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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 26, 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 2.02Results of Operations and Financial Condition

 

On October 26, 2020, Berkshire Hills Bancorp, Inc. (the “Company”), the holding company for Berkshire Bank (the “Bank”), announced its financial results for the quarter ended September 30, 2020. 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 27, 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 November 3, 2020. The webcast will be available on the Company’s website at ir.berkshirebank.com for an extended period of time.

 

Item 7.01Regulation FD Disclosure

 

During the conference call, the Company discussed that it is well along in a strategic analysis to rationalize its infrastructure footprint, including the branch office network, corporate real estate, and other operational adjustments to its business model.  It is also analyzing cost save opportunities arising from work from home as well as changes in procurement processes in the current environment.  The Company’s goal is to reduce annualized expenses by $10-15 million by the second half of 2021.  The Company expects to provide more information about these strategies in the coming months.

 

The Company made available slides for a presentation that the Company utilized in connection with its conference call.  A copy of the presentation can be found on the Company’s website at ir.berkshirebank.com.

 

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 26, 2020
       
  104.1   Cover Page for this Current Report on Form 8-K, 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: October 27, 2020 By:   /s/ Wm. Gordon Prescott
   

Wm. Gordon Prescott

Executive Vice President and

General Counsel

 

 

 

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit 99.1

 

 

Berkshire Hills Announces Third Quarter Results

 

BOSTON, October 26, 2020 - Berkshire Hills Bancorp, Inc. (NYSE: BHLB) today announced third quarter net income of $21 million, or $0.42 per share, in 2020 compared to $23 million, or $0.44 per share, in 2019. The non-GAAP measure of core earnings totaled $26 million, or $0.53 per share, in the third quarter of 2020 compared to $24 million, or $0.46, per share in the third quarter of 2019. Compared to the linked quarter, results benefited from higher revenue and lower expense as the Company continues to adjust operations to improve operating profitability.

 

THIRD QUARTER FINANCIAL HIGHLIGHTS (Changes are compared to the prior quarter. Measures identified as non-GAAP are reconciled on pages F-9 and F-10)

 

·Revenue increased by 2%
·Fee income increased by 9%
·Non-interest expense decreased by 88%, while core non-interest expense decreased by 4% (non-GAAP measure which excludes second quarter goodwill impairment charge)
·Efficiency ratio improved to 65% from 71% (non-GAAP measure)
·Equity/assets ratio improved to 9.3% from 8.9%
·Tangible equity/tangible assets ratio improved to 9.1% from 8.6% (non-GAAP measure)
·0.27% annualized net charge-offs/loans
·0.39% non-performing assets/assets

 

Acting CEO and President Sean Gray stated, “In the first half of the year, our priority was to quickly address the needs of our team members, customers, and communities being impacted by COVID-19. Starting in the third quarter, we began normalizing our operations and nearly returning to regular retail hours, while continuing to support higher digital transaction volumes. During the quarter, we continued our focus on managing our expenses and further strengthening our capital and liquidity metrics. We’re working closely with our borrowers as they progress in normalizing their operations and meeting their credit obligations. This is reflected in our stable loan performance and resumption of regular payment schedules for most of the borrowers who initially requested deferrals at the outset of the pandemic.”

 

Mr. Gray concluded, “Berkshire is evolving and adapting to the current environment, by having made investments that will support our customers and our Company today and into the future. We recently launched a best-in-class digital account opening experience that will extend our market outreach, improve customer experience, reduce fraud and allow us to operate more cost effectively. This is another step in building a 21st-century community bank that provides everyone equal access to the products and services they need to bank with dignity, achieve upward economic mobility and live healthier financial lives.”

 

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In addition to introducing its new digital account opening experience, the Company promoted Jason White, a recent Boston area CIO of the Year winner, to EVP- Chief Information Officer. The Company also announced the promotions of two leaders to the role of Regional President. Wealth Management Director Kate Hersey now leads the Boston region and Foundation Director Lori Gazzillo Kiely now leads the Berkshire County region. Now half of those holding the title of Regional President are women, furthering Berkshire’s work in support of its Be FIRST Commitment. Berkshire Bank has also been recognized with the North American Inspiring Workplaces Award.

 

FINANCIAL CONDITION

 

Berkshire’s balance sheet continued to strengthen during the most recent quarter. Total assets decreased by approximately $450 million, or 3%, to $12.6 billion in the third quarter of 2020. This was primarily due to a $388 million, or 4%, decrease in total loans reflecting continued runoff in all major loan categories. The biggest change was a $198 million, or 9%, decrease in residential mortgage balances due to accelerated prepayments in the low interest rate environment. Commercial loans outstanding included $708 million in Paycheck Protection Program (“PPP”) loans, which were stable from the prior quarter-end. Total deposits decreased by $309 million, or 3%, to $10.5 billion primarily due to a $270 million decrease in brokered balances to $814 million. Other deposit balances shifted from higher rate maturing time deposits into non-maturity products due to current low interest rates. This contributed to a decrease in the cost of deposits to 0.61% from 0.79%. Wholesale funds decreased to $1.5 billion from $1.9 billion during the quarter. Retained earnings increased book value to $23.03 per common share and the non-GAAP measure of tangible book value to $22.22 per common share. Capital metrics also improved due to the earnings benefit and reduction in total assets. The Company has received notice for the conversion of its remaining outstanding preferred stock to common stock, which is not expected to have a material impact on the Company’s financial condition and per share metrics.

 

Total delinquent accruing loans decreased to 0.45% of loans from 0.51% of loans during the most recent quarter, while non-accruing loans increased to 0.53% from 0.48%. Year-to-date net loan charge-offs measuring 0.29% of total loans remained below the levels recorded for the same period in 2019. Middle market commercial loan modifications have included an underwriting review and assessment of accrual status. Loans with payment modifications are expected to decrease further in the fourth quarter from levels previously reported. The allowance for credit losses on loans was little changed, measuring 1.50% of total loans at quarter-end, and 1.62% of loans excluding government-guaranteed PPP loans.

