EX-99.1 2 tm2213116d1_ex99-1.htm EXHIBIT 99.1

Exhibit 99.1

 

 

  

BERKSHIRE HILLS REPORTS IMPROVED FIRST QUARTER RESULTS

 

BOSTON, April 20, 2022 - Berkshire Hills Bancorp, Inc. (NYSE: BHLB) today reported that first quarter earnings per share (EPS) increased year-over-year by 62% to $0.42 in 2022 from $0.26 in 2021. The non-GAAP measure of adjusted EPS increased by 37% to $0.43 from $0.32. Earnings benefited from loan growth in 2022 together with a release of the allowance for credit losses, reflecting improved loan performance expectations. Compared to the fourth quarter of 2021, first quarter EPS was unchanged at $0.42 and adjusted EPS increased by 4% to $0.43 from $0.42.

 

FIRST QUARTER FINANCIAL HIGHLIGHTS (Non-GAAP measures are reconciled on page F-9).

 

·62% year-over-year increase in EPS
·6% increase in total loans quarter-over-quarter
·2.61% net interest margin, stable over the last five quarters
·$4 million benefit to the credit loss provision due to a release of the credit loss allowance
·0.26% non-performing assets/assets – fifth sequential quarterly improvement
·6% reduction in period-end shares outstanding year-over-year reflecting stock buybacks

 

CEO Nitin Mhatre stated, “Our strong growth in loan balances was driven by a significant increase in new loan originations that benefited from higher productivity of our existing bankers, recruitment of experienced frontline bankers and new partnership channels in the second half of 2021. Our credit metrics remained strong and our earnings benefited from a release of the credit loss allowance, which continues to provide comparatively strong coverage of the loan portfolio.”

 

“We remain well positioned to benefit from the expected rising rate environment. During the first quarter, Berkshire announced the approval of a new program to repurchase approximately $140 million in common shares and correspondingly total outstanding shares decreased by 2% during the quarter.“

 

Mr. Mhatre concluded, “Berkshire Bank recently announced an expanded partnership with fintech Narmi to create a best-in-class digital banking experience for consumers and small businesses. We continue to promote employees from within the organization and bring on board knowledgeable bankers to deepen long-term relationships with our customers. I’m also pleased that our collective efforts to support our customers and communities continue to gain recognition as we were recently named by Newsweek as one of America’s Most Trustworthy Companies and placed among the top 10 banks nationally. Our team has gotten off to a strong start in 2022 as we execute on our BEST plan in pursuit of our vision to be a high-performing, leading socially responsible community bank in New England and beyond.”

 

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RESULTS OF OPERATIONS

 

Earnings: First quarter GAAP earnings per share totaled $0.42, unchanged from the prior quarter and increased year-over-year by 62% from $0.26. The non-GAAP measure of adjusted EPS totaled $0.43, increasing quarter-over-quarter by 4% from $0.42 and year-over-year by 37% from $0.32 per share. First quarter adjustments to earnings consisted primarily of branch restructuring expenses in 2021 and unrealized equity securities losses in 2022. Year-over-year earnings improvement also resulted from a benefit in 2022 to the provision for credit losses on loans and as well as from share repurchases. The first quarter 2022 return on tangible common equity measured 7.3% and the non-GAAP measure of adjusted return on tangible common equity measured 7.5%.

 

Revenue: Net interest income was essentially unchanged quarter-over quarter. Loan growth was weighted towards the end of the quarter, with full benefit expected beginning in the second quarter. Net interest income decreased by 8% year-over-year due primarily to lower loan balances during the year 2021. The Company’s net interest income is modeled to be positively sensitive to the market forecast scenario of rising interest rates.

 

Non-interest income excluding securities losses increased 5% quarter-over-quarter including seasonal components. It decreased 18% year-over-year primarily due to the sale of insurance and branch operations in the third quarter of 2021, and PPP loan referral fees recorded in the first quarter of 2021.

 

Provision for Credit Losses on Loans: Berkshire recorded a $4 million benefit to the first quarter 2022 provision, compared to a $3 million benefit in the linked quarter and a $6.5 million charge in the first quarter of 2021. The $4 million benefit resulted from a $7 million release of the credit loss allowance net of $3 million in net loan charge-offs. The Company also utilizes the non-GAAP financial measure of Pre-tax Pre-Provision Net Revenue (“PPNR”) to evaluate the results of operations before the impact of the provision and tax expense. PPNR measured $21 million in the most recent quarter, and $22 million on a non-GAAP adjusted basis.

 

Expense: First quarter 2022 non-interest expense was down 1% quarter-over quarter and down 12% year-over-year including the impact of operations sold in 2021. Full time equivalent staff totaled 1,333 positions at period-end, compared to 1,319 positions at the start of the year. The effective tax rate was 20% in the most recent quarter, which was unchanged from the tax rate for the year 2021.

 

BALANCE SHEET (references are to period-end balances unless otherwise stated)

 

Summary: Total assets increased quarter-over-quarter by $0.5 billion, or 5%, to $12.1 billion reflecting loan growth. Total shareholders’ equity decreased quarter-over-quarter by $89 million, or 7%, due primarily to a $75 million reduction in accumulated other comprehensive income reflecting lower bond valuations as a result of the increase in interest rates during the quarter. We anticipate that the Company’s strong capital and liquidity will position it for future targeted loan growth and capital distributions which are integral elements of its BEST strategic plan.

