Exhibit 99.1
Berkshire Hills Reports 19% Increase in Quarterly Earnings Per Share
BOSTON, July 20, 2022 - Berkshire Hills Bancorp, Inc. (NYSE: BHLB) today reported that second quarter 2022 earnings per share (EPS) increased by 19% to $0.50 from $0.42 in the prior quarter. The non-GAAP measure of adjusted EPS also increased by 19% to $0.51 from $0.43. The improvement was due to loan growth and higher asset yields, while funding and operating costs were essentially flat. Compared to the second quarter of 2021, EPS improved by 16% and adjusted EPS increased by 17%.
SECOND QUARTER FINANCIAL HIGHLIGHTS (Changes are quarter-over-quarter unless otherwise stated. Non-GAAP measures are reconciled on pages F-9 and F-10).
| · | 19% increase in GAAP EPS |
| · | Broad-based increase in total loans compared to first quarter, measuring 7% based on both end-of-period and average balances |
| · | 3.11% net interest margin, increased from 2.61% in the prior quarter |
| · | 9% increase in total net revenue |
| · | Flat non-interest expense (stable over last five quarters) |
| · | 0.02% net charge-offs/average loans |
| · | 0.25% non-performing assets/assets – sixth sequential quarterly improvement |
| · | $100 million investment grade subordinated debt issuance - first Sustainability Bond issued by a U.S. community bank |
| · | 9% reduction in period-end shares outstanding year-over-year reflecting stock buybacks |
CEO Nitin Mhatre stated “Berkshire’s bankers continue to make rapid progress towards delivering on our vision to become a high-performing, socially responsible community bank in New England and beyond. Through their efforts, we generated strong growth in balances across all major loan categories. Deposit and wealth management fee revenues were the highest in five quarters.”
“Our strong balance sheet management discipline, coupled with growth in high-quality loan originations, drove a substantial increase in our net interest margin and net interest income. Non-interest expense was stable, with the result that higher revenues have led to improved bottom line profitability and a 19% increase in earnings per share.”
Mr. Mhatre concluded, “At quarter-end we completed the first sustainable bond issuance by a U.S. community bank, which will support environmental and social projects in our communities based on our Sustainable Financing Framework. We’re pleased with the strong response from investors and that the issuance was supported by an investment grade rating from Moody’s Investors Service, which acknowledged our strong financial condition, improving performance, and conservative risk management. I continue to be proud of all our employees as we successfully executed the first year of our BEST strategic transformation plan on target and with continued momentum towards exceeding the plan’s objectives.”
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RESULTS OF OPERATIONS
Earnings: Strong second quarter 2022 results were driven by robust loan growth, increased asset yields, stable funding costs, continued expense discipline and improved credit performance. The 19% sequential increase in quarterly EPS reflected positive operating leverage from 9% revenue growth and stable expenses. EPS similarly increased by 16% on a year-over-year basis, and included the benefit of share repurchases. In the most recent quarter, the Company recorded an 8.3% return on tangible common equity and a 0.82% return on assets. The Company also utilizes the 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 $29 million in the most recent quarter, increasing sequentially by 38% and year-over-year by 2%.
Revenue: Second quarter net interest income increased by 18% compared to the prior quarter and by 8% compared to the prior year. The sequential quarter growth was driven by an increase in the net interest margin to 3.11% from 2.61%, which reflected the benefit of Berkshire’s positive interest rate sensitivity in the rising interest rate environment. It also benefited from a balance sheet mix shift, as 7% growth in average loans was funded by lower yielding cash and securities. Reflecting increases in the Prime and LIBOR index rates for variable rate loans, the loan yield increased quarter-over-quarter to 3.99% from 3.61%. The yield on average earning assets improved to 3.34% from 2.82%.
The cost of funds increased to 0.24% from 0.23%, while the cost of deposits was unchanged at 0.17% compared to the prior quarter. The Company’s interest rate sensitivity remained positive at midyear 2022 and was positioned to benefit from further interest rate increases anticipated by the market in the second half of the year.
Non-interest income excluding securities gains and losses decreased by 19% quarter-over-quarter and 23% year-over-year. Excluding insurance operations sold in the third quarter of 2021, the year-over-year decrease measured 14%. Loan related fees were impacted by lower commercial loan interest rate swap revenue and adjustments on fair valued financial instruments in the rising rate environment. Deposit and wealth management fees increased for these periods, reflecting solid ongoing growth.
Provision for Credit Losses on Loans: Berkshire recorded no provision for credit losses in the second quarter of 2022 and 2021. The Company recorded a $4 million benefit in the first quarter of 2022. The Company continues to maintain strong credit quality, and the allowance for credit losses on loans was unchanged at $99 million compared to the linked quarter.
Non-Interest Expense: Berkshire has maintained non-interest expense generally stable over the last five quarters. Berkshire’s strategy to self-fund its BEST plan continues to be driven by investments in bankers and technology funded by cost saves from branch sales, consolidations, sale of insurance operations and other optimization initiatives. The second quarter efficiency ratio improved sequentially to 66.6% from 72.6%. Full time equivalent staff totaled 1,322 positions at period-end, compared to 1,319 positions at the start of the year. The effective tax rate was 21% in the most recent quarter, which was an increase from 20% for the year 2021, reflecting the increase in pre-tax profitability for the year-to-date.
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BALANCE SHEET (references are to period-end balances unless otherwise stated)
Summary: Short-term and long-term investments were used to fund a $0.5 billion increase in loans, with growth in all major categories. Liquidity and capital remained strong, with loans/deposits measuring 77% at midyear and tangible common equity/tangible assets measuring 8.5%. The common equity tier 1 capital ratio measured 12.9% at that date.
Loans: Total loans increased by 7% quarter-over-quarter and by 8% year-over-year due primarily to growth in commercial loans and residential mortgages. The Company’s expansion of its lending teams in the second half of 2021 has contributed to increased loan originations. Business volumes have also benefited from strong market demand, and prepayments have declined in the prevailing rising rate environment.
Asset Quality: Asset quality metrics remained favorable and improving in the second quarter. Non-accruing loans decreased by 9%, measuring 0.34% of period-end total loans. Annualized net loan charge-offs measured 0.02% of average loans. Accruing delinquent loans measured 0.55% of total loans, compared to 0.63% at the start of the year. The ratio of the allowance for loan credit losses to total loans decreased quarter-over-quarter to 1.27% from 1.37% and from 1.65% at midyear 2021.
Deposits and Borrowings: Total deposits decreased by 5% quarter-over-quarter and increased by 2% year-over-year. Excluding changes in overnight payroll deposits and planned reductions in brokered deposits, total deposits decreased by 1% both quarter-over-quarter and year-over-year, which included the impact of increased customer spending. The cost of deposits was unchanged at 0.17% quarter-over-quarter. Total borrowings increased during the quarter primarily due to the subordinated debt issuance.
Equity: The $80 million, or 7%, quarter-over-quarter decrease in shareholders’ equity included a $45 million net decrease due to after-tax unrealized bond losses caused by rising interest rates. Stock buybacks in the most recent quarter totaled $55 million consisting of 2.1 million shares. At midyear, book value per share totaled $22.15 and tangible book value per share totaled $21.56.
