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Press Release

Berkshire Hills Reports Fourth Quarter Earnings Growth; Dividend Increased by 4%

Company Release - 1/27/2020 4:15 PM ET

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

(PRNewsfoto/Berkshire Hills Bancorp, Inc.)

FOURTH QUARTER FINANCIAL HIGHLIGHTS 

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

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

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

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

DIVIDEND INCREASED

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

FINANCIAL CONDITION

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

RESULTS OF OPERATIONS

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

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

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

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

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

REGIONAL PRESIDENTS

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

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

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

BE FIRST CORPORATE RESPONSIBILITY UPDATE

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

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

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

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

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

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

INVESTOR CONFERENCE CALL

Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Tuesday, January 28, 2020 to discuss the results for the quarter and provide guidance about expected future results.  Participants are encouraged to pre-register for the conference call using the following link: http://dpregister.com/10138046. Callers who pre-register will be given dial-in instructions and a unique PIN to gain immediate access to the call.  Participants may pre-register at any time prior to the call and will immediately receive simple instructions via email.  Additionally, participants may reach the registration link and access the webcast by logging in through the investor section of Berkshire's website at http://ir.berkshirebank.com. Those parties who do not have internet access or are otherwise unable to pre-register for this event, may still participate at the above time by dialing 1-844-792-3726 and asking the Operator to join the Berkshire Hills Bancorp (BHLB) earnings call. A telephone replay of the call will be available through Tuesday, February 4, 2020 by dialing 1-877-344-7529 and entering access number 10138046.  The webcast will be available on Berkshire's website for an extended period of time.

BACKGROUND

Berkshire Hills Bancorp is the parent of Berkshire Bank which is transforming into a 21st century community bank pursuing purpose driven performance based on its Be FIRST corporate responsibility culture.  Headquartered in Boston, Berkshire operates 130 banking offices in seven Northeastern states, with approximately $13.2 billion in assets.

FORWARD LOOKING STATEMENTS

This document contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. There are several factors that could cause actual results to differ significantly from expectations described in the forward-looking statements. For a discussion of such factors, please see Berkshire's most recent reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission and available on the SEC's website at www.sec.gov. Berkshire does not undertake any obligation to update forward-looking statements.

NON-GAAP FINANCIAL MEASURES

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

The Company utilizes the non-GAAP measure of core earnings in evaluating operating trends, including components for core revenue and expense.  These measures exclude items which the Company does not view as related to its normalized operations.  These items primarily include securities gains/losses, merger costs, restructuring costs, and discontinued operations.  Merger costs consist primarily of severance/benefit related expenses, contract termination costs, systems conversion costs, variable compensation expenses, and professional fees.  Merger costs in 2018 and 2019 are primarily related to the acquisitions of Commerce Bancshares Corp. and SI Financial Group.  Restructuring costs generally consist of costs and losses associated with the disposition of assets and liabilities and lease terminations, including costs related to branch sales.  Restructuring costs also include severance and consulting expenses related to the Company's strategic review.  They also include costs related to the consolidation of branches, including two branches in the fourth quarter of 2019 and eight branches for the full year of 2019.  Discontinued operations are the Company's national mortgage banking operations for which the Company is pursuing sale opportunities.  In 2018, the Company recorded $8 million in charges related to the restructuring of banking systems vendor relationships.  The Company recorded a $3 million cost in 2018 for the settlement of an existing legal proceeding with a plaintiff claiming to be representing a class of depositors.  Non-core charges in 2018 also included a $1.5 million net charge related to the CEO transition. 

Non-core adjustments are presented net of an adjustment for income tax expense.  This adjustment is determined as the difference between the GAAP tax rate and the effective tax rate applicable to core income.  The efficiency ratio is adjusted for non-core revenue and expense items and for tax preference items.  The Company also calculates measures related to tangible equity, which adjust equity (and assets where applicable) to exclude intangible assets due to the importance of these measures to the investment community. References to organic growth and organic change exclude balances acquired in bank mergers. 

CONTACTS

Investor Relations Contact

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

Media Contact

Diana Pisciotta; Communications Contact; 617-784-5256

 

TABLE

INDEX

 

CONSOLIDATED UNAUDITED FINANCIAL SCHEDULES

F-1

Selected Financial Highlights

F-2

Balance Sheets

F-3

Loan and Deposit Analysis

F-4

Statements of Income

F-5

Statements of Income (Five Quarter Trend)

F-6

Average Yields and Costs

F-7

Average Balances

F-8

Asset Quality Analysis

F-9       

Reconciliation of Non-GAAP Financial Measures


and Supplementary Data (Five Quarter Trend)

F-10        

Reconciliation of Non-GAAP Financial Measures


and Supplementary Data (Year-to-Date)

 

BERKSHIRE HILLS BANCORP, INC.

SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED - (F-1)





At or for the Quarters Ended (1)





Dec. 31,


Sept. 30,


June 30,


March 31,


Dec. 31,






2019


2019


2019 (2)


2019


2018

















PER SHARE DATA













Net earnings per common share, diluted

$          0.51


$          0.44


$          0.52


$          0.51


$          0.31




Core earnings per common share, diluted (3)

0.70


0.46


0.65


0.60


0.69




Total book value per common share

34.65


34.36


34.05


33.75


33.30




Tangible book value per common share (3)

22.56


22.42


22.25


21.66


21.15




Market price at period end

32.88


29.29


31.39


27.24


26.97




Dividends per common share

0.23


0.23


0.23


0.23


0.22




Dividends per preferred share

0.46


0.46


0.46


0.46


0.44

















PERFORMANCE RATIOS (4)













Return on assets

0.78

%

0.67

%

0.79

%

0.78

%

0.47

%



Core return on assets (3)

1.08


0.71


1.01


0.92


1.07




Return on equity

5.90


5.12


6.07


5.97


3.61




Core return on equity (3)

8.09


5.35


7.67


7.00


8.09




Core return on tangible common equity (3)

13.12


8.74


12.21


11.44


13.21




Net interest margin, fully taxable equivalent (FTE) (5)(6)

3.11


3.22


3.19


3.17


3.41




Fee income/Net interest and fee income from continuing operations

18.11


17.61


16.20


17.56


15.59




Efficiency ratio (3)

53.66


53.37


56.41


59.54


54.88

















CHANGE (Year-to-date)













Total commercial loans (organic, annualized)

(7)

%

(9)

%

(10)

%

(3)

%

6

%



Total loans (organic, annualized)

(9)


(9)


(9)


(4)


9




Total deposits (organic, annualized)

0


2


6


8


3




Total net revenues from continuing operations (compared to prior year)

4


4


1


3


17




Earnings per common share (compared to prior year) 

(14)


(26)


(20)


(7)


65




Core earnings per common share (compared to prior year)(3)

(14)


(18)


(9)


(8)


32

















FINANCIAL DATA (in millions)













Total assets


$      13,212


$      13,532


$      13,653


$      12,173


$      12,212




Total earning assets

11,912


12,174


12,343


11,039


11,140




Total securities

1,770


1,861


1,905


1,881


1,919




Total loans


9,502


9,719


9,942


8,947


9,043




Allowance for loan losses

64


62


62


62


61




Total intangible assets

599


602


603


551


552




Total deposits


10,336


10,423


10,566


9,166


8,982




Total shareholders' equity

1,759


1,772


1,779


1,577


1,553




Net income


25.8


22.6


25.4


23.6


14.3




Core income (3)

35.3


23.7


32.1


27.7


32.0




Purchase accounting accretion

5.1


4.8


3.2


1.3


8.2

















ASSET QUALITY AND CONDITION RATIOS 













Net charge-offs (current quarter annualized)/average loans

0.17

%

0.92

%

0.14

%

0.15

%

0.17

%



Total non-performing assets/total assets

0.31


0.28


0.27


0.26


0.28




Allowance for loan losses/total loans

0.67


0.64


0.63


0.69


0.68




Loans/deposits

92


93


94


98


101




Shareholders' equity to total assets

13.31


13.10


13.03


12.95


12.72




Tangible shareholders' equity to tangible assets (3)

9.19


9.05


9.01


8.83


8.59































(1)

Reconciliations of non-GAAP financial measures, including all references to core and tangible amounts, appear on pages F-9 and F-10.


(2)

The Company acquired SI Financial Group, Inc. on May 17, 2019.








(3)

Non-GAAP financial measure. Core measurements are non-GAAP financial measures that are adjusted to exclude net non-core charges primarily related to acquisitions and restructuring activities. See pages F-9 and F-10 for reconciliations of non-GAAP financial measures.


(4)

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





(5)

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





(6)

The effect of purchase accounting accretion for loans, time deposits, and borrowings on the quarterly net interest margin was an increase in all quarters, which is shown sequentially as follows beginning with the most recent quarter and ending with the earliest quarter: 0.17%, 0.16%, 0.11%, 0.05%, 0.30%.





BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-2)


December 31,


September 30,


December 31,


(in thousands)

2019


2019


2018


Assets







Cash and due from banks

$            105,447


$               121,629


$                100,972


Short-term investments

470,382


180,466


82,217


Total cash and short-term investments

575,829


302,095


183,189









Trading security

10,769


11,145


11,212


Marketable equity securities, at fair value

41,556


59,596


56,638


Securities available for sale, at fair value

1,311,555


1,369,604


1,399,647


Securities held to maturity, at amortized cost

357,979


364,675


373,763


Federal Home Loan Bank stock and other restricted securities

48,019


56,049


77,344


Total securities

1,769,878


1,861,069


1,918,604









Loans held for sale

36,664


204,900


2,183









Commercial real estate loans

4,034,269


4,028,461


3,400,221


Commercial and industrial loans

1,840,508


1,845,086


1,980,046


Residential mortgages

2,685,472


2,838,657


2,566,424


Consumer loans

942,179


1,006,437


1,096,562


Total loans

9,502,428


9,718,641


9,043,253


Less: Allowance for loan losses

(63,575)