 

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Loans: Total loans increased quarter-over-quarter by $441 million, or 6% to $7.27 billion at March 31, 2022. The largest increases were in commercial real estate, asset based lending, and residential mortgages. The Company has expanded its commercial and business banking teams and is developing new sourcing channels for residential mortgages and consumer loans in its markets to support planned loan growth in 2022. Loans were down 5% year-over-year due to the impact of refinancings and targeted runoff.

 

Asset Quality: Asset quality metrics remained favorable and improving in the most recent quarter. Non-accruing loans decreased by 16%, measuring 0.41% of period-end total loans. Annualized net loan charge-offs measured 0.15% of average loans, down from 0.29% for the year 2021. Accruing delinquent loans declined to a near five quarter low of 0.28% of total loans. The allowance for credit losses on loans decreased quarter-over-quarter by $7 million to $99 million, measuring 1.37% of total loans, which was a decrease from 1.55% at the start of the year.

 

Deposits and Borrowings: Period-end total deposits increased by 6% quarter-over-quarter and 4% year-over-year. These increases were concentrated in payroll deposits, which fluctuate daily. Shifts in balances between the NOW and money market categories also relate to payroll deposits. Total average deposits increased 1% both compared to the linked quarter and compared to the first quarter of 2021. The Company has been reducing higher cost time deposits, including brokered deposits, which declined by 7% quarter-over-quarter and 28% year-over-year based on average balances. Total average non-maturity deposits increased by 3% quarter-over-quarter and 10% year-over-year. The first quarter total cost of deposits decreased to 0.17%, compared to 0.19% in the linked quarter and 0.36% in the prior year.

 

Equity: Shareholders’ equity decreased by 7% quarter-over-quarter and year-over-year. This reflected the impact of share repurchases and a $75 million reduction in the most recent quarter reflecting the lower fair value of the bond portfolio as a result of higher interest rates. The ratio of equity/assets decreased quarter-over- quarter to 9.0% from 10.2%. At quarter-end, book value per share was $22.89 and the non-GAAP measure of tangible book value per share was $22.30. These values decreased quarter-over-quarter, but were not significantly changed year-over-year.

 

ESG & CORPORATE RESPONSIBILITY UPDATE       

 

Berkshire Bank is committed to purpose-driven, community-centered banking that enhances value for all stakeholders as it pursues its vision of being a high-performing, leading socially responsible community bank in New England and beyond. Learn more about the steps Berkshire is taking at berkshirebank.com/csr and in its most recent Corporate Responsibility Report.

 

Key developments in the quarter include:

 

·Corporate Responsibility Report - Earlier this month, the Company released its 2021 Corporate Responsibility Report, Empowering Community Comebacks. The report highlights Berkshire’s performance on environmental, social, and governance matters along with its progress on its BEST Community Comeback. Detailed on the pages of the report are examples of how the simple decision of where you bank can have an outsized impact in your community.

 

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·Standing with Ukraine: Berkshire took several actions along with its employees and customers in response to the ongoing humanitarian crisis in Ukraine including making a $50,000 contribution, through its Foundation, to the Ukrainian Federation of America. In addition, Berkshire is refunding outgoing wire transfer fees to individuals who are sending money to family and non-profit organizations in Ukraine; matching employee contributions to non-profits working to aid in relief efforts; and activating a virtual supply drive to provide critical supplies to organizations working to assist in Ukraine and neighboring countries.

 

·Awards & Recognition: The Company was named to Newsweek’s list of America’s Most Trusted Companies 2022 and ranked #9 for banks. Earlier in the quarter Berkshire was also listed in Bloomberg’s Gender Equality Index and named a Best Place to Work for LGBTQ+ Equality by the Human Rights Campaign. Finally, Berkshire received a 2022 Communitas Award for Leadership in Corporate Responsibility for its BEST Community Comeback program recognizing its early progress on the multi-year commitment.

  

·Current ESG Performance: The Company moved into the top 22% of leading ESG indexes in the U.S. for its Environmental, Social and Governance (ESG) ratings. As of March 31, 2022 the Company received ratings of: MSCI ESG- BBB; ISS ESG Quality Score - Environment: 3, Social: 1, Governance: 3; and Bloomberg ESG Disclosure- 47.81. The Company is also rated by Sustainalytics.

 

INVESTOR CONFERENCE CALL AND INVESTOR PRESENTATION

 

Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Wednesday, April 20, 2022 to discuss results for the quarter and provide guidance about expected future results. The Company will also place an investor presentation at its website at ir.berkshirebank.com with additional financial information and other information about the quarter.

 

Participants are encouraged to pre-register for the conference call using the following link:

https://www.incommglobalevents.com/registration/q4inc/10475/berkshire-hills-bancorp-q1-earnings-release-conference-call/.

 

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 relations section of Berkshire's website at ir.berkshirebank.com. 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 844-200-6205 and using participant access code: 647451. Participants are requested to dial-in a few minutes before the scheduled start of the call. A telephone replay of the call will be available for one week by dialing 866-813-9403 and using access code:  478827. The webcast will be available on Berkshire's website for an extended period of time.

