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More details emerged about the $230 million acquisition of Worcester-based Commerce Bank in the third quarter conference call of Berkshire Hills Bancorp, the holding company of Berkshire Bank, in what was another packed quarter for the company.
The acquisition, announced earlier this year and completed in early October, gives Berkshire Hills another $1.9 billion in assets, and will bring Berkshire’s loan-to-deposit ratio below 100 percent.
“Commerce has the number one deposit share in Worcester,” CEO Michael Daly said on the earnings call. “And we are going to bring our expanded product set to their customer base.”
But more than Worcester, the Commerce acquisition allowed Berkshire to become Massachusetts’ largest state charted bank not including State Street Global Advisors with roughly $11.6 billion in assets.
The purchase also charts a path for Berkshire across the state from its presence in Pittsfield, through central Massachusetts with 13 new Commerce branches to Boston with another three Commerce branches.
In the third quarter, Berkshire also announced its new Boston corporate headquarters at 60 State St., right in the heart of the city’s financial district.
With the Commerce acquisition, Berkshire also passed $10 billion in assets, meaning it is subject to more regulatory scrutiny and costs under the Dodd-Frank Act such as stress testing.
Daly said the Durban Amendment would likely begin to impact the bank earlier than anticipated, but that he still expected to see core earnings per share growth of 10 percent next year. He said he expects the company to begin systems integration for Commerce next March.
Berkshire executives also divulged more information regarding Commerce’s $103 million taxi-medallion loan portfolio, a common worry among investors given the state of the taxi industry.
Richard Marotta, president of Berkshire Bank, said on the call the company is giving the portfolio a book value of roughly $35 million, meaning the company is calculating in the long term there could be $65 million in losses. Commerce has already charged-off $4 million of the portfolio including $1.3 million this year.
Marotta also said there is currently $5.5 million in loans that are 30 days past due, and that 90 percent of the portfolio is composed of Boston taxi drivers.
Still, despite the taxi-medallion portfolio, the company had another strong quarter.
Net income for the third quarter was $22.9 million, or $0.57 per share, up 40 percent year-over-year. Third quarter net interest income of roughly $72 million represents an increase of about $14 million from the third quarter of 2016.
Non-interest income was way up at $96 million for the first nine months of 2017, nearly doubling non-interest income in the first nine months of 2016. The net interest margin remained stable from the second quarter of 2017 at 3.36 percent.
Total loans reached $6.95 billion, up about $900 million year-over-year.
