Berkshire Hills Bancorp, Inc(NYSE: BHLB) reported that core earnings per share increased by 5% to$0.42in the first quarter of 2014 compared to$0.40in the previous quarter due to strong balance sheet growth. Core earnings per share decreased from$0.54in the first quarter of 2013 due primarily to lower income on real estate related loans resulting from interest rate related market shifts in 2013.
OnJanuary 17, 2014,Berkshirecompleted the acquisition of 20 branches inCentral New Yorkfrom Bank of America. During the first quarter, the Company recorded non-core charges totaling$0.46per share after-tax, primarily related to one-time costs recorded with this acquisition. This included$0.25per share from the Company's election to terminate interest rate swaps; these charges had no net impact on shareholders' equity. Including non-core charges,Berkshirerecorded a GAAP loss of$0.04per share during the first quarter of 2014, compared to per share income of$0.42in the prior quarter and the first quarter of 2013.
FIRST QUARTER FINANCIAL HIGHLIGHTS(income related comparisons are to prior quarter):
- 7% increase in net interest income
- 14% increase in fee income
- 9% annualized increase in commercial loans
- 11% annualized increase in consumer loans
- 10% increase in deposits, including acquired branches
- 3.35% net interest margin, increased from 3.26% in the prior quarter
- 0.46% non-performing assets/total assets
- 0.30% net loan charge-offs/average loans
CEOMichael Dalystated, "We started the year with solid growth. Commercial loans increased at a near double digit annualized rate, as our lending teams continue to garner market share and new relationships across our footprint. We opened a new branch office inLoudonville, New Yorkand continued to develop our consumer deposit and loan business. Our insurance and wealth management revenues improved and we are extending our reach in newer markets.
"We completed the acquisition of 20 Central New York branches near the start of the year. The integration of these new customers has been successful and our total branch count has increased to 90 full service offices, including 46 in New York. We also announced the recruitment ofScott Houghtalingas SVP/Commercial Leader for our expandedNew Yorkoperations."
Mr. Daly concluded, "Our net interest margin improved as a result of the branch acquisition. While non-interest expense also increased, organic expense growth was mostly limited to seasonal factors. Our non-core costs were primarily due to the branch acquisition and related termination of interest rate swaps which were previously disclosed. Going forward, we anticipate that our net results will mirror our core operating profitability. We continue to be selective and disciplined in managing our revenue growth, with a goal of maintaining forward momentum in operating results."
DIVIDEND DECLARED
The Board of Directors voted to declare a cash dividend of$0.18per share to shareholders of record at the close of business onMay 15, 2014, payable onMay 29, 2014. This dividend equates to a 2.8% annualized yield based on the$25.56average closing price ofBerkshire'scommon stock during the first quarter of 2014.
FINANCIAL CONDITION
Berkshireincreased its total assets by$338 million(6%) in the most recent quarter due to growth in loans and investment securities. Acquired deposits were used to repay borrowings and to fund asset growth. At quarter-end, measures of asset quality, liquidity, interest rate sensitivity, and capital remained within targets.
As ofMarch 31, 2014, tangible book value per share measured$15.84, compared to$16.27at the start of the quarter due primarily to the impacts of the branch acquisition. Total book value per share measured$26.99and$27.08at these dates, respectively.
Investment securities increased by$275 millionduring the first quarter. Growth consisted primarily of medium term U.S. agency collateralized mortgage securities, along with municipal bonds and corporate equities.
Total loans increased by$62 million(6% annualized) including 9% annualized commercial loan growth and 11% annualized consumer loan growth. This follows the trend of double digit annualized growth in these loans reported in prior quarters. All regions contributed to commercial loan originations, with strong contributions fromBerkshire Countyand Central andEastern Massachusetts, as well as asset based lending. Consumer loan growth was primarily in automobile loans reflecting continued expansion by theSyracusebased consumer team. Most of the total loan growth was recorded in the final month of the quarter.
Asset quality metrics remained favorable. Annualized net loan charge-offs measured 0.30% of average loans. Quarter-end non-performing assets decreased to 0.46% of total assets and accruing delinquent loans decreased to 0.59% of total loans. The loan loss allowance measured 0.79% of total loans; approximately 23% of quarter-end loans were balances recorded at fair value in recent bank acquisitions.
Total deposits increased by$370 million(10%) during the first quarter. Deposits added from theNew Yorkbranch acquisition were recorded at$440 millionand acquired balances were retained during the quarter. In conjunction with the deposit acquisition, the Company has de-emphasized select municipal deposit sources and other higher cost deposits. Ongoing development of consumer relationships was demonstrated by a 5% organic increase in personal demand deposit balances, excluding acquired balances. Due to the deposit growth, the loans/deposits ratio decreased to 101% from 109% during the quarter.