 

RESULTS OF OPERATIONS

 

Berkshire’s operating profitability strengthened during the most recent quarter. Berkshire reported third quarter 2020 GAAP EPS of $0.42 per share. The Company’s non-GAAP measure of core EPS totaled $0.53 per share. Measures of pre-tax pre-provision net revenue (“PPNR”) also improved. Non-core charges primarily consisted of costs related to executive separation expense, together with losses on discontinued operations and securities.

 

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Operating results were improved from the prior quarter due to higher revenues and lower expenses. Fee income growth of 9% primarily reflected higher deposit fees as transaction volumes increased. Non-interest income also benefited from recovery in financial instrument fair value adjustments following negative pandemic impacts in the first half of the year. Net interest income decreased by 1% in the third quarter due primarily to loan runoff. The net interest margin was little changed at 2.61%, as loan yields and deposit costs both declined due to the ongoing low interest rate environment.

 

Third quarter results benefited from lower operating expenses in part because second quarter expenses were elevated by $2.6 million in one-time awards accrued to compensate staff for expediting PPP loan processing to support businesses and paychecks during the economic lockdowns. Other compensation costs were also reduced during the quarter. The efficiency ratio, a non-GAAP financial measure, improved to 65% from 71% as a result of these improvements in revenue and expenses. Full time equivalent staff in continuing operations totaled 1,507 positions at period-end, compared to 1,550 positions at the start of the year. The credit loss provision decreased to $1 million, reflecting an improved economic outlook after the original pandemic downturn was recognized with high credit loss provisions in the first half of the year. The effective tax rate was a benefit of 4% due primarily to the impact of first half of the year expenses lowering the taxable income for the year.

 

BE FIRST CORPORATE RESPONSIBILITY UPDATE

 

Berkshire is committed to 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 and in its most recent Corporate Responsibility Report.

 

Key developments in the quarter include:

 

·Investing in Community Recovery & Resiliency: As people and small businesses in neighborhoods across the Company’s footprint struggle through the impacts of the COVID-19 pandemic, Berkshire’s Foundation is responding and has provided nearly $3 million in grant funding to more than 400 organizations through the end of the third quarter. These critical investments are ensuring access to resources for underserved populations to become college and career ready, ensuring quality affordable housing and supporting small business growth and entrepreneurship. In addition, 75% of Berkshire’s employees, through its award-winning XTEAM volunteer program contributed more than 6,000 hours of service.

 

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·Transitioning to a Low-Carbon Future: Berkshire is working towards transitioning its electricity to 100% renewable sources. The Company announced an agreement with Nexamp to subscribe to a community solar project in Massachusetts, lowering its carbon footprint and increasing the percentage of its energy supply procured from renewables while also reducing costs.

 

·Enhancing Environmental & Social Governance Practices: The Company completed updates to its Responsible & Sustainable Business Policy to improve the quality and clarity of its policy and disclosure. The update included new language to address Fraud Reporting & Suspicious Activity as well as Conflict of Interest. In addition, the Company enhanced its Social and Environmental Credit Risk Framework by incorporating new policy and procedure into the existing Commercial Loan Policy to more effectively mitigate the social and environmental risks associated with highly sensitive industries.

 

·Enhancing Protected Leave For Gender-Based Violence: Under the leadership of EVP, Chief Human Resources & Culture Officer Jackie Courtwright and through a unique collaboration with the non-profit FreeFrom, Berkshire enhanced protections for its employees experiencing gender-based violence by providing 15 days of paid leave a year to deal with the consequences of intimate partner violence, sexual assault, and human trafficking. This policy allows employees the ability to seek medical care, attend court proceedings, and relocate – all without missing a paycheck or depleting their accrued sick or vacation days.

 

·Recognizing Impact & Results: Berkshire was named the winner of the North American Inspiring Workplaces Award for its diversity and culture programming recognizing the efforts of its Be FIRST Commitment and internal diversity work. The Company was also named one of Massachusetts Most Charitable Companies by the Boston Business Journal for the eighth consecutive year.

 

INVESTOR CONFERENCE CALL AND INVESTOR PRESENTATION

 

Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Tuesday, October 27, 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: https://dpregister.com/sreg/10148654/da6d986a50. 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. Participants are requested to dial-in a few minutes before the scheduled start of the call. A telephone replay of the call will be available through Tuesday, November 3, 2020 by dialing 877-344-7529 and entering access number 10148654. The webcast will be available on Berkshire's website for an extended period of time.

 

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ABOUT BERKSHIRE HILLS BANCORP

 

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 $12.6 billion in assets. Berkshire Bank serves the underbanked through the Reevx LabsTM platform.

 

FORWARD LOOKING STATEMENTS

 

This document contains “forward-looking statements” within the meaning of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. You can identify these statements from the use of the words “may,” “will,” “should,” “could,” “would,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target” and similar expressions. There are many factors that could cause actual results to differ significantly from expectations described in the forward-looking statements. For a discussion of such factors, please see Berkshire’s most recent reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission and available on the SEC’s website at www.sec.gov.

 

Further, given its ongoing and dynamic nature, it is difficult to predict what continued effects the COVID-19 pandemic will have on our business and results of operations. The pandemic and the related local and national economic disruption may result in a continued decline in demand for our products and services; increased levels of loan delinquencies, problem assets and foreclosures; an increase in our allowance for loan losses; a decline in the value of loan collateral, including real estate; a greater decline in the yield on our interest-earning assets than the decline in the cost of our interest-bearing liabilities; and increased cybersecurity risks, as employees increasingly work remotely.

 

Accordingly, you should not place undue reliance on forward-looking statements, which reflect our expectations only as of the date of this document. Berkshire does not undertake any obligation to update forward-looking statements.