 

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ABOUT BERKSHIRE HILLS BANCORP

 

Berkshire Hills Bancorp is the parent of Berkshire Bank, which is transforming what it means to bank its neighbors socially, humanly, and digitally to empower the financial potential of people, families, and businesses in its communities as it pursues its vision of being a leading socially responsible omni-channel community bank in New England and beyond. Berkshire Bank provides business and consumer banking, mortgage, wealth management, and investment services. Headquartered in Boston, Berkshire has approximately $12.1 billion in assets and operates 105 branch offices in New England and New York, and is a member of the Bloomberg Gender-Equality Index. To learn more, call 800-773-5601 or follow us on Facebook, Twitter, Instagram, and LinkedIn.

 

FORWARD-LOOKING STATEMENTS

 

This document contains “forward-looking statements” within the meaning of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. You can identify these statements from the use of the words “may,” “will,” “should,” “could,” “would,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target” and similar expressions. There are many 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. You should not place undue reliance on forward-looking statements, which reflect our expectations only as of the date of this document. 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 on page F-9 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 adjusted earnings in evaluating operating trends, including components for adjusted 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, other gains/losses, merger costs, restructuring costs, goodwill impairment, and discontinued operations. In 2021, the Company recorded a third quarter net gain of $52 million on the sale of the Company’s insurance subsidiary and the Mid-Atlantic branch operations. Expense adjustments in the first quarter 2021 were primarily related to branch consolidations. Third quarter 2021 adjustments included Federal Home Loan Bank borrowings prepayment costs. They also included other restructuring charges for efficiency initiatives in operations areas including write-downs on real estate moved to held for sale and severance related to staff reductions. The fourth quarter 2021 revenue adjustment was primarily related to trailing revenue on a previously reported sale, and the expense adjustment was due primarily to branch restructuring costs. The revenue adjustment in the first quarter of 2022 was due to an unrealized loss in equity mutual funds.

 

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The Company utilizes Adjusted Pre-Provision Net Revenue (“Adjusted PPNR”) which measures adjusted income before credit loss provision and tax expense. PPNR is used by the investment community due to the volatility and variability across banks related to credit loss provision expense under the Current Expected Credit Loss accounting standard. The Company also calculates Adjusted PPNR/assets in order to utilize the PPNR measure in assessing its comparative operating profitability.

 

Non-GAAP 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 adjusted income. The efficiency ratio is adjusted for adjusted 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.

 

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CONTACTS

 

Investor Relations Contacts

 

Kevin Conn, SVP, Investor Relations & Corporate Development
Email: KAConn@berkshirebank.com
Tel: (617) 641-9206

 

David Gonci, Capital Markets Director
Email: dgonci@berkshirebank.com
Tel: (413) 281-1973

 

Media Contact:

 

Gary Levante, SVP, Corporate Responsibility & Communications
Email: glevante@berkshirebank.com
Tel: (413) 447-1737

  

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TABLE

 

INDEX

CONSOLIDATED UNAUDITED FINANCIAL SCHEDULES

F-1 Selected Financial Highlights
F-2 Balance Sheets
F-3 Loan and Deposit Analysis
F-4 Statements of Income
F-5 Statements of Income (Five Quarter Trend)
F-6 Average Balances and Average Yields and Costs
F-7 Asset Quality Analysis
F-8 Asset Quality Analysis (continued)
F-9 Reconciliation of Non-GAAP Financial Measures and Supplementary Data (Five Quarter Trend) 

 

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BERKSHIRE HILLS BANCORP, INC.

SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED - (F-1)

 

   March 31,   June 30,   Sept. 30,   Dec. 31,   March 31, 
   2021   2021   2021   2021   2022 
NOMINAL AND PER SHARE DATA                    
Net earnings per common share, diluted  $0.26   $0.43   $1.31   $0.42   $0.42 
Adjusted earnings per common share, diluted (2)   0.32    0.44    0.53    0.42    0.43 
Net income, (thousands)   13,031    21,636    63,749    20,248    20,196 
Adjusted net income, (thousands) (2)   16,015    22,104    25,695    20,172    20,789 
Total common shares outstanding, period-end (thousands)                  50,988    50,453    48,657    48,667    47,792 
Average diluted shares, (thousands)   50,565    50,608    48,744    48,340    48,067 
Total book value per common share, (end of period)   23.05    23.30    24.21    24.30    22.89 
Tangible book value per common share, (end of period) (2)   22.39    22.66    23.58    23.69    22.30 
Dividends per common share   0.12    0.12    0.12    0.12    0.12 
Full-time equivalent staff   1,467    1,417    1,333    1,319    1,333 
                          
PERFORMANCE RATIOS (3)                         
Return on equity   4.50%   7.37%   22.18%   6.86%   6.79%
Adjusted return on equity (2)   5.53    7.53    8.94    6.83    6.99 
Return on tangible common equity (2)   4.98    7.92    23.14    7.37    7.29 
Adjusted return on tangible common equity (2)   6.04    8.08    9.53    7.34    7.49 
Return on assets   0.42    0.70    2.14    0.71    0.70 
Adjusted return on assets (2)   0.51    0.71    0.86    0.71    0.72 
Net interest margin, fully taxable equivalent (FTE) (4)(5)   2.62    2.62    2.56    2.60    2.61 
Efficiency ratio (2)   71.32    67.82    68.76    71.98    72.61 
                          
