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Press Release

Berkshire Hills Announces First Quarter Results; Provides Update on Operations During Pandemic and Dividend Guidance

Company Release - 5/4/2020 4:15 PM ET

BOSTON, May 4, 2020 /PRNewswire/ -- Berkshire Hills Bancorp, Inc. (NYSE: BHLB) today reported a first quarter 2020 net loss of $0.40 per share.  The non-GAAP measure of core EPS was a loss of $0.07.  First quarter results reflect a non-cash $0.69 per share pre-tax provision for projected future credit losses primarily related to the COVID-19 pandemic.  The company's core pre-provision net revenue ("Core PPNR"), was $0.61 per share.  This is a non-GAAP financial measure of the Company's ongoing operations before provision and tax expense, and before discontinued operations and securities losses.  Berkshire's liquidity and regulatory capital metrics continued to strengthen during the quarter, supporting its 21st century community bank mission. 

(PRNewsfoto/Berkshire Hills Bancorp, Inc.)

In response to the pandemic, Berkshire took decisive actions to protect the health and safety of its team, customers and the communities it serves during the first quarter, including adjusting its operations to ensure the continued availability of essential banking services for all customers, providing support and financial flexibility to customers potentially impacted by the pandemic, and providing funding to minority-owned small businesses through the Berkshire Bank Foundation and its community-based partners.  The company also processed $650 million in loan approvals under the first round of the Paycheck Protection Program ("PPP").

FIRST QUARTER FINANCIAL HIGHLIGHTS

  • $0.40 GAAP net loss per share, including $0.69 pre-tax non-cash credit loss provision
  • $0.07 core loss per share
  • $0.61 Core PPNR per share (non-GAAP financial measure)
  • 3.02% net interest margin
  • 1.22% credit loss allowance/loans
  • 92% loans/deposits
  • 8.8% tangible equity/tangible assets (non-GAAP financial measure)
  • $33.72 book value per common share; $21.82 tangible book value per common share (non-GAAP financial measure)

COVID-19 RESPONSE

  • Servicing $650 million first round Paycheck Protection Program ("PPP") loan approvals
  • Processing payment forbearances for $1.3 billion in loans to 4,000 customers
  • Providing $3 million to assist small businesses through The Futures Fund with BECMA and MALGBT Chamber
  • Providing $1 million in grants through Berkshire Bank Foundation, including $500,000 in small business assistance through non-profit partners
  • Supporting remote work from home for 86% of the non-branch workforce
  • Maintaining full pay for all staff

CEO Richard Marotta stated, "Our teams are working hard to safely and responsibly meet the needs of our customers during this pandemic, which has shined a light on community banks' essential role in our economy.  Berkshire's number one priority has been to help the communities we serve, especially minority ones, weather this storm and rebuild as soon as it is safe to do so.  We are proud to offer additional support and financial flexibility to our customers who may have been impacted, and are also funding significant programs to help small businesses.  We continue to maintain a strong balance sheet, with ample liquidity and regulatory capital to ensure we continue to perform our essential role.  We intend to continue to lead, supporting our customers and neighbors throughout this pandemic, because we know that in the long haul when our communities prosper, Berkshire does too."

DIVIDEND GUIDANCE

The Board of Directors intends to declare and pay a regular quarterly cash dividend of $0.24 per common share in the second quarter.  In conjunction with changes in the regulatory reporting schedule this quarter, the Board plans to make the formal dividend declaration after the completion of regulatory reporting and other related regulatory actions regarding such declaration.  The Board also plans to declare and pay the regular preferred stock dividend as part of this intended future declaration.

FINANCIAL CONDITION

Total assets remained unchanged at $13.2 billion at the end of the first quarter of 2020, compared to year-end 2019.  Total loans declined by 2%, decreasing in all major categories, as the Company continued to implement its balance sheet restructuring program, focusing on its local markets and building short-term investments.  These funds are intended for the $650 million in Phase I PPP loans which are currently in process.  Total deposits decreased by 3% primarily due to changes in fluctuating payroll deposit balances and brokered deposits.  Organic deposits decreased by 1% before these changes, primarily due to some commercial accounts which utilized liquid funds for other business purposes in response to current conditions.  The period-end ratio of loans/deposits remained at 92% and liquid investments were increased during the quarter.  

