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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): January 27, 2020

 

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 2.02 Results of Operations and Financial Condition

 

On January 27, 2020, Berkshire Hills Bancorp, Inc. (the “Company”), the holding company for Berkshire Bank (the “Bank”), announced its financial results for the quarter and year ended December 31, 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 January 28, 2020, 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 February 4, 2020. The webcast will be available on the Company’s website for an extended period of time.

 

Item 8.01 Other Events

 

On January 27, 2020, the Company’s Board of Directors announced the declaration of a cash dividend of $0.24 per share of Company common stock and $0.48 per share of Company Series B preferred stock to shareholders of record at the close of business on February 17, 2020 and payable on February 28, 2020.

 

 

 

 

 

Item 9.01 Financial 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 January 27, 2020

 

  104 Cover Page Interactive Data File (embedded in the cover page formatted in Inline XBRL)

 

 

 

 

 

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: January 28, 2020 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 Fourth Quarter Earnings Growth;

 

Dividend Increased by 4%

 

BOSTON, January 27, 2020 - Berkshire Hills Bancorp, Inc. (NYSE: BHLB) reported that fourth quarter GAAP earnings increased to $0.51 per share in 2019, compared to $0.31 in 2018. Core earnings per share improved to $0.70 from $0.69 for these respective periods. Quarterly results benefited from Berkshire’s initiatives in 2019, including business repositioning strategies and completing an acquisition. Core earnings is a non-GAAP financial measure which excludes merger and restructuring charges, as well as results of discontinued operations.

 

FOURTH QUARTER FINANCIAL HIGHLIGHTS

 

·$0.51 GAAP EPS; $0.70 Core EPS
·GAAP ROA 0.78%; Core ROA 1.08%
·3.11% net interest margin
·53.7% efficiency ratio
·0.17% net loan charge-offs/average loans
·0.31% non-performing assets/assets

 

CEO Richard Marotta stated, “Berkshire’s fourth quarter profitability measures were the best of the year. We completed the systems integration of acquired operations, further trimmed non-strategic assets, and reduced higher cost wholesale funds. Measures of liquidity, capital, and asset quality improved quarter-over quarter. Additional capital was returned to shareholders through stock repurchases and we are now announcing a 4% dividend increase beginning in 2020. Our shares produced a 26% total shareholder return for the year, based on the year-end stock price.”

 

Mr. Marotta continued, “Our Be FIRST social responsibility commitment is at the heart of our efforts to transform our communities and future-proof the company. In November, we were recognized by the U.S. Chamber of Commerce with the 2019 Citizens Award, in the category of Top Corporate Steward- Small – Middle Market Business. Last week, for the first time, we announced our inclusion in the Bloomberg Gender Equality Index highlighting our commitment to human capital management, diversity, and ensuring gender equality. We recently opened our first Reevx Labs, a community co-working space in Boston’s Roxbury neighborhood. In these Labs, entrepreneurs and non-profits connect with peers to pursue their missions and access our MyBankers for support of their financial needs. I’m proud of the recognition that our teams are earning as we evolve our company with a focus on purpose driven performance."

 

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Mr. Marotta concluded, “We are announcing that eight of our proven leaders have been promoted to the new position of Regional President to serve our eight regional markets. In this role, they will drive our market positioning, enhance our performance, and maintain active community leadership roles. Reporting to Bank President Sean Gray, they will lead our top priority efforts around our Be FIRST values and commitment to being a 21st century community bank.”

 

DIVIDEND INCREASED

 

The Board of Directors approved a quarterly cash dividend of $0.24 per common share to shareholders of record at the close of business on February 17, 2020 and payable on February 28, 2020. This is a 4% increase compared to the prior $0.23 dividend per common share. This dividend equates to a 3.1% annualized yield based on the $31.35 average closing price of Berkshire’s common stock during the fourth quarter of 2019. Effective for the same dates, the Board also approved an increase in the quarterly cash dividend on preferred stock to $0.48 per share.

 

FINANCIAL CONDITION

 

Total assets decreased by $0.3 billion, or 2%, to $13.2 billion in the fourth quarter. The Company released targeted investments and loan balances in accordance with its strategic initiatives and its community focus. The sale of approximately $50 million of commercial aircraft loans was completed during the quarter, together with $30 million in other commercial balances which were held for sale at the previous quarter-end. Total deposits decreased by 1% primarily due to a decrease in retail time balances as interest rates declined. A $318 million year-end increase in payroll related balances offset a $256 million decrease in brokered time deposits. The measure of loans/deposits improved to 92% at year-end, the ratio of equity/assets improved to 13.3%, and the non-GAAP financial measure of tangible equity/tangible assets improved to 9.2%. Non-performing assets were 0.31% of total assets and accruing delinquent loans were 0.54% of total loans at year-end. The ratio of the loan loss allowance to total loans ended the year at 0.67% compared to 0.68% at the start of the year. Berkshire repurchased 815,628 common shares during the fourth quarter at an average price of $31.26 per share. Book value per share improved to $34.65 at year-end, increasing by 4% for the year. The non-GAAP financial measure of tangible book value per common share increased by 7% for the year to $22.56. Subsequent to year-end, 521,400 common shares were issued for the conversion of approximately half of the outstanding participating preferred shares in accordance with the contracted conversion terms. The common equivalent impact of these shares has previously been included in operating results per share.

 

RESULTS OF OPERATIONS

 

Fourth quarter GAAP earnings increased to $0.51 per share in 2019, compared to $0.31 in 2018. Core earnings improved to $0.70 per share compared to $0.69 for these respective periods. The non-GAAP measures of core earnings and earnings per share are reconciled to GAAP measures on pages F-9 and F-10 of the financial tables.

