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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): July 23, 2019

 

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   02109
(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).

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading symbol(s)   Name of each exchange on which registered
Common stock, par value $0.01 per share   BHLB   New York Stock Exchange

 

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 2.02 Results of Operations and Financial Condition

 

On July 23, 2019, Berkshire Hills Bancorp, Inc. (the “Company”), the holding company for Berkshire Bank (the “Bank”), announced its financial results for the quarter ended June 30, 2019. 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 July 24, 2019, 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 July 31, 2019. The webcast will be available on the Company’s website for an extended period of time.

 

Item 7.01 Regulation FD Disclosure

 

On July 24, 2019, the Company made available its slides for the investor presentation that the Company will utilize in connection with the conference call/webcast. A copy of the presentation can be found on the Company’s website at www.berkshirebank.com under the “Investor Relations” tab.

 

Item 8.01 Other Events

 

On July 23, 2019, the Company’s Board of Directors announced the declaration of a cash dividend of $0.23 per share of Company common stock and $0.46 per share of Company Series B preferred stock to shareholders of record at the close of business on August 8, 2019 and payable on August 22, 2019.

 

Item 9.01 Financial 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 July 23, 2019

 

 

 

 

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: July 24, 2019 By: /s/ Richard M. Marotta
   

Richard M. Marotta

President and Chief Executive Officer

 

 

 

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Section 2: EX-99.1 (EXHIBIT 99.1)

 

Exhibit 99.1

 

 

 

Berkshire Hills Reports Second Quarter Results; Dividend Declared

 

BOSTON, July 23, 2019 - Berkshire Hills Bancorp, Inc. (NYSE: BHLB) reported GAAP net income of $25 million, or $0.52 per share, in the second quarter of 2019. The non-GAAP measure of core earnings totaled $32 million, or $0.65 per share. Net non-core charges were primarily related to the acquisition of Willimantic, CT based SI Financial Group, Inc. on May 17, 2019 and are net of discontinued operations. GAAP EPS increased by 2% compared to the prior quarter, while core EPS increased by 8% due to the benefits of the Company’s initiatives.

 

SECOND QUARTER FINANCIAL HIGHLIGHTS (income statement metrics are compared to the prior quarter):

 

·2% increase in GAAP EPS; 8% increase in core EPS
·2% increase in net revenue from continuing operations
·3.19% net interest margin
·56.4% efficiency ratio, improved from 59.5%
·0.14% net loan charge-offs/average loans
·0.27% non-performing assets/assets

 

CEO Richard Marotta stated, “Our teams had a good quarter and contributed to improving the profitability of our operations based on revenue driven positive operating leverage. Several critical initiatives were accomplished in the most recent quarter. We completed the acquisition of SI Financial Group, which added the Savings Institute operations consisting of 23 branches and $1.7 billion in total assets in eastern Connecticut and Rhode Island. This was completed on time and on plan, including the issuance of 5.7 million Berkshire shares as merger consideration. The systems conversion remains targeted for early in the fourth quarter.”

 

Mr. Marotta continued, “We completed our strategic review and moved forward on several fronts. Our commercial aircraft portfolio is in the process of being sold, and our FCLS national mortgage banking operations are being marketed for sale. We’re seeing the benefits of our efficiency initiatives, and we’re also investing in targeted areas, including our growing SBA lending team. Repurchases of common stock have begun under our recent 2.4 million share repurchase authorization.”

 

Mr. Marotta concluded with comments about recent governance and culture initiatives. “We were pleased to add three new Board members in June: Baye Adofo-Wilson, Rheo Brouillard, and William Hughes. They represent our newer markets, enhance our diversity, and add new expertise in technology and community development finance. Longtime community organizer and activist, Malia Lazu, was appointed as EVP/Chief Experience and Culture Officer, and SVP Jacqueline Courtwright was promoted to Chief Human Resources Officer. In May, the Bank announced its Be FIRST values program, including initiatives for new community storefronts based around our MyBanker program, a new community deposit and loan product, and enhanced diversity and inclusion programs for employee recruitment and development. In June, over 90% of our employees joined together in our fourth annual Xtraordinary Day of Service, donating more than 6,000 hours of service at 37 projects throughout our footprint. Berkshire Bank was recently named as the winner of the 2019 North American Employee Engagement Award for Social Responsibility.”

 

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DIVIDEND DECLARED

 

The Board of Directors approved a quarterly cash dividend of $0.23 per common share to shareholders of record at the close of business on August 8, 2019, payable on August 22, 2019. The dividend equates to a 3.1% annualized yield based on the $29.85 average closing price of Berkshire Hills Bancorp during the second quarter of 2019. Effective on the same dates, the Board also approved a quarterly cash dividend on preferred stock totaling $0.46 per share. The Board had approved a 5% increase in the common and preferred dividend following the start of the year.

 

ACQUISITION OF SI FINANCIAL GROUP

 

Berkshire completed the acquisition of SI Financial Group (“SIFI”) on May 17, 2019. At the acquisition date, SIFI had assets with a gross fair value totaling $1.7 billion and a net fair value of $140 million net of liabilities. Berkshire recorded $176 million in total merger consideration, consisting primarily of the issuance of 5.69 million Berkshire common shares. Goodwill was recorded in the amount of $35 million, and the core deposit intangible was recorded at $18 million. For the first quarter of 2019, SIFI reported $57 million in annualized revenue and $39 million in annualized operating expense. For that period, it recorded a 3.00% net interest margin, with a 4.35% loan yield and a 1.29% interest-bearing deposit cost. Most Berkshire consolidated balance sheet and income statement categories increased as a result of the merger.