The allowance for credit losses on loans increased to 1.22% of loans from 0.67% at year-end 2019.  In accordance with changes in generally accepted accounting principles, the Company adopted the new credit loss accounting standard known as "CECL" on January 1, 2020.  The allowance was increased by $26 million to 0.94% of loans on this effective date.  Under CECL, the credit loss allowance is based on projected credit losses rather than on losses incurred.  At quarter-end, the Company projected additional future credit losses resulting primarily from an economic contraction arising from the COVID pandemic.  As a result, the Company recorded a $35 million first quarter provision for credit losses, and the allowance increased to $114 million, or 1.22% of total loans at quarter-end.  Actual future credit losses may be more or less than the Company's projections about pandemic related credit losses.  The first quarter increase in the credit loss allowance was a non-cash adjustment which had no significant impact on total regulatory risk-based capital.  The Company has a separate $8 million allowance for losses on unfunded credit commitments which is included in other liabilities.

The Company has granted loan modifications on more than 4,000 loans with balances of $1.3 billion as of April 21, representing approximately 21% of outstanding commercial loan balances, 3% of residential mortgages, and 2% of consumer loans.  Forbearances made in accordance with regulatory guidelines will not be reported as delinquencies or as troubled debts.  The increase in net loan charge-offs reflects the final resolution of one commercial real estate loan which had been in foreclosure for two years.  Nonperforming loans increased primarily due to a $13  million write-up under CECL of purchased  credit deteriorated loans.  This increase was offset by an increase in the credit loss allowance and had no impact on net loans or capital.  Loans delinquent over 90 days and accruing decreased primarily due to adjustments to purchased credit impaired loans at the time of the CECL adoption.   Also as part of this adoption, Company recorded an $8 million increase in the estimated liability for losses on unfunded loan commitments.

Total equity decreased in the first quarter due to the non-cash impacts of CECL on the January 1 adoption date and the credit loss provision recorded against income at the end of the quarter.  Most of these charges did not impact the Company's regulatory risk-based capital.  Book value per share totaled $33.72 at quarter-end, compared to $34.65 at year-end 2019.  The non-GAAP measure of tangible book value per share measured $21.82, compared to $22.56 at those respective dates.  The Company projects the total risk-based capital ratio to be 13.9% at quarter-end, exceeding the 10% threshold for the highest regulatory "well capitalized" category.  

RESULTS OF OPERATIONS

Berkshire reported a first quarter 2020 GAAP net loss of $20 million, or $0.40 per share, compared to net income of $26 million, or $0.51 per share, in the prior quarter.  Core earnings was a loss of $4 million, or $0.07 per share, compared to core earnings of $35 million, or $0.70 per share, in the prior quarter.  Core PPNR totaled $30 million, or $0.61 per share, in the first quarter compared to $48 million, or $0.95 per share, in the prior quarter.  Core PPNR measures operating results before the impact of the credit loss provision, which is a multiyear projection of future credit losses under the new CECL accounting standard.  As a core measure, it excludes net charges not viewed as related to ongoing operations.  In the most recent quarter, these net charges were primarily due to discontinued national mortgage banking operations and unrealized equity securities losses due to the stock market decline.  Most of the Company's $32 million equities portfolio remained in a net unrealized gain position at quarter-end.

The $18 million quarter-over-quarter decrease in Core PPNR was primarily due to the impact of the COVID pandemic on revenue and expense:  

  • Net interest income decreased by $5 million including the impact of lower loan balances, low yield investments held for PPP funding, and lower interest rates resulting from federal monetary stimulus. Also, the contribution from purchased loan accretion decreased by $2 million as the credit for accretion on recoveries was shifted to the credit loss allowance based on the new CECL accounting standard.
  • Non-interest income decreased, including $6 million due to noncash charges related to changes in valuations of credit related instruments as a result of pandemic related conditions. This includes a $3 million decrease to loan fees related to interest rate swaps, and $2 million in charges to other non-interest income related to fair valued loans. Additionally, volumes for fee based loan and deposit activities declined. Loan fee revenue related to swaps and SBA loan originations decreased $3 million, more than offsetting seasonal increases in wealth and insurance revenues.
  • Despite the lower revenue sources, the Company maintained staffing levels and increased technology spending as it converted most operations to work-from-home and focused on responding to borrower needs.

Quarter-over quarter expense changes also included seasonal increases in benefits and occupancy costs, along with the expiration of FDIC insurance expense credits utilized in the prior quarter.  Quarterly non-interest expense includes targeted increases in compensation, health benefits, technology costs, and social initiatives as the Company continues to pursue its goals for developing as a 21st century community bank.  Full-time equivalent staff in continuing operations was generally unchanged, and totaled 1,548 positions at quarter-end.  The Company maintained its employee compensation despite changes in workflows and schedules during the quarter, with no layoffs.  The Company recorded a $5 million tax benefit in the first quarter.  The effective tax benefit on continuing operations was 14%. 

