EX-99.1 2 t1701278_ex99-1.htm EXHIBIT 99.1

Exhibit 99.1

Berkshire Hills Reports First Quarter Earnings; Dividend Declared

PITTSFIELD, MASS., April 24, 2017. Berkshire Hills Bancorp, Inc. (NYSE: BHLB) reported first quarter 2017 earnings of $15.5 million, or 44 cents per share. Core earnings totaled $19.4 million, or $0.55 per share. Net income increased by 50% over the prior quarter and core earnings increased by 8% including the first full quarter benefit of the acquired First Choice operations. Non-core after-tax merger charges totaled $0.12 per share for the quarter.

FIRST QUARTER FINANCIAL HIGHLIGHTS (comparisons are to prior quarter unless otherwise stated):

34% increase in total net revenue

46% increase in fee income

15% annualized commercial loan growth

6% annualized total loan growth

2% annualized deposit growth

3.33% net interest margin, increased from 3.21% in the prior quarter

0.27% non-performing assets/assets

0.20% net loan charge-offs/average loans

CEO Michael Daly stated, “Berkshire is off to a strong start for the year, having delivered double-digit commercial loan growth, an expanded NIM, and a successful systems integration of First Choice on time and on plan. The First Choice operations drove our revenue gains while organic business development contributed to balance sheet growth. We opened our first Boston branch which will support our growing commercial business in Greater Boston. During the quarter we completed the consolidation of three branches and identified a fourth branch, along with other leasehold reductions, for further consolidation. We remain focused on delivering on the disciplined expansion of our business model. Across our regions, our teams have solid momentum for business growth and profitability improvement in 2017.”

DIVIDEND DECLARED

The Board of Directors voted to declare a cash dividend of $0.21 per share to shareholders of record at the close of business on May 11, 2017, payable on May 25, 2017. The dividend equates to a 2.4% annualized yield based on the $35.38 average closing price of Berkshire Hills Bancorp common stock during the quarter.

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FINANCIAL CONDITION

Total assets measured $9.3 billion at March 31, 2017. The 6% annualized loan growth was concentrated in 15% annualized commercial loan growth. The largest gain was in commercial and industrial loans, which benefited from improved activity across several regions. Deposit growth was concentrated in time account growth, providing additional protection in the event of further interest rate increases, while transaction account balances decreased seasonally. Berkshire terminated its $300 million in fixed rate interest rate swaps during the quarter in conjunction with the integration of acquired First Choice Bank assets and liabilities. The Company continues to maintain a modestly asset sensitive profile for net interest income.

At quarter-end, the ratio of loans/deposits stood at 100%. The ratio of equity/assets was 11.8% and the ratio of tangible equity/assets was 7.6%. At quarter-end, book value per share increased to $30.77 and tangible book value per share increased to $18.97. Tangible equity/assets and tangible book value are non-GAAP financial measures. Delinquent and non-accruing loans decreased to 0.78% of total loans, and annualized net loan charge-offs decreased to 0.20% of average loans during the quarter.

RESULTS OF OPERATIONS

The 50% increase in GAAP earnings and 8% increase in core earnings compared to the prior quarter primarily reflected the impact of the acquired First Choice operations. Per share results included the impact of the 4.4 million shares issued as merger consideration. GAAP earnings per share increased by $0.12 to $0.44, while core earnings per share decreased by $0.01 to $0.55. The First Choice acquisition is targeted to be accretive to earnings per share after integration is completed including targeted cost saves from combined efficiencies. During the most recent quarter, the GAAP return on assets measured 0.68% and core return on assets measured 0.85%.

Core earnings is a non-GAAP financial measure excluding non-core items viewed as not related to normalized operations. The $0.11 difference between core and GAAP EPS in the first quarter included $0.12 per share in after-tax merger related charges. Other net non-core gains/losses and expense restructuring items were mostly offsetting. Non-core gains of $13 million were realized on the sale of equity securities, and were offset by a $7 million loss recorded on the termination of the interest rate swaps and $6 million in other non-core costs primarily related to restructuring charges.