FINANCIAL DATA (in millions, end of period)                         
Total assets  $12,757   $12,273   $11,846   $11,555   $12,097 
Total earning assets   12,071    11,571    11,145    10,899    11,401 
Total loans   7,659    7,233    6,836    6,826    7,267 
Total deposits   10,244    9,914    10,365    10,069    10,699 
Loans/deposits (%)   75%   73%   66%   68%   68%
Total shareholders' equity  $1,175   $1,175   $1,178   $1,182   $1,094 
                          
ASSET QUALITY                         
Allowance for credit losses, (millions)  $124   $119   $113   $106   $99 
Net charge-offs, (millions)   (10)   (5)   (2)   (4)   (3)
Net charge-offs (QTD annualized)/average loans   0.51%   0.26%   0.12%   0.23%   0.15%
Provision expense/(income), (millions)  $7   $-   $(4)  $(3)  $(4)
Non-performing assets, (millions)   58    49    39    37    32 
Non-performing loans/total loans   0.73%   0.66%   0.54%   0.52%   0.41%
Allowance for credit losses/non-performing loans   222    250    304    300    335 
Allowance for credit losses/total loans   1.62    1.65    1.65    1.55    1.37 
                          
CAPITAL RATIOS                         
Common equity tier 1 capital to risk weighted assets(6)   14.2%   14.3%   15.3%   15.0%   14.0%
Tier 1 capital leverage ratio(6)   9.5    9.5    9.9    10.5    10.3 
Tangible common shareholders' equity/tangible assets(2)   9.0    9.3    9.7    10.0    8.8 

 

(1) Reconciliations of non-GAAP financial measures, including all references to adjusted and tangible amounts, appear on page F-9.
(2) Non-GAAP financial measure. adjusted measurements are non-GAAP financial measures that are adjusted to exclude net non-adjusted charges primarily related to acquisitions and restructuring activities. See page F-9 for reconciliations of non-GAAP financial measures.
(3) All performance ratios are annualized and are based on average balance sheet amounts, where applicable.
(4) Fully taxable equivalent considers the impact of tax advantaged investment securities and loans.
(5) The effect of purchase accounting accretion for loans, time deposits, and borrowings on the quarterly net interest margin was an increase in all quarters, 
  which is shown sequentially as follows beginning with the earliest quarter and ending with the most recent quarter: 0.05%, 0.08%, 0.06%, 0.05%, 0.03%.
(6) Presented as projected for March 31, 2022 and actual for the remaining periods.

 

 F-1 

 

 

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-2)

 

   March 31,   December 31,   March 31, 
(in thousands)  2021   2021   2022 
Assets               
Cash and due from banks  $81,285   $109,350   $151,814 
Short-term investments   1,818,323    1,518,457    1,455,437 
Total cash and cash equivalents   1,899,608    1,627,807    1,607,251 
                
Trading security   9,350    8,354    7,798 
Marketable equity securities, at fair value   15,801    15,453    14,719 
Securities available for sale, at fair value   1,627,330    1,877,585    2,032,575 
Securities held to maturity, at amortized cost   610,637    636,503    612,174 
Federal Home Loan Bank stock and other restricted securities   28,680    10,800    10,829 
Total securities   2,291,798    2,548,695    2,678,095 
Less: Allowance for credit losses on investment securities   (111)   (105)   (99)
Net securities   2,291,687    2,548,590    2,677,996 
                
Loans held for sale   18,377    6,110    300 
                
Total loans   7,658,778    6,825,847    7,267,323 
Less: Allowance for credit losses on loans   (123,800)   (106,094)   (99,475)
Net loans   7,534,978    6,719,753    7,167,848 
                
Premises and equipment, net   108,538    94,383    92,971 
Other real estate owned   149    -    - 
Goodwill and other intangible assets   33,500    29,619    28,332 
Other assets   566,809    524,074    518,322 
Assets held for sale (1)   303,697    4,577    3,988 
Total assets  $12,757,343   $11,554,913   $12,097,008 
                
Liabilities and shareholders' equity               
Demand deposits  $2,750,393   $3,008,461   $3,020,568 
NOW and other deposits   1,856,988    976,401    2,546,799 
Money market deposits   2,486,261    3,293,526    2,469,042 
Savings deposits   1,047,506    1,111,625    1,133,877 
Time deposits   2,103,222    1,678,940    1,528,922 
Total deposits   10,244,370    10,068,953    10,699,208 
                
Senior borrowings   351,354    13,331    14,563 
Subordinated borrowings   97,338    97,513    97,569 
Total borrowings   448,692    110,844    112,132 
                
Other liabilities   229,832    192,681    191,807 
Liabilities held for sale (1)   659,310    -    - 
Total liabilities   11,582,204    10,372,478    11,003,147 
                
Preferred shareholders' equity   -    -    - 
Common shareholders' equity   1,175,139    1,182,435    1,093,861 
Total shareholders' equity   1,175,139    1,182,435    1,093,861 
Total liabilities and shareholders' equity  $12,757,343   $11,554,913   $12,097,008 

 

(1)For March 31, 2021, balance includes loans and deposits held for sale relating to the Mid-Atlantic region branch sale that closed in the third quarter of 2021.