 

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GAAP return on assets was 0.78% in the final quarter of the year, and GAAP return on equity was 5.9%. The non-GAAP financial measure of core earnings resulted in core ROA of 1.08%, and core return on tangible common equity of 13.1%. These core measures were the highest results for the year. The fourth quarter efficiency ratio improved to 53.7% in 2019 from 54.9% in 2018.

 

Many measures of revenue and expense, and average common shares, increased year-over-year due to the impact of the acquisition of SI Financial Group on May 17, 2019. Fourth quarter net revenue from continuing operations increased year-over-year by 6% to $115 million. The contribution from purchase accounting accretion decreased to $5 million from $8 million. Non-interest income in 2019 also benefited from seasonally higher loan sale gains on SBA loan originations and $1.4 million in gains on other commercial loan sales, as well as higher deposit related fees including the acquired SI Financial operations. The net interest margin decreased year-over-year by 30 basis points to 3.11% including a 13 basis point decrease in the contribution from purchase accounting accretion. The remaining decrease in the margin before accretion reflected the impact of lower interest rates on the Company’s asset sensitive balance sheet, including increased prepayment activity. Other contributing factors included competitive spreads and recent changes in the Company’s liquidity management. The fourth quarter provision for loan losses decreased year-over-year to $5 million from $7 million. Net loan charge-offs measured 0.17% in both of these periods, and the provision exceeded charge-offs in both periods.

 

Total fourth quarter non-interest expense decreased by 13% year-over-year due to lower non-core expenses. Core non-interest expense was essentially flat year-over-year, with most of the incremental cost of acquired operations offset by efficiency measures undertaken by the Company during the year. Core non-interest expense decreased by 3% compared to the linked quarter. Operations in the most recent period included a $1.4 million benefit from FDIC insurance expense rebates which were completed during the quarter. Full time equivalent staff in continuing operations totaled 1,550 positions at year-end 2019. Combined full time equivalent staff in continuing operations reported by both Berkshire and SI Financial totaled 1,769 positions at year-end 2018. The effective tax rate in 2019 declined from 2018 due to lower pre-tax income in 2019, along with other changes in the Company’s operations. The full year tax rate declined year-over-year to 18% from 21%, and the fourth quarter effective tax rate declined to 13% from 19%. The core tax rate in the most recent quarter was 18%.

 

The total net after-tax adjustment to earnings for non-core items in the most recent quarter was $0.19 per share, including net charges of $0.14 from discontinued operations and $0.05 related to merger and restructuring charges, together with unrealized equity security gains. Discontinued operations comprise the Company’s national mortgage banking operations which are held for sale. The Company recorded a fourth quarter pre-tax charge of $9.5 million for these operations, reflecting an operating loss due to seasonally lower revenue and a $4.5 million write-down of mortgage servicing rights at year-end. Fourth quarter mortgage banking fees totaled $7 million in 2019 compared to $6 million in 2018. 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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REGIONAL PRESIDENTS

 

Berkshire has announced that the individuals below have been appointed to Regional President in each of its markets, leading its top priority efforts around its Be FIRST values and commitment to being a 21st century community bank.

 

·Jeannine Cimino – Mid Atlantic
·David (Matt) Emprimo – Berkshire County/VT
·Cristina Feden – Eastern CT/RI
·James Hickson – Pioneer Valley/ CT
·Paul Kelly – Central MA 
·Malia Lazu – Eastern MA
·James Morris – Capital/Albany NY
·Christopher Papayanakos – Central NY 

 

The Regional Presidents are proven Berkshire leaders in a variety of disciplines, including commercial, retail and executive management. In this role, they will report to Sean Gray, Berkshire Bank President, and they will drive Berkshire’s market positioning, enhance its performance, and maintain active community leadership roles.

 

BE FIRST CORPORATE RESPONSIBILITY UPDATE

 

Berkshire is committed to delivering purpose driven performance. Learn more about the steps Berkshire is taking to be a values-based brand for all its stakeholders at www.berkshirebank.com/csr.

 

Responsible & Sustainable Business Policy – As part of Berkshire Bank’s efforts to build a more socially responsible and values driven company, the Bank implemented a new Responsible & Sustainable Business Policy. The policy enhances the Company’s risk management and social responsibility practices with a focus on long-term sustainable performance.

 

US Chamber of Commerce Foundation Citizens Award – The U.S. Chamber of Commerce Foundation honored Berkshire Bank with the 2019 Citizens Award, in the category of Top Corporate Steward- Small – Middle Market Business, for its Be FIRST Commitment, the company’s comprehensive corporate responsibility, culture, social impact and sustainability strategy. The Citizens Awards honor businesses for their significant positive impact in communities around the world, making them one of the most prestigious honors in corporate citizenship.

 

Bloomberg Gender Equality Index – Berkshire Bank’s focus on diversity, ensuring gender equality and pay equity was highlighted as Bloomberg announced the company would be included in the 2020 Bloomberg Gender-Equality Index (GEI). The GEI tracks the financial performance of public companies committed to supporting gender equality. Through disclosure of gender-related metrics, Berkshire Bank provided a comprehensive look at its investment in workplace gender equality reflecting a high level of overall performance.

 

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Fostering Sustainable Communities & Reducing the Wealth Gap –The Company continued its commitment to closing the wealth gap so that all citizens, regardless of ethnicity, have equal opportunity for upward economic mobility, improving the business climate in communities where the bank operates. Berkshire Bank Foundation provided $2,886,558 in grant funding to support 612 organizations in 2019 and the company’s XTEAM® employee volunteer program achieved a 100% participation rate for the fourth consecutive year impacting more than one million people with their volunteer efforts.

