Exhibit 99.1

 

 

Berkshire Hills Reports Record Annual Earnings; Dividend Increased

 

PITTSFIELD, MASS., January 30, 2017 -- Berkshire Hills Bancorp, Inc. (NYSE: BHLB) reported record earnings of $59 million in 2016, an increase of 18% over the prior year. Earnings grew due to positive operating leverage from business expansion and improved efficiency. Fourth quarter 2016 results included the operations of First Choice Bank from the date of its acquisition on December 2.

 

Fourth quarter 2016 GAAP earnings per share totaled $0.32 and were net of non-core charges (after-tax) totaling $0.24 per share, which were primarily related to merger- related costs. Core earnings per share totaled $0.56 during the quarter. Core earnings is a non-GAAP measure excluding non-core items viewed as not related to normalized operations. EPS results included the impact of 4.4 million shares issued as merger consideration to First Choice Bank shareholders.

 

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

 

•

$9.2 billion in total period-end assets, including $1.1 billion added with the First Choice acquisition

o

8% increase in total loans

o

15% increase in total deposits

o

17% increase in equity

•

9% increase in fee income

•

0.24% non-performing assets/assets

•

0.21% net loan charge-offs/average loans

 

CEO Michael Daly stated, “The final quarter of the year was very strong and included the addition of $1.1 billion in assets from the acquisition of First Choice Bank in the Princeton, New Jersey area on December 2. This acquisition was completed on time and on plan, and positions Berkshire for higher revenue and earnings in 2017. Ongoing business activity remained solid. Our fourth quarter momentum contributed to a year of record earnings.”

 

Mr. Daly continued, “Berkshire is entering 2017 well-positioned for the expanded business opportunities before us. We continue to pursue our goals of enhancing profitability and strengthening our franchise. Our announcement of a 5% dividend increase at this time

 

 

reflects our positive outlook for future operations. We improved our balance sheet fundamentals and overall infrastructure and controls in 2016. This supports current operations and provides a strong foundation to support future opportunities.”

 

DIVIDEND INCREASED

 

The Board of Directors voted to increase the quarterly cash dividend by 5% to $0.21 per share, effective with the next payment to shareholders of record at the close of business on February 16, 2017 and payable on March 2, 2017. The dividend equates to a 2.6% annualized yield based on the $32.16 average closing price of Berkshire’s common stock during the fourth quarter of 2016.

 

FINANCIAL CONDITION

 

Total assets increased in the most recent quarter by $1.2 billion, or 16%, to $9.2 billion including $1.1 billion in assets related to the acquisition of First Choice Bank. Most categories of assets and liabilities increased as a result of the merger, including 8% loan growth and 15% deposit growth. Excluding acquired First Choice loans, organic loan growth for the quarter was 5% annualized and was spread among most major loan categories, including 17% in commercial and industrial loans. The Company adjusted its loan and deposit mix strategies during the quarter while integrating the acquired First Choice balances. Organic growth of transaction accounts measured 7% for the quarter. The organic decrease in total deposits included the planned run-off of certain higher costing First Choice balances after the merger date. With the benefit of the acquired First Choice deposits, the ratio of loans/deposits improved to 99% at year-end. The ratio of equity/assets improved to 11.9% and the ratio of tangible equity/assets remained unchanged at 7.7%. Book value per share increased to $30.65 and tangible book value per share increased to $18.81. Tangible equity/assets and tangible book value are non-GAAP financial measures. Including the impact of purchase accounting, the ratio of problem assets/assets improved to 0.24% and the ratio of charge-offs to average loans improved to 0.21% for the quarter.

 

RESULTS OF OPERATIONS

 

GAAP earnings decreased in the most recent quarter compared to the linked quarter and the fourth quarter of the prior year due primarily to the merger-related charges recorded for the First Choice acquisition. GAAP earnings per share were $0.32 in the most recent quarter. Core earnings measured $0.56 per share. Total revenue and expense included the impact of the acquired First Choice operations beginning on December 2. Most categories of revenue and expense increased including these acquired operations.

 

Fourth quarter net interest income increased by 2% over the prior quarter. The fourth quarter 2016 net interest margin measured 3.19%. Purchased loan accretion totaled $1.9 million in the most recent quarter, compared to $2.2 million in the prior quarter. Excluding the impact of purchased loan accretion, the margin measured 3.09% compared to 3.13% in

 

 

the prior quarter. The change in the margin included the impact of the lower margin First Choice balances.

 

Total fee income increased by 9% compared to the prior quarter. Non-interest income is net of charges for the amortization of tax credit related investments. These charges totaled $4.4 million in the most recent quarter, compared to $1.5 million in the prior quarter. These charges are more than offset by credits to net income tax expense. Tax credit related investments contributed $0.02 in net earnings per share in the fourth quarter, compared to $0.01 in the prior quarter and $0.04 in the fourth quarter of 2015.