 

 F-2 

 

 

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED LOAN & DEPOSIT ANALYSIS - UNAUDITED - (F-3)

 

LOAN ANALYSIS

                

           Growth % 
(in millions)  December 31, 2021
Balance		   March 31, 2022
Balance		   Quarter ended
March 31, 2022		 
Total commercial real estate  $3,598   $3,764    5%
Commercial and industrial loans   1,300    1,381    6 
Paycheck Protection Program (PPP) Loans   30    16    (47)
Total commercial loans   4,928    5,161    5 
                
Total residential mortgages   1,392    1,567    13 
                
Home equity   253    245    (3)
Auto and other   253    294    16 
Total consumer loans   506    539    7 
Total loans  $6,826   $7,267    6%

 

DEPOSIT ANALYSIS

 

           Growth % 
(in millions)  December 31, 2021
Balance		   March 31, 2022
Balance		   Quarter ended
March 31, 2022		 
Non-interest bearing  $3,008   $3,020    -%
NOW and other   976    2,547    161 
Money market   3,294    2,469    (25)
Savings   1,112    1,134    2 
Time deposits   1,679    1,529    (9)
Total deposits (1)  $10,069   $10,699    6%

  

(1) Included in total deposits are brokered deposits of $164.8 million and $228.1 million at March 31,2022 and December 31, 2021, respectively.

 

 F-3 

 

 

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED - (F-4)

 

   Three Months Ended 
   March 31, 
(in thousands, except per share data)  2022   2021 
Interest income  $74,823   $88,153 
Interest expense   5,760    13,060 
Net interest income, not FTE   69,063    75,093 
Non-interest income          
Deposit related fees   7,351    7,126 
Loan fees and revenue   8,265    10,246 
Insurance commissions and fees   -    3,130 
Wealth management fees   2,625    2,772 
Mortgage banking fees   19    802 
Other   3,166    2,148 
Total non-interest income excluding (losses)   21,426    26,224 
Securities (losses), net   (745)   (31)
Total non-interest income   20,681    26,193 
Total net revenue   89,744    101,286 
Total net revenue excluding (losses)   90,489    101,317 
           
Provision (benefit) for credit losses   (4,000)   6,500 
Non-interest expense          
Compensation and benefits   37,521    38,735 
Occupancy and equipment   10,067    11,024 
Technology and communications   8,527    8,593 
Professional services   2,692    6,614 
Other expenses   9,725    9,702 
Merger, restructuring and other non-operating expenses   18    3,486 
Total non-interest expense   68,550    78,154 
Total non-interest expense excluding merger, restructuring and other   68,532    74,668 
           
Income before income taxes  $25,194   $16,632 
Income tax expense   4,998    3,601 
Net income  $20,196   $13,031 
           
Basic earnings per common share  $0.42   $0.26 
Diluted earnings per common share  $0.42   $0.26 
           
Weighted average shares outstanding:          
Basic   47,668    50,330 
Diluted   48,067    50,565 

 

 F-4 

 

 

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME (5 Quarter Trend) - UNAUDITED - (F-5)

 

   March 31,   June 30,   Sept. 30,   Dec. 31,   March 31, 
(in thousands, except per share data)  2021   2021   2021   2021   2022 
Interest income  $88,153   $85,364   $79,688   $75,860   $74,823 
Interest expense   13,060    9,971    8,320    6,548    5,760 
Net interest income, not FTE   75,093    75,393    71,368    69,312    69,063 
Non-interest income                         
Deposit related fees   7,126    7,508    7,657    7,522    7,351 
Loan fees and revenue   10,246    7,431    8,285    9,098    8,265 
Insurance commissions and fees   3,130    2,292    1,581    -    - 
Wealth management fees   2,772    2,519    2,653    2,586    2,625 
Mortgage banking fees   802    534    461    259    19 
Other   2,148    2,211    1,279    993    3,166 
Total non-interest income excluding (losses)/gains   26,224    22,495    21,916    20,458    21,426 
Securities (losses), net   (31)   (484)   (166)   (106)   (745)
Gain on sale of business operations and assets, net   -    -    51,885    1,057    - 
Total non-interest income   26,193    22,011    73,635    21,409    20,681 
Total net revenue   101,286    97,404    145,003    90,721    89,744 
Total net revenue excluding (losses)/gains   101,317    97,888    93,284    89,770    90,489 
                          
Provision (benefit) for credit losses   6,500    -    (4,000)   (3,000)   (4,000)
Non-interest expense                         
Compensation and benefits   38,735    36,970    37,068    37,816    37,521 
Occupancy and equipment   11,024    10,599    10,421    9,738    10,067 
Technology and communications   8,593    8,214    8,397    8,599    8,527 
Professional services   6,614    3,701    3,180    2,365    2,692 
Other expenses   9,702    9,382    8,969    10,025    9,725 
Merger, restructuring and other non-operating expenses   3,486    6    1,425    864    18 
Total non-interest expense   78,154    68,872    69,460    69,407    68,550 
Total non-interest expense excluding merger, restructuring and other   74,668    68,866    68,035    68,543    68,532 
                          
                          
Income before income taxes  $16,632   $28,532   $79,543   $24,314   $25,194 
Income tax expense   3,601    6,896    15,794    4,066    4,998 
Net income  $13,031   $21,636   $63,749   $20,248   $20,196 
                          
Diluted earnings per common share  $0.26   $0.43   $1.31   $0.42   $0.42 
                          
Weighted average shares outstanding:                         
Basic   50,330    50,321    48,395    47,958    47,668 
Diluted   50,565    50,608    48,744    48,340    48,067 

 

 F-5 

 

 

BERKSHIRE HILLS BANCORP, INC.

