Exhibit 99.1
Berkshire Hills Reports Record Earnings for 2013;
Board Change; Annual Meeting Date Set; Dividend Declared
Pittsfield, MA — January 27, 2014 — Berkshire Hills Bancorp, Inc. (NYSE: BHLB) reported record net income totaling $41 million in 2013, an increase of 24% compared to $33 million in the prior year. Earnings per share increased by 11% to $1.65 and included the impact of shares issued in 2012 for bank acquisitions. Core earnings increased to a record $47 million in 2013 primarily due to the benefit of growth in New York and Eastern Massachusetts. Core earnings exclude net non-core charges for acquisitions, restructuring, and systems conversions. Core earnings per share totaled $1.87 in 2013, compared to $1.98 in the prior year.
For the fourth quarter of 2013, Berkshire reported net income of $10.5 million ($0.42 per share), an increase of 13% over $9.3 million ($0.38 per share) in the fourth quarter of 2012. Core earnings totaled $10.0 million ($0.40 per share) compared to $13.2 million ($0.54 per share) in 2012. Year over year fourth quarter mortgage banking fees decreased by $5.4 million due to the decline in refinancing volumes driven by higher mortgage interest rates compared to the record low rates seen in the second half of 2012.
FOURTH QUARTER FINANCIAL HIGHLIGHTS
· 16% annualized loan growth
· 14% annualized growth in total commercial loans
· 3% decrease in core non-interest expense compared to prior quarter
· 7% decrease in core non-interest expense compared to second quarter
· 0.53% non-performing assets/total assets
· 0.31% net loan charge-offs/average loans
CEO Michael Daly stated, “We produced record revenue and earnings in 2013 due to ongoing expansion in our New England and New York footprint. Loan growth was strong in all major categories in recent quarters and our goal is to produce further market share gains in 2014. Fee revenues increased in the final months of the year and we further reduced operating expenses through our restructuring strategies. We remain closely focused on the revenue and efficiency opportunities that we see for positive operating leverage based on the benefit of our expanded footprint and upgraded systems.”
Mr. Daly continued, “We enter 2014 with further initiatives to build on our progress. We recently completed the acquisition of 20 New York branches from Bank of America. We
BHLB – Berkshire Hills Bancorp | www.berkshirebank.com |
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welcomed more than 65,000 new customers, deepening our presence in the communities between Albany and Syracuse. The Bank opened a new office in Loudonville, New York this month as part of our ongoing organic expansion. The Bank has also expanded our brand awareness across our footprint through strategic media partnerships. We will continue to be flexible and judicious in managing our growth with the objective of reliable and attractive returns to investors seeking a quality investment in these uncertain financial markets.”
BOARD CHANGE
Berkshire also announced that Richard J. Murphy has been appointed to the Board of Directors, replacing Geno Auriemma, effective January 23, 2014. Mr. Murphy serves as Vice President and General Manager of the Tri-City ValleyCats, a minor league baseball team based in Troy, New York. With over 25 years of experience in professional sports management, Mr. Murphy brings to the Board a strong financial acumen, a solid background in brand and marketing, and close ties to the Albany, NY community.
While Mr. Auriemma is stepping down from the Board, he will continue to serve as a spokesperson for Berkshire Bank. As Board Chairman, Mr. Daly stated “The Board thanks Mr. Auriemma for his significant contribution to expanding the America’s Most Exciting Bank brand in Connecticut and we are pleased to be continuing that relationship. We also congratulate him on his reappointment as the head coach of the U.S. Women’s National Basketball Team and we wish him much success in his current season at the University of Connecticut.”
ANNUAL MEETING DATE SET
The Board of Directors voted that the Annual Meeting of Shareholders shall be held on May 8, 2014 at the Crowne Plaza Hotel, One West Street, Pittsfield, Massachusetts at 10:00 a.m. The date of March 13, 2014 was established as the record date for the determination of the shareholders entitled to notice of, and to vote at, the Annual Meeting.
DIVIDEND DECLARED
The Board of Directors voted to declare a cash dividend of $0.18 per share to shareholders of record at the close of business on February 13, 2014, payable on February 27, 2014. This dividend equates to a 2.8% annualized yield based on the $25.97 average closing price of Berkshire’s common stock during the fourth quarter of 2013.
NEW YORK BRANCH ACQUISITION
On January 17, 2014, Berkshire acquired approximately $450 million in deposits from Bank of America, together with related assets, including approximately $4 million in loans. Berkshire expects to use the proceeds to pay down certain borrowings and to
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purchase investment securities. As part of this transaction, Berkshire acquired 20 branches in Central New York, two of which were consolidated as part of the transaction.
FINANCIAL CONDITION
Berkshire increased its total assets by $223 million (4%) to $5.7 billion in the most recent quarter due to growth in loans and investment securities funded by borrowings. For the year, total assets increased by 7%. At year-end, measures of asset quality, liquidity, and capital remained within targets. As of December 31, 2013, tangible book value per share increased to $16.27 and total book value per share grew to $27.08.
Total loans increased by $157 million (16% annualized) in the fourth quarter, including double digit annualized growth in all major categories. Berkshire’s loan growth accelerated in the second half of the year, reflecting higher originations and a decline in runoff after the yield curve steepened in mid-year. For the full year, loan growth was approximately 5% in total and in most major categories. Growth of 15% in commercial business loans included contributions from new commercial banking teams recruited in Hartford, Syracuse, and Eastern Massachusetts. In the latter market, Berkshire consolidated its commercial banking team into a new regional headquarters located on Route 128 in Burlington, and moved its Westborough regional team into a well located new commercial office. During the year, Berkshire added a commercial leasing team and new leadership for its expanded small business lending program. Berkshire also recruited additional mortgage loan originations leadership and expanded its automobile lending operations across its footprint under the direction of its Syracuse consumer lending team from the acquired Beacon Federal Bank.
Berkshire increased its investment securities by $81 million in the fourth quarter, following a slightly larger increase in the prior quarter due to improved securities market conditions. Investments have been concentrated in medium term U.S. agency mortgage backed instruments. Berkshire is further increasing its portfolio with agency mortgage backed securities in conjunction with the New York branch acquisition subsequent to year-end.
Asset quality metrics remained favorable at year-end. Annualized net loan charge-offs measured 0.31% of average loans in the final quarter and 0.29% for the year. Year-end non-performing assets were 0.53% of total assets, compared to 0.52% at the start of the year. Accruing delinquent loans decreased to 0.73% of total loans from 1.11% during the year. The loan loss allowance measured 0.80% of total loans at year-end, compared to 0.83% at the start of the year. Approximately 24% of year-end loans were balances recorded at fair value in recent bank acquisitions.