 

Berkshire targets to achieve cost savings related efficiencies totaling approximately $12 million, or 30% of SIFI annualized non-interest expense. The Company continues to expect that it will remain within its target of approximately $23 million in total after-tax transaction costs. Including all purchase accounting and targeted transaction costs the Company estimates that the transaction will be approximately $0.45 dilutive to tangible book value per share. Projected dilution per share is less than originally anticipated due to changes in market conditions affecting purchase accounting.

 

FINANCIAL CONDITION

 

Total assets were $13.7 billion at midyear 2019, increasing by $1.5 billion, or 12%, during the quarter and including the SIFI merger. Investment securities increased by $24 million, or 1%. The SIFI merger added $143 million and there were $119 million in net reductions as a result of the Company’s strategic review, along with the integration of the SIFI securities. Total loans increased in the second quarter by $1.0 billion, or 11%, to $9.9 billion including $1.3 billion in SIFI loans. The $178 million portfolio of commercial aircraft loans was designated as held-for-sale. The Company expects to complete the sale of these loans in the third quarter. Total loans decreased organically in the quarter and year-to-date. This reflects the Company’s strategic review and emphasis on adjusting the level and mix of assets to improve capital returns and to integrate the acquired SIFI portfolio. Total deposits increased by $1.4 billion, or 15%, in the second quarter to $10.6 billion including $1.3 billion in SIFI deposits. Payroll related balances decreased by $82 million to $480 million in the second quarter. Deposits increased organically before changes related to SIFI and payroll accounts. Ratio metrics of capital, liquidity, and asset quality improved modestly during the most recent quarter. The SIFI loans were recorded at a $42 million (or 3.1%) discount to gross carrying value, including a $31 million credit discount and an $11 million interest rate discount. Near quarter-end, the Company initiated purchases of common stock under its recently approved 2.4 million share repurchase program. The Company repurchased 110 thousand shares in the second quarter and repurchases are expected to continue. Book value per common share increased by 1% to $34.05 from $33.75 in the most recent quarter, and the non-GAAP measure of tangible book value per common share increased by 3% to $22.25 from $21.66, more than offsetting the dilution from the acquisition.

 

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RESULTS OF OPERATIONS

 

GAAP earnings were $0.52 per share in the most recent quarter, compared to $0.51 in the prior quarter. Results in the second quarter were reduced by non-core charges related to the SIFI acquisition, restructuring charges, and discontinued operations.

 

The non-GAAP measure of core earnings totaled $0.65 per share in the most recent quarter, increasing by 8% from $0.60 in the prior quarter. Revenue driven positive operating leverage contributed to improving core profitability. This reflected initial benefits from the SIFI acquisition and the Company’s strategic initiatives. The return on equity measured 6.1% in the most recent quarter, and the non-GAAP metric of core return on tangible common equity measured 12.2%.

 

Compared to the prior quarter, total net revenue from continuing operations increased by $2 million, or 2%, and the non-GAAP measure of core revenue increased by $4 million, or 4%. The net interest margin was 3.19% in the most recent quarter, increasing by 0.02% from the prior quarter, including the benefit of higher accretion related to the SIFI acquisition. Fee income was down 3% from the prior quarter due to lower loan related revenue. Non-interest income decreased due to higher tax credit amortization charges which were more than offset by the benefit to income tax expense from tax credits received on projects completed during the quarter.

 

Non-interest expense increased quarter-over-quarter including the acquired SIFI operations and higher merger related charges. Compared to the prior quarter, non- interest expense increased by $5 million, or 6%, while the non-GAAP measure of core expense increased by $400 thousand, or 1%. The efficiency ratio improved to 56% from 60%. Excluding SIFI and the FCLS operations, full time equivalent staff decreased to 1,391 at midyear, compared to 1,485 at the start of the year. FCLS staff totaled 416 at midyear, compared to 432 at the start of the year. Staff in the acquired SIFI operations totaled 230 at midyear. The effective income tax rate decreased to 18% in the most recent quarter from 22% in the prior quarter due to higher tax credit benefits resulting from tax credit investment projects that came into service during the quarter. Net of the related amortization charges to non-interest income previously mentioned, these projects contributed $0.01 to earnings per share during the quarter.

 

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The FCLS national mortgage banking operations contributed $0.03 in non-core EPS during the most recent quarter, as industry business volumes improved following the decrease in long term interest rates that developed during the quarter. These operations generated $15 million in fee revenue, which was an increase of 56% quarter-over-quarter and 47% year-over-year due to improved market conditions. The Company generated $719 million in held-for-sale residential mortgages in the most recent quarter, compared to $398 million in the prior quarter and to $626 million in the second quarter of 2018. Due to the decision to sell the FCLS operations, they are accounted for as discontinued in the financial statements, and most references to revenue and expense refer to continuing operations and exclude FCLS revenue and expense.

 

INVESTOR CONFERENCE CALL AND INVESTOR PRESENTATION

 

Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Wednesday, July 24, 2019 to discuss the results for the quarter and provide guidance about expected future results. Prior to the call, the Company will post a presentation at its website with updates on its strategic initiatives. Participants are encouraged to pre-register for the conference call using the following link: http://dpregister.com/10133134. 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 Wednesday, July 31, 2019 by dialing 877-344-7529 and entering access number 10133134. 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, a premier regional bank distinguished by its local responsiveness and engagement. With corporate headquarters in Boston, the Company operates in seven Northeastern states, with approximately $13.7 billion in assets and 132 banking offices. Berkshire Bank is recognized for its entrepreneurial approach, relationship customer experience, and distinctive culture embracing and celebrating the diversity of all customers, employees and, suppliers.

