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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): July 29, 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 July 29, 2020, Berkshire Hills Bancorp, Inc. (the “Company”), the holding company for Berkshire Bank (the “Bank”), announced its financial results for the quarter ended June 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 July 30, 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 August 6, 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

 

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
   
 99.1News Release dated July 29, 2020

 

 

 

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: July 30, 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 Announces Second Quarter Results

 

BOSTON, July 29, 2020 - Berkshire Hills Bancorp, Inc. (NYSE: BHLB) today reported a second quarter loss due to non-cash charges related to goodwill impairment and the provision for credit losses, both stemming from the COVID-19 pandemic. These charges had no material impact on cash flow, liquidity, or regulatory capital. Berkshire generated positive cash earnings before these charges and the Bank continued to strengthen its regulatory capital ratios and liquidity while growing its loans and deposits.

 

Due to the macroeconomic impacts of the pandemic and the related decline in the value of bank stocks, including the Company’s stock, the Company wrote off the goodwill on its balance sheet, which was primarily related to past bank acquisitions. This resulted in the Company recording a $554 million non-cash goodwill impairment charge, or $11.02 per share, during the second quarter.

 

The Company also recorded a $30 million non-cash charge, or $0.59 per share, to provide for greater projected credit losses related to the pandemic, in accordance with the Current Expected Credit Losses (“CECL”) accounting methodology. Through midyear, the Company’s overall credit quality metrics remained within normal and historical industry ranges.

 

Reflecting the above charges totaling $584 million, the Company recorded a second quarter 2020 net loss of $549 million, or $10.93 per share. The Company’s core earnings, a non-GAAP financial measure which includes the $30 million credit loss provision, was a loss of $6 million, or $0.13 per share.

 

Pre-tax pre-provision net revenue from continuing operations (“PPNR”) was ($10.53). The Company’s measure of Core PPNR was $0.47 per share.  Core measures are non-GAAP financial measures of the Company's ongoing operations before impairment, discontinued operations and securities losses.  

 

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

 

·Total deposits up $704 million, or 7%
·$706 million in PPP loans outstanding at quarter-end
·Loans to deposits ratio improved to 87% from 92%
·Book value per share of $22.79; tangible book value per share of $21.94 (non-GAAP)
·Equity/assets ratio of 8.9%; tangible equity/tangible assets ratio of 8.6% (non-GAAP)

 

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·Allowance for credit losses on loans of 1.49% (1.61% excluding PPP loans)
·0.17% annualized net charge-offs/loans
·0.36% non-performing assets/assets

 

CEO Richard Marotta stated, “In a challenging environment for many of our employees, customers and the communities we serve and live in, Berkshire’s ongoing transformation into an innovative 21st century community bank has never been more relevant to our stakeholders and the Bank’s long-term opportunity. Guided by our Be FIRST principles, last quarter we continued to foster a more inclusive, innovative and supportive culture, which is positioning Berkshire to deliver a differentiated and compelling community banking experience to everyone in our communities, including those who have been traditionally underbanked.

 

“As we pursue this significant opportunity to realize our values and profitably grow, we remain diligently focused on day-to-day execution and strengthening the foundations of our business. While last quarter Berkshire recorded non-cash charges, including to write-off goodwill from past acquisitions, that were ultimately related to the pandemic, the Bank produced solid cash results in a challenging interest rate environment. We continued to strengthen our liquidity and regulatory capital metrics. We lowered our operating expenses even while incurring costs to expedite a substantial volume of PPP loans and to maintain our staff and compensation structure. We are well positioned to continue serving our communities in the current environment and to grow our core business results as public health and the economy begin to improve.”

 

Last quarter, Berkshire was committed to safely supporting its communities, and its branches are mostly back to normal operating availability. Berkshire provided borrower assistance through the federal initiatives for Paycheck Protection Program (“PPP”) loans and short-term loan payment modifications. The Bank continues to communicate closely with its borrowers, assessing the sensitivities of its exposures, and adjusting its underwriting, administration, and collections procedures as appropriate in the current environment.

 

FINANCIAL CONDITION

 

Total assets held level at $13.1 billion in the second quarter, as earning asset growth was generally offset by the impairment of goodwill. The balance of PPP loans increased to $706 million and is included in commercial and industrial loans. Net loans in other categories decreased due to elevated prepayments and decreased loan demand, reflecting the economic slowdown and higher customer liquidity including funds from government programs. Commercial loans totaling $43 million were recorded as held for sale at period-end. Reflecting higher customer liquidity, total deposits increased by $0.7 billion to $10.8 billion during the quarter, with growth concentrated in demand deposit accounts. As a result, the Company increased its holdings of short-term investments and decreased its use of borrowed funds. The Company’s liquidity is well positioned and remains adequate for all anticipated uses in all modeled liquidity stress scenarios.

 

The majority of PPP loans were originated in the second quarter to existing borrowers to provide payroll support during the pandemic shutdown. Additionally, the Company provided loan modifications in accordance with government guidelines, generally consisting of three month deferrals of principal and interest payments. Including the benefit of these programs, most problem asset related metrics only changed modestly in the first half of the year and remained within historical industry ranges, including charge-offs, delinquencies, non-accruals, troubled debt restructurings, criticized assets, and classified assets.

 

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The Company recorded a $30 million provision for credit losses in the second quarter. The allowance for credit losses on loans increased by $26 million to $139 million, measuring 1.49% of total loans, compared to 1.22% at the prior quarter-end. The allowance measured 1.61% of total loans excluding PPP balances at midyear. The increase in the allowance was mostly due to a more severe recession included in the national economic baseline forecast at midyear compared to the end of the first quarter. This took into account the progression of the COVID-19 disease as well as the benefit of government programs to support the economy.

