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Section 1: 8-K (FORM 8-K)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

 

FORM 8-K

 

CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15(D) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): October 28, 2019

 

BERKSHIRE HILLS BANCORP, INC.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware   001-15781   04-3510455

(State or Other Jurisdiction
of Incorporation)

 

(Commission File No.)

 

(I.R.S. Employer

Identification No.)

 

60 State Street, Boston, Massachusetts   02109
(Address of Principal Executive Offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (800) 773-5601 ext. 133773

 

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading symbol(s)   Name of each exchange on which registered
Common stock, par value $0.01 per share   BHLB   New York Stock Exchange

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

 

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨

 

 

 

 

 

  

Item 2.02Results of Operations and Financial Condition

 

On October 28, 2019, Berkshire Hills Bancorp, Inc. (the “Company”), the holding company for Berkshire Bank (the “Bank”), announced its financial results for the quarter ended September 30, 2019. The news release containing the financial results is included as Exhibit 99.1 and shall not be deemed “filed” for any purpose.

 

The Company conducted a conference call/webcast on October 29, 2019, to discuss the financial results for the quarter and provide guidance about expected future results. A telephone replay of the call will be available through November 5, 2019. The webcast will be available on the Company’s website for an extended period of time.

 

Item 8.01Other Events

 

On October 28, 2019, the Company’s Board of Directors announced the declaration of a cash dividend of $0.23 per share of Company common stock and $0.46 per share of Company Series B preferred stock to shareholders of record at the close of business on November 14, 2019 and payable on November 27, 2019.

 

Additionally, the Company announced that its Board of Directors has unanimously elected J. Williar Dunlaevy to serve as its Chairman, effective December 1, 2019. Mr. Dunlaevy will replace William J. Ryan as the Company’s Chairman, with Mr. Ryan remaining on the Board of Directors. A former bank CEO, Mr. Dunlaevy has served as a director since 2011 and is designated as independent and a financial expert by the Board of Directors under the rules of the Securities and Exchange Commission. The Bank has similarly elected Mr. Dunlaevy as Board Chair.

 

The news releases containing information regarding these matters are included as Exhibits 99.1 and 99.2.

 

 

 

 

Item 9.01Financial Statements and Exhibits

 

(a)Financial Statements of Businesses Acquired. Not applicable.

 

(b)Pro Forma Financial Information. Not applicable.

 

(c)Shell Company Transactions. Not applicable.

 

(d)Exhibits.

 

Exhibit No. Description
   
99.1 News Release dated October 28, 2019.
   
99.2 News Release dated October 28, 2019

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 

    Berkshire Hills Bancorp, Inc.
     
     
DATE: October 29, 2019 By:

/s/ Richard M. Marotta 

   

Richard M. Marotta

    President and Chief Executive Officer

 

 

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

 

Exhibit 99.1

 

 

Berkshire Hills Reports Third Quarter Results; Dividend Declared

 

BOSTON, October 28, 2019 - Berkshire Hills Bancorp, Inc. (NYSE: BHLB) reported third quarter 2019 GAAP net income of $23 million, or $0.44 per share, compared to $25 million, or $0.52 per share, in the prior quarter. The non-GAAP measure of core earnings totaled $24 million, or $0.46 per share, compared to $32 million, or $0.65 per share, in the prior quarter. Non-core earnings are net of discontinued operations and merger charges which in 2019 were related to the May 17 acquisition of SI Financial Group, Inc. Third quarter results included a $16 million loan loss provision ($0.23 per share after tax) related to the full charge-off of a commercial loan which defaulted in September due to potential fraud. Before this loan charge, core EPS increased to $0.69 from $0.65 in the prior quarter due to improved revenue and efficiency.

 

THIRD QUARTER FINANCIAL HIGHLIGHTS (income statement metrics are compared to the prior quarter):

 

·8% increase in net revenue from continuing operations
·3.22% net interest margin, increased from 3.19%
·17% increase in fee income from continuing operations
·53.4% efficiency ratio, improved from 56.4%
·0.28% non-performing assets/assets

 

CEO Richard Marotta stated, “We made good progress with our initiatives in the third quarter. Revenue grew strongly, including the benefit of a full quarter of SI Financial operations, an improved margin, and good fee income gains. Expense initiatives contributed to improved efficiency. Income declined due to a charge-off of a $16 million commercial loan which defaulted in September as a result of potential borrower fraud. Credit performance has otherwise remained solid. Liquidity and capital measures continued to strengthen, and our per share measures of book value and tangible book value improved over the prior quarter.”

 

Mr. Marotta continued, “We also announced that J. Williar (“Bill”) Dunlaevy was elected as Chair of the Board effective December 1, 2019. Our current Chair, William J. Ryan, is stepping down from that role due to health reasons, but will remain active on the Board. I’m grateful to Bill Ryan for his leadership and insights built over his successful and prominent banking career. As a career banker, Bill Dunlaevy will provide important insights as we move forward in building a 21st century community bank with a strong focus on maximizing the business benefits of expanding our operations and customer base to be more diverse and inclusive.”

 

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Mr. Marotta concluded, “During the third quarter, we introduced our Friends and Family Fund CD aimed at helping entrepreneurs of color access the seed capital they need in order to launch the businesses of their dreams. We also made progress in developing our storefront initiative and expect to have more announcements about that program before year-end. We completed the systems conversion of our acquired SI Financial operations early in October and expect to complete the merger integration on plan and within budget by the end of the year. Our combined teams are well positioned to deliver the benefits of this merger as we move forward into 2020.”

 

DIVIDEND DECLARED

 

The Board of Directors approved a quarterly cash dividend of $0.23 per common share to shareholders of record at the close of business on November 14, 2019 and payable on November 27, 2019. The dividend equates to a 3.0% annualized yield based on the $30.44 average closing price of Berkshire Hills Bancorp common stock during the third quarter of 2019. Effective on the same dates, the Board also approved a quarterly cash dividend on preferred stock totaling $0.46 per share.