 

FORWARD LOOKING STATEMENTS

 

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

 

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NON-GAAP FINANCIAL MEASURES

 

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

 

The Company utilizes the non-GAAP measure of core earnings in evaluating operating trends, including components for core revenue and expense. These measures exclude items which the Company does not view as related to its normalized operations. These items primarily include securities gains/losses, merger costs, restructuring costs, and discontinued operations. Merger costs consist primarily of severance/benefit related expenses, contract termination costs, systems conversion costs, variable compensation expenses, and professional fees. Merger costs in 2018 and 2019 are primarily related to the acquisitions of Commerce Bancshares Corp. and SI Financial Group. 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. Restructuring costs also include severance and consulting expenses related to the Company’s strategic review. Discontinued operations are the Company’s national mortgage banking operations for which the Company is pursuing sale opportunities. In 2018, the Company recorded $8 million in charges related to the restructuring of banking systems vendor relationships. The Company recorded a $3 million cost for the settlement of an existing legal proceeding with a plaintiff claiming to be representing a class of depositors. Non-core charges in 2018 also included a $1.5 million net charge related to the CEO transition.

 

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.

 

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CONTACTS

 

Investor Relations Contact

 

Erin E. Duggan; Investor Relations Manager; 413-236-3773

 

Media Contact

 

Cassandra Giovanni; Corporate Communications Manager; 860-428-9561

 

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)

 

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BERKSHIRE HILLS BANCORP, INC.

SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED - (F-1)

 

   At or for the Quarters Ended (1) 
   June 30,   March 31,   Dec. 31,   Sept. 30,   June 30, 
   2019 (2)   2019   2018   2018   2018 
                     
PER SHARE DATA                         
Net earnings per common share, diluted  $0.52   $0.51   $0.31   $0.70   $0.74 
Core earnings per common share, diluted (3)   0.65    0.60    0.69    0.72    0.73 
Total book value per common share   34.05    33.75    33.30    32.84    32.49 
Tangible book value per common share (3)   22.25    21.66    21.15    20.68    20.28 
Market price at period end   31.39    27.24    26.97    40.70    40.60 
Dividends per common share   0.23    0.23    0.22    0.22    0.22 
Dividends per preferred share   0.46    0.46    0.44    0.44    0.44 
                          
PERFORMANCE RATIOS (4)                         
Return on assets   0.79%   0.78%   0.47%   1.08%   1.17%
Core return on assets (3)   1.01    0.92    1.07    1.12    1.18 
Return on equity   6.07    5.97    3.61    8.27    8.88 
Core return on equity (3)   7.67    7.00    8.09    8.49    8.81 
Core return on tangible common equity (3)   12.21    11.44    13.21    14.02    14.68 
Net interest margin, fully taxable equivalent (FTE) (5)(6)   3.19    3.17    3.41    3.32    3.50 
Fee income/Net interest and fee income from continuing operations   16.20    17.56    15.59    18.06    17.21 
Efficiency ratio (3)   56.41    59.54    54.88    52.20    52.42 
                          
GROWTH (Year-to-date)                         
Total commercial loans (organic, annualized)   (10)%   (3)%   6%   5%   5%
Total loans (organic, annualized)   (9)   (4)   9    10    10 
Total deposits (organic, annualized)   6    8    3    0    2 
Total net revenues from continuing operations (compared to prior year)   1    3    17    22    21 
Earnings per common share (compared to prior year)   (20)   (7)   65    28    33 
Core earnings per common share (compared to prior year)(3)   (9)   (8)   32    37    36 
                          
FINANCIAL DATA (in millions)                         
Total assets  $13,653   $12,173   $12,212   $12,030   $11,902 
Total earning assets   12,343    11,039    11,140    10,957    10,827 
Total securities   1,905    1,881    1,919    1,918    1,920 
Total loans   9,942    8,947    9,043    8,905    8,710 
Allowance for loan losses   62    62    61    58    56 
Total intangible assets   603    551    552    553    555 
Total deposits   10,566    9,166    8,982    8,766    8,839 
Total shareholders' equity   1,779    1,577    1,553    1,532    1,516 
Net income   25.4    23.6    14.3    32.2    34.0 
Core income (3)   32.1    27.7    32.0    33.1    33.8 
Purchase accounting accretion   3.2    1.3    8.2    4.6    7.3 
                          
ASSET QUALITY AND CONDITION RATIOS                         
Net charge-offs (current quarter annualized)/average loans   0.14%   0.15%   0.17%   0.19%   0.21%
Total non-performing assets/total assets   0.27    0.26    0.28    0.30    0.20 
Allowance for loan losses/total loans   0.63    0.69    0.68    0.66    0.64 
Loans/deposits   94    98    101    102    99 
Shareholders' equity to total assets   13.03    12.95    12.72    12.74    12.74 
Tangible shareholders' equity to tangible assets (3)   9.01    8.83    8.59    8.53    8.47 

 

 

(1)Reconciliations of non-GAAP financial measures, including all references to core and tangible amounts, appear on pages F-9 and F-10.
(2)The Company acquired SI Financial Group, Inc. on May 17, 2019.
(3)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.
(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.
(6)The effect of purchase accounting accretion for loans, time deposits, and borrowings 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: 0.11%, 0.05%, 0.30%, 0.17%, 0.27%.

