Exhibit 99.1 

 

 

 

Berkshire Hills Reports Third Quarter Earnings; Dividend Declared

 

PITTSFIELD, MA, October 19, 2017. Berkshire Hills Bancorp, Inc. (NYSE: BHLB) reported third quarter 2017 net income of $22.9 million, or $0.57 per share and core earnings of $23.6 million, or $0.59 per share. Net income was up 40% year-over-year, while core earnings grew 35% due to the benefit of business expansion. Net income per share increased by 8%, while core EPS increased by 4%. Net income was impacted by net non-core charges related primarily to acquisitions. Core earnings related measures are non-GAAP measures that exclude these charges and other non-ordinary items.

 

THIRD QUARTER FINANCIAL HIGHLIGHTS (comparisons are to prior quarter unless otherwise stated):

 

·

9% annualized increase in commercial and industrial loans

·

14% annualized increase in demand deposit accounts

·

4% increase in net interest income

·

3.36% net interest margin

·

59.3% efficiency ratio

·

0.95% GAAP ROA; 0.98% Core ROA

·

0.23% non-performing assets/assets

·

0.19% net loan charge-offs/average loans

 

CEO Michael Daly stated, “Earnings advanced again in the third quarter and our return on assets continued to climb as our expanded teams generated solid volumes across our business lines. We fully absorbed the 7% linked quarter increase in average shares while also increasing our bottom line per share results. I’m proud of the work of our teams in serving more customers, as represented by our 31% year-over-year revenue growth.”

 

“Our recent initiatives are transforming our company. Last week, we completed our acquisition of Worcester-based Commerce Bank. This acquisition has propelled us to approximately $11.6 billion in total assets, filling in our franchise across the length of Massachusetts, and moving us strategically over the $10 billion asset mark. We’ve gained the leading deposit share in New England’s second largest city, and further cemented our position in the high growth Eastern Massachusetts market.”

 

Mr. Daly concluded, “This month we also announced our new corporate headquarters location at 60 State Street in the heart of Boston, and brought on board several Boston area senior bankers to service the commercial, retail, and private banking markets, including the four Boston area branches that we presently operate. We are bringing our revolutionary brand of banking to Boston and look forward to the many business opportunities that we have in the nation’s ninth largest metropolitan economy.”

 

 

DIVIDEND DECLARED

 

The Board of Directors voted to declare a cash dividend of $0.21 per common share to shareholders of record at the close of business on November 9, 2017, payable on November 22, 2017. The dividend equates to a 2.4% annualized yield based on the $35.26 average closing price of Berkshire Hills Bancorp common stock during the quarter. Effective on the same dates, the Board also declared a dividend of $0.42 per share for preferred stock issued in conjunction with the Commerce acquisition.

 

FINANCIAL CONDITION

 

Total assets measured $9.8 billion at September 30, 2017, increasing at a 9% annualized rate in the first nine months of the year. The 8% annualized loan growth for the year-to-date was driven by solid growth in all major loan categories, including a 9% annualized increase in commercial loans. Average loan yields increased in each successive quarter and included the benefit of higher short term interest rates. Deposit growth was 3% annualized over this period. The Commerce acquisition provides additional deposit funding sources, while adding to liquidity. Book value per share increased by 4% to $31.78 for the year-to-date, while tangible book value per share (a non-GAAP financial measure) grew by 14% to $21.38. Delinquent and non-accruing loans decreased to 0.74% of total loans, and quarterly annualized net loan charge-offs declined to 0.19% of average loans.

 

RESULTS OF OPERATIONS

 

The growth in earnings and earnings per share included first year results for the First Choice operations acquired at the end of 2016, along with the full period benefit of other 2016 acquisitions. Most measures of revenue and expense increased year-over-year due to these business combinations. Per share earnings included the impact of shares issued as merger consideration and in the May 2017 stock offering. Non-core charges in 2017 were mostly merger related, including First Choice and Commerce. Non-core activity in the first half of the year also included a loss on the termination of hedges and restructuring and other expense.

 

Compared to the prior quarter, third quarter net interest income increased by $2.5 million, or 4%, due to higher average balances. The third quarter net interest margin remained stable at 3.36% compared to the prior quarter and is up from 3.27% year-over-year, including the benefit of higher short term interest rates and higher purchased loan accretion. Total revenue decreased quarter-over-quarter due primarily to lower mortgage banking revenue, including changes related to seasonal and weather related impacts.