Total non-maturity deposits increased by $29 million (4% annualized) in the fourth quarter, while time account balances decreased by $62 million (23% annualized) as higher yielding time accounts matured. For the year, deposits decreased by $252 million (6%) due to the outplacement of non-relationship acquired balances and certain higher costing commercial balances primarily in the second quarter. These changes were in
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anticipation of the New York branch purchase announced mid-year, which resulted in approximately a $450 million increase in deposits shortly after year-end. The loan/deposit ratio measured 109% at year-end, and the pro-forma loan/deposit ratio was estimated at approximately 97% including the benefit of these acquired branches. Total borrowings increased by $234 million in the fourth quarter to support the growth in earning assets. Proceeds from the acquired deposits were planned to be used in part to repay certain borrowings.
Total equity increased by $5 million during the fourth quarter and $11 million for the full year, including the benefit of retained earnings and net of stock repurchases earlier in the year. The ratio of total equity/assets decreased to 12,0% from 12.6% during the year due to the 7% increase in total assets in 2013. The ratio of tangible equity/assets decreased to 7.5% from 7.8% during the year.
RESULTS OF OPERATIONS
Berkshire posted record revenue and earnings for the year due to expansion from organic and acquisition growth strategies, including team recruitment, de novo branch expansion, and business combinations. Most categories of revenue and expense increased as a result of this expansion. GAAP earnings include the impact of net non-core charges for acquisitions, restructuring, and systems conversions. The reconciliation of net income and core income, together with related financial measures, is shown on financial tables F-9 and F-10. In the fourth quarter, the return on assets measured 0.77% and the return on equity measured 6.18%, with minor impact from non-core items.
Berkshire’s fourth quarter net revenue decreased by $4.1 million (7%) year over year. This was primarily due to the $5.4 million decrease in mortgage banking fees from record volumes last year before rates increased near mid-year 2013. Compared to the prior quarter, total net revenue decreased by $2.4 million (4%) as lower net interest income was partially offset by higher securities gains.
Net interest income includes purchased loan accretion related to loans acquired in business combinations. Purchased loan accretion totaled $2.4 million in the most recent quarter, compared to $8.5 million in the prior quarter; prior quarter results included elevated recoveries of purchased impaired loans together with an out-of-period accounting adjustment. The net interest margin was 3.26% in the fourth quarter compared to 3.93% in the prior quarter. Excluding purchased loan accretion, the net interest margin was 3.07% and 3.21% in these two quarters, respectively, due to lower earning asset yields in the most recent quarter. The income impact of the margin change was partially offset by the 5% increase in average earning assets compared to the prior quarter.
Total fee income increased at a 6% annualized rate in the fourth quarter compared to the linked quarter, including double digit annualized growth in several major categories. Net securities gains increased to $3.4 million from $0.4 million due to the realization of gains on certain bank equity securities as a result of improved market conditions.
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The allowance for loan losses increased slightly to $33.3 million from $33.2 million during the year. The provision for loan losses also increased in 2013 to $11.4 million from $9.6 million in the prior year. Total net loan charge-offs increased to $11.3 million from $8.8 million primarily due to portfolio growth. In the most recent quarter, the provision was $3.1 million and net charge-offs were $3.0 million.
Fourth quarter core non-interest expense decreased by 3% from the linked quarter and by 7% from the second quarter of 2013 due to the restructuring program initiated shortly after mid-year. Most major categories of core expense decreased after mid-year. Full time equivalent employees totaled 939 at year-end. Total fourth quarter GAAP non-interest expense decreased by 16% year over year and 13% compared to the linked quarter including the impact of lower non-core charges. The effective income tax rate was 31% for the most recent quarter and 29% for the full year 2013.
CONFERENCE CALL
Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Tuesday, January 28, 2014 to 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: | | 4858232 |
Webcast: | | berkshirebank.com (investor relations link) |
| | |
A telephone replay of the call will be available through Wednesday, February 5, 2014 by calling 877-344-7529 and entering conference number: 10038874. The webcast will be available at Berkshire’s website above for an extended period of time.
BACKGROUND
Berkshire Hills Bancorp is the parent of Berkshire Bank — America’s Most Exciting Bank®. Including New York branches acquired in January, the Company has approximately $6.0 billion in assets and 92 full service branch offices in Massachusetts, New York, Connecticut, and Vermont providing 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 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
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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 in the accompanying financial tables. In all cases, it should be understood that non-GAAP per share measures do not depict amounts that accrue directly to the benefit of shareholders. The Company utilizes the non-GAAP measure of core earnings in evaluating operating trends, including components for core revenue and expense. These measures exclude amounts which the Company views as unrelated to its normalized operations, including merger costs, restructuring costs, and systems conversion costs. Similarly, the efficiency ratio is also adjusted for these non-core items and for tax preference items. The Company also adjusts certain equity related measures to exclude intangible assets due to the importance of these measures to the investment community. Non-GAAP expense adjustments are primarily related to charges related to merger and acquisition activity. These charges consist primarily of severance/benefit related expenses, contract termination costs, and professional fees. There are additionally non-GAAP adjustments related to non-recurring securities gains, discontinued operations, the disposition of excess properties, and core systems conversion costs. In the second half of 2013, non-core restructuring charges are related to severance costs as a result of management and staffing changes, along with facilities costs related to excess facilities where the bank is exiting its occupancy and investment. Non-core items recorded in the third quarter of 2013 also included the after-tax impact of an out-of-period accounting adjustment, along with an adjustment of variable compensation based on the additional revenue recognition.