 

Reevx Labs – The Bank recently opened its first Reevx Labs in Boston’s Roxbury neighborhood. Reevx Labs is part of the Bank’s continued commitment to bettering the community and revolutionizing the banking experience. Reevx Labs feature a series of free co-working spaces for the community with the goal of creating spaces where entrepreneurs and non-profits can connect with their peers and access the bank’s MyBankers for support of their financial needs, as they pursue their missions. Each Reevx Labs will take on a unique approach informed by the needs of the community, providing opportunities to build solutions together.

 

INVESTOR CONFERENCE CALL

 

Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Tuesday, January 28, 2020 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/10138046.  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 Berkshire's 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, February 4, 2020 by dialing 1-877-344-7529 and entering access number 10138046.  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 which is transforming into a 21st century community bank pursuing purpose driven performance based on its Be FIRST corporate responsibility culture. Headquartered in Boston, Berkshire operates 130 banking offices in seven Northeastern states, with approximately $13.2 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.

 

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. They also include costs related to the consolidation of branches, including two branches in the fourth quarter of 2019 and eight branches for the full year of 2019. 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.

 

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. References to organic growth and organic change exclude balances acquired in bank mergers.

 

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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

 

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TABLE

INDEX

CONSOLIDATED UNAUDITED FINANCIAL SCHEDULES

F-1 Selected Financial Highlights
F-2 Balance Sheets
F-3 Loan and Deposit Analysis
F-4 Statements of Income
F-5 Statements of Income (Five Quarter Trend)
F-6 Average Yields and Costs
F-7 Average Balances
F-8 Asset Quality Analysis
F-9Reconciliation of Non-GAAP Financial Measures and Supplementary Data (Five Quarter Trend)
F-10Reconciliation 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)  
   Dec. 31,   Sept. 30,   June 30,   March 31,   Dec. 31, 
   2019   2019   2019 (2)   2019   2018 
PER SHARE DATA                         
Net earnings per common share, diluted  $0.51   $0.44   $0.52   $0.51   $0.31 
Core earnings per common share, diluted (3)   0.70    0.46    0.65    0.60    0.69 
Total book value per common share   34.65    34.36    34.05    33.75    33.30 
Tangible book value per common share (3)   22.56    22.42    22.25    21.66    21.15 
Market price at period end   32.88    29.29    31.39    27.24    26.97 
Dividends per common share   0.23    0.23    0.23    0.23    0.22 
Dividends per preferred share   0.46    0.46    0.46    0.46    0.44 
                          
PERFORMANCE RATIOS (4)                         
Return on assets   0.78%   0.67%   0.79%   0.78%   0.47%
Core return on assets (3)   1.08    0.71    1.01    0.92    1.07 
Return on equity   5.90    5.12    6.07    5.97    3.61 
Core return on equity (3)   8.09    5.35    7.67    7.00    8.09 
Core return on tangible common equity (3)   13.12    8.74    12.21    11.44    13.21 
Net interest margin, fully taxable equivalent (FTE) (5)(6)   3.11    3.22    3.19    3.17    3.41 
Fee income/Net interest and fee income from continuing operations   18.11    17.61    16.20    17.56    15.59 
Efficiency ratio (3)   53.66    53.37    56.41    59.54    54.88 
                          
CHANGE (Year-to-date)                         
Total commercial loans (organic, annualized)   (7)%   (9)%   (10)%   (3)%   6%
Total loans (organic, annualized)   (9)   (9)   (9)   (4)   9 
Total deposits (organic, annualized)   0    2    6    8    3 
Total net revenues from continuing operations (compared to prior year)   4    4    1    3    17 
Earnings per common share (compared to prior year)   (14)   (26)   (20)   (7)   65 
Core earnings per common share (compared to prior year)(3)   (14)   (18)   (9)   (8)   32 
                          
FINANCIAL DATA (in millions)                         
Total assets  $13,212   $13,532   $13,653   $12,173   $12,212 
Total earning assets   11,912    12,174    12,343    11,039    11,140 
Total securities   1,770    1,861    1,905    1,881    1,919 
Total loans   9,502    9,719    9,942    8,947    9,043 
Allowance for loan losses   64    62    62    62    61 
Total intangible assets   599    602    603    551    552 
Total deposits   10,336    10,423    10,566    9,166    8,982 
Total shareholders' equity   1,759    1,772    1,779    1,577    1,553 
Net income   25.8    22.6    25.4    23.6    14.3 
Core income (3)   35.3    23.7    32.1    27.7    32.0 
Purchase accounting accretion   5.1    4.8    3.2    1.3    8.2 
                          
ASSET QUALITY AND CONDITION RATIOS                         
Net charge-offs (current quarter annualized)/average loans   0.17%   0.92%   0.14%   0.15%   0.17%
Total non-performing assets/total assets   0.31    0.28    0.27    0.26    0.28 
Allowance for loan losses/total loans   0.67    0.64    0.63    0.69    0.68 
Loans/deposits   92    93    94    98    101 
Shareholders' equity to total assets   13.31    13.10    13.03    12.95    12.72 
Tangible shareholders' equity to tangible assets (3)   9.19    9.05    9.01    8.83    8.59 

 

 

(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: 0.17%, 0.16%, 0.11%, 0.05%, 0.30%.