Borrowings were initially reduced with the acquired funds and subsequently were increased to fund asset growth. In conjunction with the branch acquisition, the Company terminated all of its interest rate swaps associated with FHLB advances, which had a notional value of$410 million. During the quarter, the Company initiated$300 millionin new medium term forward starting swaps.
The ratio of equity/assets measured 11.3% at quarter-end, decreasing from 12.0% at the start of the quarter due to the 6.0% increase in total assets following the branch acquisition. This transaction also increased goodwill and intangible assets. Excluding these assets, the ratio of tangible equity/assets decreased to 6.9% from 7.5%.
RESULTS OF OPERATIONS
First quarter 2014 core earnings totaled$10.4 million($0.42per share), compared to$10.0 million($0.40per share) in the prior quarter and to$13.5 million($0.54per share) in the first quarter of 2013. The core return on assets measured 0.71%, 0.73%, and 1.03% for these periods respectively. The branch acquisition resulted in higher core revenue and expenses in the most recent quarter, compared to the prior quarter.
GAAP earnings include the impact of net non-core charges. The reconciliation of net income and core income, together with related financial measures, is shown in financial table F-9. Non-core charges totaled$11.5 million($0.46per share) after-tax in the most recent quarter. These charges included$0.25per share recorded as a loss on termination of interest rate swap hedges. This was a charge with no impact on shareholders' equity and was related to the branch acquisition. Other non-core charges included$0.10per share in transaction and integration expenses for the branch acquisition,$0.07per share in expenses for restructuring and systems conversions, and$0.04per share for an out-of-period adjustment to interest income recorded on loans previously acquired in business combinations. Including these net non-core charges, first quarter 2014 GAAP results were a loss of$1.1 million($0.04per share). GAAP net income totaled$10.5 million($0.42per share) in both the prior quarter and in the first quarter of 2013. The GAAP loss resulted in a GAAP ROA of (0.08%) in the most recent quarter, compared to 0.77% and 0.80% in the prior periods, respectively.
Total net interest and fee revenue was$55.4 millionin the most recent quarter, which was a 9% increase over the prior quarter, and 2% lower than the first quarter of the previous year due to the decline in residential mortgage fees. First quarter 2014 net interest income totaled$42.8 million, increasing by 7% over the prior quarter and 2% over the first quarter of 2013.
The net interest margin measured 3.35%, 3.26% and 3.73% for these periods, respectively. In the most recent quarter, the margin benefited from the lower cost of acquired deposits and lower interest cost on borrowings as a result of the swap terminations. The cost of funds decreased to 0.56% from 0.73% in the prior quarter and from 0.81% in the first quarter of 2013.
Net interest income includes purchased loan accretion related to loans acquired in business combinations, including recoveries on the collection of acquired impaired loans. Current period purchased loan accretion totaled$2.8 millionin the most recent quarter, compared to$2.4 millionin the prior quarter, and$3.8 millionin the first quarter of 2013. Excluding current and out-of-period purchased loan accretion, the net interest margin was 3.24%, 3.07%, and 3.39% in these respective periods.
Fee income totaled$12.7 million, increasing by$1.6 million(14%) compared to the prior quarter and including the benefit of acquired branch operations and seasonal insurance contingency revenues. Fee income decreased by$1.8 million(12%) compared to the first quarter of 2013. Revenue from mortgage banking and loan related fee income decreased from elevated levels last year due to the midyear increase in interest rates in 2013. Wealth management fees increased by 13% over the first quarter of 2013 due to account growth and improved market conditions. Wealth management generated new business at a 9% annualized rate in the most recent quarter, and the portfolio totaled$1.3 billionat quarter-end. Insurance fees increased by 2% over this period.
The provision for loan losses totaled$3.4 million, continuing its gradual increasing trend as loan volume has increased and acquired loans season. Net charge-offs totaled$3.1 millionduring the quarter. The provision totaled$3.1 millionin the prior quarter and$2.4 millionin the first quarter of 2013.
First quarter 2014 core non-interest expense totaled$39.1 million. Including the 20 acquired branches, core expense increased by$4.4 million(13%) compared to the prior quarter and by a similar amount compared to the first quarter of 2013. First quarter expense includes seasonally higher benefits and maintenance expense. Expense growth in the most recent quarter also included targeted investment in commercial and retail market teams. Including net charges for non-core merger, conversion, and restructuring costs previously discussed, GAAP non-interest expense totaled$45.4 millionin the most recent quarter. Full time equivalent staff totaled 1,050 at quarter-end, compared to 939 at the start of the quarter. During the first quarter,Berkshireconsolidated two of the acquired New York branches which had overlap with existing locations. Additionally, two other branches have been consolidated in 2014 as part of the expense restructuring program. The effective income tax rate was 29% in the most recent quarter, unchanged from the effective rate for the year 2013.