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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
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BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-1)
| | December 31, | | September 30, | | December 31, | |
(In thousands) | | 2013 | | 2013 | | 2012 | |
Assets | | | | | | | |
Cash and due from banks | | $ | 56,841 | | $ | 61,149 | | $ | 63,382 | |
Short-term investments | | 18,698 | | 15,710 | | 34,862 | |
Total cash and short-term investments | | 75,539 | | 76,859 | | 98,244 | |
| | | | | | | |
Trading security | | 14,840 | | 15,330 | | 16,893 | |
Securities available for sale, at fair value | | 760,048 | | 684,716 | | 466,169 | |
Securities held to maturity, at amortized cost | | 44,921 | | 46,925 | | 51,024 | |
Federal Home Loan Bank stock and other restricted securities | | 50,282 | | 42,342 | | 39,785 | |
Total securities | | 870,091 | | 789,313 | | 573,871 | |
| | | | | | | |
Loans held for sale | | 15,840 | | 27,064 | | 85,368 | |
| | | | | | | |
Residential mortgages | | 1,384,274 | | 1,313,609 | | 1,324,251 | |
Commercial mortgages | | 1,417,120 | | 1,366,104 | | 1,413,544 | |
Commercial business loans | | 687,293 | | 668,983 | | 600,126 | |
Consumer loans | | 691,836 | | 675,147 | | 650,733 | |
Total loans | | 4,180,523 | | 4,023,843 | | 3,988,654 | |
Less: Allowance for loan losses | | (33,323 | ) | (33,248 | ) | (33,208 | ) |
Net loans | | 4,147,200 | | 3,990,595 | | 3,955,446 | |
| | | | | | | |
Premises and equipment, net | | 84,459 | | 83,136 | | 86,461 | |
Other real estate owned | | 2,758 | | 3,561 | | 1,929 | |
Goodwill | | 256,871 | | 256,871 | | 255,199 | |
Other intangible assets | | 13,791 | | 15,030 | | 19,059 | |
Cash surrender value of bank-owned life insurance | | 101,530 | | 100,299 | | 88,198 | |
Deferred tax asset | | 50,711 | | 61,617 | | 57,729 | |
Other assets | | 54,009 | | 45,911 | | 75,305 | |
Total assets | | $ | 5,672,799 | | $ | 5,450,256 | | $ | 5,296,809 | |
| | | | | | | |
Liabilities and stockholders’ equity | | | | | | | |
Demand deposits | | $ | 677,917 | | $ | 669,878 | | $ | 673,921 | |
NOW deposits | | 353,612 | | 352,762 | | 379,880 | |
Money market deposits | | 1,383,856 | | 1,357,201 | | 1,439,632 | |
Savings deposits | | 431,496 | | 438,135 | | 436,387 | |
Total non-maturity deposits | | 2,846,881 | | 2,817,976 | | 2,929,820 | |
Time deposits | | 1,001,648 | | 1,064,049 | | 1,170,589 | |
Total deposits | | 3,848,529 | | 3,882,025 | | 4,100,409 | |
| | | | | | | |
Senior borrowings | | 974,428 | | 740,022 | | 358,471 | |
Subordinated notes | | 89,679 | | 89,663 | | 89,617 | |
Total borrowings | | 1,064,107 | | 829,685 | | 448,088 | |
| | | | | | | |
Other liabilities | | 82,101 | | 65,351 | | 81,047 | |
Total liabilities | | 4,994,737 | | 4,777,061 | | 4,629,544 | |
| | | | | | | |
Total stockholders’ equity | | 678,062 | | 673,195 | | 667,265 | |
Total liabilities and stockholders’ equity | | $ | 5,672,799 | | $ | 5,450,256 | | $ | 5,296,809 | |
(1) Certain reclassifications have been made to prior year balances to conform to the current year presentation.
F-1
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED - (F-2)
LOAN ANALYSIS
| | | | | | | | Annualized growth % | |
(Dollars in millions) | | Dec. 31, 2013
Balance | | Sept. 30, 2013
Balance | | Dec. 31, 2012
Balance | | Quarter ended
December 31, 2013 | | Year to date | |
| | | | | | | | | | | |
Total residential mortgages | | $ | 1,384 | | $ | 1,314 | | $ | 1,324 | | 22 | % | 5 | % |
| | | | | | | | | | | |
Commercial mortgages: | | | | | | | | | | | |
Construction | | 139 | | 105 | | 168 | | 132 | | (17 | ) |
Single and multi-family | | 128 | | 132 | | 124 | | (10 | ) | 4 | |
Commercial real estate | | 1,150 | | 1,129 | | 1,122 | | 7 | | 2 | |
Total commercial mortgages | | 1,417 | | 1,366 | | 1,414 | | 15 | | 0 | |
| | | | | | | | | | | |
Total commercial business loans | | 688 | | 669 | | 600 | | 12 | | 15 | |
| | | | | | | | | | | |
Total commercial loans | | 2,105 | | 2,035 | | 2,014 | | 14 | | 5 | |
| | | | | | | | | | | |
Consumer loans: | | | | | | | | | | | |
Home equity | | 307 | | 304 | | 325 | | 4 | | (6 | ) |
Other | | 385 | | 371 | | 326 | | 16 | | 18 | |
Total consumer loans | | 692 | | 675 | | 651 | | 10 | | 6 | |
Total loans | | $ | 4,181 | | $ | 4,024 | | $ | 3,989 | | 16 | % | 5 | % |
DEPOSIT ANALYSIS
| | | | | | | | Annualized growth % | |
(Dollars in millions) | | Dec. 31, 2013
Balance | | Sept. 30, 2013
Balance | | Dec. 31, 2012
Balance | | Quarter ended
December 31, 2013 | | Year to date | |
Demand | | $ | 678 | | $ | 670 | | $ | 674 | | 5 | % | 1 | % |
NOW | | 354 | | 353 | | 380 | | 1 | | (7 | ) |
Money market | | 1,384 | | 1,357 | | 1,440 | | 8 | | (4 | ) |
Savings | | 431 | | 438 | | 436 | | (6 | ) | (1 | ) |
Total non-maturity deposits | | 2,847 | | 2,818 | | 2,930 | | 4 | | (3 | ) |
| | | | | | | | | | | |
Total time deposits | | 1,002 | | 1,064 | | 1,170 | | (23 | ) | (14 | ) |
Total deposits | | $ | 3,849 | | $ | 3,882 | | $ | 4,100 | | (3 | )% | (6 | )% |
(1) Quarterly data may not sum to annualized data due to rounding.
F-2
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED - (F-3)
| | Three Months Ended | | Years Ended | |
| | December 31, | | December 31, | |
(In thousands, except per share data) | | 2013 | | 2012 | | 2013 | | 2012 | |
Interest and dividend income | | | | | | | | | |
Loans | | $ | 43,566 | | $ | 47,601 | | $ | 186,115 | | $ | 160,936 | |
Securities and other | | 5,093 | | 3,887 | | 17,626 | | 15,003 | |
Total interest and dividend income | | 48,659 | | 51,488 | | 203,741 | | 175,939 | |
Interest expense | | | | | | | | | |
Deposits | | 5,166 | | 5,870 | | 20,859 | | 22,482 | |
Borrowings and subordinated debentures | | 3,651 | | 3,653 | | 14,130 | | 10,069 | |
Total interest expense | | 8,817 | | 9,523 | | 34,989 | | 32,551 | |
Net interest income | | 39,842 | | 41,965 | | 168,752 | | 143,388 | |
Non-interest income | | | | | | | | | |
Loan related fees | | 1,578 | | 1,162 | | 8,247 | | 5,152 | |
Mortgage banking fees | | 445 | | 5,850 | | 5,235 | | 12,403 | |
Deposit related fees | | 4,717 | | 4,355 | | 18,340 | | 15,593 | |
Insurance commissions and fees | | 2,143 | | 2,565 | | 10,020 | | 10,821 | |
Wealth management fees | | 2,212 | | 1,865 | | 8,683 | | 7,296 | |
Total fee income | | 11,095 | | 15,797 | | 50,525 | | 51,265 | |
Other | | 1,227 | | 421 | | 2,949 | | 1,306 | |
Gain on sale of securities, net | | 3,392 | | 293 | | 4,758 | | 300 | |
Non-recurring gain | | — | | 1,142 | | — | | 1,185 | |