 

F-1

 

 

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-2)

   December 31,   September 30,   December 31, 
(in thousands)  2019   2019   2018 
Assets               
Cash and due from banks  $105,447   $121,629   $100,972 
Short-term investments   470,382    180,466    82,217 
Total cash and short-term investments   575,829    302,095    183,189 
                
Trading security   10,769    11,145    11,212 
Marketable equity securities, at fair value   41,556    59,596    56,638 
Securities available for sale, at fair value   1,311,555    1,369,604    1,399,647 
Securities held to maturity, at amortized cost   357,979    364,675    373,763 
Federal Home Loan Bank stock and other restricted securities   48,019    56,049    77,344 
Total securities   1,769,878    1,861,069    1,918,604 
                
Loans held for sale   36,664    204,900    2,183 
                
Commercial real estate loans   4,034,269    4,028,461    3,400,221 
Commercial and industrial loans   1,840,508    1,845,086    1,980,046 
Residential mortgages   2,685,472    2,838,657    2,566,424 
Consumer loans   942,179    1,006,437    1,096,562 
Total loans   9,502,428    9,718,641    9,043,253 
Less: Allowance for loan losses   (63,575)   (62,230)   (61,469)
Net loans   9,438,853    9,656,411    8,981,784 
                
Premises and equipment, net   120,398    123,195    106,500 
Other real estate owned   -    -    - 
Goodwill   553,762    554,704    518,325 
Other intangible assets   45,615    47,198    33,418 
Cash surrender value of bank-owned life insurance   227,894    227,085    190,609 
Deferred tax asset, net   56,106    49,543    42,434 
Other assets   234,783    263,464    120,926 
Assets from discontinued operations   152,188    242,279    114,259 
Total assets  $13,211,970   $13,531,943   $12,212,231 
                
Liabilities and shareholders' equity               
Demand deposits  $1,884,100   $1,887,621   $1,603,019 
NOW and other deposits   1,492,569    1,267,057    1,122,321 
Money market deposits   2,528,656    2,478,947    2,245,195 
Savings deposits   841,283    831,972    724,129 
Time deposits   3,589,369    3,957,721    3,287,717 
Total deposits   10,335,977    10,423,318    8,982,381 
                
Senior borrowings   730,501    904,149    1,428,298 
Subordinated borrowings   97,049    96,991    89,518 
Total borrowings   827,550    1,001,140    1,517,816 
                
Other liabilities   261,559    301,647    149,519 
Liabilities from discontinued operations   28,320    33,614    9,597 
Total liabilities   11,453,406    11,759,719    10,659,313 
                
Preferred shareholders' equity   40,633    40,633    40,633 
Common shareholders' equity   1,717,931    1,731,591    1,512,285 
Total shareholders' equity   1,758,564    1,772,224    1,552,918 
Total liabilities and shareholders' equity  $13,211,970   $13,531,943   $12,212,231 
                
Net common shares outstanding   49,585    50,394    45,417 

 

F-2

 

 

BERKSHIRE HILLS BANCORP, INC.

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

LOAN ANALYSIS

 

                   Organic Annualized Change % (1) 
(in millions)  December 31, 2019
Balance
   September 30, 2019
Balance
   Acquired Savings
Institute Balances (2)
   December 31, 2018
Balance
   Quarter ended
December 31, 2019
   Year to Date 
Total commercial real estate  $4,034   $4,029   $624   $3,400    0%   0%
Commercial and industrial loans   1,841    1,845    244    1,980    (1)   (19)
Total commercial loans   5,875    5,874    868    5,380    0    (7)
                               
Total residential mortgages   2,685    2,839    375    2,566    (22)   (10)
                               
Home equity   381    394    58    377    (13)   (14)
Auto and other   561    612    2    720    (34)   (22)
Total consumer loans   942    1,006    60    1,097    (25)   (20)
Total loans  $9,502   $9,719   $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 Change % (1) 
(in millions)  December 31, 2019
Balance
   September 30, 2019
Balance
   Acquired Savings
Institute Balances (2)
   December 31, 2018
Balance
   Quarter ended
December 31, 2019
   Year to Date 
Demand  $1,884   $1,887   $258   $1,603    (1)%   1%
NOW and other   1,493    1,267    138    1,122    71    21 
Money market   2,529    2,479    190    2,245    8    4 
Savings   841    832    164    724    4    (6)
Time deposits   3,589    3,958    585    3,288    (37)   (9)
Total deposits  $10,336   $10,423   $1,335   $8,982    (3)%   0%

(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   Years Ended 
   December 31,   December 31, 
(in thousands, except per share data)  2019   2018   2019   2018 
Interest and dividend income from continuing operations                    
Loans  $110,915   $111,576   $448,927   $406,222 
Securities and other   14,526    15,119    60,586    59,672 
Total interest and dividend income   125,441    126,695    509,513    465,894 
Interest expense from continuing operations                    
Deposits   28,797    23,811    115,193    78,364 
Borrowings   5,311    10,118    29,062    31,330 
Total interest expense   34,108    33,929    144,255    109,694 
Net interest income from continuing operations   91,333    92,766    365,258    356,200 
Non-interest income from continuing operations                    
Mortgage banking originations   172    148    788    635 
Loan related income   7,056    5,087    24,374    23,155 
Deposit related fees   8,264    7,131    31,352    29,806 
Insurance commissions and fees   2,471    2,479    10,957    10,983 
Wealth management fees   2,239    2,287    9,353    9,447 
Total fee income   20,202    17,132    76,824    74,026 
Other   75    1,666    1,438    3,557 
Securities gains/(losses), net   1,734    (3,023)   4,389    (3,719)
Gain on sale of business operations and assets, net   1,351    -    1,351    460 
Total non-interest income   23,362    15,775    84,002    74,324 
Total net revenue from continuing operations   114,695    108,541    449,260    430,524 
Provision for loan losses   5,351    6,716    35,419    25,451 
Non-interest expense from continuing operations                    
Compensation and benefits   35,355    34,927    140,906    134,019 
Occupancy and equipment   10,798    9,366    39,586    36,927 
Technology and communications   6,702    6,103    26,523    27,147 
Marketing and promotion   1,046    1,224    4,474    4,697 
Professional services   2,288    3,302    10,798    7,343 
FDIC premiums and assessments   471    1,488    3,861    5,734 
Other real estate owned and foreclosures   4    1    154    68 
Amortization of intangible assets   1,582    1,202    5,783    4,934 
Merger, restructuring and other expense   5,713    16,006    28,046    22,144 
Other   6,328    6,754    29,726    23,880 
Total non-interest expense   70,287    80,373    289,857    266,893 
                     