 

FINANCIAL CONDITION

 

Total assets were $13.5 billion at September 30, 2019. Total loans decreased by 2% during the quarter, including targeted runoff of indirect auto loans and accelerated prepayments of residential mortgages resulting from a dip in mortgage interest rates. Approximately $50 million in acquired or syndicated non-relationship commercial balances were released. The Company continues to hold its $169 million commercial aircraft portfolio for sale. The 0.28% ratio of nonperforming assets to assets remained below the 0.30% ratio reported a year ago. Accruing delinquent loans were 0.55% of loans, remaining below the 0.60% year-ago ratio. The ratio of the loan loss allowance to total loans decreased to 0.64% from 0.66% over this time.

 

Total deposits decreased by 1% during the quarter due to a $53 million decrease in overnight payroll related balances and a targeted decrease of approximately $100 million in wholesale brokered deposits. Leverage and liquidity ratios improved. Book value per share increased by $0.31 to $34.36 and the non-GAAP measure of tangible book value per share increased by $0.17 to $22.42. During the third quarter, the Company repurchased 800 thousand shares of common stock at an average purchase price of $30.48 per share.

 

RESULTS OF OPERATIONS

 

GAAP earnings were $0.44 per share in the most recent quarter, compared to $0.52 per share in the prior quarter. Earnings per share were reduced by $0.23 due to the charge-off of the aforementioned $16 million loan which was partially offset by a $0.08 per share reduction in after-tax merger related expenses. Many measures of revenue and expense, as well as average diluted shares, increased over the prior quarter due to the full quarter impact of the SI Financial operations acquired for stock on May 17, 2019.

 

The non-GAAP measure of core earnings totaled $0.46 per share in the most recent quarter. This measure is reconciled to GAAP earnings on pages F-9 and F-10 of the financial tables. Core EPS totaled $0.65 in the prior quarter. In the most recent quarter, core earnings totaled $0.69 per share before the $0.23 net impact of the $16 million aforementioned loan charge-off. Third quarter results benefited from higher revenues and improved efficiency. The primary non-core items in the third quarter were SI Financial merger related charges and operating earnings of the national mortgage banking operations which are deemed held for sale and classified as discontinued.

 

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Net revenue from continuing operations increased by 8% compared to the prior quarter, including a 6% increase in net interest income and a 17% increase in fee income. Interest income benefited from a full quarter of SI Financial earning assets, as well as an increase in the net interest margin to 3.22% from 3.19%. As a result of lower interest rates and reduced wholesale funds, the Company’s funding costs decreased quarter-over-quarter to 1.32% from 1.41%. The total margin benefit from purchase accounting was 0.16% compared to 0.11% in the second quarter.

 

Fee income increased by $3 million quarter-over-quarter as a result of volume gains in several areas. Loan related fee income increased by $2 million including higher commercial interest rate swap fees and higher SBA loan sale gains. For the SBA fiscal year ended September 30, Berkshire’s team ranked as the 18th largest lender in the country for SBA 7A loan originations, advancing from 28th position last year. Deposit fee income increased quarter-over-quarter by $1 million including income from acquired SI Financial operations.

 

The provision for loan losses increased to $22.6 million in the most recent quarter, compared to $3.5 million in the prior quarter. This increase included $16 million provided for the previously mentioned charge-off, together with a write-down of a nonperforming commercial real estate loan which was disclosed in prior periods.

 

Total non-interest expense from continuing operations decreased quarter-over-quarter by $6 million, due to a $6 million reduction in merger related expenses. Net of merger and other non-core charges, the non-GAAP measure of core expense increased quarter-over-quarter by $1 million, or 2%. A $1.9 million rebate of FDIC premiums benefited expense by 3% during the quarter. The positive operating leverage driven by the 8% revenue increase resulted in an improvement in the efficiency ratio to 53.4% from 56.4% quarter-over quarter. With the completion of the SI Financial systems integration in early October on time and on plan, the Company is expecting to complete its targeted merger related cost saves by year-end. Full-time equivalent staff in continuing operations totaled 1,594 positions at period-end, compared to 1,621 at the start of the quarter. The effective tax rate was 17% in the third quarter, down from 18% in the prior quarter, due to the decrease in taxable income.

 

The FCLS national mortgage banking operations contributed $0.04 in non-core EPS in the most recent quarter, compared to $0.03 in the prior quarter. Mortgage banking fees totaled $15 million in the quarter, which was up 14% over the prior quarter and 63% year-over-year. The company generated $1.1 billion in residential mortgages in the most recent quarter. Due to the decision to sell the FCLS operations, they are accounted for as discontinued in the financial statements, and most references to revenue and expense refer to continuing operations and exclude FCLS revenue and expense.

 

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BE FIRST PROGRAM UPDATE

 

Expanding our base of commercial and individual customers. Including our new SI Financial operations, Berkshire has a strong geographic footprint throughout the Northeast. This footprint provides an array of diverse market demographics which provide significant opportunity for expansion. Berkshire Bank is pursuing a number of initiatives to increase market share among demographics that have typically been left behind by traditional banks (and their products/services), with a particular focus on African Americans and Latinos.

 

Pilot Projects to support minority business enterprises. Berkshire Bank is creating storefronts in traditionally minority communities/downtown areas to provide access to working space, business advice and financial products. The first storefront is being developed in Roxbury, MA and there are plans to expand these storefronts in our footprint and selectively in adjacent markets. In the third quarter, the Bank launched the “Friends and Family” fund in coordination with the Runway Project to provide seed capital to minority business enterprises funded by CD products offered for this purpose. The Bank is also taking a leadership role in the Boston area Business Equity Fund, which provides rigorously vetted traditional loan products to minority business enterprises that have participated in the existing Business Equity Initiative.

 

Efforts to better connect Berkshire Bank to minority communities. The Bank is sponsoring and actively participating in community-based events, including the Dimock Community Health Center (Stepping Out), NAACP (Freedom Fund Dinner), LGBT Chamber, Union Chapel Speaker series, and the Black Economic Alliance.

 

Enhancing diversity, equity and inclusion initiatives within Berkshire Bank. The Bank is focusing on bank products, services and operations that are conducted in a way that draws minority customers. The Bank is participating in the CEO Action for Diversity and Inclusion. Earlier this year, the Bank launched its Be FIRST values program, which is being enhanced throughout the year.

 

INVESTOR CONFERENCE CALL

 

Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Tuesday, October 29, 2019 to discuss the 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:  http://dpregister.com/10135510. 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 section of our website at http://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 1-844-792-3726 and asking the Operator to join the Berkshire Hills Bancorp (BHLB) earnings call. A telephone replay of the call will be available through Tuesday, November 5, 2019 by dialing 877-344-7529 and entering access number 10135510.  The webcast will be available on Berkshire's website for an extended period of time.