 

 F-1 

 

 

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-2)

 

   June 30,   March 31,   December 31, 
(in thousands)  2019   2019   2018 
Assets               
Cash and due from banks  $100,588   $98,689   $100,972 
Short-term investments   128,718    68,930    82,217 
Total cash and short-term investments   229,306    167,619    183,189 
                
Trading security   11,210    11,164    11,212 
Marketable equity securities, at fair value   59,121    59,121    56,638 
Securities available for sale, at fair value   1,410,535    1,386,768    1,399,647 
Securities held to maturity, at amortized cost   364,463    369,331    373,763 
Federal Home Loan Bank stock and other restricted securities   59,356    54,624    77,344 
Total securities   1,904,685    1,881,008    1,918,604 
                
Loans held for sale   184,810    4,773    2,183 
                
Commercial real estate loans   4,005,347    3,388,139    3,400,221 
Commercial and industrial loans   1,987,297    1,957,339    1,980,046 
Residential mortgages   2,882,380    2,544,824    2,566,424 
Consumer loans   1,066,804    1,057,193    1,096,562 
Total loans   9,941,828    8,947,495    9,043,253 
Less: Allowance for loan losses   (62,156)   (62,038)   (61,469)
Net loans   9,879,672    8,885,457    8,981,784 
                
Premises and equipment, net   121,619    105,651    106,500 
Other real estate owned   154    -    - 
Goodwill   553,796    518,325    518,325 
Other intangible assets   48,724    32,219    33,418 
Cash surrender value of bank-owned life insurance   227,458    191,768    190,609 
Deferred tax asset, net   51,118    38,783    42,434 
Other assets   238,951    182,720    120,926 
Assets from discontinued operations   212,745    165,078    114,259 
Total assets  $13,653,038   $12,173,401   $12,212,231 
                
Liabilities and shareholders' equity               
Demand deposits  $1,827,016   $1,526,584   $1,603,019 
NOW and other deposits   997,685    820,177    1,122,321 
Money market deposits   2,811,158    2,743,448    2,245,195 
Savings deposits   848,699    731,711    724,129 
Time deposits   4,081,398    3,344,495    3,287,717 
Total deposits   10,565,956    9,166,415    8,982,381 
                
Senior borrowings   904,814    1,120,189    1,428,298 
Subordinated borrowings   96,927    89,562    89,518 
Total borrowings   1,001,741    1,209,751    1,517,816 
                
Other liabilities   280,155    204,725    149,519 
Liabilities from discontinued operations   26,256    15,505    9,597 
Total liabilities   11,874,108    10,596,396    10,659,313 
                
Preferred shareholders' equity   40,633    40,633    40,633 
Common shareholders' equity   1,738,297    1,536,372    1,512,285 
Total shareholders' equity   1,778,930    1,577,005    1,552,918 
Total liabilities and shareholders' equity  $13,653,038   $12,173,401   $12,212,231 
                
Net common shares outstanding   51,045    45,522    45,417 

 

 F-2 

 

 

BERKSHIRE HILLS BANCORP, INC.

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

LOAN ANALYSIS

 

                   Organic Annualized Growth % (1) 
(in millions)  June 30, 2019
Balance
   Acquired Savings
Institute Balances (2)
   March 31, 2019
Balance
   December 31, 2018
Balance
   Quarter ended
June 30, 2019
   Year to Date 
                         
Total commercial real estate  $4,006   $624   $3,388   $3,400    (1)%   (1)%
Commercial and industrial loans   1,987    244    1,957    1,980    (44)   (24)
Total commercial loans   5,993    868    5,345    5,380    (17)   (10)
                               
Total residential mortgages   2,882    375    2,545    2,566    (6)   (5)
                               
Home equity   404    58    365    377    (21)   (16)
Auto and other   663    2    692    720    (18)   (16)
Total consumer loans   1,067    60    1,057    1,097    (19)   (16)
Total loans  $9,942   $1,303   $8,947   $9,043    (14)%   (9)%

 

(1) Non-GAAP financial measure.

(2) The acquired balances for Savings Institute are as of May 17, 2019.

 

DEPOSIT ANALYSIS

 

                   Organic Annualized Growth % (1) 
(in millions)  June 30, 2019
Balance
   Acquired Savings
Institute Balances (2)
   March 31, 2019
Balance
   December 31, 2018
Balance
   Quarter ended
June 30, 2019
   Year to Date 
Demand  $1,827   $258   $1,527   $1,603    11%   (4)%
NOW and other   998    138    820    1,122    20    (47)
Money market   2,811    190    2,743    2,245    (18)   34 
Savings   849    164    732    724    (26)   (11)
Time deposits   4,081    585    3,344    3,288    18    13 
Total deposits  $10,566   $1,335   $9,166   $8,982    3%   6%

 

(1) Non-GAAP financial measure.

(2) The acquired balances for Savings Institute are as of May 17, 2019.

 

 F-3 

 

 

BERKSHIRE HILLS BANCORP, INC.

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

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
(in thousands, except per share data)  2019   2018   2019   2018 
Interest and dividend income from continuing operations                    
Loans  $113,990   $100,254   $219,641   $191,995 
Securities and other   15,248    15,230    30,706    29,635 
Total interest and dividend income   129,238    115,484    250,347    221,630 
Interest expense from continuing operations                    
Deposits   28,273    17,768    54,895    33,093 
Borrowings   9,370    7,424    18,398    13,488 
Total interest expense   37,643    25,192    73,293    46,581 
Net interest income from continuing operations   91,595    90,292    177,054    175,049 
Non-interest income from continuing operations                    
Mortgage banking originations   278    334    324    472 
Loan related income   4,822    6,003    10,825    10,822 
Deposit related fees   7,525    7,605    14,383    15,671 
Insurance commissions and fees   2,738    2,549    5,591    5,574 
Wealth management fees   2,348    2,280    4,789    4,877 
Total fee income   17,711    18,771    35,912    37,416 
Other   (216)   155    754    1,423 
Securities gains/(losses), net   17    718    2,568    (784)
(Loss)/gain on sale of business operations and assets, net   -    (21)   -    460 
Total non-interest income   17,512    19,623    39,234    38,515 
Total net revenue from continuing operations   109,107    109,915    216,288    213,564 
Provision for loan losses   3,467    6,532    7,468    12,107 
Non-interest expense from continuing operations                    
Compensation and benefits   34,779    33,499    68,279    67,346 
Occupancy and equipment   9,449    9,224    18,895    18,416 
Technology and communications   6,715    7,053    12,972    13,537 
Marketing and promotion   1,155    1,084    2,422    2,306 
Professional services   3,953    864    6,228    2,560 
FDIC premiums and assessments   1,751    1,411    3,390    2,606 
Other real estate owned and foreclosures   (2)   1    -    68 
Amortization of intangible assets   1,475    1,246    2,675    2,514 
Merger, restructuring and other expense   11,155    847    18,170    5,940 
Other   6,138    6,298    15,528    11,600 
Total non-interest expense   76,568    61,527    148,559    126,893 
                     