Most categories of revenue and expense increased over the prior quarter due to the full period impact of the First Choice acquisition. Total revenue increased by 34% and core revenue increased by 26%. The first quarter 2017 net interest margin increased to 3.33% and measured 3.15% excluding purchased loan accretion. The comparable measures in the prior quarter were 3.21% and 3.11%, respectively. The improvement in the margin included the benefit of the December rate hike and a decrease in funding costs following the First Choice acquisition. Fee income increased to 30% of total interest and fee

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revenue from 25% in the prior quarter, including the benefit of the acquired First Choice mortgage origination operations.

First quarter non-interest expense increased by 22% over the prior quarter including the costs of newly acquired operations, while core non-interest expense increased by 27%. The efficiency ratio measured 62%, compared to 58% in the prior quarter, reflecting the lower operating margin associated with mortgage originations. Full time equivalent staff totaled 1,728 positions at quarter-end, compared to 1,731 at the start of the year.

The effective GAAP income tax rate was 30% and the core income tax rate was 31% in the most recent quarter. The Company received $0.01 per share in net earnings benefit from its investment in tax credit related projects during the quarter, compared to $0.02 in the prior quarter.

INVESTOR CONFERENCE CALL

Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Tuesday, April 25, 2017 to discuss its 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: dpregister.com/10104927. 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. Participants may also reach the registration link and access the webcast by logging in through the investor section of our website at ir.berkshirebank.com. Participants may also participate at the above time by dialing 1-844-792-3726 and asking the Operator to be joined to the Berkshire Hills Bancorp (BHLB) earnings call. A telephone replay of the call will be available through Tuesday, May 2, 2017 by dialing 877-344-7529 and entering access number 10104927. The webcast will be available on Berkshire's website for an extended period of time.

BACKGROUND

Berkshire Hills Bancorp is the parent of Berkshire Bank – America's Most Exciting Bank®. Berkshire has approximately $9.3 billion in assets and 97 full-service branch offices in Massachusetts, New York, Connecticut, Vermont, Pennsylvania and New Jersey providing personal and business banking, insurance, and wealth management services. The Company also offers mortgages and specialized commercial lending services in targeted national markets. For more information, visit www.berkshirebank.com.

FORWARD LOOKING STATEMENTS

This document contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. There are several 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

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10-Q filed with the Securities and Exchange Commission and available on the SEC’s website at www.sec.gov. Berkshire does not undertake any obligation to update forward-looking statements.

NON-GAAP FINANCIAL MEASURES

This document contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles (“GAAP”). These non-GAAP measures provide supplemental perspectives on operating results, performance trends, and financial condition. They are not a substitute for GAAP measures; they should be read and used in conjunction with the Company’s GAAP financial information. A reconciliation of non-GAAP financial measures to GAAP measures is included on page F-9 in the accompanying financial tables. In all cases, it should be understood that non-GAAP per share measures do not depict amounts that accrue directly to the benefit of shareholders.

The Company utilizes the non-GAAP measure of core earnings in evaluating operating trends, including components for core revenue and expense. These measures exclude items which the Company does not view as related to its normalized operations. These items include securities gains/losses, merger costs, restructuring costs, and systems conversion costs. Non-core 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 core income. The efficiency ratio is adjusted for non-core 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. Charges related to merger and acquisition activity consist primarily of severance/benefit related expenses, contract termination costs, systems conversion costs, variable compensation expenses, and professional fees. These charges are related to the following business 2016 combinations: First Choice Bank, 44 Business Capital, and RNLPC. Restructuring costs generally consist of costs and losses associated with the disposition of assets and liabilities and lease terminations, including costs related to branch sales. Non-core items recorded in the first quarter of 2017 included gains realized on the sale of equity securities and costs related to the termination of the Company’s interest rate swaps. Of note, following systems upgrades, non-material revisions were made to the calculations of the net interest margin and efficiency ratio and prior period measures were revised to include these changes.

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CONTACTS

Investor Relations Contact

Allison O’Rourke; Executive Vice President, Investor Relations Officer; 413-236-3149

Media Contact

Elizabeth Mach; Senior Vice President, Marketing Officer; 413-445-8390

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 Yields and Costs
F-7	Average Balances
F-8	Asset Quality Analysis
F-9	Reconciliation of Non-GAAP Financial Measures (Five Quarter Trend) and Supplementary Data

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BERKSHIRE HILLS BANCORP, INC.

SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED - (F-1)

	At or for the Quarters Ended (2)
	March 31,			Dec. 31,			Sept. 30,			June 30,			March 31,
	2017			2016 (3)			2016			2016 (4)			2016

PER SHARE DATA
Net earnings, diluted	$	0.44		$	0.32		$	0.53		$	0.52		$	0.52
Core earnings, diluted (1)		0.55			0.56			0.57			0.54			0.54
Total book value		30.77			30.65			29.97			29.64			29.18
Tangible book value (5)		18.97			18.81			18.78			18.44			18.44
Market price at period end		36.05			36.85			27.71			26.92			26.89
Dividends		0.21			0.20			0.20			0.20			0.20

PERFORMANCE RATIOS (6)
Return on assets		0.68	%		0.50	%		0.82	%		0.82	%		0.82	%
Core return on assets (1)		0.85			0.87			0.88			0.85			0.85
Return on equity		5.71			4.29			7.29			7.17			7.19
Core return on equity (1)		7.17			7.49			7.75			7.42			7.40
Core return on tangible equity (1)		12.05			12.23			12.99			12.45			12.20
Net interest margin, fully taxable equivalent (FTE) (7)(8)		3.33			3.21			3.27			3.32			3.33
Net interest margin (FTE), excluding purchased loan accretion (5)(8)		3.15			3.11			3.15			3.21			3.22
Fee income/Net interest and fee income		30.04			24.99			23.81			21.16			21.04
Efficiency ratio (5)(8)		61.94			58.42			57.32			58.11			59.27

GROWTH (Year-to-date)
Total commercial loans (annualized)		15	%		18	%		9	%		11	%		6	%
Total loans (annualized)		6			14			7			10			0
Total deposits (annualized)		2			18			4			2			0
Total net revenues (compared to prior year)		39			11			13			14			26
Earnings per share (compared to prior year)		(15	)		9			31			48			49
Core earnings per share (compared to prior year)(1)		2			4			6			5			8

FINANCIAL DATA (in millions)
Total assets	$	9,298		$	9,163		$	7,931		$	8,044		$	7,808
Total earning assets		8,486			8,340			7,229			7,327			7,142
Total investments		1,740			1,670			1,162			1,304			1,399
Total loans		6,656			6,550			6,047			6,000			5,727
Allowance for loan losses		46			44			43			41			40
Total intangible assets		422			423			348			349			334
Total deposits		6,656			6,622			5,750			5,657			5,584
Total shareholders' equity		1,100			1,093			933			923			906
Net income		15.5			10.3			16.4			16.0			16.0
Core income (1)		19.4			18.0			17.4			16.5			16.5

ASSET QUALITY AND CONDITION RATIOS
Net charge-offs (current quarter annualized)/average loans		0.20	%		0.21	%		0.20	%		0.22	%		0.23	%
Total non-performing assets/total assets		0.27			0.24			0.26			0.26			0.28
Allowance for loan losses/total loans		0.69			0.67			0.71			0.69			0.70
Loans/deposits		100			99			105			106			103
Shareholders' equity to total assets		11.83			11.93			11.76			11.48			11.60
Tangible shareholders' equity to tangible assets (5)		7.64			7.68			7.70			7.46			7.66

(1)

Core measurements are non-GAAP financial measures that are adjusted to exclude net non-core charges primarily related to acquisitions and restructuring activities. See page F-9 for reconciliations of non-GAAP financial measures.

(2)

Reconciliations of non-GAAP financial measures, including all references to core and tangible amounts, appear on page F-9.

(3)

The Company acquired First Choice Bank on December 2, 2016.

(4)

The Company acquired certain assets and operations related to 44 Business Capital on April 29, 2016.

(5)

Non-GAAP financial measure. See page F-9 for reconciliations of non-GAAP financial measures.

(6)

All performance ratios are annualized and are based on average balance sheet amounts, where applicable.

(7)

Fully taxable equivalent considers the impact of tax advantaged investment securities and loans.

(8)

Revisions were made to the calculations of the net interest margin, efficiency ratio, and yields for the interest annualization and the fully taxable equivalent calculations. Prior period measures were revised to include these changes.