Berkshire moved forward with its planned exit from the origination of mortgages in its discontinued national mortgage banking operations in the first quarter and has entered into an agreement with a buyer to complete this exit and for other asset and license transfers to be completed by the end of the year.  The Company reported an $8 million after-tax net loss on these operations during the most recent quarter, consisting primarily of pre-tax charges of $4 million to write-down mortgage servicing rights and $4 million in severance costs.  The Company is targeting to reduce the net loss related to this business in successive quarters, with a complete exit by the end of the year.  These results are treated as non-core items in the Company's statement of operations.

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.

COVID-19 Response- Faced with the unprecedented outbreak of the COVID-19 pandemic, Berkshire is harnessing its assets and Be FIRST culture to navigate and ensure the health, safety and economic resiliency of its employees, customers and communities.

  • Support for its People: Protecting the health and safety of Berkshire's frontline workers, and supporting their ability to serve customers, is a top priority. As a result, the bank suspended non-essential business travel, reduced branch hours, increased safety precautions including enhanced cleaning, provided protective masks, and provided additional paid sick time. The company currently has 86% of non-branch staff working from home. The bank is also ensuring financial stability, protecting pay for those employees who are unable to work their normal scheduled hours and launched an employee assistance fund to help those facing hardships. The company is leveraging its employee networks including Employee Resource Groups and Regional Cultural Councils to collect feedback, maintain culture, morale and productivity.
  • Helping its Customers: Berkshire knows this pandemic has had a serious economic impact on most individuals and businesses. The bank took swift steps to provide additional financial flexibility to customers facing financial hardships including the launch of customer assistance programs that increase debit card limits, waive penalties for early CD withdrawals, waive foreign ATM fees and provide options for loan forbearance. The company participates in the Paycheck Protection Program to assist small businesses. Berkshire continues to encourage customers to leverage its mobile, telephonic and digital banking solutions as well as its' My Bankers to conduct business.
  • Investing in Community Recovery & Resiliency: Berkshire remains committed to the economic resiliency of its communities and engaging directly with stakeholders through virtual community conversations to inform its response. The bank is providing $3 million to assist small businesses through The Futures Fund with the Black Economic Council of Massachusetts and the Massachusetts LGBT Chamber of Commerce. Berkshire's Foundation is providing $1 million in COVID-19 support, including $500,000 in small business assistance and offering flexibility for non-profits to redirect prior grant funding. The bank is evaluating strategic sponsorships and other advertising assets for re-deployment to community partners. In addition, Berkshire will harness its XTEAM volunteer program to raise funds and deploy employees through virtual skills based volunteer events with a focus on financial health, job training and other critical non-profit needs.

Corporate Responsibility Report- Earlier this month, the company released its 2019 Corporate Responsibility Report, Leading the Way Forward: Purpose-Driven Performance. The report highlights the company's environmental, social, governance and cultural programs and serves as a guide for how Berkshire will navigate the current environment while supporting all its stakeholders and its vision of a 21st century community bank that delivers purpose-driven performance.

INVESTOR CONFERENCE CALL AND INFORMATION PRESENTATION

Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Tuesday, May 5, 2020 to discuss the results for the quarter and provide guidance about expected future results.  Berkshire will also place an information 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/10141779.  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 Tuesday, May 12, 2020 by dialing 877-344-7529 and entering access number 10141779.  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" 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 effects the novel coronavirus (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 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. 

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 2019 are 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.  Discontinued operations are the Company's national mortgage banking operations for which the Company is pursuing sale opportunities.   

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 return on 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. 

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)

 

 

  BERKSHIRE HILLS BANCORP, INC.

SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED - (F-1)





At or for the Quarters Ended (1)





March 31,


Dec. 31,


Sept. 30,


June 30,


March 31,






2020


2019


2019


2019 (2)


2019

















PER SHARE DATA













Net (loss)/earnings per common share, diluted

$       (0.40)


$         0.51


$         0.44


$         0.52


$         0.51




Core (loss)/earnings per common share, diluted (3)

(0.07)


0.70


0.46


0.65


0.60




Total book value per common share

33.72


34.65


34.36


34.05


33.75




Tangible book value per common share (3)

21.82


22.56


22.42


22.25


21.66




Market price at period end

14.86


32.88


29.29


31.39


27.24




Dividends per common share

0.24


0.23


0.23


0.23


0.23




Dividends per preferred share

0.48


0.46


0.46


0.46


0.46

















PERFORMANCE RATIOS (4)













Return on assets

(0.62)

%

0.78

%

0.67

%

0.79

%

0.78

%



Core return on assets (3)

(0.11)


1.08


0.71


1.01


0.92




Return on equity

(4.61)


5.90


5.12


6.07


5.97




Core return on equity (3)

(0.85)


8.09


5.35


7.67


7.00




Core return on tangible common equity (3)

(0.95)