AVERAGE BALANCES AND AVERAGE YIELDS AND COSTS - UNAUDITED - (F-6)

 

   March 31, 2021   June 30, 2021   Sept. 30, 2021   Dec. 31, 2021   March 31, 2022 
(in millions)  Average Balance   Average Yield/Rate   Average Balance   Average Yield/Rate   Average Balance   Average Yield/Rate   Average Balance   Average Yield/Rate   Average Balance   Average Yield/Rate 
Assets                                        
Commercial real estate   3,630    3.27%   3,625    3.46%   3,577    3.40%   3,569    3.49%   3,651    3.35%
Commercial and industrial loans   1,865    4.62    1,605    4.74    1,370    4.78    1,278    4.37    1,373    4.14 
Residential mortgages   1,740    3.71    1,604    3.79    1,499    3.65    1,403    3.82    1,436    3.56 
Consumer loans   634    3.79    582    3.80    545    3.95    516    3.96    514    4.24 
Total loans (1)   7,869    3.73    7,416    3.84    6,991    3.77    6,766    3.76    6,974    3.61 
Securities (2)   2,195    2.36    2,259    2.17    2,312    2.09    2,367    2.04    2,649    1.95 
Short-term investments and loans held for sale   1,351    0.13    1,750    0.10    1,762    0.17    1,609    0.17    1,202    0.17 
Mid-Atlantic region loans held for sale   295    4.09    269    3.96    155    3.82    -    -    -    - 
Total earning assets   11,710    3.07    11,694    2.96    11,220    2.86    10,742    2.84    10,825    2.82 
Goodwill and other intangible assets   34         33         31         30         29      
Other assets   724         690         674         655         639      
Total assets   12,468         12,417         11,925         11,427         11,493      
                                                   
Liabilities and shareholders' equity                                                  
NOW and other   1,325    0.15%   1,389    0.07%   1,316    0.05%   1,331    0.05%   1,456    0.04%
Money market   2,802    0.27    2,751    0.18    2,716    0.16    2,731    0.16    2,871    0.16 
Savings   1,003    0.08    1,054    0.05    1,112    0.04    1,100    0.04    1,117    0.03 
Time   2,266    1.12    2,013    0.94    1,893    0.86    1,750    0.80    1,624    0.71 
Total interest-bearing deposits   7,396    0.48    7,207    0.35    7,037    0.31    6,912    0.28    7,068    0.24 
Borrowings (3)   511    2.78    392    3.12    263    3.89    121    5.68    122    5.21 
Mid-Atlantic region interest-bearing deposits   518    0.60    517    0.51    306    0.51    -    -    -    - 
Total interest-bearing liabilities   8,425    0.63    8,116    0.49    7,606    0.43    7,033    0.37    7,190    0.32 
Non-interest-bearing demand deposits   2,537         2,787         2,901         3,038         2,968      
Other liabilities (4)   347         340         269         175         146      
Total liabilities   11,309         11,243         10,776         10,246         10,304      
                                                   
Common shareholders' equity   1,159         1,174         1,149         1,181         1,189      
Total shareholders' equity   1,159         1,174         1,149         1,181         1,189      
Total liabilities and shareholders' equity   12,468         12,417         11,925         11,427         11,493      
                                                   
Net interest spread        2.44%        2.47%        2.43%        2.47%        2.50%
Net interest margin, FTE (5)        2.62         2.62         2.56         2.60         2.61 
Cost of funds        0.48         0.36         0.31         0.26         0.23 
Cost of deposits        0.36         0.25         0.22         0.19         0.17 
                                                   
Supplementary data                                                  
Net Interest Income, not FTE   75         75         71         69         69      
Fully taxable equivalent income adjustment   1         2         2         2         2      
Net Interest Income, FTE   77         77         73         71         71      
                                                   
Average PPP loans   546         321         90         37         27      
Average loans excluding PPP loans   7,323         7,095         6,901         6,729         6,947      
Total PPP loans, end of period   444         173         46         30         16      
Total loans excluding PPP loans, end of period   7,215         7,059         6,790         6,796         7,251      
PPP interest income   7         5         2         -         -      
                                                   
Total average non-maturity deposits   7,666         7,981         8,045         8,200         8,412      
Total average deposits   9,932         9,994         9,938         9,950         10,037      
                                                   
Purchased loan accretion   1         2         2         2         1      
Total average tangible equity (6)   1,125         1,141         1,118         1,151         1,160      

 

(1)Total loans include non-accruing loans.
(2)Average balances for securities available-for-sale are based on amortized cost.
(2)Average balances for borrowings includes the financing lease obligation which is presented under other liabilities on the consolidated balance sheet.
(4)Includes the Mid-Atlantic region non-interesting bearing deposits. As of March 31, 2022 and December 31, 2021 there were no Mid-Atlantic region average non-interest bearing deposits.
(5)The effect of PPP loans on the quarterly net interest margin is shown sequentially as follows beginning with the earliest quarter and ending with the most recent quarter:  (0.11%, 0.11%, 0.05%, 0.00%, 0.00%) This calculation excludes gross interest income on PPP loans and average PPP loan balances. 