 

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BACKGROUND

 

Berkshire Hills Bancorp is the parent of Berkshire Bank which is transforming into a 21st century community bank with a culture of belonging. Headquartered in Boston, Berkshire operates 132 banking offices in seven Northeastern states, with approximately $13.5 billion in assets.

 

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 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 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 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 primarily include securities gains/losses, merger costs, restructuring costs, and discontinued operations. Merger costs consist primarily of severance/benefit related expenses, contract termination costs, systems conversion costs, variable compensation expenses, and professional fees. Merger costs in 2018 and 2019 are primarily related to the acquisitions of Commerce Bancshares Corp. and SI Financial Group. 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. Restructuring costs also include severance and consulting expenses related to the Company’s strategic review. Discontinued operations are the Company’s national mortgage banking operations for which the Company is pursuing sale opportunities. In 2018, the Company recorded $8 million in charges related to the restructuring of banking systems vendor relationships. The Company recorded a $3 million cost in 2018 for the settlement of an existing legal proceeding with a plaintiff claiming to be representing a class of depositors. Non-core charges in 2018 also included a $1.5 million net charge related to the CEO transition.

 

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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.

 

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CONTACTS

 

Investor Relations Contact

 

David Gonci; Capital Markets Director; 413-281-1973

 

Media Contact

 

Diana Pisciotta; Communications Contact; 617-784-5256

 

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 Operations (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 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)

 

   At or for the Quarters Ended (1) 
   Sept. 30,   June 30,   March 31,   Dec. 31,   Sept. 30, 
   2019   2019 (2)   2019   2018   2018 
PER SHARE DATA                         
Net earnings per common share, diluted  $0.44   $0.52   $0.51   $0.31   $0.70 
Core earnings per common share, diluted (3)   0.46    0.65    0.60    0.69    0.72 
Total book value per common share   34.36    34.05    33.75    33.30    32.84 
Tangible book value per common share (3)   22.42    22.25    21.66    21.15    20.68 
Market price at period end   29.29    31.39    27.24    26.97    40.70 
Dividends per common share   0.23    0.23    0.23    0.22    0.22 
Dividends per preferred share   0.46    0.46    0.46    0.44    0.44 
                          
PERFORMANCE RATIOS (4)                         
Return on assets   0.67%   0.79%   0.78%   0.47%   1.08%
Core return on assets (3)   0.71    1.01    0.92    1.07    1.12 
Return on equity   5.12    6.07    5.97    3.61    8.27 
Core return on equity (3)   5.35    7.67    7.00    8.09    8.49 
Core return on tangible common equity (3)   8.74    12.21    11.44    13.21    14.02 
Net interest margin, fully taxable equivalent (FTE) (5)(6)   3.22    3.19    3.17    3.41    3.32 
Fee income/Net interest and fee income from continuing operations   17.61    16.20    17.56    15.59    18.06 
Efficiency ratio (3)   53.37    56.41    59.54    54.88    52.20 
                          
GROWTH (Year-to-date)                         
Total commercial loans (organic, annualized)   (9)%   (10)%   (3)%   6%   5%
Total loans (organic, annualized)   (9)   (9)   (4)   9    10 
Total deposits (organic, annualized)   2    6    8    3    0 
Total net revenues from continuing operations (compared to prior year)   4    1    3    17    22 
Earnings per common share (compared to prior year)   (26)   (20)   (7)   65    28 
Core earnings per common share (compared to prior year)(3)   (18)   (9)   (8)   32    37 
                          
FINANCIAL DATA (in millions)                         
Total assets  $13,532   $13,653   $12,173   $12,212   $12,030 
Total earning assets   12,174    12,343    11,039    11,140    10,957 
Total securities   1,861    1,905    1,881    1,919    1,918 
Total loans   9,719    9,942    8,947    9,043    8,905 
Allowance for loan losses   62    62    62    61    58 
Total intangible assets   602    603    551    552    553 
Total deposits   10,423    10,566    9,166    8,982    8,766 
Total shareholders' equity   1,772    1,779    1,577    1,553    1,532 
Net income   22.6    25.4    23.6    14.3    32.2 
Core income (3)   23.7    32.1    27.7    32.0    33.1 
Purchase accounting accretion   4.8    3.2    1.3    8.2    4.6 
                          
ASSET QUALITY AND CONDITION RATIOS                         
Net charge-offs (current quarter annualized)/average loans   0.92%   0.14%   0.15%   0.17%   0.19%
Total non-performing assets/total assets   0.28    0.27    0.26    0.28    0.30 
Allowance for loan losses/total loans   0.64    0.63    0.69    0.68    0.66 
Loans/deposits   93    94    98    101    102 
Shareholders' equity to total assets   13.10    13.03    12.95    12.72    12.74 
Tangible shareholders' equity to tangible assets (3)   9.05    9.01    8.83    8.59    8.53 

 

(1) Reconciliations of non-GAAP financial measures, including all references to core and tangible amounts, appear on pages F-9 and F-10.
(2) The Company acquired SI Financial Group, Inc. on May 17, 2019.
(3) Non-GAAP financial measure. Core measurements are non-GAAP financial measures that are adjusted to exclude net non-core charges primarily related to acquisitions and restructuring activities. See pages F-9 and F-10 for reconciliations of non-GAAP financial measures.
(4) All performance ratios are annualized and are based on average balance sheet amounts, where applicable.
(5) Fully taxable equivalent considers the impact of tax advantaged investment securities and loans.
(6) 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 most recent quarter and ending with the earliest quarter: 0.16%, 0.11%, 0.05%, 0.30%, 0.17%.