Income from continuing operations before income taxes  $29,072   $41,856   $60,261   $74,564 
Income tax expense   5,118    8,145    12,035    15,482 
Net income from continuing operations  $23,954   $33,711   $48,226   $59,082 
                     
Income from discontinued operations before income taxes  $2,082   $426   $1,228   $264 
Income tax expense   588    106    371    67 
Net income from discontinued operations  $1,494   $320   $857   $197 
                     
Net income  $25,448   $34,031   $49,083   $59,279 
Preferred stock dividend   240    229    480    459 
Income available to common shareholders  $25,208   $33,802   $48,603   $58,820 
                     
Basic earnings per common share:                    
Continuing Operations  $0.49   $0.73   $1.01   $1.29 
Discontinued Operations   0.03    0.01    0.02    - 
Total  $0.52   $0.74   $1.03   $1.29 
                     
Diluted earnings per common share:                    
Continuing Operations  $0.49   $0.73   $1.01   $1.28 
Discontinued Operations   0.03    0.01    0.02    - 
Total  $0.52   $0.74   $1.03   $1.28 
                     
Weighted average shares outstanding:                    
Basic   48,961    46,032    47,550    45,999 
Diluted   49,114    46,215    47,700    46,206 

 

 F-4 

 

 

BERKSHIRE HILLS BANCORP, INC.

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

 

   June 30,   March 31,   Dec. 31,   Sept. 30,   June 30, 
(in thousands, except per share data)  2019   2019   2018   2018   2018 
Interest and dividend income from continuing operations                         
Loans  $113,990   $105,651   $111,576   $102,651   $100,254 
Securities and other   15,248    15,458    15,119    14,918    15,230 
Total interest and dividend income   129,238    121,109    126,695    117,569    115,484 
Interest expense from continuing operations                         
Deposits   28,273    26,622    23,811    21,460    17,768 
Borrowings   9,370    9,028    10,118    7,724    7,424 
Total interest expense   37,643    35,650    33,929    29,184    25,192 
Net interest income from continuing operations   91,595    85,459    92,766    88,385    90,292 
Non-interest income from continuing operations                         
Mortgage banking originations   278    46    148    15    334 
Loan related income   4,822    6,003    5,087    7,246    6,003 
Deposit related fees   7,525    6,858    7,131    7,004    7,605 
Insurance commissions and fees   2,738    2,853    2,479    2,930    2,549 
Wealth management fees   2,348    2,441    2,287    2,283    2,280 
Total fee income   17,711    18,201    17,132    19,478    18,771 
Other   (216)   970    1,666    468    155 
Securities gains/(losses), net   17    2,551    (3,023)   88    718 
(Loss) on sale of business operations and assets, net   -    -    -    -    (21)
Total non-interest income   17,512    21,722    15,775    20,034    19,623 
Total net revenue from continuing operations   109,107    107,181    108,541    108,419    109,915 
Provision for loan losses   3,467    4,001    6,716    6,628    6,532 
Non-interest expense from continuing operations                         
Compensation and benefits   34,779    33,500    34,927    31,746    33,499 
Occupancy and equipment   9,449    9,446    9,366    9,145    9,224 
Technology and communications   6,715    6,257    6,103    7,507    7,053 
Marketing and promotion   1,155    1,267    1,224    1,167    1,084 
Professional services   3,953    2,275    3,302    1,481    864 
FDIC premiums and assessments   1,751    1,639    1,488    1,640    1,411 
Other real estate owned and foreclosures   (2)   2    1    (1)   1 
Amortization of intangible assets   1,475    1,200    1,202    1,218    1,246 
Merger, restructuring and other expense   11,155    7,015    16,006    198    847 
Other   6,138    9,390    6,754    5,526    6,298 
Total non-interest expense   76,568    71,991    80,373    59,627    61,527 
                          
Income from continuing operations before income taxes  $29,072   $31,189   $21,452   $42,164   $41,856 
Income tax expense   5,118    6,917    4,384    9,095    8,145 
Net income from continuing operations  $23,954   $24,272   $17,068   $33,069   $33,711 
                          
Income/(loss) from discontinued operations before income taxes  $2,082   $(854)  $(3,884)  $(1,147)  $426 
Income tax expense/(benefit)   588    (217)   (1,075)   (305)   106 
Net income/(loss) from discontinued operations  $1,494   $(637)  $(2,809)  $(842)  $320 
                          
Net income  $25,448   $23,635   $14,259   $32,227   $34,031 
Preferred stock dividend   240    240    229    230    229 
Income available to common shareholders  $25,208   $23,395   $14,030   $31,997   $33,802 
                          
Basic earnings per common share:                         
Continuing Operations  $0.49   $0.52   $0.37   $0.72   $0.73 
Discontinued Operations   0.03    (0.01)   (0.06)   (0.02)   0.01 
Total  $0.52   $0.51   $0.31   $0.70   $0.74 
                          
Diluted earnings per common share:                         
Continuing Operations  $0.49   $0.52   $0.37   $0.72   $0.73 
Discontinued Operations   0.03    (0.01)   (0.06)   (0.02)   0.01 
Total  $0.52   $0.51   $0.31   $0.70   $0.74 
                          
Weighted average shares outstanding:                         
Basic   48,961    46,113    46,061    46,030    46,032 
Diluted   49,114    46,261    46,240    46,263    46,215 

 

 F-5 

 

 

BERKSHIRE HILLS BANCORP, INC.

