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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): October 17, 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 October 17, 2018, Berkshire Hills Bancorp, Inc. (the “Company”), the holding company for Berkshire Bank (the “Bank”), announced its financial results for the quarter ended September 30, 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 October 18, 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 October 25, 2018. The webcast will be available on the Company’s website for an extended period of time.

 

Item 8.01Other Events

 

On October 17, 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 November 8, 2018 and payable on November 21, 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 October 17, 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: October 18, 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 40% Increase in Third Quarter Earnings; Dividends Declared

 

BOSTON, October 17, 2018. Berkshire Hills Bancorp, Inc. (NYSE: BHLB) reported third quarter 2018 net income of $32 million, a 40% increase over $23 million in the third quarter of 2017 due primarily to the benefit of business growth including expansion in Greater Boston through acquisition and business development.

 

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

 

·$0.70 GAAP EPS and Non-GAAP Core EPS

 

·6% annualized commercial loan growth

 

·3.32% net interest margin

 

·57.2% efficiency ratio

 

·1.08% ROA

 

·0.19% net loan charge-offs/average loans

 

·0.30% non-performing assets/assets

 

CEO Michael Daly stated, “Our third quarter earnings came in as expected. Quarterly loan related fees reached a record high, supported by strong SBA lending activity and other commercial lending related fees. We once again moved up in the annual SBA rankings, breaking into the top 30 nationally based on dollar volume. Our profitability and efficiency have also improved over last year due to the positive operating leverage from our increased business scale and diversified revenues. We’re seeing good growth in our Greater Boston and Mid-Atlantic markets, and steady business activity across the rest of our franchise. The Bank was recognized in the quarter by a United Nations IMPACT2030 Innovation Award for our support of volunteerism. This was our first full quarter following the completed integration of acquired operations and our teams are coordinating across our markets to engage our customers with our unique brand and culture promise.”

 

DIVIDENDS 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 November 8, 2018, payable on November 21, 2018. The dividend equates to a 2.1% annualized yield based on the $41.57 average closing price of Berkshire Hills Bancorp common stock during the third quarter. The Board also declared a quarterly cash dividend of $0.44 per share of preferred stock, with the same record and payment dates as above. The quarterly common and preferred dividends were increased by 5% in the first quarter of the year.

 

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FINANCIAL CONDITION

 

Total assets increased in the third quarter by $128 million, or 4% annualized, to $12.0 billion. Loan growth resulted from a 6% annualized increase in commercial loans and 19% annualized growth in residential mortgages. Average deposits increased over the prior quarter; period-end deposits decreased due to a $75 million decrease in payroll deposits, which fluctuate daily. The deposit mix shifted towards time deposits reflecting the impact of higher interest rates on customer demand. The average cost of deposits increased by 0.13% compared to the prior quarter, and the ratio of loans/deposit increased to 102% during the quarter. Capital measures were unchanged, with the ratio of equity/assets measuring 12.7%, while the non-GAAP measure of tangible equity/tangible assets measuring 8.5%. During the quarter, book value per share increased to $32.84 and tangible book value per common share increased to $20.68.

 

RESULTS OF OPERATIONS

 

Third quarter EPS increased by 23% year-over-year, propelled by higher revenues and positive operating leverage. There were negligible net non-core items during the most recent quarter, and both GAAP EPS and the non-GAAP core EPS measure totaled $0.70. The third quarter ROA measured 1.08%, while the efficiency ratio improved year-over-year to 57.2%. The third quarter return on equity was 8.3%, while the non-GAAP measure of core return on tangible common equity was 13.7%. Revenue and expense in 2018 include Commerce Bancshares Corp. operations acquired in the fourth quarter of 2017. Most categories of revenue and expense increased year-over-year due to this acquisition.

 

Third quarter net interest income increased by 24% year-over year due to growth in average earning assets. The net interest margin measured 3.32% in the most recent quarter, compared to 3.50% in the prior quarter and to 3.36% in the third quarter of 2017. The net interest margin includes purchased loan accretion, which varies each quarter primarily due to the impact of recoveries of purchased credit impaired loans. This accretion contributed 0.17%, 0.25%, and 0.14% to the margin in the above quarters, respectively. Excluding accretion, asset yields and funding costs generally trended higher in recent quarters due to the impact of Federal Reserve interest rate hikes. Non-interest income increased by 2% year-over-year. Growth in loan and deposit related fee income partially offset a decrease in mortgage banking revenue. Loan related income reached a record quarterly level due to strong SBA loan originations and related sale gains, together with other commercial lending related fees. The loan loss provision increased year-over-year, exceeding net loan charge-offs, and adding to the loan loss allowance in line with loan growth during the quarter.