SUSTAINABLE BOND ISSUANCE
On June 30, 2022, Berkshire completed the sale at par of $100 million in subordinated notes bearing interest at a fixed rate of 5.5% for the first five years. The notes will then reset quarterly to a floating rate per annum equal to a benchmark rate that is expected to be the Three-Month Term SOFR plus 249 basis points. The notes have a ten year final maturity and generally may be called at par after five years. The Company has existing subordinated notes bearing interest at 6.875% which are callable at par beginning on September 28, 2022.
Berkshire is the first public U.S. community bank holding company with under $150 billion in total assets to issue a Sustainability Bond. The Company intends to use an amount equal to the net proceeds of its sustainable bond issuance to finance or refinance new or existing social and environmental projects consistent with its Sustainable Financing Framework. Sustainalytics, a Morningstar Company, and the global leader in high-quality ESG research, ratings, and data, has independently verified that Berkshire’s Sustainable Financing Framework “is credible and impactful and in alignment with” International Capital Market Association (ICMA) guidelines and principles.
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MOODY’S RATINGS
Moody’s Ratings: Moody’s Investors Service (“Moody’s”), in a report dated June 21, 2022, assigned Berkshire and Berkshire Bank (the “Bank”) first time ratings. Moody’s assigned the Bank a long-term deposit rating of “A3”. In addition, Moody’s assigned the Bank and the Company an investment grade long-term issuer rating of “Baa3”. The rating outlooks are “Positive” for both the Company and the Bank. On July 6, 2022, Moody's assigned a “Baa3” rating to the subordinated debt issued by Berkshire.
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:
| · | Sustainable Financing Framework: Berkshire unveiled its new Sustainable Financing Framework which will guide the Company’s issuance of green, social and sustainable financings. Projects supported through the framework include renewable electricity generation; green buildings; renewable energy technology, storage and manufacturing; energy efficiency in commercial, residential and public buildings; affordable housing; workforce housing; and financial inclusion and access activities. The Sustainable Financing Framework will guide the allocation of proceeds from Berkshire’s inaugural $100 million Sustainability Bond which made it the first U.S. community bank holding company with under $150 billion in assets to issue a Sustainability Bond. |
| · | BEST Community Comeback & Comeback Tour: Company executives completed visits to each of its markets across five states including every financial center meeting with stakeholders to highlight its “BEST Community Comeback” commitment. The multi-year plan focuses on four key areas: fueling small businesses, community financing and philanthropy, financial access and empowerment, and funding environmental sustainability. As a result of the collective efforts of its employees, Berkshire is making steady progress towards the achievement of its goals. As of quarter end, Berkshire increased its use of renewable electricity to 99%. Additional information can be found at berkshirebank.com/comeback. |
| · | Launch of the Center for Women, Wellness and Wealth: Berkshire launched the Center for Women, Wellness, and Wealth (CWWW) to provide women with tools to help create a future enriched with financial stability and wellness. The Center, through partnerships with community organizations, specialized experts and thought leaders, will offer events on wellness and financial planning, philanthropic coaching and development support, and complimentary portfolio reviews through Berkshire Bank Wealth Management. |
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| · | Xtraordinary Day: The Company completed its signature Xtraordinary Day of service on June 8 during which the Bank closed its offices for the afternoon to give back to the community. This year, Berkshire Bank partnered with 39 non-profit organizations and over 1,000 Berkshire Bankers, 80% of the Company, invested the afternoon volunteering for 46 community projects across MA, NY, CT, RI, and VT. In total, employees contributed over 5,000 hours of service. |
| · | Current ESG Performance: The Company maintained its top 22% performance in leading ESG indexes in the U.S. for its Environmental, Social and Governance (ESG) ratings. As of June 30, 2022 the Company has ratings of: MSCI ESG- BBB; ISS ESG Quality Score - Environment: 2, Social: 1, Governance: 2; and Bloomberg ESG Disclosure- 59.62. The Company is also rated by Sustainalytics. Berkshire has ranked among the top 1% of all U.S. Banks for ESG in Bloomberg this year, and held the number one spot at midyear. |
INVESTOR CONFERENCE CALL AND INVESTOR PRESENTATION
Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Wednesday, July 20, 2022 to discuss 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:
https://ige.netroadshow.com/registration/q4inc/11280/berkshire-hills-bancorp-second-quarter-2022-earnings-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: 227686. 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: 465253. The webcast will be available on Berkshire's website for an extended period of time.
ABOUT BERKSHIRE HILLS BANCORP
Berkshire Hills Bancorp is the parent of Berkshire Bank. The Bank's goal is to be a high-performing, leading socially responsible community bank in New England, Upstate New York, and beyond. Berkshire Bank provides business and consumer banking, mortgage, wealth management, and investment services. Headquartered in Boston, Berkshire has approximately $11.6 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.