 

Fourth quarter non-interest expense increased over the prior quarter due primarily to the non-core charges related to the First Choice Bank acquisition. Merger and restructuring charges totaled $11.6 million and $2.2 million in these two periods respectively. Non-core expense is a non-GAAP measure that excludes costs not viewed as related to normalized operations. Core non-interest expense increased by 5% between these two periods including the new First Choice operations. Full time equivalent staff increased to 1,731 positions at quarter-end, compared to 1,208 positions at the start of the quarter, including 505 positions added with the First Choice operations. The efficiency ratio (a non-GAAP financial measure) increased to 59.1% due to the change in business mix with First Choice operations. The effective tax rate decreased to 3% due to the lower pretax income resulting from the merger charges. The effective tax rate on core income decreased to 21% in the most recent quarter from 30% in the prior quarter due to additional tax credit related investments that became operational during the period.

 

CONFERENCE CALL

 

Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Tuesday, January 31, 2017 to discuss the results for the quarter and provide guidance about expected future results. Participants are encouraged to pre-register for the conference call using the following link: http://dpregister.com/10098880. Callers who pre-register will be given dial-in instructions and a unique PIN to gain immediate access to the call. Participants may pre-register at any time prior to the call, and will immediately receive simple instructions via email. Interested persons may reach the registration link and access the webcast by logging in through the investor section of Berkshire’s website at http://ir.berkshirebank.com. Those parties who do not have internet access or are otherwise unable to pre-register for this event may still participate at the above time by dialing 1-844-792-3726 and asking to join the Berkshire Hills Bancorp (BHLB) earnings call. A telephone replay of the call will be available through Tuesday, February 7, 2017 by dialing 877-344-7529 and entering access number 10098880. 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 approximately $9.2 billion in assets and 97 full-service branch offices in Massachusetts, New York, Connecticut, Vermont, Pennsylvania and New Jersey providing

 

 

personal and business banking, insurance, and wealth management services. For more information, visit www.berkshirebank.com.

 

FORWARD LOOKING STATEMENTS

 

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

 

NON-GAAP FINANCIAL MEASURES

 

This document contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles (“GAAP”). These non-GAAP measures provide supplemental perspectives on operating results, performance trends, and financial condition. They are not a substitute for GAAP measures; they should be read and used in conjunction with the Company’s GAAP financial information. A reconciliation of non-GAAP financial measures to GAAP measures is included on pages F-9 and F-10 in the accompanying financial tables. In all cases, it should be understood that non-GAAP per share measures do not depict amounts that accrue directly to the benefit of shareholders.

 

The Company utilizes the non-GAAP measure of core earnings in evaluating operating trends, including components for core revenue and expense. These measures exclude items which the Company does not view as related to its normalized operations. These items include securities gains/losses, merger costs, restructuring costs, and systems conversion costs. 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, systems conversion costs, variable compensation expenses, and professional fees. These charges are related to the following business combinations: First Choice Bank, 44 Business Capital, Hampden Bancorp, and Firestone Financial. Restructuring costs generally consist of costs and losses associated with the disposition of assets and liabilities and lease terminations, including costs related to branch sales. The Company’s disclosures of organic growth of loans and deposits in 2016 are adjusted for the business combinations with 44 Business Capital and First Choice Bank.

 

 

###

 

CONTACTS

Investor Relations Contact

Allison O’Rourke; Executive Vice President, Finance; 413-236-3149

 

Media Contact

Elizabeth Mach; First Vice President, Marketing Officer; 413-445-8390

 

TABLE INDEX	CONSOLIDATED UNAUDITED FINANCIAL SCHEDULES
F-1	Selected Financial Highlights
F-2	Balance Sheets
F-3	Loan and Deposit Analysis
F-4	Statements of Income
F-5	Statements of Income  (Five Quarter Trend)
F-6	Average Yields and Costs
F-7	Average Balances
F-8	Asset Quality Analysis
F-9	Reconciliation of Non-GAAP Financial Measures (Five Quarter Trend) and Supplementary Data
F-10	Reconciliation of Non-GAAP Financial Measures (Year-to-Date) and Supplementary Data

 

   

BERKSHIRE HILLS BANCORP, INC.

SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED - (F-1)