 

 F-1 

 

  
BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-2)

 

   September 30,   June 30,   December 31, 
(in thousands)  2019   2019   2018 
Assets               
Cash and due from banks  $121,629   $100,588   $100,972 
Short-term investments   180,466    128,718    82,217 
Total cash and short-term investments   302,095    229,306    183,189 
                
Trading security   11,145    11,210    11,212 
Marketable equity securities, at fair value   59,596    59,578    56,638 
Securities available for sale, at fair value   1,369,604    1,410,078    1,399,647 
Securities held to maturity, at amortized cost   364,675    364,463    373,763 
Federal Home Loan Bank stock and other restricted securities   56,049    59,356    77,344 
Total securities   1,861,069    1,904,685    1,918,604 
                
Loans held for sale   204,900    184,810    2,183 
                
Commercial real estate loans   4,028,461    4,005,347    3,400,221 
Commercial and industrial loans   1,845,086    1,987,297    1,980,046 
Residential mortgages   2,838,657    2,882,380    2,566,424 
Consumer loans   1,006,437    1,066,804    1,096,562 
Total loans   9,718,641    9,941,828    9,043,253 
Less: Allowance for loan losses   (62,230)   (62,156)   (61,469)
Net loans   9,656,411    9,879,672    8,981,784 
                
Premises and equipment, net   123,195    121,619    106,500 
Other real estate owned   -    154    - 
Goodwill   554,704    554,704    518,325 
Other intangible assets   47,198    48,724    33,418 
Cash surrender value of bank-owned life insurance   227,085    227,458    190,609 
Deferred tax asset, net   49,543    51,118    42,434 
Other assets   263,464    238,950    120,926 
Assets from discontinued operations   242,279    212,745    114,259 
Total assets  $13,531,943   $13,653,945   $12,212,231 
                
Liabilities and shareholders' equity               
Demand deposits  $1,887,621   $1,827,016   $1,603,019 
NOW and other deposits   1,267,057    997,685    1,122,321 
Money market deposits   2,478,947    2,811,158    2,245,195 
Savings deposits   831,972    848,699    724,129 
Time deposits   3,957,721    4,081,398    3,287,717 
Total deposits   10,423,318    10,565,956    8,982,381 
                
Senior borrowings   904,149    904,814    1,428,298 
Subordinated borrowings   96,991    96,927    89,518 
Total borrowings   1,001,140    1,001,741    1,517,816 
                
Other liabilities   301,647    280,155    149,519 
Liabilities from discontinued operations   33,614    26,256    9,597 
Total liabilities   11,759,719    11,874,108    10,659,313 
                
Preferred shareholders' equity   40,633    40,633    40,633 
Common shareholders' equity   1,731,591    1,739,204    1,512,285 
Total shareholders' equity   1,772,224    1,779,837    1,552,918 
Total liabilities and shareholders' equity  $13,531,943   $13,653,945   $12,212,231 
                
Net common shares outstanding   50,394    51,045    45,417 

 

 F-2 

 

 

BERKSHIRE HILLS BANCORP, INC.

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

LOAN ANALYSIS

 

                   Organic Annualized Growth % (1) 
(in millions)  September 30, 2019
Balance
   June 30, 2019
Balance
   Acquired
Savings
Institute
Balances (2)
   December 31, 2018
Balance
   Quarter ended
September 30, 2019
   Year to Date 
Total commercial real estate  $4,029   $4,006   $624   $3,400    2%   0%
Commercial and industrial loans   1,845    1,987    244    1,980    (29)   (26)
Total commercial loans   5,874    5,993    868    5,380    (8)   (9)
                               
Total residential mortgages   2,839    2,882    375    2,566    (6)   (5)
                               
Home equity   394    404    58    377    (10)   (15)
Auto and other   612    663    2    720    (31)   (20)
Total consumer loans   1,006    1,067    60    1,097    (23)   (18)
Total loans  $9,719   $9,942   $1,303   $9,043   (9)%  (9)%

 

(1) Non-GAAP financial measure.

(2) The acquired balances for Savings Institute are as of May 17, 2019.

 

DEPOSIT ANALYSIS

 

                   Organic Annualized Growth % (1) 
(in millions)  September 30, 2019
Balance
   June 30, 2019
Balance
   Acquired
Savings
Institute
Balances (2)
   December 31, 2018
Balance
   Quarter ended
September 30, 2019
   Year to Date 
Demand  $1,887   $1,827   $258   $1,603    13%   2%
NOW and other   1,267    998    138    1,122    108    1 
Money market   2,479    2,811    190    2,245    (47)   3 
Savings   832    849    164    724    (8)   (10)
Time deposits   3,958    4,081    585    3,288    (12)   3 
Total deposits  $10,423   $10,566   $1,335   $8,982    (5)%   2%

 

(1) Non-GAAP financial measure.

(2) The acquired balances for Savings Institute are as of May 17, 2019.                  

 

 F-3 

 

 

  BERKSHIRE HILLS BANCORP, INC.

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

 

   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
(in thousands, except per share data)  2019   2018   2019   2018 
Interest and dividend income from continuing operations                    
Loans  $118,371   $102,651   $338,012   $294,646 
Securities and other   15,354    14,918    46,060    44,553 
Total interest and dividend income   133,725    117,569    384,072    339,199 
Interest expense from continuing operations                    
Deposits   31,501    21,460    86,396    54,553 
Borrowings   5,353    7,724    23,751    21,212 
Total interest expense   36,854    29,184    110,147    75,765 
Net interest income from continuing operations   96,871    88,385    273,925    263,434 
Non-interest income from continuing operations                    
Mortgage banking originations   292    15    616    487 
Loan related income   6,493    7,246    17,318    18,068 
Deposit related fees   8,705    7,004    23,088    22,675 
Insurance commissions and fees   2,895    2,930    8,486    8,504 
Wealth management fees   2,325    2,283    7,114    7,160 
Total fee income   20,710    19,478    56,622    56,894 
Other   609    468    1,363    1,891 
Securities gains/(losses), net   87    88    2,655    (696)
Gain on sale of business operations and assets, net   -    -    -    460 
Total non-interest income   21,406    20,034    60,640    58,549 
Total net revenue from continuing operations   118,277    108,419    334,565    321,983 
Provision for loan losses   22,600    6,628    30,068    18,735 
Non-interest expense from continuing operations                    
Compensation and benefits   37,272    31,746    105,551    99,092 
Occupancy and equipment   9,893    9,145    28,788    27,561 
Technology and communications   6,849    7,507    19,821    21,044 
Marketing and promotion   1,006    1,167    3,428    3,473 
Professional services   2,282    1,481    8,510    4,041 
FDIC premiums and assessments   -    1,640    3,390    4,246 
Other real estate owned and foreclosures   150    (1)   150    67 
Amortization of intangible assets   1,526    1,218    4,201    3,732 
Merger, restructuring and other expense   4,163    198    22,333    6,138 
Other   7,870    5,526    23,398    17,126 
Total non-interest expense   71,011    59,627    219,570    186,520 
                     