(62,230)


(61,469)


Net loans

9,438,853


9,656,411


8,981,784









Premises and equipment, net

120,398


123,195


106,500


Other real estate owned

-


-


-


Goodwill 

553,762


554,704


518,325


Other intangible assets

45,615


47,198


33,418


Cash surrender value of bank-owned life insurance

227,894


227,085


190,609


Deferred tax asset, net

56,106


49,543


42,434


Other assets

234,783


263,464


120,926


Assets from discontinued operations

152,188


242,279


114,259


Total assets 

$       13,211,970


$          13,531,943


$           12,212,231









Liabilities and shareholders' equity







Demand deposits

$         1,884,100


$            1,887,621


$             1,603,019


NOW and other deposits

1,492,569


1,267,057


1,122,321


Money market deposits

2,528,656


2,478,947


2,245,195


Savings deposits

841,283


831,972


724,129


Time deposits

3,589,369


3,957,721


3,287,717


Total deposits

10,335,977


10,423,318


8,982,381









Senior borrowings

730,501


904,149


1,428,298


Subordinated borrowings

97,049


96,991


89,518


Total borrowings

827,550


1,001,140


1,517,816









Other liabilities 

261,559


301,647


149,519


Liabilities from discontinued operations

28,320


33,614


9,597


Total liabilities

11,453,406


11,759,719


10,659,313









Preferred shareholders' equity

40,633


40,633


40,633


Common shareholders' equity

1,717,931


1,731,591


1,512,285


Total shareholders' equity

1,758,564


1,772,224


1,552,918


Total liabilities and shareholders' equity

$       13,211,970


$          13,531,943


$           12,212,231









Net common shares outstanding 

49,585


50,394


45,417


 

 

BERKSHIRE HILLS BANCORP, INC.

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

LOAN ANALYSIS







































Organic Annualized Change %(1)

(in millions)


December 31, 2019
Balance


September 30, 2019
Balance


Acquired Savings
Institute Balances (2)


December 31, 2018
Balance


Quarter ended
December 31, 2019


Year to Date  






























Total commercial real estate


$                      4,034


$                      4,029


$                         624


$                       3,400


0

%

0

%

Commercial and industrial loans 


1,841


1,845


244


1,980


(1)


(19)


Total commercial loans 


5,875


5,874


868


5,380


0


(7)
















Total residential mortgages


2,685


2,839


375


2,566


(22)


(10)
















Home equity 


381


394


58


377


(13)


(14)


Auto and other


561


612


2


720


(34)


(22)


Total consumer loans


942


1,006


60


1,097


(25)


(20)


Total loans


$                      9,502


$                      9,719


$                      1,303


$                       9,043


(9)

%

(9)

%

(1) Non-GAAP financial measure.










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


































































DEPOSIT ANALYSIS
























Organic Annualized Change % (1)

(in millions)


December 31, 2019
Balance


September 30, 2019
Balance


Acquired Savings Institute Balances (2)


December 31, 2018
Balance


Quarter ended
December 31, 2019


Year to Date


Demand


$                      1,884


$                      1,887


$                         258


$                       1,603


(1)

%

1

%

NOW and other


1,493


1,267


138


1,122


71


21


Money market


2,529


2,479


190


2,245


8


4


Savings


841


832


164


724


4


(6)


Time deposits


3,589


3,958


585


3,288


(37)


(9)


Total deposits 


$                    10,336


$                    10,423


$                      1,335


$                       8,982


(3)

%

0

%

(1) Non-GAAP financial measure.










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










 

 

BERKSHIRE HILLS BANCORP, INC.

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


Three Months Ended


Years Ended


December 31,


December 31,

(in thousands, except per share data)

2019


2018


2019


2018

Interest and dividend income from continuing operations    








Loans

$         110,915


$         111,576


$           448,927


$            406,222

Securities and other    

14,526


15,119


60,586


59,672

Total interest and dividend income    

125,441


126,695


509,513


465,894

Interest expense from continuing operations 








Deposits

28,797


23,811


115,193


78,364

Borrowings

5,311


10,118


29,062


31,330

Total interest expense    

34,108


33,929


144,255


109,694

Net interest income from continuing operations

91,333


92,766


365,258


356,200

Non-interest income from continuing operations 








Mortgage banking originations

172


148


788


635

Loan related income

7,056


5,087


24,374


23,155

Deposit related fees

8,264


7,131


31,352


29,806

Insurance commissions and fees    

2,471


2,479


10,957


10,983

Wealth management fees    

2,239


2,287


9,353


9,447

Total fee income    

20,202


17,132


76,824


74,026

Other

75


1,666


1,438


3,557

Securities gains/(losses), net     

1,734


(3,023)


4,389


(3,719)

