Exhibit 99.1
Berkshire Hills Reports 16% Increase in Second Quarter Core EPS; Dividend Declared
PITTSFIELD, MA, July 22, 2015 — Berkshire Hills Bancorp, Inc. (NYSE: BHLB) reported $0.51 in core earnings per share in the second quarter of 2015, which was a 16% increase over second quarter results in the prior year. Profit growth reflects positive operating leverage from ongoing business development. Second quarter core EPS also increased at an 8% annualized rate compared to the prior quarter. GAAP EPS totaled $0.35 in the most recent quarter and reflected net non-core charges primarily related to the Hampden Bancorp acquisition, which was completed on April 17.
SECOND QUARTER FINANCIAL HIGHLIGHTS (comparisons are to prior quarter unless otherwise stated):
· 8% annualized increase in core earnings per share
· 13% increase in commercial loans (8% annualized organic)
· 13% increase in deposits (10% annualized organic)
· 14% increase in fee income
· 61.5% efficiency ratio
· 0.05% improvement in core ROA to 0.81% (0.56% GAAP ROA)
· 0.27% non-performing assets/assets
· 0.27% net loan charge-offs/average loans
CEO Michael Daly stated, “We had a good second quarter in organic business development across our regions and business lines. Commercial loan activity remained strong and deposits grew nicely after the slower winter quarter. Loan and deposit fee income also advanced and mortgage banking revenues remained elevated.”
“I’m proud of our recent achievements in building Berkshire’s franchise. The acquisition of Hampden Bancorp was completed in April and was followed by a seamless systems conversion in June. We announced an agreement to acquire Firestone Financial, a commercial specialty lender in Eastern Massachusetts, and have moved expeditiously towards our goal of completing this attractive acquisition in August.”
Mr. Daly concluded, “The benefit of our positive operating leverage was demonstrated by improvement in our profitability and efficiency metrics in the second quarter. Our net interest margin continued to improve and is expected to benefit from the planned
BHLB — Berkshire Hills Bancorp | www.berkshirebank.com |
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Firestone acquisition in the third quarter. In addition to improving bottom line results, we introduced Apple Pay™ convenience to our customers, and our employees participated in the biggest Week of Community Service in our Company’s history. We continue to benefit from heightened recognition in our markets as a preferred partner, combining local focus with strong regional resources.”
DIVIDEND DECLARED
The Board of Directors voted to declare a cash dividend of $0.19 per share to shareholders of record at the close of business on August 6, 2015, payable on August 20, 2015. This dividend equates to a 2.7% annualized yield based on the $27.92 average closing price of Berkshire’s common stock during the second quarter.
FINANCIAL CONDITION
Total assets increased by $948 million, or 14%, to $7.5 billion in the second quarter. This includes approximately $700 million added by the Hampden acquisition, which resulted in increases in most categories of assets and liabilities. Capital ratios improved and were enhanced by the equity issued for this acquisition. Liquidity ratios improved due to the strong deposit growth during the quarter.
Total commercial loans increased at an 8% organic annualized rate in the second quarter. This growth reflected ongoing strong originations offset in part by targeted reductions in lower margin accounts. Total loans grew at a 5% annualized organic rate including mortgage growth less the impact of an ongoing repositioning of the auto loan portfolio.
Asset quality metrics remained favorable. Annualized net loan charge-offs measured 0.27% of average loans for the quarter. Quarter-end non-performing assets decreased to 0.27% of total assets and accruing delinquent loans decreased to 0.41% of total loans. The loan loss allowance measured 0.70% of total loans. Pursuant to accounting principles, no loan loss allowance was required for the $493 million in acquired Hampden loans, which were 9% of midyear loans.
Annualized organic deposit growth measured 10% in the second quarter, rebounding from slower growth in the winter quarter. This growth included targeted promotions of money market and time deposits, along with higher brokered balances. The ratio of loans/deposits was 99% at midyear, compared to 101% at the start of the year. Total borrowings increased due to acquired Hampden borrowings, as well as approximately $100 million in additional borrowings which were subsequently repaid from excess cash on July 1, 2015.
Midyear tangible book value per share stood at $17.16, and was little changed from $17.19 at the start of the year despite the goodwill recorded for Hampden. Total book value per share measured $28.02 at midyear. The $9 million accumulated other comprehensive income outstanding at the beginning of the quarter was eliminated due to lower bond prices following the recent rise in long term interest rates. This noncash
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unrealized change reduced book value per share by approximately $0.32 but had no impact on the Company’s regulatory capital. The Company issued approximately 4.2 million net shares for the Hampden acquisition.
RESULTS OF OPERATIONS
Most categories of revenue and expense increased in the most recent quarter including the impact of the added operations of Hampden Bancorp as of April 17. Compared to the prior quarter, total core revenue increased by 16% and total core non-interest expense increased by 11%. The Hampden acquisition was not estimated to be accretive to core EPS until after most planned cost saves are achieved in the second half of the year. Including the benefit of the Hampden merger, profitability metrics improved, and Berkshire’s core ROA and core ROE increased compared to the prior quarter and to the second quarter of 2014. The core return on tangible equity increased to 12.3%. The second quarter efficiency ratio was 61.5% which was also an improvement over the prior quarter and year over year. The Company recorded $0.16 per share in net non-core charges in the most recent quarter; these charges were primarily related to Hampden merger costs. GAAP EPS totaled $0.35 per share including the impact of these charges, and the GAAP ROE was 5.1%.
Net interest income increased by $7.1 million, or 16%, compared to the prior quarter. The net interest margin improved to 3.30% from 3.18% for these periods. Net interest income included $2.2 million in purchased loan accretion primarily from recoveries on the collection of credit impaired loans in prior bank acquisitions. Excluding purchased loan accretion, the margin improved to 3.16% in the most recent quarter compared to 3.15% in the prior quarter, including the benefit of higher loan yields and lower deposit costs.
Fee income increased quarter over quarter by $1.9 million, or 14%. Fee income included strong organic growth in loan related fees, including revenues on interest rate swaps and seasoned loan sale gains. Mortgage banking revenues remained elevated due to improved market conditions this year and deposit related fees increased from the slower winter quarter. Non-core securities gains totaled $2.4 million primarily due to the income recognized on Hampden shares previously owned by Berkshire.
The loan loss provision totaled $4.2 million compared to $3.9 million in the prior quarter and exceeded net charge-offs in each of these quarters. Core non-interest expense totaled $45.3 million. At 2.52% of average assets, this ratio was little changed from the prior quarter. Core non-interest expense growth of $4.6 million included Hampden operating costs, along with higher costs related to the increase in impaired loan recoveries and loan related revenue. Expense growth also included additional investment in developing fee business lines to support future revenue growth. GAAP non-interest expense totaled $54.0 million in the second quarter compared to $45.1 million in the prior quarter, including $8.7 million and $4.4 million in non-core expenses in the two periods, respectively. Total full time equivalent staff increased by 6% to 1,153 including the Hampden team. With its combined strategies of revenue growth and expense
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management, Berkshire operated with an improved efficiency ratio measuring 61.5% in the most recent quarter. The Company had 93 ongoing branches as of midyear and in 2015 has consolidated seven branches and entered an agreement to sell its Tennessee branch in the second half of the year.
