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Section 1: 8-K (FORM 8-K)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

 

FORM 8-K

 

CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15(D) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): April 23, 2018

 

BERKSHIRE HILLS BANCORP, INC.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware   001-15781   04-3510455

(State or Other Jurisdiction)

of Incorporation)

  (Commission File No.)  

(I.R.S. Employer

Identification No.)

 

60 State Street, Boston, Massachusetts   01209
(Address of Principal Executive Offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (800) 773-5601, ext. 133773

 

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

 

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

 

 

 

 

Item 2.02Results of Operations and Financial Condition

 

On April 23, 2018, Berkshire Hills Bancorp, Inc. (the “Company”), the holding company for Berkshire Bank (the “Bank”), announced its financial results for the quarter ended March 31, 2018. The news release containing the financial results is included as Exhibit 99.1 and shall not be deemed “filed” for any purpose.

 

The Company will conduct a conference call/webcast on April 24, 2018 to discuss the financial results for the quarter and provide guidance about expected future results. A telephone replay of the call will be available through May 1, 2018. The webcast will be available on the Company’s website for an extended period of time.

 

Item 8.01Other Events

 

On April 23, 2018, the Company’s Board of Directors announced the declaration of a cash dividend of $0.22 per share of Company common stock and $0.44 per share of Company Series B preferred stock to shareholders of record at the close of business on May 10, 2018 and payable on May 24, 2018.

 

Item 9.01Financial Statements and Exhibits

 

(a)Financial Statements of Businesses Acquired. Not applicable.

 

(b)Pro Forma Financial Information. Not applicable.

 

(c)Shell Company Transactions. Not applicable.

 

(d)Exhibits.

 

  Exhibit No.   Description
       
  99.1   News Release dated April 23, 2018

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 

    Berkshire Hills Bancorp, Inc.
     
     
DATE: April 24, 2018 By: /s/ Michael P. Daly
   

Michael P. Daly

President and Chief Executive Officer

 

 

 

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

 

Exhibit 99.1

 


Berkshire Hills Reports 63% Increase in First Quarter Earnings;

 

Dividend Declared

 

BOSTON, April 23, 2018. Berkshire Hills Bancorp, Inc. (NYSE: BHLB) reported first quarter 2018 net income of $25 million, which was a 63% increase over 2017 first quarter results of $15 million. This reflected the ongoing benefit of the Company’s growth and expansion, together with the benefit of a lower federal tax rate resulting from federal tax reform near the end of 2017.

 

FIRST QUARTER FINANCIAL HIGHLIGHTS (income statement comparisons are year over year and balance sheet growth is compared to prior quarter-end):

 

·$0.55 GAAP EPS
·$0.65 Core EPS
·13% increase in net revenue
·30% increase in loan and deposit related fee income
·4% annualized loan growth; 3% annualized C&I loan growth
·3% increase in average deposits
·3.36% net interest margin
·59.5% efficiency ratio
·0.27% non-performing assets/assets
·0.17% net loan charge-offs/average loans

 

CEO Michael Daly stated, “We had a solid start to the year, delivering ongoing growth while integrating our new Commerce operations. With the benefit of greater efficiency, GAAP return on assets improved to 0.88% and core return on assets improved to 1.04%. We expect continued momentum in the second quarter where GAAP return on assets will improve to over 1.00% and core return on assets will improve to over 1.10%. We formally opened our new Boston corporate headquarters, which also serves as a regional hub for Greater Boston relationship teams. We added additional bankers both in Boston and in the Princeton, NJ area. We also opened a new branch in Simsbury, CT, which uses a combination of virtual teller technology and MyBanker relationship professionals to provide enhanced customer support and product availability.”

 

DIVIDEND DECLARED

 

The Board of Directors declared a quarterly cash dividend of $0.22 per common share to shareholders of record at the close of business on May 10, 2018, payable on May 24, 2018. The dividend equates to a 2.3% annualized yield based on the $37.88 average closing price of Berkshire Hills Bancorp common stock during the first quarter. The Board also declared a quarterly cash dividend of $0.44 per share for the preferred stock issued in conjunction with the Commerce acquisition, with the same record and payment dates as above. The quarterly common and preferred dividends were increased in the prior quarter by 5%.