 

As previously noted, the Company conducted a goodwill impairment assessment during the most recent quarter. The Company had a balance of $554 million in goodwill primarily from past bank acquisitions which generally consisted of an exchange of shares recorded based on stock market valuations at the time of acquisition. Due to the pandemic, industry-wide stock prices and earnings expectations have declined significantly, and the Company concluded that the goodwill balance was no longer supported by its estimate of the Company’s fair value. The entire goodwill balance was therefore written off as a non-cash expense that was deemed non-core by the Company. This charge had no material impact on cash flows, liquidity, tangible equity, or regulatory capital.

 

The PPP loans are government guaranteed and the runoff of other loan balances contributed positively to the Company’s regulatory capital ratios. The Company conducts equity stress analyses, including severe adverse pandemic loss scenarios provided by third parties, in addition to Dodd-Frank stress testing. The Company believes that its capital is well cushioned above the Well Capitalized metrics in the adverse modeling scenarios based on the assumptions utilized.

 

RESULTS OF OPERATIONS

 

Berkshire reported a second quarter 2020 GAAP net loss of $549 million, or $10.93 per share. This included an impairment charge of $554 million, or $11.02 per share, for the goodwill write-off. Pre-tax pre-provision net revenue from continuing operations (“PPNR”) measured ($529) million, or ($10.53) per share. Second quarter Core PPNR totaled $24 million, or $0.47 per share, and excludes goodwill impairment and the loss on discontinued operations. Compared to the linked quarter, Core PPNR decreased by $7 million, or $0.14 per share, due to a $9 million, or 10%, decrease in net interest income. The net interest margin decreased to 2.62% from 3.04% in the prior quarter. This primarily reflected a 0.58% decrease in the yield on earning assets related to lower short-term rates, runoff of higher fixed rate assets, and growth in lower yielding short-term investments and PPP loans. The second quarter was the first full quarter to reflect the impact of the 1.5% general decrease in short-term interest rates that occurred in the first quarter. The decline in asset yields was partially offset by a 0.17% quarter-over-quarter decrease in average deposit costs to 0.79%. The balance of net deferred PPP loan origination fees was $19 million at midyear; much of this balance is expected to be recognized in net interest income during the second half of the year. The revenue impact of lower net interest income was partially offset by a $2 million increase in fee income over the first quarter due to $3 million in mark to market charges recorded in the first quarter. Second quarter fee income benefited from higher loan origination and swap volumes, which was offset by lower deposit fee revenue due to lower activity and waived charges. The provision for credit losses decreased quarter-over-quarter to $30 million from $35 million due a decrease in total loans excluding PPP loans, and to lower net loan charge-offs.

 

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Non-interest expense increased quarter-over quarter by $553 million due to the $554 million non-cash goodwill impairment charge. Second quarter expense included $2 million in discretionary expense related to PPP loans which was mostly the result of a bonus accrual to compensate staff for expediting PPP loan processing. Full-time equivalent staff in continuing operations totaled 1,511 positions at midyear, compared to 1,550 positions at the start of the year. The Company recorded a second quarter $16 million income tax benefit from continuing operations which was mostly related to the tax-deductible portion of the goodwill write-off. The Company recorded a second quarter $6 million net after-tax loss on discontinued operations representing wind-down costs related to the sale and disposition of these operations. This loss was reduced from $8 million in the prior quarter. The Company plans to fully exit these operations by the end of 2020.

 

DIVIDEND UPDATE

 

Last quarter, the Board changed its procedure for declaring the payment of dividends. Going forward, the Company will now generally target the third month of the quarter to announce its determinations regarding dividend declarations, rather than concurrent with the earnings release.

 

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 and in its most recent Corporate Responsibility Report.

 

Key developments in the quarter include:

 

ØSupporting its People: Berkshire launched a series of employee engagement and wellness initiatives including a health and wellness resource group and is providing holistic support through its employee assistance program. In addition, the You FIRST Employee Assistance Fund, launched in May, is providing critical financial support to employees facing hardships.

 

ØHelping its Customers: As of June 30, Berkshire associates contacted over 16,000 customers to ensure they were healthy, safe and answer any financial questions. In addition, Berkshire continued to provide critical funding to small businesses, including black and brown owned enterprises and non-customers, through the Paycheck Protection Program helping nearly 5,000 organizations with approximately $706 million in loans.

 

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ØInvesting in Recovery & Resiliency: Berkshire Bank Foundation, the philanthropic arm of the bank, provided more than $1 million in COVID-19 support, exceeding its previously announced commitment in response to widespread need. Berkshire employees also came together to raise funds to support local non-profit organizations and continued providing virtual volunteer services to address community needs.

 

ØFostering Dialogue on Racial Equity: The “Reimagining America Town Hall Series,” hosted by Berkshire, featured The Future Of The Black Economy, The Future Of The Latinx Economy and How to be a Strong Ally. The town halls highlighted the significant racial injustices and economic inequities that exist in the country and affirmed Berkshire’s commitment to serving and creating economic opportunities for all members of the community, especially those in the Black and Brown communities who have been traditionally underserved by banks.

 

ØHonoring Juneteenth: The Company dedicated June 19th, also known as Juneteenth – the oldest national commemoration of the ending of slavery in the United States, as a day for intentional learning, reflection and a holiday. Bank branches closed at 2PM and employees received a “floating” day off to be used during the year. The Company also hosted a conversation for its people managers on creating safe and inclusive spaces for their teams.

 

ØLaunching ReevxLabs.com: Reevx Labs, powered by Berkshire Bank, announced the launch of its new online hub, ReevxLabs.com. Created for local communities and the people who live and work in them, ReevxLabs.com offers resources and support for emerging entrepreneurs, artists, and small non-profit organizations. The Labs operate with a commitment to banking the underbanked with dignity and a guiding belief that by disrupting the traditional barriers to resources, the Labs can build new economies that change communities and the world. The Reevx Labs ecosystem provides many ways to get involved and support movements. From utilizing the suite of socially responsible 21st century banking products, to unique programs allowing for direct contributions to local communities, Reevx Labs empowers everyone to be part of the solution.