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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 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 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 adjustments in 2022 were related to fair market value changes in equity and trading investments.
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) |
| F-10 | Reconciliation of Non-GAAP Financial Measures and Supplementary Data (Year-to-Date) |
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BERKSHIRE HILLS BANCORP, INC.
SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED - (F-1)
| June 30, | Sept. 30, | Dec. 31, | March 31, | June 30, | ||||||||||||||||
| 2021 | 2021 | 2021 | 2022 | 2022 | ||||||||||||||||
| NOMINAL AND PER SHARE DATA | ||||||||||||||||||||
| Net earnings per common share, diluted | $ | 0.43 | $ | 1.31 | $ | 0.42 | $ | 0.42 | $ | 0.50 | ||||||||||
| Adjusted earnings per common share, diluted (2) | 0.44 | 0.53 | 0.42 | 0.43 | 0.51 | |||||||||||||||
| Net income, (thousands) | 21,636 | 63,749 | 20,248 | 20,196 | 23,115 | |||||||||||||||
| Adjusted net income, (thousands) (2) | 22,104 | 25,695 | 20,172 | 20,789 | 23,562 | |||||||||||||||
| Total common shares outstanding, period-end (thousands) | 50,453 | 48,657 | 48,667 | 47,792 | 45,788 | |||||||||||||||
| Average diluted shares, (thousands) | 50,608 | 48,744 | 48,340 | 48,067 | 46,102 | |||||||||||||||
| Total book value per common share, (end of period) | 23.30 | 24.21 | 24.30 | 22.89 | 22.15 | |||||||||||||||
| Tangible book value per common share, (end of period) (2) | 22.66 | 23.58 | 23.69 | 22.30 | 21.56 | |||||||||||||||
| Dividends per common share | 0.12 | 0.12 | 0.12 | 0.12 | 0.12 | |||||||||||||||
| Full-time equivalent staff | 1,417 | 1,333 | 1,319 | 1,333 | 1,322 | |||||||||||||||
| PERFORMANCE RATIOS (3) | ||||||||||||||||||||
| Return on equity | 7.37 | % | 22.18 | % | 6.86 | % | 6.79 | % | 7.82 | % | ||||||||||
| Adjusted return on equity (2) | 7.53 | 8.94 | 6.83 | 6.99 | 7.97 | |||||||||||||||
| Return on tangible common equity (2) | 7.92 | 23.14 | 7.37 | 7.29 | 8.33 | |||||||||||||||
| Adjusted return on tangible common equity (2) | 8.08 | 9.53 | 7.34 | 7.49 | 8.48 | |||||||||||||||
| Return on assets | 0.70 | 2.14 | 0.71 | 0.70 | 0.82 | |||||||||||||||
| Adjusted return on assets (2) | 0.71 | 0.86 | 0.71 | 0.72 | 0.84 | |||||||||||||||
| Net interest margin, fully taxable equivalent (FTE) (4)(5) | 2.62 | 2.56 | 2.60 | 2.61 | 3.11 | |||||||||||||||
| Efficiency ratio (2) | 67.82 | 68.76 | 71.98 | 72.61 | 66.60 | |||||||||||||||
| FINANCIAL DATA (in millions, end of period) | ||||||||||||||||||||
| Total assets | $ | 12,273 | $ | 11,846 | $ | 11,555 | $ | 12,097 | $ | 11,579 | ||||||||||
| Total earning assets | 11,571 | 11,145 | 10,899 | 11,401 | 10,849 | |||||||||||||||
| Total loans | 7,233 | 6,836 | 6,826 | 7,267 | 7,803 | |||||||||||||||
| Total deposits | 9,914 | 10,365 | 10,069 | 10,699 | 10,115 | |||||||||||||||
| Loans/deposits (%) | 73 | % | 66 | % | 68 | % | 68 | % | 77 | % | ||||||||||
| Total shareholders' equity | $ | 1,175 | $ | 1,178 | $ | 1,182 | $ | 1,094 | $ | 1,014 | ||||||||||
| ASSET QUALITY | ||||||||||||||||||||
| Allowance for credit losses, (millions) | $ | 119 | $ | 113 | $ | 106 | $ | 99 | $ | 99 | ||||||||||
| Net charge-offs, (millions) | (5 | ) | (2 | ) | (4 | ) | (3 | ) | (0 | ) | ||||||||||
| Net charge-offs (QTD annualized)/average loans | 0.26 | % | 0.12 | % | 0.23 | % | 0.15 | % | 0.02 | % | ||||||||||
| Provision expense/(income), (millions) | $ | - | $ | (4 | ) | $ | (3 | ) | $ | (4 | ) | $ | - | |||||||
| Non-performing assets, (millions) | 49 | 39 | 37 | 32 | 29 | |||||||||||||||
| Non-performing loans/total loans | 0.66 | % | 0.54 | % | 0.52 | % | 0.41 | % | 0.34 | % | ||||||||||
| Allowance for credit losses/non-performing loans | 250 | 304 | 300 | 335 | 368 | |||||||||||||||
| Allowance for credit losses/total loans | 1.65 | 1.65 | 1.55 | 1.37 | 1.27 | |||||||||||||||
| CAPITAL RATIOS | ||||||||||||||||||||
| Common equity tier 1 capital to risk weighted assets(6) | 14.3 | % | 15.3 | % | 15.0 | % | 13.9 | % | 12.9 | % | ||||||||||
| Tier 1 capital leverage ratio(6) | 9.5 | 9.9 | 10.5 | 10.3 | 10.2 | |||||||||||||||
| Tangible common shareholders' equity/tangible assets(2) | 9.3 | 9.7 | 10.0 | 8.8 | 8.5 | |||||||||||||||
| (1) | Reconciliations of non-GAAP financial measures, including all references to adjusted and tangible amounts, appear on pages F-9 and F-10. |
| (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 pages F-9 and F-10 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: 0.08%, 0.06%, 0.06%, 0.03%, 0.03%. |
| (6) | Presented as projected for June 30, 2022 and actual for the remaining periods. |
F-1
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-2)
| June 30, | December 31, | March 31, | June 30, | |||||||||||||
| (in thousands) | 2021 | 2021 | 2022 | 2022 | ||||||||||||
| Assets | ||||||||||||||||
| Cash and due from banks | $ | 98,262 | $ | 109,350 | $ | 151,814 | $ | 156,470 | ||||||||
| Short-term investments | 1,728,419 | 1,518,457 | 1,455,437 | 714,547 | ||||||||||||
| Total cash and cash equivalents | 1,826,681 | 1,627,807 | 1,607,251 | 871,017 | ||||||||||||
| Trading security | 8,853 | 8,354 | 7,798 | 7,040 | ||||||||||||
| Marketable equity securities, at fair value | 15,709 | 15,453 | 14,719 | 14,154 | ||||||||||||
| Securities available for sale, at fair value | 1,640,512 | 1,877,585 | 2,032,575 | 1,697,019 | ||||||||||||
| Securities held to maturity, at amortized cost | 665,786 | 636,503 | 612,174 | 602,611 | ||||||||||||
| Federal Home Loan Bank stock and other restricted securities | 19,638 | 10,800 | 10,829 | 9,365 | ||||||||||||
| Total securities | 2,350,498 | 2,548,695 | 2,678,095 | 2,330,189 | ||||||||||||