Gain on sale of business operations and assets, net

1,351


-


1,351


460

Total non-interest income      

23,362


15,775


84,002


74,324

Total net revenue from continuing operations

114,695


108,541


449,260


430,524

Provision for loan losses   

5,351


6,716


35,419


25,451

Non-interest expense from continuing operations








Compensation and benefits

35,355


34,927


140,906


134,019

Occupancy and equipment     

10,798


9,366


39,586


36,927

Technology and communications

6,702


6,103


26,523


27,147

Marketing and promotion     

1,046


1,224


4,474


4,697

Professional services

2,288


3,302


10,798


7,343

FDIC premiums and assessments

471


1,488


3,861


5,734

Other real estate owned and foreclosures

4


1


154


68

Amortization of intangible assets     

1,582


1,202


5,783


4,934

Merger, restructuring and other expense 

5,713


16,006


28,046


22,144

Other

6,328


6,754


29,726


23,880

Total non-interest expense     

70,287


80,373


289,857


266,893









Income from continuing operations before income taxes       

$           39,057


$           21,452


$           123,984


$            138,180

Income tax expense

6,421


4,384


22,463


28,961

Net income from continuing operations

$           32,636


$           17,068


$           101,521


$            109,219









(Loss)/income from discontinued operations before income taxes

$           (9,514)


$           (3,884)


$             (5,539)


$              (4,767)

Income tax (benefit)/expense

(2,629)


(1,075)


(1,468)


(1,313)

Net (loss)/income from discontinued operations

$           (6,885)


$           (2,809)


$             (4,071)


$              (3,454)









Net income

$           25,751


$           14,259


$             97,450


$            105,765

Preferred stock dividend

240


229


960


918

Income available to common shareholders

$           25,511


$           14,030


$             96,490


$            104,847









Basic earnings per common share:








Continuing Operations

$               0.65


$               0.37


$                 2.06


$                  2.37

Discontinued Operations

(0.14)


(0.06)


(0.08)


(0.08)

Total

$               0.51


$               0.31


$                 1.98


$                  2.30









Diluted earnings per common share:








Continuing Operations

$               0.65


$               0.37


$                 2.05


$                  2.36

Discontinued Operations

(0.14)


(0.06)


(0.08)


(0.07)

Total

$               0.51


$               0.31


$                 1.97


$                  2.29









Weighted average shares outstanding:      








Basic

50,494


46,061


49,263


46,024

Diluted

50,702


46,240


49,421


46,240









 

 

BERKSHIRE HILLS BANCORP, INC.

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




Dec. 31,


Sept. 30,


June 30,


March 31,


Dec. 31,


(in thousands, except per share data)

2019


2019


2019


2019


2018


Interest and dividend income from continuing operations    











Loans

$      110,915


$      118,371


$      113,990


$      105,651


$      111,576


Securities and other    

14,526


15,354


15,248


15,458


15,119


Total interest and dividend income    

125,441


133,725


129,238


121,109


126,695


Interest expense from continuing operations











Deposits

28,797


31,501


28,273


26,622


23,811


Borrowings

5,311


5,353


9,370


9,028


10,118


Total interest expense    

34,108


36,854


37,643


35,650


33,929


Net interest income from continuing operations

91,333


96,871


91,595


85,459


92,766


Non-interest income from continuing operations











Mortgage banking originations

172


292


278


46


148


Loan related income

7,056


6,493


4,822


6,003


5,087


Deposit related fees

8,264


8,705


7,525


6,858


7,131


Insurance commissions and fees    

2,471


2,895


2,738


2,853


2,479


Wealth management fees    

2,239


2,325


2,348


2,441


2,287


Total fee income    

20,202


20,710


17,711


18,201


17,132


Other

75


609


(216)


970


1,666


Securities gains/(losses), net     

1,734


87


17


2,551


(3,023)


Gain on sale of business operations and assets, net

1,351


-


-


-


-


Total non-interest income      

23,362


21,406


17,512


21,722


15,775


Total net revenue from continuing operations

114,695


118,277


109,107


107,181


108,541


Provision for loan losses   

5,351


22,600


3,467


4,001


6,716


Non-interest expense from continuing operations











Compensation and benefits

35,355


37,272


34,779


33,500


34,927


Occupancy and equipment     

10,798


9,893


9,449


9,446


9,366


Technology and communications

6,702


6,849


6,715


6,257


6,103


Marketing and promotion  

1,046


1,006


1,155


1,267


1,224


Professional services

2,288


2,282


3,953


2,275


3,302


FDIC premiums and assessments

471


-


1,751


1,639


1,488


Other real estate owned and foreclosures

4


150


(2)


2


1


Amortization of intangible assets     

1,582


1,526


1,475


1,200


1,202


Merger, restructuring and other expense 

5,713


4,163


11,155


7,015


16,006


Other

6,328


7,870


6,138


9,390


6,754


Total non-interest expense     

70,287


71,011


76,568


71,991


80,373













Income from continuing operations before income taxes

$        39,057


$        24,666


$        29,072


$        31,189


$        21,452


Income tax expense 

6,421


4,007


5,118


6,917


4,384


Net income from continuing operations

$        32,636


$        20,659


$        23,954


$        24,272


$        17,068













(Loss)/income from discontinued operations before income taxes

$         (9,514)