 

ØESG Ratings Updates: The Company enhanced its Environmental, Social & Governance (ESG) disclosure scores from prominent third parties, receiving an updated rating of 41.67 from Bloomberg and an Environmental Quality Score of 2 and a Social Quality Score of 1 from ISS. Both scores reflect above average performance compared to peers.

 

INVESTOR CONFERENCE CALL AND INVESTOR PRESENTATION

 

Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Thursday, July 30, 2020 to discuss the results for the quarter and provide guidance about expected future results.  Berkshire will also place an investor presentation at its website at ir.berkshirebank.com before the conference call. Participants are encouraged to pre-register for the conference call using the following link: http://dpregister.com/10146228. Callers who pre-register will be given dial-in instructions and a unique PIN to gain immediate access to the call.  Participants may pre-register at any time prior to the call and will immediately receive simple instructions via email.  Additionally, participants may reach the registration link and access the webcast by logging in through the investor section of our website at http://ir.berkshirebank.com. Those parties who do not have internet access or are otherwise unable to pre-register for this event, may still participate at the above time by dialing 1-844-792-3726 and asking the Operator to join the Berkshire Hills Bancorp (BHLB) earnings call. 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 Thursday, August 6, 2020 by dialing 877-344-7529 and entering access number 10146228. 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 $13.1 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 page F-9 in the accompanying financial tables. In all cases, it should be understood that non-GAAP per share measures do not depict amounts that accrue directly to the benefit of shareholders.

 

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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 has introduced the measure of Core Pre-Provision Net Revenue (“Core PPNR”) to 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 per share and 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 Contact

 

Jeffrey Mathews; Communications Contact; (646) 569-5711

 

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) 
   June 30,   March 31,   Dec. 31,   Sept. 30,   June 30, 
   2020   2020   2019   2019   2019 (2) 
PER SHARE DATA                    
Net (loss)/earnings per common share, diluted  $(10.93)  $(0.40)  $0.51   $0.44   $0.52 
Core (loss)/earnings per common share, diluted (3)   (0.13)   (0.07)   0.70    0.46    0.65 
Total book value per common share   22.79    33.90    34.65    34.36    34.05 
Tangible book value per common share (3)   21.94    22.00    22.56    22.42    22.25 
Market price at period end   11.02    14.86    32.88    29.29    31.39 
Dividends per common share   0.24    0.24    0.23    0.23    0.23 
Dividends per preferred share   0.48    0.48    0.46    0.46    0.46 
                          
PERFORMANCE RATIOS (4)                         
Return on assets   (16.38)%   (0.62)%   0.78%   0.67%   0.79%
Core return on assets (3)   (0.19)   (0.11)   1.08    0.71    1.01 
Return on equity   (131.17)   (4.58)   5.90    5.12    6.07 
Core return on equity (3)   (1.54)   (0.84)   8.09    5.35    7.67 
Core return on tangible common equity (3)   (2.05)   (0.94)   13.12    8.74    12.21 
Net interest margin, fully taxable equivalent (FTE) (5)(6)   2.62    3.04    3.11    3.22    3.19 
Fee income/Net interest and fee income from continuing operations   18.45    15.46    18.11    17.61    16.20 
Efficiency ratio (3)   71.01    66.92    53.66    53.37    56.41 
                          
CHANGE (Year-to-date)                         
Total commercial loans (organic, annualized)   12%   (5)%   (7)%   (9)%   (10)%
Total loans (organic, annualized)   (3)   (8)   (9)   (9)   (9)
Total deposits (organic, annualized)   9    (10)   0    2    6 
Total net revenues from continuing operations (compared to prior year)   (14)   (14)   4    4    1 
(Loss)/earnings per common share (compared to prior year)   (1,200)   (178)   (14)   (26)   (20)
Core (loss)/earnings per common share (compared to prior year)(3)   (116)   (112)   (14)   (18)   (9)
                          
FINANCIAL DATA (in millions)                         
Total assets  $13,063   $13,122   $13,216   $13,532   $13,653 
Total earning assets   12,267    11,785    11,916    12,174    12,343 
Total securities   1,882    1,837    1,770    1,861    1,905 
Total loans   9,370    9,303    9,502    9,719    9,942 
Allowance for credit losses   139    114    64    62    62 
Total intangible assets   42    598    599    602    603 
Total deposits   10,776    10,072    10,336    10,423    10,566 
Total shareholders' equity   1,164    1,722    1,759    1,772    1,779 
Net (loss)/income   (549.4)   (19.9)   25.8    22.6    25.4 
Core (loss)/income (3)   (6.5)   (3.6)   35.3    23.7    32.1 
Purchase accounting accretion   2.1    3.1    5.1    4.8    3.2 
Goodwill impairment   553.8    -    -    -    - 
                          
ASSET QUALITY AND CONDITION RATIOS                         
Net charge-offs (current quarter annualized)/average loans   0.17%   0.45%   0.17%   0.92%   0.14%
Total non-performing assets/total assets   0.36    0.40    0.31    0.28    0.27 
Allowance for credit losses/total loans   1.49    1.22    0.67    0.64    0.63 
Loans/deposits   87    92    92    93    94 
Shareholders' equity to total assets   8.91    13.13    13.31    13.10    13.03 
Tangible shareholders' equity to tangible assets (3)   8.61    8.98    9.19    9.05    9.01 

 

 

(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: 0.07%, 0.11%, 0.17%, 0.16%, 0.11%.