| Less: Allowance for credit losses on investment securities | (130 | ) | (105 | ) | (99 | ) | (94 | ) | ||||||||
| Net securities | 2,350,368 | 2,548,590 | 2,677,996 | 2,330,095 | ||||||||||||
| Loans held for sale | 6,494 | 6,110 | 300 | 1,062 | ||||||||||||
| Total loans | 7,232,591 | 6,825,847 | 7,267,323 | 7,803,451 | ||||||||||||
| Less: Allowance for credit losses on loans | (119,044 | ) | (106,094 | ) | (99,475 | ) | (99,021 | ) | ||||||||
| Net loans | 7,113,547 | 6,719,753 | 7,167,848 | 7,704,430 | ||||||||||||
| Premises and equipment, net | 104,680 | 94,383 | 92,971 | 89,657 | ||||||||||||
| Other real estate owned | 85 | - | - | - | ||||||||||||
| Goodwill and other intangible assets | 32,203 | 29,619 | 28,332 | 27,046 | ||||||||||||
| Other assets | 562,691 | 524,074 | 518,322 | 550,275 | ||||||||||||
| Assets held for sale (1) | 276,576 | 4,577 | 3,988 | 5,386 | ||||||||||||
| Total assets | $ | 12,273,325 | $ | 11,554,913 | $ | 12,097,008 | $ | 11,578,968 | ||||||||
| Liabilities and shareholders' equity | ||||||||||||||||
| Demand deposits | $ | 2,819,012 | $ | 3,008,461 | $ | 3,020,568 | $ | 2,921,347 | ||||||||
| NOW and other deposits | 1,696,762 | 976,401 | 2,546,799 | 2,247,544 | ||||||||||||
| Money market deposits | 2,398,256 | 3,293,526 | 2,469,042 | 2,327,004 | ||||||||||||
| Savings deposits | 1,065,428 | 1,111,625 | 1,133,877 | 1,143,352 | ||||||||||||
| Time deposits | 1,934,442 | 1,678,940 | 1,528,922 | 1,475,417 | ||||||||||||
| Total deposits | 9,913,900 | 10,068,953 | 10,699,208 | 10,114,664 | ||||||||||||
| Senior borrowings | 217,847 | 13,331 | 14,563 | 58,542 | ||||||||||||
| Subordinated borrowings | 97,396 | 97,513 | 97,569 | 195,659 | ||||||||||||
| Total borrowings | 315,243 | 110,844 | 112,132 | 254,201 | ||||||||||||
| Other liabilities | 222,105 | 192,681 | 191,807 | 196,053 | ||||||||||||
| Liabilities held for sale (1) | 646,688 | - | - | - | ||||||||||||
| Total liabilities | 11,097,936 | 10,372,478 | 11,003,147 | 10,564,918 | ||||||||||||
| Preferred shareholders' equity | - | - | - | - | ||||||||||||
| Common shareholders' equity | 1,175,389 | 1,182,435 | 1,093,861 | 1,014,050 | ||||||||||||
| Total shareholders' equity | 1,175,389 | 1,182,435 | 1,093,861 | 1,014,050 | ||||||||||||
| Total liabilities and shareholders' equity | $ | 12,273,325 | $ | 11,554,913 | $ | 12,097,008 | $ | 11,578,968 | ||||||||
| (1) | For June 30, 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 | June 30, 2022 Balance | Quarter ended June 30, 2022 | Year to Date | |||||||||||||||
| Total commercial real estate | $ | 3,598 | $ | 3,764 | $ | 3,920 | 4 | % | 9 | % | ||||||||||
| Commercial and industrial loans | 1,330 | 1,397 | 1,471 | 5 | 11 | |||||||||||||||
| Total commercial loans | 4,928 | 5,161 | 5,391 | 4 | 9 | |||||||||||||||
| Total residential mortgages | 1,392 | 1,567 | 1,819 | 16 | 31 | |||||||||||||||
| Home equity | 253 | 245 | 241 | (2 | ) | (5 | ) | |||||||||||||
| Auto and other | 253 | 294 | 352 | 20 | 39 | |||||||||||||||
| Total consumer loans | 506 | 539 | 593 | 10 | 17 | |||||||||||||||
| Total loans | $ | 6,826 | $ | 7,267 | $ | 7,803 | 7 | % | 14 | % | ||||||||||
DEPOSIT ANALYSIS
| Growth % | ||||||||||||||||||||
| (in millions) | December 31, 2021 Balance | March 31, 2022 Balance | June 30, 2022 Balance | Quarter ended June 30, 2022 | Year to Date | |||||||||||||||
| Non-interest bearing | $ | 3,008 | $ | 3,020 | $ | 2,921 | (3 | )% | (3 | )% | ||||||||||
| NOW and other | 976 | 2,547 | 2,248 | (12 | ) | 130 | ||||||||||||||
| Money market | 3,294 | 2,469 | 2,327 | (6 | ) | (29 | ) | |||||||||||||
| Savings | 1,112 | 1,134 | 1,143 | 1 | 3 | |||||||||||||||
| Time deposits | 1,679 | 1,529 | 1,476 | (3 | ) | (12 | ) | |||||||||||||
| Total deposits (1) | $ | 10,069 | $ | 10,699 | $ | 10,115 | (5 | )% | 0 | % | ||||||||||
| (1) | Included in total deposits are brokered deposits of $112.9 million, $164.8 million, and $228.1 million at June 30, 2022, March 31,2022, and December 31, 2021, respectively. |
F-3
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED - (F-4)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (in thousands, except per share data) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Interest income | $ | 87,379 | $ | 85,364 | $ | 162,202 | $ | 173,517 | ||||||||
| Interest expense | 6,021 | 9,971 | 11,781 | 23,031 | ||||||||||||
| Net interest income, not FTE | 81,358 | 75,393 | 150,421 | 150,486 | ||||||||||||
| Non-interest income | ||||||||||||||||
| Deposit related fees | 8,005 | 7,508 | 15,356 | 14,634 | ||||||||||||
| Loan fees and revenue | 4,623 | 7,431 | 12,888 | 17,677 | ||||||||||||
| Insurance commissions and fees | - | 2,292 | - | 5,422 | ||||||||||||
| Wealth management fees | 2,775 | 2,519 | 5,400 | 5,291 | ||||||||||||
| Mortgage banking fees | 109 | 534 | 128 | 1,336 | ||||||||||||
| Other | 1,812 | 2,211 | 4,978 | 4,359 | ||||||||||||
| Total non-interest income excluding (losses) | 17,324 | 22,495 | 38,750 | 48,719 | ||||||||||||
| Securities (losses), net | (973 | ) | (484 | ) | (1,718 | ) | (515 | ) | ||||||||
| Total non-interest income | 16,351 | 22,011 | 37,032 | 48,204 | ||||||||||||
| Total net revenue | 97,709 | 97,404 | 187,453 | 198,690 | ||||||||||||
| Total net revenue excluding (losses) | 98,682 | 97,888 | 189,171 | 199,205 | ||||||||||||
| Provision (benefit) for credit losses | - | - | (4,000 | ) | 6,500 | |||||||||||
| Non-interest expense | ||||||||||||||||
| Compensation and benefits | 37,830 | 36,970 | 75,351 | 75,705 | ||||||||||||
| Occupancy and equipment | 9,438 | 10,599 | 19,505 | 21,623 | ||||||||||||
| Technology and communications | 8,611 | 8,214 | 17,138 | 16,807 | ||||||||||||
| Professional services | 2,913 | 3,701 | 5,605 | 10,315 | ||||||||||||