Total non-interest income | | 15,714 | | 17,653 | | 58,232 | | 54,056 | |
Total net revenue | | 55,556 | | 59,618 | | 226,984 | | 197,444 | |
Provision for loan losses | | 3,100 | | 2,840 | | 11,378 | | 9,590 | |
Non-interest expense | | | | | | | | | |
Compensation and benefits | | 16,736 | | 18,862 | | 71,134 | | 64,081 | |
Occupancy and equipment | | 5,421 | | 5,985 | | 22,540 | | 19,469 | |
Technology and communications | | 3,169 | | 2,949 | | 12,944 | | 9,467 | |
Marketing and promotion | | 765 | | 483 | | 2,596 | | 2,031 | |
Professional services | | 1,558 | | 1,600 | | 6,569 | | 5,785 | |
FDIC premiums and assessments | | 899 | | 919 | | 3,473 | | 3,377 | |
Other real estate owned and foreclosures | | 255 | | 66 | | 700 | | 281 | |
Amortization of intangible assets | | 1,239 | | 1,357 | | 5,268 | | 5,339 | |
Merger, restructuring and conversion related expenses | | 2,493 | | 7,497 | | 14,848 | | 18,019 | |
Other | | 4,622 | | 4,548 | | 17,287 | | 12,957 | |
Total non-interest expense | | 37,157 | | 44,266 | | 157,359 | | 140,806 | |
| | | | | | | | | |
Income from continuing operations before income taxes | | 15,299 | | 12,512 | | 58,247 | | 47,048 | |
Income tax expense | | 4,762 | | 3,183 | | 17,104 | | 13,223 | |
Net income from continuing operations | | 10,537 | | 9,329 | | 41,143 | | 33,825 | |
Loss from discontinued operations before income taxes (including gain on disposals of $63) | | — | | — | | — | | (261 | ) |
Income tax expense | | — | | — | | — | | 376 | |
Net loss from discontinued operations | | — | | — | | — | | (637 | ) |
Net income | | $ | 10,537 | | $ | 9,329 | | $ | 41,143 | | $ | 33,188 | |
| | | | | | | | | |
Basic earnings per share: | | | | | | | | | |
Continuing operations | | $ | 0.43 | | $ | 0.39 | | $ | 1.66 | | $ | 1.52 | |
Discontinued operations | | — | | — | | — | | (0.03 | ) |
Total basic earnings per share | | $ | 0.43 | | $ | 0.39 | | $ | 1.66 | | $ | 1.49 | |
| | | | | | | | | |
Diluted earnings per share: | | | | | | | | | |
Continuing operations | | $ | 0.42 | | $ | 0.38 | | $ | 1.65 | | $ | 1.52 | |
Discontinued operations | | — | | — | | — | | (0.03 | ) |
Total diluted earnings per share | | $ | 0.42 | | $ | 0.38 | | $ | 1.65 | | $ | 1.49 | |
| | | | | | | | | |
Weighted average shares outstanding: | | | | | | | | | |
Basic | | 24,701 | | 24,165 | | 24,802 | | 22,201 | |
Diluted | | 24,857 | | 24,396 | | 24,965 | | 22,329 | |
F-3
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED - (F-4)
| | Quarters Ended | |
| | Dec. 31, | | Sept. 30, | | June 30, | | Mar. 31, | | Dec. 31, | |
(In thousands, except per share data) | | 2013 | | 2013 | | 2013 | | 2013 | | 2012 | |
Interest and dividend income | | | | | | | | | | | |
Loans | | $ | 43,566 | | $ | 50,025 | | $ | 45,443 | | $ | 47,081 | | $ | 47,601 | |
Securities and other | | 5,093 | | 4,479 | | 4,254 | | 3,800 | | 3,887 | |
Total interest and dividend income | | 48,659 | | 54,504 | | 49,697 | | 50,881 | | 51,488 | |
Interest expense | | | | | | | | | | | |
Deposits | | 5,166 | | 5,278 | | 5,052 | | 5,363 | | 5,870 | |
Borrowings and subordinated debentures | | 3,651 | | 3,357 | | 3,541 | | 3,581 | | 3,653 | |
Total interest expense | | 8,817 | | 8,635 | | 8,593 | | 8,944 | | 9,523 | |
Net interest income | | 39,842 | | 45,869 | | 41,104 | | 41,937 | | 41,965 | |
Non-interest income | | | | | | | | | | | |
Loan related fees | | 1,578 | | 1,308 | | 2,644 | | 2,717 | | 1,162 | |
Mortgage banking fees | | 445 | | 444 | | 2,129 | | 2,217 | | 5,850 | |
Deposit related fees | | 4,717 | | 4,559 | | 4,805 | | 4,259 | | 4,355 | |
Insurance commissions and fees | | 2,143 | | 2,473 | | 2,407 | | 2,997 | | 2,565 | |
Wealth management fees | | 2,212 | | 2,137 | | 2,070 | | 2,264 | | 1,865 | |
Total fee income | | 11,095 | | 10,921 | | 14,055 | | 14,454 | | 15,797 | |
Other | | 1,227 | | 832 | | 546 | | 344 | | 421 | |
Gain on sale of securities, net | | 3,392 | | 361 | | 1,005 | | — | | 293 | |
Non-recurring gain | | — | | — | | — | | — | | 1,142 | |
Total non-interest income | | 15,714 | | 12,114 | | 15,606 | | 14,798 | | 17,653 | |
Total net revenue | | 55,556 | | 57,983 | | 56,710 | | 56,735 | | 59,618 | |
Provision for loan losses | | 3,100 | | 3,178 | | 2,700 | | 2,400 | | 2,840 | |
Non-interest expense | | | | | | | | | | | |
Compensation and benefits | | 16,736 | | 18,506 | | 18,151 | | 17,741 | | 18,862 | |
Occupancy and equipment | | 5,421 | | 5,614 | | 5,737 | | 5,768 | | 5,985 | |
Technology and communications | | 3,169 | | 3,304 | | 3,480 | | 2,991 | | 2,949 | |
Marketing and promotion | | 765 | | 590 | | 603 | | 638 | | 483 | |
Professional services | | 1,558 | | 1,757 | | 1,764 | | 1,490 | | 1,600 | |
FDIC premiums and assessments | | 899 | | 856 | | 890 | | 828 | | 919 | |
Other real estate owned and foreclosures | | 255 | | 138 | | 284 | | 23 | | 66 | |
Amortization of intangible assets | | 1,239 | | 1,307 | | 1,345 | | 1,377 | | 1,357 | |
Merger, restructuring and conversion related expenses | | 2,493 | | 6,516 | | 775 | | 5,064 | | 7,497 | |
Other | | 4,622 | | 4,196 | | 4,906 | | 3,563 | | 4,548 | |
Total non-interest expense | | 37,157 | | 42,784 | | 37,935 | | 39,483 | | 44,266 | |
| | | | | | | | | | | |
Income from continuing operations before income taxes | | 15,299 | | 12,021 | | 16,075 | | 14,852 | | 12,512 | |
Income tax expense | | 4,762 | | 3,917 | | 4,038 | | 4,387 | | 3,183 | |
Net income | | $ | 10,537 | | $ | 8,104 | | $ | 12,037 | | $ | 10,465 | | $ | 9,329 | |
| | | | | | | | | | | |
Basic earnings per share: | | | | | | | | | | | |
Continuing operations | | $ | 0.43 | | $ | 0.33 | | $ | 0.49 | | $ | 0.42 | | $ | 0.39 | |
Discontinued operations | | — | | — | | — | | — | | — | |
Total basic earnings per share | | $ | 0.43 | | $ | 0.33 | | $ | 0.49 | | $ | 0.42 | | $ | 0.39 | |
| | | | | | | | | | | |
Diluted earnings per share: | | | | | | | | | | | |
Continuing operations | | $ | 0.42 | | $ | 0.33 | | $ | 0.48 | | $ | 0.42 | | $ | 0.38 | |
Discontinued operations | | — | | — | | — | | — | | — | |
Total diluted earnings per share | | $ | 0.42 | | $ | 0.33 | | $ | 0.48 | | $ | 0.42 | | $ | 0.38 | |
| | | | | | | | | | | |
Weighted average shares outstanding: | | | | | | | | | | | |
Basic | | 24,701 | | 24,748 | | 24,779 | | 24,927 | | 24,165 | |
Diluted | | 24,857 | | 24,873 | | 24,956 | | 25,136 | | 24,396 | |
(1) | The Company acquired Beacon Federal Bancorp on October 19, 2012. The income statements include operations of the acquired institution as of that date. |
F-4
BERKSHIRE HILLS BANCORP, INC.
