Greater Westfield Chamber of Commerce

Berkshire Hills Reports Fourth Quarter Results; Increases Dividend 5%

BOSTON, Jan. 23, 2019 /PRNewswire/ -- Berkshire Hills Bancorp, Inc. (NYSE: BHLB) reported GAAP net income of $14 million, or $0.31 per common share in the fourth quarter of 2018.   The non-GAAP measure of core earnings totaled $29 million, or $0.63 per share, during this period.   Both GAAP and core EPS totaled $0.70 in the prior quarter.  The benefit of higher net interest income in the fourth quarter was offset by lower fee income and higher expense.  Core EPS is net of non-core charges which totaled $0.32 per share after tax in the fourth quarter and included merger related expenses and other items, including costs related to the restructuring of the Company's banking systems provider relationships.  

(PRNewsfoto/Berkshire Hills Bancorp, Inc.)

FOURTH QUARTER FINANCIAL HIGHLIGHTS (balance sheet growth is compared to prior quarter-end):

  • 2% loan and deposit growth
  • 3.41% net interest margin
  • 60.3% efficiency ratio
  • 0.17% net loan charge-offs/average loans
  • 0.28% non-performing assets/assets

CEO Richard Marotta stated, "Core earnings for the year were in line with our original plan, and fourth quarter core earnings also met our expectations before the impact of the government shutdown on SBA related fee revenue.  During 2018, our teams made great strides integrating our Eastern-Massachusetts acquisition and developing organic business across our footprint.  Loan growth was consistent throughout the year, and deposit balances increased with the benefit of higher activity in the fourth quarter.  Our internal capital generation supported our balance sheet growth, and our credit performance and asset quality remain strong."

Mr. Marotta added, "In December, we announced an agreement to acquire SI Financial, which adds a solid deposit franchise in southeastern New England, and complements our operations in Springfield, Worcester, and Hartford.  We're working expeditiously to complete this merger by mid-year 2019 with a goal of completing the integration later in the year to achieve future targeted accretive benefits of increased scale and a combined pro forma asset base of nearly $14 billion.   We completed a technology project in the fourth quarter, and restructured our banking systems provider relationships which will benefit our long term competitive profile.  In recognition of the year's progress, our Board approved a 5% dividend increase effective with our next dividend."

Mr. Marotta concluded "Our Berkshire teams are moving forward together, supported by a strong culture.  Our corporate responsibility initiatives in 2018 included increasing our minimum wage to $15 per hour, formalization of equal pay standards, naming a Corporate Social Responsibility Officer, and initiating a diversity and inclusion program which is augmented by our Boston headquarters location.   We're committed to a long-term focus and judicious business management to deliver on our franchise investment and the expectations of our constituents."


The Board of Directors voted to increase the quarterly cash dividend by $0.01, or 5%, to $0.23 per common share to shareholders of record at the close of business on February 14, 2019, payable on February 28, 2019.  The dividend equates to a 3.4% annualized yield based on the $26.97 closing price of Berkshire Hills Bancorp at year-end 2018.  Effective on the same dates, the Board also increased the quarterly cash dividend on preferred stock by 5% to $0.46 per share.


Total assets increased to $12.2 billion in the fourth quarter, resulting from 2% growth in commercial loans and residential mortgages.  Commercial loan growth was concentrated in Central and Eastern Massachusetts, together with higher specialty lending and asset based lending balances.  Mortgage growth was based on originations in Eastern Massachusetts in support of the Bank's expansion.  Deposits increased by 2% including seasonally higher year-end activity.  Payroll service related balances increased by $108 million, and accounted for most of the shift between NOW and money market accounts.     The average cost of deposits was 1.07% in the fourth quarter, increasing by 0.11% quarter-over-quarter, in line with the Company's expectations.  Liquidity and capital metrics were little changed in the fourth quarter.   The year-end ratio of loans/deposits was 101%.  The year-end 2018 equity/assets ratio measured 12.7% and tangible equity/tangible assets measured 8.6%.  Book value per common share increased in 2018 by 4% to $33.30, while the non-GAAP measure of tangible book value per common share improved by 7% to $21.15.


GAAP earnings per share decreased to $0.31 in the fourth quarter, compared to $0.70 in the prior quarter.  Net non-core charges totaled $19 million, or $0.32 per share after-tax, in the fourth quarter.  This included $8 million in expense related to the restructuring of the Company's banking systems vendor relationships to improve the breadth, flexibility, and scalability of these systems.  This charge is expected to be earned back in less than three years, including benefits related to merger integration costs.  Non-core charges in the fourth quarter included $3 million in merger related expenses, a $3 million accrued expense related to a legal settlement, and a $3 million charge to non-interest income due to a reduction in the carrying value of equity securities which are marked-to-market quarterly.  Other non-core charges included a $1.5 million expense related to the CEO transition, consisting of a payout pursuant to a resignation and separation agreement, net of the reversal of accrued conditional benefits which were forfeited as part of this agreement.