 

1 

 

 

FINANCIAL CONDITION

 

Total assets ended the first quarter of 2018 at $11.5 billion. Both commercial loans and residential mortgages contributed to the 4% annualized increase in total loans. Period-end deposit balances are impacted by daily fluctuations related to payroll processing. Average deposits increased by 3% compared to the prior quarter. Asset quality metrics remained strong. Delinquency metrics increased due to one commercial credit which is expected to remain accruing and is in the process of collection. Metrics related to capital, liquidity, and book value per share were generally stable compared to the start of the year.

 

RESULTS OF OPERATIONS

 

First quarter revenue and expense included the full quarter impact of the Commerce operations acquired on October 13, 2017. 2018 first quarter net income totaled $25 million, which was a 63% increase over 2017 first quarter results of $15 million. Earnings per share increased by 25% to $0.55, including the impact of additional shares issued in 2017. First quarter core earnings per share improved by 18% to $0.65 per share in 2018 compared $0.55 in 2017. The measure of core earnings per share excludes amounts viewed as not related to normalized operations. In the most recent quarter these were primarily related to the integration of the Commerce operations.

 

Quarterly net revenue totaled $115 million in the most recent quarter, and included the impact of lower mortgage banking fees, which was partially offset by seasonal gains in wealth and insurance fee income compared to the prior quarter. The net interest margin decreased to 3.36% from 3.50% in the prior quarter. The contribution from purchased loan accretion decreased by 0.08%. Additionally, the contribution of taxable equivalent securities yields decreased by 0.05% as a result of lower federal income taxes. The cost of funds increased due to change in deposit mix and higher deposit and borrowings funding costs as a result of increases in short term market interest rates. The first quarter loan loss provision was $5.6 million and exceeded the net loan charge-offs recorded during the period.

 

Total first quarter non-interest expense decreased by 15% compared to the prior quarter, primarily due to lower non-core Commerce merger charges. Total core expense increased by 1% including a full quarter of the new Commerce operations. The efficiency ratio measured 59.5%, including the benefit of expense reductions in mortgage banking. Total full-time equivalent staff measured 1,941 positions at quarter-end, compared to 1,992 positions at the start of the year. The first quarter effective income tax rate was 22% in 2018 compared to 30% in 2017, reflecting the benefit of federal income tax reform which became effective in 2018.

 

INVESTOR CONFERENCE CALL

 

Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Tuesday, April 24, 2018 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/10118850. 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.  Additionally, participants 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 participate at the above time by dialing 1-844-792-3726 and asking the Operator to join the Berkshire Hills Bancorp (BHLB) earnings call. A telephone replay of the call will be available through Tuesday, May 1, 2018 by dialing 877-344-7529 and entering access number 10118850.  The webcast will be available on Berkshire's website for an extended period of time.

 

2 

 

 

BACKGROUND

 

Berkshire Hills Bancorp is the parent of Berkshire Bank - America's Most Exciting Bank®. The Company has approximately $11.5 billion in assets and 114 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. Securities gains/losses include unrealized gains/losses on equity securities beginning in the first quarter of 2018. 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 in 2017 and 2018 are primarily related to business combinations with First Choice Bank and Commerce Bancshares Corp. 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.

 

###

 

3 

 

 

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 Operations (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

 

4 

 

 

 

SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED - (F-1)

 

   At or for the Quarters Ended (2) 
   March 31,   Dec. 31,   Sept. 30,   June 30,   March 31, 
   2018   2017 (3)   2017   2017   2017 
PER SHARE DATA                         
Net earnings/(loss), diluted  $0.55   $(0.06)  $0.57   $0.53   $0.44 
Core earnings, diluted (1)   0.65    0.58    0.59    0.58    0.55 
Total book value per common share   32.12    32.14    31.78    31.37    30.77 
Tangible book value per common share (1)   19.86    19.83    21.38    20.96    18.97 
Market price at period end   37.95    36.60    38.75    35.15    36.05 
Dividends per common share   0.22    0.21    0.21    0.21    0.21 
Dividends per preferred share   0.44    0.42    -    -    - 
                          