CONFERENCE CALL
Berkshirewill conduct a conference call/webcast at10:00 a.m. eastern timeonTuesday, April 29, 2014to discuss the results for the quarter and provide guidance about expected future results. Participants should dial-in to the call a few minutes before it begins. Information about the conference call follows:
Dial-in:
888-317-6003
Elite Entry Number:
0011655
Webcast:
berkshirebank.com (investor relations link)
A PDF version of this earnings release is available at the above link. A telephone replay of the call will be available throughWednesday, May 7, 2014by calling 877-344-7529 and entering conference number: 10043772. The webcast will be available atBerkshire'swebsite above for an extended period of time.
BACKGROUND
Berkshire Hills Bancorp is the parent of Berkshire Bank –America's Most Exciting Bank®. The Company has$6.0 billionin assets and 90 full service branch offices inMassachusetts,New York,Connecticut, andVermontproviding personal and business banking, insurance, and wealth management services.
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 seeBerkshire'smost recent report on Form 10-K filed with the Securities and Exchange Commission and available on the SEC's website atwww.sec.gov.Berkshiredoes not undertake any obligation to update forward-looking statements.
OUT OF PERIOD ADJUSTMENT
In the first quarter of 2014, the Company recorded a correction of an error to reduce interest income by$1.4 millionrepresenting interest income previously recorded on loans acquired in prior years. After evaluating the quantitative and qualitative aspects of these adjustments, the Company concluded that its prior period financial statements were not materially misstated and, therefore, no restatement was required.
NON-GAAP FINANCIAL MEASURES
This document contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles ("GAAP"). These non-GAAP measures provide supplemental perspectives on operating results, performance trends, and financial condition. They are not a substitute for GAAP measures; they should be read and used in conjunction with the Company's GAAP financial information. A reconciliation of non-GAAP financial measures to GAAP measures is included in the accompanying financial tables. In all cases, it should be understood that non-GAAP per share measures do not depict amounts that accrue directly to the benefit of shareholders. The Company utilizes the non-GAAP measure of core earnings in evaluating operating trends, including components for core revenue and expense. These measures exclude amounts which the Company views as unrelated to its normalized operations, including securities gains/losses, losses recorded for hedge terminations, merger costs, restructuring costs, systems conversion costs, and out-of-period adjustments. Non-core adjustments are presented net of estimated income tax expense or benefit. Similarly, the efficiency ratio is also adjusted for these non-core items and for tax preference items. The Company also adjusts certain equity related measures to exclude intangible assets due to the importance of these measures to the investment community. Charges related to merger and acquisition activity consist primarily of severance/benefit related expenses, contract termination costs, and professional fees. Systems conversion costs relate primarily to the Company's core systems conversion and systems conversions costs in conjunction with this which have been recorded in recent periods. Restructuring costs primarily consist of employee severance costs and costs and losses associated with the disposition of assets which were undertaken as a project to right-size expenses following a decline in revenue in 2013. Out-of-period accounting adjustments for interest income on acquired loans were recorded following systems conversions and merger related accounting activity and were deemed non-core. Non-core expenses include variable rate compensation related to non-core items. The Company evaluates GAAP, core, and non-core items to analyze its effective tax rate and to arrive at core income that is net of an effective core tax rate which is consistent with its analysis of expected core tax items for the year.
