BHLB Berkshire Hills Bancorp Inc

PITTSFIELD, Mass., April 27, 2015 /PRNewswire/ -- Berkshire Hills Bancorp, Inc. (NYSE: BHLB) reported $0.50 in core earnings per share in the first quarter of 2015, which was a 19% increase over first quarter results in the prior year.  Profit growth has been due to higher revenues from continued business momentum.   First quarter core EPS increased by 4% from $0.48 in the fourth quarter of 2014.  GAAP EPS totaled $0.35 per share in the most recent quarter compared to $0.46 in the linked quarter.  Earnings in both periods were impacted by non-core charges related primarily to growth and restructuring, including charges related to the acquisition of Hampden Bancorp, which was completed on April 17, 2015.

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

• 4% increase in core earnings per share
• 14% annualized increase in commercial loans
• 6% annualized increase in deposits
• 11% annualized increase in demand deposits
• 9% increase in fee income (year-over-year)
• 0.36% non-performing assets/assets
• 0.28% net loan charge-offs/average loans

CEO Michael Daly stated, "We continued our momentum of sequential and year-over-year growth in core EPS in the most recent quarter.  We also maintained double digit annualized expansion in our focus areas of commercial loans and demand deposits, where we continue to capitalize on the strength of our regional bank franchise.  This contributed to an increase in our net interest margin before purchased loan accretion.  Most categories of fee income also increased year over year as we further develop revenue synergies and deepen our market and wallet share."

Mr. Daly continued, "Our acquisition of Springfield-based Hampden Bancorp was completed on April 17 on schedule.  We look forward to expanding our share of that market through the additional services that we can deliver with our resources.  In recent weeks, Berkshire also announced the recruitment of leadership talent for our Hartford commercial banking team and for our successful Albany private banking and wealth teams.  We've delivered core earnings growth while also strengthening our market presence and the financial solutions that we offer in our regions.  Hockey legend Ray Bourque and left wing Milan Lucic joined us as spokespersons and we completed a second successful season in our partnership with NESN (New England Sports Network) as the Official Bank of Boston Bruins coverage on the network, garnering widespread brand recognition and significant business leads."

Mr. Daly concluded, "The Hampden acquisition boosted our assets and outstanding shares by more than 10% and we continue to target accretive financial benefits after merger efficiencies are achieved during the year.   We are maintaining our focus on expense disciplines and efficiency while improving our overall franchise positioning and talent redeployment to better serve our customers.  Our goal is to continue to generate positive core operating leverage from revenue synergies and expense management to further improve core earnings and profitability."

DIVIDEND DECLARED

The Board of Directors voted to declare a cash dividend of $0.19 per share to shareholders of record at the close of business on May 14, 2015, payable on May 28, 2015.  This dividend equates to a 2.9% annualized yield based on the $26.18 average closing price of Berkshire's common stock during the first quarter.  In January 2015, the Board increased the dividend by $0.01, or 6%, from the $0.18 quarterly amount which was in effect throughout 2014.

FINANCIAL CONDITION

Total assets increased at a 4% annualized rate in the first quarter due primarily to a 4% annualized increase in total loans funded by a 6% annualized increase in total deposits.  Capital and liquidity ratios remained solid and did not change significantly.  Tangible book value per share increased at a 6% annualized rate to $17.46 and total book value per share increased at a 3% annualized rate to $28.36. 

Berkshire continued to generate strong double digit commercial loan growth, which measured 14% annualized in the first quarter of 2015, including 11% annualized growth in commercial and industrial loan balances.  Managed reductions in other loans resulted in 4% annualized growth in total loans during the quarter.  Residential mortgage loans decreased as most first quarter mortgage originations were sold into the secondary market following a decrease in interest rates at the start of the year.  The decrease in consumer loans was due to a change in the auto loan portfolio strategy initiated in the final quarter of 2014.

Asset quality metrics remained favorable and continued to improve.  Annualized net loan charge-offs measured 0.28% of average loans for the quarter.   Quarter-end non-performing assets decreased to 0.36% of total assets and accruing delinquent loans decreased to 0.43% of total loans.  The loan loss allowance increased to 0.77% of total loans; approximately 15% of quarter-end loans were balances recorded at fair value in prior year bank acquisitions.

Annualized first quarter deposit growth of 6% included increases in most major categories.  Growth was primarily in relationship oriented transaction accounts.  The ratio of loans/deposits was 100% at quarter-end, compared to 101% at the start of the quarter. 

RESULTS OF OPERATIONS

First quarter 2015 core EPS increased by $0.02, or 4%, over the linked quarter due to growth in loans and fee revenues. The first quarter core return on equity improved to 7.1% and the core return on tangible equity improved to 12.1%.  Net non-core charges totaled $0.15 per share during the quarter, including $0.11 related to the Hampden merger and $0.04 in branch restructuring charges.  The GAAP return on equity measured 5.0% during the quarter including the impact of these non-core charges.