		At or for the Quarters Ended (1)(2)
		Dec. 31,				Sept. 30,				June 30,				March 31,				Dec. 31,
		2016 (3)				2016				2016 (4)				2016				2015
PER SHARE DATA
Net earnings, diluted		$	0.32			$	0.53			$	0.52			$	0.52			$	0.52
Core earnings, diluted (5)			0.56				0.57				0.54				0.54				0.54
Total book value			30.65				29.97				29.64				29.18				28.64
Tangible book value (5)			18.81				18.78				18.44				18.44				17.84
Market price at period end			36.85				27.71				26.92				26.89				29.11
Dividends			0.20				0.20				0.20				0.20				0.19
PERFORMANCE RATIOS (6)
Return on assets			0.50	%			0.82	%			0.82	%			0.82	%			0.82	%
Core return on assets (5)			0.87				0.88				0.85				0.85				0.85
Return on equity			4.29				7.29				7.17				7.19				7.34
Core return on equity (5)			7.49				7.75				7.42				7.40				7.58
Core return on tangible equity (5)			12.23				12.99				12.45				12.20				12.68
Net interest margin, fully taxable equivalent (FTE) (7)			3.19				3.25				3.31				3.33				3.35
Net interest margin (FTE), excluding purchased loan accretion (5)			3.09				3.13				3.20				3.21				3.22
Fee income/Net interest and fee income			24.99				23.81				21.16				21.04				19.62
Efficiency ratio (5)			59.06				57.90				58.71				59.86				60.56
GROWTH (Year-to-date)
Total commercial loans, (annualized)			18	%			9	%			11	%			6	%			29	%
Total loans, (annualized)			14				7				10				0				22
Total deposits, (annualized)			18				4				2				0				20
Total net revenues, (compared to prior year)			11				13				14				26				18
Earnings per share, (compared to prior year)			9				31				48				49				27
Core earnings per share, (compared to prior year)			4				6				5				8				16
FINANCIAL DATA (In millions)
Total assets		$	9,163			$	7,931			$	8,044			$	7,808			$	7,832
Total earning assets			8,340				7,229				7,327				7,142				7,140
Total investments			1,670				1,162				1,304				1,399				1,402
Total loans			6,550				6,047				6,000				5,727				5,725
Allowance for loan losses			44				43				41				40				39
Total intangible assets			422				348				349				334				335
Total deposits			6,622				5,750				5,657				5,584				5,589
Total shareholders' equity			1,093				933				923				906				887
Net income			10.3				16.4				16.0				16.0				16.0
Core income (5)			18.0				17.4				16.5				16.5				16.5
ASSET QUALITY AND CONDITION RATIOS
Net charge-offs (current quarter annualized)/average loans			0.21	%			0.20	%			0.22	%			0.23	%			0.25	%
Allowance for loan losses/total loans			0.67				0.71				0.69				0.70				0.69
Loans/deposits			99				105				106				103				102
Shareholders' equity to total assets			11.93				11.76				11.48				11.60				11.33
Tangible shareholders' equity to tangible assets (5)			7.68				7.70				7.46				7.66				7.37

(1)	Core measurements are non-GAAP financial measures that are adjusted to exclude net non-core charges primarily related to acquisitions and restructuring activities.
(2)	Reconciliations of non-GAAP financial measures, including all references to core and tangible amounts, appear on pages F-9 and F-10.
(3)	The Company acquired First Choice Bank on December 2, 2016.
(4)	The Company acquired certain assets and operations related to 44 Business Capital on April 29, 2016.
(5)	Non-GAAP financial measure. See F-9 and F-10 for reconciliations of non-GAAP financial measures.
(6)	All performance ratios are annualized and are based on average balance sheet amounts, where applicable.
(7)	Fully taxable equivalent considers the impact of tax advantaged investment securities and loans.

 

 

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-2)

		December 31,				September 30,				December 31,
(In thousands)		2016 (1)				2016				2015
Assets
Cash and due from banks		$	71,494			$	61,107			$	72,918
Short-term investments			41,581				8,178				30,644
Total cash and short-term investments			113,075				69,285				103,562
Trading security			13,229				14,149				14,189
Securities available for sale, at fair value			1,209,537				946,853				1,154,457
Securities held to maturity, at amortized cost			334,368				131,467				131,652
Federal Home Loan Bank stock and other restricted securities			71,112				61,277				71,018
Total securities			1,628,246				1,153,746				1,371,316
Loans held for sale, at fair value			120,673				20,471				13,191
Commercial real estate			2,616,438				2,327,044				2,059,767
Commercial and industrial loans			1,062,038				994,874				1,048,263
Residential mortgages			1,893,131				1,818,111				1,815,035
Consumer loans			978,180				906,975				802,171
Total loans			6,549,787				6,047,004				5,725,236
Less: Allowance for loan losses			(43,998	)			(43,105	)			(39,308	)
Net loans			6,505,789				6,003,899				5,685,928
Premises and equipment, net			93,215				85,794				88,072
Other real estate owned			151				80				1,725
Goodwill			402,871				339,975				323,943
Other intangible assets			19,445				8,308				10,664
Cash surrender value of bank-owned life insurance			139,257				127,880				125,233
Deferred tax asset, net			43,817				34,616				42,526
Other assets			96,003				87,107				64,926
Total assets		$	9,162,542			$	7,931,161			$	7,831,086
Liabilities and shareholders' equity
Demand deposits		$	1,278,875			$	1,113,733			$	1,081,860
NOW deposits			570,583				476,189				510,807
Money market deposits			1,781,605				1,469,075				1,408,107
Savings deposits			657,486				607,868				601,761
Time deposits			2,333,543				2,082,889				1,986,600
Total deposits			6,622,092				5,749,754				5,589,135
Senior borrowings			1,224,836				1,048,914				1,174,335
Subordinated borrowings			89,161				89,116				88,983
Total borrowings			1,313,997				1,138,030				1,263,318
Other liabilities			133,155				110,784				91,444
Total liabilities			8,069,244				6,998,568				6,943,897
Total common shareholders' equity			1,093,298				932,593				887,189
Total liabilities and shareholders' equity		$	9,162,542			$	7,931,161			$	7,831,086
Net shares outstanding			35,673				31,122				30,974