 

Third quarter non-interest expense decreased by 5% quarter-over-quarter, and the efficiency ratio improved to 59.3%. Mortgage banking expenses were reduced in line with related revenue. The Company also benefited from the integration of First Choice operations, as well as lower merger related costs. Full time equivalent staff totaled 1,788 positions at the end of the third quarter compared to 1,731 at the start of the year, reflecting growth and infrastructure investment. The third quarter effective income tax rate was 24% and included the benefit of tax credit investments related primarily to historic rehabilitation for residential housing. These investments contributed $0.01 to EPS in each quarter this year.

 

 

INVESTOR CONFERENCE CALL

 

Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Friday, October 20, 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: dpregister.com/10112415. Participants may pre-register at any time prior to the call. Additionally, investors may access the webcast at ir.berkshirebank.com. Investors may also participate at the above time by dialing 1-844-792-3726.  A telephone replay of the call will be available through Friday, October 27, 2017 by dialing 877-344-7529 and entering access number 10112415.  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^®. Including the acquired Commerce operations, Berkshire has approximately $11.6 billion in assets and 113 full service branches in Massachusetts, New York, Connecticut, Vermont, New Jersey, and Pennsylvania providing personal and business banking, insurance, and wealth management services. The Company also offers mortgages and specialized commercial lending services in targeted national markets.

 

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 page F-9 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 primarily include securities gains/losses, merger costs, and restructuring costs. 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, financial planning assets, and Commerce. 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. Additionally, the Company recorded charges for hedge terminations in the first quarter of 2017 and legal settlement costs during the year.

 

 

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. Of note, following systems upgrades, non-material revisions were made in the first quarter of 2017 to the calculations of the net interest margin and efficiency ratio and prior period measures were revised to include these changes.

 

###

 

CONTACTS

 

Investor Relations Contact

 

Allison O’Rourke; Executive Vice President, Investor Relations Officer; 413-236-3149

 

Media Contact

 

Elizabeth Mach; Senior 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 (2)
		Sept. 30,				June 30,				March 31,				Dec. 31,				Sept. 30,
		2017				2017				2017				2016 (3)				2016
PER SHARE DATA
Net earnings, diluted		$	0.57			$	0.53			$	0.44			$	0.32			$	0.53
Core earnings, diluted (1)			0.59				0.58				0.55				0.56				0.57
Total book value			31.78				31.37				30.77				30.65				29.97
Tangible book value (1)			21.38				20.96				18.97				18.81				18.78
Market price at period end			38.75				35.15				36.05				36.85				27.71
Dividends			0.21				0.21				0.21				0.20				0.20
PERFORMANCE RATIOS (4)
Return on assets			0.95	%			0.84	%			0.68	%			0.50	%			0.82	%
Core return on assets (1)			0.98				0.92				0.85				0.87				0.88
Return on equity			7.26				6.80				5.71				4.29				7.29
Core return on equity (1)			7.47				7.45				7.17				7.49				7.75
Core return on tangible equity (1)			11.42				11.96				12.05				12.23				12.99
Net interest margin, fully taxable equivalent (FTE) (5)			3.36				3.36				3.33				3.21				3.27
Fee income/Net interest and fee income			29.96				32.23				30.04				24.99				23.81
Efficiency ratio (1)			59.28				61.72				61.94				58.42				57.32
GROWTH (Year-to-date)
Total commercial loans (annualized)			9	%			13	%			15	%			18	%			9	%
Total loans (annualized)			8				10				6				14				7
Total deposits (annualized)			3				3				2				18				4
Total net revenues (compared to prior year)			37				40				39				11				13
Earnings per share (compared to prior year)			(2	)			(8	)			(15	)			9				31
Core earnings per share (compared to prior year)(1)			4				5				2				4				6
FINANCIAL DATA (in millions)
Total assets		$	9,767			$	9,627			$	9,298			$	9,163			$	7,931
Total earning assets			8,944				8,807				8,486				8,340				7,229
Total investments			1,853				1,796				1,740				1,670				1,162
Total loans			6,947				6,864				6,656				6,550				6,047
Allowance for loan losses			49				47				46				44				43
Total intangible assets			420				421				422				423				348
Total deposits			6,790				6,715				6,656				6,622				5,750
Total shareholders' equity			1,285				1,268				1,100				1,093				933
Net income			22.9				19.7				15.5				10.3				16.4
Core income (1)			23.6				21.6				19.4				18.0				17.4
ASSET QUALITY AND CONDITION RATIOS
Net charge-offs (current quarter annualized)/average loans			0.19	%			0.20	%			0.20	%			0.21	%			0.20	%
Total non-performing assets/total assets			0.23				0.25				0.27				0.24				0.26
Allowance for loan losses/total loans			0.71				0.69				0.69				0.67				0.71
Loans/deposits			102				102				100				99				105
Shareholders' equity to total assets			13.15				13.17				11.83				11.93				11.76
Tangible shareholders' equity to tangible assets (1)			9.25				9.20				7.64				7.68				7.70