F-1

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-2)

	March 31,			December 31,
(in thousands)	2017			2016
Assets
Cash and due from banks	$	67,580		$	71,494
Short-term investments		25,763			41,581
Total cash and short-term investments		93,343			113,075

Trading security		12,966			13,229
Securities available for sale, at fair value		1,293,683			1,209,537
Securities held to maturity, at amortized cost		331,179			334,368
Federal Home Loan Bank stock and other restricted securities		76,407			71,112
Total securities		1,714,235			1,628,246

Loans held for sale, at fair value		89,741			120,673

Commercial real estate		2,673,363			2,616,438
Commercial and industrial loans		1,146,125			1,062,038
Residential mortgages		1,850,684			1,893,131
Consumer loans		985,761			978,180
Total loans		6,655,933			6,549,787
Less: Allowance for loan losses		(45,804	)		(43,998	)
Net loans		6,610,129			6,505,789

Premises and equipment, net		95,203			93,215
Other real estate owned		71			151
Goodwill		403,106			403,106
Other intangible assets		18,644			19,445
Cash surrender value of bank-owned life insurance		139,914			139,257
Deferred tax asset, net		42,403			41,128
Other assets		91,119			98,457
Total assets	$	9,297,908		$	9,162,542

Liabilities and shareholders' equity
Demand deposits	$	1,194,633		$	1,278,875
NOW deposits		562,743			570,583
Money market deposits		1,819,403			1,781,605
Savings deposits		660,007			657,486
Time deposits		2,419,268			2,333,543
Total deposits		6,656,054			6,622,092

Senior borrowings		1,294,721			1,224,836
Subordinated borrowings		89,206			89,161
Total borrowings		1,383,927			1,313,997

Other liabilities		158,374			133,155
Total liabilities		8,198,355			8,069,244

Total common shareholders' equity		1,099,553			1,093,298
Total liabilities and shareholders' equity	$	9,297,908		$	9,162,542

Net shares outstanding		35,729			35,673

F-2

BERKSHIRE HILLS BANCORP, INC.

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

LOAN ANALYSIS

					Annualized Growth %
(in millions)	March 31, 2017 Balance		December 31, 2016 Balance		Quarter ended March 31, 2017

Commercial real estate - construction	$	306	$	288		26	%
Commercial real estate - other		2,367		2,329		7
Total commercial real estate		2,673		2,617		9
Commercial and industrial loans		1,146		1,062		32
Total commercial loans		3,819		3,679		15

Total residential mortgages		1,851		1,893		(9	)

Home equity		390		394		(4	)
Auto and other		596		584		8
Total consumer loans		986		978		3
Total loans	$	6,656	$	6,550		6	%

DEPOSIT ANALYSIS

					Annualized Growth %
(in millions)	March 31, 2017 Balance		December 31, 2016 Balance		Quarter ended March 31, 2017
Demand	$	1,195	$	1,279		(26	)%
NOW		563		571		(6	)
Money market		1,819		1,782		8
Savings		660		657		2
Total non-maturity deposits		4,237		4,289		(5	)

Total time deposits		2,419		2,333		15
Total deposits	$	6,656	$	6,622		2	%

F-3

BERKSHIRE HILLS BANCORP, INC.

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

	Three Months Ended
	March 31,
(in thousands, except per share data)	2017			2016
Interest and dividend income
Loans	$	68,943		$	58,442
Securities and other		11,766			10,034
Total interest and dividend income		80,709			68,476
Interest expense
Deposits		9,098			7,159
Borrowings		4,725			3,620
Total interest expense		13,823			10,779
Net interest income		66,886			57,697
Non-interest income
Mortgage banking originations		12,678			821
Loan related income		4,179			3,046
Deposit related fees		6,204			6,109
Insurance commissions and fees		3,136			2,893
Wealth management fees		2,526			2,502
Total fee income		28,723			15,371
Other		93			223
Securities gains, net		12,570			36
Loss on termination of hedges		(6,629	)		-
Total non-interest income		34,757			15,630
Total net revenue		101,643			73,327
Provision for loan losses		5,095			4,006
Non-interest expense
Compensation and benefits		36,119			25,714
Occupancy and equipment		9,026			6,690
Technology and communications		6,087			4,857
Marketing and promotion		1,999			673
Professional services		2,451			1,280
FDIC premiums and assessments		1,298			1,233
Other real estate owned and foreclosures		28			263
Amortization of intangible assets		801			819
Merger, restructuring and conversion expense		11,682			780
Other		4,835			4,791
Total non-interest expense		74,326			47,100