Income from continuing operations before income taxes  $24,666   $42,164   $84,927   $116,728 
Income tax expense   4,007    9,095    16,042    24,577 
Net income from continuing operations  $20,659   $33,069   $68,885   $92,151 
                     
Income/(loss) from discontinued operations before income taxes  $2,747   $(1,147)  $3,975   $(883)
Income tax expense/(benefit)   790    (305)   1,161    (238)
Net income/(loss) from discontinued operations  $1,957   $(842)  $2,814   $(645)
                     
Net income  $22,616   $32,227   $71,699   $91,506 
Preferred stock dividend   240    230    720    689 
Income available to common shareholders  $22,376   $31,997   $70,979   $90,817 
                     
Basic earnings per common share:                    
Continuing Operations  $0.40   $0.72   $1.41   $2.00 
Discontinued Operations   0.04    (0.02)   0.06    (0.01)
Total  $0.44   $0.70   $1.47   $1.99 
                     
Diluted earnings per common share:                    
Continuing Operations  $0.40   $0.72   $1.40   $1.99 
Discontinued Operations   0.04    (0.02)   0.06    (0.01)
Total  $0.44   $0.70   $1.46   $1.98 
                     
Weighted average shares outstanding:                    
Basic   51,422    46,030    48,846    46,009 
Diluted   51,545    46,263    48,987    46,226 

 

 F-4 

 

 

 BERKSHIRE HILLS BANCORP, INC.

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

   

   Sept. 30,   June 30,   March 31,   Dec. 31,   Sept. 30, 
(in thousands, except per share data)  2019   2019   2019   2018   2018 
Interest and dividend income from continuing operations                         
Loans  $118,371   $113,990   $105,651   $111,576   $102,651 
Securities and other   15,354    15,248    15,458    15,119    14,918 
Total interest and dividend income   133,725    129,238    121,109    126,695    117,569 
Interest expense from continuing operations                         
Deposits   31,501    28,273    26,622    23,811    21,460 
Borrowings   5,353    9,370    9,028    10,118    7,724 
Total interest expense   36,854    37,643    35,650    33,929    29,184 
Net interest income from continuing operations   96,871    91,595    85,459    92,766    88,385 
Non-interest income from continuing operations                         
Mortgage banking originations   292    278    46    148    15 
Loan related income   6,493    4,822    6,003    5,087    7,246 
Deposit related fees   8,705    7,525    6,858    7,131    7,004 
Insurance commissions and fees   2,895    2,738    2,853    2,479    2,930 
Wealth management fees   2,325    2,348    2,441    2,287    2,283 
Total fee income   20,710    17,711    18,201    17,132    19,478 
Other   609    (216)   970    1,666    468 
Securities gains/(losses), net   87    17    2,551    (3,023)   88 
(Loss) on sale of business operations and assets, net   -    -    -    -    - 
Total non-interest income   21,406    17,512    21,722    15,775    20,034 
Total net revenue from continuing operations   118,277    109,107    107,181    108,541    108,419 
Provision for loan losses   22,600    3,467    4,001    6,716    6,628 
Non-interest expense from continuing operations                         
Compensation and benefits   37,272    34,779    33,500    34,927    31,746 
Occupancy and equipment   9,893    9,449    9,446    9,366    9,145 
Technology and communications   6,849    6,715    6,257    6,103    7,507 
Marketing and promotion   1,006    1,155    1,267    1,224    1,167 
Professional services   2,282    3,953    2,275    3,302    1,481 
FDIC premiums and assessments   -    1,751    1,639    1,488    1,640 
Other real estate owned and foreclosures   150    (2)   2    1    (1)
Amortization of intangible assets   1,526    1,475    1,200    1,202    1,218 
Merger, restructuring and other expense   4,163    11,155    7,015    16,006    198 
Other   7,870    6,138    9,390    6,754    5,526 
Total non-interest expense   71,011    76,568    71,991    80,373    59,627 
                          
Income from continuing operations before income taxes  $24,666   $29,072   $31,189   $21,452   $42,164 
Income tax expense   4,007    5,118    6,917    4,384    9,095 
Net income from continuing operations  $20,659   $23,954   $24,272   $17,068   $33,069 
                          
Income/(loss) from discontinued operations before income taxes  $2,747   $2,082   $(854)  $(3,884)  $(1,147)
Income tax expense/(benefit)   790    588    (217)   (1,075)   (305)
Net income/(loss) from discontinued operations  $1,957   $1,494   $(637)  $(2,809)  $(842)
                          
Net income  $22,616   $25,448   $23,635   $14,259   $32,227 
Preferred stock dividend   240    240    240    229    230 
Income available to common shareholders  $22,376   $25,208   $23,395   $14,030   $31,997 
                          
                          
Basic earnings per common share:                         
Continuing Operations  $0.40   $0.49   $0.52   $0.37   $0.72 
Discontinued Operations   0.04    0.03    (0.01)   (0.06)   (0.02)
Total  $0.44   $0.52   $0.51   $0.31   $0.70 
                          
Diluted earnings per common share:                         
Continuing Operations  $0.40   $0.49   $0.52   $0.37   $0.72 
Discontinued Operations   0.04    0.03    (0.01)   (0.06)   (0.02)
Total  $0.44   $0.52   $0.51   $0.31   $0.70 
                          
Weighted average shares outstanding:                         
Basic   51,422    48,961    46,113    46,061    46,030 
Diluted   51,545    49,114    46,261    46,240    46,263 

 

 F-5 

 

 

BERKSHIRE HILLS BANCORP, INC.