Berkshire’s income tax rate on core income was 17% in the most recent quarter, compared to 8% in the prior quarter. This includes the impact of the higher income from the Hampden operations, and the lower proportional benefit of tax-advantaged investments. Berkshire’s tax rate on GAAP income was 10% in the most recent quarter and reflected the tax benefit related to non-core Hampden merger related charges.
CONFERENCE CALL
Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Thursday, July 23, 2015 to discuss the results for the quarter and provide guidance about expected future results. Participants should dial-in to the call 10-15 minutes before it begins. Information about the conference call follows:
Live Dial-in: | 888-317-6003; access number: 6453365 |
Webcast: | ir.berkshirebank.com |
Replay: | 877-344-7529; access number: 10068292 |
A telephone replay of the call will be available through Friday, July 31, 2015. The webcast will be available on Berkshire’s website for an extended period of time.
BACKGROUND
Berkshire Hills Bancorp is the parent of Berkshire Bank — America’s Most Exciting Bank®. Berkshire has $7.5 billion in assets and 93 ongoing full-service branch offices in Massachusetts, New York, Connecticut, and Vermont providing personal and business banking, insurance, and wealth management services. Berkshire has a pending agreement to acquire Firestone Financial Corp., a commercial specialty finance company with $190 million in assets, located in Needham, Massachusetts.
FORWARD LOOKING STATEMENTS
This document contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. There are several factors that could cause actual results to differ significantly from expectations described in the forward-looking statements. For a discussion of such factors, please see Berkshire’s most recent reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission and available on the SEC’s website at www.sec.gov. Berkshire does not undertake any obligation to update forward-looking statements.
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ADDITIONAL INFORMATION FOR STOCKHOLDERS
In connection with the proposed merger with Firestone Financial Corp., Berkshire has filed with the Securities and Exchange Commission (“SEC”) a Registration Statement on Form S-4 that includes a Proxy Statement of Firestone and a Prospectus of Berkshire, as well as other relevant documents concerning the proposed merger. Investors and stockholders are urged to read the Registration Statement and the Proxy Statement/Prospectus regarding the proposed merger and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information. A free copy of the Registration Statement and Proxy Statement/Prospectus, as well as other filings containing information about Berkshire and Firestone, when they become available, may be obtained at the SEC’s Internet site (www.sec.gov). Copies of the Registration Statement and Proxy Statement/Prospectus and the filings that will be incorporated by reference therein may also be obtained, free of charge, from Berkshire’s website at ir.berkshirebank.com or by contacting Berkshire Investor Relations at 413-236-3149.
PARTICIPANTS IN SOLICITATION
Berkshire and Firestone and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of Firestone in connection with the proposed merger. Information about the directors and executive officers of Berkshire is set forth in the proxy statement for Berkshire’s 2015 annual meeting of stockholders, as filed with the SEC on the Schedule 14A on April 1, 2015; in the Form 8-K filed April 28, 2015, and in the Form 8-K filed on May 7, 2015. Information about the directors and executive officers of Firestone is set forth in the Proxy Statement/Prospectus filed with the SEC by Berkshire on Form S-4/A on June 29, 2015. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction and a description of their direct and indirect interests, by security holdings or otherwise, may be obtained by reading other relevant documents regarding the proposed merger filed with the SEC, as they become available. Free copies of these documents may be obtained as described in the preceding paragraph.
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
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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 an adjustment for income tax expense. This adjustment is determined as the difference between the GAAP tax rate and the effective tax rate applicable to core income. The efficiency ratio is adjusted for non-core revenue and expense items and for tax preference items. The Company also calculates measures related to tangible equity, which adjust equity (and assets where applicable) to exclude intangible assets due to the importance of these measures to the investment community. 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 related systems conversions costs. Restructuring costs primarily consist of costs and losses associated with the disposition of assets. In the most recent quarter, the Company reported organic growth of loans and deposits, which excluded the balances of accounts acquired in the Hampden acquisition.
CONTACTS
Investor Relations Contact
Allison O’Rourke; Senior Vice President, Investor Relations Officer; 413-236-3149
Media Contact
Elizabeth Mach; Vice President, Marketing Officer; 413-445-8390
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BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-1)
| | June 30, | | March 31, | | December 31, | |
(In thousands) | | 2015 | | 2015 | | 2014 | |
Assets | | | | | | | |
Cash and due from banks | | $ | 177,858 | | $ | 43,089 | | $ | 54,179 | |
Short-term investments | | 27,660 | | 19,125 | | 17,575 | |
Total cash and short-term investments | | 205,518 | | 62,214 | | 71,754 | |
| | | | | | | |
Trading security | | 14,378 | | 14,970 | | 14,909 | |
Securities available for sale, at fair value | | 1,204,756 | | 1,099,656 | | 1,091,818 | |
Securities held to maturity, at amortized cost | | 86,994 | | 42,818 | | 43,347 | |
Federal Home Loan Bank stock and other restricted securities | | 73,212 | | 58,734 | | 55,720 | |
Total securities | | 1,379,340 | | 1,216,178 | | 1,205,794 | |
| | | | | | | |
Loans held for sale, at fair value | | 48,514 | | 29,305 | | 19,493 | |
| | | | | | | |
Residential mortgages | | 1,637,356 | | 1,473,239 | | 1,496,204 | |
Commercial real estate | | 1,907,237 | | 1,672,099 | | 1,611,567 | |
Commercial and industrial loans | | 921,190 | | 826,815 | | 804,366 | |
Consumer loans | | 818,831 | | 756,510 | | 768,463 | |
Total loans | | 5,284,614 | | 4,728,663 | | 4,680,600 | |
Less: Allowance for loan losses | | (37,197 | ) | (36,286 | ) | (35,662 | ) |
Net loans | | 5,247,417 | | 4,692,377 | | 4,644,938 | |
| | | | | | | |
Premises and equipment, net | | 87,519 | | 85,053 | | 87,279 | |
Other real estate owned | | 674 | | 1,444 | | 2,049 | |
Goodwill | | 308,043 | | 264,742 | | 264,742 | |
Other intangible assets | | 12,473 | | 10,627 | | 11,528 | |
Cash surrender value of bank-owned life insurance | | 123,536 | | 105,302 | | 104,588 | |
Deferred tax asset, net | | 39,565 | | 26,828 | | 28,776 | |
Other assets | | 66,148 | | 77,169 | | 61,090 | |
Total assets (1) | | $ | 7,518,747 | | $ | 6,571,239 | | $ | 6,502,031 | |
| | | | | | | |
Liabilities and stockholders’ equity | | | | | | | |
Demand deposits | | $ | 1,012,003 | | $ | 892,225 | | $ | 869,302 | |
NOW deposits | | 458,570 | | 436,458 | | 426,108 | |
Money market deposits | | 1,477,770 | | 1,372,924 | | 1,407,179 | |
Savings deposits | | 621,909 | | 512,607 | | 496,344 | |
Time deposits | | 1,751,924 | | 1,505,469 | | 1,455,746 | |
Total deposits | | 5,322,176 | | 4,719,683 | | 4,654,679 | |
| | | | | | | |
Senior borrowings | | 1,176,484 | | 956,118 | | 962,576 | |
Subordinated borrowings | | 89,782 | | 89,765 | | 89,747 | |
Total borrowings | | 1,266,266 | | 1,045,883 | | 1,052,323 | |
| | | | | | | |
Other liabilities | | 103,154 | | 89,443 | | 85,742 | |
Total liabilities | | 6,691,596 | | 5,855,009 | | 5,792,744 | |
| | | | | | | |
Total stockholders’ equity | | 827,151 | | 716,230 | | 709,287 | |
Total liabilities and stockholders’ equity | | $ | 7,518,747 | | $ | 6,571,239 | | $ | 6,502,031 | |
| | | | | | | |
Net shares outstanding | | 29,521 | | 25,253 | | 25,183 | |
(1) The Company acquired Hampden Bancorp, Inc. (“Hampden”) on April 17, 2015 with total assets of $0.7 billion.