ASSET QUALITY ANALYSIS - (F-5)
| | At or for the Quarters Ended | |
| | Dec. 31, | | Sept. 30, | | June 30, | | Mar. 31, | | Dec. 31, | |
(Dollars in thousands) | | 2013 | | 2013 | | 2013 | | 2013 | | 2012 | |
NON-PERFORMING ASSETS | | | | | | | | | | | |
Non-accruing loans: | | | | | | | | | | | |
Residential mortgages | | $ | 7,867 | | $ | 8,487 | | $ | 5,945 | | $ | 8,818 | | $ | 7,466 | |
Commercial mortgages | | 13,739 | | 13,800 | | 14,948 | | 12,396 | | 12,617 | |
Commercial business loans | | 2,356 | | 2,753 | | 3,481 | | 3,519 | | 3,681 | |
Consumer loans | | 3,493 | | 3,227 | | 2,405 | | 2,325 | | 1,748 | |
Total non-accruing loans | | 27,455 | | 28,267 | | 26,779 | | 27,058 | | 25,512 | |
Other real estate owned | | 2,758 | | 3,561 | | 2,713 | | 2,513 | | 1,929 | |
Total non-performing assets | | $ | 30,213 | | $ | 31,828 | | $ | 29,492 | | $ | 29,571 | | $ | 27,441 | |
| | | | | | | | | | | |
Total non-accruing loans/total loans | | 0.66 | % | 0.70 | % | 0.69 | % | 0.70 | % | 0.64 | % |
Total non-performing assets/total assets | | 0.53 | % | 0.58 | % | 0.56 | % | 0.56 | % | 0.52 | % |
| | | | | | | | | | | |
PROVISION AND ALLOWANCE FOR LOAN LOSSES | | | | | | | | | | | |
Balance at beginning of period | | $ | 33,248 | | $ | 33,248 | | $ | 33,263 | | $ | 33,208 | | $ | 33,090 | |
Charged-off loans | | (3,462 | ) | (3,417 | ) | (3,457 | ) | (2,501 | ) | (3,073 | ) |
Recoveries on charged-off loans | | 437 | | 239 | | 742 | | 156 | | 351 | |
Net loans charged-off | | (3,025 | ) | (3,178 | ) | (2,715 | ) | (2,345 | ) | (2,722 | ) |
Provision for loan losses | | 3,100 | | 3,178 | | 2,700 | | 2,400 | | 2,840 | |
Balance at end of period | | $ | 33,323 | | $ | 33,248 | | $ | 33,248 | | $ | 33,263 | | $ | 33,208 | |
| | | | | | | | | | | |
Allowance for loan losses/total loans | | 0.80 | % | 0.83 | % | 0.86 | % | 0.86 | % | 0.83 | % |
Allowance for loan losses/non-accruing loans | | 121 | % | 118 | % | 124 | % | 123 | % | 130 | % |
| | | | | | | | | | | |
NET LOAN CHARGE-OFFS | | | | | | | | | | | |
Residential mortgages | | $ | (564 | ) | $ | (351 | ) | $ | (852 | ) | $ | (260 | ) | $ | (1,034 | ) |
Commercial mortgages | | (763 | ) | (1,480 | ) | (1,283 | ) | (952 | ) | (893 | ) |
Commercial business loans | | (1,042 | ) | (940 | ) | (93 | ) | (631 | ) | (496 | ) |
Home equity | | 45 | | (174 | ) | (121 | ) | (199 | ) | (22 | ) |
Other consumer | | (701 | ) | (233 | ) | (366 | ) | (303 | ) | (277 | ) |
Total, net | | $ | (3,025 | ) | $ | (3,178 | ) | $ | (2,715 | ) | $ | (2,345 | ) | $ | (2,722 | ) |
| | | | | | | | | | | |
Net charge-offs (QTD annualized)/average loans | | 0.31 | % | 0.32 | % | 0.27 | % | 0.23 | % | 0.28 | % |
Net charge-offs (YTD annualized)/average loans | | 0.29 | % | 0.28 | % | 0.26 | % | 0.23 | % | 0.26 | % |
| | | | | | | | | | | |
DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS | | | | | | | | | | | |
30-89 Days delinquent | | 0.51 | % | 0.42 | % | 0.70 | % | 0.61 | % | 0.63 | % |
90+ Days delinquent and still accruing | | 0.22 | % | 0.29 | % | 0.40 | % | 0.47 | % | 0.48 | % |
Total accruing delinquent loans | | 0.73 | % | 0.71 | % | 1.10 | % | 1.08 | % | 1.11 | % |
Non-accruing loans | | 0.66 | % | 0.70 | % | 0.69 | % | 0.70 | % | 0.64 | % |
Total delinquent and non-accruing loans | | 1.39 | % | 1.41 | % | 1.79 | % | 1.78 | % | 1.75 | % |
F-5
BERKSHIRE HILLS BANCORP, INC.