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

 

 

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED - (F-3)

LOAN ANALYSIS

 

																		Organic Annualized Growth % (1)
(in millions)		December 31, 2016 Balance				Acquired First Choice Bank Balance (2)				September 30, 2016 Balance				December 31, 2015 Balance				Quarter ended December 31, 2016				Year to Date
Commercial real estate - construction		$	288			$	11			$	242			$	254				57	%			9	%
Commercial real estate - other			2,329				315				2,085				1,806				(14	)			9
Total commercial real estate (3)			2,617				326				2,327				2,060				(6	)			9
Commercial and industrial loans			1,062				24				995				1,048				17				(1	)
Total commercial loans			3,679				350				3,322				3,108				1				6
Total residential mortgages			1,893				26				1,818				1,815				11				3
Home equity			394				37				358				361				(2	)			(1	)
Auto and other			584				13				549				441				17				30
Total consumer loans			978				50				907				802				9				16
Total loans		$	6,550			$	426			$	6,047			$	5,725				5	%			6	%

(1)	Non-GAAP financial measure.
(2)	Acquired First Choice Bank loans are as of December 2, 2016.
(3)	Total commercial real estate loans include $37 million in loans acquired as part of the acquisition of certain assets and operations related to  44 Business Capital; however, the year to date organic annualized growth excludes these acquired loans.

 

DEPOSIT ANALYSIS

 

																		Organic Annualized Growth % (1)
(in millions)		December 31, 2016 Balance				Acquired First Choice Bank Balance (2)				September 30, 2016 Balance				December 31, 2015 Balance				Quarter ended December 31, 2016				Year to Date
Demand		$	1,279			$	89			$	1,114			$	1,082				27	%			10	%
NOW			571				67				476				511				24				(1	)
Money market			1,782				337				1,469				1,408				(7	)			3
Savings			657				51				608				601				(1	)			1
Total non-maturity deposits			4,289				544				3,667				3,602				8				4
Total time deposits			2,333				349				2,083				1,987				(19	)			(0	)
Total deposits		$	6,622			$	893			$	5,750			$	5,589				(1	)%			3	%

(1)	Non-GAAP financial measure.
(2)	Acquired First Choice Bank deposits are as of December 2, 2016.

 

 

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED - (F-4)

		Three Months Ended								Years Ended
		December 31,								December 31,
(In thousands, except per share data)		2016				2015				2016				2015
Interest and dividend income
Loans		$	62,884			$	59,055			$	242,600			$	211,347
Securities and other			9,550				9,369				37,839				35,683
Total interest and dividend income			72,434				68,424				280,439				247,030
Interest expense
Deposits			8,556				6,661				30,883				22,948
Borrowings			4,720				3,015				17,289				10,233
Total interest expense			13,276				9,676				48,172				33,181
Net interest income			59,158				58,748				232,267				213,849
Non-interest income
Loan related income			5,648				2,707				16,694				8,310
Mortgage banking income			3,537				641				7,555				4,133
Deposit related fees			6,285				6,416				24,963				25,084
Insurance commissions and fees			2,323				2,254				10,477				10,251
Wealth management fees			1,911				2,326				8,917				9,702
Total fee income			19,704				14,344				68,606				57,480
Other			(2,849	)			(1,739	)			(3,289	)			(5,302	)
Securities (losses) gains, net			(652	)			(357	)			(551	)			2,110
Gain on sale of business operations, net			522				-				1,085				-
Total non-interest income			16,725				12,248				65,851				54,288
Total net revenue			75,883				70,996				298,118				268,137
Provision for loan losses			4,100				4,431				17,362				16,726
Non-interest expense
Compensation and benefits			28,103				25,819				104,600				97,370
Occupancy and equipment			7,320				7,308				27,220				28,486
Technology and communications			5,310				4,553				19,883				16,881
Marketing and promotion			1,080				1,012				3,161				3,306
Professional services			1,666				1,472				6,199				5,172
FDIC premiums and assessments			1,422				1,220				5,066				4,649
Other real estate owned and foreclosures			(11	)			33				691				833
Amortization of intangible assets			572				841				2,927				3,563
Merger, restructuring and conversion expense			11,633				1,118				15,461				17,611
Other			3,995				4,903				18,094				18,958
Total non-interest expense			61,090				48,279				203,302				196,829
Income before income taxes			10,693				18,286				77,454				54,582
Income tax expense			362				2,273				18,784				5,064
Net income		$	10,331			$	16,013			$	58,670			$	49,518
Earnings per share:
Basic		$	0.32			$	0.53			$	1.89			$	1.74
Diluted		$	0.32			$	0.52			$	1.88			$	1.73
Weighted average shares outstanding:
Basic			32,185				30,500				30,988				28,393
Diluted			32,381				30,694				31,167				28,564