 

NON-GAAP FINANCIAL MEASURES

 

This document contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles (“GAAP”). These non-GAAP measures provide supplemental perspectives on operating results, performance trends, and financial condition. They are not a substitute for GAAP measures; they should be read and used in conjunction with the Company’s GAAP financial information. A reconciliation of non-GAAP financial measures to GAAP measures is included on pages F-9 and F-10 in the accompanying financial tables. In all cases, it should be understood that non-GAAP per share measures do not depict amounts that accrue directly to the benefit of shareholders.

 

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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, goodwill impairment, and discontinued operations. Discontinued operations are the Company’s national mortgage banking operations which the Company is exiting pursuant to a sales agreement. Merger costs consist primarily of severance/benefit related expenses, contract termination costs, systems conversion costs, variable compensation expenses, and professional fees. Merger costs in 2019 were primarily related to the acquisition of 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 eight branches for the full year of 2019. The Company recorded a full impairment its goodwill in the second quarter of 2020, which was classified as noncore. Noncore charges in the third quarter of 2020 were primarily related to executive separation expense, which was principally the result of the separation with the CEO.

 

The Company has introduced the measure of Core Pre-Provision Net Revenue (“Core PPNR”) which measures core income before credit loss provision and tax expense. Due to the non-cash projections introduced into the calculation of income by the new CECL accounting standard, the investment community is placing more emphasis on PPNR in order to measure the results of operations and to compare them across banks which may have widely varying estimates of future economic conditions that affect their provision expense and reported earnings. The Company also calculates core PPNR/assets in order to utilize the PPNR measure in assessing its comparative operating profitability.

 

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 Contacts: 

John Lovallo 

Email: [email protected] 

Tel: (917) 612-8419

  

Cate Cronin 

Email: [email protected] 

Tel: (202) 738-7302

 

 

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 Operations
   
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, 
   2020   2020   2020   2019   2019 
                     
PER SHARE DATA                         
Net earnings/(loss) per common share, diluted  $0.42   $(10.93)  $(0.40)  $0.51   $0.44 
Core earnings/(loss) per common share, diluted (2)   0.53    (0.13)   (0.07)   0.70    0.46 
Total book value per common share   23.03    22.79    33.90    34.65    34.36 
Tangible book value per common share (2)   22.22    21.94    22.00    22.56    22.42 
Market price at period end   10.11    11.02    14.86    32.88    29.29 
Dividends per common share   0.12    0.24    0.24    0.23    0.23 
Dividends per preferred share   0.24    0.48    0.48    0.46    0.46 
                          
PERFORMANCE RATIOS (3)                         
Return on assets   0.67%   (16.38)%   (0.62)%   0.78%   0.67%
Core return on assets (2)   0.84    (0.19)   (0.11)   1.08    0.71 
Return on equity   7.50    (131.17)   (4.58)   5.90    5.12 
Core return on equity (2)   9.33    (1.54)   (0.84)   8.09    5.35 
Core return on tangible common equity (2)   10.27    (2.05)   (0.94)   13.12    8.74 
Net interest margin, fully taxable equivalent (FTE) (4)(5)   2.61    2.62    3.04    3.11    3.22 
Fee income/Net interest and fee income from continuing operations   19.82    18.45    15.46    18.11    17.61 
Efficiency ratio (2)   65.39    71.01    66.92    53.66    53.37 
                          
CHANGE (Year-to-date)                         
Total commercial loans (organic, annualized)   5%   12%   (5)%   (7)%   (9)%
Total loans (organic, annualized)   (7)   (3)   (8)   (9)   (9)
Total deposits (organic, annualized)   2    9    (10)   0    2 
Total net revenues from continuing operations (compared to prior year)   (15)   (14)   (14)   4    4 
(Loss)/earnings per common share (compared to prior year)   (847)   (1,200)   (178)   (14)   (26)
Core earnings/(loss) per common share (compared to prior year)(2)   (81)   (116)   (112)   (14)   (18)
                          
FINANCIAL DATA (in millions)                         
Total assets  $12,614   $13,063   $13,122   $13,216   $13,532 
Total earning assets   11,832    12,267    11,785    11,916    12,174 
Total securities   1,988    1,882    1,837    1,770    1,861 
Total loans   8,982    9,370    9,303    9,502    9,719 
Allowance for credit losses   134    139    114    64    62 
Total intangible assets   41    42    598    599    602 
Total deposits   10,467    10,776    10,072    10,336    10,423 
Total shareholders' equity   1,179    1,164    1,722    1,759    1,772 
Net income/(loss)   21.2    (549.4)   (19.9)   25.8    22.6 
Core income/(loss) (2)   26.4    (6.5)   (3.6)   35.3    23.7 
Purchase accounting accretion   2.5    2.1    3.1    5.1    4.8 
Goodwill impairment   -    553.8    -    -    - 
                          
ASSET QUALITY AND CONDITION RATIOS                         
Net charge-offs (current quarter annualized)/average loans   0.27%   0.17%   0.45%   0.17%   0.92%
Total non-performing assets/total assets   0.39    0.36    0.40    0.31    0.28 
Allowance for credit losses/total loans   1.50    1.49    1.22    0.67    0.64 
Loans/deposits   86    87    92    92    93 
Shareholders' equity to total assets   9.35    8.91    13.13    13.31    13.10 
Tangible shareholders' equity to tangible assets (2)   9.05    8.61    8.98    9.19    9.05 

 

(1)Reconciliations of non-GAAP financial measures, including all references to core and tangible amounts, appear on pages F-9 and F-10.
(2)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.
(3)All performance ratios are annualized and are based on average balance sheet amounts, where applicable.
(4)Fully taxable equivalent considers the impact of tax advantaged investment securities and loans.
(5)The effect of purchase accounting accretion for loans, time deposits, and borrowings on the quarterly net interest margin was an increase in all quarters, which is shown sequentially as follows beginning with the most recent quarter and ending with the earliest quarter: 0.08%, 0.07%, 0.11%, 0.17%, 0.16%.
 F-1 

 

 

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-2)

 

 