SELECTED FINANCIAL HIGHLIGHTS - (F-6)
| | At or for the Quarters Ended | |
| | Dec. 31, | | Sept. 30, | | June 30, | | Mar. 31, | | Dec. 31, | |
| | 2013 | | 2013 | | 2013 | | 2013 | | 2012 | |
PER SHARE DATA | | | | | | | | | | | |
Core earnings, diluted | | $ | 0.40 | | $ | 0.43 | | $ | 0.48 | | $ | 0.54 | | $ | 0.54 | |
Net earnings, diluted | | 0.42 | | 0.33 | | 0.48 | | 0.42 | | 0.38 | |
Tangible book value | | 16.27 | | 16.08 | | 15.96 | | 15.87 | | 15.63 | |
Total book value | | 27.08 | | 26.98 | | 26.82 | | 26.68 | | 26.53 | |
Market price at period end | | 27.27 | | 25.11 | | 27.76 | | 25.54 | | 23.86 | |
Dividends | | 0.18 | | 0.18 | | 0.18 | | 0.18 | | 0.18 | |
| | | | | | | | | | | |
PERFORMANCE RATIOS | | | | | | | | | | | |
Core return on assets | | 0.73 | % | 0.81 | % | 0.92 | % | 1.03 | % | 1.02 | % |
Return on assets | | 0.77 | | 0.61 | | 0.93 | | 0.80 | | 0.72 | |
Core return on equity | | 5.87 | | 6.29 | | 7.13 | | 8.10 | | 8.32 | |
Core return on tangible equity | | 10.47 | | 11.18 | | 12.84 | | 14.57 | | 15.24 | |
Return on equity | | 6.18 | | 4.74 | | 7.21 | | 6.28 | | 5.86 | |
Net interest margin, fully taxable equivalent | | 3.26 | | 3.93 | | 3.63 | | 3.73 | | 3.67 | |
Fee income/Net interest and fee income | | 21.78 | | 19.23 | | 25.48 | | 25.63 | | 27.35 | |
Efficiency ratio | | 63.21 | | 60.98 | | 63.05 | | 57.14 | | 59.68 | |
| | | | | | | | | | | |
GROWTH | | | | | | | | | | | |
Total commercial loans, year-to-date (annualized) | | 5 | % | 1 | % | (2 | )% | 0 | % | 29 | % |
Total loans, year-to-date (annualized) | | 5 | | 1 | | (6 | ) | (10 | ) | 35 | |
Total deposits, year-to-date (annualized) | | (6 | ) | (7 | ) | (14 | ) | 0 | | 30 | |
Total net revenues, year-to-date, compared to prior year | | 15 | | 24 | | 28 | | 39 | | 39 | |
Earnings per share, year-to-date, compared to prior year | | 11 | | 11 | | 40 | | 50 | | 62 | |
Core earnings per share, year-to-date, compared to prior year | | (6 | ) | 3 | | 11 | | 20 | | 29 | |
| | | | | | | | | | | |
FINANCIAL DATA (In millions) | | | | | | | | | | | |
Total assets | | $ | 5,673 | | $ | 5,450 | | $ | 5,224 | | $ | 5,245 | | $ | 5,297 | |
Total earning assets | | 5,085 | | 4,856 | | 4,629 | | 4,646 | | 4,683 | |
Total loans | | 4,181 | | 4,024 | | 3,871 | | 3,889 | | 3,989 | |
Allowance for loan losses | | 33 | | 33 | | 33 | | 33 | | 33 | |
Total intangible assets | | 271 | | 272 | | 272 | | 273 | | 274 | |
Total deposits | | 3,849 | | 3,882 | | 3,815 | | 4,101 | | 4,100 | |
Total stockholders’ equity | | 678 | | 673 | | 673 | | 674 | | 667 | |
Total core income | | 10.0 | | 10.7 | | 11.9 | | 13.5 | | 13.2 | |
Total net income | | 10.5 | | 8.1 | | 12.0 | | 10.5 | | 9.3 | |
| | | | | | | | | | | |
ASSET QUALITY RATIOS | | | | | | | | | | | |
Net charge-offs (current quarter annualized)/average loans | | 0.31 | % | 0.32 | % | 0.27 | % | 0.23 | % | 0.28 | % |
Allowance for loan losses/total loans | | 0.80 | | 0.83 | | 0.86 | | 0.86 | | 0.83 | |
| | | | | | | | | | | |
CAPITAL RATIOS | | | | | | | | | | | |
Stockholders’ equity to total assets | | 11.95 | % | 12.35 | % | 12.88 | % | 12.85 | % | 12.60 | % |
Tangible stockholders’ equity to tangible assets | | 7.54 | | 7.74 | | 8.10 | | 8.06 | | 7.82 | |
(1) Reconciliation of Non-GAAP financial measures, including all references to core and tangible amounts, appear on pages F-9 and F-10.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.
F-6
BERKSHIRE HILLS BANCORP, INC.
AVERAGE BALANCES - (F-7)
| | Quarters Ended | |
| | Dec. 31, | | Sept. 30, | | June 30, | | Mar. 31, | | Dec. 31, | |
(In thousands) | | 2013 | | 2013 | | 2013 | | 2013 | | 2012 | |
Assets | | | | | | | | | | | |
Loans: | | | | | | | | | | | |
Residential mortgages | | $ | 1,330,674 | | $ | 1,247,661 | | $ | 1,218,192 | | $ | 1,290,989 | | $ | 1,340,375 | |
Commercial mortgages | | 1,381,628 | | 1,353,923 | | 1,381,755 | | 1,406,628 | | 1,404,515 | |
Commercial business loans | | 673,292 | | 647,939 | | 627,591 | | 601,695 | | 580,436 | |
Consumer loans | | 687,540 | | 651,565 | | 634,715 | | 644,674 | | 598,802 | |
Total loans | | 4,073,134 | | 3,901,088 | | 3,862,253 | | 3,943,986 | | 3,924,128 | |
Securities | | 813,417 | | 735,307 | | 655,396 | | 591,304 | | 572,268 | |
Short-term investments and loans held for sale | | 35,438 | | 60,820 | | 90,680 | | 98,160 | | 126,378 | |
Total earning assets | | 4,921,989 | | 4,697,215 | | 4,608,329 | | 4,633,450 | | 4,622,774 | |
Goodwill and other intangible assets | | 271,147 | | 271,670 | | 272,421 | | 273,428 | | 267,588 | |
Other assets | | 305,617 | | 317,722 | | 317,856 | | 333,485 | | 312,665 | |
Total assets | | $ | 5,498,753 | | $ | 5,286,607 | | $ | 5,198,606 | | $ | 5,240,363 | | $ | 5,203,027 | |
| | | | | | | | | | | |
Liabilities and stockholders’ equity | | | | | | | | | | | |
Deposits: | | | | | | | | | | | |
NOW | | $ | 348,600 | | $ | 345,682 | | $ | 358,255 | | $ | 368,392 | | $ | 355,366 | |
Money market | | 1,392,570 | | 1,329,591 | | 1,358,590 | | 1,477,497 | | 1,404,113 | |
Savings | | 435,766 | | 442,408 | | 449,296 | | 441,547 | | 422,447 | |
Time | | 1,044,850 | | 1,064,199 | | 1,087,357 | | 1,148,345 | | 1,161,175 | |
Total interest-bearing deposits | | 3,221,786 | | 3,181,880 | | 3,253,498 | | 3,435,781 | | 3,343,101 | |
Borrowings and notes | | 857,848 | | 708,798 | | 574,822 | | 423,739 | | 519,831 | |
Total interest-bearing liabilities | | 4,079,634 | | 3,890,678 | | 3,828,320 | | 3,859,520 | | 3,862,932 | |
Non-interest-bearing demand deposits | | 681,368 | | 658,568 | | 636,469 | | 645,923 | | 635,044 | |
Other liabilities | | 56,261 | | 52,874 | | 65,568 | | 68,509 | | 68,475 | |
Total liabilities | | 4,817,263 | | 4,602,120 | | 4,530,357 | | 4,573,952 | | 4,566,451 | |
| | | | | | | | | | | |
Total stockholders’ equity | | 681,490 | | 684,487 | | 668,249 | | 666,411 | | 636,576 | |
| | | | | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 5,498,753 | | $ | 5,286,607 | | $ | 5,198,606 | | $ | 5,240,363 | | $ | 5,203,027 | |
| | | | | | | | | | | |
Supplementary data | | | | | | | | | | | |
Total non-maturity deposits | | $ | 2,858,304 | | $ | 2,776,249 | | $ | 2,802,610 | | $ | 2,933,359 | | $ | 2,816,970 | |
Total deposits | | 3,903,154 | | 3,840,448 | | 3,889,967 | | 4,081,704 | | 3,978,145 | |
Fully taxable equivalent income adjustment | | 639 | | 652 | | 644 | | 629 | | 667 | |
Total average tangible equity | | 410,343 | | 412,817 | | 395,828 | | 392,983 | | 368,988 | |
(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.
