Year-over-year quarterly income increased to $12 million at Berkshire Hills Bancorp during the second quarter this year from $7.9 million during the same time frame last year, but the company had expected better results this quarter and consequently cut its estimate in advance of releasing its earnings.
Earlier this week, the company announced that it anticipated core earnings of 48 cents per share this quarter. While that’s still an increase over the 47 cents per share for the same time last year, those results still fell below management’s expectations, and the company cited tightening mortgage origination volumes and margins, impacts on commercial loan and interest rate swap revenues and higher expenses due to the completion of integration and efficiency projects, as an explanation.
"We had anticipated better results for the quarter," CEO Michael Daly said in a statement accompanying the earnings release. "We made a decision late last year not to book assets or keep assets that could be uneconomic in the future, and we relied on expected fee income from mortgage operations to supplement revenue. An abrupt and unexpected change in the yield curve in the second half of the quarter removed that supplement. Going forward, we will look to expense reduction and resumption of earning asset growth to contribute to our earnings objectives while we maintain our disciplined standards."
In its earnings release, the holding company for the Pittsfield-headquartered Berkshire Bank also highlighted a 17 percent annualized increase in commercial loans during the quarter and a 20 percent, or $9.4 million, increase in net revenue compared with the second quarter of 2012.
Berkshire Hills Bancorp’s net interest margin came to 3.63 percent, compared with 3.73 percent in the previous quarter. Nonperforming assets came to 0.56 percent of total assets compared with 0.6 percent for the same period last year, and annualized net loan charge-offs were 0.27 percent of average loans.
Total loans came to $3.9 million, compared with $3.4 million at June 30 last year. The loan loss allowance increased slightly to 0.86 percent of total loans from 0.83 percent during the first half of the year. For loans from business activities (excluding acquired loans), net charge-offs were 0.25 percent of average loans and the related allowance measured 1.19 percent of these loans.
Total assets decreased slightly for the six months ended June 30 to $5.2 billion from $5.3 billion at the end of 2012. The company attributed this to restructuring of acquired loan portfolios.
Total deposits decreased by 7 percent, or $285 million, in the most recent quarter. This included a $208 million reduction in money market balances which were primarily rate sensitive commercial balances. These amounts were replaced with borrowings to reduce funding costs and utilization of Berkshire’s supplemental deposit insurance program. The balance of the deposit reduction was primarily related to the restructuring of brokered and other non-core deposit sources following the integration of Beacon Federal operations earlier this year. Reflecting these activities, the cost of funds decreased to 0.77 percent in the most recent quarter, compared to 0.81 percent in the prior quarter. The loan/deposit ratio stood at 101 percent at midyear.
The company said it anticipated the acquisition of 20 Bank of America branches in New York to provide an additional $640 million in low cost core deposits next year.
