EX-99.1 2 tm2221462d1_ex99-1.htm EXHIBIT 99.1

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