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

 

   Quarters Ended 
   June 30,   March 31,   Dec. 31,   Sept. 30,   June 30, 
   2019   2019   2018   2018   2018 
                     
Earning assets                         
Loans:                         
Commercial real estate   5.01%   4.91%   5.40%   4.67%   5.08%
Commercial and industrial loans   5.79    5.83    5.97    6.22    5.73 
Residential mortgages   3.74    3.74    3.72    3.66    3.72 
Consumer loans   4.52    4.45    4.52    4.27    4.13 
Total loans   4.76    4.73    4.94    4.66    4.73 
Securities   3.38    3.46    3.34    3.32    3.45 
Short-term investments and loans held for sale   3.37    3.59    3.74    3.82    3.86 
Total earning assets   4.51    4.49    4.64    4.41    4.48 
                          
Funding liabilities                         
Deposits:                         
NOW and other   0.66    0.65    0.59    0.58    0.44 
Money market   1.27    1.23    1.10    0.92    0.88 
Savings   0.15    0.18    0.16    0.15    0.14 
Time   2.06    2.07    1.93    1.76    1.54 
Total interest-bearing deposits   1.44    1.44    1.31    1.18    1.02 
Borrowings   2.92    2.85    2.67    2.42    2.29 
Total interest-bearing liabilities   1.66    1.65    1.55    1.38    1.23 
                          
Net interest spread   2.85    2.84    3.09    3.03    3.25 
Net interest margin   3.19    3.17    3.41    3.32    3.50 
                          
Cost of funds (1)   1.41    1.41    1.31    1.16    1.03 
Cost of deposits   1.18    1.19    1.07    0.96    0.83 

 

 

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

 

 F-6 

 

 

BERKSHIRE HILLS BANCORP, INC.

AVERAGE BALANCES - UNAUDITED - (F-7)

 

   Quarters Ended 
   June 30,   March 31,   Dec. 31,   Sept. 30,   June 30, 
(in thousands)  2019   2019   2018   2018   2018 
Assets                         
Loans                         
Commercial real estate  $3,716,130   $3,377,902   $3,373,936   $3,331,097   $3,316,482 
Commercial and industrial loans   2,056,384    1,986,792    1,921,361    1,824,369    1,773,722 
Residential mortgages   2,711,348    2,556,299    2,539,592    2,459,943    2,268,886 
Consumer loans   1,064,579    1,079,583    1,112,433    1,120,942    1,113,089 
Total loans (1)   9,548,441    9,000,576    8,947,322    8,736,351    8,472,179 
Securities (2)   1,893,298    1,895,768    1,933,891    1,928,851    1,931,104 
Short-term investments and loans held for sale   117,029    67,367    51,827    47,752    36,136 
Total earning assets (3)   11,558,768    10,963,711    10,933,040    10,712,954    10,439,419 
Goodwill and other intangible assets   555,606    550,966    552,206    554,359    554,591 
Other assets   593,917    557,442    494,377    501,739    486,616 
Assets from discontinued operations   192,466    115,721    101,464    141,443    130,392 
Total assets  $12,900,757   $12,187,840   $12,081,087   $11,910,495   $11,611,018 
                          
Liabilities and shareholders' equity                         
Deposits                         
NOW and other  $1,053,335   $963,043   $920,225   $844,888   $819,166 
Money market   2,474,071    2,378,496    2,339,699    2,348,516    2,524,713 
Savings   780,797    736,707    728,853    740,765    749,995 
Time   3,593,022    3,429,375    3,229,521    3,274,518    2,878,846 
Total interest-bearing deposits   7,901,225    7,507,621    7,218,298    7,208,687    6,972,720 
Borrowings   1,415,614    1,351,834    1,566,478    1,363,914    1,382,794 
Total interest-bearing liabilities   9,316,839    8,859,455    8,784,776    8,572,601    8,355,514 
Non-interest-bearing demand deposits   1,673,560    1,538,767    1,579,013    1,635,564    1,619,470 
Other liabilities   215,704    192,119    127,370    132,521    89,933 
Liabilities from discontinued operations   18,434    13,962    8,854    11,880    12,650 
Total liabilities   11,224,537    10,604,303    10,500,013    10,352,566    10,077,567 
                          
Preferred shareholders' equity   40,633    40,633    40,633    40,633    40,633 
Common shareholders' equity   1,635,587   1,542,904    1,540,441    1,517,296    1,492,818 
Total shareholders' equity   1,676,220    1,583,537    1,581,074    1,557,929    1,533,451 
Total liabilities and shareholders' equity  $12,900,757   $12,187,840   $12,081,087   $11,910,495   $11,611,018 
                          
Supplementary data                         
Total average non-maturity deposits  $5,981,763   $5,617,013   $5,567,790   $5,569,733   $5,713,344 
Total average deposits   9,574,785    9,046,388    8,797,311    8,844,251    8,592,190 
Fully taxable equivalent income adjustment   1,882    1,809    1,763    1,807    2,033 
Total average tangible equity (4)   1,120,614    1,032,571    1,028,868    1,003,570    978,860 

 

 

(1)Total loans include non-accruing loans.
(2)Average balances for securities available-for-sale are based on amortized cost.
(3)Excludes discontinued operations for presentation purposes. Performance ratios are calculated including the impact of discontinued operations.
(4)See page F-9 for details on the calculation of total average tangible equity.