| Other expenses | 9,648 | 9,382 | 19,373 | 19,084 | ||||||||||||
| Merger, restructuring and other non-operating expenses | 35 | 6 | 53 | 3,492 | ||||||||||||
| Total non-interest expense | 68,475 | 68,872 | 137,025 | 147,026 | ||||||||||||
| Total non-interest expense excluding merger, restructuring and other | 68,440 | 68,866 | 136,972 | 143,534 | ||||||||||||
| Income before income taxes | $ | 29,234 | $ | 28,532 | $ | 54,428 | $ | 45,164 | ||||||||
| Income tax expense | 6,119 | 6,896 | 11,117 | 10,497 | ||||||||||||
| Net income | $ | 23,115 | $ | 21,636 | $ | 43,311 | $ | 34,667 | ||||||||
| Basic earnings per common share | $ | 0.50 | $ | 0.43 | $ | 0.93 | $ | 0.69 | ||||||||
| Diluted earnings per common share | $ | 0.50 | $ | 0.43 | $ | 0.92 | $ | 0.69 | ||||||||
| Weighted average shares outstanding: | ||||||||||||||||
| Basic | 45,818 | 50,321 | 46,733 | 50,327 | ||||||||||||
| Diluted | 46,102 | 50,608 | 47,074 | 50,588 | ||||||||||||
F-4
BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME (5 Quarter Trend) - UNAUDITED - (F-5)
| June 30, | Sept. 30, | Dec. 31, | March 31, | June 30, | ||||||||||||||||
| (in thousands, except per share data) | 2021 | 2021 | 2021 | 2022 | 2022 | |||||||||||||||
| Interest income | $ | 85,364 | $ | 79,688 | $ | 75,860 | $ | 74,823 | $ | 87,379 | ||||||||||
| Interest expense | 9,971 | 8,320 | 6,548 | 5,760 | 6,021 | |||||||||||||||
| Net interest income, not FTE | 75,393 | 71,368 | 69,312 | 69,063 | 81,358 | |||||||||||||||
| Non-interest income | ||||||||||||||||||||
| Deposit related fees | 7,508 | 7,657 | 7,522 | 7,351 | 8,005 | |||||||||||||||
| Loan fees and revenue | 7,431 | 8,285 | 9,098 | 8,265 | 4,623 | |||||||||||||||
| Insurance commissions and fees | 2,292 | 1,581 | - | - | - | |||||||||||||||
| Wealth management fees | 2,519 | 2,653 | 2,586 | 2,625 | 2,775 | |||||||||||||||
| Mortgage banking fees | 534 | 461 | 259 | 19 | 109 | |||||||||||||||
| Other | 2,211 | 1,279 | 993 | 3,166 | 1,812 | |||||||||||||||
| Total non-interest income excluding (losses)/gains | 22,495 | 21,916 | 20,458 | 21,426 | 17,324 | |||||||||||||||
| Securities (losses), net | (484 | ) | (166 | ) | (106 | ) | (745 | ) | (973 | ) | ||||||||||
| Gain on sale of business operations and assets, net | - | 51,885 | 1,057 | - | - | |||||||||||||||
| Total non-interest income | 22,011 | 73,635 | 21,409 | 20,681 | 16,351 | |||||||||||||||
| Total net revenue | 97,404 | 145,003 | 90,721 | 89,744 | 97,709 | |||||||||||||||
| Total net revenue excluding (losses)/gains | 97,888 | 93,284 | 89,770 | 90,489 | 98,682 | |||||||||||||||
| Provision (benefit) for credit losses | - | (4,000 | ) | (3,000 | ) | (4,000 | ) | - | ||||||||||||
| Non-interest expense | ||||||||||||||||||||
| Compensation and benefits | 36,970 | 37,068 | 37,816 | 37,521 | 37,830 | |||||||||||||||
| Occupancy and equipment | 10,599 | 10,421 | 9,738 | 10,067 | 9,438 | |||||||||||||||
| Technology and communications | 8,214 | 8,397 | 8,599 | 8,527 | 8,611 | |||||||||||||||
| Professional services | 3,701 | 3,180 | 2,365 | 2,692 | 2,913 | |||||||||||||||
| Other expenses | 9,382 | 8,969 | 10,025 | 9,725 | 9,648 | |||||||||||||||
| Merger, restructuring and other non-operating expenses | 6 | 1,425 | 864 | 18 | 35 | |||||||||||||||
| Total non-interest expense | 68,872 | 69,460 | 69,407 | 68,550 | 68,475 | |||||||||||||||
| Total non-interest expense excluding merger, restructuring and other | 68,866 | 68,035 | 68,543 | 68,532 | 68,440 | |||||||||||||||
| Income before income taxes | $ | 28,532 | $ | 79,543 | $ | 24,314 | $ | 25,194 | $ | 29,234 | ||||||||||
| Income tax expense | 6,896 | 15,794 | 4,066 | 4,998 | 6,119 | |||||||||||||||
| Net income | $ | 21,636 | $ | 63,749 | $ | 20,248 | $ | 20,196 | $ | 23,115 | ||||||||||
| Diluted earnings per common share | $ | 0.43 | $ | 1.31 | $ | 0.42 | $ | 0.42 | $ | 0.50 | ||||||||||
| Weighted average shares outstanding: | ||||||||||||||||||||
| Basic | 50,321 | 48,395 | 47,958 | 47,668 | 45,818 | |||||||||||||||
| Diluted | 50,608 | 48,744 | 48,340 | 48,067 | 46,102 | |||||||||||||||
F-5
| BERKSHIRE HILLS BANCORP, INC. | ||||||||||||||||||||||||||||||||||||||||
| AVERAGE BALANCES AND AVERAGE YIELDS AND COSTS - UNAUDITED - (F-6) | ||||||||||||||||||||||||||||||||||||||||
| June 30, 2021 | Sept. 30, 2021 | Dec. 31, 2021 | March 31, 2022 | June 30, 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 | 3,625 | 3.46 | % | 3,577 | 3.40 | % | 3,569 | 3.49 | % | 3,651 | 3.35 | % | 3,831 | 3.79 | % | |||||||||||||||||||||||||
| Commercial and industrial loans | 1,605 | 4.74 | 1,370 | 4.78 | 1,278 | 4.37 | 1,373 | 4.14 | 1,447 | 4.46 | ||||||||||||||||||||||||||||||
| Residential mortgages | 1,604 | 3.79 | 1,499 | 3.65 | 1,403 | 3.82 | 1,436 | 3.56 | 1,652 | 3.57 | ||||||||||||||||||||||||||||||
| Consumer loans | 582 | 3.80 | 545 | 3.95 | 516 | 3.96 | 514 | 4.24 | 562 | 5.41 | ||||||||||||||||||||||||||||||
| Total loans (1) | 7,416 | 3.84 | 6,991 | 3.77 | 6,766 | 3.76 | 6,974 | 3.61 | 7,492 | 3.99 | ||||||||||||||||||||||||||||||
| Securities (2) | 2,259 | 2.17 | 2,312 | 2.09 | 2,367 | 2.04 | 2,649 | 1.95 | 2,621 | 1.97 | ||||||||||||||||||||||||||||||
| Short-term investments and loans held for sale | 1,750 | 0.10 | 1,762 | 0.17 | 1,609 | 0.17 | 1,202 | 0.17 | 476 | 0.57 | ||||||||||||||||||||||||||||||
| Mid-Atlantic region loans held for sale | 269 | 3.96 | 155 | 3.82 | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Total earning assets | 11,694 | 2.96 | 11,220 | 2.86 | 10,742 | 2.84 | 10,825 | 2.82 | 10,589 | 3.34 | ||||||||||||||||||||||||||||||
| Goodwill and other intangible assets | 33 | 31 | 30 | 29 | 27 | |||||||||||||||||||||||||||||||||||
| Other assets | 690 | 674 | 655 | 639 | 644 | |||||||||||||||||||||||||||||||||||
