Berkshire Hills Bancorp reports Q4 income, dividend increase

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Berkshire Hills Bancorp reports Q4 income, dividend increase

Fri, 01/26/2018 - 2:31am -- tim

Vermont Business Magazine Berkshire Hills Bancorp, Inc. (NYSE: BHLB) reported that fourth quarter pre-tax income grew by 82% to $19.5 million in 2017 compared to $10.7 million in the prior year.  This improvement was due to business development and the benefit of mergers, including Worcester-based Commerce Bancshares Corp which was acquired on October 13, 2017.  Net income after-tax was impacted by an $18 million non-core charge to income tax expense resulting from federal tax reform enacted near year-end.  This reform is expected to benefit future earnings due to a lower statutory federal tax rate beginning in 2018.  Net income after-tax totaled $55 million in 2017 compared to $59 million in 2016. Bankshire Bank has branches in southern Vermont.

The tax charge noted above reduced fourth quarter earnings per share by $0.40 and resulted in a fourth quarter net loss of $0.06 per share in 2017, compared to a profit of $0.32 per share in 2016.  Fourth quarter core earnings per share improved by 4% to $0.58 in 2017, from $0.56 in 2016.  The measure of core earnings excludes the above tax charge and also excludes other net non-core charges primarily related to merger costs.  These costs in the fourth quarter of 2017 were mostly related to the Commerce acquisition, which increased assets by $1.8 billion, or 19%, to $11.6 billion at year-end.  

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

  • 15% increase in net quarterly revenue to a record $116 million
  • 19% increase in total loans; 6% annualized organic increase excluding Commerce
  • 29% increase in total deposits, 4% organic increase excluding Commerce
  • 3.50% net interest margin; increased from 3.36%
  • 57.4% efficiency ratio
  • 0.21% non-performing assets/assets
  • 0.17% net loan charge-offs/average loans

CEO Michael Daly stated, "During a very busy quarter, our market teams delivered solid business results in our franchise.   We finished the year with double digit annualized organic growth in commercial and industrial loans, which were up 70% for the year including acquired balances.   Our SBA team was very busy throughout the year, moving up to 17th spot nationally in the annual SBA 7A loan count rankings as of September 30.  Organic deposit growth measured 4% during the quarter, including seasonally high year-end commercial balances.   The net interest margin improved to 3.50% including the benefit of increased purchased loan accretion relating to the Commerce acquisition.  Including this benefit, the efficiency ratio improved to 57.4%."

"With the completion of the Commerce acquisition, we added nearly $2 billion in assets.  Including the First Choice merger in December 2016, we have grown our assets by more than 30% and have crossed the $10 billion regulatory threshold to become the third largest regional bank based in New England.   The Commerce merger was also the catalyst for the move of our corporate headquarters to Boston, positioning us as the largest regional banking company located there.   We recruited new leadership for our Greater Boston region, and are looking forward to further opportunities to expand in this market."

Daly concluded, "We're optimistic about the economic prospects in our regions.  We expect that the recent federal tax reform will lower our future statutory tax rate, leaving us more capital to provide credit support for the growth of the businesses and communities that we serve.   Due to the tax reform, we also recently announced new investment initiatives in our team and in our communities, including a higher minimum wage, employee bonuses, expansion of our AMEBU training programs, and a contribution to our Foundation to fund future community support.    As we've done in recent years, we are announcing a penny increase in our quarterly dividend reflecting our improved profitability in 2017 and our positive future outlook." 

DIVIDEND INCREASED

The Board of Directors voted to increase the quarterly cash dividend by $0.01, or 5%, to $0.22 per common share to shareholders of record at the close of business on February 15, 2018, payable on March 1, 2018.  The dividend equates to a 2.3% annualized yield based on the $38.09 average closing price of Berkshire Hills Bancorp common stock during the fourth quarter.  Effective on the same dates, the Board also increased the quarterly cash dividend on preferred stock to $0.44 per share for preferred stock issued in conjunction with the Commerce acquisition.

ANNUAL MEETING ANNOUNCED

The Board of Directors voted that the Annual Meeting of Shareholders will be held on May 17, 2018 at the Crowne Plaza Hotel, One West Street, Pittsfield, Massachusetts at 10:00 a.m., local time.  The date of March 22, 2018 was established as the record date for the determination of the shareholders entitled to notice of, and to vote at, the Annual Meeting.

FINANCIAL CONDITION

Total assets increased by $1.8 billion to $11.6 billion during the fourth quarter of 2017, due to the Commerce acquisition.  Total loans increased by $1.4 billion to $8.3 billion, including $1.2 billion added with Commerce, net of a $104 million fair value discount.  Goodwill and intangible assets increased by $137 million due primarily to the Commerce loan discounts.  Commercial loans increased to 61% of total loans with the Commerce addition.   Excluding the acquired balances, organic loan growth was 6% annualized in the fourth quarter, including a 10% contribution from C&I loans and a 15% contribution from residential mortgages.  For the year, organic loan growth was 8%, including balanced growth among the commercial, mortgage, and consumer categories. At year-end, delinquent and non-accruing loans measured 0.83% of total loans including the Commerce addition, and quarterly annualized net loan charge-offs measured 0.17% of average loans. 

Total deposits increased by $2.0 billion to $8.7 billion, including $1.7 billion added with Commerce.  Organic deposit growth of $247 million included a $224 million seasonal increase in commercial payroll deposits.   Organic deposit growth was 6% for the year.  The ratio of loans/deposits decreased to 95% at year-end due to the addition of the Commerce balances.     

Total shareholders' equity increased during the fourth quarter by $212 million, or 16%, to $1.5 billion.  This included the $229 million in stock issued for the Commerce acquisition, including $188 million of common stock and $41 million of non-voting convertible preferred stock.  For the year, book value per common share increased by 5% to $32.14, and tangible book value per common share, a non-GAAP financial measure, also increased by 5% to $19.83. 

RESULTS OF OPERATIONS

Most measures of revenue and expense increased over the prior quarter due to the addition of the Commerce operations after October 13, 2017.   These measures increased year-over-year due to Commerce as well as the full period benefit of integrated First Choice operations.  Per share earnings included the impact of shares issued as merger consideration and in the May 2017 stock offering.  Non-core charges in 2017 were mostly merger-related, including First Choice and Commerce.  Non-core activity during the year also included a charge on the termination of hedges and restructuring and other expense, as well as the write-down of the net deferred tax asset as a result of federal tax reform.