PERFORMANCE RATIOS (4)                         
Return on assets   0.88%   (0.10)%   0.95%   0.84%   0.68%
Core return on assets (1)   1.04    0.94    0.98    0.92    0.85 
Return on equity   6.69    (0.77)   7.26    6.80    5.71 
Core return on equity (1)   7.92    7.16    7.47    7.45    7.17 
Core return on tangible common equity (1)   13.43    11.90    11.42    11.96    12.05 
Net interest margin, fully taxable equivalent (FTE) (5)   3.36    3.50    3.36    3.36    3.33 
Fee income/Net interest and fee income   25.51    25.91    29.96    32.23    30.04 
Efficiency ratio (1)   59.54    57.43    59.28    61.72    61.94 
                          
GROWTH (Year-to-date)                         
Total commercial loans (annualized)   1%   38%   9%   13%   15%
Total loans (annualized)   4    27    8    10    6 
Total deposits (annualized)   (3)   32    3    3    2 
Total net revenues (compared to prior year)   13    41    37    40    39 
Earnings per share (compared to prior year)   25    (25)   (2)   (8)   (15)
Core earnings per share (compared to prior year) (1)   18    4    4    5    2 
                          
FINANCIAL DATA (in millions)                         
Total assets  $11,519   $11,571   $9,767   $9,627   $9,298 
Total earning assets   10,442    10,509    8,944    8,807    8,486 
Total securities   1,932    1,899    1,824    1,773    1,714 
Total loans   8,376    8,299    6,947    6,864    6,656 
Allowance for loan losses   54    52    49    47    46 
Total intangible assets   556    558    420    421    422 
Total deposits   8,683    8,750    6,790    6,715    6,656 
Total shareholders' equity   1,498    1,496    1,285    1,268    1,100 
Net income/(loss)   25.2    (2.8)   22.9    19.7    15.5 
Core income (1)   29.9    26.3    23.6    21.6    19.4 
                          
ASSET QUALITY AND CONDITION RATIOS                         
Net charge-offs (current quarter annualized)/average loans   0.17%   0.17%   0.19%   0.20%   0.20%
Total non-performing assets/total assets   0.27    0.21    0.23    0.25    0.27 
Allowance for loan losses/total loans   0.64    0.62    0.71    0.69    0.69 
Loans/deposits   96    95    102    102    100 
Shareholders' equity to total assets   13.00    12.93    13.15    13.17    11.83 
Tangible shareholders' equity to tangible assets (1)   8.59    8.52    9.25    9.20    7.64 

                         
(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 page F-9 for reconciliations of non-GAAP financial measures.
(2) Reconciliations of non-GAAP financial measures, including all references to core and tangible amounts, appear on page F-9.      
(3) The Company acquired Commerce Bancshares Corp., the parent of Commerce Bank & Trust Company, on October 13, 2017.       
(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.              

               

 F-1 

 

 

  

CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-2)

 

   March 31,   December 31, 
(in thousands)  2018   2017 
Assets          
Cash and due from banks  $88,193   $91,122 
Short-term investments   35,694    157,641 
Total cash and short-term investments   123,887    248,763 
           
Trading security   11,795    12,277 
Securities available for sale, at fair value   1,460,660    1,426,099 
Securities held to maturity, at amortized cost   395,337    397,103 
Federal Home Loan Bank stock and other restricted securities   64,038    63,085 
Total securities   1,931,830    1,898,564 
           
Loans held for sale, at fair value   98,440    153,620 
           
Commercial real estate   3,266,737    3,264,742 
Commercial and industrial loans   1,818,974    1,803,939 
Residential mortgages   2,181,807    2,102,807 
Consumer loans   1,108,899    1,127,850 
Total loans   8,376,417    8,299,338 
Less: Allowance for loan losses   (53,859)   (51,834)
Net loans   8,322,558    8,247,504 
           
Premises and equipment, net   111,237    109,352 
Other real estate owned   -    - 
Goodwill   519,128    519,287 
Other intangible assets   37,085    38,296 
Cash surrender value of bank-owned life insurance   192,379    191,221 
Deferred tax asset, net   51,679    47,061 
Other assets   131,024    117,083 
Total assets  $11,519,247   $11,570,751 
           