 

 

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME (5 Quarter Trend) - UNAUDITED - (F-5)

 

		Dec. 31,				Sept. 30,				June 30,				March 31,				Dec. 31,
(In thousands, except per share data)		2016				2016				2016				2016				2015
Interest and dividend income
Loans		$	62,884			$	61,571			$	59,703			$	58,442			$	59,055
Securities and other			9,550				8,940				9,315				10,034				9,369
Total interest and dividend income			72,434				70,511				69,018				68,476				68,424
Interest expense
Deposits			8,556				7,790				7,378				7,159				6,661
Borrowings			4,720				4,750				4,199				3,620				3,015
Total interest expense			13,276				12,540				11,577				10,779				9,676
Net interest income			59,158				57,971				57,441				57,697				58,748
Non-interest income
Loan related income			5,648				5,102				2,898				3,046				2,707
Mortgage banking income			3,537				1,862				1,335				821				641
Deposit related fees			6,285				6,278				6,291				6,109				6,416
Insurance commissions and fees			2,323				2,601				2,660				2,893				2,254
Wealth management fees			1,911				2,269				2,235				2,502				2,326
Total fee income			19,704				18,112				15,419				15,371				14,344
Other			(2,849	)			188				(851	)			223				(1,739	)
Securities (losses) gains, net			(652	)			78				(13	)			36				(357	)
Gain on sale of business operations, net			522				563				-				-				-
Total non-interest income			16,725				18,941				14,555				15,630				12,248
Total net revenue			75,883				76,912				71,996				73,327				70,996
Provision for loan losses			4,100				4,734				4,522				4,006				4,431
Non-interest expense
Compensation and benefits			28,103				26,119				24,664				25,714				25,819
Occupancy and equipment			7,320				6,650				6,560				6,690				7,308
Technology and communications			5,310				4,902				4,814				4,857				4,553
Marketing and promotion			1,080				671				737				673				1,012
Professional services			1,666				1,744				1,509				1,280				1,472
FDIC premiums and assessments			1,422				1,208				1,203				1,233				1,220
Other real estate owned and foreclosures			(11	)			46				393				263				33
Amortization of intangible assets			572				749				787				819				841
Merger, restructuring and conversion expense			11,633				2,170				878				780				1,118
Other			3,995				4,585				4,723				4,791				4,903
Total non-interest expense			61,090				48,844				46,268				47,100				48,279
Income before income taxes			10,693				23,334				21,206				22,221				18,286
Income tax expense			362				6,953				5,249				6,220				2,273
Net income		$	10,331			$	16,381			$	15,957			$	16,001			$	16,013
Earnings per share:
Basic		$	0.32			$	0.53			$	0.52			$	0.52			$	0.53
Diluted		$	0.32			$	0.53			$	0.52			$	0.52			$	0.52
Weighted average shares outstanding:
Basic			32,185				30,621				30,605				30,511				30,500
Diluted			32,381				30,811				30,765				30,688				30,694

 

 

BERKSHIRE HILLS BANCORP, INC.

AVERAGE YIELDS AND COSTS (Fully Taxable Equivalent - Annualized) - UNAUDITED - (F-6)

		Quarters Ended
		Dec. 31,				Sept. 30,				June 30,				March 31,				Dec. 31,
		2016				2016				2016				2016				2015
Earning assets
Loans:
Commercial real estate			4.21	%			4.28	%			4.45	%			4.18	%			4.17	%
Commercial and industrial loans			4.96				5.15				4.93				5.04				5.51
Residential mortgages			3.56				3.60				3.63				3.86				3.72
Consumer loans			3.45				3.41				3.40				3.44				3.30
Total loans			4.05				4.10				4.14				4.13				4.15
Securities			3.35				3.26				3.28				3.26				2.96
Short-term investments and loans held for sale			2.13				1.69				1.29				0.91				0.89
Total earning assets			3.89				3.94				3.97				3.93				3.89
Funding liabilities
Deposits:
NOW			0.16				0.12				0.13				0.13				0.14
Money market			0.48				0.46				0.47				0.49				0.45
Savings			0.12				0.12				0.11				0.13				0.14
Time			1.14				1.10				1.06				0.99				0.93
Total interest-bearing deposits			0.69				0.67				0.65				0.63				0.59
Borrowings			1.64				1.53				1.38				1.19				0.96
Total interest-bearing liabilities			0.87				0.85				0.81				0.75				0.67
Net interest spread			3.02				3.09				3.16				3.18				3.22
Net interest margin			3.19				3.25				3.31				3.33				3.35
Cost of funds (1)			0.73				0.72				0.68				0.64				0.56
Cost of deposits (2)			0.56				0.54				0.53				0.51				0.48

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

(2) The average cost of deposits includes the deposits held for sale.