The Company recorded a loss of $3 million in the most recent quarter, including the $18 million tax expense and $11 million in net other after-tax non-core charges primarily related to the Commerce acquisition.   Core income increased to a record quarterly amount of $26 million in the most recent quarter, increasing by 12% over the prior quarter.   Measured as a percent of assets, GAAP results were a loss of 0.10%, whereas core return on assets measured 0.94%.  The Company's goal is to generate future improvement in this measure, with the benefit of merger efficiencies and tax changes offsetting the higher regulatory costs related to crossing the $10 billion asset regulatory threshold.

Quarterly net revenue increased to a record $116 million in the most recent quarter, including Commerce operations for most of the quarter.  Revenue increased by $15 million, or 15%, compared to the prior quarter, primarily due to Commerce.  Berkshire's fourth quarter net interest margin improved to 3.50% including higher purchased loan accretion and other increases in earning asset yields.   Purchased loan accretion contributed 0.21% to the net interest margin in the most recent quarter, compared to 0.14% in the prior quarter, when the margin was 3.36%.  Total fee income decreased 2% due to seasonal factors. 

Total non-interest expense increased by $24 million to $90 million in the fourth quarter, compared to the prior quarter.   This included a $17 million increase in non-core expense, including $14 millionrelated to the Commerce acquisition and $3 million accrued for tax reform related investments in employees and community contributions.   Additional merger-related expenses are planned in 2018 as integration activities are completed.   Core non-interest expense increased by $7 million to $71 millionincluding the new Commerce operations.   The Company plans to benefit from additional efficiencies related to cost saves following the completion of the Commerce integration in 2018, including the systems conversion planned for March 2018.  Berkshire had full time equivalent staff totaling 1,992 at year-end 2017, including the Commerce positions which were reported at 226 as of September 30, 2017.  Berkshire reported 1,788 full time equivalent staff as of that date. 

Fourth quarter income tax expense included the $18 million one-time net charge for the write-down of the net deferred tax assets at year-end.  The charge was primarily due to the unamortized balance related to fair value discounts recorded on prior acquisitions (including Commerce), as well as the accumulated excess of loan loss provisions over charge-offs.   The Company expects that the effect of the federal tax reform will be to lower its future income tax expense compared to what it would have been under the previous tax rules.   The income tax rate on core income was 32% for the fourth quarter and 29% for the full year 2017.  The Company recorded $0.01 per share in net benefit from its tax credit investments in each quarter in 2017, which was net of amortization charges included in non-interest income. 

INVESTOR CONFERENCE CALL

Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Friday, January 26, 2018 to discuss the results for the quarter and provide guidance about expected future results.  Participants are encouraged to pre-register for the conference call using the following link:  http://dpregister.com/10115690.  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.  Investors may reach the registration link and access the webcast by logging in through the investor section of the Company's website at http://ir.berkshirebank.com.  Persons may also 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 Friday, February 2, 2018 by dialing 877-344-7529 and entering access number 10115690.  The webcast will be available on Berkshire's website for an extended period of time.

BACKGROUND

Berkshire Hills Bancorp is the parent of Berkshire Bank - America's Most Exciting Bank®.  The Company has approximately $11.6 billion in assets and 113 full service branches in Massachusetts, New York, Connecticut, Vermont, New Jersey, and Pennsylvania providing personal and business banking, insurance, and wealth management services. The Company also offers mortgages and specialized commercial lending services in targeted national markets.

FORWARD LOOKING STATEMENTS

This document contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. There are several factors that could cause actual results to differ significantly from expectations described in the forward-looking statements. For a discussion of such factors, please see Berkshire's most recent reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission and available on the SEC's website at www.sec.gov. Berkshire does not undertake any obligation to update forward-looking statements.

NON-GAAP FINANCIAL MEASURES

This document contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles ("GAAP").  These non-GAAP measures provide supplemental perspectives on operating results, performance trends, and financial condition.  They are not a substitute for GAAP measures; they should be read and used in conjunction with the Company's GAAP financial information.  A reconciliation of non-GAAP financial measures to GAAP measures is included on 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, and restructuring costs.  Charges related to merger and acquisition activity consist primarily of severance/benefit related expenses, contract termination costs, systems conversion costs, variable compensation expenses, and professional fees.  These charges are related to the following business combinations: First Choice Bank, 44 Business Capital, financial planning assets, and Commerce.  Restructuring costs generally consist of costs and losses associated with the disposition of assets and liabilities and lease terminations, including costs related to branch sales.  Additionally, the Company recorded charges for hedge terminations in the first quarter of 2017 and legal settlement costs during the year. 

Non-core adjustments are presented net of an adjustment for income tax expense.  This adjustment is determined as the difference between the GAAP tax rate and the effective tax rate applicable to core income.  In the fourth quarter of 2017, the Company recorded an $18 million one-time non-core charge to income tax expense representing the partial write-down of its net deferred tax assets as a consequence of federal tax reform that was enacted near year-end.  In conjunction with this tax reform, the Company also announced plans for certain expenditures totaling $3.4 million representing investments in employee bonuses and charitable giving; these charges were included in other non-core expense during the quarter.

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.  Of note, following systems upgrades, non-material revisions were made in the first quarter of 2017 to the calculations of the net interest margin and efficiency ratio and prior period measures were revised to include these changes.  

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

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

 

TABLE

INDEX

 

CONSOLIDATED UNAUDITED FINANCIAL SCHEDULES

F-1

Selected Financial Highlights

F-2

Balance Sheets

F-3

Loan and Deposit Analysis

F-4

Statements of Operations

F-5

Statements of Operations  (Five Quarter Trend)

F-6

Average Yields and Costs

F-7

Average Balances

F-8

Asset Quality Analysis

F-9

Reconciliation of Non-GAAP Financial Measures (Five Quarter Trend) and Supplementary Data

F-10

Reconciliation of Non-GAAP Financial Measures (Year-to-Date) and Supplementary Data

       

BERKSHIRE HILLS BANCORP, INC.

SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED - (F-1)

     

At or for the Quarters Ended (2)

     

Dec. 31,

 

Sept. 30,

 

June 30,

 

March 31,

 

Dec. 31,

 
     

2017 (3)

 

2017

 

2017

 

2017

 

2016 (4)

 
                         

PER SHARE DATA

                   
 

Net earnings, diluted

$        (0.06)

 

$          0.57

 

$         0.53

 

$          0.44

 

$          0.32

 
 

Core earnings, diluted (1)

0.58

 

0.59

 

0.58

 

0.55

 

0.56

 
 

Total book value per common share

32.14

 

31.78

 

31.37

 

30.77

 

30.65

 
 

Tangible book value per common share (1)

19.83

 

21.38

 

20.96

 

18.97

 

18.81

 
 

Market price at period end

36.60

 

38.75

 

35.15

 

36.05

 

36.85

 
 

Dividends

 

0.21

 

0.21

 

0.21

 

0.21

 

0.20

 
                         

PERFORMANCE RATIOS (5)

                   
 

Return on assets

(0.10)

%

0.95

%

0.84

%

0.68

%

0.50

%

 

Core return on assets (1)

0.94

 

0.98

 

0.92

 

0.85

 

0.87

 
 

Return on equity

(0.77)

 

7.26

 

6.80

 

5.71

 

4.29

 
 

Core return on equity (1)

7.16

 

7.47

 

7.45

 

7.17

 

7.49

 
 

Core return on tangible common equity (1)

11.90

 

11.42

 

11.96

 

12.05

 

12.23

 
 

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

3.50

 

3.36

 

3.36

 

3.33

 

3.21

 
 

Fee income/Net interest and fee income

25.91

 

29.96

 

32.23

 

30.04

 

24.99

 
 

Efficiency ratio (1)

57.43

 

59.28

 

61.72

 

61.94

 

58.42

 
                         

GROWTH (Year-to-date)

                   
 

Total commercial loans (annualized)

38

%

9

%

13

%

15

%

18

%

 

Total loans (annualized)

27

 

8

 

10

 

6

 

14

 
 

Total deposits (annualized)

32

 

3

 

3

 

2

 

18

 
 

Total net revenues (compared to prior year)

41

 

37

 

40

 

39

 

11

 
 

Earnings per share (compared to prior year)

(25)

 

(2)

 

(8)

 

(15)

 

9

 
 

Core earnings per share (compared to prior year)(1)

4

 

4

 

5

 

2

 

4

 
                         

FINANCIAL DATA (in millions)

                   
 

Total assets

 

$      11,571

 

$        9,767

 

$       9,627

 

$        9,298

 

$        9,163

 
 

Total earning assets

10,509

 

8,944

 

8,807

 

8,486

 

8,340

 
 

Total securities

1,899

 

1,824

 

1,773

 

1,714

 

1,628

 
 

Total loans

 

8,299

 

6,947

 

6,864

 

6,656

 

6,550

 
 

Allowance for loan losses

52

 

49

 

47

 

46

 

44

 
 

Total intangible assets

558

 

420

 

421

 

422

 

423

 
 

Total deposits

 

8,750

 

6,790

 

6,715

 

6,656

 

6,622

 
 

Total shareholders' equity

1,496

 

1,285

 

1,268

 

1,100

 

1,093

 
 

Net (loss)/income

(2.8)

 

22.9

 

19.7

 

15.5

 

10.3

 
 

Core income (1)

26.3

 

23.6

 

21.6

 

19.4

 

18.0

 
                         

ASSET QUALITY AND CONDITION RATIOS

                   
 

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

0.17

%

0.19

%

0.20

%

0.20

%

0.21

%

 

Total non-performing assets/total assets

0.21

 

0.23

 

0.25

 

0.27

 

0.24

 
 

Allowance for loan losses/total loans

0.62

 

0.71

 

0.69

 

0.69

 

0.67

 
 

Loans/deposits

95

 

102

 

102

 

100

 

99

 
 

Shareholders' equity to total assets

12.93

 

13.15

 

13.17

 

11.83

 

11.93

 
 

Tangible shareholders' equity to tangible assets (1)

8.52

 

9.25

 

9.20

 

7.64

 

7.68

 
                         

(1)

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.

     

(2)

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

 

(3)

The Company acquired Commerce Bancshares Corp., the parent of Commerce Bank & Trust Company, on October 13, 2017.

     

(4)

The Company acquired First Choice Bank on December 2, 2016.

                   

(5)

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

         

(6)

Fully taxable equivalent considers the impact of tax advantaged investment securities and loans.

             
                         

 

 

BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-2)

 

December 31,

 

September 30,

 

December 31,

 

(in thousands)

2017

 

2017

 

2016

 

Assets

           

Cash and due from banks

$              91,122

 

$              62,827

 

$              71,494

 

Short-term investments

157,641

 

29,219

 

41,581

 

Total cash and short-term investments

248,763

 

92,046

 

113,075

 
             

Trading security

12,277

 

12,603

 

13,229

 

Securities available for sale, at fair value

1,426,099

 

1,341,013

 

1,209,537

 

Securities held to maturity, at amortized cost

397,103

 

395,065

 

334,368

 

Federal Home Loan Bank stock and other restricted securities

63,085

 

75,117

 

71,112

 

Total securities

1,898,564

 

1,823,798

 

1,628,246

 
             

Loans held for sale, at fair value

153,620

 

143,745

 

120,673

 
             

Commercial real estate

3,264,742

 

2,671,237

 

2,616,438

 

Commercial and industrial loans

1,803,939

 

1,254,947

 

1,062,038

 

Residential mortgages

2,102,807

 

1,983,126

 

1,893,131

 

Consumer loans

1,127,850

 

1,038,096

 

978,180

 

Total loans

8,299,338

 

6,947,406

 

6,549,787

 

Less: Allowance for loan losses

(51,834)

 

(49,004)

 

(43,998)

 

Net loans

8,247,504

 

6,898,402

 

6,505,789

 
             

Premises and equipment, net

109,352

 

94,729

 

93,215

 

Other real estate owned

-

 

288

 

151

 

Goodwill

519,287

 

403,106

 

403,106

 

Other intangible assets

38,296

 

17,136

 

19,445

 

Cash surrender value of bank-owned life insurance

191,221

 

161,290

 

139,257

 

Deferred tax asset, net

47,061

 

39,467

 

41,128

 

Other assets

117,083

 

92,696

 

98,457

 

Total assets

$       11,570,751

 

$         9,766,703

 

$         9,162,542

 
             

Liabilities and shareholders' equity

           

Demand deposits

$         1,667,323

 

$         1,221,043

 

$         1,278,875

 

NOW deposits

673,891

 

573,607

 

570,583

 

Money market deposits

2,776,157

 

1,751,190

 

1,781,605

 

Savings deposits

741,954

 

670,683

 

657,486

 

Time deposits

2,890,205

 

2,573,623

 

2,333,543

 

Total deposits

8,749,530

 

6,790,146

 

6,622,092

 
             

Senior borrowings

1,047,736

 