F-1
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED - (F-2)
LOAN ANALYSIS
| | | | | | | | | | Organic Annualized Growth % | |
(in millions) | | June 30,
2015
Balance | | Acquired
Hampden
Balance | | March 31,
2015
Balance | | Dec. 31,
2014
Balance | | Quarter ended
June 30, 2015 | | Year to date | |
| | | | | | | | | | | | | |
Total residential mortgages | | $ | 1,638 | | $ | 130 | | $ | 1,473 | | $ | 1,496 | | 10 | % | 2 | % |
| | | | | | | | | | | | | |
Commercial real estate | | 1,907 | | 240 | | 1,672 | | 1,612 | | (1 | ) | 7 | |
Commercial and industrial loans | | 921 | | 41 | | 827 | | 804 | | 26 | | 19 | |
Total commercial loans | | 2,828 | | 281 | | 2,499 | | 2,416 | | 8 | | 11 | |
| | | | | | | | | | | | | |
Home equity | | 351 | | 35 | | 318 | | 319 | | (1 | ) | (1 | ) |
Auto and other | | 468 | | 47 | | 439 | | 450 | | (17 | ) | (13 | ) |
Total consumer loans | | 819 | | 82 | | 757 | | 769 | | (10 | ) | (8 | ) |
Total loans | | $ | 5,285 | | $ | 493 | | $ | 4,729 | | $ | 4,681 | | 5 | % | 5 | % |
DEPOSIT ANALYSIS
| | | | | | | | | | Organic Annualized Growth % | |
(in millions) | | June 30,
2015
Balance | | Acquired
Hampden
Balance | | March 31,
2015
Balance | | Dec. 31,
2014
Balance | | Quarter ended
June 30, 2015 | | Year to date | |
Demand | | $ | 1,012 | | $ | 97 | | $ | 892 | | $ | 869 | | 10 | % | 11 | % |
NOW | | 458 | | 51 | | 436 | | 426 | | (27 | ) | (9 | ) |
Money market | | 1,478 | | 62 | | 1,373 | | 1,407 | | 13 | | 1 | |
Savings | | 622 | | 120 | | 513 | | 497 | | (8 | ) | 2 | |
Total non-maturity deposits | | 3,570 | | 330 | | 3,214 | | 3,199 | | 3 | | 3 | |
| | | | | | | | | | | | | |
Total time deposits | | 1,752 | | 154 | | 1,506 | | 1,456 | | 24 | | 20 | |
Total deposits | | $ | 5,322 | | $ | 484 | | $ | 4,720 | | $ | 4,655 | | 10 | % | 8 | % |
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BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED - (F-3)
| | Three Months Ended | | Six Months Ended | |
| | June, 30 | | June 30, | |
(In thousands, except per share data) | | 2015 | | 2014 | | 2015 | | 2014 | |
Interest and dividend income | | | | | | | | | |
Loans | | $ | 51,504 | | $ | 42,309 | | $ | 95,949 | | $ | 84,803 | |
Securities and other | | 8,899 | | 8,866 | | 17,205 | | 16,167 | |
Total interest and dividend income | | 60,403 | | 51,175 | | 113,154 | | 100,970 | |
Interest expense | | | | | | | | | |
Deposits | | 5,292 | | 4,478 | | 10,241 | | 9,199 | |
Borrowings | | 2,474 | | 2,368 | | 4,783 | | 4,676 | |
Total interest expense | | 7,766 | | 6,846 | | 15,024 | | 13,875 | |
Net interest income | | 52,637 | | 44,329 | | 98,130 | | 87,095 | |
Non-interest income | | | | | | | | | |
Loan related income | | 2,783 | | 1,846 | | 4,066 | | 3,094 | |
Mortgage banking income | | 1,546 | | 691 | | 2,799 | | 1,063 | |
Deposit related fees | | 6,442 | | 6,610 | | 12,119 | | 12,049 | |
Insurance commissions and fees | | 2,486 | | 2,460 | | 5,453 | | 5,509 | |
Wealth management fees | | 2,397 | | 2,294 | | 5,000 | | 4,843 | |
Total fee income | | 15,654 | | 13,901 | | 29,437 | | 26,558 | |
Other | | (1,258 | ) | 402 | | (2,513 | ) | 926 | |
Securities gains, net | | 2,384 | | 203 | | 2,418 | | 237 | |
Loss on termination of hedges | | — | | — | | — | | (8,792 | ) |
Total non-interest income | | 16,780 | | 14,506 | | 29,342 | | 18,929 | |
Total net revenue | | 69,417 | | 58,835 | | 127,472 | | 106,024 | |
Provision for loan losses | | 4,204 | | 3,989 | | 8,055 | | 7,385 | |
Non-interest expense | | | | | | | | | |
Compensation and benefits | | 24,503 | | 20,279 | | 46,314 | | 40,138 | |
Occupancy and equipment | | 7,243 | | 6,656 | | 14,351 | | 13,470 | |
Technology and communications | | 4,090 | | 3,800 | | 7,683 | | 7,578 | |
Marketing and promotion | | 800 | | 621 | | 1,513 | | 1,142 | |
Professional services | | 1,375 | | 1,024 | | 2,647 | | 2,176 | |
FDIC premiums and assessments | | 1,143 | | 1,029 | | 2,272 | | 2,038 | |
Other real estate owned and foreclosures | | 251 | | 33 | | 502 | | 556 | |
Amortization of intangible assets | | 934 | | 1,274 | | 1,835 | | 2,580 | |
Merger, restructuring and conversion expense (1) | | 8,711 | | 190 | | 13,132 | | 6,491 | |
Other | | 4,975 | | 4,357 | | 8,924 | | 8,454 | |
Total non-interest expense | | 54,025 | | 39,263 | | 99,173 | | 84,623 | |
| | | | | | | | | |
Income before income taxes | | 11,188 | | 15,583 | | 20,244 | | 14,016 | |
Income tax expense | | 1,144 | | 4,119 | | 1,441 | | 3,658 | |
Net income | | $ | 10,044 | | $ | 11,464 | | $ | 18,803 | | $ | 10,358 | |
| | | | | | | | | |
Earnings per share: | | | | | | | | | |
Basic | | $ | 0.35 | | $ | 0.46 | | $ | 0.71 | | $ | 0.42 | |
Diluted | | $ | 0.35 | | $ | 0.46 | | $ | 0.70 | | $ | 0.42 | |
| | | | | | | | | |
Weighted average shares outstanding: | | | | | | | | | |
Basic | | 28,301 | | 24,715 | | 26,557 | | 24,707 | |
Diluted | | 28,461 | | 24,809 | | 26,713 | | 24,821 | |
(1) Merger, restructuring and conversion expenses include Hampden acquisition and branch acquisition related expenses and restructuring expenses.