Income from continuing operations before income taxes  $39,057   $21,452   $123,984   $138,180 
Income tax expense   6,421    4,384    22,463    28,961 
Net income from continuing operations  $32,636   $17,068   $101,521   $109,219 
                     
(Loss)/income from discontinued operations before income taxes  $(9,514)  $(3,884)  $(5,539)  $(4,767)
Income tax (benefit)/expense   (2,629)   (1,075)   (1,468)   (1,313)
Net (loss)/income from discontinued operations  $(6,885)  $(2,809)  $(4,071)  $(3,454)
                     
Net income  $25,751   $14,259   $97,450   $105,765 
Preferred stock dividend   240    229    960    918 
Income available to common shareholders  $25,511   $14,030   $96,490   $104,847 
                     
Basic earnings per common share:                    
Continuing Operations  $0.65   $0.37   $2.06   $2.37 
Discontinued Operations   (0.14)   (0.06)   (0.08)   (0.08)
Total  $0.51   $0.31   $1.98   $2.30 
                     
Diluted earnings per common share:                    
Continuing Operations  $0.65   $0.37   $2.05   $2.36 
Discontinued Operations   (0.14)   (0.06)   (0.08)   (0.07)
Total  $0.51   $0.31   $1.97   $2.29 
                     
Weighted average shares outstanding:                    
Basic   50,494    46,061    49,263    46,024 
Diluted   50,702    46,240    49,421    46,240 

 

 F-4 

 

 

BERKSHIRE HILLS BANCORP, INC.

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

 

   Dec. 31,   Sept. 30,   June 30,   March 31,   Dec. 31, 
(in thousands, except per share data)  2019   2019   2019   2019   2018 
Interest and dividend income from continuing operations                         
Loans  $110,915   $118,371   $113,990   $105,651   $111,576 
Securities and other   14,526    15,354    15,248    15,458    15,119 
Total interest and dividend income   125,441    133,725    129,238    121,109    126,695 
Interest expense from continuing operations                         
Deposits   28,797    31,501    28,273    26,622    23,811 
Borrowings   5,311    5,353    9,370    9,028    10,118 
Total interest expense   34,108    36,854    37,643    35,650    33,929 
Net interest income from continuing operations   91,333    96,871    91,595    85,459    92,766 
Non-interest income from continuing operations                         
Mortgage banking originations   172    292    278    46    148 
Loan related income   7,056    6,493    4,822    6,003    5,087 
Deposit related fees   8,264    8,705    7,525    6,858    7,131 
Insurance commissions and fees   2,471    2,895    2,738    2,853    2,479 
Wealth management fees   2,239    2,325    2,348    2,441    2,287 
Total fee income   20,202    20,710    17,711    18,201    17,132 
Other   75    609    (216)   970    1,666 
Securities gains/(losses), net   1,734    87    17    2,551    (3,023)
Gain on sale of business operations and assets, net   1,351    -    -    -    - 
Total non-interest income   23,362    21,406    17,512    21,722    15,775 
Total net revenue from continuing operations   114,695    118,277    109,107    107,181    108,541 
Provision for loan losses   5,351    22,600    3,467    4,001    6,716 
Non-interest expense from continuing operations                         
Compensation and benefits   35,355    37,272    34,779    33,500    34,927 
Occupancy and equipment   10,798    9,893    9,449    9,446    9,366 
Technology and communications   6,702    6,849    6,715    6,257    6,103 
Marketing and promotion   1,046    1,006    1,155    1,267    1,224 
Professional services   2,288    2,282    3,953    2,275    3,302 
FDIC premiums and assessments   471    -    1,751    1,639    1,488 
Other real estate owned and foreclosures   4    150    (2)   2    1 
Amortization of intangible assets   1,582    1,526    1,475    1,200    1,202 
Merger, restructuring and other expense   5,713    4,163    11,155    7,015    16,006 
Other   6,328    7,870    6,138    9,390    6,754 
Total non-interest expense   70,287    71,011    76,568    71,991    80,373 
                          
Income from continuing operations before income taxes  $39,057   $24,666   $29,072   $31,189   $21,452 
Income tax expense   6,421    4,007    5,118    6,917    4,384 
Net income from continuing operations  $32,636   $20,659   $23,954   $24,272   $17,068 
                          
(Loss)/income from discontinued operations before income taxes  $(9,514)  $2,747   $2,082   $(854)  $(3,884)
Income tax (benefit)/expense   (2,629)   790    588    (217)   (1,075)
Net income/(loss) from discontinued operations  $(6,885)  $1,957   $1,494   $(637)  $(2,809)
                          