   September 30,   June 30,   December 31, 
(in thousands)  2020   2020   2019 
Assets               
Cash and due from banks  $90,537   $102,105   $105,447 
Short-term investments   844,755    942,047    474,382 
Total cash and short-term investments   935,292    1,044,152    579,829 
                
Trading security   9,525    9,519    10,769 
Marketable equity securities, at fair value   31,993    33,263    41,556 
Securities available for sale, at fair value   1,575,289    1,458,036    1,311,555 
Securities held to maturity, at amortized cost   330,197    334,895    357,979 
Federal Home Loan Bank stock and other restricted securities   40,520    46,139    48,019 
Total securities   1,987,524    1,881,852    1,769,878 
Less: Allowance for credit losses on investment securities   (96)   (113)   - 
Net securities   1,987,428    1,881,739    1,769,878 
                
Loans held for sale   15,854    62,881    36,664 
                
Total loans   8,982,336    9,370,271    9,502,428 
Less: Allowance for credit losses on loans   (134,414)   (139,394)   (63,575)
Net loans   8,847,922    9,230,877    9,438,853 
                
Premises and equipment, net   117,116    118,722    120,398 
Other real estate owned   40    40    - 
Goodwill   -    -    553,762 
Other intangible assets   40,947    42,477    45,615 
Cash surrender value of bank-owned life insurance   231,217    229,812    227,894 
Other assets   425,675    430,592    288,945 
Assets from discontinued operations   12,966    21,692    154,132 
Total assets  $12,614,457   $13,062,984   $13,215,970 
                
Liabilities and shareholders' equity               
Demand deposits  $2,585,173   $2,573,786   $1,884,100 
NOW and other deposits   1,522,289    1,453,397    1,492,569 
Money market deposits   2,516,168    2,525,761    2,528,656 
Savings deposits   952,836    932,243    841,283 
Time deposits   2,890,093    3,290,721    3,589,369 
Total deposits   10,466,559    10,775,908    10,335,977 
                
Senior borrowings   605,483    719,638    730,501 
Subordinated borrowings   97,223    97,165    97,049 
Total borrowings   702,706    816,803    827,550 
                
Other liabilities   251,220    280,843    267,398 
Liabilities from discontinued operations   14,947    25,290    26,481 
Total liabilities   11,435,432    11,898,844    11,457,406 
                
Preferred shareholders' equity   20,325    20,325    40,633 
Common shareholders' equity   1,158,700    1,143,815    1,717,931 
Total shareholders' equity   1,179,025    1,164,140    1,758,564 
Total liabilities and shareholders' equity  $12,614,457   $13,062,984   $13,215,970 
                
Net common shares outstanding   50,306    50,192    49,585 

 

 F-2 

 

 

BERKSHIRE HILLS BANCORP, INC.

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

 

 

LOAN ANALYSIS

 

               Annualized Growth % 
(in millions)  September 30, 2020
Balance
   June 30, 2020
Balance
   December 31, 2019
Balance
   Quarter ended
September 30, 2020
   Year to Date 
                     
Total commercial real estate  $3,943   $3,996   $4,034    (5)%   (3)%
Commercial and industrial loans   2,147    2,222    1,841    (14)   22 
Total commercial loans   6,090    6,218    5,875    (8)   5 
                          
Total residential mortgages   2,122    2,320    2,685    (34)   (28)
                          
Home equity   350    364    381    (15)   (11)
Auto and other   420    468    561    (41)   (34)
Total consumer loans   770    832    942    (30)   (24)
Total loans  $8,982   $9,370   $9,502    (17)%   (7)%

 

 

DEPOSIT ANALYSIS
                     
               Annualized Growth % 
(in millions)  September 30, 2020
Balance
   June 30, 2020
Balance
   December 31, 2019
Balance
   Quarter ended
September 30, 2020
   Year to Date 
Demand  $2,585   $2,574   $1,884    2%   50%
NOW and other   1,523    1,453    1,493    19    3 
Money market   2,516    2,526    2,529    (2)   (1)
Savings   953    932    841    9    18 
Time deposits   2,890    3,291    3,589    (49)   (26)
Total deposits  $10,467   $10,776   $10,336    (11)%   2%

 

 F-3 

 

 

BERKSHIRE HILLS BANCORP, INC.

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

 

 

   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
(in thousands, except per share data)  2020   2019   2020   2019 
Interest and dividend income from continuing operations                    
Loans  $85,688   $118,371   $278,259   $338,012 
Securities and other   12,080    15,354    39,392    46,060 
Total interest and dividend income   97,768    133,725    317,651    384,072 
Interest expense from continuing operations                    
Deposits   16,070    31,501    60,460    86,396 
Borrowings   4,643    5,353    16,118    23,751 
Total interest expense   20,713    36,854    76,578    110,147 
Net interest income from continuing operations   77,055    96,871    241,073    273,925 
Non-interest income from continuing operations                    
Mortgage banking originations   2,044    292    4,647    616 
Loan related income   4,988    6,493    12,007    17,318 
Deposit related fees   7,062    8,705    20,382    23,088 
Insurance commissions and fees   2,660    2,895    8,451    8,486 
Wealth management fees   2,299    2,325    6,926    7,114 
Total fee income   19,053    20,710    52,413    56,622 
Other   1,927    609    492    1,363 
Securities (losses)/gains, net   (1,017)   87    (9,925)   2,655 
Total non-interest income   19,963    21,406    42,980    60,640 
Total net revenue from continuing operations   97,018    118,277    284,053    334,565 
Provision for credit losses   1,200    22,600    65,878    30,068 
Non-interest expense from continuing operations                    
Compensation and benefits   34,809    37,272    111,121    105,551 
Occupancy and equipment   11,084    9,893    32,411    28,788 
Technology and communications   8,540    6,849    24,376    19,821 
Marketing and promotion   1,002    1,006    3,069    3,428 
Professional services   2,567    2,282    7,852    8,510 
FDIC premiums and assessments   1,518    -    4,658    3,390 
Other real estate owned and foreclosures   40    150    81    150 
Amortization of intangible assets   1,530    1,526    4,668    4,201 
Goodwill impairment   -    -    553,762    - 
Merger, restructuring and other expense   5,316    4,163    5,316    22,333 
Other   6,437    7,870    21,129    23,398 
Total non-interest expense   72,843    71,011    768,443    219,570 
                     