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

 

   Quarters Ended 
   Sept. 30,   June 30,   March 31,   Dec. 31,   Sept. 30, 
   2019   2019   2019   2018   2018 
Earning assets                         
Loans:                         
Commercial real estate   4.92%   5.01%   4.91%   5.40%   4.67%
Commercial and industrial loans   5.58    5.79    5.83    5.97    6.22 
Residential mortgages   3.73    3.74    3.74    3.72    3.66 
Consumer loans   4.55    4.52    4.45    4.52    4.27 
Total loans   4.67    4.76    4.73    4.94    4.66 
Securities   3.41    3.38    3.46    3.34    3.32 
Short-term investments and loans held for sale   4.11    3.37    3.59    3.74    3.82 
Total earning assets   4.45    4.51    4.49    4.64    4.41 
                          
Funding liabilities                         
Deposits:                         
NOW and other   0.61    0.66    0.65    0.59    0.58 
Money market   1.27    1.27    1.23    1.10    0.92 
Savings   0.13    0.15    0.18    0.16    0.15 
Time   2.02    2.06    2.07    1.93    1.76 
Total interest-bearing deposits   1.43    1.44    1.44    1.31    1.18 
Borrowings   3.12    2.92    2.85    2.67    2.42 
Total interest-bearing liabilities   1.57    1.66    1.65    1.55    1.38 
                          
Net interest spread   2.88    2.85    2.84    3.09    3.03 
Net interest margin   3.22    3.19    3.17    3.41    3.32 
                          
Cost of funds (1)   1.32    1.41    1.41    1.31    1.16 
Cost of deposits   1.18    1.18    1.19    1.07    0.96 

 

 

 

(1) Cost of funds includes all deposits and borrowings.                                        

 

 F-6 

 

 

 BERKSHIRE HILLS BANCORP, INC.

AVERAGE BALANCES - UNAUDITED - (F-7)

 

   Quarters Ended 
   Sept. 30,   June 30,   March 31,   Dec. 31,   Sept. 30, 
(in thousands)  2019   2019   2019   2018   2018 
Assets                         
Loans                         
Commercial real estate  $3,998,144   $3,716,130   $3,377,902   $3,373,936   $3,331,097 
Commercial and industrial loans   1,951,205    2,056,384    1,986,792    1,921,361    1,824,369 
Residential mortgages   2,849,216    2,711,348    2,556,299    2,539,592    2,459,943 
Consumer loans   1,035,893    1,064,579    1,079,583    1,112,433    1,120,942 
Total loans (1)   9,834,458    9,548,441    9,000,576    8,947,322    8,736,351 
Securities (2)   1,846,985    1,893,298    1,895,768    1,933,891    1,928,851 
Short-term investments and loans held for sale   309,897    117,029    67,367    51,827    47,752 
Total earning assets (3)   11,991,340    11,558,768    10,963,711    10,933,040    10,712,954 
Goodwill and other intangible assets   603,762    555,606    550,966    552,206    554,359 
Other assets   668,218    593,917    557,442    494,377    501,739 
Assets from discontinued operations   204,339    192,466    115,721    101,464    141,443 
Total assets  $13,467,659   $12,900,757   $12,187,840   $12,081,087   $11,910,495 
                          
Liabilities and shareholders' equity                         
Deposits                         
NOW and other  $1,111,637   $1,053,335   $963,043   $920,225   $844,888 
Money market   2,624,639    2,474,071    2,378,496    2,339,699    2,348,516 
Savings   838,445    780,797    736,707    728,853    740,765 
Time   4,158,688    3,593,022    3,429,375    3,229,521    3,274,518 
Total interest-bearing deposits   8,733,409    7,901,225    7,507,621    7,218,298    7,208,687 
Borrowings   805,035    1,415,614    1,351,834    1,566,478    1,363,914 
Total interest-bearing liabilities   9,538,444    9,316,839    8,859,455    8,784,776    8,572,601 
Non-interest-bearing demand deposits   1,864,964    1,673,560    1,538,767    1,579,013    1,635,564 
Other liabilities   267,922    215,704    192,119    127,370    132,521 
Liabilities from discontinued operations   28,206    18,434    13,962    8,854    11,880 
Total liabilities   11,699,536    11,224,537    10,604,303    10,500,013    10,352,566 
                          
Preferred shareholders' equity   40,633    40,633    40,633    40,633    40,633 
Common shareholders' equity   1,727,490   1,635,587    1,542,904    1,540,441    1,517,296 
Total shareholders' equity   1,768,123    1,676,220    1,583,537    1,581,074    1,557,929 
Total liabilities and shareholders' equity  $13,467,659   $12,900,757   $12,187,840   $12,081,087   $11,910,495 
                          
Supplementary data                         
Total average non-maturity deposits  $6,439,685   $5,981,763   $5,617,013   $5,567,790   $5,569,733 
Total average deposits   10,598,373    9,574,785    9,046,388    8,797,311    8,844,251 
Fully taxable equivalent income adjustment   1,826    1,882    1,809    1,763    1,807 
Total average tangible equity (4)   1,164,361    1,120,614    1,032,571    1,028,868    1,003,570 

 

 

(1) Total loans include non-accruing loans.

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

(3) Excludes discontinued operations for presentation purposes. Performance ratios are calculated including the impact of discontinued operations.

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

  

 F-7 

 

 

BERKSHIRE HILLS BANCORP, INC.

ASSET QUALITY ANALYSIS - UNAUDITED - (F-8)

 

   At or for the Quarters Ended 
   Sept. 30,   June 30,   March 31,   Dec. 31,   Sept. 30, 
(in thousands)  2019   2019   2019   2018   2018 
NON-PERFORMING ASSETS                         
Non-accruing loans:                         
Commercial real estate  $15,829   $19,366   $18,513   $20,371   $22,639 
Commercial and industrial loans   12,224    9,256    5,614    6,003    4,914 
Residential mortgages   3,062    3,579    2,341    2,217    2,683 
Consumer loans   5,191    3,570    4,038    3,834    4,401 
Total non-accruing loans   36,306    35,771    30,506    32,425    34,637 
Other real estate owned   -    154    -    -    - 
Repossessed assets   1,003    874    742    1,209    1,069 
Total non-performing assets  $37,309   $36,799   $31,248   $33,634   $35,706 
                          
Total non-accruing loans/total loans   0.37%   0.36%   0.34%   0.36%   0.39%
Total non-performing assets/total assets   0.28%   0.27%   0.26%   0.28%   0.30%
                          