 

Third quarter non-interest expense decreased from the prior quarter including lower mortgage banking related expense and completion of Commerce related cost savings. Total full-time equivalent staff decreased to 1,970 positions at quarter-end from 1,992 positions at the start of the year. The third quarter effective income tax rate was 21% in 2018 compared to 24% in 2017, including the benefit of federal income tax reform which became effective in 2018.

 

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INVESTOR CONFERENCE CALL

 

Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Thursday, October 18, 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/10125042. 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 still 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 Thursday, October 25, 2018 by dialing 877-344-7529 and entering access number 10125042.  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®. The Company has approximately $12.0 billion in assets and 115 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 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.

 

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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 the 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.

 

###

 

CONTACTS

 

Investor Relations Contact

 

James M. Moses, Senior Executive Vice President & CFO; 413-236-3379

 

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 and Supplementary Data (Five Quarter Trend)
F-10   Reconciliation of Non-GAAP Financial Measures and Supplementary Data (Year-to-Date)

 

 4 

 

 

SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED - (F-1)

 

   At or for the Quarters Ended (2) 
   Sept. 30,   June 30,   March 31,   Dec. 31,   Sept. 30, 
   2018   2018   2018   2017 (3)   2017 
                     
PER SHARE DATA                         
Net earnings/(loss) per common share, diluted  $0.70   $0.74   $0.55   $(0.06)  $0.57 
Core earnings per common share, diluted (1)   0.70    0.74    0.65    0.58    0.59 
Total book value per common share   32.84    32.49    32.12    32.14    31.78 
Tangible book value per common share (1)   20.68    20.28    19.86    19.83    21.38 
Market price at period end   40.70    40.60    37.95    36.60    38.75 
Dividends per common share   0.22    0.22    0.22    0.21    0.21 
Dividends per preferred share   0.44    0.44    0.44    0.42    - 
                          
PERFORMANCE RATIOS (4)                         
Return on assets   1.08%   1.17%   0.88%   (0.10)%   0.95%
Core return on assets (1)   1.08    1.17    1.04    0.94    0.98 
Return on equity   8.27    8.88    6.69    (0.77)   7.26 
Core return on equity (1)   8.28    8.89    7.92    7.16    7.47 
Core return on tangible common equity (1)   13.67    14.82    13.43    11.90    11.42 
Net interest margin, fully taxable equivalent (FTE) (5)   3.32    3.50    3.36    3.50    3.36 
Fee income/Net interest and fee income   24.33    24.25    25.51    25.91    29.96 
Efficiency ratio (1)   57.15    56.37    59.54    57.43    59.28 
                          
GROWTH (Year-to-date)                         
Total commercial loans (annualized)   5%   5%   1%   38%   9%
Total loans (annualized)   10    10    4    27    8 
Total deposits (annualized)   0    2    (3)   32    3 
Total net revenues (compared to prior year)   16    16    13    41    37 
Earnings per common share (compared to prior year)   28    33    25    (25)   (2)
Core earnings per common share (compared to prior year)(1)   22    24    18    4    4 
                          
FINANCIAL DATA (in millions)                         
Total assets  $12,030   $11,902   $11,519   $11,571   $9,767 
Total earning assets   10,957    10,827    10,442    10,509    8,944 
Total securities   1,918    1,920    1,932    1,899    1,824 
Total loans   8,905    8,710    8,376    8,299    6,947 
Allowance for loan losses   58    56    54    52    49 
Total intangible assets   553    555    556    558    420 
Total deposits   8,766    8,839    8,683    8,750    6,790 
Total shareholders' equity   1,532    1,516    1,498    1,496    1,285 
Net income/(loss)   32.2    34.0    25.2    (2.8)   22.9 
Core income (1)   32.2    34.1    29.9    26.3    23.6 
                          