CONTACTS
Investor Relations Contact
Allison O'Rourke, Vice President - Investor Relations; 413-236-3149
Media Contact
Ray Smith, Assistant Vice President - Marketing; 413-236-3756
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-1)
March 31,
December 31,
(In thousands)
2014
2013
Assets
Cash and due from banks
$ 60,023
$ 56,841
Short-term investments
12,650
18,698
Total cash and short-term investments
72,673
75,539
Trading security
14,923
14,840
Securities available for sale, at fair value
1,033,637
760,048
Securities held to maturity, at amortized cost
43,159
44,921
Federal Home Loan Bank stock and other restricted securities
53,124
50,282
Total securities
1,144,843
870,091
Loans held for sale, at fair value
7,669
15,840
Residential mortgages
1,377,771
1,384,274
Commercial real estate
1,456,976
1,417,120
Commercial and industrial loans
696,895
687,293
Consumer loans
710,985
691,836
Total loans
4,242,627
4,180,523
Less: Allowance for loan losses
(33,602)
(33,323)
Net loans
4,209,025
4,147,200
Premises and equipment, net
87,805
84,459
Other real estate owned
2,418
2,758
Goodwill
264,770
256,871
Other intangible assets
15,035
13,791
Cash surrender value of bank-owned life insurance
102,343
101,530
Deferred tax asset, net
40,202
50,711
Other assets
63,548
54,009
Total assets
$ 6,010,331
$ 5,672,799
Liabilities and stockholders' equity
Demand deposits
$ 770,841
$ 677,917
NOW deposits
434,833
353,612
Money market deposits
1,459,062
1,383,856
Savings deposits
478,107
431,496
Time deposits
1,075,740
1,001,648
Total deposits
4,218,583
3,848,529
Senior borrowings
936,747
974,428
Subordinated borrowings
89,696
89,679
Total borrowings
1,026,443
1,064,107
Other liabilities
87,715
82,101
Total liabilities
5,332,741
4,994,737
Total stockholders' equity
677,590
678,062
Total liabilities and stockholders' equity
$ 6,010,331
$ 5,672,799
(1) The Company acquired 20 branches in Central New York on January 17, 2014, including $440 million in deposits
and $4 million in loans from the branch acquisition as of that date.
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED - (F-2)
LOAN ANALYSIS
Annualized growth %
(Dollars in millions)
Mar. 31, 2014
Balance
Dec. 31, 2013
Balance
Quarter ended
March 31, 2014
Total residential mortgages
$ 1,378
$ 1,384
(2)
%
Total commercial real estate
1,457
1,417
11
Total commercial and industrial loans
697
688
5
Total commercial loans
2,154
2,105
9
Home equity
305
307
(3)
Auto and other
406
385
22
Total consumer loans
711
692
11
Total loans
$ 4,243
$ 4,181
6
%
DEPOSIT ANALYSIS
Annualized growth %
(Dollars in millions)
Mar. 31, 2014
Balance
Branch
Acquisition
Balance
Dec. 31, 2013
Balance
Quarter ended
March 31, 2014
Demand
$ 771
$ 110
$ 678
55
%
NOW
435
80
354
92
Money market
1,459
124
1,384
22
Savings
478
36
431
44
Total non-maturity deposits
3,143
350
2,847
42
Total time deposits
1,076
90
1,002
30
Total deposits
$ 4,219
$ 440
$ 3,849
38
%
(1) The Company acquired 20 branches in Central New York on January 17, 2014, including $440 million in deposits,
as shown above, and $4 million in loans from the branch acquisition as of that date.
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED - (F-3)
Three Months Ended
March 31,
(In thousands, except per share data)
2014
2013
Interest and dividend income
Loans
$ 42,494
$ 47,081
Securities and other
7,301
3,800
Total interest and dividend income
49,795
50,881
Interest expense
Deposits
4,721
5,363
Borrowings
2,308
3,581
Total interest expense
7,029
8,944
Net interest income
42,766
41,937
Non-interest income
Loan related fees
1,248
2,717
Mortgage banking fees
372
2,217
Deposit related fees
5,439
4,259
Insurance commissions and fees
3,049
2,997
Wealth management fees
2,549
2,264
Total fee income
12,657
14,454
Other
524
344
Gain on sale of securities, net
34
-
Loss on termination of hedges
(8,792)
-
Total non-interest income
4,423
14,798
Total net revenue
47,189
56,735
Provision for loan losses
3,396
2,400
Non-interest expense
Compensation and benefits
19,859
17,741
Occupancy and equipment
6,814
5,768
Technology and communications
3,778
2,991
Marketing and promotion
521
638
Professional services
1,152
1,490
FDIC premiums and assessments
1,009
828
Other real estate owned and foreclosures
523
23
Amortization of intangible assets
1,306
1,377
Merger, restructuring and conversion expenses
6,301
5,064
Other
4,097
3,563
Total non-interest expense
45,360
39,483
(Loss) income before income taxes
(1,567)
14,852
Income tax (benefit) expense
(461)
4,387
Net (loss) income
$ (1,106)
$ 10,465
Basic and diluted (loss) earnings per share:
$ (0.04)
$ 0.42
Weighted average shares outstanding:
Basic
24,698
24,948
Diluted
24,698
25,143
(1) The Company acquired 20 branches in Central New York on January 17, 2014. The income statement for the
three months ended March 31, 2014 includes operations of the branch acquisition beginning on that date.
(2) Merger, restructuring and conversion expenses include acquisition related expenses.
