Vermont Business Magazine Berkshire Hills Bancorp, Inc(NYSE: BHLB), the parent company of Berkshire Bank with branches in southwestern Vermont, reported on Monday first quarter 2017 earnings of $15.5 million, or 44 cents per share. Core earnings totaled $19.4 million, or $0.55 per share. Net income increased by 50 percentover the prior quarter and core earnings increased by 8 percent, including the first full quarter benefit of the acquired First Choice operations. Non-core after-tax merger charges totaled $0.12 per share for the quarter.
FIRST QUARTER FINANCIAL HIGHLIGHTS (comparisons are to prior quarter unless otherwise stated):
• 34% increase in total net revenue
• 46% increase in fee income
• 15% annualized commercial loan growth
• 6% annualized total loan growth
• 2% annualized deposit growth
• 3.33% net interest margin, increased from 3.21% in the prior quarter
• 0.27% non-performing assets/assets
• 0.20% net loan charge-offs/average loans
CEO Michael Daly stated, “Berkshire is off to a strong start for the year, having delivered double-digit commercial loan growth, an expanded NIM, and a successful systems integration of First Choice on time and on plan. The First Choice operations drove our revenue gains while organic business development contributed to balance sheet growth. We opened our first Boston branch which will support our growing commercial business in Greater Boston. During the quarter we completed the consolidation of three branches and identified a fourth branch, along with other leasehold reductions, for further consolidation. We remain focused on delivering on the disciplined expansion of our business model. Across our regions, our teams have solid momentum for business growth and profitability improvement in 2017.”
DIVIDEND DECLARED
The Board of Directors voted to declare a cash dividend of $0.21 per share to shareholders of record at the close of business on May 11, 2017, payable on May 25, 2017. The dividend equates to a 2.4% annualized yield based on the $35.38 average closing price of Berkshire Hills Bancorp common stock during the quarter.
FINANCIAL CONDITION
Total assets measured $9.3 billion at March 31, 2017. The 6% annualized loan growth was concentrated in 15% annualized commercial loan growth. The largest gain was in commercial and industrial loans, which benefited from improved activity across several regions. Deposit growth was concentrated in time account growth, providing additional protection in the event of further interest rate increases, while transaction account balances decreased seasonally. Berkshire terminated its $300 million in fixed rate interest rate swaps during the quarter in conjunction with the integration of acquired First Choice Bank assets and liabilities. The Company continues tomaintain amodestly asset sensitive profile for net interest income.
At quarter-end, the ratio of loans/deposits stood at 100%. The ratio of equity/assets was 11.8% and the ratio of tangible equity/assets was 7.6%. At quarter-end, book value per share increased to $30.77 and tangible book value per share increased to $18.97. Tangible equity/assets and tangible book value are non-GAAP financial measures. Delinquent and non-accruing loans decreased to 0.78% of total loans, and annualized net loan charge-offs decreased to 0.20% of average loans during the quarter.
RESULTS OF OPERATIONS
The 50% increase in GAAP earnings and 8% increase in core earnings compared to the prior quarter primarily reflected the impact of the acquired First Choice operations. Per share results included the impact of the 4.4 million shares issued as merger consideration. GAAP earnings per share increased by $0.12 to $0.44, while core earnings per share decreased by $0.01 to $0.55. The First Choice acquisition is targeted to be accretive to earnings per share after integration is completed including targeted cost saves from combined efficiencies. During the most recent quarter, the GAAP return on assets measured 0.68% and core return on assets measured 0.85%.
Core earnings is a non-GAAP financial measure excluding non-core items viewed as not related to normalized operations. The $0.11 difference between core and GAAP EPS in the first quarter included $0.12 per share in after-tax merger related charges. Other net non-core gains/losses and expense restructuring items were mostly offsetting. Non-core gains of $13 million were realized on the sale of equity securities, and were offset by a $7 million loss recorded on the termination of the interest rate swaps and $6 million in other non-core costs primarily related to restructuring charges.
Most categories of revenue and expense increased over the prior quarter due to the full period impact of the First Choice acquisition. Total revenue increased by 34% and core revenue increased by 26%. The first quarter 2017 net interest margin increased to 3.33% and measured 3.15% excluding purchased loan accretion. The comparable measures in the prior quarter were 3.21% and 3.11%, respectively. The improvement in the margin included the benefit of the December rate hike and a decrease in funding costs following the First Choice acquisition. Fee income increased to 30% of total interest and fee revenue from 25% in the prior quarter, including the benefit of the acquired First Choice mortgage origination operations.
First quarter non-interest expense increased by 22% over the prior quarter including the costs of newly acquired operations, while core non-interest expense increased by 27%. The efficiency ratio measured 62%, compared to 58% in the prior quarter, reflecting the lower operating margin associated with mortgage originations. Full time equivalent staff totaled 1,728 positions at quarter-end, compared to 1,731 at the start of the year.
The effective GAAP income tax rate was 30% and the core income tax rate was 31% in the most recent quarter. The Company received $0.01 per share in net earnings benefit from its investment in tax credit related projects during the quarter, compared to $0.02 in the prior quarter.
INVESTOR CONFERENCE CALL
Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Tuesday, April 25, 2017 to discuss its 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: dpregister.com/10104927. 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. Participants may also reach the registration link and access the webcast by logging in through the investor section of our website at ir.berkshirebank.com. Participants may also participate at the above time by dialing 1-844-792-3726 and asking the Operator to be joined to the Berkshire Hills Bancorp (BHLB) earnings call. A telephone replay of the call will be available through Tuesday, May 2, 2017 by dialing 877-344-7529 and entering access number 10104927. 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. Berkshire has approximately $9.3 billion in assets and 97 full-service branch offices in Massachusetts, New York, Connecticut, Vermont, Pennsylvania and New Jersey providing personal and business banking, insurance, and wealthmanagement services. The Company also offers mortgages and specialized commercial lending services in targeted national markets. For more information, visit www.berkshirebank.com.
PITTSFIELD, MASS., April 24, 2017. Berkshire Hills Bancorp, Inc