Core earnings per share decreased to $0.63 in the fourth quarter from $0.70 in the prior quarter, reflecting a $1 million decrease in revenue and a $3 million increase in core expense.  Net interest income increased by $4 million quarter-over-quarter, including the benefit of a 2% increase in average earning assets and an increase in the net interest margin to 3.41% from 3.32%.  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 0.30% to the fourth quarter 2018 margin, compared to 0.17% in the prior quarter.  Rising funding costs resulted in a 0.04% reduction in the margin before the impact of purchased loan accretion.  The cost of funds increased by 0.15% due to Federal Reserve Bank interest rate hikes and increased average utilization of higher cost borrowings.

Fourth quarter fee income decreased by $6 million quarter-over-quarter, with the decrease split between mortgage banking revenue and SBA loan sale gains included in loan related income.  These reductions reflected market conditions, including lower volumes and tighter margins, as well as seasonal factors.   The SBA decrease included $1 million in gains related to loans that could not be processed for sale due to the partial federal government shutdown.

The fourth quarter loan loss provision increased quarter-over-quarter, adding to the loan loss allowance concurrent with loan growth during the quarter.  The provision exceeded net loan charge-offs, which measured 0.17% of average loans, and the allowance increased to 0.68% of total loans.  Charge-offs, delinquencies, and non-accruals all decreased compared to the prior quarter, and remain at favorable levels.

GAAP non-interest expense increased by $19 million quarter-over-quarter, including the above mentioned non-core expenses.  Core non-interest expense increased by $3 million quarter-over-quarter, including higher compensation expense and professional fees in support of current initiatives.  Total full-time equivalent staff decreased to 1,916 positions at year-end, from 1,992 positions at the start of the year, primarily due to volume related reductions in mortgage banking staff.    The GAAP effective income tax rate was 19% for the fourth quarter and 21% for the year 2018.  The core effective tax rate for the year was also 21%.


Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Thursday, January 24, 2019 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:  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  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, January 31, 2019 by dialing 877-344-7529 and entering access number 10127662.  The webcast will be available on Berkshire's website for an extended period of time.


Berkshire Hills Bancorp is the parent of Berkshire Bank, which is recognized for its entrepreneurial approach, relationship customer experience and distinctive culture.  The Company has approximately $12.2 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.  Berkshire has a pending agreement to acquire SI Financial Group, Inc., the parent of Savings Institute Bank & Trust Company, a $1.6 billion bank with 23 branches in eastern Connecticut and southern Rhode Island.


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 Berkshire does not undertake any obligation to update forward-looking statements.


In connection with the proposed merger, Berkshire will file with the Securities and Exchange Commission ("SEC") a Registration Statement on Form S-4 that will include a Proxy Statement of SI Financial Group ("SIFI") and a Prospectus of Berkshire, as well as other relevant documents concerning the proposed merger. Before making any voting or investment decision, investors and security holders of SIFI and Berkshire are urged to carefully read the entire registration statement and Proxy Statement/Prospectus, when they become available, as well as any amendments or supplements to these documents, because they will contain important information about the proposed transaction. A free copy of the Registration Statement and Proxy Statement/Prospectus, as well as other filings containing information about Berkshire and SIFI, when they become available, may be obtained at the SEC's Internet site ( Copies of documents filed by Berkshire with the SEC may also be obtained, free of charge, from Berkshire's website at or by contacting Erin Duggan at 413-236-3773.  Copies of the documents filed by SIFI with the SEC may also be obtained, free of charge, from SIFI's website at or by contacting Rheo Brouillard at 860-456-6540.


Berkshire and SIFI and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of SIFI in connection with the proposed merger. Information about the directors and executive officers of Berkshire is set forth in the proxy statement for Berkshire's 2018 annual meeting of stockholders, as filed with the SEC on a Schedule 14A on April 6, 2018. Information about the directors and executive officers of SIFI is set forth in the proxy statement for SIFI's 2018 annual meeting of stockholders, as filed with the SEC on a Schedule 14A on March 29, 2018.   Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction and a description of their direct and indirect interests, by security holdings or otherwise, may be obtained by reading the Proxy Statement/Prospectus and other relevant documents regarding the proposed merger to be filed with the SEC (when they become available). Free copies of these documents may be obtained as described in the preceding paragraph.


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, 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.  The merger related charges in 2017 and 2018 are primarily related to the business combinations with First Choice Bank and Commerce Bancshares Corp., and the pending combination with SI Financial.  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.  In 2018, the Company recorded $8 million in charges related to the restructuring of banking systems vendor relationships in conjunction with contractual arrangements extending to 2026.  The Company recorded a $3 million cost for the pending 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, consisting of a $7.5 million payout pursuant to a resignation and separation agreement, net of the reversal of accrued conditional benefits which were forfeited in this agreement.

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.

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

Media Contact
Elizabeth Mach; Senior Vice President, Marketing Officer; 413-445-8390



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