A reduction in mortgage banking fees resulting from a decline in residential mortgage refinancing demand led to a decline in year-over-year net income during the third quarter at the parent company for Berkshire Bank, but the bank’s aggressive growth strategy more than made up for pricing pressures in a low interest rate environment.
Net income for the third quarter declined 19 percent to $8.1 million, compared with $10 million for the comparable period last year, but net income for the nine months ended Sept. 30 increased 28 percent to $30.6 million, compared with $23.9 million for the same quarter last year.
"We had a good quarter and our business expansion initiatives have driven year-to-date earnings growth despite the headwinds resulting from the interest rate environment. At the beginning of the third quarter, we took action to further consolidate the benefits from our expansion. We renewed loan growth while trimming core expenses, achieving near-term core earnings and profitability targets," CEO Michael Daly said in a statement.
Berkshire Hills Bancorp also recorded a 16 percent annualized increase in commercial business loans and in total loans, an 8 percent annualized increase in total commercial loans, and a 7 percent annualized increase in total deposits.
Lower refinancing demand, tighter margins on secondary market activity and higher retention of adjustable rate mortgages resulted in a decrease in mortgage banking revenue. Mortgage banking fees were down $1.7 million and other loan fees declined $1.3 million, primarily due to loan sales in the previous quarter. Overall, noninterest income declined to $12.1 million during the third quarter, compared with $15.6 million in the linked quarter.
The third quarter provision for loan losses increased to $3.2 million in 2013 from $2.7 million in the linked quarter and from $2.5 million in the third quarter of 2012. Net loan charge-offs totaled $3.2 million, $2.7 million and $2.3 million for these periods, respectively. Following the loan loss provision, the loan loss allowance remained unchanged at $33.2 million during the most recent quarter and for the first nine months of the year.
