Berkshire Hills Reports Second Quarter Results; Dividend Declared

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July 23, 2019 4:15 PM EDT

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, 2019Balance

Acquired Savings Institute Balances (2)

March 31, 2019Balance

December 31, 2018Balance

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, 2019Balance

Acquired Savings Institute Balances (2)

March 31, 2019Balance

December 31, 2018Balance

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. 

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/berkshire-hills-reports-second-quarter-results-dividend-declared-300889746.html

SOURCE Berkshire Hills Bancorp, Inc.


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