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BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED - (F-4)
| | Quarters Ended | |
| | June 30, | | March 31, | | Dec. 31, | | Sept. 30, | | June 30, | |
(In thousands, except per share data) | | 2015 | | 2015 | | 2014 | | 2014 | | 2014 | |
Interest and dividend income | | | | | | | | | | | |
Loans | | $ | 51,504 | | $ | 44,445 | | $ | 45,706 | | $ | 43,958 | | $ | 42,309 | |
Securities and other | | 8,899 | | 8,306 | | 8,310 | | 8,098 | | 8,866 | |
Total interest and dividend income | | 60,403 | | 52,751 | | 54,016 | | 52,056 | | 51,175 | |
Interest expense | | | | | | | | | | | |
Deposits | | 5,292 | | 4,949 | | 5,109 | | 4,877 | | 4,478 | |
Borrowings | | 2,474 | | 2,309 | | 2,260 | | 2,230 | | 2,368 | |
Total interest expense | | 7,766 | | 7,258 | | 7,369 | | 7,107 | | 6,846 | |
Net interest income | | 52,637 | | 45,493 | | 46,647 | | 44,949 | | 44,329 | |
Non-interest income | | | | | | | | | | | |
Loan related income | | 2,783 | | 1,283 | | 1,763 | | 1,471 | | 1,846 | |
Mortgage banking income | | 1,546 | | 1,253 | | 504 | | 994 | | 691 | |
Deposit related fees | | 6,442 | | 5,677 | | 6,137 | | 6,449 | | 6,610 | |
Insurance commissions and fees | | 2,486 | | 2,967 | | 2,223 | | 2,632 | | 2,460 | |
Wealth management fees | | 2,397 | | 2,603 | | 2,373 | | 2,330 | | 2,294 | |
Total fee income | | 15,654 | | 13,783 | | 13,000 | | 13,876 | | 13,901 | |
Other | | (1,258 | ) | (1,255 | ) | 1,200 | | 520 | | 402 | |
Securities gains, net | | 2,384 | | 34 | | — | | 245 | | 203 | |
Loss on termination of hedges | | — | | — | | — | | — | | — | |
Total non-interest income | | 16,780 | | 12,562 | | 14,200 | | 14,641 | | 14,506 | |
Total net revenue | | 69,417 | | 58,055 | | 60,847 | | 59,590 | | 58,835 | |
Provision for loan losses | | 4,204 | | 3,851 | | 3,898 | | 3,685 | | 3,989 | |
Non-interest expense | | | | | | | | | | | |
Compensation and benefits | | 24,503 | | 21,811 | | 20,965 | | 20,665 | | 20,279 | |
Occupancy and equipment | | 7,243 | | 7,108 | | 6,655 | | 6,780 | | 6,656 | |
Technology and communications | | 4,090 | | 3,593 | | 3,702 | | 3,484 | | 3,800 | |
Marketing and promotion | | 800 | | 713 | | 771 | | 659 | | 621 | |
Professional services | | 1,375 | | 1,272 | | 1,205 | | 830 | | 1,024 | |
FDIC premiums and assessments | | 1,143 | | 1,129 | | 1,083 | | 1,163 | | 1,029 | |
Other real estate owned and foreclosures | | 251 | | 251 | | 232 | | 13 | | 33 | |
Amortization of intangible assets | | 934 | | 901 | | 996 | | 1,236 | | 1,274 | |
Merger, restructuring and conversion expense (1) | | 8,711 | | 4,421 | | 1,762 | | 238 | | 190 | |
Other | | 4,975 | | 3,949 | | 4,305 | | 4,619 | | 4,357 | |
Total non-interest expense | | 54,025 | | 45,148 | | 41,676 | | 39,687 | | 39,263 | |
| | | | | | | | | | | |
Income before income taxes | | 11,188 | | 9,056 | | 15,273 | | 16,218 | | 15,583 | |
Income tax expense | | 1,144 | | 297 | | 3,875 | | 4,230 | | 4,119 | |
Net income | | $ | 10,044 | | $ | 8,759 | | $ | 11,398 | | $ | 11,988 | | $ | 11,464 | |
| | | | | | | | | | | |
Earnings per share: | | | | | | | | | | | |
Basic | | $ | 0.35 | | $ | 0.35 | | $ | 0.46 | | $ | 0.48 | | $ | 0.46 | |
Diluted | | $ | 0.35 | | $ | 0.35 | | $ | 0.46 | | $ | 0.48 | | $ | 0.46 | |
| | | | | | | | | | | |
Weighted average shares outstanding: | | | | | | | | | | | |
Basic | | 28,301 | | 24,803 | | 24,758 | | 24,747 | | 24,715 | |
Diluted | | 28,461 | | 24,955 | | 24,912 | | 24,861 | | 24,809 | |
(1) See note on Page F-3
F-4
BERKSHIRE HILLS BANCORP, INC.