Liabilities and shareholders' equity          
Demand deposits  $1,575,243   $1,606,656 
NOW and other deposits   715,581    734,558 
Money market deposits   2,749,763    2,776,157 
Savings deposits   756,711    741,954 
Time deposits   2,885,969    2,890,205 
Total deposits   8,683,267    8,749,530 
           
Senior borrowings   1,125,860    1,047,736 
Subordinated borrowings   89,384    89,339 
Total borrowings   1,215,244    1,137,075 
           
Other liabilities   123,079    187,882 
Total liabilities   10,021,590    10,074,487 
           
Total preferred shareholders' equity   40,633    40,633 
Total common shareholders' equity   1,457,024    1,455,631 
Total shareholders' equity   1,497,657    1,496,264 
Total liabilities and shareholders' equity  $11,519,247   $11,570,751 
           
Net common shares outstanding   45,360    45,290 

 

 F-2 

 

 

 

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

LOAN ANALYSIS

 

           Annualized Growth % 
(in millions)  March 31, 2018
Balance
   December 31, 2017
Balance
   Quarter ended
March 31, 2018
 
             
Commercial real estate - construction  $347   $354    (8)%
Commercial real estate - other   2,920    2,910    1 
Total commercial real estate   3,267    3,264    0 
Commercial and industrial loans   1,819    1,804    3 
Total commercial loans   5,086    5,068    1 
                
Total residential mortgages   2,181    2,103    15 
                
Home equity   400    410    (10)
Auto and other   709    718    (5)
Total consumer loans   1,109    1,128    (7)
Total loans  $8,376   $8,299    4%

 

 

DEPOSIT ANALYSIS

 

           Annualized Growth % 
(in millions)  March 31, 2018
Balance
   December 31, 2017
Balance
   Quarter ended
March 31, 2018
 
Demand  $1,575   $1,606    (8)%
NOW and other   715    735    (11)
Money market   2,750    2,776    (4)
Savings   757    742    8 
Time deposits   2,886    2,890    (1)
Total deposits  $8,683   $8,749    (3)%

 

 F-3 

 

 

 

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

 

   Three Months Ended 
   March 31, 
(in thousands, except per share data)  2018   2017 
Interest and dividend income          
Loans  $92,835   $68,943 
Securities and other   14,405    11,766 
Total interest and dividend income   107,240    80,709 
Interest expense          
Deposits   15,325    9,098 
Borrowings   6,445    4,725 
Total interest expense   21,770    13,823 
Net interest income   85,470    66,886 
Non-interest income          
Mortgage banking originations   10,147    12,678 
Loan related income   5,438    4,179 
Deposit related fees   8,066    6,204 
Insurance commissions and fees   3,025    3,136 
Wealth management fees   2,597    2,526 
Total fee income   29,273    28,723 
Other   1,268    93 
Securities (losses)/gains, net   (1,502)   12,570 
Gain on sale of business operations and assets, net   481    - 
Loss on termination of hedges   -    (6,629)
Total non-interest income   29,520    34,757 
Total net revenue   114,990    101,643 
Provision for loan losses   5,575    5,095 
Non-interest expense          
Compensation and benefits   42,184    36,119 
Occupancy and equipment   10,082    9,026 
Technology and communications   6,830    6,087 
Marketing and promotion   2,612    1,999 
Professional services   2,053    2,451 
FDIC premiums and assessments   1,195    1,298 
Other real estate owned and foreclosures   67    28 
Amortization of intangible assets   1,268    801 
Merger, restructuring and other expense   5,093    11,682 
Other   5,485    4,835 
Total non-interest expense   76,869    74,326 
           
Income before income taxes   32,546    22,222 
Income tax expense   7,298    6,762 
Net income  $25,248   $15,460 
Preferred stock dividend   230    - 
Income available to common shareholders  $25,018   $15,460 
           
Earnings per common share:          
Basic  $0.55   $0.44 
Diluted  $0.55   $0.44 
           
Weighted average shares outstanding:          
Basic   45,966    35,280 
Diluted   46,200    35,452 

 

 F-4 

 

 

 

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

 