 

(1)	Non-GAAP financial measure. Core measurements are non-GAAP financial measures that are adjusted to exclude net non-core charges primarily
	related to acquisitions and restructuring activities. See pages F-9 and F-10 for reconciliations of non-GAAP financial measures.
(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)	All performance ratios are annualized and are based on average balance sheet amounts, where applicable.
(5)	Fully taxable equivalent considers the impact of tax advantaged investment securities and loans.

 

 

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-2)

 

		September 30,				June 30,				December 31,
(in thousands)		2017				2017				2016
Assets
Cash and due from banks		$	62,827			$	78,407			$	71,494
Short-term investments			29,219				23,426				41,581
Total cash and short-term investments			92,046				101,833				113,075
Trading security			12,603				12,837				13,229
Securities available for sale, at fair value			1,341,013				1,329,993				1,209,537
Securities held to maturity, at amortized cost			395,065				350,992				334,368
Federal Home Loan Bank stock and other restricted securities			75,117				78,874				71,112
Total securities			1,823,798				1,772,696				1,628,246
Loans held for sale, at fair value			143,745				146,482				120,673
Commercial real estate			2,671,237				2,689,522				2,616,438
Commercial and industrial loans			1,254,947				1,227,936				1,062,038
Residential mortgages			1,983,126				1,934,068				1,893,131
Consumer loans			1,038,096				1,012,956				978,180
Total loans			6,947,406				6,864,482				6,549,787
Less: Allowance for loan losses			(49,004	)			(47,359	)			(43,998	)
Net loans			6,898,402				6,817,123				6,505,789
Premises and equipment, net			94,729				94,354				93,215
Other real estate owned			288				279				151
Goodwill			403,106				403,106				403,106
Other intangible assets			17,136				17,874				19,445
Cash surrender value of bank-owned life insurance			161,290				140,135				139,257
Deferred tax asset, net			39,467				40,948				41,128
Other assets			92,696				92,441				98,457
Total assets		$	9,766,703			$	9,627,271			$	9,162,542
Liabilities and shareholders' equity
Demand deposits		$	1,221,043			$	1,179,456			$	1,278,875
NOW deposits			573,607				574,661				570,583
Money market deposits			1,751,190				1,790,173				1,781,605
Savings deposits			670,683				669,617				657,486
Time deposits			2,573,623				2,500,947				2,333,543
Total deposits			6,790,146				6,714,854				6,622,092
Senior borrowings			1,399,354				1,382,974				1,224,836
Subordinated borrowings			89,295				89,250				89,161
Total borrowings			1,488,649				1,472,224				1,313,997
Other liabilities			203,381				171,999				133,155
Total liabilities			8,482,176				8,359,077				8,069,244
Total common shareholders' equity			1,284,527				1,268,194				1,093,298
Total liabilities and shareholders' equity		$	9,766,703			$	9,627,271			$	9,162,542
Net shares outstanding			40,424				40,428				35,673

 

 

BERKSHIRE HILLS BANCORP, INC.