Income/(loss) from continuing operations before income taxes  $22,975   $24,666   $(550,268)  $84,927 
Income tax (benefit)/expense   (68)   4,007    (18,194)   16,042 
Net income/(loss) from continuing operations  $23,043   $20,659   $(532,074)  $68,885 
                     
(Loss)/income from discontinued operations before income taxes  $(2,477)  $2,747   $(21,741)  $3,975 
Income tax (benefit)/expense   (659)   790    (5,789)   1,161 
Net (loss)/income from discontinued operations  $(1,818)  $1,957   $(15,952)  $2,814 
                     
Net income/(loss)  $21,225   $22,616   $(548,026)  $71,699 
Preferred stock dividend   58    240    313    720 
Income/(loss) available to common shareholders  $21,167   $22,376   $(548,339)  $70,979 
                     
Basic earnings/(loss) per common share:                    
Continuing Operations  $0.46   $0.40   $(10.58)  $1.41 
Discontinued Operations   (0.04)   0.04    (0.32)   0.06 
Total  $0.42   $0.44   $(10.90)  $1.47 
                     
Diluted earnings/(loss) per common share:                    
Continuing Operations  $0.46   $0.40   $(10.58)  $1.40 
Discontinued Operations   (0.04)   0.04    (0.32)   0.06 
Total  $0.42   $0.44   $(10.90)  $1.46 
                     
Weighted average shares outstanding:                    
Basic   50,329    51,422    50,256    48,846 
Diluted   50,329    51,545    50,256    48,987 


 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)  2020   2020   2020   2019   2019 
Interest and dividend income from continuing operations                         
Loans  $85,688   $90,876   $101,695   $110,915   $118,371 
Securities and other   12,080    12,812    14,500    14,526    15,354 
Total interest and dividend income   97,768    103,688    116,195    125,441    133,725 
Interest expense from continuing operations                         
Deposits   16,070    20,552    23,838    28,797    31,501 
Borrowings   4,643    5,546    5,929    5,311    5,353 
Total interest expense   20,713    26,098    29,767    34,108    36,854 
Net interest income from continuing operations   77,055    77,590    86,428    91,333    96,871 
Non-interest income from continuing operations                         
Mortgage banking originations   2,044    1,644    959    172    292 
Loan related income   4,988    5,717    1,302    7,056    6,493 
Deposit related fees   7,062    5,373    7,947    8,264    8,705 
Insurance commissions and fees   2,660    2,767    3,024    2,471    2,895 
Wealth management fees   2,299    2,057    2,570    2,239    2,325 
Total fee income   19,053    17,558    15,802    20,202    20,710 
Other   1,927    (999)   (436)   75    609 
Securities (losses)/gains, net   (1,017)   822    (9,730)   1,734    87 
Gain on sale of business operations and assets, net   -    -    -    1,351    - 
Total non-interest income   19,963    17,381    5,636    23,362    21,406 
Total net revenue from continuing operations   97,018    94,971    92,064    114,695    118,277 
Provision for credit losses   1,200    29,871    34,807    5,351    22,600 
Non-interest expense from continuing operations                         
Compensation and benefits   34,809    39,403    36,909    35,355    37,272 
Occupancy and equipment   11,084    10,195    11,132    10,798    9,893 
Technology and communications   8,540    7,755    8,081    6,702    6,849 
Marketing and promotion   1,002    902    1,165    1,046    1,006 
Professional services   2,567    2,565    2,720    2,288    2,282 
FDIC premiums and assessments   1,518    1,658    1,482    471    - 
Other real estate owned and foreclosures   40    14    27    4    150 
Amortization of intangible assets   1,530    1,558    1,580    1,582    1,526 
Goodwill impairment   -    553,762    -    -    - 
Merger, restructuring and other expense   5,316    -    -    5,713    4,163 
Other   6,437    6,463    8,229    6,328    7,870 
Total non-interest expense   72,843    624,275    71,325    70,287    71,011 
                          
Income/(loss) from continuing operations before income taxes  $22,975   $(559,175)  $(14,068)  $39,057   $24,666 
Income tax (benefit)/expense   (68)   (16,130)   (1,996)   6,421    4,007 
Net income/(loss) from continuing operations  $23,043   $(543,045)  $(12,072)  $32,636   $20,659 
                          
(Loss)/income from discontinued operations before income taxes  $(2,477)  $(8,635)  $(10,629)  $(9,514)  $2,747 
Income tax (benefit)/expense   (659)   (2,299)   (2,831)   (2,629)   790 
Net (loss)/income from discontinued operations  $(1,818)  $(6,336)  $(7,798)  $(6,885)  $1,957 
                          
Net income/(loss)  $21,225   $(549,381)  $(19,870)  $25,751   $22,616 
Preferred stock dividend   58    130    125    240    240 
Income/(loss) available to common shareholders  $21,167   $(549,511)  $(19,995)  $25,511   $22,376 
                          
                          
Basic earnings/(loss) per common share:                         
Continuing Operations  $0.46   $(10.80)  $(0.24)  $0.65   $0.40 
Discontinued Operations   (0.04)   (0.13)   (0.16)   (0.14)   0.04 
Total  $0.42   $(10.93)  $(0.40)  $0.51   $0.44 
                          
Diluted earnings/(loss) per common share:                         
Continuing Operations  $0.46   $(10.80)  $(0.24)  $0.65   $0.40 
Discontinued Operations   (0.04)   (0.13)   (0.16)   (0.14)   0.04 
Total  $0.42   $(10.93)  $(0.40)  $0.51   $0.44 
                          