 

F-1

 

 

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-2)

 

   June 30,   March 31,   December 31, 
(in thousands)  2020   2020   2019 
Assets               
Cash and due from banks  $102,105   $90,280   $105,447 
Short-term investments   942,047    515,140    474,382 
Total cash and short-term investments   1,044,152    605,420    579,829 
                
Trading security   9,519    9,829    10,769 
Marketable equity securities, at fair value   33,263    32,283    41,556 
Securities available for sale, at fair value   1,458,036    1,403,858    1,311,555 
Securities held to maturity, at amortized cost   334,895    336,802    357,979 
Federal Home Loan Bank stock and other restricted securities   46,139    54,306    48,019 
Total securities   1,881,852    1,837,078    1,769,878 
Less: Allowance for credit losses on investment securities   (113)   (141)   - 
Net securities   1,881,739    1,836,937    1,769,878 
                
Loans held for sale   62,881    4,252    36,664 
                
Total loans   9,370,271    9,303,177    9,502,428 
Less: Allowance for credit losses on loans   (139,394)   (113,510)   (63,575)
Net loans   9,230,877    9,189,667    9,438,853 
                
Premises and equipment, net   118,722    120,667    120,398 
Other real estate owned   40    224    - 
Goodwill   -    553,762    553,762 
Other intangible assets   42,477    44,035    45,615 
Cash surrender value of bank-owned life insurance   229,812    228,447    227,894 
Other assets   430,592    398,038    288,945 
Assets from discontinued operations   21,692    140,064    154,132 
Total assets  $13,062,984   $13,121,513   $13,215,970 
                
Liabilities and shareholders' equity               
Demand deposits  $2,573,786   $1,922,490   $1,884,100 
NOW and other deposits   1,453,397    1,546,626    1,492,569 
Money market deposits   2,525,761    2,391,835    2,528,656 
Savings deposits   932,243    867,024    841,283 
Time deposits   3,290,721    3,343,700    3,589,369 
Total deposits   10,775,908    10,071,675    10,335,977 
                
Senior borrowings   719,638    944,053    730,501 
Subordinated borrowings   97,165    97,107    97,049 
Total borrowings   816,803    1,041,160    827,550 
                
Other liabilities   280,843    255,846    267,398 
Liabilities from discontinued operations   25,290    30,554    26,481 
Total liabilities   11,898,844    11,399,235    11,457,406 
                
Preferred shareholders' equity   20,325    20,325    40,633 
Common shareholders' equity   1,143,815    1,701,953    1,717,931 
Total shareholders' equity   1,164,140    1,722,278    1,758,564 
Total liabilities and shareholders' equity  $13,062,984   $13,121,513   $13,215,970 
                
Net common shares outstanding   50,192    50,199    49,585 

 

 

F-2

 

 

BERKSHIRE HILLS BANCORP, INC.

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

LOAN ANALYSIS

 

               Annualized Growth % 
(in millions)  June 30, 2020
Balance
   March 31, 2020
Balance
   December 31, 2019
Balance
   Quarter ended
June 30, 2020
   Year to Date 
Total commercial real estate  $3,996   $3,986   $4,034    1%   (2)%
Commercial and industrial loans   2,222    1,812    1,841    90    42 
Total commercial loans   6,218    5,798    5,875    29    12 
                          
Total residential mortgages   2,320    2,604    2,685    (44)   (27)
                          
Home equity   364    378    381    (15)   (9)
Auto and other   468    523    561    (42)   (33)
Total consumer loans   832    901    942    (31)   (23)
Total loans  $9,370   $9,303   $9,502    3%   (3)%

 

DEPOSIT ANALYSIS

 

               Annualized Growth % 
(in millions)  June 30, 2020
Balance
   March 31, 2020
Balance
   December 31, 2019
Balance
   Quarter ended
June 30, 2020
   Year to Date 
Demand  $2,574   $1,922   $1,884    136%   73%
NOW and other   1,453    1,547    1,493    (24)   (5)
Money market   2,526    2,392    2,529    22    (0)
Savings   932    867    841    30    22 
Time deposits   3,291    3,344    3,589    (6)   (17)
Total deposits  $10,776   $10,072   $10,336    28%   9%

 

F-3

 

 

BERKSHIRE HILLS BANCORP, INC.

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

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
(in thousands, except per share data)  2020   2019   2020   2019 
Interest and dividend income from continuing operations                    
Loans  $90,876   $113,990   $192,571   $219,641 
Securities and other   12,812    15,248    27,312    30,706 
Total interest and dividend income   103,688    129,238    219,883    250,347 
Interest expense from continuing operations                    
Deposits   20,552    28,273    44,390    54,895 
Borrowings   5,546    9,370    11,475    18,398 
Total interest expense   26,098    37,643    55,865    73,293 
Net interest income from continuing operations   77,590    91,595    164,018    177,054 
Non-interest income from continuing operations                    
Mortgage banking originations   1,644    278    2,603    324 
Loan related income   5,717    4,822    7,019    10,825 
Deposit related fees   5,373    7,525    13,320    14,383 
Insurance commissions and fees   2,767    2,738    5,791    5,591 
Wealth management fees   2,057    2,348    4,627    4,789 
Total fee income   17,558    17,711    33,360    35,912 
Other   (999)   (216)   (1,435)   754 
Securities gains/(losses), net   822    17    (8,908)   2,568 
Total non-interest income   17,381    17,512    23,017    39,234 
Total net revenue from continuing operations   94,971    109,107    187,035    216,288 
Provision for credit losses   29,871    3,467    64,678    7,468 
Non-interest expense from continuing operations                    
Compensation and benefits   39,403    34,779    76,312    68,279 
Occupancy and equipment   10,195    9,449    21,327    18,895 
Technology and communications   7,755    6,715    15,836    12,972 
Marketing and promotion   902    1,155    2,067    2,422 
Professional services   2,565    3,953    5,285    6,228 
FDIC premiums and assessments   1,658    1,751    3,140    3,390 
Other real estate owned and foreclosures   14    (2)   41    - 
Amortization of intangible assets   1,558    1,475    3,138    2,675 
Goodwill impairment   553,762    -    553,762    - 
Merger, restructuring and other expense   -    11,155    -    18,170 
Other   6,463    6,138    14,692    15,528 
Total non-interest expense   624,275    76,568    695,600    148,559 
                     
(Loss)/income from continuing operations before income taxes  $(559,175)  $29,072   $(573,243)  $60,261 
Income tax (benefit)/expense   (16,130)   5,118    (18,126)   12,035 
Net (loss)/income from continuing operations  $(543,045)  $23,954   $(555,117)  $48,226 
                     