 

 

BERKSHIRE HILLS BANCORP, INC.

AVERAGE BALANCES - UNAUDITED - (F-7)

		Quarters Ended
		Dec. 31,				Sept. 30,				June 30,				March 31,				Dec. 31,
(In thousands)		2016				2016 (2)(4)				2016 (2)(4)				2016 (2)(4)				2015
Assets
Loans
Commercial real estate		$	2,442,515			$	2,260,482			$	2,173,539			$	2,079,001			$	2,034,917
Commercial and industrial loans			998,543				1,009,581				1,047,866				1,027,257				1,033,081
Residential mortgages			1,833,530				1,839,364				1,759,193				1,798,034				1,790,334
Consumer loans			936,957				900,432				844,759				807,888				807,768
Total loans (1)			6,211,545				6,009,859				5,825,357				5,712,180				5,666,100
Securities (3)			1,255,207				1,197,760				1,247,357				1,342,590				1,368,505
Short-term investments and loans held for sale			83,057				40,259				41,449				56,042				51,241
Total earning assets			7,549,809				7,247,878				7,114,163				7,110,812				7,085,846
Goodwill and other intangible assets			362,567				349,059				344,832				333,948				335,440
Other assets			363,322				360,182				349,816				346,327				342,902
Total assets		$	8,275,698			$	7,957,119			$	7,808,811			$	7,791,087			$	7,764,188
Liabilities and shareholders' equity
Deposits
NOW		$	499,852			$	474,650			$	492,901			$	484,334			$	491,445
Money market			1,612,160				1,448,108				1,403,629				1,417,068				1,455,267
Savings			620,092				608,365				612,261				602,414				604,215
Time			2,171,325				2,095,269				2,047,020				2,063,712				1,958,394
Total interest-bearing deposits			4,903,429				4,626,392				4,555,811				4,567,528				4,509,321
Borrowings			1,144,846				1,235,065				1,223,629				1,222,288				1,256,287
Total interest-bearing liabilities			6,048,275				5,861,457				5,779,440				5,789,816				5,765,608
Non-interest-bearing demand deposits			1,178,308				1,084,786				1,032,951				1,026,447				1,033,844
Other liabilities			85,951				111,743				105,948				84,042				91,877
Total liabilities			7,312,534				7,057,986				6,918,339				6,900,305				6,891,329
Total shareholders' equity			963,164				899,133				890,472				890,782				872,859
Total liabilities and shareholders' equity		$	8,275,698			$	7,957,119			$	7,808,811			$	7,791,087			$	7,764,188
Supplementary data
Total non-maturity deposits		$	3,910,412			$	3,615,909			$	3,541,742			$	3,530,263			$	3,584,771
Total deposits			6,081,737				5,711,178				5,588,762				5,593,975				5,543,165
Fully taxable equivalent income adjustment			1,339				1,200				1,180				1,134				1,108
Total average tangible equity (5)			600,597				550,074				545,640				556,834				537,419

(1)

Total loans include non-accruing loans.

(2)

The average balances of loans include loans associated with branch sales, which are presented under loans held for sale on the consolidated balance sheet.

(3)

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

(4)

The average balances of deposits include the deposits held for sale presented under other liabilities on the consolidated balance sheet.

(5)

See page F-9.

 

 

BERKSHIRE HILLS BANCORP, INC.

ASSET QUALITY ANALYSIS - UNAUDITED - (F-8)