(6)See page F-9 for details on the calculation of total average tangible equity.

 

 F-6 

 

                               

BERKSHIRE HILLS BANCORP, INC.

ASSET QUALITY ANALYSIS - UNAUDITED - (F-7)   

 

   March 31,   June 30,   Sept. 30,   Dec. 31,   March 31, 
(in thousands)  2021   2021   2021   2021   2022 
NON-PERFORMING ASSETS                         
Non-accruing loans:                         
Commercial real estate  $28,325   $22,799   $14,845   $13,954   $8,984 
Commercial and industrial loans   9,371    9,427    7,140    6,747    5,618 
Residential mortgages   10,674    9,238    9,763    9,825    11,079 
Consumer loans   7,447    6,141    5,399    4,800    4,000 
Total non-accruing loans   55,817    47,605    37,147    35,326    29,681 
Other real estate owned   149    85    -    -    - 
Repossessed assets   1,701    1,666    1,664    1,736    2,004 
Total non-performing assets  $57,667   $49,356   $38,811   $37,062   $31,685 
                          
Total non-accruing loans/total loans   0.73%   0.66%   0.54%   0.52%   0.41%
Total non-accruing loans/total loans excluding PPP loans   0.77%   0.67%   0.55%   0.52%   0.42%
Total non-performing assets/total assets   0.45%   0.40%   0.33%   0.32%   0.26%
                          
PROVISION AND ALLOWANCE FOR CREDIT LOSSES ON LOANS                         
Balance at beginning of period  $127,302   $123,800   $119,044   $112,916   $106,094 
Charged-off loans   (11,460)   (7,248)   (4,334)   (7,976)   (6,048)
Recoveries on charged-off loans   1,465    2,492    2,206    4,154    3,429 
Net loans charged-off   (9,995)   (4,756)   (2,128)   (3,822)   (2,619)
Provision (benefit) for loan credit losses   6,493    -    (4,000)   (3,000)   (4,000)
Balance at end of period  $123,800   $119,044   $112,916   $106,094   $99,475 
                          
Allowance for credit losses/total loans   1.62%   1.65%   1.65%   1.55%   1.37%
Allowance for credit losses/total loans excluding PPP loans   1.72%   1.69%   1.66%   1.56%   1.37%
Allowance for credit losses/non-accruing loans   222%   250%   304%   300%   335%
                          
NET LOAN CHARGE-OFFS                         
Commercial real estate  $(6,959)  $(2,325)  $(1,391)  $(2,208)  $(3,280)
Commercial and industrial loans   (2,662)   (2,331)   110    (1,649)   653 
Residential mortgages   80    176    (677)   (2)   (50)
Home equity   (42)   (136)   106    106    135 
Auto and other consumer   (412)   (140)   (276)   (69)   (77)
Total, net  $(9,995)  $(4,756)  $(2,128)  $(3,822)  $(2,619)
                          
Net charge-offs (QTD annualized)/average loans   0.51%   0.26%   0.12%   0.23%   0.15%
Net charge-offs (YTD annualized)/average loans   0.51%   0.39%   0.30%   0.29%   0.15%

 

 F-7 

 

 

BERKSHIRE HILLS BANCORP, INC.

ASSET QUALITY ANALYSIS - UNAUDITED (F-8)

 

   March 31, 2021   June 30, 2021   September 30, 2021   December 31, 2021   March 31, 2022 
(in thousands)  Balance   Percent of Total Loans   Balance   Percent of Total Loans   Balance   Percent of Total Loans   Balance   Percent of Total Loans   Balance   Percent of Total Loans 
30-89 Days delinquent  $28,565    0.37%  $15,483    0.22%  $18,365    0.27%  $39,863    0.58%  $13,517    0.19%
90+ Days delinquent and still accruing   6,124    0.08%   3,129    0.04%   3,803    0.06%   3,270    0.05%   6,613    0.09%
Total accruing delinquent loans   34,689    0.45%   18,612    0.26%   22,168    0.33%   43,133    0.63%   20,130    0.28%
Non-accruing loans   55,817    0.73%   47,605    0.66%   37,147    0.54%   35,326    0.52%   29,681    0.41%
Total delinquent and non-accruing loans  $90,506    1.18%  $66,217    0.92%  $59,315    0.87%  $78,459    1.15%  $49,811    0.69%

 

 F-8 

 

 

BERKSHIRE HILLS BANCORP, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA- UNAUDITED - (F-9) 

 

      March 31,   June 30,   Sept. 30,   Dec. 31,   March 31, 
(in thousands)     2021   2021   2021   2021   2022 
Total revenue  (A)  $101,286   $97,404   $145,003   $90,721   $89,744 
Adj: Net securities losses (1)      31    484    166    106    745 
Adj: Net (gains) on sale of business operations and assets      -    -    (51,885)   (1,057)   - 
Total adjusted revenue (2)  (B)  $101,317   $97,888   $93,284   $89,770   $90,489 
                             