ASSET QUALITY ANALYSIS - UNAUDITED - (F-5)
| | At or for the Quarters Ended | |
| | June 30, | | March 31, | | Dec. 31, | | Sept. 30, | | June 30, | |
(in thousands) | | 2015 | | 2015 | | 2014 | | 2014 | | 2014 | |
NON-PERFORMING ASSETS | | | | | | | | | | | |
Non-accruing loans: | | | | | | | | | | | |
Residential mortgages | | $ | 4,234 | | $ | 4,153 | | $ | 3,908 | | $ | 4,810 | | $ | 5,295 | |
Commercial real estate | | 9,733 | | 13,516 | | 12,878 | | 12,192 | | 12,583 | |
Commercial and industrial loans | | 3,031 | | 1,308 | | 1,705 | | 2,225 | | 4,821 | |
Consumer loans | | 2,991 | | 3,032 | | 3,214 | | 3,660 | | 3,359 | |
Total non-accruing loans | | 19,989 | | 22,009 | | 21,705 | | 22,887 | | 26,058 | |
Other real estate owned | | 674 | | 1,444 | | 2,049 | | 4,854 | | 2,445 | |
Total non-performing assets | | $ | 20,663 | | $ | 23,453 | | $ | 23,754 | | $ | 27,741 | | $ | 28,503 | |
| | | | | | | | | | | |
Total non-accruing loans/total loans | | 0.38 | % | 0.47 | % | 0.46 | % | 0.50 | % | 0.59 | % |
Total non-performing assets/total assets | | 0.27 | % | 0.36 | % | 0.37 | % | 0.44 | % | 0.45 | % |
| | | | | | | | | | | |
PROVISION AND ALLOWANCE FOR LOAN LOSSES | | | | | | | | | | | |
Balance at beginning of period | | $ | 36,286 | | $ | 35,662 | | $ | 34,966 | | $ | 34,353 | | $ | 33,602 | |
Charged-off loans | | (4,176 | ) | (3,432 | ) | (3,660 | ) | (3,360 | ) | (3,516 | ) |
Recoveries on charged-off loans | | 883 | | 205 | | 458 | | 288 | | 278 | |
Net loans charged-off | | (3,293 | ) | (3,227 | ) | (3,202 | ) | (3,072 | ) | (3,238 | ) |
Provision for loan losses | | 4,204 | | 3,851 | | 3,898 | | 3,685 | | 3,989 | |
Balance at end of period | | $ | 37,197 | | $ | 36,286 | | $ | 35,662 | | $ | 34,966 | | $ | 34,353 | |
| | | | | | | | | | | |
Allowance for loan losses/total loans | | 0.70 | % | 0.77 | % | 0.76 | % | 0.77 | % | 0.77 | % |
Allowance for loan losses/non-accruing loans | | 186 | % | 165 | % | 164 | % | 153 | % | 132 | % |
| | | | | | | | | | | |
NET LOAN CHARGE-OFFS | | | | | | | | | | | |
Residential mortgages | | $ | (367 | ) | $ | (299 | ) | $ | (181 | ) | $ | (394 | ) | $ | (602 | ) |
Commercial real estate | | (2,461 | ) | (2,007 | ) | (1,810 | ) | (1,470 | ) | (1,028 | ) |
Commercial and industrial loans | | (124 | ) | (375 | ) | (540 | ) | (687 | ) | (1,341 | ) |
Home equity | | (174 | ) | (202 | ) | (240 | ) | (193 | ) | (51 | ) |
Auto and other consumer | | (167 | ) | (344 | ) | (431 | ) | (328 | ) | (216 | ) |
Total, net | | $ | (3,293 | ) | $ | (3,227 | ) | $ | (3,202 | ) | $ | (3,072 | ) | $ | (3,238 | ) |
| | | | | | | | | | | |
Net charge-offs (QTD annualized)/average loans | | 0.27 | % | 0.28 | % | 0.29 | % | 0.28 | % | 0.31 | % |
Net charge-offs (YTD annualized)/average loans | | 0.26 | % | 0.28 | % | 0.29 | % | 0.29 | % | 0.30 | % |
| | | | | | | | | | | |
DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS | | | | | | | | | | | |
30-89 Days delinquent | | 0.29 | % | 0.28 | % | 0.42 | % | 0.32 | % | 0.34 | % |
90+ Days delinquent and still accruing | | 0.12 | % | 0.15 | % | 0.10 | % | 0.12 | % | 0.21 | % |
Total accruing delinquent loans | | 0.41 | % | 0.43 | % | 0.52 | % | 0.44 | % | 0.55 | % |
Non-accruing loans | | 0.38 | % | 0.47 | % | 0.46 | % | 0.50 | % | 0.59 | % |
Total delinquent and non-accruing loans | | 0.79 | % | 0.90 | % | 0.98 | % | 0.94 | % | 1.14 | % |
F-5
BERKSHIRE HILLS BANCORP, INC.
SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED - (F-6)
| | At or for the Quarters Ended (1) | |
| | June 30, | | March 31, | | Dec. 31, | | Sept. 30, | | June 30, | |
| | 2015 | | 2015 | | 2014 | | 2014 | | 2014 | |
| | | | | | | | | | | |
PER SHARE DATA | | | | | | | | | | | |
Core earnings, diluted | | $ | 0.51 | | $ | 0.50 | | $ | 0.48 | | $ | 0.46 | | $ | 0.44 | |
Net earnings, diluted | | 0.35 | | 0.35 | | 0.46 | | 0.48 | | 0.46 | |
Tangible book value | | 17.16 | | 17.46 | | 17.19 | | 16.67 | | 16.40 | |
Total book value | | 28.02 | | 28.36 | | 28.17 | | 27.69 | | 27.49 | |
Market price at period end | | 28.48 | | 27.70 | | 26.66 | | 23.49 | | 23.22 | |
Dividends | | 0.19 | | 0.19 | | 0.18 | | 0.18 | | 0.18 | |
| | | | | | | | | | | |
PERFORMANCE RATIOS (2) | | | | | | | | | | | |
Core return on assets | | 0.81 | % | 0.76 | % | 0.75 | % | 0.73 | % | 0.71 | % |
Return on assets | | 0.56 | | 0.54 | | 0.71 | | 0.77 | | 0.75 | |
Core return on equity | | 7.32 | | 7.06 | | 6.89 | | 6.59 | | 6.32 | |
Core return on tangible equity | | 12.30 | | 12.14 | | 11.96 | | 11.76 | | 11.34 | |
Return on equity | | 5.05 | | 5.00 | | 6.52 | | 6.95 | | 6.64 | |
Net interest margin, fully taxable equivalent | | 3.30 | | 3.18 | | 3.23 | | 3.20 | | 3.26 | |
Fee income/Net interest and fee income | | 22.92 | | 23.25 | | 21.79 | | 23.59 | | 23.87 | |
Efficiency ratio | | 61.51 | | 63.27 | | 62.46 | | 62.89 | | 62.96 | |
| | | | | | | | | | | |
GROWTH | | | | | | | | | | | |
Total commercial loans, year-to-date (organic annualized) | | 11 | % | 14 | % | 15 | % | 14 | % | 19 | % |
Total loans, year-to-date (organic annualized) | | 5 | | 4 | | 12 | | 12 | | 13 | |
Total net revenues, year-to-date, compared to prior year | | 20 | | 23 | | — | | (3 | ) | (7 | ) |
Core earnings per share, year-to-date | | 17 | | 19 | | (4 | ) | (10 | ) | (15 | ) |
Earnings per share, year-to-date (4) | | 69 | | N/M | | (18 | ) | (27 | ) | (54 | ) |
| | | | | | | | | | | |
FINANCIAL DATA (In millions) | | | | | | | | | | | |
Total assets | | $ | 7,519 | | $ | 6,571 | | $ | 6,502 | | $ | 6,352 | | $ | 6,311 | |