1,399,354

 

1,224,836

 

Subordinated borrowings

89,339

 

89,295

 

89,161

 

Total borrowings

1,137,075

 

1,488,649

 

1,313,997

 
             

Other liabilities

187,882

 

203,381

 

133,155

 

Total liabilities

10,074,487

 

8,482,176

 

8,069,244

 
             

Total preferred shareholders' equity

40,633

 

-

 

-

 

Total common shareholders' equity

1,455,631

 

1,284,527

 

1,093,298

 

Total shareholders' equity

1,496,264

 

1,284,527

 

1,093,298

 

Total liabilities and shareholders' equity

$       11,570,751

 

$         9,766,703

 

$         9,162,542

 
             

Net shares outstanding

45,290

 

40,424

 

35,673

 
             

 

 

BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED - (F-3)

LOAN ANALYSIS

                           
                           
                   

Organic Annualized 
Growth % (1)

(in millions)

 

December 31, 2017
Balance

 

Acquired 
Commerce Balances

 

September 30, 2017
Balance

 

December 31, 2016
Balance

 

Quarter ended 
December 31, 2017

 

Year to Date 

 
                           
                           

Commercial real estate - construction

$                    266

 

$                        64

 

$                    284

 

$                     288

 

(114)

%

(29)

%

Commercial real estate - other

 

2,998

 

510

 

2,387

 

2,329

 

17

 

7

 

Total commercial real estate

 

3,264

 

574

 

2,671

 

2,617

 

3

 

3

 

Commercial and industrial loans

 

1,804

 

519

 

1,255

 

1,062

 

10

 

21

 

Total commercial loans

 

5,068

 

1,093

 

3,926

 

3,679

 

5

 

8

 
                           

Total residential mortgages

 

2,103

 

48

 

1,983

 

1,893

 

15

 

9

 
                           

Home equity

 

410

 

26

 

386

 

394

 

(2)

 

(3)

 

Auto and other

 

718

 

74

 

652

 

584

 

(5)

 

10

 

Total consumer loans

 

1,128

 

100

 

1,038

 

978

 

(4)

 

5

 

Total loans (2)

 

$                 8,299

 

$                   1,241

 

$                 6,947

 

$                  6,550

 

6

%

8

%

(1) Non-GAAP financial measure.

                         

(2) Acquired Commerce loans are as of October 13, 2017.

                   
                           
                           
                           
                           

DEPOSIT ANALYSIS

                           
                 

Organic Annualized 
Growth % (1)

(in millions)

 

December 31, 2017
Balance

 

Acquired 
Commerce Balances

 

September 30, 2017
Balance

 

December 31, 2016
Balance

 

Quarter ended 
December 31, 2017

 

Year to Date

 

Demand

 

$                 1,667

 

$                      456

 

$                 1,221

 

$                  1,279

 

(3)

%

(5)

%

NOW

 

674

 

53

 

574

 

571

 

33

 

9

 

Money market

 

2,776

 

849

 

1,751

 

1,782

 

40

 

8

 

Savings

 

742

 

82

 

671

 

657

 

(7)

 

0

 

Time deposits

 

2,890

 

272

 

2,573

 

2,333

 

7

 

12

 

Total deposits (2)

 

$                 8,749

 

$                   1,712

 

$                 6,790

 

$                  6,622

 

15

%

6

%

(1) Non-GAAP financial measure.

                         

(2) Acquired Commerce deposits are as of October 13, 2017.

                 
                           

 

 

BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED - (F-4)

 

Three Months Ended

 

Years Ended

 

December 31,

 

December 31,

(in thousands, except per share data)

2017

 

2016

 

2017

 

2016

Interest and dividend income   

             

Loans

$           91,149

 

$           62,884

 

$           308,099

 

$            242,600

Securities and other   

14,674

 

9,550

 

52,159

 

37,839

Total interest and dividend income   

105,823

 

72,434

 

360,258

 

280,439

Interest expense

             

Deposits

13,802

 

8,556

 

43,855

 

30,883

Borrowings

5,655

 

4,720

 

21,608

 

17,289

Total interest expense   

19,457

 

13,276

 

65,463

 

48,172

Net interest income

86,366

 

59,158

 

294,795

 

232,267

Non-interest income

             

Mortgage banking originations

11,918

 

3,537

 

54,251

 

16,694

Loan related income

5,866

 

5,648

 

21,401

 

7,555

Deposit related fees

7,871

 

6,285

 

27,165

 

24,963

Insurance commissions and fees   

2,284

 

2,323

 

10,589

 

10,477

Wealth management fees   

2,268

 

1,911

 

9,395

 

8,917

Total fee income   

30,207

 

19,704

 

122,801

 

68,606

Other

(939)

 

(2,849)

 

(3,377)

 

(3,289)

Securities gains (losses), net    

30

 

(652)

 

12,598

 

(551)

Gain on sale of business operations, net

-

 

522

 

296

 

1,085

Loss on termination of hedges

-

 

-

 

(6,629)

 

-

Total non-interest income     

29,298

 

16,725

 

125,689

 

65,851

Total net revenue

115,664

 

75,883

 

420,484

 

298,118

Provision for loan losses  

6,141

 

4,100

 

21,025

 

17,362

Non-interest expense

             

Compensation and benefits

42,220

 

28,103

 

152,979

 

104,600

Occupancy and equipment    

9,451

 

7,320

 

35,422

 

27,220

Technology and communications

6,286

 

5,310

 

25,900

 

19,883

Marketing and promotion    

4,573

 

1,080

 

11,877

 

3,161

Professional services

2,277

 

1,666

 

9,165

 

6,199

FDIC premiums and assessments

1,920

 

1,422

 

6,457

 

5,066

Other real estate owned and foreclosures

9

 

(11)

 

44

 

691

Amortization of intangible assets    

1,183

 

572

 

3,493

 

2,927

Merger, restructuring and other expense

15,553

 

11,633

 

31,558

 

15,461

Other

6,569

 

3,995

 

22,815

 

18,094

Total non-interest expense    

90,041

 

61,090

 

299,710

 

203,302

               

Income before income taxes      

19,482

 

10,693

 

99,749

 

77,454

Income tax expense

22,292

 

362

 

44,502

 

18,784

Net (loss)/income

$           (2,810)

 

$           10,331

 

$             55,247

 

$              58,670

Preferred stock dividend

219

 

-

 

219

 

-

(Loss)/income available to common shareholders

$           (3,029)

 

$           10,331

 

$             55,028

 

$              58,670

               