F-7
BERKSHIRE HILLS BANCORP, INC.
AVERAGE YIELDS (Fully Taxable Equivalent - Annualized) - (F-8)
| | Quarters Ended | |
| | Dec. 31, | | Sept. 30, | | June 30, | | Mar. 31, | | Dec. 31, | |
| | 2013 | | 2013 | | 2013 | | 2013 | | 2012 | |
Earning assets | | | | | | | | | | | |
Loans: | | | | | | | | | | | |
Residential mortgages | | 3.98 | % | 3.99 | % | 4.19 | % | 4.04 | % | 4.00 | % |
Commercial mortgages | | 4.73 | | 5.80 | | 5.27 | | 5.45 | | 5.78 | |
Commercial business loans | | 3.91 | | 6.09 | | 4.04 | | 4.40 | | 4.09 | |
Consumer loans | | 4.01 | | 4.39 | | 4.78 | | 4.94 | | 4.56 | |
Total loans | | 4.24 | | 5.02 | | 4.67 | | 4.75 | | 4.73 | |
Securities | | 2.80 | | 2.77 | | 3.00 | | 3.04 | | 3.17 | |
Short-term investments and loans held for sale | | 1.92 | | 4.05 | | 2.02 | | 1.83 | | 2.86 | |
Total earning assets | | 3.97 | | 4.66 | | 4.38 | | 4.51 | | 4.49 | |
| | | | | | | | | | | |
Funding liabilities | | | | | | | | | | | |
Deposits: | | | | | | | | | | | |
NOW | | 0.18 | | 0.18 | | 0.26 | | 0.29 | | 0.35 | |
Money market | | 0.44 | | 0.44 | | 0.39 | | 0.39 | | 0.43 | |
Savings | | 0.16 | | 0.16 | | 0.17 | | 0.18 | | 0.20 | |
Time | | 1.25 | | 1.29 | | 1.23 | | 1.23 | | 1.31 | |
Total interest-bearing deposits | | 0.64 | | 0.66 | | 0.62 | | 0.63 | | 0.70 | |
Borrowings and notes | | 1.69 | | 1.88 | | 2.47 | | 3.43 | | 2.80 | |
Total interest-bearing liabilities | | 0.86 | | 0.88 | | 0.90 | | 0.94 | | 0.98 | |
| | | | | | | | | | | |
Net interest spread | | 3.11 | | 3.78 | | 3.48 | | 3.57 | | 3.51 | |
Net interest margin | | 3.26 | | 3.93 | | 3.63 | | 3.73 | | 3.67 | |
| | | | | | | | | | | |
Cost of funds | | 0.73 | | 0.75 | | 0.77 | | 0.81 | | 0.84 | |
Cost of deposits | | 0.53 | | 0.55 | | 0.52 | | 0.53 | | 0.59 | |
(1) Cost of funds includes all deposits and borrowings.
F-8
BERKSHIRE HILLS BANCORP, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES - (F-9)
| | | | At or for the Quarters Ended | |
| | | | Dec. 31, | | Sept. 30, | | June 30, | | Mar. 31, | | Dec. 31, | |
(Dollars in thousands) | | | | 2013 | | 2013 | | 2013 | | 2013 | | 2012 | |
Net income | | | | $ | 10,537 | | $ | 8,104 | | $ | 12,037 | | $ | 10,465 | | $ | 9,329 | |
Adj: Gain on sale of securities and other non-recurring gain, net | | | | (3,392 | ) | (361 | ) | (1,005 | ) | — | | (1,435 | ) |
Adj: Merger related expenses | | | | 932 | | 1,307 | | 775 | | 4,984 | | 5,852 | |
Adj: Restructuring expenses | | | | 1,361 | | 5,209 | | — | | — | | — | |
Adj: System conversion and other expenses | | | | 200 | | — | | — | | 80 | | 1,645 | |
Adj: Out of period interest revenue adjustment (5) | | | | — | | (2,222 | ) | — | | — | | — | |
Adj: Variable compensation adjustment (5) | | | | — | | 500 | | — | | — | | — | |
Adj: Income taxes | | | | 364 | | (1,788 | ) | 93 | | (2,042 | ) | (2,147 | ) |
Total core income | | (A) | | $ | 10,002 | | $ | 10,749 | | $ | 11,900 | | $ | 13,487 | | $ | 13,244 | |
| | | | | | | | | | | | | |
Total revenue | | | | $ | 55,556 | | $ | 57,983 | | $ | 56,710 | | $ | 56,735 | | $ | 59,618 | |
Adj: Gain on sale of securities and other non-recurring gain, net | | | | (3,392 | ) | (361 | ) | (1,005 | ) | — | | (1,435 | ) |
Adj: Out of period interest revenue adjustment | | | | — | | (2,222 | ) | — | | — | | — | |
Total core revenue | | | | $ | 52,164 | | $ | 55,400 | | $ | 55,705 | | $ | 56,735 | | $ | 58,183 | |
| | | | | | | | | | | | | |
Total non-interest expense | | | | $ | 37,157 | | $ | 42,784 | | $ | 37,935 | | $ | 39,483 | | $ | 44,266 | |
Less: Total non-core expense (see above) | | | | (2,493 | ) | (6,516 | ) | (775 | ) | (5,064 | ) | (7,497 | ) |
Adj: Variable compensation adjustment (5) | | | | — | | (500 | ) | — | | — | | — | |
Core non-interest expense | | | | $ | 34,664 | | $ | 35,768 | | $ | 37,160 | | $ | 34,419 | | $ | 36,769 | |
| | | | | | | | | | | | | |
(Dollars in millions, except per share data) | | | | | | | | | | | | | |
Total average assets | | (B) | | $ | 5,499 | | $ | 5,287 | | $ | 5,199 | | $ | 5,240 | | $ | 5,203 | |
Total average stockholders’ equity | | (C) | | 681 | | 684 | | 668 | | 666 | | 637 | |
Total average tangible stockholders’ equity | | (D) | | 410 | | 413 | | 396 | | 393 | | 369 | |
| | | | | | | | | | | | | |
Total stockholders’ equity, period-end | | | | 678 | | 673 | | 673 | | 674 | | 667 | |
Less: Intangible assets, period-end | | | | (271 | ) | (272 | ) | (272 | ) | (273 | ) | (274 | ) |
Total tangible stockholders’ equity, period-end | | (E) | | $ | 407 | | $ | 401 | | $ | 401 | | $ | 401 | | $ | 393 | |
| | | | | | | | | | | | | |
Total shares outstanding, period-end (thousands) | | (F) | | 25,036 | | 24,952 | | 25,096 | | 25,254 | | 25,148 | |
Average diluted shares outstanding (thousands) | | (G) | | 24,857 | | 24,873 | | 24,956 | | 25,136 | | 24,396 | |