Income before income taxes		22,222			22,221
Income tax expense		6,762			6,220
Net income	$	15,460		$	16,001

Earnings per share:
Basic	$	0.44		$	0.52
Diluted	$	0.44		$	0.52

Weighted average shares outstanding:
Basic		35,280			30,511
Diluted		35,452			30,688

F-4

BERKSHIRE HILLS BANCORP, INC.

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

	March 31,			Dec. 31,			Sept. 30,		June 30,			March 31,
(in thousands, except per share data)	2017			2016			2016		2016			2016
Interest and dividend income
Loans	$	68,943		$	62,884		$	61,571	$	59,703		$	58,442
Securities and other		11,766			9,550			8,940		9,315			10,034
Total interest and dividend income		80,709			72,434			70,511		69,018			68,476
Interest expense
Deposits		9,098			8,556			7,790		7,378			7,159
Borrowings		4,725			4,720			4,750		4,199			3,620
Total interest expense		13,823			13,276			12,540		11,577			10,779
Net interest income		66,886			59,158			57,971		57,441			57,697
Non-interest income
Mortgage banking originations		12,678			3,537			1,862		1,335			821
Loan related income		4,179			5,648			5,102		2,898			3,046
Deposit related fees		6,204			6,285			6,278		6,291			6,109
Insurance commissions and fees		3,136			2,323			2,601		2,660			2,893
Wealth management fees		2,526			1,911			2,269		2,235			2,502
Total fee income		28,723			19,704			18,112		15,419			15,371
Other		93			(2,849	)		188		(851	)		223
Securities gains (losses), net		12,570			(652	)		78		(13	)		36
Gain on sale of business operations, net		-			522			563		-			-
Loss on termination of hedges		(6,629	)		-			-		-			-
Total non-interest income		34,757			16,725			18,941		14,555			15,630
Total net revenue		101,643			75,883			76,912		71,996			73,327
Provision for loan losses		5,095			4,100			4,734		4,522			4,006
Non-interest expense
Compensation and benefits		36,119			28,103			26,119		24,664			25,714
Occupancy and equipment		9,026			7,320			6,650		6,560			6,690
Technology and communications		6,087			5,310			4,902		4,814			4,857
Marketing and promotion		1,999			1,080			671		737			673
Professional services		2,451			1,666			1,744		1,509			1,280
FDIC premiums and assessments		1,298			1,422			1,208		1,203			1,233
Other real estate owned and foreclosures		28			(11	)		46		393			263
Amortization of intangible assets		801			572			749		787			819
Merger, restructuring and conversion expense		11,682			11,633			2,170		878			780
Other		4,835			3,995			4,585		4,723			4,791
Total non-interest expense		74,326			61,090			48,844		46,268			47,100

Income before income taxes		22,222			10,693			23,334		21,206			22,221
Income tax expense		6,762			362			6,953		5,249			6,220
Net income	$	15,460		$	10,331		$	16,381	$	15,957		$	16,001

Earnings per share:
Basic	$	0.44		$	0.32		$	0.53	$	0.52		$	0.52
Diluted	$	0.44		$	0.32		$	0.53	$	0.52		$	0.52

Weighted average shares outstanding:
Basic		35,280			32,185			30,621		30,605			30,511
Diluted		35,452			32,381			30,811		30,765			30,688

F-5

BERKSHIRE HILLS BANCORP, INC.