PROVISION AND ALLOWANCE FOR LOAN LOSSES                         
Balance at beginning of period  $62,156   $62,038   $61,469   $58,457   $55,925 
Charged-off loans   (23,524)   (3,966)   (4,579)   (4,029)   (4,471)
Recoveries on charged-off loans   998    617    1,147    325    375 
Net loans charged-off   (22,526)   (3,349)   (3,432)   (3,704)   (4,096)
Provision for loan losses   22,600    3,467    4,001    6,716    6,628 
Balance at end of period  $62,230   $62,156   $62,038   $61,469   $58,457 
                          
Allowance for loan losses/total loans   0.64%   0.63%   0.69%   0.68%   0.66%
Allowance for loan losses/non-accruing loans   171%   174%   203%   190%   169%
                          
NET LOAN CHARGE-OFFS                         
Commercial real estate  $(2,759)  $(1,235)  $(752)  $(1,357)  $(3,074)
Commercial and industrial loans   (18,850)   (995)   (1,580)   (1,538)   (189)
Residential mortgages   (140)   (139)   (95)   (108)   61 
Home equity   (71)   (300)   (257)   (116)   (242)
Auto and other consumer   (706)   (680)   (748)   (585)   (652)
Total, net  $(22,526)  $(3,349)  $(3,432)  $(3,704)  $(4,096)
                          
Net charge-offs (QTD annualized)/average loans   0.92%   0.14%   0.15%   0.17%   0.19%
Net charge-offs (YTD annualized)/average loans   0.41%   0.15%   0.15%   0.18%   0.19%
                          
DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS                         
30-89 Days delinquent   0.26%   0.20%   0.22%   0.27%   0.38%
90+ Days delinquent and still accruing   0.29%   0.28%   0.23%   0.22%   0.22%
Total accruing delinquent loans   0.55%   0.48%   0.45%   0.49%   0.60%
Non-accruing loans   0.37%   0.36%   0.34%   0.36%   0.39%
Total delinquent and non-accruing loans   0.92%   0.84%   0.79%   0.85%   0.99%

 

 F-8 

 

 

BERKSHIRE HILLS BANCORP, INC.

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

 

      At or for the Quarters Ended 
      Sept. 30,   June 30,   March 31,   Dec. 31,   Sept. 30, 
(in thousands)     2019   2019   2019   2018   2018 
Net income     $22,616   $25,448   $23,635   $14,259   $32,227 
Adj: Net securities (gains)/losses (1)      (87)   (17)   (2,551)   3,023    (88)
Adj: Net (gains) on sale of business operations and assets      -    -    -    -    - 
Adj: Merger and acquisition expense      3,802    9,711    1,609    2,792    198 
Adj: Restructuring expense and other expense      361    1,444    5,406    1,822    - 
Adj: Legal settlements      -    -    -    3,000    - 
Adj: Systems vendor restructuring costs      -    -    -    8,379    - 
Adj: (Income)/loss from discontinued operations before income taxes      (2,747)   (2,082)   854    3,884    1,147 
Adj: Income taxes      (281)   (2,385)   (1,223)   (5,185)   (397)
Total core income (2)  (A)  $23,664   $32,119   $27,730   $31,974   $33,087 
                             
Total revenue from continuing operations     $118,277   $109,107   $107,181   $108,541   $108,419 
Adj: Net securities (gains)/losses (1)      (87)   (17)   (2,551)   3,023    (88)
Adj: Net (gains) on sale of business operations and assets      -    -    -    -    - 
Total core revenue (2)  (B)  $118,190   $109,090   $104,630   $111,564   $108,331 
                             
Total non-interest expense from continuing operations     $71,011   $76,568   $71,991   $80,373   $59,627 
Less: Merger, restructuring and other expense (see above)      (4,163)   (11,155)   (7,015)   (4,614)   (198)
Less: Legal settlements      -    -    -    (3,000)   - 
Less: Systems vendor restructuring costs      -    -    -    (8,379)   - 
Core non-interest expense (2)  (C)  $66,848   $65,413   $64,976   $64,380   $59,429 
                             
(in millions, except per share data)                            
Total average assets  (D)  $13,468   $12,901   $12,188   $12,081   $11,910 
Total average shareholders' equity  (E)   1,768    1,676    1,584    1,581    1,558 
Total average tangible shareholders' equity (2)  (F)   1,164    1,121    1,033    1,029    1,004 
Total average tangible common shareholders' equity (2)  (G)   1,124    1,080    992    988    963 
Total tangible shareholders' equity, period-end (2)(3)  (H)   1,170    1,176    1,026    1,001    979 
Total tangible common shareholders' equity, period-end (2)(3)  (I)   1,130    1,136    986    961    939 
Total tangible assets, period-end (2)(3)  (J)   12,930    13,051    11,623    11,660    11,477 
                             
Total common shares outstanding, period-end (thousands)                 (K)   50,394    51,045    45,522    45,417    45,420 
Average diluted shares outstanding (thousands)  (L)   51,545    49,114    46,261    46,240    46,263 
                             
Core earnings per common share, diluted (2)  (A/L)  $0.46   $0.65   $0.60   $0.69   $0.72 
Tangible book value per common share, period-end (2)  (I/K)   22.42    22.25    21.66    21.15    20.68 
Total tangible shareholders' equity/total tangible assets (2)  (H)/(J)   9.05    9.01    8.83    8.59    8.53 
                             
Performance ratios (4)                            
GAAP return on assets      0.67%   0.79%   0.78    0.47%   1.08%
Core return on assets (2)      0.71    1.01    0.92    1.07    1.12 
GAAP return on equity      5.12    6.07    5.97    3.61    8.27 
Core return on equity (2)  (A/E)   5.35    7.67    7.00    8.09    8.49 
Core return on tangible common equity (2)(5)  (A+O)/(G)   8.74    12.21    11.44    13.21    14.02 
Efficiency ratio (2)(6)  (C-O)/(B+M+P)   53.37    56.41    59.54    54.88    52.20 
Net interest margin      3.22    3.19    3.17    3.41    3.32 
                             
Supplementary data (in thousands)                            
Tax benefit on tax-credit investments (7)  (M)  $2,382   $2,381   $684   $1,787   $1,374 
Non-interest income charge on tax-credit investments (8)  (N)   (1,942)   (1,938)   (579)   (1,610)   (1,112)
Net income on tax-credit investments  (M+N)   440    443    105    177    262 
                             
Intangible amortization  (O)  $1,526   $1,475   $1,200   $1,202   $1,218 
Fully taxable equivalent income adjustment  (P)   1,826    1,882    1,809    1,763    1,807 