(Loss)/income from discontinued operations before income taxes  $(8,635)  $2,082   $(19,264)  $1,228 
Income tax (benefit)/expense   (2,299)   588    (5,130)   371 
Net (loss)/income from discontinued operations  $(6,336)  $1,494   $(14,134)  $857 
                     
Net (loss)/income  $(549,381)  $25,448   $(569,251)  $49,083 
Preferred stock dividend   130    240    255    480 
(Loss)/income available to common shareholders  $(549,511)  $25,208   $(569,506)  $48,603 
                     
Basic (loss)/earnings per common share:                    
Continuing Operations  $(10.80)  $0.49   $(11.05)  $1.01 
Discontinued Operations   (0.13)   0.03    (0.28)   0.02 
Total  $(10.93)  $0.52   $(11.33)  $1.03 
                     
Diluted (loss)/earnings per common share:                    
Continuing Operations  $(10.80)  $0.49   $(11.05)  $1.01 
Discontinued Operations   (0.13)   0.03    (0.28)   0.02 
Total  $(10.93)  $0.52   $(11.33)  $1.03 
                     
Weighted average shares outstanding:                    
Basic   50,246    48,961    50,228    47,550 
Diluted   50,246    49,114    50,228    47,700 

 

F-4

 

 

BERKSHIRE HILLS BANCORP, INC.

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

 

   June 30,   March 31,   Dec. 31,   Sept. 30,   June 30, 
(in thousands, except per share data)  2020   2020   2019   2019   2019 
Interest and dividend income from continuing operations                         
Loans  $90,876   $101,695   $110,915   $118,371   $113,990 
Securities and other   12,812    14,500    14,526    15,354    15,248 
Total interest and dividend income   103,688    116,195    125,441    133,725    129,238 
Interest expense from continuing operations                         
Deposits   20,552    23,838    28,797    31,501    28,273 
Borrowings   5,546    5,929    5,311    5,353    9,370 
Total interest expense   26,098    29,767    34,108    36,854    37,643 
Net interest income from continuing operations   77,590    86,428    91,333    96,871    91,595 
Non-interest income from continuing operations                         
Mortgage banking originations   1,644    959    172    292    278 
Loan related income   5,717    1,302    7,056    6,493    4,822 
Deposit related fees   5,373    7,947    8,264    8,705    7,525 
Insurance commissions and fees   2,767    3,024    2,471    2,895    2,738 
Wealth management fees   2,057    2,570    2,239    2,325    2,348 
Total fee income   17,558    15,802    20,202    20,710    17,711 
Other   (999)   (436)   75    609    (216)
Securities gains/(losses), net   822    (9,730)   1,734    87    17 
Gain on sale of business operations and assets, net   -    -    1,351    -    - 
Total non-interest income   17,381    5,636    23,362    21,406    17,512 
Total net revenue from continuing operations   94,971    92,064    114,695    118,277    109,107 
Provision for credit losses   29,871    34,807    5,351    22,600    3,467 
Non-interest expense from continuing operations                         
Compensation and benefits   39,403    36,909    35,355    37,272    34,779 
Occupancy and equipment   10,195    11,132    10,798    9,893    9,449 
Technology and communications   7,755    8,081    6,702    6,849    6,715 
Marketing and promotion   902    1,165    1,046    1,006    1,155 
Professional services   2,565    2,720    2,288    2,282    3,953 
FDIC premiums and assessments   1,658    1,482    471    -    1,751 
Other real estate owned and foreclosures   14    27    4    150    (2)
Amortization of intangible assets   1,558    1,580    1,582    1,526    1,475 
Goodwill impairment   553,762    -    -    -    - 
Merger, restructuring and other expense   -    -    5,713    4,163    11,155 
Other   6,463    8,229    6,328    7,870    6,138 
Total non-interest expense   624,275    71,325    70,287    71,011    76,568 
                          
(Loss)/income from continuing operations before income taxes  $(559,175)  $(14,068)  $39,057   $24,666   $29,072 
Income tax (benefit)/expense   (16,130)   (1,996)   6,421    4,007    5,118 
Net (loss)/ income from continuing operations  $(543,045)  $(12,072)  $32,636   $20,659   $23,954 
                          
(Loss)/income from discontinued operations before income taxes  $(8,635)  $(10,629)  $(9,514)  $2,747   $2,082 
Income tax (benefit)/expense   (2,299)   (2,831)   (2,629)   790    588 
Net (loss)/income from discontinued operations  $(6,336)  $(7,798)  $(6,885)  $1,957   $1,494 
                          
Net (loss)/income  $(549,381)  $(19,870)  $25,751   $22,616   $25,448 
Preferred stock dividend   130    125    240    240    240 
(Loss)/income available to common shareholders  $(549,511)  $(19,995)  $25,511   $22,376   $25,208 
                          
                          
Basic (loss)/earnings per common share:                         
Continuing Operations  $(10.80)  $(0.24)  $0.65   $0.40   $0.49 
Discontinued Operations   (0.13)   (0.16)   (0.14)   0.04    0.03 
Total  $(10.93)  $(0.40)  $0.51   $0.44   $0.52 
                          
Diluted (loss)/earnings per common share:                         
Continuing Operations  $(10.80)  $(0.24)  $0.65   $0.40   $0.49 
Discontinued Operations   (0.13)   (0.16)   (0.14)   0.04    0.03 
Total  $(10.93)  $(0.40)  $0.51   $0.44   $0.52 
                          
Weighted average shares outstanding:                         
Basic   50,246    50,204    50,494    51,422    48,961 
Diluted   50,246    50,204    50,702    51,545    49,114 

 

F-5

 

 

BERKSHIRE HILLS BANCORP, INC.

