momentum we need to achieve our earnings growth targets and to generate revenue growth through further market share gains."
Mr. Daly continued, "We are pleased with the progress of our strategic acquisitions of the operations of Greenpark Mortgage Corporation and CBT – The Connecticut Bank and Trust Company. We look forward to having the well regarded Greenpark team join us in the current quarter, and our partnership with them contributed to our first quarter results. The Connecticut Bank and Trust Company acquisition was completed on schedule on April 20. We are now operating 8 branches in the Greater Hartford area, bringing our total branch count to 68, and introducing our brand and products into this attractive market. We look forward to additional revenue and earnings growth from both of these strategic initiatives, along with the benefits to all of our business lines from this further expansion of our footprint."
The Board of Directors voted to declare a cash dividend of $0.17 per share to shareholders of record at the close of business on May 10, 2012, payable on May 24, 2012. This dividend equated to a 3.0% yield based on the $22.67 average closing price of Berkshire's common stock in the first quarter of 2012.
Total assets increased at a 4% annualized rate during the first quarter of 2012 including 11% annualized loan growth. The $82 million increase in loans primarily resulted from increased bookings of Massachusetts residential mortgages relating to the partnership with Greenpark Mortgage during the transition period prior to the planned acquisition in the second quarter. Commercial business loans increased at an 18% annualized rate, and the pipeline of pending commercial loans grew including the benefit of Berkshire's recent expansion in Central/Eastern Massachusetts with the opening of its Westborough commercial lending office. The Bank plans to continue to maintain an asset sensitive interest rate profile based on commercial loan growth and the integration of the CBT balance sheet. All major categories of deposit account balances increased, with growth continuing to come primarily from Berkshire's expanding New York region, including a new office in Colonie, New York. In January, the Company completed the divestiture of the deposits of four former Legacy New York offices which were reported as discontinued operations at the end of 2011.
Asset performance remained favorable and improving in the most recent quarter, with non-performing assets decreasing to 0.58% of total assets, and the annualized ratio of net loan charge-offs/average loans decreasing to 0.24%. The allowance for loan losses increased slightly to $32.7 million, measuring 1.07% of loans and 143% of non-performing loans at the end of the quarter.
Capital ratios were little changed during the most recent quarter, with tangible equity/assets measuring 8.8% and total equity/assets measuring 13.8% at quarter-end. Tangible book value per share increased to $15.81 from $15.60 during the quarter, while total book value per share increased to $26.28 from $26.17.
RESULTS OF OPERATIONS
First quarter results in 2012 included the operations of Rome Bancorp (acquired on April 1, 2011) and Legacy Bancorp (acquired on July 21, 2011), along with the per share impact of shares issued as merger consideration for those acquisitions. Most first quarter categories of income and expense increased from year-to-year due to these acquisitions. This discussion therefore primarily compares the most recent quarter to the fourth quarter of 2011, which also included these acquired operations. The core return on assets increased to 0.94% in the most recent quarter from 0.93% in the prior quarter. The GAAP ROA was 0.59% compared to 0.85% for these periods, respectively, including noncore expense charges.
Total net revenue increased by $1.0 million (10% annualized) in the most recent quarter, compared to the linked quarter. This growth was due to an increase in fee income, including the benefit of increases in mortgage secondary market income, insurance income, and wealth management income. These increases included increased business volume in these areas, along with some seasonal and pricing related factors. Net interest income was stable compared to the prior quarter, and the net interest margin increased slightly to 3.62%. Loan growth was weighted towards the latter part of the quarter and is expected to produce a higher proportionate revenue benefit in the second quarter. The provision for loan losses decreased to $2.0 million in the most recent quarter from $2.3 million in the prior quarter. Net loan charge-offs totaled $1.8 million during the quarter.
Core non-interest expense increased by $0.4 million (7% annualized) in the most recent quarter, compared to the linked quarter. Expense growth included the impact of office expansion in retail and commercial banking. The efficiency ratio remained unchanged at 59%. Net non-recurring and merger related expense totaled $2.9 million after-tax in the most recent quarter. This included merger related expenses for the Legacy and CBT acquisitions, disposition costs of excess premises in Pittsfield following the Legacy integration, and systems conversion costs related to the core systems conversion planned for later in 2012. Additionally, the Company recorded a $0.6 million after-tax non-core charge related to the divestiture of four New York branches in January. This charge included $0.4 million in income tax expense due to the non-deductibility of the goodwill associated with these branches. The effective income tax rate on core income from continuing operations was 27% in the most recent quarter, compared to a 24% effective tax rate for the year 2011, reflecting the expectation of higher core income in 2012.
UNAUDITED SELECTED FINANCIAL HIGHLIGHTS OF CBT – THE CONNECTICUT BANK AND TRUST COMPANY
Included in the financial exhibits to this news release are unaudited selected first quarter financial highlights of CBT. This information does not include all items which may affect the final financial statements of CBT as of March 31, 2012 and it does not include non-core charges related to the merger of CBT into Berkshire. Additional financial information about CBT will be provided in the notes to the financial statements of Berkshire as of June 30, 2012, which will reflect the acquisition of CBT as of April 20, 2012.
Berkshire will conduct a conference call/webcast at 10:00 A.M. eastern time on Wednesday, April 25, 2012 to discuss the results for the quarter and guidance about expected future results. Participants should dial-in to the call a few minutes before it begins. Information about the conference call follows:
A telephone replay of the call will be available through May 2, 2012 by calling 877-344-7529 and entering access code: 10011976. The webcast and a podcast will be available at Berkshire's website above for an extended period of time.
Berkshire Hills Bancorp is the parent of Berkshire Bank - America's Most Exciting Bank(SM). Including the recently acquired operations of CBT, Berkshire has $4.3 billion in assets and 68 full service branch offices in Massachusetts, New York, Connecticut, and Vermont providing personal and business banking, insurance, and wealth management services. Berkshire Bank provides 100% deposit insurance protection for all deposit accounts, regardless of amount, based on a combination of FDIC insurance and the Depositors Insurance Fund (DIF). For more information, visit www.berkshirebank.com or call 800-773-5601.
FORWARD LOOKING STATEMENTS
This document may contain 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 made in this document.
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 merger costs, restructuring costs, and systems conversion costs. Similarly, the efficiency ratio is also adjusted for these non-core items and for tax preference items. The Company also adjusts certain equity related measures to exclude intangible assets due to the importance of these measures to the investment community. Non-GAAP expense adjustments are primarily related to charges related to merger and acquisition activity. These charges consist primarily of severance/benefit related expenses, contract termination costs, and professional fees. There are additionally non-GAAP adjustments related to non-recurring securities gains, discontinued operations, the disposition of excess properties, and core systems conversion costs. Tax adjustments are based on an analysis of tax accruals for core income and for GAAP income, with the net difference included with non-core items and reflecting the timing impacts of tax expense estimates.
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED BALANCE SHEETS - UNAUDITED - F-1
Cash and due from banks
Securities available for sale, at fair value
Securities held to maturity, at amortized cost
Federal Home Loan Bank stock and other restricted securities
Loans held for sale
Commercial business loans
Less: Allowance for loan losses
Premises and equipment, net
Other real estate owned
Other intangible assets
Cash surrender value of bank-owned life insurance
Assets from discontinued operations
Liabilities and stockholders' equity
Money market deposits
Total non-maturity deposits
Junior subordinated debentures
Liabilities from discontinued operations
Total stockholders' equity
Total liabilities and stockholders' equity
(1) At year end 2011, four branches were held for sale as discontinued operations and sold in the first quarter of 2012.