   March 31,   Dec. 31,   Sept. 30,   June 30,   March 31, 
(in thousands, except per share data)  2018   2017   2017   2017   2017 
Interest and dividend income                         
Loans  $92,835   $91,149   $76,024   $71,983   $68,943 
Securities and other   14,405    14,674    13,036    12,683    11,766 
Total interest and dividend income   107,240    105,823    89,060    84,666    80,709 
Interest expense                         
Deposits   15,325    13,802    10,984    9,971    9,098 
Borrowings   6,445    5,655    6,078    5,150    4,725 
Total interest expense   21,770    19,457    17,062    15,121    13,823 
Net interest income   85,470    86,366    71,998    69,545    66,886 
Non-interest income                         
Mortgage banking originations   10,147    11,918    13,374    16,281    12,678 
Loan related income   5,438    5,866    6,081    5,275    4,179 
Deposit related fees   8,066    7,871    6,445    6,645    6,204 
Insurance commissions and fees   3,025    2,284    2,581    2,588    3,136 
Wealth management fees   2,597    2,268    2,315    2,286    2,526 
Total fee income   29,273    30,207    30,796    33,075    28,723 
Other   1,268    (939)   (2,255)   (276)   93 
Securities (losses)/gains, net   (1,502)   30    (1)   (1)   12,570 
Gain on sale of business operations and assets, net   481    -    296    -    - 
Loss on termination of hedges   -    -    -    -    (6,629)
Total non-interest income   29,520    29,298    28,836    32,798    34,757 
Total net revenue   114,990    115,664    100,834    102,343    101,643 
Provision for loan losses   5,575    6,141    4,900    4,889    5,095 
Non-interest expense                         
Compensation and benefits   42,184    42,220    37,643    36,997    36,119 
Occupancy and equipment   10,082    9,451    8,267    8,678    9,026 
Technology and communications   6,830    6,286    6,644    6,883    6,087 
Marketing and promotion   2,612    4,573    2,128    3,177    1,999 
Professional services   2,053    2,277    2,247    2,190    2,451 
FDIC premiums and assessments   1,195    1,920    1,651    1,588    1,298 
Other real estate owned and foreclosures   67    9    (23)   30    28 
Amortization of intangible assets   1,268    1,183    739    770    801 
Merger, restructuring and other expense   5,093    15,553    1,420    2,903    11,682 
Other   5,485    6,569    5,104    6,307    4,835 
Total non-interest expense   76,869    90,041    65,820    69,523    74,326 
                          
Income before income taxes   32,546    19,482    30,114    27,931    22,222 
Income tax expense   7,298    22,292    7,211    8,237    6,762 
Net income/(loss)  $25,248   $(2,810)  $22,903   $19,694   $15,460 
Preferred stock dividend   230    219    -    -    - 
Income/(loss) available to common shareholders  $25,018   $(3,029)  $22,903   $19,694   $15,460 
                          
                          
Earnings/(loss) per common share:                         
Basic  $0.55   $(0.06)  $0.57   $0.53   $0.44 
Diluted  $0.55   $(0.06)  $0.57   $0.53   $0.44 
                          
Weighted average shares outstanding:                         
Basic   45,966    45,122    39,984    37,324    35,280 
Diluted   46,200    45,122    40,145    37,474    35,452 

 

 F-5 

 

 

 

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

 

   Quarters Ended 
   March 31,   Dec. 31,   Sept. 30,   June 30,   March 31, 
   2018   2017   2017   2017   2017 
                     
Earning assets                         
Loans:                         
Commercial real estate   4.76%   4.73%   4.64%   4.41%   4.58%
Commercial and industrial loans   5.19    5.25    5.09    5.30    4.86 
Residential mortgages   3.56    3.76    3.68    3.62    3.56 
Consumer loans   4.01    3.94    3.88    3.81    3.62 
Total loans   4.45    4.47    4.33    4.25    4.19 
Securities   3.26    3.55    3.43    3.45    3.38 
Short-term investments and loans held for sale   3.43    2.90    3.40    3.07    2.40 
Total earning assets   4.21    4.27    4.13    4.07    4.00 
                          