Earnings per common share:

             

Basic

$             (0.06)

 

$               0.32

 

$                 1.41

 

$                  1.89

Diluted

$             (0.06)

 

$               0.32

 

$                 1.39

 

$                  1.88

               

Weighted average shares outstanding:     

             

Basic

44,215

 

32,185

 

39,228

 

30,988

Diluted

44,215

 

32,381

 

39,620

 

31,167

               
               

 

 

BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (5 Quarter Trend) - UNAUDITED - (F-5)

   
 

Dec. 31,

 

Sept. 30,

 

June 30,

 

March 31,

 

Dec. 31,

 

(in thousands, except per share data)

2017

 

2017

 

2017

 

2017

 

2016

 

Interest and dividend income   

                   

Loans

$        91,149

 

$        76,024

 

$          71,983

 

$        68,943

 

$        62,884

 

Securities and other   

14,674

 

13,036

 

12,683

 

11,766

 

9,550

 

Total interest and dividend income   

105,823

 

89,060

 

84,666

 

80,709

 

72,434

 

Interest expense

                   

Deposits

13,802

 

10,984

 

9,971

 

9,098

 

8,556

 

Borrowings

5,655

 

6,078

 

5,150

 

4,725

 

4,720

 

Total interest expense   

19,457

 

17,062

 

15,121

 

13,823

 

13,276

 

Net interest income

86,366

 

71,998

 

69,545

 

66,886

 

59,158

 

Non-interest income

                   

Mortgage banking originations

11,918

 

13,374

 

16,281

 

12,678

 

3,537

 

Loan related income

5,866

 

6,081

 

5,275

 

4,179

 

5,648

 

Deposit related fees

7,871

 

6,445

 

6,645

 

6,204

 

6,285

 

Insurance commissions and fees   

2,284

 

2,581

 

2,588

 

3,136

 

2,323

 

Wealth management fees   

2,268

 

2,315

 

2,286

 

2,526

 

1,911

 

Total fee income   

30,207

 

30,796

 

33,075

 

28,723

 

19,704

 

Other

(939)

 

(2,255)

 

(276)

 

93

 

(2,849)

 

Securities gains (losses), net    

30

 

(1)

 

(1)

 

12,570

 

(652)

 

Gain on sale of business operations, net

-

 

296

 

-

 

-

 

522

 

Loss on termination of hedges

-

 

-

 

-

 

(6,629)

 

-

 

Total non-interest income     

29,298

 

28,836

 

32,798

 

34,757

 

16,725

 

Total net revenue

115,664

 

100,834

 

102,343

 

101,643

 

75,883

 

Provision for loan losses  

6,141

 

4,900

 

4,889

 

5,095

 

4,100

 

Non-interest expense

                   

Compensation and benefits

42,220

 

37,643

 

36,997

 

36,119

 

28,103

 

Occupancy and equipment    

9,451

 

8,267

 

8,678

 

9,026

 

7,320

 

Technology and communications

6,286

 

6,644

 

6,883

 

6,087

 

5,310

 

Marketing and promotion 

4,573

 

2,128

 

3,177

 

1,999

 

1,080

 

Professional services

2,277

 

2,247

 

2,190

 

2,451

 

1,666

 

FDIC premiums and assessments

1,920

 

1,651

 

1,588

 

1,298

 

1,422

 

Other real estate owned and foreclosures

9

 

(23)

 

30

 

28

 

(11)

 

Amortization of intangible assets    

1,183

 

739

 

770

 

801

 

572

 

Merger, restructuring and other expense

15,553

 

1,420

 

2,903

 

11,682

 

11,633

 

Other

6,569

 

5,104

 

6,307

 

4,835

 

3,995

 

Total non-interest expense    

90,041

 

65,820

 

69,523

 

74,326

 

61,090

 
                     

Income before income taxes

19,482

 

30,114

 

27,931

 

22,222

 

10,693

 

Income tax expense

22,292

 

7,211

 

8,237

 

6,762

 

362

 

Net (loss)/income

$         (2,810)

 

$        22,903

 

$          19,694

 

$        15,460

 

$        10,331

 

Preferred stock dividend

219

 

-

 

-

 

-

 

-

 

(Loss)/income available to common shareholders

$         (3,029)

 

$        22,903

 

$          19,694

 

$        15,460

 

$        10,331

 
                     
                     

Earnings per common share:

                   

Basic

$           (0.06)

 

$            0.57

 

$              0.53

 

$            0.44

 

$            0.32

 

Diluted

$           (0.06)

 

$            0.57

 

$              0.53

 

$            0.44

 

$            0.32

 
                     

Weighted average shares outstanding:     

                   

Basic

44,215

 

39,984

 

37,324

 

35,280

 

32,185

 

Diluted

44,215

 

40,145

 

37,474

 

35,452

 

32,381

 
                     
 

 

 

BERKSHIRE HILLS BANCORP, INC.
AVERAGE YIELDS AND COSTS (Fully Taxable Equivalent - Annualized) - UNAUDITED - (F-6)

   

Quarters Ended

   

Dec. 31,

 

Sept. 30,

 

June 30,

 

March 31,

 

Dec. 31,

 
   

2017

 

2017

 

2017

 

2017

 

2016

 
                       

Earning assets

                     

Loans:

                     

Commercial real estate

 

4.73

%

4.64

%

4.41

%

4.58

%

4.17

%

Commercial and industrial loans

 

5.25

 

5.09

 

5.30

 

4.86

 

4.88

 

Residential mortgages

 

3.76

 

3.68

 

3.62

 

3.56

 

3.57

 

Consumer loans

 

3.94

 

3.88

 

3.81

 

3.62

 

3.44

 

Total loans

 

4.47

 

4.33

 

4.25

 

4.19

 

4.00

 

Securities

 

3.55

 

3.43

 

3.45

 

3.38

 

3.58

 

Short-term investments and loans held for sale

 

2.90

 

3.40

 

3.07

 

2.40

 

2.13

 

Total earning assets

 

4.27

 

4.13

 

4.07

 

4.00

 

3.91

 
                       

Funding liabilities

                     

Deposits:

                     

NOW

 

0.27

 

0.26

 

0.23

 

0.22

 

0.16

 

Money market

 

0.66

 

0.57

 

0.54

 

0.52

 

0.48

 

Savings

 

0.14

 

0.14

 

0.14

 

0.13

 

0.12

 

Time

 

1.25

 

1.20

 

1.13

 

1.08

 

1.14

 

Total interest-bearing deposits

 

0.82

 

0.78

 

0.73

 

0.69

 

0.69

 

Borrowings

 

1.81

 

1.65

 

1.46

 

1.38

 

1.63

 

Total interest-bearing liabilities

 

0.98

 

0.96

 

0.88

 

0.83

 

0.87

 
                       

Net interest spread

 

3.29

 

3.17

 

3.19

 

3.17

 

3.04

 

Net interest margin (1)

 

3.50

 

3.36

 

3.36

 

3.33

 

3.21

 
                       

Cost of funds (2)

 

0.81

 

0.82

 

0.75

 

0.70

 

0.73

 

Cost of deposits

 

0.66

 

0.64

 

0.60

 

0.56

 

0.56

 
                       

(1) The effect of purchased loan accretion 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:  0.21%, 0.14%, 0.12%, 0.18%, 0.10%. See page F-7 for purchased loan

 

       accretion.