| Total assets | 12,417 | 11,925 | 11,427 | 11,493 | 11,260 | |||||||||||||||||||||||||||||||||||
| Liabilities and shareholders' equity | ||||||||||||||||||||||||||||||||||||||||
| NOW and other | 1,389 | 0.07 | % | 1,316 | 0.05 | % | 1,331 | 0.05 | % | 1,456 | 0.04 | % | 1,454 | 0.12 | % | |||||||||||||||||||||||||
| Money market | 2,751 | 0.18 | 2,716 | 0.16 | 2,731 | 0.16 | 2,871 | 0.16 | 2,811 | 0.19 | ||||||||||||||||||||||||||||||
| Savings | 1,054 | 0.05 | 1,112 | 0.04 | 1,100 | 0.04 | 1,117 | 0.03 | 1,127 | 0.03 | ||||||||||||||||||||||||||||||
| Time | 2,013 | 0.94 | 1,893 | 0.86 | 1,750 | 0.80 | 1,624 | 0.71 | 1,460 | 0.64 | ||||||||||||||||||||||||||||||
| Total interest-bearing deposits | 7,207 | 0.35 | 7,037 | 0.31 | 6,912 | 0.28 | 7,068 | 0.24 | 6,852 | 0.24 | ||||||||||||||||||||||||||||||
| Borrowings (3) | 392 | 3.12 | 263 | 3.89 | 121 | 5.68 | 122 | 5.21 | 160 | 4.61 | ||||||||||||||||||||||||||||||
| Mid-Atlantic region interest-bearing deposits | 517 | 0.51 | 306 | 0.51 | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Total interest-bearing liabilities | 8,116 | 0.49 | 7,606 | 0.43 | 7,033 | 0.37 | 7,190 | 0.32 | 7,012 | 0.34 | ||||||||||||||||||||||||||||||
| Non-interest-bearing demand deposits | 2,787 | 2,901 | 3,038 | 2,968 | 2,903 | |||||||||||||||||||||||||||||||||||
| Other liabilities (4) | 340 | 269 | 175 | 146 | 163 | |||||||||||||||||||||||||||||||||||
| Total liabilities | 11,243 | 10,776 | 10,246 | 10,304 | 10,078 | |||||||||||||||||||||||||||||||||||
| Common shareholders' equity | 1,174 | 1,149 | 1,181 | 1,189 | 1,182 | |||||||||||||||||||||||||||||||||||
| Total shareholders' equity | 1,174 | 1,149 | 1,181 | 1,189 | 1,182 | |||||||||||||||||||||||||||||||||||
| Total liabilities and shareholders' equity | 12,417 | 11,925 | 11,427 | 11,493 | 11,260 | |||||||||||||||||||||||||||||||||||
| Net interest spread | 2.47 | % | 2.43 | % | 2.47 | % | 2.50 | % | 2.99 | % | ||||||||||||||||||||||||||||||
| Net interest margin, FTE (5) | 2.62 | 2.56 | 2.60 | 2.61 | 3.11 | |||||||||||||||||||||||||||||||||||
| Cost of funds | 0.36 | 0.31 | 0.26 | 0.23 | 0.24 | |||||||||||||||||||||||||||||||||||
| Cost of deposits | 0.25 | 0.22 | 0.19 | 0.17 | 0.17 | |||||||||||||||||||||||||||||||||||
| Supplementary data | ||||||||||||||||||||||||||||||||||||||||
| Net Interest Income, not FTE | 75 | 71 | 69 | 69 | 81 | |||||||||||||||||||||||||||||||||||
| Fully taxable equivalent income adjustment | 2 | 2 | 2 | 2 | 2 | |||||||||||||||||||||||||||||||||||
| Net Interest Income, FTE | 77 | 73 | 71 | 71 | 83 | |||||||||||||||||||||||||||||||||||
| Average PPP loans (6) | 321 | 90 | 37 | 27 | NM | |||||||||||||||||||||||||||||||||||
| Average loans excluding PPP loans (6) | 7,095 | 6,901 | 6,729 | 6,947 | 7,492 | |||||||||||||||||||||||||||||||||||
| Total PPP loans, end of period (6) | 173 | 46 | 30 | 16 | NM | |||||||||||||||||||||||||||||||||||
| Total loans excluding PPP loans, end of period (6) | 7,059 | 6,790 | 6,796 | 7,251 | 7,803 | |||||||||||||||||||||||||||||||||||
| PPP interest income | 5 | 2 | - | - | - | |||||||||||||||||||||||||||||||||||
| Total average non-maturity deposits | 7,981 | 8,045 | 8,200 | 8,412 | 8,295 | |||||||||||||||||||||||||||||||||||
| Total average deposits | 9,994 | 9,938 | 9,950 | 10,037 | 9,755 | |||||||||||||||||||||||||||||||||||
| Purchased loan accretion | 2 | 2 | 2 | 1 | 1 | |||||||||||||||||||||||||||||||||||
| Total average tangible equity (7) | 1,141 | 1,118 | 1,151 | 1,160 | 1,155 | |||||||||||||||||||||||||||||||||||
| (1) | Total loans include non-accruing loans. |
| (2) | Average balances for securities available-for-sale are based on amortized cost. |
| (3) | 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 June 30, 2022, 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%, 0.05%, 0.00%, 0.00%, 0.00%) This calculation excludes gross interest income on PPP loans and average PPP loan balances. |
| (6) | As of June 30, 2022, the PPP loan balances and interest are not considered material and will no longer be considered in adjusted metrics. |
| (7) | 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) | ||||||||||||||||||||
| June 30, | Sept. 30, | Dec. 31, | March 31, | June 30, | ||||||||||||||||
| (in thousands) | 2021 | 2021 | 2021 | 2022 | 2022 | |||||||||||||||
| NON-PERFORMING ASSETS | ||||||||||||||||||||
| Non-accruing loans: | ||||||||||||||||||||
| Commercial real estate | $ | 22,799 | $ | 14,845 | $ | 13,954 | $ | 8,984 | $ | 8,277 | ||||||||||
| Commercial and industrial loans | 9,427 | 7,140 | 6,747 | 5,618 | 4,891 | |||||||||||||||
| Residential mortgages | 9,238 | 9,763 | 9,825 | 11,079 | 10,331 | |||||||||||||||
| Consumer loans | 6,141 | 5,399 | 4,800 | 4,000 | 3,385 | |||||||||||||||
| Total non-accruing loans | 47,605 | 37,147 | 35,326 | 29,681 | 26,884 | |||||||||||||||
| Other real estate owned | 85 | - | - | - | - | |||||||||||||||
| Repossessed assets | 1,666 | 1,664 | 1,736 | 2,004 | 2,004 | |||||||||||||||
| Total non-performing assets | $ | 49,356 | $ | 38,811 | $ | 37,062 | $ | 31,685 | $ | 28,888 | ||||||||||
| Total non-accruing loans/total loans | 0.66 | % | 0.54 | % | 0.52 | % | 0.41 | % | 0.34 | % | ||||||||||
| Total non-accruing loans/total loans excluding PPP loans | 0.67 | % | 0.55 | % | 0.52 | % | 0.42 | % | 0.38 | % | ||||||||||
| Total non-performing assets/total assets | 0.40 | % | 0.33 | % | 0.32 | % | 0.26 | % | 0.25 | % | ||||||||||
| PROVISION AND ALLOWANCE FOR CREDIT LOSSES ON LOANS | ||||||||||||||||||||
| Balance at beginning of period | $ | 123,800 | $ | 119,044 | $ | 112,916 | $ | 106,094 | $ | 99,475 | ||||||||||
| Charged-off loans | (7,248 | ) | (4,334 | ) | (7,976 | ) | (6,048 | ) | (1,593 | ) | ||||||||||
| Recoveries on charged-off loans | 2,492 | 2,206 | 4,154 | 3,429 | 1,139 | |||||||||||||||