ASSET QUALITY AND CONDITION RATIOS                         
Net charge-offs (current quarter annualized)/average loans   0.19%   0.21%   0.17%   0.17%   0.19%
Total non-performing assets/total assets   0.30    0.20    0.27    0.21    0.23 
Allowance for loan losses/total loans   0.66    0.64    0.64    0.62    0.71 
Loans/deposits   102    99    96    95    102 
Shareholders' equity to total assets   12.74    12.74    13.00    12.93    13.15 
Tangible shareholders' equity to tangible assets (1)   8.53    8.47    8.59    8.52    9.25 

 

(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 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)

 

   September 30,   June 30,   December 31, 
(in thousands)  2018   2018   2017 
Assets               
Cash and due from banks  $93,038   $90,964   $91,122 
Short-term investments   42,696    48,093    157,641 
Total cash and short-term investments   135,734    139,057    248,763 
                
Trading security   11,179    11,483    12,277 
Marketable equity securities, at fair value   59,734    59,726    45,185 
Securities available for sale, at fair value   1,391,373    1,393,250    1,380,914 
Securities held to maturity, at amortized cost   379,404    379,905    397,103 
Federal Home Loan Bank stock and other restricted securities   76,184    75,530    63,085 
Total securities   1,917,874    1,919,894    1,898,564 
                
Loans held for sale, at fair value   91,639    149,182    153,620 
                
Commercial real estate loans   3,371,773    3,319,323    3,264,742 
Commercial and industrial loans   1,902,228    1,875,118    1,803,939 
Residential mortgages   2,509,324    2,397,192    2,102,807 
Consumer loans   1,121,188    1,118,333    1,127,850 
Total loans   8,904,513    8,709,966    8,299,338 
Less: Allowance for loan losses   (58,457)   (55,925)   (51,834)
Net loans   8,846,056    8,654,041    8,247,504 
                
Premises and equipment, net   111,130    112,217    109,352 
Other real estate owned   -    -    - 
Goodwill   518,325    519,128    519,287 
Other intangible assets   34,620    35,838    38,296 
Cash surrender value of bank-owned life insurance   194,369    193,121    191,221 
Deferred tax asset, net   56,708    53,679    47,061 
Other assets   123,604    125,806    117,083 
Total assets  $12,030,059   $11,901,963   $11,570,751 
                
Liabilities and shareholders' equity               
Demand deposits  $1,563,845   $1,553,039   $1,606,656 
NOW and other deposits   844,210    858,014    734,558 
Money market deposits   2,447,184    2,619,943    2,776,157 
Savings deposits   737,682    747,722    741,954 
Time deposits   3,173,180    3,060,034    2,890,205 
Total deposits   8,766,101    8,838,752    8,749,530 
                
Senior borrowings   1,450,653    1,274,342    1,047,736 
Subordinated borrowings   89,473    89,429    89,339 
Total borrowings   1,540,126    1,363,771    1,137,075 
                
Other liabilities   191,517    183,199    187,882 
Total liabilities   10,497,744    10,385,722    10,074,487 
                
Preferred shareholders' equity   40,633    40,633    40,633 
Common shareholders' equity   1,491,682    1,475,608    1,455,631 
Total shareholders' equity   1,532,315    1,516,241    1,496,264 
Total liabilities and shareholders' equity  $12,030,059   $11,901,963   $11,570,751 
                
Net common shares outstanding   45,420    45,420    45,290 

 

 F-2 

 

 

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

 

               Annualized Growth % 
(in millions)  September 30, 2018
Balance
   June 30, 2018
Balance
   December 31, 2017
Balance
   Quarter ended
September 30, 2018
   Year to Date 
                     
Commercial real estate - construction  $374   $406   $354    (31)%   8%
Commercial real estate - other   2,998    2,915    2,910    11    4 
Total commercial real estate   3,372    3,319    3,264    6    4 
Commercial and industrial loans   1,902    1,875    1,804    6    7 
Total commercial loans   5,274    5,195    5,068    6    5 
                          
Total residential mortgages   2,510    2,397    2,103    19    26 
                          
Home equity   389    393    410    (4)   (7)
Auto and other   732    725    718    4    3 
Total consumer loans   1,121    1,118    1,128    1    (1)
Total loans  $8,905   $8,710   $8,299    9%   10%

 

DEPOSIT ANALYSIS

 

               Annualized Growth % 
(in millions)  September 30, 2018
Balance
   June 30, 2018
Balance
   December 31, 2017
Balance
   Quarter ended
September 30, 2018
   Year to Date 
Demand  $1,564   $1,553   $1,606    3%   (3)%
NOW and other   844    858    735    (7)   20 
Money market   2,447    2,620    2,776    (26)   (16)
Savings   738    748    742    (5)   (1)
Time deposits   3,173    3,060    2,890    15    13 
Total deposits  $8,766   $8,839   $8,749    (3)%   0%