Total earning assets | | 6,740 | | 5,993 | | 5,923 | | 5,765 | | 5,700 | |
Total investments | | 1,379 | | 1,216 | | 1,206 | | 1,171 | | 1,198 | |
Total loans | | 5,285 | | 4,729 | | 4,681 | | 4,553 | | 4,450 | |
Allowance for loan losses | | 37 | | 36 | | 36 | | 35 | | 34 | |
Total intangible assets | | 321 | | 275 | | 276 | | 277 | | 279 | |
Total deposits | | 5,322 | | 4,720 | | 4,655 | | 4,563 | | 4,479 | |
Total stockholders’ equity | | 827 | | 716 | | 709 | | 697 | | 690 | |
Total core income | | 14.6 | | 12.4 | | 12.0 | | 11.4 | | 10.9 | |
Total net income | | 10.0 | | 8.8 | | 11.4 | | 12.0 | | 11.5 | |
| | | | | | | | | | | |
ASSET QUALITY RATIOS | | | | | | | | | | | |
Net charge-offs (current quarter annualized)/average loans | | 0.27 | % | 0.28 | % | 0.29 | % | 0.28 | % | 0.31 | % |
Allowance for loan losses/total loans | | 0.70 | | 0.77 | | 0.78 | | 0.77 | | 0.77 | |
| | | | | | | | | | | |
CONDITION RATIOS | | | | | | | | | | | |
Stockholders’ equity to total assets | | 11.00 | % | 10.90 | % | 10.91 | % | 10.97 | % | 10.94 | % |
Tangible stockholders’ equity to tangible assets (3) | | 7.04 | | 7.00 | | 6.95 | | 6.91 | | 6.81 | |
Investments to total assets | | 18.35 | | 18.51 | | 18.54 | | 18.43 | | 18.99 | |
Loans/deposits | | 99 | | 100 | | 101 | | 100 | | 99 | |
(1) Reconciliation of Non-GAAP financial measures, including all references to core and tangible amounts, appear on pages F-9 and F-10.
(2) All performance ratios are annualized and are based on average balance sheet amounts, where applicable.
(3) Tangible assets are total assets less total intangible assets.
(4) N/M means not meaningful.
F-6
BERKSHIRE HILLS BANCORP, INC.
AVERAGE BALANCES - UNAUDITED - (F-7)
| | Quarters Ended | |
| | June 30, | | March 31, | | Dec. 31, | | Sept. 30, | | June 30, | |
(In thousands) | | 2015 | | 2015 | | 2014 | | 2014 | | 2014 | |
Assets | | | | | | | | | | | |
Loans: | | | | | | | | | | | |
Residential mortgages | | $ | 1,562,503 | | $ | 1,469,910 | | $ | 1,468,271 | | $ | 1,412,720 | | $ | 1,379,625 | |
Commercial real estate | | 1,889,306 | | 1,646,638 | | 1,611,343 | | 1,579,258 | | 1,488,462 | |
Commercial and industrial loans | | 886,297 | | 806,710 | | 733,750 | | 716,787 | | 703,798 | |
Consumer loans | | 821,933 | | 765,938 | | 782,584 | | 763,296 | | 729,654 | |
Total loans (1) (5) | | 5,160,039 | | 4,689,196 | | 4,595,948 | | 4,472,061 | | 4,301,539 | |
Securities (2) | | 1,301,918 | | 1,176,559 | | 1,190,182 | | 1,169,765 | | 1,225,646 | |
Short-term investments and loans held for sale | | 72,003 | | 55,652 | | 54,843 | | 39,496 | | 28,426 | |
Total earning assets | | 6,533,960 | | 5,921,407 | | 5,840,973 | | 5,681,322 | | 5,555,611 | |
Goodwill and other intangible assets | | 303,780 | | 275,732 | | 276,645 | | 277,775 | | 279,024 | |
Other assets | | 357,026 | | 300,264 | | 304,909 | | 305,698 | | 311,176 | |
Total assets | | $ | 7,194,766 | | $ | 6,497,403 | | $ | 6,422,527 | | $ | 6,264,795 | | $ | 6,145,811 | |
| | | | | | | | | | | |
Liabilities and stockholders’ equity | | | | | | | | | | | |
Deposits (4): | | | | | | | | | | | |
NOW | | $ | 460,378 | | $ | 423,474 | | $ | 415,806 | | $ | 417,802 | | $ | 425,824 | |
Money market | | 1,437,428 | | 1,408,777 | | 1,426,722 | | 1,405,454 | | 1,448,624 | |
Savings | | 606,231 | | 502,412 | | 479,988 | | 480,036 | | 481,790 | |
Time | | 1,558,350 | | 1,419,706 | | 1,425,865 | | 1,406,914 | | 1,152,651 | |
Total interest-bearing deposits | | 4,062,387 | | 3,754,369 | | 3,748,381 | | 3,710,206 | | 3,508,889 | |
Borrowings | | 1,287,319 | | 1,106,541 | | 1,053,884 | | 980,135 | | 1,113,431 | |
Total interest-bearing liabilities | | 5,349,706 | | 4,860,910 | | 4,802,265 | | 4,690,341 | | 4,622,320 | |
Non-interest-bearing demand deposits | | 974,160 | | 869,780 | | 863,795 | | 824,489 | | 779,775 | |
Other liabilities | | 75,487 | | 65,453 | | 56,805 | | 60,088 | | 52,712 | |
Total liabilities | | 6,399,353 | | 5,796,143 | | 5,722,865 | | 5,574,918 | | 5,454,807 | |
| | | | | | | | | | | |
Total stockholders’ equity | | 795,413 | | 701,260 | | 699,662 | | 689,877 | | 691,004 | |
| | | | | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 7,194,766 | | $ | 6,497,403 | | $ | 6,422,527 | | $ | 6,264,795 | | $ | 6,145,811 | |
| | | | | | | | | | | |
Supplementary data | | | | | | | | | | | |
Total non-maturity deposits (4) | | $ | 3,478,197 | | $ | 3,204,443 | | $ | 3,186,311 | | $ | 3,127,781 | | $ | 3,136,013 | |
Total deposits (4) | | 5,036,547 | | 4,624,149 | | 4,612,176 | | 4,534,695 | | 4,288,664 | |
Fully taxable equivalent income adjustment | | 1,068 | | 889 | | 887 | | 859 | | 852 | |
Total average tangible equity (3) | | 491,633 | | 425,528 | | 423,017 | | 412,102 | | 411,980 | |
|
__________________________ |
(1) | Total loans include non-accruing loans. |
(2) | Average balances for securities available-for-sale are based on amortized cost. |
(3) | Total average tangible equity results from the subtraction of average goodwill and other intangible assets from total average stockholders’ equity. |
(4) | The average balances of deposits include the deposits held for sale presented under other liabilities on the consolidated balance sheet. |
(5) | The average balances of loans include the loans associated with the Tennessee branch sale presented under loans held for sale on the consolidated balance sheet. |
| | | | | | | | | | | | | | | | | |
F-7
BERKSHIRE HILLS BANCORP, INC.