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

 

LOAN ANALYSIS

 

														Annualized Growth %
(in millions)		September 30, 2017 Balance				June 30, 2017 Balance				December 31, 2016 Balance				Quarter ended September 30, 2017				Year to Date
Commercial real estate - construction		$	284			$	291			$	288				(10	)%			(2	)%
Commercial real estate - other			2,387				2,398				2,329				(2	)			3
Total commercial real estate			2,671				2,689				2,617				(3	)			3
Commercial and industrial loans			1,255				1,228				1,062				9				24
Total commercial loans			3,926				3,917				3,679				1				9
Total residential mortgages			1,983				1,934				1,893				10				6
Home equity			386				388				394				(2	)			(3	)
Auto and other			652				625				584				17				15
Total consumer loans			1,038				1,013				978				10				8
Total loans		$	6,947			$	6,864			$	6,550				5	%			8	%

 

DEPOSIT ANALYSIS

 

														Annualized Growth %
(in millions)		September 30, 2017 Balance				June 30, 2017 Balance				December 31, 2016 Balance				Quarter ended September 30, 2017				Year to Date
Demand		$	1,221			$	1,179			$	1,279				14	%			(6	)%
NOW			574				575				571				(1	)			1
Money market			1,751				1,790				1,782				(9	)			(2	)
Savings			671				670				657				1				3
Time deposits			2,573				2,501				2,333				12				14
Total deposits		$	6,790			$	6,715			$	6,622				4	%			3	%

 

 

BERKSHIRE HILLS BANCORP, INC.

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

 

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
(in thousands, except per share data)		2017				2016				2017				2016
Interest and dividend income
Loans		$	76,024			$	61,571			$	216,950			$	179,716
Securities and other			13,036				8,940				37,485				28,289
Total interest and dividend income			89,060				70,511				254,435				208,005
Interest expense
Deposits			10,984				7,790				30,053				22,327
Borrowings			6,078				4,750				15,953				12,569
Total interest expense			17,062				12,540				46,006				34,896
Net interest income			71,998				57,971				208,429				173,109
Non-interest income
Mortgage banking originations			13,374				1,862				42,333				4,018
Loan related income			6,081				5,102				15,535				11,046
Deposit related fees			6,445				6,278				19,294				18,678
Insurance commissions and fees			2,581				2,601				8,305				8,154
Wealth management fees			2,315				2,269				7,127				7,006
Total fee income			30,796				18,112				92,594				48,902
Other			(2,255	)			188				(2,438	)			(440	)
Securities (losses) gains, net			(1	)			78				12,568				101
Gain on sale of business operations, net			296				563				296				563
Loss on termination of hedges			-				-				(6,629	)			-
Total non-interest income			28,836				18,941				96,391				49,126
Total net revenue			100,834				76,912				304,820				222,235
Provision for loan losses			4,900				4,734				14,884				13,262
Non-interest expense
Compensation and benefits			37,643				26,119				110,759				76,497
Occupancy and equipment			8,267				6,650				25,971				19,900
Technology and communications			6,644				4,902				19,614				14,573
Marketing and promotion			2,128				671				7,304				2,081
Professional services			2,247				1,744				6,888				4,533
FDIC premiums and assessments			1,651				1,208				4,537				3,644
Other real estate owned and foreclosures			(23	)			46				35				702
Amortization of intangible assets			739				749				2,310				2,355
Merger, restructuring and other expense			1,420				2,170				16,005				3,828
Other			5,104				4,585				16,246				14,099
Total non-interest expense			65,820				48,844				209,669				142,212
Income before income taxes			30,114				23,334				80,267				66,761
Income tax expense			7,211				6,953				22,210				18,422
Net income		$	22,903			$	16,381			$	58,057			$	48,339
Earnings per share:
Basic		$	0.57			$	0.53			$	1.55			$	1.58
Diluted		$	0.57			$	0.53			$	1.54			$	1.57
Weighted average shares outstanding:
Basic			39,984				30,621				37,547				30,584
Diluted			40,145				30,811				37,708				30,757

 

 

BERKSHIRE HILLS BANCORP, INC.

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

 