		At or for the Quarters Ended
		Dec. 31,				Sept. 30,				June 30,				March 31,				Dec. 31,
(in thousands)		2016				2016				2016				2016				2015
NON-PERFORMING ASSETS
Non-accruing loans:
Commercial real estate		$	5,883			$	6,295			$	4,808			$	5,001			$	4,882
Commercial and industrial loans			7,523				6,714				7,590				7,480				8,259
Residential mortgages			3,795				4,374				4,882				4,732				3,966
Consumer loans			4,833				3,281				3,376				3,588				3,768
Total non-accruing loans			22,034				20,664				20,656				20,801				20,875
Other real estate owned			151				80				595				1,440				1,725
Total non-performing assets		$	22,185			$	20,744			$	21,251			$	22,241			$	22,600
Total non-accruing loans/total loans			0.34	%			0.34	%			0.34	%			0.36	%			0.36	%
Total non-performing assets/total assets			0.24	%			0.26	%			0.26	%			0.28	%			0.29	%
PROVISION AND ALLOWANCE FOR LOAN LOSSES
Balance at beginning of period		$	43,105			$	41,397			$	40,055			$	39,308			$	38,180
Charged-off loans			(3,488	)			(3,441	)			(3,393	)			(3,704	)			(3,538	)
Recoveries on charged-off loans			281				415				213				445				235
Net loans charged-off			(3,207	)			(3,026	)			(3,180	)			(3,259	)			(3,303	)
Provision for loan losses			4,100				4,734				4,522				4,006				4,431
Balance at end of period		$	43,998			$	43,105			$	41,397			$	40,055			$	39,308
Allowance for loan losses/total loans			0.67	%			0.71	%			0.69	%			0.70	%			0.69	%
Allowance for loan losses/non-accruing loans			200	%			209	%			200	%			193	%			188	%
NET LOAN CHARGE-OFFS
Commercial real estate		$	(676	)		$	(547	)		$	(534	)		$	(1,043	)		$	(1,152	)
Commercial and industrial loans			(1,148	)			(1,610	)			(1,720	)			(847	)			(1,056	)
Residential mortgages			(768	)			(452	)			(568	)			(774	)			(633	)
Home equity			(47	)			(65	)			(164	)			(221	)			(118	)
Auto and other consumer			(568	)			(352	)			(194	)			(374	)			(344	)
Total, net		$	(3,207	)		$	(3,026	)		$	(3,180	)		$	(3,259	)		$	(3,303	)
Net charge-offs (QTD annualized)/average loans			0.21	%			0.20	%			0.22	%			0.23	%			0.25	%
Net charge-offs (YTD annualized)/average loans			0.21	%			0.22	%			0.22	%			0.23	%			0.25	%
DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS
30-89 Days delinquent			0.35	%			0.25	%			0.25	%			0.26	%			0.34	%
90+ Days delinquent and still accruing			0.15	%			0.09	%			0.08	%			0.07	%			0.09	%
Total accruing delinquent loans			0.50	%			0.34	%			0.33	%			0.33	%			0.43	%
Non-accruing loans			0.34	%			0.34	%			0.34	%			0.36	%			0.36	%
Total delinquent and non-accruing loans			0.84	%			0.68	%			0.67	%			0.69	%			0.79	%

 

 

BERKSHIRE HILLS BANCORP, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA- UNAUDITED - (F-9)

				At or for the Quarters Ended
				Dec. 31,				Sept. 30,				June 30,				March 31,				Dec. 31,
(in thousands)				2016				2016				2016				2016				2015
Net income				$	10,331			$	16,381			$	15,957			$	16,001			$	16,013
Adj: Net securities losses (gains)					652				(78	)			13				(36	)			357
Adj: Net (gains) on sale of business operations					(522	)			(563	)			-				-				-
Adj: Merger and acquisition expense					10,820				1,453				701				527				1,230
Adj: Restructuring expense and other					1,113				717				177				253				(112	)
Adj:  Income taxes					(4,373	)			(492	)			(334	)			(256	)			(959	)
Total core income		(A)		$	18,021			$	17,418			$	16,514			$	16,489			$	16,529
Total revenue				$	75,883			$	76,912			$	71,996			$	73,327			$	70,996
Adj: Net securities losses (gains)					652				(78	)			13				(36	)			357
Adj: Net (gains) on sale of business operations					(522	)			(563	)			-				-				-
Total core revenue		(B)		$	76,013			$	76,271			$	72,009			$	73,291			$	71,353
Total non-interest expense				$	61,090			$	48,844			$	46,268			$	47,100			$	48,279
Less: Total non-core expense (see above)					(11,933	)			(2,170	)			(878	)			(780	)			(1,118	)
Core non-interest expense		(C)		$	49,157			$	46,674			$	45,390			$	46,320			$	47,161
(in millions, except per share data)
Total average assets		(D)		$	8,276			$	7,957			$	7,809			$	7,791			$	7,764
Total average shareholders' equity		(E)			963				899				890				891				873
Total average tangible shareholders' equity		(F)			601				550				546				557				537
Total tangible shareholders' equity, period-end (1)		(G)			671				584				574				572				553
Total tangible assets, period-end (1)		(H)			8,740				7,583				7,695				7,474				7,497
Total common shares outstanding, period-end (thousands)		(I)			35,673				31,122				31,156				31,039				30,974
Average diluted shares outstanding (thousands)		(J)			32,381				30,811				30,765				30,688				30,694
Core earnings per share, diluted		(A/J)		$	0.56			$	0.57			$	0.54			$	0.54			$	0.54
Tangible book value per share, period-end		(G/I)			18.81				18.78				18.44				18.44				17.84
Total tangible shareholders' equity/total tangible assets		(G)/(H)			7.68				7.70				7.46				7.66				7.37
Performance ratios (2)
GAAP return on assets					0.50	%			0.82	%			0.82	%			0.82	%			0.82	%
Core return on assets		(A/D)			0.87				0.88				0.85				0.85				0.85
GAAP return on equity					4.29				7.29				7.17				7.19				7.34
Core return on equity		(A/E)			7.49				7.75				7.42				7.40				7.58
Core return on tangible equity (3)		(A/F)			12.23				12.99				12.45				12.20				12.68
Efficiency ratio (4)(5)		(C-M)/(B+K+N)			59.06				57.90				58.71				59.86				60.56
Net interest margin					3.19				3.25				3.31				3.33				3.35
Supplementary data (in thousands)
Tax benefit on tax-credit investments (6)		(K)		$	4,918			$	1,852			$	2,777			$	1,588			$	4,029
Non-interest income charge on tax-credit investments (7)		(L)			(4,428	)			(1,525	)			(1,938	)			(1,101	)			(2,851	)
Net income on tax-credit investments		(K+L)			490				327				839				487				1,178
Intangible amortization		(M)			572				749				787				819				841
Fully taxable equivalent income adjustment		(N)			1,339				1,200				1,180				1,134				1,108

(1)

Total tangible shareholders' equity is computed by taking total shareholders' equity less the intangible assets at period-end.