Net income  $25,751   $22,616   $25,448   $23,635   $14,259 
Preferred stock dividend   240    240    240    240    229 
Income available to common shareholders  $25,511   $22,376   $25,208   $23,395   $14,030 
                          
                          
Basic earnings per common share:                         
Continuing Operations  $0.65   $0.40   $0.49   $0.52   $0.37 
Discontinued Operations   (0.14)   0.04    0.03    (0.01)   (0.06)
Total  $0.51   $0.44   $0.52   $0.51   $0.31 
                          
Diluted earnings per common share:                         
Continuing Operations  $0.65   $0.40   $0.49   $0.52   $0.37 
Discontinued Operations   (0.14)   0.04    0.03    (0.01)   (0.06)
Total  $0.51   $0.44   $0.52   $0.51   $0.31 
                          
Weighted average shares outstanding:                         
Basic   50,494    51,422    48,961    46,113    46,061 
Diluted   50,702    51,545    49,114    46,261    46,240 

 

 F-5 

 

 

BERKSHIRE HILLS BANCORP, INC.

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

 

   Quarters Ended 
   Dec. 31,   Sept. 30,   June 30,   March 31,   Dec. 31, 
   2019   2019   2019   2019   2018 
Earning assets                         
Loans:                         
Commercial real estate   4.80%   4.92%   5.01%   4.91%   5.40%
Commercial and industrial loans   5.35    5.58    5.79    5.83    5.97 
Residential mortgages   3.61    3.73    3.74    3.74    3.72 
Consumer loans   4.38    4.55    4.52    4.45    4.52 
Total loans   4.52    4.67    4.76    4.73    4.94 
Securities   3.31    3.41    3.38    3.46    3.34 
Short-term investments and loans held for sale   3.15    4.11    3.37    3.59    3.74 
Total earning assets   4.27    4.45    4.51    4.49    4.64 
                          
Funding liabilities                         
Deposits:                         
NOW and other   0.54    0.61    0.66    0.65    0.59 
Money market   1.18    1.27    1.27    1.23    1.10 
Savings   0.14    0.13    0.15    0.18    0.16 
Time   1.97    2.02    2.06    2.07    1.93 
Total interest-bearing deposits   1.35    1.43    1.44    1.44    1.31 
Borrowings   2.77    3.12    2.92    2.85    2.67 
Total interest-bearing liabilities   1.48    1.57    1.66    1.65    1.55 
                          
Net interest spread   2.79    2.88    2.85    2.84    3.09 
Net interest margin   3.11    3.22    3.19    3.17    3.41 
                          
Cost of funds (1)   1.23    1.32    1.41    1.41    1.31 
Cost of deposits   1.11    1.18    1.18    1.19    1.07 

  

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

 

 F-6 

 

 

BERKSHIRE HILLS BANCORP, INC.

AVERAGE BALANCES - UNAUDITED - (F-7)

 

   Quarters Ended 
   Dec. 31,   Sept. 30,   June 30,   March 31,   Dec. 31, 
(in thousands)  2019   2019   2019   2019   2018 
Assets                         
Loans                         
Commercial real estate  $4,056,244   $3,998,144   $3,716,130   $3,377,902   $3,373,936 
Commercial and industrial loans   1,768,039    1,951,205    2,056,384    1,986,792    1,921,361 
Residential mortgages   2,758,676    2,849,216    2,711,348    2,556,299    2,539,592 
Consumer loans   974,889    1,035,893    1,064,579    1,079,583    1,112,433 
Total loans (1)    9,557,848    9,834,458    9,548,441    9,000,576    8,947,322 
Securities (2)   1,752,968    1,846,985    1,893,298    1,895,768    1,933,891 
Short-term investments and loans held for sale   444,622    309,897    117,029    67,367    51,827 
Total earning assets (3)   11,755,438    11,991,340    11,558,768    10,963,711    10,933,040 
Goodwill and other intangible assets   601,192    603,762    555,606    550,966    552,206 
Other assets   737,396    668,218    593,917    557,442    494,377 
Assets from discontinued operations   176,251    204,339    192,466    115,721    101,464 
Total assets  $13,270,277   $13,467,659   $12,900,757   $12,187,840   $12,081,087 
                          
Liabilities and shareholders' equity                         
Deposits                         
NOW and other  $1,085,485   $1,111,637   $1,053,335   $963,043   $920,225 
Money market   2,688,766    2,624,639    2,474,071    2,378,496    2,339,699 
Savings   835,209    838,445    780,797    736,707    728,853 
Time   3,827,175    4,158,688    3,593,022    3,429,375    3,229,521 
Total interest-bearing deposits   8,436,635    8,733,409    7,901,225    7,507,621    7,218,298 
Borrowings   853,911    805,035    1,415,614    1,351,834    1,566,478 
Total interest-bearing liabilities   9,290,546    9,538,444    9,316,839    8,859,455    8,784,776 
Non-interest-bearing demand deposits   1,898,045    1,864,964    1,673,560    1,538,767    1,579,013 
Other liabilities   302,665    267,922    215,704    192,119    127,370 
Liabilities from discontinued operations   32,285    28,206    18,434    13,962    8,854 
Total liabilities   11,523,541    11,699,536    11,224,537    10,604,303    10,500,013 
                          
Preferred shareholders' equity   40,633    40,633    40,633    40,633    40,633 
Common shareholders' equity   1,706,103   1,727,490    1,635,587    1,542,904    1,540,441 
Total shareholders' equity   1,746,736    1,768,123    1,676,220    1,583,537    1,581,074 
Total liabilities and shareholders' equity  $13,270,277   $13,467,659   $12,900,757   $12,187,840   $12,081,087 
                          