| Net loans charged-off | (4,756 | ) | (2,128 | ) | (3,822 | ) | (2,619 | ) | (454 | ) | ||||||||||
| Provision (benefit) for loan credit losses | - | (4,000 | ) | (3,000 | ) | (4,000 | ) | - | ||||||||||||
| Balance at end of period | $ | 119,044 | $ | 112,916 | $ | 106,094 | $ | 99,475 | $ | 99,021 | ||||||||||
| Allowance for credit losses/total loans | 1.65 | % | 1.65 | % | 1.55 | % | 1.37 | % | 1.27 | % | ||||||||||
| Allowance for credit losses/total loans excluding PPP loans | 1.69 | % | 1.66 | % | 1.56 | % | 1.37 | % | 1.27 | % | ||||||||||
| Allowance for credit losses/non-accruing loans | 250 | % | 304 | % | 300 | % | 335 | % | 368 | % | ||||||||||
| NET LOAN CHARGE-OFFS | ||||||||||||||||||||
| Commercial real estate | $ | (2,325 | ) | $ | (1,391 | ) | $ | (2,208 | ) | $ | (3,280 | ) | $ | (76 | ) | |||||
| Commercial and industrial loans | (2,331 | ) | 110 | (1,649 | ) | 653 | (237 | ) | ||||||||||||
| Residential mortgages | 176 | (677 | ) | (2 | ) | (50 | ) | (30 | ) | |||||||||||
| Home equity | (136 | ) | 106 | 106 | 135 | 33 | ||||||||||||||
| Auto and other consumer | (140 | ) | (276 | ) | (69 | ) | (77 | ) | (144 | ) | ||||||||||
| Total, net | $ | (4,756 | ) | $ | (2,128 | ) | $ | (3,822 | ) | $ | (2,619 | ) | $ | (454 | ) | |||||
| Net charge-offs (QTD annualized)/average loans | 0.26 | % | 0.12 | % | 0.23 | % | 0.15 | % | 0.02 | % | ||||||||||
| Net charge-offs (YTD annualized)/average loans | 0.39 | % | 0.30 | % | 0.29 | % | 0.15 | % | 0.08 | % | ||||||||||
F-7
| BERKSHIRE HILLS BANCORP, INC. | ||||||||||||||||||||||||||||||||||||||||
| ASSET QUALITY ANALYSIS - UNAUDITED (F-8) | ||||||||||||||||||||||||||||||||||||||||
| June 30, 2021 | September 30, 2021 | December 31, 2021 | March 31, 2022 | June 30, 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 | $ | 15,483 | 0.22 | % | $ | 18,365 | 0.27 | % | $ | 39,863 | 0.58 | % | $ | 13,517 | 0.19 | % | $ | 36,184 | 0.46 | % | ||||||||||||||||||||
| 90+ Days delinquent and still accruing | 3,129 | 0.04 | % | 3,803 | 0.06 | % | 3,270 | 0.05 | % | 6,613 | 0.09 | % | 6,760 | 0.09 | % | |||||||||||||||||||||||||
| Total accruing delinquent loans | 18,612 | 0.26 | % | 22,168 | 0.33 | % | 43,133 | 0.63 | % | 20,130 | 0.28 | % | 42,944 | 0.55 | % | |||||||||||||||||||||||||
| Non-accruing loans | 47,605 | 0.66 | % | 37,147 | 0.54 | % | 35,326 | 0.52 | % | 29,681 | 0.41 | % | 26,884 | 0.34 | % | |||||||||||||||||||||||||
| Total delinquent and non-accruing loans | $ | 66,217 | 0.92 | % | $ | 59,315 | 0.87 | % | $ | 78,459 | 1.15 | % | $ | 49,811 | 0.69 | % | $ | 69,828 | 0.89 | % | ||||||||||||||||||||
F-8
| BERKSHIRE HILLS BANCORP, INC. | ||||||||||||||||||||||||
| RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA- UNAUDITED - (F-9) | ||||||||||||||||||||||||
| June 30, | Sept. 30, | Dec. 31, | March 31, | June 30, | ||||||||||||||||||||
| (in thousands) | 2021 | 2021 | 2021 | 2022 | 2022 | |||||||||||||||||||
| Total revenue | (A) | $ | 97,404 | $ | 145,003 | $ | 90,721 | $ | 89,744 | $ | 97,709 | |||||||||||||
| Adj: Net securities losses (1) | 484 | 166 | 106 | 745 | 973 | |||||||||||||||||||
| Adj: Net (gains) on sale of business operations and assets | - | (51,885 | ) | (1,057 | ) | - | - | |||||||||||||||||
| Total adjusted revenue (2) | (B) | $ | 97,888 | $ | 93,284 | $ | 89,770 | $ | 90,489 | $ | 98,682 | |||||||||||||
| Total non-interest expense | (C) | $ | 68,872 | $ | 69,460 | $ | 69,407 | $ | 68,550 | $ | 68,475 | |||||||||||||
| Less: Merger, restructuring and other expense | (6 | ) | (1,425 | ) | (864 | ) | (18 | ) | (35 | ) | ||||||||||||||
| Adjusted non-interest expense (2) | (D) | $ | 68,866 | $ | 68,035 | $ | 68,543 | $ | 68,532 | $ | 68,440 | |||||||||||||
| Pre-tax, pre-provision net revenue (PPNR) | (A-C) | $ | 28,532 | $ | 75,543 | $ | 21,314 | $ | 21,194 | $ | 29,234 | |||||||||||||
| Adjusted pre-tax, pre-provision net revenue (PPNR) | (B-D) | 29,022 | 25,249 | 21,227 | 21,957 | 30,242 | ||||||||||||||||||
| Net income | $ | 21,636 | $ | 63,749 | $ | 20,248 | $ | 20,196 | $ | 23,115 | ||||||||||||||
| Adj: Net securities losses (1) | 484 | 166 | 106 | 745 | 973 | |||||||||||||||||||
| Adj: Net (gains) on sale of business operations and assets | - | (51,885 | ) | (1,057 | ) | - | - | |||||||||||||||||
| Adj: Restructuring expense and other expense | 6 | 1,425 | 864 | 18 | 35 | |||||||||||||||||||
| Adj: Income taxes (expense)/benefit | (22 | ) | 12,240 | 11 | (170 | ) | (561 | ) | ||||||||||||||||
| Total adjusted income (2) | (E) | $ | 22,104 | $ | 25,695 | $ | 20,172 | $ | 20,789 | $ | 23,562 | |||||||||||||
| (in millions, except per share data) | ||||||||||||||||||||||||
| Total average assets | (F) | $ | 12,417 | $ | 11,925 | $ | 11,427 | $ | 11,493 | $ | 11,260 | |||||||||||||
| Total average shareholders' equity | (G) | 1,174 | 1,149 | 1,181 | 1,189 | 1,182 | ||||||||||||||||||
| Total average tangible shareholders' equity (2)(3) | (H) | 1,141 | 1,118 | 1,151 | 1,160 | 1,155 | ||||||||||||||||||
| Total average tangible common shareholders' equity (2)(3) | (I) | 1,141 | 1,118 | 1,151 | 1,160 | 1,155 | ||||||||||||||||||
| Total tangible shareholders' equity, period-end (2)(3) | (J) | 1,143 | 1,147 | 1,153 | 1,066 | 987 | ||||||||||||||||||
| Total tangible common shareholders' equity, period-end (2)(3) | (K) | 1,143 | 1,147 | 1,153 | 1,066 | 987 | ||||||||||||||||||
| Total tangible assets, period-end (2)(3) | (L) | 12,241 | 11,815 | 11,525 | 12,069 | 11,552 | ||||||||||||||||||
| Total common shares outstanding, period-end (thousands) | (M) | 50,453 | 48,657 | 48,667 | 47,792 | 45,788 | ||||||||||||||||||
| Average diluted shares outstanding (thousands) | (N) | 50,608 | 48,744 | 48,340 | 48,067 | 46,102 | ||||||||||||||||||
| GAAP earnings per common share, diluted (2) | $ | 0.43 | $ | 1.31 | $ | 0.42 | $ | 0.42 | $ | 0.50 | ||||||||||||||