                     

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

                 
                       

 

 

BERKSHIRE HILLS BANCORP, INC.
AVERAGE BALANCES - UNAUDITED - (F-7)

 

Quarters Ended

 

Dec. 31,

 

Sept. 30,

 

June 30,

 

March 31,

 

Dec. 31,

 

(in thousands)

2017

 

2017

 

2017

 

2017

 

2016

 

Assets

                   

Loans

                   

Commercial real estate

$            3,161,902

 

$            2,669,558

 

$            2,691,804

 

$            2,631,281

 

$            2,442,515

 

Commercial and industrial loans

1,645,719

 

1,183,980

 

1,130,384

 

1,072,716

 

998,543

 

Residential mortgages

2,081,548

 

1,977,538

 

1,871,329

 

1,906,457

 

1,833,530

 

Consumer loans

1,123,683

 

1,030,032

 

996,488

 

978,683

 

936,957

 

Total loans (1)

8,012,852

 

6,861,108

 

6,690,005

 

6,589,137

 

6,211,545

 

Securities (2)

1,921,724

 

1,779,379

 

1,701,443

 

1,625,769

 

1,255,207

 

Short-term investments and loans held for sale

146,101

 

167,724

 

148,276

 

118,537

 

83,057

 

Total earning assets

10,080,677

 

8,808,211

 

8,539,724

 

8,333,443

 

7,549,809

 

Goodwill and other intangible assets

533,157

 

420,853

 

421,601

 

422,331

 

362,641

 

Other assets

516,802

 

402,188

 

369,317

 

388,211

 

363,248

 

Total assets

$          11,130,636

 

$            9,631,252

 

$            9,330,642

 

$            9,143,985

 

$            8,275,698

 
                     

Liabilities and shareholders' equity

                   

Deposits

                   

NOW

$               644,890

 

$               570,864

 

$               572,688

 

$               574,799

 

$               499,852

 

Money market

2,371,203

 

1,768,108

 

1,794,693

 

1,804,738

 

1,612,160

 

Savings

733,157

 

669,690

 

667,863

 

648,839

 

620,092

 

Time

2,906,423

 

2,587,702

 

2,472,990

 

2,351,183

 

2,171,325

 

Total interest-bearing deposits

6,655,673

 

5,596,364

 

5,508,234

 

5,379,559

 

4,903,429

 

Borrowings

1,229,781

 

1,445,700

 

1,398,653

 

1,374,620

 

1,144,846

 

Total interest-bearing liabilities

7,885,454

 

7,042,064

 

6,906,887

 

6,754,179

 

6,048,275

 

Non-interest-bearing demand deposits

1,648,894

 

1,196,451

 

1,155,533

 

1,178,790

 

1,178,308

 

Other liabilities

127,562

 

131,003

 

110,367

 

128,573

 

85,951

 

Total liabilities

9,661,910

 

8,369,518

 

8,172,787

 

8,061,542

 

7,312,534

 
                     

Total preferred shareholders' equity

34,892

 

-

 

-

 

-

 

-

 

Total common shareholders' equity

1,433,834

 

1,261,734

 

1,157,855

 

1,082,443

 

963,164

 

Total shareholders' equity

1,468,726

 

1,261,734

 

1,157,855

 

1,082,443

 

963,164

 

Total liabilities and shareholders' equity

$          11,130,636

 

$            9,631,252

 

$            9,330,642

 

$            9,143,985

 

$            8,275,698

 
                     
                     

Supplementary data

                   

Total non-maturity deposits

$            5,398,144

 

$            4,205,113

 

$            4,190,777

 

$            4,207,166

 

$            3,910,412

 

Total deposits

8,304,567

 

6,792,815

 

6,663,767

 

6,558,349

 

6,081,737

 

Fully taxable equivalent income adjustment

3,122

 

2,950

 

2,644

 

2,511

 

2,228

 

Purchased loan accretion

5,507

 

3,066

 

2,550

 

3,687

 

1,886

 

Total average tangible equity (3)

935,569

 

840,881

 

736,254

 

660,112

 

600,523

 
                     

(1) Total loans include non-accruing loans.

                   

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

             

(3) See page F-9 for details on the calculation of total average tangible equity.

             
                     

 

 

BERKSHIRE HILLS BANCORP, INC.
ASSET QUALITY ANALYSIS - UNAUDITED - (F-8)

   

At or for the Quarters Ended

   

Dec. 31,

 

Sept. 30,

 

June 30,

 

March 31,

 

Dec. 31,

 

(in thousands)

 

2017

 

2017

 

2017

 

2017

 

2016

 

NON-PERFORMING ASSETS

                     

Non-accruing loans:

                     

Commercial real estate

 

$            7,266

 

$            5,228

 

$            7,587

 

$            7,718

 

$            5,883

 

Commercial and industrial loans

 

7,311

 

9,681

 

8,387

 

8,327

 

7,523

 

Residential mortgages

 

2,883

 

3,092

 

3,245

 

3,971

 

3,795

 

Consumer loans

 

5,438

 

4,350

 

4,977

 

5,109

 

5,039

 

Total non-accruing loans

 

22,898

 

22,351

 

24,196

 

25,125

 

22,240

 

Other real estate owned

 

-

 

288

 

279

 

71

 

151

 

Repossessed assets

 

1,147

 

-

 

-

 

-

 

-

 

Total non-performing assets

 

$          24,045

 

$          22,639

 

$          24,475

 

$          25,196

 

$          22,391

 
                       

Total non-accruing loans/total loans

 

0.28%

 

0.32%

 

0.35%

 

0.38%

 

0.34%

 

Total non-performing assets/total assets

 

0.21%

 

0.23%

 