13.12


8.74


12.21


11.44




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

3.02


3.11


3.22


3.19


3.17




Fee income/Net interest and fee income from continuing operations

15.46


18.11


17.61


16.20


17.56




Efficiency ratio (3)

66.92


53.66


53.37


56.41


59.54

















CHANGE (Year-to-date)













Total commercial loans (organic, annualized)

(5)

%

(7)

%

(9)

%

(10)

%

(3)

%



Total loans (organic, annualized)

(8)


(9)


(9)


(9)


(4)




Total deposits (organic, annualized)

(10)


0


2


6


8




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

(14)


4


4


1


3




(Loss)/earnings per common share (compared to prior year) 

(178)


(14)


(26)


(20)


(7)




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

(112)


(14)


(18)


(9)


(8)

















FINANCIAL DATA (in millions)













Total assets


$     13,221


$     13,216


$     13,532


$     13,653


$     12,173




Total earning assets

11,894


11,916


12,174


12,343


11,039




Total securities

1,837


1,770


1,861


1,905


1,881




Total loans


9,303


9,502


9,719


9,942


8,947




Allowance for credit losses

114


64


62


62


62




Total intangible assets

598


599


602


603


551




Total deposits


10,072


10,336


10,423


10,566


9,166




Total shareholders' equity

1,713


1,759


1,772


1,779


1,577




Net (loss)/income

(19.9)


25.8


22.6


25.4


23.6




Core (loss)/income (3)

(3.6)


35.3


23.7


32.1


27.7




Purchase accounting accretion

3.1


5.1


4.8


3.2


1.3

















ASSET QUALITY AND CONDITION RATIOS 













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

0.45

%

0.17

%

0.92

%

0.14

%

0.15

%



Total non-performing assets/total assets

0.40


0.31


0.28


0.27


0.26




Allowance for credit losses/total loans

1.22


0.67


0.64


0.63


0.69




Loans/deposits


92


92


93


94


98




Shareholders' equity to total assets

12.96


13.31


13.10


13.03


12.95




Tangible shareholders' equity to tangible assets (3)

8.84


9.19


9.05


9.01


8.83































(1)

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



(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 page F-9 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: 0.11%, 0.17%, 0.16%, 0.11%, 0.05%.






 

 

  BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-2)


March 31,


December 31,


(in thousands)

2020


2019


Assets





Cash and due from banks

$            90,280


$          105,447


Short-term investments

624,064


474,382


Total cash and short-term investments

714,344


579,829







Trading security

9,829


10,769


Marketable equity securities, at fair value

32,283


41,556


Securities available for sale, at fair value

1,403,858


1,311,555


Securities held to maturity, at amortized cost

336,802


357,979


Federal Home Loan Bank stock and other restricted securities

54,306


48,019


Total securities

1,837,078


1,769,878


Less: Allowance for credit losses on investment securities

(141)


-


Net securities

1,836,937


1,769,878







Loans held for sale

4,252


36,664







Commercial real estate loans

3,985,856


4,034,269


Commercial and industrial loans

1,812,445


1,840,508


Residential mortgages

2,604,390


2,685,472


Consumer loans

900,486


942,179


Total loans

9,303,177


9,502,428


Less: Allowance for credit losses on loans 

(113,510)


(63,575)


Net loans

9,189,667


9,438,853







Premises and equipment, net

120,667


120,398


Other real estate owned

224


-


Goodwill 

553,762


553,762


Other intangible assets

44,035


45,615


Cash surrender value of bank-owned life insurance

228,447


227,894


Deferred tax asset, net

44,575


51,017


Other assets

344,470


239,872


Assets from discontinued operations

140,064


152,188


Total assets 

$     13,221,444


$     13,215,970







Liabilities and shareholders' equity





Demand deposits

$       1,922,490


$       1,884,100


NOW and other deposits

1,546,626


1,492,569


Money market deposits

2,391,835


2,528,656


Savings deposits

867,024


841,283


Time deposits

3,343,700


3,589,369


Total deposits

10,071,675


10,335,977







Senior borrowings

944,053


730,501


Subordinated borrowings

97,107


97,049


Total borrowings

1,041,160


827,550







Other liabilities 

364,770


267,398


Liabilities from discontinued operations

30,554


26,481


Total liabilities

11,508,159


11,457,406







Preferred shareholders' equity

20,325


40,633


Common shareholders' equity

1,692,960


1,717,931


Total shareholders' equity

1,713,285


1,758,564


Total liabilities and shareholders' equity

$     13,221,444


$     13,215,970







Net common shares outstanding 

50,199


49,585


 

 

  BERKSHIRE HILLS BANCORP, INC.