		Sept. 30,				June 30,				March 31,				Dec. 31,				Sept. 30,
(in thousands, except per share data)		2017				2017				2017				2016				2016
Interest and dividend income
Loans		$	76,024			$	71,983			$	68,943			$	62,884			$	61,571
Securities and other			13,036				12,683				11,766				9,550				8,940
Total interest and dividend income			89,060				84,666				80,709				72,434				70,511
Interest expense
Deposits			10,984				9,971				9,098				8,556				7,790
Borrowings			6,078				5,150				4,725				4,720				4,750
Total interest expense			17,062				15,121				13,823				13,276				12,540
Net interest income			71,998				69,545				66,886				59,158				57,971
Non-interest income
Mortgage banking originations			13,374				16,281				12,678				3,537				1,862
Loan related income			6,081				5,275				4,179				5,648				5,102
Deposit related fees			6,445				6,645				6,204				6,285				6,278
Insurance commissions and fees			2,581				2,588				3,136				2,323				2,601
Wealth management fees			2,315				2,286				2,526				1,911				2,269
Total fee income			30,796				33,075				28,723				19,704				18,112
Other			(2,255	)			(276	)			93				(2,849	)			188
Securities (losses) gains , net			(1	)			(1	)			12,570				(652	)			78
Gain on sale of business operations, net			296				-				-				522				563
Loss on termination of hedges			-				-				(6,629	)			-				-
Total non-interest income			28,836				32,798				34,757				16,725				18,941
Total net revenue			100,834				102,343				101,643				75,883				76,912
Provision for loan losses			4,900				4,889				5,095				4,100				4,734
Non-interest expense
Compensation and benefits			37,643				36,997				36,119				28,103				26,119
Occupancy and equipment			8,267				8,678				9,026				7,320				6,650
Technology and communications			6,644				6,883				6,087				5,310				4,902
Marketing and promotion			2,128				3,177				1,999				1,080				671
Professional services			2,247				2,190				2,451				1,666				1,744
FDIC premiums and assessments			1,651				1,588				1,298				1,422				1,208
Other real estate owned and foreclosures			(23	)			30				28				(11	)			46
Amortization of intangible assets			739				770				801				572				749
Merger, restructuring and other expense			1,420				2,903				11,682				11,633				2,170
Other			5,104				6,307				4,835				3,995				4,585
Total non-interest expense			65,820				69,523				74,326				61,090				48,844
Income before income taxes			30,114				27,931				22,222				10,693				23,334
Income tax expense			7,211				8,237				6,762				362				6,953
Net income		$	22,903			$	19,694			$	15,460			$	10,331			$	16,381
Earnings per share:
Basic		$	0.57			$	0.53			$	0.44			$	0.32			$	0.53
Diluted		$	0.57			$	0.53			$	0.44			$	0.32			$	0.53
Weighted average shares outstanding:
Basic			39,984				37,324				35,280				32,185				30,621
Diluted			40,145				37,474				35,452				32,381				30,811

 

 

BERKSHIRE HILLS BANCORP, INC.

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

 

		Quarters Ended
		Sept. 30,				June 30,				March 31,				Dec. 31,				Sept. 30,
		2017				2017				2017				2016				2016
Earning assets
Loans:
Commercial real estate			4.64	%			4.41	%			4.58	%			4.17	%			4.25	%
Commercial and industrial loans			5.09				5.30				4.86				4.88				5.06
Residential mortgages			3.68				3.62				3.56				3.57				3.62
Consumer loans			3.88				3.81				3.62				3.44				3.40
Total loans			4.33				4.25				4.19				4.00				4.06
Securities			3.43				3.45				3.38				3.58				3.47
Short-term investments and loans held for sale			3.40				3.07				2.40				2.13				1.68
Total earning assets			4.13				4.07				4.00				3.91				3.95
Funding liabilities
Deposits:
NOW			0.26				0.23				0.22				0.16				0.12
Money market			0.57				0.54				0.52				0.48				0.46
Savings			0.14				0.14				0.13				0.12				0.12
Time			1.20				1.13				1.08				1.14				1.10
Total interest-bearing deposits			0.78				0.73				0.69				0.69				0.67
Borrowings			1.65				1.46				1.38				1.63				1.52
Total interest-bearing liabilities			0.96				0.88				0.83				0.87				0.85
Net interest spread			3.17				3.19				3.17				3.04				3.10
Net interest margin (1)			3.36				3.36				3.33				3.21				3.27
Cost of funds (2)			0.82				0.75				0.70				0.73				0.72
Cost of deposits (3)			0.64				0.60				0.56				0.56				0.54

 

(1)	The effect of purchased loan accretion on the quarterly net interest margin was an increase in all quarters, which is shown sequentially as follows  beginning with the most recent quarter and ending with the earliest quarter:  0.14%, 0.12%, 0.18%, 0.10%, 0.12%. See page F-7 for purchased loan   accretion.
(2)	Cost of funds includes all deposits and borrowings.
(3)	The average cost of deposits includes the deposits held for sale.