$          2,747


$          2,082


$            (854)


$         (3,884)


Income tax (benefit)/expense

(2,629)


790


588


(217)


(1,075)


Net income/(loss) from discontinued operations

$         (6,885)


$          1,957


$          1,494


$            (637)


$         (2,809)













Net income

$        25,751


$        22,616


$        25,448


$        23,635


$        14,259


Preferred stock dividend

240


240


240


240


229


Income available to common shareholders

$        25,511


$        22,376


$        25,208


$        23,395


$        14,030
























Basic earnings per common share:











Continuing Operations

$            0.65


$            0.40


$            0.49


$            0.52


$            0.37


Discontinued Operations

(0.14)


0.04


0.03


(0.01)


(0.06)


Total

$            0.51


$            0.44


$            0.52


$            0.51


$            0.31













Diluted earnings per common share:











Continuing Operations

$            0.65


$            0.40


$            0.49


$            0.52


$            0.37


Discontinued Operations

(0.14)


0.04


0.03


(0.01)


(0.06)


Total

$            0.51


$            0.44


$            0.52


$            0.51


$            0.31













Weighted average shares outstanding:      











Basic

50,494


51,422


48,961


46,113


46,061


Diluted

50,702


51,545


49,114


46,261


46,240


 

 

BERKSHIRE HILLS BANCORP, INC.

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



Quarters Ended



Dec. 31,


Sept. 30,


June 30,


March 31,


Dec. 31,




2019


2019


2019


2019


2018














Earning assets 












Loans:












Commercial real estate


4.80

%

4.92

%

5.01

%

4.91

%

5.40

%

Commercial and industrial loans


5.35


5.58


5.79


5.83


5.97


Residential mortgages


3.61


3.73


3.74


3.74


3.72


Consumer loans


4.38


4.55


4.52


4.45


4.52


Total loans


4.52


4.67


4.76


4.73


4.94


Securities


3.31


3.41


3.38


3.46


3.34


Short-term investments and loans held for sale


3.15


4.11


3.37


3.59


3.74


Total earning assets


4.27


4.45


4.51


4.49


4.64














Funding liabilities












Deposits:












NOW and other


0.54


0.61


0.66


0.65


0.59


Money market


1.18


1.27


1.27


1.23


1.10


Savings


0.14


0.13


0.15


0.18


0.16


Time


1.97


2.02


2.06


2.07


1.93


Total interest-bearing deposits


1.35


1.43


1.44


1.44


1.31


Borrowings


2.77


3.12


2.92


2.85


2.67


Total interest-bearing liabilities


1.48


1.57


1.66


1.65


1.55














Net interest spread


2.79


2.88


2.85


2.84


3.09


Net interest margin


3.11


3.22


3.19


3.17


3.41














Cost of funds (1)


1.23


1.32


1.41


1.41


1.31


Cost of deposits 


1.11


1.18


1.18


1.19


1.07














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










 

 

BERKSHIRE HILLS BANCORP, INC.

AVERAGE BALANCES - UNAUDITED - (F-7)


Quarters Ended


Dec. 31, 


Sept. 30, 


June 30, 


March 31, 


Dec. 31, 


(in thousands)

2019


2019


2019


2019


2018


Assets











Loans











Commercial real estate

$            4,056,244


$            3,998,144


$            3,716,130


$            3,377,902


$            3,373,936


Commercial and industrial loans

1,768,039


1,951,205


2,056,384


1,986,792


1,921,361


Residential mortgages

2,758,676


2,849,216


2,711,348


2,556,299


2,539,592


Consumer loans

974,889


1,035,893


1,064,579


1,079,583


1,112,433


Total loans (1) 

9,557,848


9,834,458


9,548,441


9,000,576


8,947,322


Securities (2)

1,752,968


1,846,985


1,893,298


1,895,768


1,933,891


Short-term investments and loans held for sale

444,622


309,897


117,029


67,367


51,827


Total earning assets (3)