| | | | | | | | | | | | | |
Core earnings per share, diluted | | (A/G) | | $ | 0.40 | | $ | 0.43 | | $ | 0.48 | | $ | 0.54 | | $ | 0.54 | |
Tangible book value per share, period-end | | (E/F) | | $ | 16.27 | | $ | 16.08 | | $ | 15.96 | | $ | 15.87 | | $ | 15.63 | |
| | | | | | | | | | | | | |
Core return (annualized) on assets | | (A/B) | | 0.73 | % | 0.81 | % | 0.92 | % | 1.03 | % | 1.02 | % |
Core return (annualized) on equity | | (A/C) | | 5.87 | | 6.29 | | 7.13 | | 8.10 | | 8.32 | |
Core return (annualized) on tangible equity (4) | | (A/D) | | 10.47 | | 11.18 | | 12.84 | | 14.57 | | 15.24 | |
Efficiency ratio (1) | | | | 63.21 | | 60.98 | | 63.05 | | 57.14 | | 59.68 | |
| | | | | | | | | | | | | |
Supplementary data | | | | | | | | | | | | | |
Tax credit benefit of tax shelter investments | | | | $ | 80 | | $ | 458 | | $ | 458 | | $ | 458 | | $ | 483 | |
Intangible amortization | | | | $ | (1,239 | ) | $ | (1,307 | ) | $ | (1,345 | ) | $ | (1,377 | ) | $ | (1,357 | ) |
(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, which is used widely in the banking industry, 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) | In the third quarter of 2013, additional revenue was recorded following an out-of-period adjustment. Based on this additional revenue variable compensation was also adjusted accordingly in the third quarter. |
F-9
BERKSHIRE HILLS BANCORP, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES - (F-10)
| | | | At or for the Years Ended | |
| | | | December 31, | | December 31, | |
(Dollars in thousands) | | | | 2013 | | 2012 | |
Net income | | | | $ | 41,143 | | $ | 33,188 | |
Adj: Gain on sale of securities and other non-recurring gain, net | | | | (4,758 | ) | (1,485 | ) |
Adj: Merger related expenses | | | | 7,998 | | 12,509 | |
Adj: Restructuring expenses | | | | 6,570 | | — | |
Adj: System conversion and other expenses | | | | 280 | | 6,147 | |
Adj: Out of period interest revenue adjustment (5) | | | | (1,287 | ) | — | |
Adj: Variable compensation adjustment (5) | | | | 500 | | — | |
Adj: Income taxes | | | | (3,750 | ) | (6,114 | ) |
Total core income | | (A) | | $ | 46,696 | | $ | 44,245 | |
| | | | | | | |
Total revenue | | | | $ | 226,984 | | $ | 197,514 | |
Adj: Gain on sale of securities and other non-recurring gain, net | | | | (4,758 | ) | (1,485 | ) |
Adj: Out of period interest revenue adjustment | | | | (1,287 | ) | — | |
Total core revenue | | | | $ | 220,939 | | $ | 196,029 | |
| | | | | | | |
Total non-interest expense | | | | $ | 157,359 | | $ | 141,136 | |
Less: Total non-core expense (see above) | | | | (14,848 | ) | (18,656 | ) |
Adj: Variable compensation adjustment (5) | | | | (500 | ) | — | |
Core non-interest expense | | | | $ | 142,011 | | $ | 122,480 | |
| | | | | | | |
(Dollars in millions, except per share data) | | | | | | | |
Total average assets | | (B) | | $ | 5,306 | | $ | 4,529 | |
Total average stockholders’ equity | | (C) | | 675 | | 587 | |
Total average tangible stockholders’ equity | | (D) | | 403 | | 344 | |
| | | | | | | |
Total stockholders’ equity, period-end | | | | 678 | | 667 | |
Less: Intangible assets, period-end | | | | (271 | ) | (274 | ) |
Total tangible stockholders’ equity, period-end | | (E) | | $ | 407 | | $ | 393 | |
| | | | | | | |
Total common shares outstanding, period-end (thousands) | | (F) | | 25,036 | | 25,148 | |
Average diluted common shares outstanding (thousands) | | (G) | | 24,965 | | 22,329 | |
| | | | | | | |
Core earnings per common share, diluted | | (A/G) | | $ | 1.87 | | $ | 1.98 | |
Tangible book value per common share, period-end | | (E/F) | | $ | 16.27 | | $ | 15.63 | |
| | | | | | | |
Core return (annualized) on assets | | (A/B) | | 0.88 | % | 0.98 | % |
Core return (annualized) on equity | | (A/C) | | 6.92 | | 7.54 | |
Core return (annualized) on tangible equity (4) | | (A/D) | | 12.37 | | 13.77 | |
Efficiency ratio (1) | | | | 60.79 | | 58.71 | |
| | | | | | | |
Supplementary data | | | | | | | |
GAAP return on assets | | | | 0.78 | % | 0.73 | % |
GAAP return on equity | | | | 6.09 | | 5.66 | |
Net interest margin | | | | 3.63 | | 3.62 | |
Tax credit benefit of tax shelter investments | | | | $ | 1,455 | | $ | 1,976 | |
Intangible amortization | | | | $ | (5,268 | ) | $ | (5,346 | ) |
(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, which is used widely in the banking industry, 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) | In the third quarter of 2013, additional revenue was recorded following an out-of-period adjustment. Based on this additional revenue variable compensation was also adjusted accordingly in the third quarter. |
(6) | Amounts related to discontinued operations have not been reclassified on the above schedule, although they are reclassified on the balance sheet and income statement. |
F-10