Funding liabilities                         
Deposits:                         
NOW and other   0.28    0.25    0.26    0.23    0.22 
Money market   0.73    0.66    0.57    0.54    0.52 
Savings   0.14    0.14    0.14    0.14    0.13 
Time   1.40    1.25    1.20    1.13    1.08 
Total interest-bearing deposits   0.90    0.82    0.78    0.73    0.69 
Borrowings   2.02    1.81    1.65    1.46    1.38 
Total interest-bearing liabilities   1.08    0.97    0.96    0.88    0.83 
                          
Net interest spread   3.13    3.30    3.17    3.19    3.17 
Net interest margin (1)   3.36    3.50    3.36    3.36    3.33 
                          
Cost of funds (2)   0.90    0.81    0.82    0.75    0.70 
Cost of deposits   0.73    0.66    0.64    0.60    0.56 

 

(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:  0.13%, 0.21%, 0.14%, 0.12%, 0.18%. See page F-7 for purchased loan accretion.
(2) Cost of funds includes all deposits and borrowings.                  

 

 F-6 

 

 

 

AVERAGE BALANCES - UNAUDITED - (F-7)

 

   Quarters Ended 
   March 31,   Dec. 31,   Sept. 30,   June 30,   March 31, 
(in thousands)  2018   2017   2017   2017   2017 
Assets                         
Loans                         
Commercial real estate  $3,250,861   $3,161,902   $2,669,558   $2,691,804   $2,631,281 
Commercial and industrial loans   1,811,433    1,645,719    1,183,980    1,130,384    1,072,716 
Residential mortgages   2,138,544    2,081,548    1,977,538    1,871,329    1,906,457 
Consumer loans   1,114,586    1,123,683    1,030,032    996,488    978,683 
Total loans (1)    8,315,424    8,012,852    6,861,108    6,690,005    6,589,137 
Securities (2)   1,933,002    1,921,724    1,779,379    1,701,443    1,625,769 
Short-term investments and loans held for sale   139,161    146,101    167,724    148,276    118,537 
Total earning assets   10,387,587    10,080,677    8,808,211    8,539,724    8,333,443 
Goodwill and other intangible assets   557,321    533,157    420,853    421,601    422,331 
Other assets   521,745    516,802    402,188    369,317    388,211 
Total assets  $11,466,653   $11,130,636   $9,631,252   $9,330,642   $9,143,985 
                          
Liabilities and shareholders' equity                         
Deposits                         
NOW and other  $712,181   $702,353   $570,864   $572,688   $574,799 
Money market   2,518,920    2,371,203    1,768,108    1,794,693    1,804,738 
Savings   743,944    733,157    669,690    667,863    648,839 
Time   2,913,512    2,906,423    2,587,702    2,472,990    2,351,183 
Total interest-bearing deposits   6,888,557    6,713,136    5,596,364    5,508,234    5,379,559 
Borrowings   1,275,173    1,229,781    1,445,700    1,398,653    1,374,620 
Total interest-bearing liabilities   8,163,730    7,942,917    7,042,064    6,906,887    6,754,179 
Non-interest-bearing demand deposits   1,656,260    1,591,431    1,196,451    1,155,533    1,178,790 
Other liabilities   137,976    127,562    131,003    110,367    128,573 
Total liabilities   9,957,966    9,661,910    8,369,518    8,172,787    8,061,542 
                          
Total preferred shareholders' equity   40,633    34,892    -    -    - 
Total common shareholders' equity   1,468,054#   1,433,834    1,261,734    1,157,855    1,082,443 
Total shareholders' equity   1,508,687    1,468,726    1,261,734    1,157,855    1,082,443 
Total liabilities and shareholders' equity  $11,466,653   $11,130,636   $9,631,252   $9,330,642   $9,143,985 
                          
                          
Supplementary data                         
Total average non-maturity deposits  $5,631,305   $5,398,144   $4,205,113   $4,190,777   $4,207,166 
Total average deposits   8,544,817    8,304,567    6,792,815    6,663,767    6,558,349 
Fully taxable equivalent income adjustment   1,820    3,122    2,950    2,644    2,511 
Purchased loan accretion   3,433    5,507    3,066    2,550    3,687 
Total average tangible equity (3)   951,366    935,569    840,881    736,254    660,112 

                     
(1) Total loans include non-accruing loans.                    
(2) Average balances for securities available-for-sale are based on amortized cost.              