| Adjusted earnings per common share, diluted (2) | (E/N) | 0.44 | 0.53 | 0.42 | 0.43 | 0.51 | ||||||||||||||||||
| Tangible book value per common share, period-end (2) | (K/M) | 22.66 | 23.58 | 23.69 | 22.30 | 21.56 | ||||||||||||||||||
| Total tangible shareholders' equity/total tangible assets (2) | (J/L) | 9.34 | 9.71 | 10.00 | 8.83 | 8.54 | ||||||||||||||||||
| Performance ratios (4) | ||||||||||||||||||||||||
| GAAP return on equity | 7.37 | % | 22.18 | % | 6.86 | % | 6.79 | 7.82 | % | |||||||||||||||
| Adjusted return on equity (2) | (E/G) | 7.53 | 8.94 | 6.83 | 6.99 | 7.97 | ||||||||||||||||||
| Return on tangible common equity (2)(5) | 7.92 | 23.14 | 7.37 | 7.29 | 8.33 | |||||||||||||||||||
| Adjusted return on tangible common equity (2)(5) | (E+Q)/(I) | 8.08 | 9.53 | 7.34 | 7.49 | 8.48 | ||||||||||||||||||
| GAAP return on assets | 0.70 | 2.14 | 0.71 | 0.70 | 0.82 | |||||||||||||||||||
| Adjusted return on assets (2) | 0.71 | 0.86 | 0.71 | 0.72 | 0.84 | |||||||||||||||||||
| PPNR from continuing operations/assets (2) | 0.92 | 2.53 | 0.75 | 0.74 | 1.04 | |||||||||||||||||||
| Adjusted PPNR/assets (2) | 0.93 | 0.85 | 0.74 | 0.76 | 1.07 | |||||||||||||||||||
| Efficiency ratio (2)(6) | (D-Q)/(B+O+R) | 67.82 | 68.76 | 71.98 | 72.61 | 66.60 | ||||||||||||||||||
| Net interest margin, FTE | 2.62 | 2.56 | 2.60 | 2.61 | 3.11 | |||||||||||||||||||
| Supplementary data (in thousands) | ||||||||||||||||||||||||
| Tax benefit on tax-credit investments (7) | (O) | $ | 79 | $ | 2,195 | $ | 2,057 | $ | 596 | $ | 595 | |||||||||||||
| Non-interest income charge on tax-credit investments (8) | (P) | (175 | ) | (1,789 | ) | (1,448 | ) | (357 | ) | (351 | ) | |||||||||||||
| Net income on tax-credit investments | (O+P) | (96 | ) | 406 | 609 | 239 | 244 | |||||||||||||||||
| Intangible amortization | (Q) | $ | 1,297 | $ | 1,296 | $ | 1,288 | $ | 1,286 | $ | 1,286 | |||||||||||||
| Fully taxable equivalent income adjustment | (R) | 1,660 | 1,586 | 1,604 | 1,524 | 1,560 | ||||||||||||||||||
| (1) | Net securities losses/(gains) 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/(loss) 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
| BERKSHIRE HILLS BANCORP, INC. | ||||||||||||
| RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA- UNAUDITED - (F-10) | ||||||||||||
| At or for the Six Months Ended | ||||||||||||
| June 30, | June 30, | |||||||||||
| (in thousands) | 2021 | 2022 | ||||||||||
| Total revenue | (A) | $ | 198,690 | $ | 187,453 | |||||||
| Adj: Net securities losses (1) | 515 | 1,718 | ||||||||||
| Total adjusted revenue (2) | (B) | $ | 199,205 | $ | 189,171 | |||||||
| Total non-interest expense | (C) | $ | 147,026 | $ | 137,025 | |||||||
| Less: Merger, restructuring and other expense | (3,492 | ) | (53 | ) | ||||||||
| Adjusted non-interest expense (2) | (D) | $ | 143,534 | $ | 136,972 | |||||||
| Pre-tax, pre-provision net revenue (PPNR) | (A-C) | $ | 51,664 | $ | 50,428 | |||||||
| Adjusted pre-tax, pre-provision net revenue (PPNR) | (B-D) | 55,671 | 52,199 | |||||||||
| Net income | $ | 34,667 | $ | 43,311 | ||||||||
| Adj: Net securities losses (1) | 515 | 1,718 | ||||||||||
| Adj: Restructuring expense and other expense | 3,492 | 53 | ||||||||||
| Adj: Income taxes benefit/(expense) | (555 | ) | (731 | ) | ||||||||
| Total adjusted income/(loss) (2) | (E) | $ | 38,119 | $ | 44,351 | |||||||
| (in millions, except per share data) | ||||||||||||
| Total average assets | (F) | $ | 12,442 | $ | 11,376 | |||||||
| Total average shareholders' equity | (G) | 1,166 | 1,185 | |||||||||
| Total average tangible shareholders' equity (2)(3) | (H) | 1,133 | 1,157 | |||||||||
| Total average tangible common shareholders' equity (2)(3) | (I) | 1,133 | 1,157 | |||||||||
| Total tangible shareholders' equity, period-end (2)(3) | (J) | 1,143 | 987 | |||||||||
| Total tangible common shareholders' equity, period-end (2)(3) | (K) | 1,143 | 987 | |||||||||
| Total tangible assets, period-end (2)(3) | (L) | 12,241 | 11,552 | |||||||||
| Total common shares outstanding, period-end (thousands) | (M) | 50,453 | 45,788 | |||||||||
| Average diluted shares outstanding (thousands) | (N) | 50,588 | 47,074 | |||||||||
| GAAP earnings/(loss) per common share, diluted (2) | $ | 0.69 | $ | 0.92 | ||||||||
| Adjusted earnings per common share, diluted (2) | (E/N) | 0.75 | 0.94 | |||||||||
| Tangible book value per common share, period-end (2) | (K/M) | 22.66 | 21.56 | |||||||||
| Total tangible shareholders' equity/total tangible assets (2) | (J/L) | 9.34 | 8.54 | |||||||||
| Performance ratios (4) | ||||||||||||
| GAAP return on equity | 5.95 | % | 7.31 | % | ||||||||
| Adjusted return on equity (2) | (E/G) | 6.54 | 7.49 | |||||||||
| Return on tangible common equity (2)(5) | 6.46 | 7.81 | ||||||||||
| Adjusted return on tangible common equity (2)(5) | (E+Q)/(I) | 7.07 | 7.99 | |||||||||
| GAAP return on assets | 0.56 | 0.76 | ||||||||||
| Adjusted return on assets (2) | 0.61 | 0.78 | ||||||||||
| PPNR from continuing operations/assets (2) | 0.83 | 0.89 | ||||||||||
| Adjusted PPNR/assets (2) | 0.89 | 0.92 | ||||||||||
| Efficiency ratio (2)(6) | (D-Q)/(B+O+R) | 69.60 | 69.48 | |||||||||
| Net interest margin, FTE | 2.62 | 2.86 | ||||||||||
| Supplementary data (in thousands) | ||||||||||||
| Tax benefit on tax-credit investments (7) | (O) | $ | 120 | $ | 1,191 | |||||||
| Non-interest income charge on tax-credit investments (8) | (P) | (207 | ) | (708 | ) | |||||||
| Net income on tax-credit investments | (O+P) | (87 | ) | 483 | ||||||||
| Intangible amortization | (Q) | $ | 2,616 | $ | 2,572 | |||||||
| Fully taxable equivalent income adjustment | (R) | 3,154 | 3,084 | |||||||||
| (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/(loss) 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-10