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

 

   Quarters Ended 
   June 30,   March 31,   Dec. 31,   Sept. 30,   June 30, 
   2020   2020   2019   2019   2019 
Earning assets                         
Loans:                         
Commercial real estate   3.78%   4.41%   4.80%   4.92%   5.01%
Commercial and industrial loans   4.02    5.03    5.35    5.58    5.79 
Residential mortgages   3.78    3.77    3.61    3.73    3.74 
Consumer loans   3.72    4.28    4.38    4.55    4.52 
Total loans   3.83    4.33    4.52    4.67    4.76 
Securities   3.07    3.32    3.31    3.41    3.38 
Short-term investments and loans held for sale   0.50    1.78    3.15    4.11    3.37 
Total earning assets   3.50    4.08    4.27    4.45    4.51 
                          
Funding liabilities                         
Deposits:                         
NOW and other   0.30    0.46    0.54    0.61    0.66 
Money market   0.58    0.98    1.18    1.27    1.27 
Savings   0.10    0.13    0.14    0.13    0.15 
Time   1.84    1.87    1.97    2.02    2.06 
Total interest-bearing deposits   1.01    1.18    1.35    1.43    1.44 
Borrowings   2.38    2.60    2.77    3.12    2.92 
Total interest-bearing liabilities   1.16    1.33    1.48    1.57    1.66 
                          
Net interest spread   2.34    2.75    2.79    2.88    2.85 
Net interest margin   2.62    3.04    3.11    3.22    3.19 
                          
Cost of funds (1)   0.92    1.11    1.23    1.32    1.41 
Cost of deposits   0.79    0.96    1.11    1.18    1.18 

 

 

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

 

F-6

 

 

BERKSHIRE HILLS BANCORP, INC.

AVERAGE BALANCES - UNAUDITED - (F-7)

 

   Quarters Ended 
   June 30,   March 31,   Dec. 31,   Sept. 30,   June 30, 
(in thousands)  2020   2020   2019   2019   2019 
Assets                         
Loans                         
Commercial real estate  $4,005,018   $4,000,461   $4,056,244   $3,998,144   $3,716,130 
Commercial and industrial loans   2,152,820    1,795,813    1,768,039    1,951,205    2,056,384 
Residential mortgages   2,452,622    2,654,224    2,758,676    2,849,216    2,711,348 
Consumer loans   865,318    921,810    974,889    1,035,893    1,064,579 
Total loans (1)   9,475,778    9,372,308    9,557,848    9,834,458    9,548,441 
Securities (2)   1,793,381    1,744,635    1,752,968    1,846,985    1,893,298 
Short-term investments and loans held for sale   697,138    374,894    444,622    309,897    117,029 
Total earning assets (3)   11,966,297    11,491,837    11,755,438    11,991,340    11,558,768 
Goodwill and other intangible assets   590,672    598,347    601,192    603,762    555,606 
Other assets   751,702    663,056    737,396    668,218    593,917 
Assets from discontinued operations   109,923    98,528    176,251    204,339    192,466 
Total assets  $13,418,594   $12,851,768   $13,270,277   $13,467,659   $12,900,757 
                          
Liabilities and shareholders' equity                         
Deposits                         
NOW and other  $1,183,839   $1,159,388   $1,085,485   $1,111,637   $1,053,335 
Money market   2,672,066    2,752,465    2,688,766    2,624,639    2,474,071 
Savings   901,218    846,942    835,209    838,445    780,797 
Time   3,399,222    3,333,070    3,827,175    4,158,688    3,593,022 
Total interest-bearing deposits   8,156,345    8,091,865    8,436,635    8,733,409    7,901,225 
Borrowings   942,033    949,316    853,911    805,035    1,415,614 
Total interest-bearing liabilities   9,098,378    9,041,181    9,290,546    9,538,444    9,316,839 
Non-interest-bearing demand deposits   2,343,173    1,849,295    1,898,045    1,864,964    1,673,560 
Other liabilities   272,690    203,797    304,504    267,922    215,704 
Liabilities from discontinued operations   28,988    23,799    30,446    28,206    18,434 
Total liabilities   11,743,229    11,118,072    11,523,541    11,699,536    11,224,537 
                          
Preferred shareholders' equity   20,325    20,548    40,633    40,633    40,633 
Common shareholders' equity   1,655,040    1,713,148    1,706,103    1,727,490    1,635,587 
Total shareholders' equity   1,675,365    1,733,696    1,746,736    1,768,123    1,676,220 
Total liabilities and shareholders' equity  $13,418,594   $12,851,768   $13,270,277   $13,467,659   $12,900,757 
                          
Supplementary data                         
Total average non-maturity deposits  $7,100,296   $6,608,090   $6,507,505   $6,439,685   $5,981,763 
Total average deposits   10,499,518    9,941,160    10,334,680    10,598,373    9,574,785 
Fully taxable equivalent income adjustment   1,580    1,824    1,934    1,826    1,882 
Total average tangible equity (4)   1,084,693    1,135,349    1,145,544    1,164,361    1,120,614 

 

 

(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 
   June 30,   March 31,   Dec. 31,   Sept. 30,   June 30, 
(in thousands)  2020   2020   2019   2019   2019 
NON-PERFORMING ASSETS                         
Non-accruing loans:                         
Commercial real estate  $12,486   $16,938   $20,119   $15,829   $19,366 
Commercial and industrial loans   15,045    18,370    11,373    12,224    9,256 
Residential mortgages   9,840    9,636    3,343    3,062    3,579 
Consumer loans   7,513    6,172    4,805    5,191    3,570 
Total non-accruing loans   44,884    51,116    39,640    36,306    35,771 
Other real estate owned   517    224    -    -    154 
Repossessed assets   1,581    1,316    858    1,003    874 
Total non-performing assets  $46,982   $52,656   $40,498   $37,309   $36,799 
                          
Total non-accruing loans/total loans   0.48%   0.55%   0.42%   0.37%   0.36%
Total non-performing assets/total assets   0.36%   0.40%   0.31%   0.28%   0.27%
                          