(3) See page F-9 for details on the calculation of total average tangible equity. 

 

             

 F-7 

 

 

 

ASSET QUALITY ANALYSIS - UNAUDITED - (F-8)

  

   At or for the Quarters Ended 
   March 31,   Dec. 31,   Sept. 30,   June 30,   March 31, 
(in thousands)  2018   2017   2017   2017   2017 
NON-PERFORMING ASSETS                         
Non-accruing loans:                         
Commercial real estate  $10,084   $7,266   $5,228   $7,587   $7,718 
Commercial and industrial loans   7,430    7,311    9,681    8,387    8,327 
Residential mortgages   5,777    2,883    3,092    3,245    3,971 
Consumer loans   5,996    5,438    4,350    4,977    5,109 
Total non-accruing loans   29,287    22,898    22,351    24,196    25,125 
Other real estate owned   -    -    288    279    71 
Repossessed assets   1,241    1,147    -    -    - 
Total non-performing assets  $30,528   $24,045   $22,639   $24,475   $25,196 
                          
Total non-accruing loans/total loans   0.35%   0.28%   0.32%   0.35%   0.38%
Total non-performing assets/total assets   0.27%   0.21%   0.23%   0.25%   0.27%
                          
PROVISION AND ALLOWANCE FOR LOAN LOSSES                         
Balance at beginning of period  $51,834   $49,004   $47,359   $45,804   $43,998 
Charged-off loans   (3,791)   (3,734)   (3,796)   (3,431)   (3,623)
Recoveries on charged-off loans   241    423    541    97    334 
Net loans charged-off   (3,550)   (3,311)   (3,255)   (3,334)   (3,289)
Provision for loan losses   5,575    6,141    4,900    4,889    5,095 
Balance at end of period  $53,859   $51,834   $49,004   $47,359   $45,804 
                          
Allowance for loan losses/total loans   0.64%   0.62%   0.71%   0.69%   0.69%
Allowance for loan losses/non-accruing loans   184%   226%   219%   196%   182%
                          
NET LOAN CHARGE-OFFS                         
Commercial real estate  $(817)  $(881)  $(1,425)  $(1,474)  $(633)
Commercial and industrial loans   (972)   (960)   (573)   (625)   (1,634)
Residential mortgages   (406)   (759)   130    (337)   (324)
Home equity   (588)   (123)   (634)   (268)   (95)
Auto and other consumer   (767)   (588)   (753)   (630)   (603)
Total, net  $(3,550)  $(3,311)  $(3,255)  $(3,334)  $(3,289)
                          
Net charge-offs (QTD annualized)/average loans   0.17%   0.17%   0.19%   0.20%   0.20%
Net charge-offs (YTD annualized)/average loans   0.17%   0.19%   0.20%   0.20%   0.20%
                          
DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS                         
30-89 Days delinquent   0.39%   0.35%   0.25%   0.23%   0.24%
90+ Days delinquent and still accruing   0.23%   0.20%   0.17%   0.12%   0.16%
Total accruing delinquent loans   0.62%   0.55%   0.42%   0.35%   0.40%
Non-accruing loans   0.35%   0.28%   0.32%   0.35%   0.38%
Total delinquent and non-accruing loans   0.97%   0.83%   0.74%   0.70%   0.78%

 

 F-8 

 

 

 

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

 

       At or for the Quarters Ended 
       March 31,   Dec. 31,   Sept. 30,   June 30,   March 31, 
(in thousands)      2018   2017   2017   2017   2017 
Net income/(loss)       $25,248   $(2,810)  $22,903   $19,694   $15,460 
Adj: Net securities losses/(gains) (1)        1,502    (30)   1    1    (12,570)
Adj: Loss on termination of hedges        -    -    -    -    6,629 
Adj: Net (gains) on sale of business operations and assets        (481)   -    (296)   -    - 
Adj: Merger and acquisition expense        5,093    15,553    1,110    2,266    5,947 
Adj: Restructuring expense and other expense        -    -    310    637    5,735 
Adj: Employee and community investment        -    3,400    -    -    - 
Adj: Deferred tax asset impairment        -    18,145    -    -    - 
Adj: Income taxes        (1,481)   (7,963)   (474)   (1,039)   (1,801)
Total core income (2)   (A)   $29,881   $26,295   $23,554   $21,559   $19,400 
                               