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

LOAN ANALYSIS























Annualized Growth %

(in millions)


March 31, 2020
Balance


December 31, 2019
Balance


Quarter ended
March 31, 2020










Total commercial real estate


$                    3,986


$                     4,034


(5)

%

Commercial and industrial loans 


1,812


1,841


(6)


Total commercial loans 


5,798


5,875


(5)










Total residential mortgages


2,604


2,685


(12)










Home equity 


378


381


(3)


Auto and other


523


561


(27)


Total consumer loans


901


942


(16)


Total loans


$                    9,303


$                     9,502


(8)

%

















































DEPOSIT ANALYSIS














Annualized Growth %

(in millions)


March 31, 2020
Balance


December 31, 2019
Balance


Quarter ended
March 31, 2020


Demand


$                    1,922


$                     1,884


8

%

NOW and other


1,547


1,493


14


Money market


2,392


2,529


(22)


Savings


867


841


12


Time deposits


3,344


3,589


(27)


Total deposits 


$                  10,072


$                   10,336


(10)

%









 

 

BERKSHIRE HILLS BANCORP, INC.

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


Three Months Ended



March 31,


(in thousands, except per share data)

2020


2019


Interest and dividend income from continuing operations    





Loans

$        101,695


$        105,651


Securities and other    

14,500


15,458


Total interest and dividend income    

116,195


121,109


Interest expense from continuing operations 





Deposits

23,838


26,622


Borrowings

5,929


9,028


Total interest expense    

29,767


35,650


Net interest income from continuing operations

86,428


85,459


Non-interest income from continuing operations 





Mortgage banking originations

959


46


Loan related income

1,302


6,003


Deposit related fees

7,947


6,858


Insurance commissions and fees    

3,024


2,853


Wealth management fees    

2,570


2,441


Total fee income    

15,802

#

18,201

#

Other

(436)


970


Securities (losses)/gains, net     

(9,730)


2,551


Total non-interest income      

5,636


21,722


Total net revenue from continuing operations

92,064


107,181


Provision for credit losses   

34,807


4,001


Non-interest expense from continuing operations





Compensation and benefits

36,909


33,500


Occupancy and equipment     

11,132


9,446


Technology and communications

8,081


6,257


Marketing and promotion     

1,165


1,267


Professional services

2,720


2,275


FDIC premiums and assessments

1,482


1,639


Other real estate owned and foreclosures

27


2


Amortization of intangible assets     

1,580


1,200


Merger, restructuring and other expense 

-


7,015


Other

8,229


9,390


Total non-interest expense     

71,325


71,991







(Loss)/income from continuing operations before income taxes       

$        (14,068)


$          31,189


Income tax (benefit)/expense

(1,996)


6,917


Net (loss)/income from continuing operations

$        (12,072)


$          24,272







(Loss)/income from discontinued operations before income taxes

$        (10,629)


$             (854)


Income tax (benefit)/expense

(2,831)


(217)


Net (loss)/income from discontinued operations

$          (7,798)


$             (637)







Net (loss)/income

$        (19,870)


$          23,635


Preferred stock dividend

125


240


(Loss)/income available to common shareholders

$        (19,995)


$          23,395







Basic (loss)/earnings per common share:





Continuing Operations

$            (0.24)


$              0.52


Discontinued Operations

(0.16)


(0.01)


Total

$            (0.40)


$              0.51







Diluted (loss)/earnings per common share:





Continuing Operations

$            (0.24)


$              0.52


Discontinued Operations

(0.16)


(0.01)


Total

$            (0.40)


$              0.51







Weighted average shares outstanding:      





Basic

50,204


46,113


Diluted

50,204


46,261


 

 

BERKSHIRE HILLS BANCORP, INC.

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




March 31,


Dec. 31,


Sept. 30,


June 30,


March 31,


(in thousands, except per share data)

2020


2019


2019


2019


2019


Interest and dividend income from continuing operations    











Loans

$     101,695


$     110,915


$     118,371


$     113,990


$     105,651


Securities and other    

14,500


14,526


15,354


15,248


15,458


Total interest and dividend income    

116,195


125,441


133,725


129,238


121,109


Interest expense from continuing operations











Deposits

23,838


28,797


31,501


28,273


26,622


Borrowings

5,929


5,311


5,353


9,370


9,028


Total interest expense    

29,767


34,108


36,854


37,643


35,650


Net interest income from continuing operations

86,428


91,333


96,871


91,595


85,459


Non-interest income from continuing operations











Mortgage banking originations

959


172


292


278


46


Loan related income

1,302


7,056


6,493


4,822


6,003


Deposit related fees

7,947


8,264


8,705


7,525


6,858


Insurance commissions and fees    

3,024


2,471


2,895


2,738


2,853


Wealth management fees    

2,570


2,239


2,325


2,348


2,441


Total fee income    

15,802


20,202


20,710


17,711


18,201


Other

(436)