AVERAGE YIELDS AND COSTS (Fully Taxable Equivalent - Annualized) - UNAUDITED - (F-6)

	Quarters Ended
	March 31,			Dec. 31,			Sept. 30,			June 30,			March 31,
	2017			2016			2016			2016			2016

Earning assets (1)
Loans:
Commercial real estate		4.58	%		4.17	%		4.25	%		4.42	%		4.14	%
Commercial and industrial loans		4.86			4.88			5.06			4.85			4.96
Residential mortgages		3.55			3.57			3.62			3.61			3.84
Consumer loans		3.62			3.44			3.40			3.39			3.43
Total loans		4.24			4.03			4.08			4.11			4.10
Securities		3.38			3.58			3.47			3.45			3.42
Short-term investments and loans held for sale		2.71			2.13			1.68			1.29			0.91
Total earning assets		4.00			3.91			3.95			3.97			3.94

Funding liabilities (1)
Deposits:
NOW		0.22			0.16			0.12			0.13			0.13
Money market		0.52			0.48			0.46			0.47			0.49
Savings		0.13			0.12			0.12			0.11			0.13
Time		1.08			1.14			1.10			1.06			0.99
Total interest-bearing deposits		0.69			0.69			0.67			0.65			0.63
Borrowings		1.38			1.63			1.52			1.37			1.18
Total interest-bearing liabilities		0.83			0.87			0.85			0.80			0.75

Net interest spread		3.17			3.04			3.10			3.17			3.19
Net interest margin		3.33			3.21			3.27			3.32			3.33

Cost of funds (2)		0.70			0.73			0.72			0.68			0.63
Cost of deposits (3)		0.56			0.56			0.54			0.53			0.51

(1)

(2)

Cost of funds includes all deposits and borrowings.

(3)

The average cost of deposits includes the deposits held for sale.

F-6

BERKSHIRE HILLS BANCORP, INC.

AVERAGE BALANCES - UNAUDITED - (F-7)

	Quarters Ended
	March 31,		Dec. 31,		Sept. 30,		June 30,		March 31,
(in thousands)	2017		2016		2016 (2)(4)		2016 (2)(4)		2016 (2)(4)
Assets
Loans
Commercial real estate	$	2,631,281	$	2,442,515	$	2,260,482	$	2,173,539	$	2,079,001
Commercial and industrial loans		1,072,716		998,543		1,009,581		1,047,866		1,027,257
Residential mortgages		1,886,734		1,833,530		1,839,364		1,759,193		1,798,034
Consumer loans		978,683		936,957		900,432		844,759		807,888
Total loans (1)		6,569,414		6,211,545		6,009,859		5,825,357		5,712,180
Securities (3)		1,625,769		1,255,207		1,197,760		1,247,357		1,342,590
Short-term investments and loans held for sale		137,619		83,057		40,259		41,449		56,042
Total earning assets		8,332,802		7,549,809		7,247,878		7,114,163		7,110,812
Goodwill and other intangible assets		422,331		362,641		349,059		344,832		333,948
Other assets		388,852		363,248		360,182		349,816		346,327
Total assets	$	9,143,985	$	8,275,698	$	7,957,119	$	7,808,811	$	7,791,087

Liabilities and shareholders' equity
Deposits
NOW	$	574,799	$	499,852	$	474,650	$	492,901	$	484,334
Money market		1,804,738		1,612,160		1,448,108		1,403,629		1,417,068
Savings		648,839		620,092		608,365		612,261		602,414
Time		2,351,183		2,171,325		2,095,269		2,047,020		2,063,712
Total interest-bearing deposits		5,379,559		4,903,429		4,626,392		4,555,811		4,567,528
Borrowings		1,374,620		1,144,846		1,235,065		1,223,629		1,222,288
Total interest-bearing liabilities		6,754,179		6,048,275		5,861,457		5,779,440		5,789,816
Non-interest-bearing demand deposits		1,178,790		1,178,308		1,084,786		1,032,951		1,026,447
Other liabilities		128,573		85,951		111,743		105,948		84,042
Total liabilities		8,061,542		7,312,534		7,057,986		6,918,339		6,900,305

Total shareholders' equity		1,082,443		963,164		899,133		890,472		890,782
Total liabilities and shareholders' equity	$	9,143,985	$	8,275,698	$	7,957,119	$	7,808,811	$	7,791,087

Supplementary data
Total non-maturity deposits	$	4,207,166	$	3,910,412	$	3,615,909	$	3,541,742	$	3,530,263
Total deposits		6,558,349		6,081,737		5,711,178		5,588,762		5,593,975
Fully taxable equivalent income adjustment		2,511		2,228		2,004		1,972		1,894
Purchased loan accretion		3,687		1,886		2,214		1,981		2,069
Total average tangible equity (5)		660,112		600,523		550,074		545,640		556,834

(1)

Total loans include non-accruing loans.