Total non-interest expense  (C)  $78,154   $68,872   $69,460   $69,407   $68,550 
Less: Merger, restructuring and other expense      (3,486)   (6)   (1,425)   (864)   (18)
Adjusted non-interest expense (2)                                      (D)  $74,668   $68,866   $68,035   $68,543   $68,532 
                             
Pre-tax, pre-provision net revenue (PPNR)  (A-C)  $23,132   $28,532   $75,543   $21,314   $21,194 
Adjusted pre-tax, pre-provision net revenue (PPNR)  (B-D)   26,649    29,022    25,249    21,227    21,957 
                             
Net income     $13,031   $21,636   $63,749   $20,248   $20,196 
Adj: Net securities losses (1)      31    484    166    106    745 
Adj: Net (gains) on sale of business operations and assets      -    -    (51,885)   (1,057)   - 
Adj: Restructuring expense and other expense      3,486    6    1,425    864    18 
Adj: Income taxes (expense)/benefit      (533)   (22)   12,240    11    (170)
Total adjusted income (2)  (E)  $16,015   $22,104   $25,695   $20,172   $20,789 
                             
(in millions, except per share data)                            
Total average assets  (F)  $12,468   $12,417   $11,925   $11,427   $11,493 
Total average shareholders' equity  (G)   1,159    1,174    1,149    1,181    1,189 
Total average tangible shareholders' equity (2)(3)                          (H)   1,125    1,141    1,118    1,151    1,160 
Total average tangible common shareholders' equity (2)(3)                          (I)   1,125    1,141    1,118    1,151    1,160 
Total tangible shareholders' equity, period-end (2)(3)  (J)   1,142    1,143    1,147    1,153    1,066 
Total tangible common shareholders' equity, period-end (2)(3)  (K)   1,142    1,143    1,147    1,153    1,066 
Total tangible assets, period-end (2)(3)  (L)   12,724    12,241    11,815    11,525    12,069 
                             
Total common shares outstanding, period-end (thousands)                 (M)   50,988    50,453    48,657    48,667    47,792 
Average diluted shares outstanding (thousands)  (N)   50,565    50,608    48,744    48,340    48,067 
                             
GAAP earnings per common share, diluted (2)     $0.26   $0.43   $1.31   $0.42   $0.42 
Adjusted earnings per common share, diluted (2)  (E/N)   0.32    0.44    0.53    0.42    0.43 
Tangible book value per common share, period-end (2)  (K/M)   22.39    22.66    23.58    23.69    22.30 
Total tangible shareholders' equity/total tangible assets (2)  (J/L)   8.98    9.34    9.71    10.00    8.83 
                             
Performance ratios (4)                            
GAAP return on equity      4.50%   7.37%   22.18%   6.86%   6.79%
Adjusted return on equity (2)  (E/G)   5.53    7.53    8.94    6.83    6.99 
Return on tangible common equity (2)(5)      4.98    7.92    23.14    7.37    7.29 
Adjusted return on tangible common equity (2)(5)  (E+Q)/(I)   6.04    8.08    9.53    7.34    7.49 
GAAP return on assets      0.42    0.70    2.14    0.71    0.70 
Adjusted return on assets (2)      0.51    0.71    0.86    0.71    0.72 
PPNR from continuing operations/assets (2)      0.74    0.92    2.53    0.75    0.74 
Adjusted PPNR/assets (2)      0.85    0.93    0.85    0.74    0.76 
Efficiency ratio (2)(6)                                                                                  (D-Q)/(B+O+R)   71.32    67.82    68.76    71.98    72.61 
Net interest margin, FTE      2.62    2.62    2.56    2.60    2.61 
                             
Supplementary data (in thousands)                            
Tax benefit on tax-credit investments (7)  (O)  $41   $79   $2,195   $2,057   $596 
Non-interest income charge on tax-credit investments (8)  (P)   (33)   (175)   (1,789)   (1,448)   (357)
Net income on tax-credit investments  (O+P)   9    (96)   406    609    239 
                             
Intangible amortization  (Q)  $1,319   $1,297   $1,296   $1,288   $1,286 
Fully taxable equivalent income adjustment  (R)   1,494    1,660    1,586    1,604    1,524 

 

(1)Net securities losses include the change in fair value of the Company's equity securities in compliance with the Company's adoption of ASU 2016-01.
(2)Non-GAAP financial measure.
(3)Total tangible shareholders' equity is computed by taking total shareholders' equity less the intangible assets at period-end. Total tangible assets is computed by taking intangible assets at period-end.
(4)Ratios are annualized and based on average balance sheet amounts, where applicable. Quarterly data may not sum to year-to-date data due to rounding.
(5)Adjusted return on tangible equity is computed by dividing the total adjusted income adjusted for the tax-effected amortization of intangible assets, assuming a 27% marginal rate, by tangible equity.
(6)Efficiency ratio is computed by dividing total adjusted tangible non-interest expense by the sum of total net interest income on a fully taxable equivalent basis and total adjusted  non-interest income adjusted to include tax credit benefit of tax shelter investments.  The Company uses this non-GAAP measure to provide important information regarding its operational efficiency.
(7)The tax benefit is the direct reduction to the income tax provision due to tax credits and deductions generated from investments in historic  rehabilitation and low-income housing.

(8)The non-interest income charge is the reduction to the tax-advantaged investments, which are incurred as the tax credits are generated.

 

 F-9