 

 F-3 

 

  


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

 

   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
(in thousands, except per share data)  2018   2017   2018   2017 
Interest and dividend income                    
Loans  $104,273   $76,024   $298,757   $216,950 
Securities and other   14,918    13,036    44,553    37,485 
Total interest and dividend income   119,191    89,060    343,310    254,435 
Interest expense                    
Deposits   21,460    10,984    54,553    30,053 
Borrowings   8,390    6,078    22,825    15,953 
Total interest expense   29,850    17,062    77,378    46,006 
Net interest income   89,341    71,998    265,932    208,429 
Non-interest income                    
Mortgage banking originations   8,971    13,374    29,313    42,333 
Loan related income   7,537    6,081    19,524    15,535 
Deposit related fees   7,004    6,445    22,675    19,294 
Insurance commissions and fees   2,930    2,581    8,504    8,305 
Wealth management fees   2,283    2,315    7,160    7,127 
Total fee income   28,725    30,796    87,176    92,594 
Other   468    (2,255)   1,891    (2,438)
Securities gains/(losses), net   88    (1)   (696)   12,568 
Gain on sale of business operations and assets, net   -    296    460    296 
(Loss) on termination of hedges   -    -    -    (6,629)
Total non-interest income   29,281    28,836    88,831    96,391 
Total net revenue   118,622    100,834    354,763    304,820 
Provision for loan losses   6,628    4,900    18,735    14,884 
Non-interest expense                    
Compensation and benefits   39,923    37,643    123,241    110,759 
Occupancy and equipment   10,144    8,267    30,456    25,971 
Technology and communications   7,949    6,644    22,138    19,614 
Marketing and promotion   1,484    2,128    6,465    7,304 
Professional services   1,867    2,247    5,059    6,888 
FDIC premiums and assessments   1,640    1,651    4,246    4,537 
Other real estate owned and foreclosures   (1)   (23)   67    35 
Amortization of intangible assets   1,218    739    3,732    2,310 
Merger, restructuring and other expense   198    1,420    6,138    16,005 
Other   6,555    5,104    18,641    16,246 
Total non-interest expense   70,977    65,820    220,183    209,669 
                     
Income before income taxes   41,017    30,114    115,845    80,267 
Income tax expense   8,790    7,211    24,339    22,210 
Net income  $32,227   $22,903   $91,506   $58,057 
Preferred stock dividend   230    -    689    - 
Income available to common shareholders  $31,997   $22,903   $90,817   $58,057 
                     
Earnings per common share:                    
Basic  $0.70   $0.57   $1.99   $1.55 
Diluted  $0.70   $0.57   $1.98   $1.54 
                     
Weighted average shares outstanding:                    
Basic   46,030    39,984    46,009    37,547 
Diluted   46,263    40,145    46,226    37,708 

 

 F-4 

 

 


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

 

   Sept. 30,   June 30,   March 31,   Dec. 31,   Sept. 30, 
(in thousands, except per share data)  2018   2018   2018   2017   2017 
Interest and dividend income                         
Loans  $104,273   $101,649   $92,835   $91,149   $76,024 
Securities and other   14,918    15,230    14,405    14,674    13,036 
Total interest and dividend income   119,191    116,879    107,240    105,823    89,060 
Interest expense                         
Deposits   21,460    17,768    15,325    13,802    10,984 
Borrowings   8,390    7,990    6,445    5,655    6,078 
Total interest expense   29,850    25,758    21,770    19,457    17,062 
Net interest income   89,341    91,121    85,470    86,366    71,998 
Non-interest income                         
Mortgage banking originations   8,971    10,195    10,147    11,918    13,374 
Loan related income   7,537    6,549    5,438    5,866    6,081 
Deposit related fees   7,004    7,605    8,066    7,871    6,445 
Insurance commissions and fees   2,930    2,549    3,025    2,284    2,581 
Wealth management fees   2,283    2,280    2,597    2,268    2,315 
Total fee income   28,725    29,178    29,273    30,207    30,796 
Other   468    155    1,268    (939)   (2,255)
Securities gains/(losses), net   88    718    (1,502)   30    (1)
(Loss)/gain on sale of business operations and assets, net   -    (21)   481    -    296 
(Loss) on termination of hedges   -    -    -    -    - 
Total non-interest income   29,281    30,030    29,520    29,298    28,836 
Total net revenue   118,622    121,151    114,990    115,664    100,834 
Provision for loan losses   6,628    6,532    5,575    6,141    4,900 
Non-interest expense                         
Compensation and benefits   39,923    41,134    42,184    42,220    37,643 
Occupancy and equipment   10,144    10,230    10,082    9,451    8,267 
Technology and communications   7,949    7,359    6,830    6,286    6,644 
Marketing and promotion   1,484    2,369    2,612    4,573    2,128 
Professional services   1,867    1,139    2,053    2,277    2,247 
FDIC premiums and assessments   1,640    1,411    1,195    1,920    1,651 
Other real estate owned and foreclosures   (1)   1    67    9    (23)
Amortization of intangible assets   1,218    1,246    1,268    1,183    739 
Merger, restructuring and other expense   198    847    5,093    15,553    1,420 
Other   6,555    6,601    5,485    6,569    5,104 
Total non-interest expense   70,977    72,337    76,869    90,041    65,820 
                          