Total net interest income decreased sequentially by $1.2 million, or 2%, including a $1.3 million decrease to $0.3 million in purchased loan accretion. The net interest margin increased to 3.15% from 3.12% before purchased loan accretion including the benefit of the shift in mix towards higher yielding loans from investment securities.  Including purchased loan accretion, the net interest margin was 3.18% in the first quarter, compared to 3.23% in the prior quarter.

Total fee income increased by $1.1 million, or 9% year-over-year, with increases in most major categories.  Fee income was up $0.8 million, or 6%, compared to the linked quarter.  Seasonal increases in insurance and wealth management revenues mostly offset seasonal and weather related decreases in loan and deposit fees.  Mortgage banking fees increased due to increased refinancing demand spurred by lower interest rates.

The loan loss provision totaled $3.9 million in each of the two most recent quarters and exceeded net charge-offs of $3.2 million in each of these quarters.   Including seasonal and weather related factors, first quarter core non-interest expense increased to $40.7 million from $39.9 million in the linked quarter.  Full-time equivalent staff was unchanged at 1,091 at quarter-end.  The efficiency ratio increased to 63.3% due to seasonality and lower revenue from purchased loan accretion.  This ratio is expected to improve due to planned revenue growth and efficiencies related to the Hampden acquisition and the branch restructuring. 

Berkshire's increased financing of tax-advantaged commercial development projects contributed $0.04 in additional EPS in the first quarter, compared to the prior quarter.  This offset the $0.03 after-tax impact of the previously noted decrease in purchased loan accretion.  Due to its regional reach and resources, the Company has expanded its tax-advantaged investments in redevelopment projects with commercial relationship partners in its communities.   This financing resulted in a charge to non-interest income which is more than offset by the tax benefits which are a component of income tax expense.  This activity is summarized and included with Supplementary Data reported on schedule F-9.

UNAUDITED FINANCIAL HIGHLIGHTS OF HAMPDEN BANCORP

Included in the financial exhibits to this news release are unaudited selected first quarter financial highlights for Hampden, which was acquired by Berkshire on April 17, 2015.  This information does not include all items which may affect Hampden's final financial statements as of March 31, 2015 and it does not include non-core charges related to the merger of Hampden into Berkshire. Additional financial information about Hampden will be provided in the notes to Berkshire's midyear financial statements, which will include merger accounting adjustments as well as the results of the acquired Hampden operations from the effective date of the merger. 

CONFERENCE CALL

Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Tuesday, April 28, 2015 to discuss the results for the quarter and provide guidance about expected future results. Participants should dial-in to the call 10-15 minutes before it begins. Information about the conference call follows:

Live Dial-in:  888-317-6003; access number: 5204709
Webcast:  ir.berkshirebank.com 
Replay:  877-344-7529; access number: 10062838

A telephone replay of the call will be available through Wednesday, May 6, 2015. The webcast will be available on Berkshire's website for an extended period of time.  A print friendly version of this news release will be available at the web link shown above.

BACKGROUND

Berkshire Hills Bancorp is the parent of Berkshire Bank – America's Most Exciting Bank^®. Including the operations of Hampden Bancorp acquired on April 17, 2015, Berkshire has $7.2 billion in assets and 96 full-service branch offices in Massachusetts, New York, Connecticut, and Vermont providing personal and business banking, insurance, and wealth management services.  Including new shares issued for the Hampden acquisition, Berkshire now has 29.52 million shares outstanding. 

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 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 amounts which the Company views as unrelated to its normalized operations, including securities gains/losses, losses recorded for hedge terminations, merger costs, restructuring costs, systems conversion costs, and out-of-period adjustments.  Non-core adjustments are presented net of an adjustment for income tax expense.  This adjustment is determined as the difference between the GAAP tax rate and the effective tax rate applicable to core income.  The efficiency ratio is adjusted for non-core revenue and expense items and for tax preference items.  The Company also calculates measures related to tangible equity, which adjust equity (and assets where applicable) to exclude intangible assets due to the importance of these measures to the investment community.  Charges related to merger and acquisition activity consist primarily of severance/benefit related expenses, contract termination costs, and professional fees.  Systems conversion costs relate primarily to the Company's core systems conversion and related systems conversions costs.   Restructuring costs primarily consist of costs and losses associated with the disposition of assets.   

CONTACTS

Investor Relations Contact
Allison O'Rourke; Senior Vice President, Investor Relations Officer; 413-236-3149

Media Contact
Ray Smith; Assistant Vice President, Marketing; 413-236-3756