0.25%

 

0.27%

 

0.24%

 
                       

PROVISION AND ALLOWANCE FOR LOAN LOSSES

                   

Balance at beginning of period

 

$          49,004

 

$          47,359

 

$          45,804

 

$          43,998

 

$          43,105

 

Charged-off loans

 

(3,734)

 

(3,796)

 

(3,431)

 

(3,623)

 

(3,488)

 

Recoveries on charged-off loans

 

423

 

541

 

97

 

334

 

281

 

Net loans charged-off

 

(3,311)

 

(3,255)

 

(3,334)

 

(3,289)

 

(3,207)

 

Provision for loan losses

 

6,141

 

4,900

 

4,889

 

5,095

 

4,100

 

Balance at end of period

 

$          51,834

 

$          49,004

 

$          47,359

 

$          45,804

 

$          43,998

 
                       

Allowance for loan losses/total loans

 

0.62%

 

0.71%

 

0.69%

 

0.69%

 

0.67%

 

Allowance for loan losses/non-accruing loans

 

226%

 

219%

 

196%

 

182%

 

198%

 
                       

NET LOAN CHARGE-OFFS

                     

Commercial real estate

 

$             (881)

 

$          (1,425)

 

$          (1,474)

 

$             (633)

 

$             (676)

 

Commercial and industrial loans

 

(960)

 

(573)

 

(625)

 

(1,634)

 

(1,148)

 

Residential mortgages

 

(759)

 

130

 

(337)

 

(324)

 

(768)

 

Home equity

 

(123)

 

(634)

 

(268)

 

(95)

 

(47)

 

Auto and other consumer

 

(588)

 

(753)

 

(630)

 

(603)

 

(568)

 

Total, net

 

$          (3,311)

 

$          (3,255)

 

$          (3,334)

 

$          (3,289)

 

$          (3,207)

 
                       

Net charge-offs (QTD annualized)/average loans

0.17%

 

0.19%

 

0.20%

 

0.20%

 

0.21%

 

Net charge-offs (YTD annualized)/average loans

0.19%

 

0.20%

 

0.20%

 

0.20%

 

0.21%

 
                       

DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS

                 

30-89 Days delinquent

 

0.35%

 

0.25%

 

0.23%

 

0.24%

 

0.35%

 

90+ Days delinquent and still accruing

 

0.20%

 

0.17%

 

0.12%

 

0.16%

 

0.15%

 

Total accruing delinquent loans

 

0.55%

 

0.42%

 

0.35%

 

0.40%

 

0.50%

 

Non-accruing loans

 

0.28%

 

0.32%

 

0.35%

 

0.38%

 

0.34%

 

Total delinquent and non-accruing loans

 

0.83%

 

0.74%

 

0.70%

 

0.78%

 

0.84%

 
                       

 

 

BERKSHIRE HILLS BANCORP, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA- UNAUDITED - (F-9)

   

At or for the Quarters Ended

   

Dec. 31,

 

Sept. 30,

 

June 30,

 

March 31,

 

Dec. 31,

 

(in thousands)

 

2017

 

2017

 

2017

 

2017

 

2016

 

Net (loss)/income

 

$       (2,810)

 

$       22,903

 

$    19,694

 

$    15,460

 

$       10,331

 

Adj: Net securities (gains)/losses

 

(30)

 

1

 

1

 

(12,570)

 

652

 

Adj: Loss on termination of hedges

 

-

 

-

 

-

 

6,629

 

-

 

Adj: Net (gains) on sale of business operations

 

-

 

(296)

 

-

 

-

 

(522)

 

Adj: Merger and acquisition expense

 

15,553

 

1,110

 

2,266

 

5,947

 

10,820

 

Adj: Restructuring expense and other expense

 

-

 

310

 

637

 

5,735

 

1,113

 

Adj: Employee and community investment

 

3,400

 

-

 

-

 

-

 

-

 

Adj: Deferred tax asset impairment

 

18,145

 

-

 

-

 

-

 

-

 

Adj: Income taxes

 

(7,963)

 

(474)

 

(1,039)

 

(1,801)

 

(4,373)

 

Total core income (4)

(A)

$       26,295

 

$       23,554

 

$    21,559

 

$    19,400

 

$       18,021

 
                       

Total revenue

 

$     115,664

 

$     100,834

 

$  102,343

 

$  101,643

 

$       75,883

 

Adj: Net securities losses/(gains)

 

(30)

 

1

 

1

 

(12,570)

 

652

 

Adj: Net (gains) on sale of business operations

 

-

 

(296)

 

-

 

-

 

(522)

 

Adj: Loss on termination of hedges

 

-

 

-

 

-

 

6,629

 

-

 

Total core revenue (4)

(B)

$     115,634

 

$     100,539

 

$  102,344

 

$    95,702

 

$       76,013

 
                       

Total non-interest expense

 

$       90,041

 

$       65,820

 

$    69,523

 

$    74,326

 

$       61,090

 

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

 

(15,553)

 

(1,420)

 

(2,903)

 

(11,682)

 

(11,933)

 

Less: Employee and community investment

 

(3,400)

 

-

 

-

 

-

 

-

 

Core non-interest expense (4)                                    

(C)

$       71,088

 

$       64,400

 

$    66,620

 

$    62,644

 

$       49,157

 
                       

(in millions, except per share data)

                     

Total average assets                                               

(D)

$       11,131

 

$         9,631

 

$      9,331

 

$      9,144

 

$         8,276

 

Total average shareholders' equity                        

(E)

1,469

 

1,262

 

1,158

 

1,082

 

963

 

Total average tangible shareholders' equity (4)                       

(F)

936

 

841

 

736

 

660

 

601

 

Total average tangible common shareholders' equity (4)                       

(G)

901

 

841

 

736

 

660

 

601

 

Total tangible shareholders' equity, period-end (1)(4)

(H)

939

 

864

 

847

 

678

 

671

 

Total tangible common shareholders' equity, period-end (1)(4)

(I)

898

 

864

 

847

 

678

 

671

 

Total tangible assets, period-end (1)(4)

(J)

11,013

 

9,346

 

9,206

 

8,876

 

8,740

 
                       

Total common shares outstanding, period-end (thousands)              

(K)

45,290

 

40,424

 

40,428

 

35,729

 

35,673

 

Average diluted shares outstanding (thousands)

(L)

45,295

 

40,145

 

37,474

 

35,452

 

32,381

 
                       

Core earnings per share, diluted (4)

(A/L)

$           0.58

 

$           0.59

 