Income before income taxes   41,017    42,282    32,546    19,482    30,114 
Income tax expense   8,790    8,251    7,298    22,292    7,211 
Net income/(loss)  $32,227   $34,031   $25,248   $(2,810)  $22,903 
Preferred stock dividend   230    229    230    219    - 
Income/(loss) available to common shareholders  $31,997   $33,802   $25,018   $(3,029)  $22,903 
                          
Earnings/(loss) per common share:                         
Basic  $0.70   $0.74   $0.55   $(0.06)  $0.57 
Diluted  $0.70   $0.74   $0.55   $(0.06)  $0.57 
                          
Weighted average shares outstanding:                         
Basic   46,030    46,032    45,966    45,122    39,984 
Diluted   46,263    46,215    46,200    45,122    40,145 

 

 F-5 

 

  


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

 

   Quarters Ended 
   Sept. 30,   June 30,   March 31,   Dec. 31,   Sept. 30, 
   2018   2018   2018   2017   2017 
Earning assets                         
Loans:                         
Commercial real estate   4.67%   5.08%   4.76%   4.73%   4.64%
Commercial and industrial loans   6.22    5.73    5.19    5.25    5.09 
Residential mortgages   3.66    3.72    3.56    3.76    3.68 
Consumer loans   4.27    4.13    4.01    3.94    3.88 
Total loans   4.66    4.73    4.45    4.47    4.33 
Securities   3.36    3.47    3.26    3.55    3.43 
Short-term investments and loans held for sale   3.82    3.86    3.43    2.90    3.40 
Total earning assets   4.41    4.48    4.21    4.27    4.13 
                          
Funding liabilities                         
Deposits:                         
NOW and other   0.58    0.44    0.28    0.25    0.26 
Money market   0.92    0.88    0.73    0.66    0.57 
Savings   0.15    0.14    0.14    0.14    0.14 
Time   1.76    1.54    1.40    1.25    1.20 
Total interest-bearing deposits   1.18    1.02    0.90    0.82    0.78 
Borrowings   2.42    2.29    2.02    1.81    1.65 
Total interest-bearing liabilities   1.38    1.23    1.08    0.97    0.96 
                          
Net interest spread   3.03    3.25    3.13    3.30    3.17 
Net interest margin (1)   3.32    3.50    3.36    3.50    3.36 
                          
Cost of funds (2)   1.16    1.03    0.90    0.81    0.82 
Cost of deposits   0.96    0.83    0.73    0.66    0.64 

 

(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:  0.17%, 0.25%, 0.13%, 0.21%, 0.14%. 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 
   Sept. 30,   June 30,   March 31,   Dec. 31,   Sept. 30, 
(in thousands)  2018   2018   2018   2017   2017 
Assets                         
Loans                         
Commercial real estate  $3,331,097   $3,316,482   $3,250,861   $3,161,902   $2,669,558 
Commercial and industrial loans   1,824,369    1,773,722    1,811,433    1,645,719    1,183,980 
Residential mortgages   2,459,943    2,268,886    2,138,544    2,081,548    1,977,538 
Consumer loans   1,120,942    1,113,089    1,114,586    1,123,683    1,030,032 
Total loans (1)   8,736,351    8,472,179    8,315,424    8,012,852    6,861,108 
Securities (2)   1,928,851    1,931,104    1,933,002    1,921,724    1,779,379 
Short-term investments and loans held for sale   167,187    146,190    139,161    146,101    167,724 
Total earning assets   10,832,389    10,549,473    10,387,587    10,080,677    8,808,211 
Goodwill and other intangible assets   554,359    554,591    557,321    533,157    420,853 
Other assets   523,747    506,954    521,745    516,802    402,188 
Total assets  $11,910,495   $11,611,018   $11,466,653   $11,130,636   $9,631,252 
                          