 

 

BERKSHIRE HILLS BANCORP, INC.

AVERAGE BALANCES - UNAUDITED - (F-7)

 

		Quarters Ended
		Sept. 30,				June 30,				March 31,				Dec. 31,				Sept. 30,
(in thousands)		2017				2017				2017				2016				2016 (2)(4)
Assets
Loans
Commercial real estate		$	2,669,558			$	2,691,804			$	2,631,281			$	2,442,515			$	2,260,482
Commercial and industrial loans			1,183,980				1,130,384				1,072,716				998,543				1,009,581
Residential mortgages			1,977,538				1,871,329				1,906,457				1,833,530				1,839,364
Consumer loans			1,030,032				996,488				978,683				936,957				900,432
Total loans (1)			6,861,108				6,690,005				6,589,137				6,211,545				6,009,859
Securities (3)			1,779,379				1,701,443				1,625,769				1,255,207				1,197,760
Short-term investments and loans held for sale			167,724				148,276				118,537				83,057				40,259
Total earning assets			8,808,211				8,539,724				8,333,443				7,549,809				7,247,878
Goodwill and other intangible assets			420,853				421,601				422,331				362,641				349,059
Other assets			402,188				369,317				388,211				363,248				360,182
Total assets		$	9,631,252			$	9,330,642			$	9,143,985			$	8,275,698			$	7,957,119
Liabilities and shareholders' equity
Deposits
NOW		$	570,864			$	572,688			$	574,799			$	499,852			$	474,650
Money market			1,768,108				1,794,693				1,804,738				1,612,160				1,448,108
Savings			669,690				667,863				648,839				620,092				608,365
Time			2,587,702				2,472,990				2,351,183				2,171,325				2,095,269
Total interest-bearing deposits			5,596,364				5,508,234				5,379,559				4,903,429				4,626,392
Borrowings			1,445,700				1,398,653				1,374,620				1,144,846				1,235,065
Total interest-bearing liabilities			7,042,064				6,906,887				6,754,179				6,048,275				5,861,457
Non-interest-bearing demand deposits			1,196,451				1,155,533				1,178,790				1,178,308				1,084,786
Other liabilities			131,003				110,367				128,573				85,951				111,743
Total liabilities			8,369,518				8,172,787				8,061,542				7,312,534				7,057,986
Total shareholders' equity			1,261,734				1,157,855				1,082,443				963,164				899,133
Total liabilities and shareholders' equity		$	9,631,252			$	9,330,642			$	9,143,985			$	8,275,698			$	7,957,119
Supplementary data
Total non-maturity deposits		$	4,205,113			$	4,190,777			$	4,207,166			$	3,910,412			$	3,615,909
Total deposits			6,792,815				6,663,767				6,558,349				6,081,737				5,711,178
Fully taxable equivalent income adjustment			2,950				2,644				2,511				2,228				2,004
Purchased loan accretion			3,066				2,550				3,687				1,886				2,214
Total average tangible equity (5)			840,881				736,254				660,112				600,523				550,074

 