Weighted average shares outstanding:                         
Basic   50,329    50,246    50,204    50,494    51,422 
Diluted   50,329    50,246    50,204    50,702    51,545 

 

 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, 
   2020   2020   2020   2019   2019 
                     
Earning assets                         
Loans:                         
Commercial real estate   3.52%   3.78%   4.41%   4.80%   4.92%
Commercial and industrial loans   3.88    4.02    5.03    5.35    5.58 
Residential mortgages   3.78    3.78    3.77    3.61    3.73 
Consumer loans   3.59    3.72    4.28    4.38    4.55 
Total loans   3.68    3.83    4.33    4.52    4.67 
Securities   2.78    3.07    3.32    3.31    3.41 
Short-term investments and loans held for sale   0.21    0.50    1.78    3.15    4.11 
Total earning assets   3.31    3.50    4.08    4.27    4.45 
                          
Funding liabilities                         
Deposits:                         
NOW and other   0.24    0.30    0.46    0.54    0.61 
Money market   0.38    0.58    0.98    1.18    1.27 
Savings   0.10    0.10    0.13    0.14    0.13 
Time   1.63    1.84    1.87    1.97    2.02 
Total interest-bearing deposits   0.81    1.01    1.18    1.35    1.43 
Borrowings   2.36    2.38    2.60    2.77    3.12 
Total interest-bearing liabilities   0.95    1.16    1.33    1.48    1.57 
                          
Net interest spread   2.36    2.34    2.75    2.79    2.88 
Net interest margin   2.61    2.62    3.04    3.11    3.22 
                          
Cost of funds (1)   0.73    0.92    1.11    1.23    1.32 
Cost of deposits   0.61    0.79    0.96    1.11    1.18 

 

 

(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)  2020   2020   2020   2019   2019 
Assets                    
Loans                    
Commercial real estate  $3,986,424   $4,005,018   $4,000,461   $4,056,244   $3,998,144 
Commercial and industrial loans   2,191,749    2,152,820    1,795,813    1,768,039    1,951,205 
Residential mortgages   2,224,132    2,452,622    2,654,224    2,758,676    2,849,216 
Consumer loans   800,824    865,318    921,810    974,889    1,035,893 
Total loans (1)    9,203,129    9,475,778    9,372,308    9,557,848    9,834,458 
Securities (2)   1,873,533    1,793,381    1,744,635    1,752,968    1,846,985 
Short-term investments and loans held for sale   766,447    697,138    374,894    444,622    309,897 
Total earning assets (3)   11,843,109    11,966,297    11,491,837    11,755,438    11,991,340 
Goodwill and other intangible assets   41,460    590,672    598,347    601,192    603,762 
Other assets   759,534    751,702    663,056    737,396    668,218 
Assets from discontinued operations   16,041    109,923    98,528    176,251    204,339 
Total assets  $12,660,144   $13,418,594   $12,851,768   $13,270,277   $13,467,659 
                          
Liabilities and shareholders' equity                         
Deposits                         
NOW and other  $1,243,487   $1,183,839   $1,159,388   $1,085,485   $1,111,637 
Money market   2,673,567    2,672,066    2,752,465    2,688,766    2,624,639 
Savings   940,488    901,218    846,942    835,209    838,445 
Time   3,056,419    3,399,222    3,333,070    3,827,175    4,158,688 
Total interest-bearing deposits   7,913,961    8,156,345    8,091,865    8,436,635    8,733,409 
Borrowings   777,369    942,033    949,316    853,911    805,035 
Total interest-bearing liabilities   8,691,330    9,098,378    9,041,181    9,290,546    9,538,444 
Non-interest-bearing demand deposits   2,558,981    2,343,173    1,849,295    1,898,045    1,864,964 
Other liabilities   254,273    272,690    203,797    304,504    267,922 
Liabilities from discontinued operations   22,805    28,988    23,799    30,446    28,206 
Total liabilities   11,527,389    11,743,229    11,118,072    11,523,541    11,699,536 
                          
Preferred shareholders' equity   20,325    20,325    20,548    40,633    40,633 
Common shareholders' equity   1,112,430    1,655,040    1,713,148    1,706,103    1,727,490 
Total shareholders' equity   1,132,755    1,675,365    1,733,696    1,746,736    1,768,123 
Total liabilities and shareholders' equity  $12,660,144   $13,418,594   $12,851,768   $13,270,277   $13,467,659 
                          
                          
Supplementary data                         
Total average non-maturity deposits  $7,416,523   $7,100,296   $6,608,090   $6,507,505   $6,439,685 
Total average deposits   10,472,942    10,499,518    9,941,160    10,334,680    10,598,373 
Fully taxable equivalent income adjustment   1,512    1,580    1,824    1,934    1,826 
Total average tangible equity (4)   1,091,295    1,084,693    1,135,349    1,145,544    1,164,361 

 

 

(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)  2020   2020   2020   2019   2019 
NON-PERFORMING ASSETS                         
Non-accruing loans:                         
Commercial real estate  $14,777   $12,486   $16,938   $20,119   $15,829 
Commercial and industrial loans   15,035    15,045    18,370    11,373    12,224 
Residential mortgages   7,928    9,840    9,636    3,343    3,062 
Consumer loans   9,650    7,513    6,172    4,805    5,191 
Total non-accruing loans   47,390    44,884    51,116    39,640    36,306 
Other real estate owned   401    517    224    -    - 
Repossessed assets   1,646    1,581    1,316    858    1,003 
Total non-performing assets  $49,437   $46,982   $52,656   $40,498   $37,309 
                          
Total non-accruing loans/total loans   0.53%   0.48%   0.55%   0.42%   0.37%
Total non-performing assets/total assets   0.39%   0.36%   0.40%   0.31%   0.28%
                          