 

 F-7 

 

 

BERKSHIRE HILLS BANCORP, INC.

ASSET QUALITY ANALYSIS - UNAUDITED - (F-8)

 

   At or for the Quarters Ended 
   June 30,   March 31,   Dec. 31,   Sept. 30,   June 30, 
(in thousands)  2019   2019   2018   2018   2018 
NON-PERFORMING ASSETS                         
Non-accruing loans:                         
Commercial real estate  $19,366   $18,513   $20,372   $22,639   $10,338 
Commercial and industrial loans   9,256    5,614    6,003    4,914    4,029 
Residential mortgages   3,579    2,341    2,217    2,683    3,196 
Consumer loans   3,570    4,038    3,834    4,401    5,466 
Total non-accruing loans   35,771    30,506    32,426    34,637    23,029 
Other real estate owned   154    -    -    -    - 
Repossessed assets   874    742    1,209    1,069    1,241 
Total non-performing assets  $36,799   $31,248   $33,635   $35,706   $24,270 
                          
Total non-accruing loans/total loans   0.36%   0.34%   0.36%   0.39%   0.26%
Total non-performing assets/total assets   0.27%   0.26%   0.28%   0.30%   0.20%
                          
PROVISION AND ALLOWANCE FOR LOAN LOSSES                         
Balance at beginning of period  $62,038   $61,469   $58,457   $55,925   $53,859 
Charged-off loans   (3,966)   (4,579)   (4,029)   (4,471)   (5,714)
Recoveries on charged-off loans   617    1,147    325    375    1,248 
Net loans charged-off   (3,349)   (3,432)   (3,704)   (4,096)   (4,466)
Provision for loan losses   3,467    4,001    6,716    6,628    6,532 
Balance at end of period  $62,156   $62,038   $61,469   $58,457   $55,925 
                          
Allowance for loan losses/total loans   0.63%   0.69%   0.68%   0.66%   0.64%
Allowance for loan losses/non-accruing loans   174%   203%   190%   169%   243%
                          
NET LOAN CHARGE-OFFS                         
Commercial real estate  $(1,235)  $(752)  $(1,357)  $(3,074)  $(2,079)
Commercial and industrial loans   (995)   (1,580)   (1,538)   (189)   (1,193)
Residential mortgages   (139)   (95)   (108)   61    (632)
Home equity   (300)   (257)   (116)   (242)   108 
Auto and other consumer   (680)   (748)   (585)   (652)   (670)
Total, net  $(3,349)  $(3,432)  $(3,704)  $(4,096)  $(4,466)
                          
Net charge-offs (QTD annualized)/average loans   0.14%   0.15%   0.17%   0.19%   0.21%
Net charge-offs (YTD annualized)/average loans   0.15%   0.15%   0.18%   0.19%   0.19%
                          
DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS                         
30-89 Days delinquent   0.20%   0.22%   0.27%   0.38%   0.22%
90+ Days delinquent and still accruing   0.28%   0.23%   0.22%   0.22%   0.40%
Total accruing delinquent loans   0.48%   0.45%   0.49%   0.60%   0.62%
Non-accruing loans   0.36%   0.34%   0.36%   0.39%   0.26%
Total delinquent and non-accruing loans   0.84%   0.79%   0.85%   0.99%   0.88%

 

 F-8 

 

 

BERKSHIRE HILLS BANCORP, INC.

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

 

      At or for the Quarters Ended 
      June 30,   March 31,   Dec. 31,   Sept. 30,   June 30, 
(in thousands)     2019   2019   2018   2018   2018 
Net income     $25,448   $23,635   $14,259   $32,227   $34,031 
Adj: Net securities (gains)/losses (1)      (17)   (2,551)   3,023    (88)   (718)
Adj: Net losses/(gains) on sale of business operations and assets      -    -    -    -    21 
Adj: Merger and acquisition expense      9,711    1,609    2,792    198    847 
Adj: Restructuring expense and other expense      1,444    5,406    1,822    -    - 
Adj: Legal settlements      -    -    3,000    -    - 
Adj: Systems vendor restructuring costs      -    -    8,379    -    - 
Adj: (Income)/loss from discontinued operations before income taxes      (2,082)   854    3,884    1,147    (426)
Adj: Income taxes      (2,385)   (1,223)   (5,185)   (397)   - 
Total core income (2)  (A)  $32,119   $27,730   $31,974   $33,087   $33,755 
                             
Total revenue from continuing operations     $109,107   $107,181   $108,541   $108,419   $109,915 
Adj: Net securities (gains)/losses (1)      (17)   (2,551)   3,023    (88)   (718)
Adj: Net losses/(gains) on sale of business operations and assets      -    -    -    -    21 
Total core revenue (2)  (B)  $109,090   $104,630   $111,564   $108,331   $109,218 
                             
Total non-interest expense from continuing operations     $76,568   $71,991   $80,373   $59,627   $61,527 
Less: Merger, restructuring and other expense (see above)      (11,155)   (7,015)   (4,614)   (198)   (847)
Less: Legal settlements      -    -    (3,000)   -    - 
Less: Systems vendor restructuring costs      -    -    (8,379)   -    - 
Core non-interest expense (2)  (C)  $65,413   $64,976   $64,380   $59,429   $60,680 
                             