11,755,438


11,991,340


11,558,768


10,963,711


10,933,040


Goodwill and other intangible assets

601,192


603,762


555,606


550,966


552,206


Other assets

737,396


668,218


593,917


557,442


494,377


Assets from discontinued operations

176,251


204,339


192,466


115,721


101,464


Total assets

$          13,270,277


$          13,467,659


$          12,900,757


$          12,187,840


$          12,081,087













Liabilities and shareholders' equity











Deposits 











NOW and other

$            1,085,485


$            1,111,637


$            1,053,335


$               963,043


$               920,225


Money market

2,688,766


2,624,639


2,474,071


2,378,496


2,339,699


Savings

835,209


838,445


780,797


736,707


728,853


Time

3,827,175


4,158,688


3,593,022


3,429,375


3,229,521


Total interest-bearing deposits

8,436,635


8,733,409


7,901,225


7,507,621


7,218,298


Borrowings

853,911


805,035


1,415,614


1,351,834


1,566,478


Total interest-bearing liabilities

9,290,546


9,538,444


9,316,839


8,859,455


8,784,776


Non-interest-bearing demand deposits

1,898,045


1,864,964


1,673,560


1,538,767


1,579,013


Other liabilities 

302,665


267,922


215,704


192,119


127,370


Liabilities from discontinued operations

32,285


28,206


18,434


13,962


8,854


Total liabilities

11,523,541


11,699,536


11,224,537


10,604,303


10,500,013













Preferred shareholders' equity

40,633


40,633


40,633


40,633


40,633


Common shareholders' equity

1,706,103


1,727,490


1,635,587


1,542,904


1,540,441


Total shareholders' equity

1,746,736


1,768,123


1,676,220


1,583,537


1,581,074


Total liabilities and shareholders' equity

$          13,270,277


$          13,467,659


$          12,900,757


$          12,187,840


$          12,081,087
























Supplementary data











Total average non-maturity deposits

$            6,507,505


$            6,439,685


$            5,981,763


$            5,617,013


$            5,567,790


Total average deposits 

10,334,680


10,598,373


9,574,785


9,046,388


8,797,311


Fully taxable equivalent income adjustment

1,934


1,826


1,882


1,809


1,763


Total average tangible equity (4)

1,145,544


1,164,361


1,120,614


1,032,571


1,028,868













(1) Total loans include non-accruing loans.











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








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


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








 

BERKSHIRE HILLS BANCORP, INC.

ASSET QUALITY ANALYSIS - UNAUDITED - (F-8)



At or for the Quarters Ended



Dec. 31,


Sept. 30,


June 30,


March 31,


Dec. 31,


(in thousands)


2019


2019


2019


2019


2018


NON-PERFORMING ASSETS












Non-accruing loans:












Commercial real estate


$          20,119


$          15,829


$          19,366


$          18,513


$          20,372


Commercial and industrial loans


11,373


12,224


9,256


5,614


6,003


Residential mortgages


3,343


3,062


3,579


2,341


2,217


Consumer loans


4,805


5,191


3,570


4,038


3,834


Total non-accruing loans


39,640


36,306


35,771


30,506


32,426


Other real estate owned


-


-


154


-


-


Repossessed assets


858


1,003


874


742


1,209


Total non-performing assets


$          40,498


$          37,309


$          36,799


$          31,248


$          33,635














Total non-accruing loans/total loans


0.42%


0.37%


0.36%


0.34%


0.36%


Total non-performing assets/total assets


0.31%


0.28%


0.27%


0.26%


0.28%














PROVISION AND ALLOWANCE FOR LOAN LOSSES











Balance at beginning of period


$          62,230


$          62,156


$          62,038


$          61,469


$          58,457


Charged-off loans


(4,485)


(23,524)


(3,966)


(4,579)


(4,029)


Recoveries on charged-off loans


479


998


617


1,147


325


Net loans charged-off


(4,006)


(22,526)


(3,349)


(3,432)


(3,704)


Provision for loan losses


5,351


22,600


3,467


4,001


6,716


Balance at end of period


$          63,575


$          62,230


$          62,156


$          62,038


$          61,469














Allowance for loan losses/total loans


0.67%


0.64%


0.63%


0.69%


0.68%


Allowance for loan losses/non-accruing loans


160%


171%


174%


203%


190%














NET LOAN CHARGE-OFFS












Commercial real estate


$          (1,419)


$          (2,759)


$          (1,235)


$             (752)


$          (1,357)


Commercial and industrial loans


(1,495)


(18,850)


(995)


(1,580)


(1,538)


Residential mortgages


(351)


(140)


(139)


(95)


(108)


Home equity 


(67)


(71)


(300)


(257)


(116)


Auto and other consumer


(674)


(706)


(680)


(748)


(585)


Total, net


$          (4,006)


$        (22,526)


$          (3,349)


$          (3,432)


$          (3,704)














Net charge-offs (QTD annualized)/average loans 

0.17%


0.92%


0.14%


0.15%


0.17%


Net charge-offs (YTD annualized)/average loans 

0.35%


0.41%


0.15%


0.15%


0.18%














DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS










30-89 Days delinquent


0.25%


0.26%


0.20%


0.22%


0.27%


90+ Days delinquent and still accruing


0.29%


0.29%


0.28%


0.23%


0.22%


Total accruing delinquent loans


0.54%


0.55%


0.48%


0.45%


0.49%


Non-accruing loans


0.42%


0.37%


0.36%


0.34%


0.36%


Total delinquent and non-accruing loans


0.96%


0.92%


0.84%


0.79%


0.85%


 

 

BERKSHIRE HILLS BANCORP, INC.