 

 

(1) Net securities (gains)/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 total assets less the 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) Core return on tangible equity is computed by dividing the total core income adjusted for the tax-effected amortization of intangible assets, assuming a 27% marginal rate, by tangible equity.
(6) Efficiency ratio is computed by dividing total 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.
(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 Nine Months Ended 
      Sept. 30,   Sept. 30, 
(Dollars in thousands)     2019   2018 
Net income     $71,699   $91,506 
Adj: Net securities(gains)/losses (1)      (2,655)   696 
Adj: Net (gains) on sale of business operations and assets      -    (460)
Adj: Merger and acquisition expenses      15,122    6,138 
Adj: Restructuring expense and other      7,211    - 
Adj: (Income)/loss from discontinued operations before income taxes      (3,975)   883 
Adj: Income taxes      (3,889)   (1,917)
Total core income (2)  (A)  $83,513   $96,846 
              
Total revenue from continuing operations     $334,565   $321,983 
Adj: Net securities(gains)/losses (1)      (2,655)   696 
Adj: Net (gains) on sale of business operations and assets      -    (460)
Total core revenue (2)  (B)  $331,910   $322,219 
Total non-interest expense from continuing operations     $219,570   $186,520 
Less: Merger, restructuring and other expense (see above)      (22,333)   (6,138)
Core non-interest expense (2)  (C)  $197,237   $180,382 
              
(in millions, except per share data)             
Total average assets  (D)  $12,857   $11,687 
Total average shareholders' equity  (E)   1,677    1,534 
Total average tangible shareholders' equity (2)  (F)   1,106    978 
Total average tangible common shareholders' equity (2)  (G)   1,066    937 
Total tangible shareholders' equity, period-end (2)(3)  (H)   1,170    979 
Total tangible common shareholders' equity, period-end (2)(3)  (I)   1,130    939 
Total tangible assets, period-end (2)(3)  (J)   12,930    11,477 
Total common shares outstanding, period-end (thousands)                 (K)   50,394    45,420 
Average diluted shares outstanding (thousands)  (L)   48,987    46,226 
Core earnings per common share, diluted (2)  (A/L)  $1.70   $2.08 
Tangible book value per common share, period-end (2)  (I/K)   22.42    20.68 
Total tangible shareholders' equity/total tangible assets (2)  (H)/(J)   9.05    8.53 
              
Performance ratios (4)             
GAAP return on assets      0.74%   1.05%
Core return on assets (2)  (A/D)   0.88    1.12 
GAAP return on equity      5.70    7.96 
Core return on equity (2)  (A/E)   6.64    8.42 
Core return on tangible common equity (2)(5)  (A+O)/(G)   10.74    14.07 
Efficiency ratio (2)(6)  (C-O)/(B+M+P)   56.30    53.21 
Net interest margin      3.19    3.39 
              
Supplementary data             
Tax benefit on tax-credit investments (7)  (M)  $5,447   $4,089 
Non-interest income charge on tax-credit investments (8)  (N)   (4,459)   (3,212)
Net income on tax-credit investments  (M+N)   988    877 
              
Intangible amortization  (O)   4,201    3,732 
Fully taxable equivalent income adjustment  (P)   5,517    5,660 

 

  

(1) Net securities (gains)/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 total assets less the 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) Core return on tangible equity is computed by dividing the total core income adjusted for the tax-effected amortization of intangible assets, assuming a 27% marginal rate, by tangible equity.
(6) Efficiency ratio is computed by dividing total 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.

 

(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 

 

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Section 3: EX-99.2 (EXHIBIT 99.2)

 

Exhibit 99.2

 

 

Berkshire Hills Elects J. Williar Dunlaevy as Board Chair; William J. Ryan to Remain on Board

 

BOSTON, October 28, 2019 - Berkshire Hills Bancorp, Inc. (NYSE: BHLB) announced that its Board of Directors has unanimously elected J. Williar (“Bill”) Dunlaevy to serve as its Chairman, effective December 1, 2019. A former bank CEO, Mr. Dunlaevy has served as a director since 2011 and is designated as independent as well as a financial expert by the Board of Directors under the rules of the Securities and Exchange Commission and the New York Stock Exchange. The Company’s banking subsidiary, Berkshire Bank, has similarly elected Mr. Dunlaevy as Board Chair.

 

Mr. Dunlaevy commented, “I’m honored to have been chosen to succeed Bill Ryan as Chairman, and I look forward to continuing to work with the management team and the entire Board to deliver on our commitment to our shareholders, customers, and communities. I want to thank Bill for his leadership, friendship and tremendous contributions to Berkshire as chairman over the past five years. I’m pleased that he’ll remain as a director so the board may continue to benefit from his substantial banking experience and valued judgement. Our Board and management team remain dedicated to our vision of building a 21st century community bank.”

 

Mr. Ryan stated, “I’m delighted that the Board has selected Bill Dunlaevy to succeed me as Chairman. He has great expertise in community banking and is committed to success for our company, culture, and vision. I look forward to continuing to work closely with Bill in our new roles as I scale back my commitments for health reasons.”

 

Mr. Dunlaevy is the former Chief Executive Officer and Chairman of the Board of Legacy Bancorp, Inc. and Legacy Banks (“Legacy”). He served as the Chief Executive Officer and Chairman of the Board of Legacy from 1996 until their merger with Berkshire in 2011. A community leader, Mr. Dunlaevy currently serves as a director of the Berkshire Bank Foundation and previously served as Chairman of the Berkshire Taconic Community Foundation. Mr. Dunlaevy has also been a director of the Depositors Insurance Fund, Massachusetts Bankers Association, and Savings Bank Life Insurance Company of Massachusetts (“SBLI”).

 

BACKGROUND

 

Berkshire Hills Bancorp is the parent of Berkshire Bank which is transforming into a 21st century community bank with a culture of belonging. Headquartered in Boston, Berkshire operates 132 banking offices in seven Northeastern states, with approximately $13.5 billion in assets.

 

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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 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.

 

CONTACTS

 

Investor Relations Contact
 
David Gonci, Capital Markets Director, 413-281-1973
 
Media Contact
 
Diana Pisciotta; Communications Contact; 617-784-5256

 

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