Liabilities and shareholders' equity                         
Deposits                         
NOW and other  $844,888   $819,166   $712,181   $702,353   $570,864 
Money market   2,348,516    2,524,713    2,518,920    2,371,203    1,768,108 
Savings   740,765    749,995    743,944    733,157    669,690 
Time   3,274,518    2,878,846    2,913,512    2,906,423    2,587,702 
Total interest-bearing deposits   7,208,687    6,972,720    6,888,557    6,713,136    5,596,364 
Borrowings   1,363,914    1,382,794    1,275,173    1,229,781    1,445,700 
Total interest-bearing liabilities   8,572,601    8,355,514    8,163,730    7,942,917    7,042,064 
Non-interest-bearing demand deposits   1,635,564    1,619,470    1,656,260    1,591,431    1,196,451 
Other liabilities   144,401    102,583    137,976    127,562    131,003 
Total liabilities   10,352,566    10,077,567    9,957,966    9,661,910    8,369,518 
                          
Preferred shareholders' equity   40,633    40,633    40,633    34,892    - 
Common shareholders' equity   1,517,296   1,492,818    1,468,054    1,433,834    1,261,734 
Total shareholders' equity   1,557,929    1,533,451    1,508,687    1,468,726    1,261,734 
Total liabilities and shareholders' equity  $11,910,495   $11,611,018   $11,466,653   $11,130,636   $9,631,252 
                          
Supplementary data                         
Total average non-maturity deposits  $5,569,733   $5,713,344   $5,631,305   $5,398,144   $4,205,113 
Total average deposits   8,844,251    8,592,190    8,544,817    8,304,567    6,792,815 
Fully taxable equivalent income adjustment   1,807    2,033    1,820    3,122    2,950 
Purchased loan accretion   4,548    6,881    3,433    5,507    3,066 
Total average tangible equity (3)   1,003,570    978,860    951,366    935,569    840,881 

 

 

(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 
   Sept. 30,   June 30,   March 31,   Dec. 31,   Sept. 30, 
(in thousands)  2018   2018   2018   2017   2017 
NON-PERFORMING ASSETS                         
Non-accruing loans:                         
Commercial real estate  $22,639   $10,338   $10,084   $7,266   $5,228 
Commercial and industrial loans   4,914    4,029    7,430    7,311    9,681 
Residential mortgages   2,683    3,196    5,777    2,883    3,092 
Consumer loans   4,401    5,466    5,996    5,438    4,350 
Total non-accruing loans   34,637    23,029    29,287    22,898    22,351 
Other real estate owned   -    -    -    -    288 
Repossessed assets   1,069    1,241    1,241    1,147    - 
Total non-performing assets  $35,706   $24,270   $30,528   $24,045   $22,639 
                          
Total non-accruing loans/total loans   0.39%   0.26%   0.35%   0.28%   0.32%
Total non-performing assets/total assets   0.30%   0.20%   0.27%   0.21%   0.23%
                          
PROVISION AND ALLOWANCE FOR LOAN LOSSES                         
Balance at beginning of period  $55,925   $53,859   $51,834   $49,004   $47,359 
Charged-off loans   (4,471)   (5,714)   (3,791)   (3,734)   (3,796)
Recoveries on charged-off loans   375    1,248    241    423    541 
Net loans charged-off   (4,096)   (4,466)   (3,550)   (3,311)   (3,255)
Provision for loan losses   6,628    6,532    5,575    6,141    4,900 
Balance at end of period  $58,457   $55,925   $53,859   $51,834   $49,004 
                          
Allowance for loan losses/total loans   0.66%   0.64%   0.64%   0.62%   0.71%
Allowance for loan losses/non-accruing loans   169%   243%   184%   226%   219%
                          