PROVISION AND ALLOWANCE FOR CREDIT LOSSES ON LOANS                         
Balance at beginning of period  $139,394   $113,510   $63,575   $62,230   $62,156 
Adoption of ASU No. 2016-13 (1)   -    -    25,434    -    - 
Balance after adoption of ASU No. 2016-13   139,394    113,510    89,009    62,230    62,156 
Charged-off loans   (7,776)   (7,274)   (12,432)   (4,485)   (23,524)
Recoveries on charged-off loans   1,580    3,259    1,958    479    998 
Net loans charged-off   (6,196)   (4,015)   (10,474)   (4,006)   (22,526)
Provision for loan credit losses   1,216    29,899    34,975    5,351    22,600 
Balance at end of period  $134,414   $139,394   $113,510   $63,575   $62,230 
                          
Allowance for credit losses/total loans   1.50%   1.49%   1.22%   0.67%   0.64%
Allowance for credit losses/non-accruing loans   284%   311%   222%   160%   171%
                          
NET LOAN CHARGE-OFFS                         
Commercial real estate  $(635)  $(1,679)  $(5,990)  $(1,419)  $(2,759)
Commercial and industrial loans   (5,551)   (1,059)   (3,728)   (1,495)   (18,850)
Residential mortgages   517    (966)   (19)   (351)   (140)
Home equity   (57)   (10)   (107)   (67)   (71)
Auto and other consumer   (470)   (301)   (630)   (674)   (706)
Total, net  $(6,196)  $(4,015)  $(10,474)  $(4,006)  $(22,526)
                          
Net charge-offs (QTD annualized)/average loans   0.27%   0.17%   0.45%   0.17%   0.92%
Net charge-offs (YTD annualized)/average loans   0.29%   0.31%   0.45%   0.35%   0.41%
                          
DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS                         
30-89 Days delinquent   0.31%   0.37%   0.43%   0.25%   0.26%
90+ Days delinquent and still accruing   0.14%   0.14%   0.05%   0.29%   0.29%
Total accruing delinquent loans   0.45%   0.51%   0.48%   0.54%   0.55%
Non-accruing loans   0.53%   0.48%   0.55%   0.42%   0.37%
Total delinquent and non-accruing loans   0.98%   0.99%   1.03%   0.96%   0.92%

 

 

(1)This balance includes $12 million of PCD confirmed losses as of January 1, 2020.              
 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)     2020   2020   2020   2019   2019 
Net income/(loss)     $21,225   $(549,381)  $(19,870)  $25,751   $22,616 
Adj: Net securities losses/(gains) (1)      1,017    (822)   9,730    (1,734)   (87)
Adj: Goodwill impairment      -    553,762    -    -    - 
Adj: Net (gains) on sale of business operations and assets      -    -    -    -    - 
Adj: Merger and acquisition expense      -    -    -    3,611    3,802 
Adj: Restructuring expense and other expense      5,316    -    -    2,102    361 
Adj: Loss/(income) from discontinued operations before income taxes      2,477    8,635    10,629    9,514    (2,747)
Adj: Income taxes      (3,611)   (18,658)   (4,134)   (3,910)   (281)
Total core income/(loss) (2)  (A)  $26,424   $(6,464)  $(3,645)  $35,334   $23,664 
                             
Total revenue from continuing operations     $97,018   $94,971   $92,064   $114,695   $118,277 
Adj: Net securities losses/(gains) (1)      1,017    (822)   9,730    (1,734)   (87)
Total core revenue (2)  (B)  $98,035   $94,149   $101,794   $112,961   $118,190 
                             
Total non-interest expense from continuing operations     $72,843   $624,275   $71,325   $70,287   $71,011 
Less: Merger, restructuring and other expense (see above)      (5,316)   -    -    (5,713)   (4,163)
Less: Goodwill impairment      -    (553,762)   -    -    - 
Core non-interest expense (2)    (C)  $67,527   $70,513   $71,325   $64,574   $66,848 
                             
Total revenue     $96,752   $90,383   $93,869   $116,860   $134,067 
Total non-interest expense      75,054    628,322    83,759    81,966    84,054 
Pre-tax, pre-provision net revenue (PPNR)     $21,698   $(537,939)  $10,110   $34,894   $50,013 
                             
Total revenue from continuing operations     $97,018   $94,971   $92,064   $114,695   $118,277 
Total non-interest expense from continuing operations      72,843    624,275    71,325    70,287    71,011 
Pre-tax, pre-provision net revenue (PPNR) from continuing operations     $24,175   $(529,304)  $20,739   $44,408   $47,266 
                             
Total core revenue (2)     $98,035   $94,149   $101,794   $112,961   $118,190 
Core non-interest expense (2)       67,527    70,513    71,325    64,574    66,848 
Core pre-tax, pre-provision net revenue (PPNR)     $30,508   $23,636   $30,469   $48,387   $51,342 
                             
(in millions, except per share data)                            
Total average assets  (D)  $12,660   $13,419   $12,852   $13,270   $13,468 
Total average shareholders' equity  (E)   1,133    1,675    1,734    1,747    1,768 
Total average tangible shareholders' equity (2)   (F)   1,091    1,085    1,135    1,146    1,164 
Total average tangible common shareholders' equity (2)   (G)   1,071    1,064    1,115    1,105    1,124 
Total tangible shareholders' equity, period-end (2)(3)  (H)   1,138    1,122    1,124    1,159    1,170 
Total tangible common shareholders' equity, period-end (2)(3)  (I)   1,118    1,101    1,104    1,119    1,130 
Total tangible assets, period-end (2)(3)  (J)   12,574    13,021    12,524    12,617    12,930 
                             
Total common shares outstanding, period-end (thousands)   (K)   50,306    50,192    50,199    49,585    50,394 
Average diluted shares outstanding (thousands)  (L)   50,329    50,246    50,204    50,702    51,545 
                             
Core earnings/(loss) per common share, diluted (2)  (A/L)  $0.53   $(0.13)  $(0.07)  $0.70   $0.46 
Tangible book value per common share, period-end (2)  (I/K)   22.22    21.94    22.00    22.56    22.42 
Total tangible shareholders' equity/total tangible assets (2)  (H)/(J)   9.05    8.61    8.98    9.19    9.05 
                             