(2)

The average balances of loans include loans associated with branch sales, which are presented under loans held for sale on the consolidated balance sheet.

(3)

Average balances for securities available-for-sale are based on amortized cost.

(4)

The average balances of deposits include the deposits held for sale presented under other liabilities on the consolidated balance sheet.

(5)

See page F-9.

F-7

BERKSHIRE HILLS BANCORP, INC.

ASSET QUALITY ANALYSIS - UNAUDITED - (F-8)

	At or for the Quarters Ended
	March 31,			Dec. 31,			Sept. 30,			June 30,			March 31,
(in thousands)	2017			2016			2016			2016			2016
NON-PERFORMING ASSETS
Non-accruing loans:
Commercial real estate	$	7,718		$	5,883		$	6,295		$	4,808		$	5,001
Commercial and industrial loans		8,327			7,523			6,714			7,590			7,480
Residential mortgages		3,971			3,795			4,374			4,882			4,732
Consumer loans		5,109			4,833			3,281			3,376			3,588
Total non-accruing loans		25,125			22,034			20,664			20,656			20,801
Other real estate owned		71			151			80			595			1,440
Total non-performing assets	$	25,196		$	22,185		$	20,744		$	21,251		$	22,241

Total non-accruing loans/total loans		0.38	%		0.34	%		0.34	%		0.34	%		0.36	%
Total non-performing assets/total assets		0.27	%		0.24	%		0.26	%		0.26	%		0.28	%

PROVISION AND ALLOWANCE FOR LOAN LOSSES
Balance at beginning of period	$	43,998		$	43,105		$	41,397		$	40,055		$	39,308
Charged-off loans		(3,623	)		(3,488	)		(3,441	)		(3,393	)		(3,704	)
Recoveries on charged-off loans		334			281			415			213			445
Net loans charged-off		(3,289	)		(3,207	)		(3,026	)		(3,180	)		(3,259	)
Provision for loan losses		5,095			4,100			4,734			4,522			4,006
Balance at end of period	$	45,804		$	43,998		$	43,105		$	41,397		$	40,055

Allowance for loan losses/total loans		0.69	%		0.67	%		0.71	%		0.69	%		0.70	%
Allowance for loan losses/non-accruing loans		182	%		200	%		209	%		200	%		193	%

NET LOAN CHARGE-OFFS
Commercial real estate	$	(633	)	$	(676	)	$	(547	)	$	(534	)	$	(1,043	)
Commercial and industrial loans		(1,634	)		(1,148	)		(1,610	)		(1,720	)		(847	)
Residential mortgages		(324	)		(768	)		(452	)		(568	)		(774	)
Home equity		(95	)		(47	)		(65	)		(164	)		(221	)
Auto and other consumer		(603	)		(568	)		(352	)		(194	)		(374	)
Total, net	$	(3,289	)	$	(3,207	)	$	(3,026	)	$	(3,180	)	$	(3,259	)

Net charge-offs (QTD annualized)/average loans		0.20	%		0.21	%		0.20	%		0.22	%		0.23	%
Net charge-offs (YTD annualized)/average loans		0.20	%		0.21	%		0.22	%		0.22	%		0.23	%

DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS
30-89 Days delinquent		0.24	%		0.35	%		0.25	%		0.25	%		0.26	%
90+ Days delinquent and still accruing		0.16	%		0.15	%		0.09	%		0.08	%		0.07	%
Total accruing delinquent loans		0.40	%		0.50	%		0.34	%		0.33	%		0.33	%
Non-accruing loans		0.38	%		0.34	%		0.34	%		0.34	%		0.36	%
Total delinquent and non-accruing loans		0.78	%		0.84	%		0.68	%		0.67	%		0.69	%

F-8

BERKSHIRE HILLS BANCORP, INC.