PROVISION AND ALLOWANCE FOR CREDIT LOSSES ON LOANS                         
Balance at beginning of period  $113,510   $63,575   $62,230   $62,156   $62,038 
Adoption of ASU No. 2016-13 (1)   -    25,434    -    -    - 
Balance after adoption of ASU No. 2016-13   113,510    89,009    62,230    62,156    62,038 
Charged-off loans   (7,274)   (12,432)   (4,485)   (23,524)   (3,966)
Recoveries on charged-off loans   3,259    1,958    479    998    617 
Net loans charged-off   (4,015)   (10,474)   (4,006)   (22,526)   (3,349)
Provision for loan credit losses   29,899    34,975    5,351    22,600    3,467 
Balance at end of period  $139,394   $113,510   $63,575   $62,230   $62,156 
                          
Allowance for credit losses/total loans   1.49%   1.22%   0.67%   0.64%   0.63%
Allowance for credit losses/non-accruing loans   311%   222%   160%   171%   174%
                          
NET LOAN CHARGE-OFFS                         
Commercial real estate  $(1,679)  $(5,990)  $(1,419)  $(2,759)  $(1,235)
Commercial and industrial loans   (1,059)   (3,728)   (1,495)   (18,850)   (995)
Residential mortgages   (966)   (19)   (351)   (140)   (139)
Home equity   (10)   (107)   (67)   (71)   (300)
Auto and other consumer   (301)   (630)   (674)   (706)   (680)
Total, net  $(4,015)  $(10,474)  $(4,006)  $(22,526)  $(3,349)
                          
Net charge-offs (QTD annualized)/average loans   0.17%   0.45%   0.17%   0.92%   0.14%
Net charge-offs (YTD annualized)/average loans   0.31%   0.45%   0.35%   0.41%   0.15%
                          
DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS                         
30-89 Days delinquent   0.37%   0.43%   0.25%   0.26%   0.20%
90+ Days delinquent and still accruing   0.14%   0.05%   0.29%   0.29%   0.28%
Total accruing delinquent loans   0.51%   0.48%   0.54%   0.55%   0.48%
Non-accruing loans   0.48%   0.55%   0.42%   0.37%   0.36%
Total delinquent and non-accruing loans   0.99%   1.03%   0.96%   0.92%   0.84%

 

 

(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 
      June 30,   March 31,   Dec. 31,   Sept. 30,   June 30, 
(in thousands)     2020   2020   2019   2019   2019 
Net (loss)/income     $(549,381)  $(19,870)  $25,751   $22,616   $25,448 
Adj: Net securities (gains)/losses (1)                (822)   9,730    (1,734)   (87)   (17)
Adj: Goodwill impairment      553,762    -    -    -    - 
Adj: Merger and acquisition expense      -    -    3,611    3,802    9,711 
Adj: Restructuring expense and other expense      -    -    2,102    361    1,444 
Adj: Loss/(income) from discontinued operations before income taxes      8,635    10,629    9,514    (2,747)   (2,082)
Adj: Income taxes      (18,658)   (4,134)   (3,910)   (281)   (2,385)
Total core (loss)/income (2)  (A)  $(6,464)  $(3,645)  $35,334   $23,664   $32,119 
                             
Total revenue from continuing operations     $94,971   $92,064   $114,695   $118,277   $109,107 
Adj: Net securities (gains)/losses (1)      (822)   9,730    (1,734)   (87)   (17)
Total core revenue (2)  (B)  $94,149   $101,794   $112,961   $118,190   $109,090 
                             
Total non-interest expense from continuing operations     $624,275   $71,325   $70,287   $71,011   $76,568 
Less: Merger, restructuring and other expense (see above)      -    -    (5,713)   (4,163)   (11,155)
Less: Goodwill impairment      (553,762)   -    -    -    - 
Core non-interest expense (2)  (C)  $70,513   $71,325   $64,574   $66,848   $65,413 
                             
Total revenue     $90,383   $93,869   $116,860   $134,067   $123,109 
Total non-interest expense      628,322    83,759    81,966    84,054    88,488 
Pre-tax, pre-provision net revenue (PPNR)     $(537,939)  $10,110   $34,894   $50,013   $34,621 
                             
Total revenue from continuing operations     $94,971   $92,064   $114,695   $118,277   $109,107 
Total non-interest expense from continuing operations      624,275    71,325    70,287    71,011    76,568 
Pre-tax, pre-provision net revenue (PPNR) from continuing operations     $(529,304)  $20,739   $44,408   $47,266   $32,539 
                             
Total core revenue (2)     $94,149   $101,794   $112,961   $118,190   $109,090 
Core non-interest expense (2)      70,513    71,325    64,574    66,848    65,413 
Core pre-tax, pre-provision net revenue (PPNR)     $23,636   $30,469   $48,387   $51,342   $43,677 
                             
(in millions, except per share data)                            
Total average assets  (D)  $13,419   $12,852   $13,270   $13,468   $12,901 
Total average shareholders' equity  (E)   1,675    1,734    1,747    1,768    1,676 
Total average tangible shareholders' equity (2)  (F)   1,085    1,135    1,146    1,164    1,121 
Total average tangible common shareholders' equity (2)  (G)   1,064    1,115    1,105    1,124    1,080 
Total tangible shareholders' equity, period-end (2)(3)  (H)   1,122    1,124    1,159    1,170    1,176 
Total tangible common shareholders' equity, period-end (2)(3)  (I)   1,101    1,104    1,119    1,130    1,136 
Total tangible assets, period-end (2)(3)  (J)   13,021    12,524    12,617    12,930    13,051 
                             
Total common shares outstanding, period-end (thousands)                 (K)   50,192    50,199    49,585    50,394    51,045 
Average diluted shares outstanding (thousands)  (L)   50,246    50,204    50,702    51,545    49,114 
                             
Core (loss)/earnings per common share, diluted (2)  (A/L)  $(0.13)  $(0.07)  $0.70   $0.46   $0.65 
                             