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



At or for the Quarters Ended



Dec. 31,


Sept. 30,


June 30,


March 31,


Dec. 31,


(in thousands)


2019


2019


2019


2019


2018


Net income


$       25,751


$       22,616


$       25,448


$       23,635


$       14,259


Adj: Net securities (gains)/losses (1)


(1,734)


(87)


(17)


(2,551)


3,023


Adj: Merger and acquisition expense


3,611


3,802


9,711


1,609


2,792


Adj: Restructuring expense and other expense


2,102


361


1,444


5,406


1,822


Adj: Legal settlements


-


-


-


-


3,000


Adj: Systems vendor restructuring costs


-


-


-


-


8,379


Adj: Loss/(income) from discontinued operations before income taxes

9,514


(2,747)


(2,082)


854


3,884


Adj: Income taxes


(3,910)


(281)


(2,385)


(1,223)


(5,185)


Total core income (2)

(A)

$       35,334


$       23,664


$       32,119


$       27,730


$       31,974














Total revenue from continuing operations


$     114,695


$     118,277


$     109,107


$     107,181


$     108,541


Adj: Net securities (gains)/losses (1)


(1,734)


(87)


(17)


(2,551)


3,023


Adj: Net (gains) on sale of business operations and assets


-


-


-


-


-


Total core revenue (2)

(B)

$     112,961


$     118,190


$     109,090


$     104,630


$     111,564














Total non-interest expense from continuing operations


$       70,287


$       71,011


$       76,568


$       71,991


$       80,373


Less: Merger, restructuring and other expense (see above)


(5,713)


(4,163)


(11,155)


(7,015)


(4,614)


Less: Legal settlements


-


-


-


-


(3,000)


Less: Systems vendor restructuring costs


-


-


-


-


(8,379)


Core non-interest expense (2)                                    

(C)

$       64,574


$       66,848


$       65,413


$       64,976


$       64,380














(in millions, except per share data)












Total average assets                                                

(D)

$       13,270


$       13,468


$       12,901


$       12,188


$       12,081


Total average shareholders' equity                         

(E)

1,747


1,768


1,676


1,584


1,581


Total average tangible shareholders' equity (2)                        

(F)

1,146


1,164


1,121


1,033


1,029


Total average tangible common shareholders' equity (2)                        

(G)

1,105


1,124


1,080


992


988


Total tangible shareholders' equity, period-end (2)(3)

(H)

1,159


1,170


1,176


1,026


1,001


Total tangible common shareholders' equity, period-end (2)(3)

(I)

1,119


1,130


1,136


986


961


Total tangible assets, period-end (2)(3)

(J)

12,613


12,930


13,051


11,623


11,660














Total common shares outstanding, period-end (thousands)               

(K)

49,585


50,394


51,045


45,522


45,417


Average diluted shares outstanding (thousands)

(L)

50,702


51,545


49,114


46,261


46,240














Core earnings per common share, diluted(2)

(A/L)

$           0.70


$           0.46


$           0.65


$           0.60


$           0.69


Tangible book value per common share, period-end (2)

(I/K)

22.56


22.42


22.25


21.66


21.15


Total tangible shareholders' equity/total tangible assets (2)

(H)/(J)

9.19


9.05


9.01


8.83


8.59














Performance ratios (4)












GAAP return on assets


0.78

%

0.67


0.79

%

0.78


0.47

%

Core return on assets (2)


1.08


0.71


1.01


0.92


1.07


GAAP return on equity 


5.90


5.12


6.07


5.97


3.61


Core return on equity (2)

(A/E)

8.09


5.35


7.67


7.00


8.09


Core return on tangible common equity (2)(5)

(A+O)/(G)

13.12


8.74


12.21


11.44


13.21


Efficiency ratio (2)(6)                                                                                

(C-O)/(B+M+P)

53.66


53.37


56.41


59.54


54.88


Net interest margin


3.11


3.22


3.19


3.17


3.41














Supplementary data (in thousands)












Tax benefit on tax-credit investments (7)

(M)

$         2,503


$         2,382


$         2,381


$            684


$         1,787


Non-interest income charge on tax-credit investments (8)

(N)

(1,996)


(1,942)


(1,938)


(579)


(1,610)


Net income on tax-credit investments

(M+N)

507


440


443


105


177














Intangible amortization

(O)

$         1,582


$         1,526


$         1,475


$         1,200


$         1,202


Fully taxable equivalent income adjustment 

(P)

1,934


1,826


1,882


1,809


1,763


























(1) Net securities (gains)/losses include the change in fair value of the Company's equity securities in compliance with the Company's adoption of ASU 2016-01.


(2) Non-GAAP financial measure.












(3) Total tangible shareholders' equity is computed by taking total shareholders' equity less the intangible assets at period-end. 






     Total tangible assets is computed by taking total assets less the intangible assets at period-end.  








(4) Ratios are annualized and based on average balance sheet amounts, where applicable. Quarterly data may not sum to year-to-date data due 




     to rounding.












(5) Core return on tangible equity is computed by dividing the total core income adjusted for the tax-effected amortization of intangible assets,




     assuming a 27% marginal rate, by tangible equity.