75


609


(216)


970


Securities (losses)/gains, net     

(9,730)


1,734


87


17


2,551


Gain on sale of business operations and assets, net

-


1,351


-


-


-


Total non-interest income      

5,636


23,362


21,406


17,512


21,722


Total net revenue from continuing operations

92,064


114,695


118,277


109,107


107,181


Provision for credit losses   

34,807


5,351


22,600


3,467


4,001


Non-interest expense from continuing operations











Compensation and benefits

36,909


35,355


37,272


34,779


33,500


Occupancy and equipment     

11,132


10,798


9,893


9,449


9,446


Technology and communications

8,081


6,702


6,849


6,715


6,257


Marketing and promotion  

1,165


1,046


1,006


1,155


1,267


Professional services

2,720


2,288


2,282


3,953


2,275


FDIC premiums and assessments

1,482


471


-


1,751


1,639


Other real estate owned and foreclosures

27


4


150


(2)


2


Amortization of intangible assets     

1,580


1,582


1,526


1,475


1,200


Merger, restructuring and other expense 

-


5,713


4,163


11,155


7,015


Other

8,229


6,328


7,870


6,138


9,390


Total non-interest expense     

71,325


70,287


71,011


76,568


71,991













(Loss)/income from continuing operations before income taxes

$     (14,068)


$       39,057


$       24,666


$       29,072


$       31,189


Income tax (benefit)/expense

(1,996)


6,421


4,007


5,118


6,917


Net (loss)/ income from continuing operations

$     (12,072)


$       32,636


$       20,659


$       23,954


$       24,272













(Loss)/income from discontinued operations before income taxes

$     (10,629)


$       (9,514)


$         2,747


$         2,082


$          (854)


Income tax (benefit)/expense

(2,831)


(2,629)


790


588


(217)


Net (loss)/income from discontinued operations

$       (7,798)


$       (6,885)


$         1,957


$         1,494


$          (637)













Net (loss)/income

$     (19,870)


$       25,751


$       22,616


$       25,448


$       23,635


Preferred stock dividend

125


240


240


240


240


(Loss)/income available to common shareholders

$     (19,995)


$       25,511


$       22,376


$       25,208


$       23,395
























Basic (loss)/earnings per common share:











Continuing Operations

$         (0.24)


$           0.65


$           0.40


$           0.49


$           0.52


Discontinued Operations

(0.16)


(0.14)


0.04


0.03


(0.01)


Total

$         (0.40)


$           0.51


$           0.44


$           0.52


$           0.51








Diluted (loss)/earnings per common share:











Continuing Operations

$         (0.24)


$           0.65


$           0.40


$           0.49


$           0.52


Discontinued Operations

(0.16)


(0.14)


0.04


0.03


(0.01)


Total

$         (0.40)


$           0.51


$           0.44


$           0.52


$           0.51













Weighted average shares outstanding:      











Basic

50,204


50,494


51,422


48,961


46,113


Diluted

50,204


50,702


51,545


49,114


46,261













 

 

  BERKSHIRE HILLS BANCORP, INC.

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



Quarters Ended



March 31,


Dec. 31,


Sept. 30,


June 30,


March 31,




2020


2019


2019


2019


2019














Earning assets 












Loans:












Commercial real estate


4.41

%

4.80

%

4.92

%

5.01

%

4.91

%

Commercial and industrial loans


5.03


5.35


5.58


5.79


5.83


Residential mortgages


3.77


3.61


3.73


3.74


3.74


Consumer loans


4.28


4.38


4.55


4.52


4.45


Total loans


4.33


4.52


4.67


4.76


4.73


Securities


3.32


3.31


3.41


3.38


3.46


Short-term investments and loans held for sale


1.52


3.15


4.11


3.37


3.59


Total earning assets


4.05


4.27


4.45


4.51


4.49














Funding liabilities












Deposits:












NOW and other


0.46


0.54


0.61


0.66


0.65


Money market


0.98


1.18


1.27


1.27


1.23


Savings


0.13


0.14


0.13


0.15


0.18


Time


1.87


1.97


2.02


2.06


2.07


Total interest-bearing deposits


1.18


1.35


1.43


1.44


1.44


Borrowings


2.60


2.77


3.12


2.92


2.85


Total interest-bearing liabilities


1.33


1.48


1.57


1.66


1.65














Net interest spread


2.72


2.79


2.88


2.85


2.84


Net interest margin


3.02


3.11


3.22


3.19


3.17














Cost of funds (1)


1.11


1.23


1.32


1.41


1.41


Cost of deposits 


0.96


1.11


1.18


1.18


1.19














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






 

 

  BERKSHIRE HILLS BANCORP, INC.