Performance ratios (4)                            
GAAP return on assets      0.67%   (16.38)%   (0.62)%   0.78%   0.67%
Core return on assets (2)      0.84    (0.19)   (0.11)   1.08    0.71 
GAAP return on equity      7.50    (131.17)   (4.58)   5.90    5.12 
Core return on equity (2)  (A/E)   9.33    (1.54)   (0.84)   8.09    5.35 
Core return on tangible common equity (2)(5)  (A+O)/(G)   10.27    (2.05)   (0.94)   13.12    8.74 
PPNR/assets (2)      0.69    (16.04)   0.31    1.05    1.49 
Core PPNR/assets (2)      0.97    0.71    0.96    1.48    1.55 
Efficiency ratio (2)(6)   (C-O)/(B+M+P)   65.39    71.01    66.92    53.66    53.37 
Net interest margin      2.61    2.62    3.04    3.11    3.22 
                             
Supplementary data (in thousands)                            
Tax benefit on tax-credit investments (7)  (M)  $1,377   $1,379   $608   $2,503   $2,382 
Non-interest income charge on tax-credit investments (8)  (N)   (1,090)   (1,097)   (486)   (1,996)   (1,942)
Net income on tax-credit investments  (M+N)   287    282    122    507    440 
                             
Intangible amortization  (O)  $1,530   $1,558   $1,580   $1,582   $1,526 
Fully taxable equivalent income adjustment  (P)   1,512    1,580    1,824    1,934    1,826 

 

 

(1)Net securities losses/(gains) include the change in fair value of the Company's equity securities in compliance with the Company's adoption of ASU 2016-01.
(2)Non-GAAP financial measure.
(3)Total tangible shareholders' equity is computed by taking total shareholders' equity less the intangible assets at period-end. Total tangible assets is computed by taking 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/(loss) adjusted for the tax-effected amortization of intangible assets, assuming a 27% marginal rate, by tangible equity.
(6)Efficiency ratio is computed by dividing total 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)     2020   2019 
Net (loss)/income     $(548,026)  $71,699 
Adj: Net securities losses/(gains) (1)      9,925    (2,655)
Adj: Goodwill impairment      553,762    - 
Adj: Merger and acquisition expenses      -    15,122 
Adj: Restructuring expense and other      5,316    7,211 
Adj: Loss/(income) from discontinued operations before income taxes      21,741    (3,975)
Adj: Income taxes      (26,403)   (3,889)
Total core income (2)  (A)  $16,315   $83,513 
              
Total revenue from continuing operations     $284,053   $334,565 
Adj: Net securities losses/(gains) (1)      9,925    (2,655)
Total core revenue (2)  (B)  $293,978   $331,910 
Total non-interest expense from continuing operations     $768,443   $219,570 
Less: Merger, restructuring and other expense (see above)      (5,316)   (22,333)
Less: Goodwill impairment      (553,762)   - 
Core non-interest expense (2)                                      (C)  $209,365   $197,237 
              
Total revenue     $281,004   $373,630 
Total non-interest expense      787,135    254,660 
Pre-tax, pre-provision net revenue (PPNR)     $(506,131)  $118,970 
              
Total revenue from continuing operations     $284,053   $334,565 
Total non-interest expense from continuing operations      768,443    219,570 
Pre-tax, pre-provision net revenue (PPNR) from continuing operations     $(484,390)  $114,995 
              
Total core revenue (2)     $293,978   $331,910 
Core non-interest expense (2)                                          209,365    197,237 
Core pre-tax, pre-provision net revenue (PPNR)     $84,613   $134,673 
              
(in millions, except per share data)             
Total average assets  (D)  $13,001   $12,857 
Total average shareholders' equity  (E)   1,513    1,677 
Total average tangible shareholders' equity (2)                          (F)   1,104    1,106 
Total average tangible common shareholders' equity (2)                          (G)   1,083    1,066 
Total tangible shareholders' equity, period-end (2)(3)  (H)   1,138    1,170 
Total tangible common shareholders' equity, period-end (2)(3)  (I)   1,118    1,130 
Total tangible assets, period-end (2)(3)  (J)   12,574    12,930 
Total common shares outstanding, period-end (thousands)                 (K)   50,306    50,394 
Average diluted shares outstanding (thousands)  (L)   50,290    48,987 
Core earnings per common share, diluted (2)  (A/L)  $0.32   $1.70 
Tangible book value per common share, period-end (2)  (I/K)   22.22    22.42 
Total tangible shareholders' equity/total tangible assets (2)  (H)/(J)   9.05    9.05 
              
Performance ratios (4)             
GAAP return on assets      (5.63)%   0.74%
Core return on assets (2)  (A/D)   0.17    0.88 
GAAP return on equity      (48.26)   5.70 
Core return on equity (2)  (A/E)   1.44    6.64 
Core return on tangible common equity (2)(5)  (A+O)/(G)   2.39    10.74 
PPNR/assets (2)      (5.19)   1.23 
Core PPNR/assets (2)      0.87    1.40 
Efficiency ratio (2)(6)                                                                                 (C-O)/(B+M+P)   67.72    56.30 
Net interest margin      2.75    3.19 
              
Supplementary data             
Tax benefit on tax-credit investments (7)  (M)  $3,364   $5,447 
Non-interest income charge on tax-credit investments (8)  (N)   (2,673)   (4,459)
Net income on tax-credit investments  (M+N)   691    988 
              
Intangible amortization  (O)   4,668    4,201 
Fully taxable equivalent income adjustment  (P)   4,917    5,517 

  

 

(1)Net securities losses/(gains) include the change in fair value of the Company's equity securities in compliance with the Company's adoption of ASU 2016-01.
(2)Non-GAAP financial measure.
(3)Total tangible shareholders' equity is computed by taking total shareholders' equity less the intangible assets at period-end. Total tangible assets is computed by taking 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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