AVERAGE YIELDS (Fully Taxable Equivalent - Annualized) - UNAUDITED - (F-8)
| | Quarters Ended | |
| | June 30, | | March 31, | | Dec. 30, | | Sept. 30, | | June 30, | |
| | 2015 | | 2015 | | 2014 | | 2014 | | 2014 | |
| | | | | | | | | | | |
Earning assets | | | | | | | | | | | |
Loans: | | | | | | | | | | | |
Residential mortgages | | 4.08 | % | 3.94 | % | 3.88 | % | 3.86 | % | 3.99 | % |
Commercial real estate | | 4.46 | | 4.12 | | 4.18 | | 4.26 | | 4.20 | |
Commercial and industrial loans | | 3.64 | | 3.70 | | 4.22 | | 3.79 | | 3.82 | |
Consumer loans | | 3.24 | | 3.23 | | 3.35 | | 3.34 | | 3.49 | |
Total loans | | 4.02 | | 3.86 | | 3.96 | | 3.91 | | 3.96 | |
Securities | | 2.99 | | 3.10 | | 3.00 | | 2.98 | | 3.13 | |
Short-term investments and loans held for sale | | 1.13 | | 1.40 | | 1.37 | | 1.65 | | 1.40 | |
Total earning assets | | 3.77 | | 3.67 | | 3.73 | | 3.70 | | 3.76 | |
| | | | | | | | | | | |
Funding liabilities | | | | | | | | | | | |
Deposits: | | | | | | | | | | | |
NOW | | 0.15 | | 0.14 | | 0.15 | | 0.17 | | 0.15 | |
Money market | | 0.37 | | 0.40 | | 0.42 | | 0.37 | | 0.36 | |
Savings | | 0.17 | | 0.15 | | 0.14 | | 0.14 | | 0.16 | |
Time | | 0.91 | | 0.92 | | 0.91 | | 0.91 | | 0.98 | |
Total interest-bearing deposits | | 0.52 | | 0.53 | | 0.54 | | 0.52 | | 0.51 | |
Borrowings | | 0.77 | | 0.85 | | 0.85 | | 0.90 | | 0.85 | |
Total interest-bearing liabilities | | 0.58 | | 0.61 | | 0.61 | | 0.60 | | 0.59 | |
| | | | | | | | | | | |
Net interest spread | | 3.19 | | 3.06 | | 3.12 | | 3.10 | | 3.17 | |
Net interest margin | | 3.30 | | 3.18 | | 3.23 | | 3.20 | | 3.26 | |
| | | | | | | | | | | |
Cost of funds (1) | | 0.49 | | 0.51 | | 0.52 | | 0.51 | | 0.51 | |
Cost of deposits (2) | | 0.42 | | 0.43 | | 0.44 | | 0.43 | | 0.42 | |
(1) Cost of funds includes all deposits and borrowings.
(2) The average cost of deposits include the deposits held for sale.
F-8
BERKSHIRE HILLS BANCORP, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES - UNAUDITED - (F-9)
| | | | At or for the Quarters Ended | |
| | | | June 30, | | March 31, | | Dec. 31, | | Sept. 30, | | June 30, | |
(in thousands) | | | | 2015 | | 2015 | | 2014 | | 2014 | | 2014 | |
Net income | | | | $ | 10,044 | | $ | 8,759 | | $ | 11,398 | | $ | 11,988 | | $ | 11,464 | |
Adj: Securities gains | | | | (2,384 | ) | (34 | ) | — | | (245 | ) | (203 | ) |
Adj: Loss on termination of hedges | | | | — | | — | | — | | — | | — | |
Adj: Merger and acquisition expense | | | | 5,665 | | 3,275 | | 1,708 | | — | | 52 | |
Adj: Restructuring and conversion expense | | | | 3,046 | | 1,146 | | 54 | | 238 | | 138 | |
Adj: Income taxes | | | | (1,815 | ) | (772 | ) | (1,114 | ) | (612 | ) | (536 | ) |
Total core income | | (A) | | $ | 14,556 | | $ | 12,374 | | $ | 12,046 | | $ | 11,369 | | $ | 10,915 | |
| | | | | | | | | | | | | |
Total revenue | | | | $ | 69,417 | | $ | 58,055 | | $ | 60,847 | | $ | 59,590 | | $ | 58,835 | |
Adj: Securities gains | | | | (2,384 | ) | (34 | ) | — | | (245 | ) | (203 | ) |
Total core revenue | | (B) | | $ | 67,033 | | $ | 58,021 | | $ | 60,847 | | $ | 59,345 | | $ | 58,632 | |
| | | | | | | | | | | | | |
Total non-interest expense | | | | $ | 54,025 | | $ | 45,148 | | $ | 41,676 | | $ | 39,687 | | $ | 39,263 | |
Less: Total non-core expense (see above) | | | | (8,711 | ) | (4,421 | ) | (1,762 | ) | (238 | ) | (190 | ) |
Core non-interest expense | | (C) | | $ | 45,314 | | $ | 40,727 | | $ | 39,914 | | $ | 39,449 | | $ | 39,073 | |
(in millions, except per share data) | | | | | | | | | | | | | |
Total average assets | | (D) | | $ | 7,195 | | $ | 6,497 | | $ | 6,423 | | $ | 6,265 | | $ | 6,146 | |
Total average stockholders’ equity | | (E) | | 795 | | 701 | | 700 | | 690 | | 691 | |
Total average tangible stockholders’ equity | | (F) | | 492 | | 426 | | 423 | | 412 | | 412 | |
Total tangible stockholders’ equity, period-end (1) | | (G) | | 507 | | 441 | | 433 | | 420 | | 411 | |
| | | | | | | | | | | | | |
Total common shares outstanding, period-end (thousands) | | (H) | | 29,521 | | 25,253 | | 25,183 | | 25,173 | | 25,115 | |
Average diluted shares outstanding (thousands) | | (I) | | 28,461 | | 24,955 | | 24,912 | | 24,861 | | 24,809 | |
| | | | | | | | | | | | | |
Core earnings per share, diluted | | (A/I) | | $ | 0.51 | | $ | 0.50 | | $ | 0.48 | | $ | 0.46 | | $ | 0.44 | |
Tangible book value per share, period-end | | (G/H) | | $ | 17.16 | | $ | 17.46 | | $ | 17.19 | | $ | 16.67 | | $ | 16.40 | |
| | | | | | | | | | | | | |
Performance ratios (2) | | | | | | | | | | | | | |
Core return on assets | | (A/D) | | 0.81 | % | 0.76 | % | 0.75 | % | 0.73 | % | 0.71 | % |
Core return on equity | | (A/E) | | 7.32 | | 7.06 | | 6.89 | | 6.59 | | 6.32 | |
Core return on tangible equity (3) | | (A/F) | | 12.30 | | 12.14 | | 11.96 | | 11.76 | | 11.34 | |
Efficiency ratio | | (C-L)/(B+J+M) | | 61.51 | | 63.27 | | 62.46 | | 62.89 | | 62.96 | |
| | | | | | | | | | | | | |
Supplementary data (in thousands) | | | | | | | | | | | | | |
Tax benefit - tax-advantaged investments (4) | | (J) | | $ | 4,034 | | $ | 4,034 | | $ | 570 | | $ | 555 | | $ | 555 | |
Non-interest income charge - tax-advantaged investments (5) | | (K) | | (2,851 | ) | (2,851 | ) | (417 | ) | (417 | ) | (417 | ) |
Net income on tax-advantaged investments | | (J+K) | | 1,183 | | 1,183 | | 153 | | 138 | | 138 | |
Intangible amortization | | (L) | | 934 | | 901 | | 996 | | 1,236 | | 1,274 | |
Fully taxable equivalent income adjustment | | (M) | | 1,068 | | 889 | | 887 | | 859 | | 852 | |
(1) Total tangible stockholders’ equity is computed by taking total stockholders’ equity less the intangible assets at period-end.