AVERAGE BALANCES - UNAUDITED - (F-7)


Quarters Ended


March 31, 


Dec. 31, 


Sept. 30, 


June 30, 


March 31, 


(in thousands)

2020


2019


2019


2019


2019


Assets











Loans











Commercial real estate

$          4,000,461


$          4,056,244


$          3,998,144


$          3,716,130


$          3,377,902


Commercial and industrial loans

1,795,813


1,768,039


1,951,205


2,056,384


1,986,792


Residential mortgages

2,654,224


2,758,676


2,849,216


2,711,348


2,556,299


Consumer loans

921,810


974,889


1,035,893


1,064,579


1,079,583


Total loans (1) 

9,372,308


9,557,848


9,834,458


9,548,441


9,000,576


Securities (2)

1,744,635


1,752,968


1,846,985


1,893,298


1,895,768


Short-term investments and loans held for sale

450,197


444,622


309,897


117,029


67,367


Total earning assets (3)

11,567,140


11,755,438


11,991,340


11,558,768


10,963,711


Goodwill and other intangible assets

598,347


601,192


603,762


555,606


550,966


Other assets

654,063


737,396


668,218


593,917


557,442


Assets from discontinued operations

98,528


176,251


204,339


192,466


115,721


Total assets

$        12,918,078


$        13,270,277


$        13,467,659


$        12,900,757


$        12,187,840













Liabilities and shareholders' equity











Deposits 











NOW and other

$          1,159,388


$          1,085,485


$          1,111,637


$          1,053,335


$             963,043


Money market

2,752,465


2,688,766


2,624,639


2,474,071


2,378,496


Savings

846,942


835,209


838,445


780,797


736,707


Time

3,333,070


3,827,175


4,158,688


3,593,022


3,429,375


Total interest-bearing deposits

8,091,865


8,436,635


8,733,409


7,901,225


7,507,621


Borrowings

949,316


853,911


805,035


1,415,614


1,351,834


Total interest-bearing liabilities

9,041,181


9,290,546


9,538,444


9,316,839


8,859,455


Non-interest-bearing demand deposits

1,849,295


1,898,045


1,864,964


1,673,560


1,538,767


Other liabilities 

279,100


304,504


267,922


215,704


192,119


Liabilities from discontinued operations

23,799


30,446


28,206


18,434


13,962


Total liabilities

11,193,375


11,523,541


11,699,536


11,224,537


10,604,303













Preferred shareholders' equity

20,548


40,633


40,633


40,633


40,633


Common shareholders' equity

1,704,155


1,706,103


1,727,490


1,635,587


1,542,904


Total shareholders' equity

1,724,703


1,746,736


1,768,123


1,676,220


1,583,537


Total liabilities and shareholders' equity

$        12,918,078


$        13,270,277


$        13,467,659


$        12,900,757


$        12,187,840
























Supplementary data











Total average non-maturity deposits

$          6,608,090


$          6,507,505


$          6,439,685


$          5,981,763


$          5,617,013


Total average deposits 

9,941,160


10,334,680


10,598,373


9,574,785


9,046,388


Fully taxable equivalent income adjustment

1,824


1,934


1,826


1,882


1,809


Total average tangible equity (4)

1,126,356


1,145,544


1,164,361


1,120,614


1,032,571













(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



March 31,


Dec. 31,


Sept. 30,


June 30,


March 31,


(in thousands)


2020


2019


2019


2019


2019


NON-PERFORMING ASSETS












Non-accruing loans:












Commercial real estate


$        16,938


$        20,119


$        15,829


$        19,366


$        18,513


Commercial and industrial loans


18,370


11,373


12,224


9,256


5,614


Residential mortgages


9,636


3,343


3,062


3,579


2,341


Consumer loans


6,172


4,805


5,191


3,570


4,038


Total non-accruing loans


51,116


39,640


36,306


35,771


30,506


Other real estate owned


224


-


-


154


-


Repossessed assets


1,316


858


1,003


874


742


Total non-performing assets


$        52,656


$        40,498


$        37,309


$        36,799


$        31,248














Total non-accruing loans/total loans


0.55%


0.42%


0.37%


0.36%


0.34%


Total non-performing assets/total assets


0.40%


0.31%


0.28%


0.27%


0.26%














PROVISION AND ALLOWANCE FOR CREDIT LOSSES ON LOANS










Balance at beginning of period


$        63,575


$        62,230


$        62,156


$        62,038


$        61,469


Adoption of ASU No. 2016-13 (1)


25,434


-


-


-


-


Balance after adoption of ASU No. 2016-13


89,009


62,230


62,156


62,038


61,469


Charged-off loans


(12,432)


(4,485)


(23,524)


(3,966)


(4,579)