PPNR per common share, diluted (2)      (10.71)   0.20    0.69    0.97    0.70 
PPNR from continuing operations per common share, diluted (2)      (10.53)   0.41    0.88    0.92    0.66 
Core PPNR per common share, diluted (2)      0.47    0.61    0.95    1.00    0.89 
                             
Tangible book value per common share, period-end (2)  (I/K)   21.94    22.00    22.56    22.42    22.25 
Total tangible shareholders' equity/total tangible assets (2)  (H)/(J)   8.61    8.98    9.19    9.05    9.01 
                             
Performance ratios (4)                            
GAAP return on assets      (16.38)%   (0.62)%   0.78%   0.67%   0.79%
Core return on assets (2)      (0.19)   (0.11)   1.08    0.71    1.01 
GAAP return on equity      (131.17)   (4.58)   5.90    5.12    6.07 
Core return on equity (2)  (A/E)   (1.54)   (0.84)   8.09    5.35    7.67 
Core return on tangible common equity (2)(5)  (A+O)/(G)   (2.05)   (0.94)   13.12    8.74    12.21 
PPNR/assets (2)      (16.04)   0.31    1.05    1.49    1.07 
Core PPNR/assets (2)      0.71    0.96    1.48    1.55    1.37 
Efficiency ratio (2)(6)  (C-O)/(B+M+P)   71.01    66.92    53.66    53.37    56.41 
Net interest margin      2.62    3.04    3.11    3.22    3.19 
                             
Supplementary data (in thousands)                            
Tax benefit on tax-credit investments (7)  (M)  $1,379   $608   $2,503   $2,382   $2,381 
Non-interest income charge on tax-credit investments (8)  (N)   (1,097)   (486)   (1,996)   (1,942)   (1,938)
Net income on tax-credit investments  (M+N)   282    122    507    440    443 
                             
Intangible amortization  (O)  $1,558   $1,580   $1,582   $1,526   $1,475 
Fully taxable equivalent income adjustment  (P)   1,580    1,824    1,934    1,826    1,882 

 

 

(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 (loss)/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 Six Months Ended 
      June 30,   June 30, 
(Dollars in thousands)     2020   2019 
Net income     $(569,251)  $49,083 
Adj: Net securities(gains)/losses (1)      8,908    (2,568)
Adj: Goodwill impairment      553,762    - 
Adj: Merger and acquisition expenses      -    11,320 
Adj: Restructuring expense and other      -    6,850 
Adj: Loss from discontinued operations before income taxes      19,264    (1,228)
Adj: Income taxes      (22,792)   (3,608)
Total core income (2)  (A)  $(10,109)  $59,849 
              
Total revenue from continuing operations     $187,035   $216,288 
Adj: Net securities(gains)/losses (1)      8,908    (2,568)
Total core revenue (2)  (B)  $195,943   $213,720 
Total non-interest expense from continuing operations     $695,600   $148,559 
Less: Merger, restructuring and other expense (see above)      -    (18,170)
Less: Goodwill impairment      (553,762)   - 
Core non-interest expense (2)  (C)  $141,838   $130,389 
              
Total revenue     $184,252   $239,563 
Total non-interest expense      712,081    170,606 
Pre-tax, pre-provision net revenue (PPNR)     $(527,829)  $68,957 
              
Total revenue from continuing operations     $187,035   $216,288 
Total non-interest expense from continuing operations      695,600    148,559 
Pre-tax, pre-provision net revenue (PPNR) from continuing operations     $(508,565)  $67,729 
              
Total core revenue (2)     $195,943   $213,720 
Core non-interest expense (2)      141,838    130,389 
Core pre-tax, pre-provision net revenue (PPNR)     $54,105   $83,331 
              
(in millions, except per share data)             
Total average assets  (D)  $13,173   $12,546 
Total average shareholders' equity  (E)   1,705    1,630 
Total average tangible shareholders' equity (2)  (F)   1,110    1,077 
Total average tangible common shareholders' equity (2)  (G)   1,090    1,036 
Total tangible shareholders' equity, period-end (2)(3)  (H)   1,122    1,176 
Total tangible common shareholders' equity, period-end (2)(3)  (I)   1,101    1,136 
Total tangible assets, period-end (2)(3)  (J)   13,021    13,051 
Total common shares outstanding, period-end (thousands)                 (K)   50,192    51,045 
Average diluted shares outstanding (thousands)  (L)   50,228    47,700 
              
Core earnings per common share, diluted (2)  (A/L)  $(0.20)  $1.25 
              
PPNR per common share, diluted (2)      (10.51)   1.45 
PPNR from continuing operations per common share, diluted (2)      (10.13)   1.42 
Core PPNR per common share, diluted (2)      1.08    1.75 
              
Tangible book value per common share, period-end (2)  (I/K)   21.94    22.25 
Total tangible shareholders' equity/total tangible assets (2)  (H)/(J)   8.61    9.01 
              
Performance ratios (4)             
GAAP return on assets      (8.67)%   0.78%
Core return on assets (2)  (A/D)   (0.15)   0.97 
GAAP return on equity      (66.79)   6.02 
Core return on equity (2)  (A/E)   (1.19)   7.34 
Core return on tangible common equity (2)(5)  (A+O)/(G)   (1.48)   11.84 
PPNR/assets (2)      (8.01)   1.10 
Core PPNR/assets (2)      0.82    1.33 
Efficiency ratio (2)(6)  (C-O)/(B+M+P)   68.89    57.93 
Net interest margin      2.82    3.18 
              
Supplementary data             
Tax benefit on tax-credit investments (7)  (M)  $1,987   $3,065 
Non-interest income charge on tax-credit investments (8)  (N)   (1,583)   (2,517)
Net income on tax-credit investments  (M+N)   404    548 
              
Intangible amortization  (O)   3,138    2,675 
Fully taxable equivalent income adjustment  (P)   3,404    3,691 

 

 

(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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