NET LOAN CHARGE-OFFS                         
Commercial real estate  $(3,074)  $(2,079)  $(817)  $(881)  $(1,425)
Commercial and industrial loans   (189)   (1,193)   (972)   (960)   (573)
Residential mortgages   61    (632)   (406)   (759)   130 
Home equity   (242)   108    (588)   (123)   (634)
Auto and other consumer   (652)   (670)   (767)   (588)   (753)
Total, net  $(4,096)  $(4,466)  $(3,550)  $(3,311)  $(3,255)
                          
Net charge-offs (QTD annualized)/average loans   0.19%   0.21%   0.17%   0.17%   0.19%
Net charge-offs (YTD annualized)/average loans   0.19%   0.19%   0.17%   0.19%   0.20%
                          
DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS                         
30-89 Days delinquent   0.38%   0.22%   0.39%   0.35%   0.25%
90+ Days delinquent and still accruing   0.22%   0.40%   0.23%   0.20%   0.17%
Total accruing delinquent loans   0.60%   0.62%   0.62%   0.55%   0.42%
Non-accruing loans   0.39%   0.26%   0.35%   0.28%   0.32%
Total delinquent and non-accruing loans   0.99%   0.88%   0.97%   0.83%   0.74%

 

 

 F-8 

 

  


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)     2018   2018   2018   2017   2017 
Net income/(loss)     $32,227   $34,031   $25,248   $(2,810)  $22,903 
Adj: Net securities (gains)/losses (1)      (88)   (718)   1,502    (30)   1 
Adj: Net losses/(gains) on sale of business operations and assets      -    21    (481)   -    (296)
Adj: Merger and acquisition expense      198    847    5,093    15,553    1,110 
Adj: Restructuring expense and other expense      -    -    -    -    310 
Adj: Employee and community investment      -    -    -    3,400    - 
Adj: Deferred tax asset impairment      -    -    -    18,145    - 
Adj: Income taxes      (92)   (105)   (1,481)   (7,963)   (474)
Total core income (2)  (A)  $32,245   $34,076   $29,881   $26,295   $23,554 
                             
Total revenue     $118,622   $121,151   $114,990   $115,664   $100,834 
Adj: Net securities (gains)/losses (1)      (88)   (718)   1,502    (30)   1 
Adj: Net losses/(gains) on sale of business operations and assets      -    21    (481)   -    (296)
Total core revenue (2)  (B)  $118,534   $120,454   $116,011   $115,634   $100,539 
                             
Total non-interest expense     $70,977   $72,337   $76,869   $90,041   $65,820 
Less: Merger, restructuring and other expense (see above)      (198)   (847)   (5,093)   (15,553)   (1,420)
Less: Employee and community investment      -    -    -    (3,400)   - 
Core non-interest expense (2)  (C)  $70,779   $71,490   $71,776   $71,088   $64,400 
                             
(in millions, except per share data)                            
Total average assets  (D)  $11,910   $11,611   $11,467   $11,131   $9,631 
Total average shareholders' equity  (E)   1,558    1,533    1,509    1,469    1,262 
Total average tangible shareholders' equity (2)  (F)   1,004    979    951    936    841 
Total average tangible common shareholders' equity (2)  (G)   963    938    911    901    841 
Total tangible shareholders' equity, period-end (2)(3)  (H)   979    961    941    939    864 
Total tangible common shareholders' equity, period-end (2)(3)  (I)   939    921    901    898    864 
Total tangible assets, period-end (2)(3)  (J)   11,477    11,347    10,963    11,013    9,346 
                             
Total common shares outstanding, period-end (thousands)                 (K)   45,420    45,420    45,360    45,290    40,424 
Average diluted shares outstanding (thousands)  (L)   46,263    46,215    46,200    45,383    40,145 
                             
Core earnings per common share, diluted (2)  (A/L)  $0.70   $0.74   $0.65   $0.58   $0.59 
Tangible book value per common share, period-end (2)  (I/K)   20.68    20.28    19.86    19.83    21.38 
Total tangible shareholders' equity/total tangible assets (2)  (H)/(J)   8.53    8.47    8.59    8.53    9.25 
                             