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED - (F-4)
Quarters Ended
Mar. 31,
Dec. 31,
Sept. 30,
June 30,
Mar. 31,
(In thousands, except per share data)
2014
2013
2013
2013
2013
Interest and dividend income
Loans
$ 42,494
$ 43,566
$ 50,025
$ 45,443
$ 47,081
Securities and other
7,301
5,093
4,479
4,254
3,800
Total interest and dividend income
49,795
48,659
54,504
49,697
50,881
Interest expense
Deposits
4,721
5,166
5,278
5,052
5,363
Borrowings
2,308
3,651
3,357
3,541
3,581
Total interest expense
7,029
8,817
8,635
8,593
8,944
Net interest income
42,766
39,842
45,869
41,104
41,937
Non-interest income
Loan related fees
1,248
1,578
1,308
2,644
2,717
Mortgage banking fees
372
445
444
2,129
2,217
Deposit related fees
5,439
4,717
4,559
4,805
4,259
Insurance commissions and fees
3,049
2,143
2,473
2,407
2,997
Wealth management fees
2,549
2,212
2,137
2,070
2,264
Total fee income
12,657
11,095
10,921
14,055
14,454
Other
524
1,227
832
546
344
Gain on sale of securities, net
34
3,392
361
1,005
-
Loss on termination of hedges
(8,792)
-
-
-
-
Total non-interest income
4,423
15,714
12,114
15,606
14,798
Total net revenue
47,189
55,556
57,983
56,710
56,735
Provision for loan losses
3,396
3,100
3,178
2,700
2,400
Non-interest expense
Compensation and benefits
19,859
16,736
18,506
18,151
17,741
Occupancy and equipment
6,814
5,421
5,614
5,737
5,768
Technology and communications
3,778
3,169
3,304
3,480
2,991
Marketing and promotion
521
765
590
603
638
Professional services
1,152
1,558
1,757
1,764
1,490
FDIC premiums and assessments
1,009
899
856
890
828
Other real estate owned and foreclosures
523
255
138
284
23
Amortization of intangible assets
1,306
1,239
1,307
1,345
1,377
Merger, restructuring and conversion expenses
6,301
2,493
6,516
775
5,064
Other
4,097
4,622
4,196
4,906
3,563
Total non-interest expense
45,360
37,157
42,784
37,935
39,483
(Loss) income before income taxes
(1,567)
15,299
12,021
16,075
14,852
Income tax (benefit) expense
(461)
4,762
3,917
4,038
4,387
Net (loss) income
$ (1,106)
$ 10,537
$ 8,104
$ 12,037
$ 10,465
(Loss) earnings per share:
Basic
$ (0.04)
$ 0.43
$ 0.33
$ 0.49
$ 0.42
Diluted
$ (0.04)
$ 0.42
$ 0.33
$ 0.48
$ 0.42
Weighted average shares outstanding:
Basic
24,698
24,701
24,748
24,779
24,948
Diluted
24,698
24,857
24,873
24,956
25,143
(1) See notes on Page F-3
BERKSHIRE HILLS BANCORP, INC.
ASSET QUALITY ANALYSIS - (F-5)
At or for the Quarters Ended
Mar. 31,
Dec. 31,
Sept. 30,
June 30,
Mar. 31,
(Dollars in thousands)
2014
2013
2013
2013
2013
NON-PERFORMING ASSETS
Non-accruing loans:
Residential mortgages
$ 6,071
$ 7,867
$ 8,487
$ 5,945
$ 8,818
Commercial real estate
13,036
13,739
13,800
14,948
12,396
Commercial and industrial loans
2,411
2,356
2,753
3,481
3,519
Consumer loans
3,846
3,493
3,227
2,405
2,325
Total non-accruing loans
25,364
27,455
28,267
26,779
27,058
Other real estate owned
2,418
2,758
3,561
2,713
2,513
Total non-performing assets
$ 27,782
$ 30,213
$ 31,828
$ 29,492
$ 29,571
Total non-accruing loans/total loans
0.60%
0.66%
0.70%
0.69%
0.70%
Total non-performing assets/total assets
0.46%
0.53%
0.58%
0.56%
0.56%
PROVISION AND ALLOWANCE FOR LOAN LOSSES
Balance at beginning of period
$ 33,323
$ 33,248
$ 33,248
$ 33,263
$ 33,208
Charged-off loans
(3,317)
(3,462)
(3,417)
(3,457)
(2,501)
Recoveries on charged-off loans
200
437
239
742
156
Net loans charged-off
(3,117)
(3,025)
(3,178)
(2,715)
(2,345)
Provision for loan losses
3,396
3,100
3,178
2,700
2,400