$        0.58

 

$        0.55

 

$           0.56

 

Tangible book value per common share, period-end (4)

(I/K)

19.83

 

21.38

 

20.96

 

18.97

 

18.81

 

Total tangible shareholders' equity/total tangible assets (4)

(H)/(J)

8.53

 

9.25

 

9.20

 

7.64

 

7.68

 
                       

Performance ratios (2)

                     

GAAP return on assets

 

(0.10)

%

0.95

%

0.84

%

0.68

%

0.50

%

Core return on assets (4)

(A/D)

0.94

 

0.98

 

0.92

 

0.85

 

0.87

 

GAAP return on equity

 

(0.77)

 

7.26

 

6.80

 

5.71

 

4.29

 

Core return on equity (4)

(A/E)

7.16

 

7.47

 

7.45

 

7.17

 

7.49

 

Core return on tangible common equity (3)(4)

(A+O)/(G)

11.90

 

11.42

 

11.96

 

12.05

 

12.23

 

Efficiency ratio (4)(5)                                                                                

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

57.43

 

59.28

 

61.72

 

61.94

 

58.42

 

Net interest margin

 

3.50

 

3.36

 

3.36

 

3.33

 

3.21

 
                       

Supplementary data (in thousands)

                     

Tax benefit on tax-credit investments (6)

(M)

$         2,957

 

$         3,905

 

$      1,696

 

$      1,624

 

$         4,918

 

Non-interest income charge on tax-credit investments (7)

(N)

(2,564)

 

(3,347)

 

(1,453)

 

(1,329)

 

(4,428)

 

Net income on tax-credit investments

(M+N)

393

 

558

 

243

 

295

 

490

 
                       

Intangible amortization

(O)

$         1,183

 

$            739

 

$         770

 

$         801

 

$            572

 

Fully taxable equivalent income adjustment

(P)

3,122

 

2,950

 

2,644

 

2,511

 

2,228

 
                       
                       

(1) 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. 

             

(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-effected amortization of intangible assets,

   

      assuming a 40% marginal rate, by tangible equity.

                     

(4) Non-GAAP financial measure.

                     

(5) 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.

           

(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.

     
                       

 

 

 

BERKSHIRE HILLS BANCORP, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA - UNAUDITED - (F-10)

     

At or for the Years Ended

     

December 31,

 

December 31,

 
 

(Dollars in thousands)

 

2017

 

2016

 
 

Net (loss)/income

 

$                   55,247

 

$                   58,670

 
 

Adj: Net securities (gains)/losses

 

(12,598)

 

551

 
 

Adj: Loss on termination of hedges

 

6,629

 

-

 
 

Adj: Net (gains) on sale of business operations

 

(296)

 

(1,085)

 
 

Adj: Merger and acquisition expenses

 

24,876

 

13,501

 
 

Adj: Restructuring expense and other

 

6,682

 

2,260

 
 

Adj: Employee and community investment

 

3,400

 

-

 
 

Adj: Deferred tax asset impairment

 

18,145

 

-

 
 

Adj: Income taxes

 

(11,277)

 

(5,455)

 
 

Total core income (4)

(A)

$                   90,808

 

$                   68,442

 
             
 

Total revenue

 

$                 420,484

 

$                 298,118

 
 

Adj: Net securities (gains)

 

(12,598)

 

551

 
 

Adj: Net (gains) on sale of business operations

 

(296)

 

(1,085)

 
 

Adj: Loss on termination of hedges

 

6,629

 

-

 
 

Total core revenue (4)

(B)

$                 414,219

 

$                 297,584

 
 

Total non-interest expense

 

$                 299,710

 

$                 203,302

 
 

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

 

(31,558)

 

(15,761)

 
 

Less: Employee and community investment

 

(3,400)

 

-

 
 

Core non-interest expense (4)                                   

(C)

$                 264,752

 

$                 187,541

 
             
 

(in millions, except per share data)

         
 

Total average assets                                               

(D)

$                     9,809

 

$                     7,958

 
 

Total average shareholders' equity                        

(E)

1,243

 

911

 
 

Total average tangible shareholders' equity (4)                       

(F)

793

 

563

 
 

Total average tangible common shareholders' equity (4)                       

(G)

784

 

563

 
 

Total tangible shareholders' equity, period-end (1)(4)

(H)

939

 

671

 
 

Total tangible common shareholders' equity, period-end (1)(4)

(I)

898

 

671

 
 

Total tangible assets, period-end (1)(4)

(J)

11,013

 

8,740

 
 

Total common shares outstanding, period-end (thousands)              

(K)

45,290

 

35,673

 
 

Average diluted shares outstanding (thousands)

(L)

39,620

 

31,167

 
 

Core earnings per common share, diluted (4)

(A/L)

$                       2.29

 

$                       2.20

 
 

Tangible book value per common share, period-end (4)

(I/K)

19.83

 

18.81

 
 

Total tangible shareholders' equity/total tangible assets (4)

(H)/(J)

8.53

 

7.68

 
             
 

Performance ratios (2)

         
 

GAAP return on assets

 

0.56

%

0.74

%

 

Core return on assets (4)

(A/D)

0.93

 

0.86

 
 

GAAP return on equity

 

4.45

 

6.44

 
 

Core return on equity (4)

(A/E)

7.31

 

7.51

 
 

Core return on tangible common equity (3)(4)

(A+O)/(G)

11.82

 

12.47

 
 

Efficiency ratio (4)(5)                                                                              

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

59.97

 

58.71

 
 

Net interest margin

 

3.40

 

3.28

 
             
 

Supplementary data

         
 

Tax benefit on tax-credit investments (6)

(M)

$                   10,182

 

$                   11,134

 
 

Non-interest income charge on tax-credit investments (7)

(N)

(8,693)

 

(8,993)

 
 

Net income on tax-credit investments

(M+N)

1,489

 

2,143

 
             
 

Intangible amortization

(O)

3,493

 

2,927

 
 

Fully taxable equivalent income adjustment

(P)

11,227

 

5,742

 
             
             

(1) 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.

     

(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-effected amortization of

 

      intangible assets, assuming a 40% marginal rate, by tangible equity.

         

(4) Non-GAAP financial measure.

         

(5) 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.

   

(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.

     

(7) The non-interest income charge is the reduction to the tax-advantaged investments, which are incurred as the tax credits are generated.

             

SOURCE PITTSFIELD, Mass., Jan. 25, 2018 /PRNewswire/ -- Berkshire Hills Bancorp, Inc. www.berkshirebank.com