Total revenue       $114,990   $115,664   $100,834   $102,343   $101,643 
Adj: Net securities losses/(gains) (1)        1,502    (30)   1    1    (12,570)
Adj: Net (gains) on sale of business operations        (481)   -    (296)   -    - 
Adj: Loss on termination of hedges        -    -    -    -    6,629 
Total core revenue (2)   (B)   $116,011   $115,634   $100,539   $102,344   $95,702 
                               
Total non-interest expense       $76,869   $90,041   $65,820   $69,523   $74,326 
Less: Merger, restructuring and other expense (see above)        (5,093)   (15,553)   (1,420)   (2,903)   (11,682)
Less: Employee and community investment        -    (3,400)   -    -    - 
Core non-interest expense (2)                                       (C)   $71,776   $71,088   $64,400   $66,620   $62,644 
                               
(in millions, except per share data)                              
Total average assets   (D)   $11,467   $11,131   $9,631   $9,331   $9,144 
Total average shareholders' equity   (E)    1,509    1,469    1,262    1,158    1,082 
Total average tangible shareholders' equity (2)                           (F)    951    936    841    736    660 
Total average tangible common shareholders' equity (2)                           (G)    911    901    841    736    660 
Total tangible shareholders' equity, period-end (2)(3)   (H)    941    939    864    847    678 
Total tangible common shareholders' equity, period-end (2)(3)   (I)    901    898    864    847    678 
Total tangible assets, period-end (2)(3)   (J)    10,963    11,013    9,346    9,206    8,876 
                               
Total common shares outstanding, period-end (thousands)                  (K)    45,360    45,290    40,424    40,428    35,729 
Average diluted shares outstanding (thousands)   (L)    46,200    45,383    40,145    37,474    35,452 
                               
Core earnings per share, diluted (2)   (A/L)   $0.65   $0.58   $0.59   $0.58   $0.55 
Tangible book value per common share, period-end (2)   (I/K)    19.86    19.83    21.38    20.96    18.97 
Total tangible shareholders' equity/total tangible assets (2)   (H)/(J)    8.59    8.53    9.25    9.20    7.64 
                               
Performance ratios (4)                              
GAAP return on assets        0.88%   (0.10)%   0.95%   0.84%   0.68%
Core return on assets (2)   (A/D)    1.04    0.94    0.98    0.92    0.85 
GAAP return on equity        6.69    (0.77)   7.26    6.80    5.71 
Core return on equity (2)   (A/E)    7.92    7.16    7.47    7.45    7.17 
Core return on tangible common equity (2)(5)   (A+O)/(G)    13.43    11.90    11.42    11.96    12.05 
Efficiency ratio (2)(6)                                                                                   (C-O)/(B+M+P)    59.54    57.43    59.28    61.72    61.94 
Net interest margin        3.36    3.50    3.36    3.36    3.33 
                               
Supplementary data (in thousands)                              
Tax benefit on tax-credit investments (7)   (M)   $596   $2,957   $3,905   $1,696   $1,624 
Non-interest income charge on tax-credit investments (8)   (N)    (506)   (2,564)   (3,347)   (1,453)   (1,329)
Net income on tax-credit investments   (M+N)    90    393    558    243    295 
                               
Intangible amortization   (O)   $1,268   $1,183   $739   $770   $801 
Fully taxable equivalent income adjustment   (P)    1,820    3,122    2,950    2,644    2,511 

 

(1) Net securities losses/(gains) for the period ending March 31, 2018 includes the change in fair value of the Company's equity securities in compliance with the Company's adoption of ASU 2016-01. There were no non-equity securities sold during the period ending March 31, 2018.
(2) Non-GAAP financial measure.
(3) 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.
(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-effected amortization of intangible assets, assuming a 27.32% marginal rate, by tangible equity.
(6) 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.
(7) The tax benefit is the direct reduction to the income tax provision due to tax credits and deductions generated from investments in historic rehabilitation and low-income housing.
(8) The non-interest income charge is the reduction to the tax-advantaged investments, which are incurred as the tax credits are generated.       

 

 F-9 

 

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