Balance at end of period
$ 33,602
$ 33,323
$ 33,248
$ 33,248
$ 33,263
Allowance for loan losses/total loans
0.79%
0.80%
0.83%
0.86%
0.86%
Allowance for loan losses/non-accruing loans
132%
121%
118%
124%
123%
NET LOAN CHARGE-OFFS
Residential mortgages
$ (1,055)
$ (564)
$ (351)
$ (852)
$ (260)
Commercial real estate
(1,105)
(763)
(1,480)
(1,283)
(952)
Commercial and industrial loans
(215)
(1,042)
(940)
(93)
(631)
Home equity
(458)
45
(174)
(121)
(199)
Auto and other consumer
(284)
(701)
(233)
(366)
(303)
Total, net
$ (3,117)
$ (3,025)
$ (3,178)
$ (2,715)
$ (2,345)
Net charge-offs (QTD annualized)/average loans
0.30%
0.31%
0.32%
0.27%
0.23%
Net charge-offs (YTD annualized)/average loans
0.30%
0.29%
0.28%
0.26%
0.23%
DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS
30-89 Days delinquent
0.37%
0.51%
0.42%
0.70%
0.61%
90+ Days delinquent and still accruing
0.22%
0.22%
0.29%
0.40%
0.47%
Total accruing delinquent loans
0.59%
0.73%
0.71%
1.10%
1.08%
Non-accruing loans
0.60%
0.66%
0.70%
0.69%
0.70%
Total delinquent and non-accruing loans
1.19%
1.39%
1.41%
1.79%
1.78%
BERKSHIRE HILLS BANCORP, INC.
SELECTED FINANCIAL HIGHLIGHTS - (F-6)
At or for the Quarters Ended
Mar. 31,
Dec. 31,
Sept. 30,
June 30,
Mar. 31,
2014
2013
2013
2013
2013
PER SHARE DATA
Core earnings, diluted
$ 0.42
$ 0.40
$ 0.43
$ 0.48
$ 0.54
Net earnings, diluted
(0.04)
0.42
0.33
0.48
0.42
Tangible book value
15.84
16.27
16.08
15.96
15.87
Total book value
26.99
27.08
26.98
26.82
26.68
Market price at period end
25.88
27.27
25.11
27.76
25.54
Dividends
0.18
0.18
0.18
0.18
0.18
PERFORMANCE RATIOS
Core return on assets
0.71
%
0.73
%
0.81
%
0.92
%
1.03
%
Return on assets
(0.08)
0.77
0.61
0.93
0.80
Core return on equity
6.02
5.87
6.29
7.13
8.10
Core return on tangible equity
10.84
10.47
11.18
12.84
14.57
Return on equity
(0.64)
6.18
4.74
7.21
6.28
Net interest margin, fully taxable equivalent
3.35
3.26
3.93
3.63
3.73
Fee income/Net interest and fee income
22.84
21.78
19.23
25.48
25.63
Efficiency ratio
64.42
63.21
60.98
63.05
57.14
GROWTH
Total commercial loans, year-to-date (annualized)
9
%
5
%
1
%
(2)
%
0
%
Total loans, year-to-date (annualized)
6
5
1
(6)
(10)
Total deposits, year-to-date (annualized)
38
(6)
(7)
(14)
0
Total net revenues, year-to-date, compared to prior year
(17)
15
24
28
39
Earnings per share, year-to-date, compared to prior year
(110)
11
11
40
50
Core earnings per share, year-to-date, compared to prior year
(22)
(6)
3
11
20
FINANCIAL DATA(In millions)
Total assets
$ 6,010
$ 5,673
$ 5,450
$ 5,224
$ 5,245
Total earning assets
5,408
5,085
4,856
4,629
4,646
Total loans
4,243
4,181
4,024
3,871
3,889
Allowance for loan losses
34
33
33
33
33
Total intangible assets
280
271
272
272
273
Total deposits
4,219
3,849
3,882
3,815
4,101
Total stockholders' equity
678
678
673
673
674
Total core income
10.4
10.0
10.7
11.9
13.5
Total net income
(1.1)
10.5
8.1
12.0
10.5
ASSET QUALITY RATIOS
Net charge-offs (current quarter annualized)/average loans
0.30
%
0.31
%
0.32
%
0.27
%
0.23
%
Allowance for loan losses/total loans
0.79
0.80
0.83
0.86
0.86
CONDITION RATIOS
Stockholders' equity to total assets
11.27
%
11.95
%
12.35
%
12.88
%
12.85
%
Tangible stockholders' equity to tangible assets
6.94
7.54
7.74
8.10
8.06
Investments to total assets
19.05
15.34
14.48
12.85
12.65
Loans/deposits
101
109
104
101
95
(1)
Reconciliation of Non-GAAP financial measures, including all references to core and tangible amounts, appear on page F-9.