Total tangible assets is computed by taking total assets less the intangible assets at period-end.

(2)

Ratios are annualized and based on average balance sheet amounts, where applicable. Quarterly data may not sum to year-to-date data due to rounding.

(3)

Core return on tangible equity is computed by dividing the total core income adjusted for the tax-effected amortization of intangible assets, assuming a 40% marginal rate, by tangible equity.

(4)

Non-GAAP financial measure.

(5)

Efficiency ratio is computed by dividing total core tangible non-interest expense by the sum of total net interest income on a fully taxable equivalent basis and total core non-interest income adjusted to include tax credit benefit of tax shelter investments. The Company uses this non-GAAP measure to provide important information regarding its operational efficiency.

(6)

The tax benefit is the direct reduction to the income tax provision due to tax credits and deductions generated from investments in historic rehabilitation, low-income housing, new market projects, and renewable energy projects.

(7)

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

 

 

BERKSHIRE HILLS BANCORP, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA - UNAUDITED - (F-10)

				At or for the Years Ended
				Dec. 31,				Dec. 31,
(Dollars in thousands)				2016				2015
Net income				$	58,670			$	49,518
Adj: Net securities losses (gains)					551				(2,110	)
Adj: Net (gains) on sale of business operations					(1,085	)			-
Adj: Merger and acquisition expenses					13,501				13,157
Adj: Restructuring expense and other					2,260				4,454
Adj: Income taxes					(5,455	)			(5,409	)
Total core income		(A)		$	68,442			$	59,610
Total revenue				$	298,118			$	268,137
Adj: Net securities losses (gains)					551				(2,110	)
Adj: Net (gains) on sale of business operations					(1,085	)			-
Total core revenue		(B)		$	297,584			$	266,027
Total non-interest expense				$	203,302			$	196,830
Less: Total non-core expense (see above)					(15,761	)			(17,611	)
Core non-interest expense		(C)		$	187,541			$	179,219
(Dollars in millions, except per share data)
Total average assets		(D)		$	7,958			$	7,249
Total average shareholders' equity		(E)			911				805
Total average tangible shareholders' equity		(F)			563				494
Total tangible shareholders' equity, period-end (1)		(G)			671				553
Total tangible assets, period-end (1)		(H)			8,740				7,496
Total common shares outstanding, period-end (thousands)		(I)			35,673				30,974
Average diluted shares outstanding (thousands)		(J)			31,167				28,564
Core earnings per common share, diluted		(A/J)		$	2.20			$	2.09
Tangible book value per common share, period-end		(G/I)			18.81				17.84
Total tangible shareholders' equity/total tangible assets		(G/H)			7.68				7.37
Performance ratios (2)
GAAP return on assets					0.74	%			0.68	%
Core return on assets		(A/D)			0.86				0.82
GAAP return on equity					6.44				6.15
Core return on equity		(A/E)			7.51				7.40
Core return on tangible equity (3)		(A/F)			12.47				12.49
Efficiency ratio (4)(5)		(C-M) / (B+K+N)			58.87				61.34
Net interest margin					3.27				3.31
Supplementary data
Tax benefit on tax-credit investments (6)		(K)		$	11,134			$	16,127
Non-interest income charge on tax-credit investments (7)		(L)			(8,993	)			(11,406	)
Net income on tax-credit investments		(K+L)			2,143				4,721
Intangible amortization		(M)			2,927				3,563
Fully taxable equivalent income adjustment		(N)			4,853				4,196

(1)

Total tangible shareholders' equity is computed by taking total shareholders' equity less the intangible assets at period-end.

Total tangible assets is computed by taking total assets less the intangible assets at period-end.

(2)

Ratios are annualized and based on average balance sheet amounts, where applicable. Quarterly data may not sum to year-to-date data due to rounding.

(3)

Core return on tangible equity is computed by dividing the total core income adjusted for the tax-effected amortization of intangible assets, assuming a 40% marginal rate, by tangible equity.

(4)

Non-GAAP financial measure.

(5)

Efficiency ratio is computed by dividing total core tangible non-interest expense by the sum of total net interest income on a fully taxable equivalent basis and total core non-interest income adjusted to include tax credit benefit of tax shelter investments. The Company uses this non-GAAP measure to provide important information regarding its operational efficiency.

(6)

The tax benefit is the direct reduction to the income tax provision due to tax credits and deductions generated from investments in historic rehabilitation, low-income housing, new market projects, and renewable energy.

(7)

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