(2) Ratios are annualized and based on average balance sheet amounts, where applicable. Quarterly data may not sum to year-to-date data due to rounding.
(3) Core return on tangible equity is computed by dividing the total core income adjusted for the tax-affected amortization of intangible assets, assuming a 40% marginal rate, by tangible equity.
(4) The tax benefit is the direct reduction to the income tax provision due to tax credits and deductions generated from investments in historic rehabilitation, low-income housing, new market projects, and renewable energy projects.
(5) The non-interest income charge is the reduction to the tax-advantaged investments, which are incurred as the tax credits are generated.
F-9
BERKSHIRE HILLS BANCORP, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES - UNAUDITED - (F-10)
| | | | As of or at Six Months Ended | |
| | | | June 30, | | June 30, | |
(Dollars in thousands) | | | | 2015 | | 2014 | |
Net income | | | | $ | 18,803 | | $ | 10,358 | |
Adj: Securities gains | | | | (2,418 | ) | (237 | ) |
Adj: Loss on termination of hedges | | | | — | | 8,792 | |
Adj: Merger and acquisition expenses | | | | 8,940 | | 3,689 | |
Adj: Restructuring and conversion expenses | | | | 4,192 | | 2,803 | |
Adj: Out-of-period adjustment (1) | | | | — | | 1,381 | |
Adj: Income taxes | | | | (2,587 | ) | (5,459 | ) |
Total core income | | (A) | | $ | 26,930 | | $ | 21,327 | |
Total revenue | | | | 127,472 | | $ | 106,024 | |
Adj: Securities gains | | | | (2,418 | ) | (237 | ) |
Adj: Loss on termination of hedges | | | | — | | 8,792 | |
Adj: Out-of-period adjustment (1) | | | | — | | 1,381 | |
Total core revenue | | (B) | | $ | 125,054 | | $ | 115,960 | |
Total non-interest expense | | | | $ | 99,173 | | $ | 84,623 | |
Less: Total non-core expense (see above) | | | | (13,132 | ) | (6,492 | ) |
Core non-interest expense | | (C) | | $ | 86,041 | | $ | 78,131 | |
(Dollars in millions, except per share data) | | | | | | | |
Total average assets | | (D) | | $ | 6,846 | | $ | 5,999 | |
Total average stockholders’ equity | | (E) | | 748 | | 692 | |
Total average tangible stockholders’ equity | | (F) | | 459 | | 413 | |
Total tangible stockholders’ equity, period-end (2) | | (G) | | 507 | | 411 | |
Total common shares outstanding, period-end (thousands) | | (H) | | 29,521 | | 25,115 | |
Average diluted shares outstanding (thousands) (3) | | (I) | | 26,713 | | 24,821 | |
Core earnings per common share, diluted | | (A/I) | | $ | 1.01 | | $ | 0.86 | |
Tangible book value per common share, period-end | | (G/H) | | $ | 17.16 | | $ | 16.40 | |
| | | | | | | |
Performance ratios (4) | | | | | | | |
Core return on assets | | (A/D) | | 0.79 | % | 0.71 | % |
Core return on equity | | (A/E) | | 7.20 | | 6.17 | |
Core return on tangible equity (5) | | (A/F) | | 12.23 | | 11.09 | |
Efficiency ratio | | (C-L)/(B+J+M) | | 62.34 | | 63.68 | |
| | | | | | | |
Supplementary data | | | | | | | |
Tax benefit - tax-advantaged investments (6) | | (J) | | $ | 8,068 | | $ | 1,110 | |
Non-interest income charge - tax-advantaged investments (7) | | (K) | | (5,703 | ) | (834 | ) |
Net income on tax-advantaged investments | | (J+K) | | 2,365 | | 276 | |
Intangible amortization | | (L) | | 1,835 | | 2,580 | |
Fully taxable equivalent income adjustment | | (M) | | 1,957 | | 1,570 | |
| | | | | | | |
GAAP return on assets | | | | 0.55 | % | 0.35 | % |
GAAP return on equity | | | | 5.03 | | 3.00 | |
Net interest margin | | | | 3.24 | | 3.31 | |
(1) The out of period adjustment shown above relates to interest income earned on loans acquired in bank acquisitions.
(2) Total tangible stockholders’ equity is computed by taking total stockholders’ equity less the intangible assets at period-end.
(3) Average diluted shares computed for core earnings per share differ from GAAP average diluted shares, in the first quarter of 2014, due to the GAAP net loss compared to core net income for the period.
(4) Ratios are annualized and based on average balance sheet amounts, where applicable. Quarterly data may not sum to year-to-date data due to rounding.
(5) Core return on tangible equity is computed by dividing the total core income adjusted for the tax-affected amortization of intangible assets, assuming a 40% marginal rate, by tangible equity.
(6) The tax benefit is the direct reduction to the income tax provision due to tax credits and deductions generated from investments in historic rehabilitation, low-income housing, new market projects, and renewable energy projects.
(7) The non-interest income charge is the reduction to the tax-advantaged investments, which are incurred as the tax credits are generated.
F-10