Tangible assets are total assets less total intangible assets.
(2)
All performance ratios are annualized and are based on average balance sheet amounts, where applicable.
(3)
See note on Page F-9 on tangible equity.
BERKSHIRE HILLS BANCORP, INC.
AVERAGE BALANCES - (F-7)
Quarters Ended
Mar. 31,
Dec. 31,
Sept. 30,
June 30,
Mar. 31,
(In thousands)
2014
2013
2013
2013
2013
Assets
Loans:
Residential mortgages
$ 1,379,266
$ 1,330,674
$ 1,247,661
$ 1,218,192
$ 1,290,989
Commercial real estate
1,420,382
1,381,628
1,353,923
1,381,755
1,406,628
Commercial and industrial loans
684,776
673,292
647,939
627,591
601,695
Consumer loans
699,598
687,540
651,565
634,715
644,674
Total loans
4,184,022
4,073,134
3,901,088
3,862,253
3,943,986
Securities
1,047,658
813,417
735,307
655,396
591,304
Short-term investments and loans held for sale
28,631
35,438
60,820
90,680
98,160
Total earning assets
5,260,311
4,921,989
4,697,215
4,608,329
4,633,450
Goodwill and other intangible assets
278,386
271,147
271,670
272,421
273,428
Other assets
312,145
305,617
317,722
317,856
333,485
Total assets
$ 5,850,842
$ 5,498,753
$ 5,286,607
$ 5,198,606
$ 5,240,363
Liabilities and stockholders' equity
Deposits:
NOW
$ 409,631
$ 348,600
$ 345,682
$ 358,255
$ 368,392
Money market
1,490,408
1,392,570
1,329,591
1,358,590
1,477,497
Savings
463,615
435,766
442,408
449,296
441,547
Time
1,069,987
1,044,850
1,064,199
1,087,357
1,148,345
Total interest-bearing deposits
3,433,641
3,221,786
3,181,880
3,253,498
3,435,781
Borrowings
899,458
857,848
708,798
574,822
423,739
Total interest-bearing liabilities
4,333,099
4,079,634
3,890,678
3,828,320
3,859,520
Non-interest-bearing demand deposits
749,982
681,368
658,568
636,469
645,923
Other liabilities
76,258
56,261
52,874
65,568
68,509
Total liabilities
5,159,339
4,817,263
4,602,120
4,530,357
4,573,952
Total stockholders' equity
691,503
681,490
684,487
668,249
666,411
Total liabilities and stockholders' equity
$ 5,850,842
$ 5,498,753
$ 5,286,607
$ 5,198,606
$ 5,240,363
Supplementary data
Total non-maturity deposits
$ 3,113,636
$ 2,858,304
$ 2,776,249
$ 2,802,610
$ 2,933,359
Total deposits
4,183,623
3,903,154
3,840,448
3,889,967
4,081,704
Fully taxable equivalent income adjustment
718
639
652
644
629
Total average tangible equity
413,117
410,343
412,817
395,828
392,983
(1) Average balances for securities available-for-sale are based on amortized cost. Total loans include non-accruing loans.
(2) Total average tangible equity results from the subtraction of average goodwill and other intangible assets from total average
stockholders' equity.
(3) The average balances of deposits include the deposits held for sale presented under other liabilities on the consolidated balance sheet.
BERKSHIRE HILLS BANCORP, INC.
AVERAGE YIELDS (Fully Taxable Equivalent - Annualized) - (F-8)
Quarters Ended
Mar. 31,
Dec. 31,
Sept. 30,
June 30,
Mar. 31,
2014
2013
2013
2013
2013
Earning assets
Loans:
Residential mortgages
4.12
%
3.98
%
3.99
%
4.19
%
4.04
%
Commercial real estate
4.44
4.73
5.80
5.27
5.45
Commercial and industrial loans
3.97
3.91
6.09
4.04
4.40
Consumer loans
3.56
4.01
4.39
4.78
4.94
Total loans
4.13
4.26
5.02
4.67
4.75
Securities
3.04
2.72
2.77
3.00
3.04
Short-term investments and loans held for sale
1.51
1.92
4.05
2.02
1.83
Total earning assets
3.89
3.97
4.66
4.38
4.51
Funding liabilities
Deposits:
NOW
0.15
0.18
0.18
0.26
0.29
Money market
0.37
0.44
0.44
0.39
0.39
Savings
0.16
0.16
0.16
0.17
0.18
Time
1.15
1.25
1.29
1.23
1.23
Total interest-bearing deposits
0.56
0.64
0.66
0.62
0.63
Borrowings
1.04
1.69
1.88
2.47
3.43
Total interest-bearing liabilities
0.66
0.86
0.88
0.90
0.94
Net interest spread
3.23
3.11
3.78
3.48
3.57
Net interest margin
3.35
3.26
3.93
3.63
3.73
Cost of funds
0.56
0.73
0.75
0.77
0.81
Cost of deposits
0.46
0.53
0.55
0.52
0.53
(1) Cost of funds includes all deposits and borrowings.