(in millions, except per share data)                            
Total average assets  (D)  $12,901   $12,188   $12,081   $11,910   $11,611 
Total average shareholders' equity  (E)   1,676    1,584    1,581    1,558    1,533 
Total average tangible shareholders' equity (2)  (F)   1,121    1,033    1,029    1,004    979 
Total average tangible common shareholders' equity (2)  (G)   1,080    992    988    963    938 
Total tangible shareholders' equity, period-end (2)(3)  (H)   1,176    1,026    1,001    979    961 
Total tangible common shareholders' equity, period-end (2)(3)  (I)   1,136    986    961    939    921 
Total tangible assets, period-end (2)(3)  (J)   13,051    11,623    11,660    11,477    11,347 
                             
Total common shares outstanding, period-end (thousands)  (K)   51,045    45,522    45,417    45,420    45,420 
Average diluted shares outstanding (thousands)  (L)   49,114    46,261    46,240    46,263    46,215 
                             
Core earnings per common share, diluted (2)  (A/L)  $0.65   $0.60   $0.69   $0.72   $0.73 
Tangible book value per common share, period-end (2)  (I/K)   22.25    21.66    21.15    20.68    20.28 
Total tangible shareholders' equity/total tangible assets (2)  (H)/(J)   9.01    8.83    8.59    8.53    8.47 
                             
Performance ratios (4)                            
GAAP return on assets      0.79%   0.78    0.47%   1.08%   1.17%
Core return on assets (2)      1.01    0.92    1.07    1.12    1.18 
GAAP return on equity      6.07    5.97    3.61    8.27    8.88 
Core return on equity (2)  (A/E)   7.67    7.00    8.09    8.49    8.81 
Core return on tangible common equity (2)(5)  (A+O)/(G)   12.21    11.44    13.21    14.02    14.68 
Efficiency ratio (2)(6)  (C-O)/(B+M+P)   56.41    59.54    54.88    52.20    52.42 
Net interest margin      3.19    3.17    3.41    3.32    3.50 
                             
Supplementary data (in thousands)                            
Tax benefit on tax-credit investments (7)  (M)  $2,381   $684   $1,787   $1,374   $2,119 
Non-interest income charge on tax-credit investments (8)  (N)   (1,938)   (579)   (1,610)   (1,112)   (1,594)
Net income on tax-credit investments  (M+N)   443    105    177    262    525 
                             
Intangible amortization  (O)  $1,475   $1,200   $1,202   $1,218   $1,246 
Fully taxable equivalent income adjustment  (P)   1,882    1,809    1,763    1,807    2,033 

 

 

(1)Net securities (gains)/losses 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% 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 

 

 

BERKSHIRE HILLS BANCORP, INC.

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

 

      At or for the Six Months Ended 
      June 30,   June 30, 
(Dollars in thousands)     2019   2018 
Net (loss)/income     $49,083   $59,279 
Adj: Net securities losses/(gains) (1)      (2,568)   784 
Adj: Net (gains) on sale of business operations      -    (460)
Adj: Merger and acquisition expenses      11,320    5,940 
Adj: Restructuring expense and other      6,850    - 
Adj: (Income) from discontinued operations before income taxes      (1,228)   (264)
Adj: Income taxes      (3,608)   (1,520)
Total core income (2)  (A)  $59,849   $63,759 
              
Total revenue     $216,288   $213,564 
Adj: Net securities losses/(gains) (1)      (2,568)   784 
Adj: Net (gains) on sale of business operations      -    (460)
Total core revenue (2)  (B)  $213,720   $213,888 
              
Total non-interest expense     $148,559   $126,893 
Less: Merger, restructuring and other expense (see above)      (18,170)   (5,940)
Core non-interest expense (2)  (C)  $130,389   $120,953 
              
(in millions, except per share data)             
Total average assets  (D)  $12,546   $11,567 
Total average shareholders' equity  (E)   1,630    1,521 
Total average tangible shareholders' equity (2)  (F)   1,077    965 
Total average tangible common shareholders' equity (2)  (G)   1,036    925 
Total tangible shareholders' equity, period-end (2)(3)  (H)   1,176    961 
Total tangible common shareholders' equity, period-end (2)(3)  (I)   1,136    921 
Total tangible assets, period-end (2)(3)  (J)   13,051    11,347 
              
Total common shares outstanding, period-end (thousands)  (K)   51,045    45,420 
Average diluted shares outstanding (thousands)  (L)   47,700    46,206 
              
Core earnings per common share, diluted (2)  (A/L)  $1.25   $1.38 
Tangible book value per common share, period-end (2)  (I/K)   22.25    20.28 
Total tangible shareholders' equity/total tangible assets (2)  (H)/(J)   9.01    8.47 
              
Performance ratios (4)             
GAAP return on assets      0.78%   1.03%
Core return on assets (2)  (A/D)   0.97    1.12 
GAAP return on equity      6.02    7.79 
Core return on equity (2)  (A/E)   7.34    8.38 
Core return on tangible common equity (2)(5)  (A+O)/(G)   11.84    14.13 
Efficiency ratio (2)(6)  (C-O)/(B+M+P)   57.93    53.72 
Net interest margin      3.18    3.43 
              
Supplementary data             
Tax benefit on tax-credit investments (7)  (M)  $3,065   $2,715 
Non-interest income charge on tax-credit investments (8)  (N)   (2,517)   (2,100)
Net income on tax-credit investments  (M+N)   548    615 
              
Intangible amortization  (O)   2,675    2,514 
Fully taxable equivalent income adjustment  (P)   3,691    3,853 

 

 

(1)Net securities (gains)/losses 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% 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-10 

 

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