(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
		Sept. 30,				June 30,				March 31,				Dec. 31,				Sept. 30,
(in thousands)		2017				2017				2017				2016				2016
NON-PERFORMING ASSETS
Non-accruing loans:
Commercial real estate		$	5,228			$	7,587			$	7,718			$	5,883			$	6,295
Commercial and industrial loans			9,681				8,387				8,327				7,523				6,714
Residential mortgages			3,092				3,245				3,971				3,795				4,374
Consumer loans			4,350				4,977				5,109				5,039				3,281
Total non-accruing loans			22,351				24,196				25,125				22,240				20,664
Other real estate owned			288				279				71				151				80
Total non-performing assets		$	22,639			$	24,475			$	25,196			$	22,391			$	20,744
Total non-accruing loans/total loans			0.32	%			0.35	%			0.38	%			0.34	%			0.34	%
Total non-performing assets/total assets			0.23	%			0.25	%			0.27	%			0.24	%			0.26	%
PROVISION AND ALLOWANCE FOR LOAN LOSSES
Balance at beginning of period		$	47,359			$	45,804			$	43,998			$	43,105			$	41,397
Charged-off loans			(3,796	)			(3,431	)			(3,623	)			(3,488	)			(3,441	)
Recoveries on charged-off loans			541				97				334				281				415
Net loans charged-off			(3,255	)			(3,334	)			(3,289	)			(3,207	)			(3,026	)
Provision for loan losses			4,900				4,889				5,095				4,100				4,734
Balance at end of period		$	49,004			$	47,359			$	45,804			$	43,998			$	43,105
Allowance for loan losses/total loans			0.71	%			0.69	%			0.69	%			0.67	%			0.71	%
Allowance for loan losses/non-accruing loans			219	%			196	%			182	%			198	%			209	%
NET LOAN CHARGE-OFFS
Commercial real estate		$	(1,425	)		$	(1,474	)		$	(633	)		$	(676	)		$	(547	)
Commercial and industrial loans			(573	)			(625	)			(1,634	)			(1,148	)			(1,610	)
Residential mortgages			130				(337	)			(324	)			(768	)			(452	)
Home equity			(634	)			(268	)			(95	)			(47	)			(65	)
Auto and other consumer			(753	)			(630	)			(603	)			(568	)			(352	)
Total, net		$	(3,255	)		$	(3,334	)		$	(3,289	)		$	(3,207	)		$	(3,026	)
Net charge-offs (QTD annualized)/average loans			0.19	%			0.20	%			0.20	%			0.21	%			0.20	%
Net charge-offs (YTD annualized)/average loans			0.20	%			0.20	%			0.20	%			0.21	%			0.22	%
DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS
30-89 Days delinquent			0.25	%			0.23	%			0.24	%			0.35	%			0.25	%
90+ Days delinquent and still accruing			0.17	%			0.12	%			0.16	%			0.15	%			0.09	%
Total accruing delinquent loans			0.42	%			0.35	%			0.40	%			0.50	%			0.34	%
Non-accruing loans			0.32	%			0.35	%			0.38	%			0.34	%			0.34	%
Total delinquent and non-accruing loans			0.74	%			0.70	%			0.78	%			0.84	%			0.68	%

 

 

BERKSHIRE HILLS BANCORP, INC.

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

 

				At or for the Quarters Ended
				Sept. 30,				June 30,				March 31,				Dec. 31,				Sept. 30,
(in thousands)				2017				2017				2017				2016				2016
Net income				$	22,903			$	19,694			$	15,460			$	10,331			$	16,381
Adj: Net securities losses/(gains)					1				1				(12,570	)			652				(78	)
Adj: Loss on termination of hedges					-				-				6,629				-				-
Adj: Net (gains) on sale of business operations					(296	)			-				-				(522	)			(563	)
Adj: Merger and acquisition expense					1,110				2,266				5,947				10,820				1,453
Adj: Restructuring expense and other expense					310				637				5,735				1,113				717
Adj: Income taxes					(474	)			(1,039	)			(1,801	)			(4,373	)			(492	)
Total core income (4)		(A)		$	23,554			$	21,559			$	19,400			$	18,021			$	17,418
Total revenue				$	100,834			$	102,343			$	101,643			$	75,883			$	76,912
Adj: Net securities losses/(gains)					1				1				(12,570	)			652				(78	)
Adj: Net (gains) on sale of business operations					(296	)			-				-				(522	)			(563	)
Adj: Loss on termination of hedges					-				-				6,629				-				-
Total core revenue (4)		(B)		$	100,539			$	102,344			$	95,702			$	76,013			$	76,271
Total non-interest expense				$	65,820			$	69,523			$	74,326			$	61,090			$	48,844
Less: Merger, restructuring and other expense (see above)					(1,420	)			(2,903	)			(11,682	)			(11,933	)			(2,170	)
Core non-interest expense (4)		(C)		$	64,400			$	66,620			$	62,644			$	49,157			$	46,674
(in millions, except per share data)
Total average assets		(D)		$	9,631			$	9,331			$	9,144			$	8,276			$	7,957
Total average shareholders' equity		(E)			1,262				1,158				1,082				963				899
Total average tangible shareholders' equity (4)		(F)			841				736				660				601				550
Total tangible shareholders' equity, period-end (1)(4)		(G)			864				847				678				671				584
Total tangible assets, period-end (1)(4)		(H)			9,346				9,206				8,876				8,740				7,583
Total common shares outstanding, period-end (thousands)		(I)			40,424				40,428				35,729				35,673				31,122
Average diluted shares outstanding (thousands)		(J)			40,145				37,474				35,452				32,381				30,811
Core earnings per share, diluted (4)		(A/J)		$	0.59			$	0.58			$	0.55			$	0.56			$	0.57
Tangible book value per share, period-end (4)		(G/I)			21.38				20.96				18.97				18.81				18.78
Total tangible shareholders' equity/total tangible assets (4)		(G)/(H)			9.25				9.20				7.64				7.68				7.70
Performance ratios (2)
GAAP return on assets					0.95	%			0.84	%			0.68	%			0.50	%			0.82	%
Core return on assets (4)		(A/D)			0.98				0.92				0.85				0.87				0.88
GAAP return on equity					7.26				6.80				5.71				4.29				7.29
Core return on equity (4)		(A/E)			7.47				7.45				7.17				7.49				7.75
Core return on tangible equity (3)(4)		(A/F)			11.42				11.96				12.05				12.23				12.99
Efficiency ratio (4)(5)		(C-M)/(B+K+N)			59.28				61.72				61.94				58.42				57.32
Net interest margin					3.36				3.36				3.33				3.21				3.27
Supplementary data (in thousands)
Tax benefit on tax-credit investments (6)		(K)		$	3,905			$	1,696			$	1,624			$	4,918			$	1,852
Non-interest income charge on tax-credit investments (7)		(L)			(3,347	)			(1,453	)			(1,329	)			(4,428	)			(1,525	)
Net income on tax-credit investments		(K+L)			558				243				295				490				327
Intangible amortization		(M)		$	739			$	770			$	801			$	572			$	749
Fully taxable equivalent income adjustment		(N)			2,950				2,644				2,511				2,228				2,004