BERKSHIRE HILLS BANCORP, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES - (F-9)
At or for the Quarters Ended
Mar. 31,
Dec. 31,
Sept. 30,
June 30,
Mar. 31,
(Dollars in thousands)
2014
2013
2013
2013
2013
Net income
$ (1,106)
$ 10,537
$ 8,104
$ 12,037
$ 10,465
Adj: Gain on sale of securities, net
(34)
(3,392)
(361)
(1,005)
-
Adj: Loss on termination of hedges
8,792
-
-
-
-
Adj: Merger and acquisition expenses
3,637
932
1,307
775
4,984
Adj: Restructuring, conversion and other expenses (5)
2,665
1,561
5,709
-
80
Adj: Out-of-period adjustment (6)
1,381
-
(2,222)
-
-
Adj: Income taxes
(4,923)
364
(1,788)
93
(2,042)
Total core income
(A)
$ 10,412
$ 10,002
$ 10,749
$ 11,900
$ 13,487
Total revenue
$ 47,189
$ 55,556
$ 57,983
$ 56,710
$ 56,735
Adj: Gain on sale of securities, net
(34)
(3,392)
(361)
(1,005)
-
Adj: Loss on termination of hedges
8,792
-
-
-
-
Adj: Out-of-period adjustment (6)
1,381
-
(2,222)
-
-
Total core revenue
$ 57,328
$ 52,164
$ 55,400
$ 55,705
$ 56,735
Total non-interest expense
$ 45,360
$ 37,157
$ 42,784
$ 37,935
$ 39,483
Less: Total non-core expense (see above)
(6,302)
(2,493)
(7,016)
(775)
(5,064)
Core non-interest expense
$ 39,058
$ 34,664
$ 35,768
$ 37,160
$ 34,419
(Dollars in millions, except per share data)
Total average assets
(B)
$ 5,851
$ 5,499
$ 5,287
$ 5,199
$ 5,240
Total average stockholders' equity
(C)
692
681
684
668
666
Total average tangible stockholders' equity
(D)
413
410
413
396
393
Total tangible stockholders' equity, period-end (7)
(E)
398
407
401
401
401
Total shares outstanding, period-end (thousands)
(F)
25,105
25,036
24,952
25,096
25,254
Average diluted shares outstanding (thousands) (8)
(G)
24,833
24,857
24,873
24,956
25,143
Core earnings per share, diluted
(A/G)
$ 0.42
$ 0.40
$ 0.43
$ 0.48
$ 0.54
Tangible book value per share, period-end
(E/F)
$ 15.84
$ 16.27
$ 16.08
$ 15.96
$ 15.87
Core return on assets
(A/B)
0.71
%
0.73
%
0.81
%
0.92
%
1.03
%
Core return on equity
(A/C)
6.02
5.87
6.29
7.13
8.10
Core return on tangible equity (4)
(A/D)
10.84
10.47
11.18
12.84
14.57
Efficiency ratio (1)
64.42
63.21
60.98
63.05
57.14
Supplementary data
Tax credit benefit of tax shelter investments
$ 555
$ 80
$ 458
$ 458
$ 458
Intangible amortization
$ 1,306
$ 1,239
$ 1,307
$ 1,345
$ 1,377
(1) 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.
(2) Ratios are annualized and based on average balance sheet amounts, where applicable.
(3) Quarterly data may not sum to year-to-date data due to the out-of-period adjustment recorded in the third quarter of 2013
and rounding.
(4) Core return on tangible equity is computed by dividing the total core income adjusted for the tax-affected amortization of
intangible assets, assuming a 40% marginal rate, by tangible equity.
(5) Prior period variable compensation is shown above under restructuring, conversion and other expenses.
(6) The out of period adjustments shown above relate to interest income earned on loans acquired in bank acquisitions.
(7) Total tangible stockholders' equity is computed by taking total stockholders' equity less the intangible assets at period-end.
(8) Average diluted shares computed for core earnings per share differ from GAAP average diluted shares due to the GAAP net loss compared to core net
income for the period.
PITTSFIELD, Mass.,April 28, 2014/PRNewswire/ --Berkshire Hills Bancorp, Inc