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

		At or for the Quarters Ended
		March 31,			Dec. 31,			Sept. 30,			June 30,			March 31,
(in thousands)		2017			2016			2016			2016			2016
Net income		$	15,460		$	10,331		$	16,381		$	15,957		$	16,001
Adj: Net securities (gains) losses			(12,570	)		652			(78	)		13			(36	)
Adj. Loss on termination of hedges			6,629			-			-			-			-
Adj: Net (gains) on sale of business operations			-			(522	)		(563	)		-			-
Adj: Merger and acquisition expense			5,947			10,820			1,453			701			527
Adj: Restructuring expense and other expense			5,735			1,113			717			177			253
Adj: Income taxes			(1,801	)		(4,373	)		(492	)		(334	)		(256	)
Total core income	(A)	$	19,400		$	18,021		$	17,418		$	16,514		$	16,489

Total revenue		$	101,643		$	75,883		$	76,912		$	71,996		$	73,327
Adj: Net securities (gains) losses			(12,570	)		652			(78	)		13			(36	)
Adj: Net (gains) on sale of business operations			-			(522	)		(563	)		-			-
Adj. Loss on termination of hedges			6,629			-			-			-			-
Total core revenue	(B)	$	95,702		$	76,013		$	76,271		$	72,009		$	73,291

Total non-interest expense		$	74,326		$	61,090		$	48,844		$	46,268		$	47,100
Less: Total non-core expense (see above)			(11,682	)		(11,933	)		(2,170	)		(878	)		(780	)
Core non-interest expense	(C)	$	62,644		$	49,157		$	46,674		$	45,390		$	46,320

(in millions, except per share data)
Total average assets	(D)	$	9,144		$	8,276		$	7,957		$	7,809		$	7,791
Total average shareholders' equity	(E)		1,082			963			899			890			891
Total average tangible shareholders' equity	(F)		660			601			550			546			557
Total tangible shareholders' equity, period-end (1)	(G)		678			671			584			574			572
Total tangible assets, period-end (1)	(H)		8,876			8,740			7,583			7,695			7,474

Total common shares outstanding, period-end (thousands)	(I)		35,729			35,673			31,122			31,156			31,039
Average diluted shares outstanding (thousands)	(J)		35,452			32,381			30,811			30,765			30,688

Core earnings per share, diluted	(A/J)	$	0.55		$	0.56		$	0.57		$	0.54		$	0.54
Tangible book value per share, period-end	(G/I)		18.97			18.81			18.78			18.44			18.44
Total tangible shareholders' equity/total tangible assets	(G)/(H)		7.64			7.68			7.70			7.46			7.66

Performance ratios (2)
GAAP return on assets			0.68	%		0.50	%		0.82	%		0.82	%		0.82	%
Core return on assets	(A/D)		0.85			0.87			0.88			0.85			0.85
GAAP return on equity			5.71			4.29			7.29			7.17			7.19
Core return on equity	(A/E)		7.17			7.49			7.75			7.42			7.40
Core return on tangible equity (3)	(A/F)		12.05			12.23			12.99			12.45			12.20
Efficiency ratio (4)(5)(6) (C-M)/(B+K+N)			61.94			58.42			57.32			58.11			59.27
Net interest margin(6)			3.33			3.21			3.27			3.32			3.33

Supplementary data (in thousands)
Tax benefit on tax-credit investments (7)	(K)	$	1,624		$	4,918		$	1,852		$	2,777		$	1,588
Non-interest income charge on tax-credit investments (8)	(L)		(1,329	)		(4,428	)		(1,525	)		(1,938	)		(1,101	)
Net income on tax-credit investments	(K+L)		295			490			327			839			487

Intangible amortization	(M)	$	801		$	572		$	749		$	787		$	819
Fully taxable equivalent income adjustment (6)	(N)		2,511			2,228			2,004			1,972			1,894

(1)

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 total assets less the intangible assets at period-end.

(2)

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.

(3)

Core return on tangible equity is computed by dividing the total core income adjusted for the tax-effected amortization of intangible assets, assuming a 40% marginal rate, by tangible equity.

(4)

Non-GAAP financial measure.

(5)

Efficiency ratio is computed by dividing total core tangible non-interest expense by the sum of total net interest income on a fully taxable equivalent basis and total core 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.

(6)

(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, low-income housing, new market projects, and renewable energy projects.

(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