Performance ratios (4)                            
GAAP return on assets      1.08%   1.17%   0.88%   (0.10)%   0.95%
Core return on assets (2)  (A/D)   1.08    1.17    1.04    0.94    0.98 
GAAP return on equity      8.27    8.88    6.69    (0.77)   7.26 
Core return on equity (2)  (A/E)   8.28    8.89    7.92    7.16    7.47 
Core return on tangible common equity (2)(5)  (A+O)/(G)   13.67    14.82    13.43    11.90    11.42 
Efficiency ratio (2)(6)  (C-O)/(B+M+P)   57.15    56.37    59.54    57.43    59.28 
Net interest margin      3.32    3.50    3.36    3.50    3.36 
                             
Supplementary data (in thousands)                            
Tax benefit on tax-credit investments (7)  (M)  $1,374   $2,119   $596   $2,957   $3,905 
Non-interest income charge on tax-credit investments (8)  (N)   (1,112)   (1,594)   (506)   (2,564)   (3,347)
Net income on tax-credit investments  (M+N)   262    525    90    393    558 
                             
Intangible amortization  (O)  $1,218   $1,246   $1,268   $1,183   $739 
Fully taxable equivalent income adjustment  (P)   1,807    2,033    1,820    3,122    2,950 

 

(1)Net securities (gains)/losses for the periods ending March 31, 2018, June 30, 2018, and September 30, 2018 include the change in fair value of the Company's equity securities in compliance with the Company's adoption of ASU 2016-01.
(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 for 2018 and a 40% marginal rate for 2017, 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 

 

  


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)     2018   2017 
Net (loss)/income     $91,506   $58,057 
Adj: Net securities losses/(gains) (1)      696    (12,568)
Adj: Loss on termination of hedges      -    6,629 
Adj: Net (gains) on sale of business operations      (460)   (296)
Adj: Merger and acquisition expenses      6,138    9,323 
Adj: Restructuring expense and other      -    6,682 
Adj: Income taxes      (1,678)   (3,314)
Total core income (2)  (A)  $96,202   $64,513 
              
Total revenue     $354,763   $304,820 
Adj: Net securities losses/(gains) (1)      696    (12,568)
Adj: Net (gains) on sale of business operations      (460)   (296)
Adj: Loss on termination of hedges      -    6,629 
Total core revenue (2)  (B)  $354,999   $298,585 
Total non-interest expense     $220,183   $209,669 
Less: Merger, restructuring and other expense (see above)      (6,138)   (16,005)
Core non-interest expense (2)  (C)  $214,045   $193,664 
              
(in millions, except per share data)             
Total average assets  (D)  $11,687   $9,369 
Total average shareholders' equity  (E)   1,534    1,167 
Total average tangible shareholders' equity (2)  (F)   978    746 
Total average tangible common shareholders' equity (2)  (G)   937    - 
Total tangible shareholders' equity, period-end (2)(3)  (H)   979    864 
Total tangible common shareholders' equity, period-end (2)(3)  (I)   939    - 
Total tangible assets, period-end (2)(3)  (J)   11,477    9,346 
Total common shares outstanding, period-end (thousands)                 (K)   45,420    40,424 
Average diluted shares outstanding (thousands)  (L)   46,226    37,708 
Core earnings per common share, diluted (2)  (A/L)  $2.08   $1.71 
Tangible book value per common share, period-end (2)  (I/K)   20.68    21.38 
Total tangible shareholders' equity/total tangible assets (2)  (H)/(J)   8.53    9.25 
              
Performance ratios (4)             
GAAP return on assets      1.05%   0.83%
Core return on assets (2)  (A/D)   1.10    0.92 
GAAP return on equity      7.96    6.63 
Core return on equity (2)  (A/E)   8.36    7.37 
Core return on tangible common equity (2)(5)  (A+O)/(G)   13.97    11.78 
Efficiency ratio (2)(6)  (C-O)/(B+M+P)   57.66    60.96 
Net interest margin      3.39    3.35 
              
Supplementary data             
Tax benefit on tax-credit investments (7)  (M)  $4,089   $7,225 
Non-interest income charge on tax-credit investments (8)  (N)   (3,212)   (6,129)
Net income on tax-credit investments  (M+N)   877    1,096 
              
Intangible amortization  (O)   3,732    2,310 
Fully taxable equivalent income adjustment  (P)   5,660    8,105 

 

(1)Net securities losses/(gains) for the period ending September 30, 2018 includes the change in fair value of the Company's equity securities in compliance with the Company's adoption of ASU 2016-01.
(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 for 2018 and 40% marginal rate for 2017, 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-10 

 

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