Supplementary data                         
Total average non-maturity deposits  $6,507,505   $6,439,685   $5,981,763   $5,617,013   $5,567,790 
Total average deposits   10,334,680    10,598,373    9,574,785    9,046,388    8,797,311 
Fully taxable equivalent income adjustment   1,934    1,826    1,882    1,809    1,763 
Total average tangible equity (4)   1,145,544    1,164,361    1,120,614    1,032,571    1,028,868 

 

(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 
   Dec. 31,   Sept. 30,   June 30,   March 31,   Dec. 31, 
(in thousands)  2019   2019   2019   2019   2018 
NON-PERFORMING ASSETS                         
Non-accruing loans:                         
Commercial real estate  $20,119   $15,829   $19,366   $18,513   $20,372 
Commercial and industrial loans   11,373    12,224    9,256    5,614    6,003 
Residential mortgages   3,343    3,062    3,579    2,341    2,217 
Consumer loans   4,805    5,191    3,570    4,038    3,834 
Total non-accruing loans   39,640    36,306    35,771    30,506    32,426 
Other real estate owned   -    -    154    -    - 
Repossessed assets   858    1,003    874    742    1,209 
Total non-performing assets  $40,498   $37,309   $36,799   $31,248   $33,635 
                          
Total non-accruing loans/total loans   0.42%   0.37%   0.36%   0.34%   0.36%
Total non-performing assets/total assets   0.31%   0.28%   0.27%   0.26%   0.28%
                          
PROVISION AND ALLOWANCE FOR LOAN LOSSES                         
Balance at beginning of period  $62,230   $62,156   $62,038   $61,469   $58,457 
Charged-off loans   (4,485)   (23,524)   (3,966)   (4,579)   (4,029)
Recoveries on charged-off loans   479    998    617    1,147    325 
Net loans charged-off   (4,006)   (22,526)   (3,349)   (3,432)   (3,704)
Provision for loan losses   5,351    22,600    3,467    4,001    6,716 
Balance at end of period  $63,575   $62,230   $62,156   $62,038   $61,469 
                          
Allowance for loan losses/total loans   0.67%   0.64%   0.63%   0.69%   0.68%
Allowance for loan losses/non-accruing loans   160%   171%   174%   203%   190%
                          
NET LOAN CHARGE-OFFS                         
Commercial real estate  $(1,419)  $(2,759)  $(1,235)  $(752)  $(1,357)
Commercial and industrial loans   (1,495)   (18,850)   (995)   (1,580)   (1,538)
Residential mortgages   (351)   (140)   (139)   (95)   (108)
Home equity   (67)   (71)   (300)   (257)   (116)
Auto and other consumer   (674)   (706)   (680)   (748)   (585)
Total, net  $(4,006)  $(22,526)  $(3,349)  $(3,432)  $(3,704)
                          
Net charge-offs (QTD annualized)/average loans   0.17%   0.92%   0.14%   0.15%   0.17%
Net charge-offs (YTD annualized)/average loans   0.35%   0.41%   0.15%   0.15%   0.18%
                          
DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS                         
30-89 Days delinquent   0.25%   0.26%   0.20%   0.22%   0.27%
90+ Days delinquent and still accruing   0.29%   0.29%   0.28%   0.23%   0.22%
Total accruing delinquent loans   0.54%   0.55%   0.48%   0.45%   0.49%
Non-accruing loans   0.42%   0.37%   0.36%   0.34%   0.36%
Total delinquent and non-accruing loans   0.96%   0.92%   0.84%   0.79%   0.85%

 

 F-8 

 

  

BERKSHIRE HILLS BANCORP, INC.

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

 

      At or for the Quarters Ended 
      Dec. 31,   Sept. 30,   June 30,   March 31,   Dec. 31, 
(in thousands)     2019   2019   2019   2019   2018 
Net income     $25,751   $22,616   $25,448   $23,635   $14,259 
Adj: Net securities (gains)/losses (1)      (1,734)   (87)   (17)   (2,551)   3,023 
Adj: Merger and acquisition expense      3,611    3,802    9,711    1,609    2,792 
Adj: Restructuring expense and other expense      2,102    361    1,444    5,406    1,822 
Adj: Legal settlements      -    -    -    -    3,000 
Adj: Systems vendor restructuring costs      -    -    -    -    8,379 
Adj: Loss/(income) from discontinued operations before income taxes      9,514    (2,747)   (2,082)   854    3,884 
Adj: Income taxes      (3,910)   (281)   (2,385)   (1,223)   (5,185)
Total core income (2)  (A)  $35,334   $23,664   $32,119   $27,730   $31,974 
                             
Total revenue from continuing operations     $114,695   $118,277   $109,107   $107,181   $108,541 
Adj: Net securities (gains)/losses (1)      (1,734)   (87)   (17)   (2,551)   3,023 
Adj: Net (gains) on sale of business operations and assets      -    -    -    -    - 
Total core revenue (2)  (B)  $112,961   $118,190   $109,090   $104,630   $111,564 
                             
Total non-interest expense from continuing operations     $70,287   $71,011   $76,568   $71,991   $80,373 
Less: Merger, restructuring and other expense (see above)      (5,713)   (4,163)   (11,155)   (7,015)   (4,614)
Less: Legal settlements      -    -    -    -    (3,000)
Less: Systems vendor restructuring costs      -    -    -    -    (8,379)
Core non-interest expense (2)  (C)  $64,574   $66,848   $65,413   $64,976   $64,380 
                             