 

(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 Nine Months Ended
				September 30,				September 30,
(Dollars in thousands)				2017				2016
Net income				$	58,057			$	48,339
Adj: Net securities (gains)					(12,568	)			(101	)
Adj: Loss on termination of hedges					6,629				-
Adj: Net (gains) on sale of business operations					(296	)			(563	)
Adj: Merger and acquisition expenses					9,323				2,681
Adj: Restructuring expense and other					6,682				1,147
Adj: Income taxes					(3,314	)			(1,082	)
Total core income (4)		(A)		$	64,513			$	50,421
Total revenue				$	304,820			$	222,235
Adj: Net securities (gains)					(12,568	)			(101	)
Adj: Net (gains) on sale of business operations					(296	)			(563	)
Adj: Loss on termination of hedges					6,629				-
Total core revenue (4)		(B)		$	298,585			$	221,571
Total non-interest expense				$	209,669			$	142,212
Less: Merger, restructuring and other expense (see above)					(16,005	)			(3,828	)
Core non-interest expense (4)		(C)		$	193,664			$	138,384
(Dollars in millions, except per share data)
Total average assets		(D)		$	9,369			$	7,852
Total average shareholders' equity		(E)			1,167				893
Total average tangible shareholders' equity (4)		(F)			746				551
Total tangible shareholders' equity, period-end (1)(4)		(G)			864				584
Total tangible assets, period-end (1)(4)		(H)			9,346				7,583
Total common shares outstanding, period-end (thousands)		(I)			40,424				31,122
Average diluted shares outstanding (thousands)		(J)			37,708				30,757
Core earnings per common share, diluted (4)		(A/J)		$	1.71			$	1.64
Tangible book value per common share, period-end (4)		(G/I)			21.38				18.78
Total tangible shareholders' equity/total tangible assets (4)		(G/H)			9.25				7.70
Performance ratios (2)
GAAP return on assets					0.83	%			0.82	%
Core return on assets (4)		(A/D)			0.92				0.86
GAAP return on equity					6.63				7.21
Core return on equity (4)		(A/E)			7.37				7.53
Core return on tangible equity (3)(4)		(A/F)			11.78				12.55
Efficiency ratio (4)(5)		(C-M)/(B+K+N)			60.96				58.22
Net interest margin					3.35				3.30
Supplementary data
Tax benefit on tax-credit investments (6)		(K)		$	7,225			$	6,217
Non-interest income charge on tax-credit investments (7)		(L)			(6,129	)			(4,564	)
Net income on tax-credit investments		(K+L)			1,096				1,653
Intangible amortization		(M)			2,310				2,355
Fully taxable equivalent income adjustment		(N)			8,105				5,870

 

(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.