(6) Efficiency ratio is computed by dividing total core tangible non-interest expense by the sum of total net interest income on a fully 




     taxable equivalent basis and total core non-interest income adjusted to include tax credit benefit of tax shelter investments.  The  




     Company uses this non-GAAP measure to provide important information regarding its operational efficiency.







(7) The tax benefit is the direct reduction to the income tax provision due to tax credits and deductions generated from investments in historic  




      rehabilitation and low-income housing.












(8) The non-interest income charge is the reduction to the tax-advantaged investments, which are incurred as the tax credits are generated. 




 

 


BERKSHIRE HILLS BANCORP, INC.


RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA - UNAUDITED - (F-10)




At or for the Years Ended




Dec. 31,


Dec. 31,



(Dollars in thousands)


2019


2018



Net income 


$                   97,450


$                 105,765



Adj: Net securities(gains)/losses (1)


(4,389)


3,719



Adj: Merger and acquisition expenses


18,733


8,930



Adj: Restructuring expense and other


9,313


1,362



Adj: Legal settlements


-


3,000



Adj: Systems vendor restructuring costs


-


8,379



Adj: Loss from discontinued operations before income taxes


5,539


4,767



Adj: Income taxes


(7,799)


(7,102)



Total core income (2)

(A)

$                 118,847


$                 128,820










Total revenue from continuing operations


$                 449,260


$                 430,524



Adj: Net securities(gains)/losses (1)


(4,389)


3,719



Adj: Net (gains) on sale of business operations and assets


-


(460)



Total core revenue(2)

(B)

$                 444,871


$                 433,783



Total non-interest expense from continuing operations


$                 289,857


$                 266,893



Less: Merger, restructuring and other expense (see above)


(28,046)


(10,752)



Less: Legal settlements


-


(3,000)



Less: Systems vendor restructuring costs


-


(8,379)



Core non-interest expense (2)                                    

(C)

$                 261,811


$                 244,762










(in millions, except per share data)







Total average assets                                                

(D)

$                   12,961


$                   11,769



Total average shareholders' equity                         

(E)

1,694


1,546



Total average tangible shareholders' equity (2)                        

(F)

1,116


991



Total average tangible common shareholders' equity (2)                        

(G)

1,076


950



Total tangible shareholders' equity, period-end (2)(3)

(H)

1,159


1,001



Total tangible common shareholders' equity, period-end (2)(3)

(I)

1,119


961



Total tangible assets, period-end (2)(3)

(J)

12,613


11,660



Total common shares outstanding, period-end (thousands)               

(K)

49,585


45,417



Average diluted shares outstanding (thousands)

(L)

49,421


46,231



Core earnings per common share, diluted(2)

(A/L)

$                       2.40


$                       2.79



Tangible book value per common share, period-end (2)

(I/K)

22.56


21.15



Total tangible shareholders' equity/total tangible assets (2)

(H)/(J)

9.19


8.59










Performance ratios (4)







GAAP return on assets


0.75

%

0.90

%


Core return on assets (2)

(A/D)

0.93


1.12



GAAP return on equity 


5.75


6.84



Core return on equity (2)

(A/E)

7.01


8.33



Core return on tangible common equity (2)(5)

(A+O)/(G)

11.35


13.84



Efficiency ratio (2)(6)                                                                               

(C-O)/(B+M+P)

55.63


53.64



Net interest margin


3.17


3.40










Supplementary data







Tax benefit on tax-credit investments (7)

(M)

$                     7,950


$                     5,876



Non-interest income charge on tax-credit investments (8)

(N)

(6,455)


(4,822)



Net income on tax-credit investments

(M+N)

1,495


1,054










Intangible amortization

(O)

5,783


4,934



Fully taxable equivalent income adjustment

(P)

7,451


7,423
















(1) Net securities (gains)/losses include the change in fair value of the Company's equity securities in compliance with the Company's adoption 


 of ASU 2016-01.






(2) Non-GAAP financial measure.






(3) Total tangible shareholders' equity is computed by taking total shareholders' equity less the intangible assets at period-end. 



Total tangible assets is computed by taking total assets less the intangible assets at period-end. 




(4) Ratios are annualized and based on average balance sheet amounts, where applicable. Quarterly data may not sum to year-to-date data 


due to rounding.






(5) Core return on tangible equity is computed by dividing the total core income adjusted for the tax-effected amortization of 


      intangible assets, assuming a 27% marginal rate, by tangible equity.






(6) Efficiency ratio is computed by dividing total core tangible non-interest expense by the sum of total net interest income on a fully 


      taxable equivalent basis and total core non-interest income adjusted to include tax credit benefit of tax shelter investments.  The  


      Company uses this non-GAAP measure to provide important information regarding its operational efficiency.



(7) The tax benefit is the direct reduction to the income tax provision due to tax credits and deductions generated from investments in  


 historic rehabilitation and low-income housing.






(8) The non-interest income charge is the reduction to the tax-advantaged investments, which are incurred as the tax credits are generated. 

 

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SOURCE Berkshire Hills Bancorp, Inc.

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