(in millions, except per share data)                            
Total average assets  (D)  $13,270   $13,468   $12,901   $12,188   $12,081 
Total average shareholders' equity  (E)   1,747    1,768    1,676    1,584    1,581 
Total average tangible shareholders' equity (2)  (F)   1,146    1,164    1,121    1,033    1,029 
Total average tangible common shareholders' equity (2)  (G)   1,105    1,124    1,080    992    988 
Total tangible shareholders' equity, period-end (2)(3)  (H)   1,159    1,170    1,176    1,026    1,001 
Total tangible common shareholders' equity, period-end (2)(3)  (I)   1,119    1,130    1,136    986    961 
Total tangible assets, period-end (2)(3)  (J)   12,613    12,930    13,051    11,623    11,660 
                             
Total common shares outstanding, period-end (thousands)  (K)   49,585    50,394    51,045    45,522    45,417 
Average diluted shares outstanding (thousands)  (L)   50,702    51,545    49,114    46,261    46,240 
                             
Core earnings per common share, diluted (2)  (A/L)  $0.70   $0.46   $0.65   $0.60   $0.69 
Tangible book value per common share, period-end (2)  (I/K)   22.56    22.42    22.25    21.66    21.15 
Total tangible shareholders' equity/total tangible assets (2)  (H)/(J)   9.19    9.05    9.01    8.83    8.59 
                             
Performance ratios (4)                            
GAAP return on assets      0.78%   0.67    0.79%   0.78    0.47%
Core return on assets (2)      1.08    0.71    1.01    0.92    1.07 
GAAP return on equity      5.90    5.12    6.07    5.97    3.61 
Core return on equity (2)  (A/E)   8.09    5.35    7.67    7.00    8.09 
Core return on tangible common equity (2)(5)  (A+O)/(G)   13.12    8.74    12.21    11.44    13.21 
Efficiency ratio (2)(6)  (C-O)/(B+M+P)   53.66    53.37    56.41    59.54    54.88 
Net interest margin      3.11    3.22    3.19    3.17    3.41 
                             
Supplementary data (in thousands)                            
Tax benefit on tax-credit investments (7)  (M)  $2,503   $2,382   $2,381   $684   $1,787 
Non-interest income charge on tax-credit investments (8)  (N)   (1,996)   (1,942)   (1,938)   (579)   (1,610)
Net income on tax-credit investments  (M+N)   507    440    443    105    177 
                             
Intangible amortization  (O)  $1,582   $1,526   $1,475   $1,200   $1,202 
Fully taxable equivalent income adjustment  (P)   1,934    1,826    1,882    1,809    1,763 

 

(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 Years Ended 
      Dec. 31,   Dec. 31, 
(Dollars in thousands)     2019   2018 
Net income     $97,450   $105,765 
Adj: Net securities(gains)/losses (1)      (4,389)   3,719 
Adj: Merger and acquisition expenses      18,733    8,930 
Adj: Restructuring expense and other      9,313    1,362 
Adj: Legal settlements      -    3,000 
Adj: Systems vendor restructuring costs      -    8,379 
Adj: Loss from discontinued operations before income taxes      5,539    4,767 
Adj: Income taxes      (7,799)   (7,102)
Total core income (2)  (A)  $118,847   $128,820 
              
Total revenue from continuing operations     $449,260   $430,524 
Adj: Net securities(gains)/losses (1)      (4,389)   3,719 
Adj: Net (gains) on sale of business operations and assets      -    (460)
Total core revenue (2)  (B)  $444,871   $433,783 
Total non-interest expense from continuing operations     $289,857   $266,893 
Less: Merger, restructuring and other expense (see above)      (28,046)   (10,752)
Less: Legal settlements      -    (3,000)
Less: Systems vendor restructuring costs      -    (8,379)
Core non-interest expense (2)  (C)  $261,811   $244,762 
              
(in millions, except per share data)             
Total average assets  (D)  $12,961   $11,769 
Total average shareholders' equity  (E)   1,694    1,546 
Total average tangible shareholders' equity (2)  (F)   1,116    991 
Total average tangible common shareholders' equity (2)  (G)   1,076    950 
Total tangible shareholders' equity, period-end (2)(3)  (H)   1,159    1,001 
Total tangible common shareholders' equity, period-end (2)(3)  (I)   1,119    961 
Total tangible assets, period-end (2)(3)  (J)   12,613    11,660 
              
Total common shares outstanding, period-end (thousands)  (K)   49,585    45,417 
Average diluted shares outstanding (thousands)  (L)   49,421    46,231 
              
Core earnings per common share, diluted (2)  (A/L)  $2.40   $2.79 
Tangible book value per common share, period-end (2)  (I/K)   22.56    21.15 
Total tangible shareholders' equity/total tangible assets (2)  (H)/(J)   9.19    8.59 
              
Performance ratios (4)             
GAAP return on assets      0.75%   0.90%
Core return on assets (2)  (A/D)   0.93    1.12 
GAAP return on equity      5.75    6.84 
Core return on equity (2)  (A/E)   7.01    8.33 
Core return on tangible common equity (2)(5)  (A+O)/(G)   11.35    13.84 
Efficiency ratio (2)(6)  (C-O)/(B+M+P)   55.63    53.64 
Net interest margin      3.17    3.40 
              
Supplementary data             
Tax benefit on tax-credit investments (7)  (M)  $7,950   $5,876 
Non-interest income charge on tax-credit investments (8)  (N)   (6,455)   (4,822)
Net income on tax-credit investments  (M+N)   1,495    1,054 
              
Intangible amortization  (O)   5,783    4,934 
Fully taxable equivalent income adjustment  (P)   7,451    7,423 

 

(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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