Recoveries on charged-off loans


1,958


479


998


617


1,147


Net loans charged-off


(10,474)


(4,006)


(22,526)


(3,349)


(3,432)


Provision for loan credit losses


34,975


5,351


22,600


3,467


4,001


Balance at end of period


$      113,510


$        63,575


$        62,230


$        62,156


$        62,038














Allowance for credit losses/total loans


1.22%


0.67%


0.64%


0.63%


0.69%


Allowance for credit losses/non-accruing loans


222%


160%


171%


174%


203%














NET LOAN CHARGE-OFFS












Commercial real estate


$         (5,990)


$         (1,419)


$         (2,759)


$         (1,235)


$            (752)


Commercial and industrial loans


(3,728)


(1,495)


(18,850)


(995)


(1,580)


Residential mortgages


(19)


(351)


(140)


(139)


(95)


Home equity 


(107)


(67)


(71)


(300)


(257)


Auto and other consumer


(630)


(674)


(706)


(680)


(748)


Total, net


$       (10,474)


$         (4,006)


$       (22,526)


$         (3,349)


$         (3,432)














Net charge-offs (QTD annualized)/average loans 


0.45%


0.17%


0.92%


0.14%


0.15%


Net charge-offs (YTD annualized)/average loans 


0.45%


0.35%


0.41%


0.15%


0.15%














DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS










30-89 Days delinquent


0.43%


0.25%


0.26%


0.20%


0.22%


90+ Days delinquent and still accruing


0.05%


0.29%


0.29%


0.28%


0.23%


Total accruing delinquent loans


0.48%


0.54%


0.55%


0.48%


0.45%


Non-accruing loans


0.55%


0.42%


0.37%


0.36%


0.34%


Total delinquent and non-accruing loans


1.03%


0.96%


0.92%


0.84%


0.79%


(1) This balance includes $12 million of PCD confirmed losses as of January 1, 2020.


 

 

  BERKSHIRE HILLS BANCORP, INC.

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



At or for the Quarters Ended



March 31,


Dec. 31,


Sept. 30,


June 30,


March 31,


(in thousands)


2020


2019


2019


2019


2019


Net (loss)/income


$    (19,870)


$      25,751


$      22,616


$      25,448


$      23,635


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


9,730


(1,734)


(87)


(17)


(2,551)


Adj: Merger and acquisition expense


-


3,611


3,802


9,711


1,609


Adj: Restructuring expense and other expense


-


2,102


361


1,444


5,406


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

10,629


9,514


(2,747)


(2,082)


854


Adj: Income taxes


(4,134)


(3,910)


(281)


(2,385)


(1,223)


Total core (loss)/income (2)

(A)

$      (3,645)


$      35,334


$      23,664


$      32,119


$      27,730














Total revenue from continuing operations


$      92,064


$    114,695


$    118,277


$    109,107


$    107,181


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


9,730


(1,734)


(87)


(17)


(2,551)


Total core revenue (2)

(B)

$    101,794


$    112,961


$    118,190


$    109,090


$    104,630














Total non-interest expense from continuing operations


$      71,325


$      70,287


$      71,011


$      76,568


$      71,991


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


-


(5,713)


(4,163)


(11,155)


(7,015)


Core non-interest expense (2)                                    

(C)

$      71,325


$      64,574


$      66,848


$      65,413


$      64,976














Total revenue


$      93,869


$    116,860


$    134,067


$    123,109


$    116,454


Total non-interest expense


83,759


81,966


84,054


88,488


82,118


Pre-tax, pre-provision net revenue 


$      10,110


$      34,894


$      50,013


$      34,621


$      34,336














Total revenue from continuing operations


$      92,064


$    114,695


$    118,277


$    109,107


$    107,181


Total non-interest expense from continuing operations


71,325


70,287


71,011


76,568


71,991


Pre-tax, pre-provision net revenue from continuing operations


$      20,739


$      44,408


$      47,266


$      32,539


$      35,190














Total core revenue (2)


$    101,794


$    112,961


$    118,190


$    109,090


$    104,630


Core non-interest expense (2)                                    


71,325


64,574


66,848


65,413


64,976


Core pre-tax, pre-provision net revenue 


$      30,469


$      48,387


$      51,342


$      43,677


$      39,654














(in millions, except per share data)












Total average assets                                                

(D)

$      12,918


$      13,270


$      13,468


$      12,901


$      12,188


Total average shareholders' equity                         

(E)

1,725


1,747


1,768


1,676


1,584


Total average tangible shareholders' equity (2)                        

(F)

1,126


1,146


1,164


1,121


1,033


Total average tangible common shareholders' equity (2)                        

(G)

1,106


1,105


1,124


1,080


992


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

(H)

1,115


1,159


1,170


1,176


1,026


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

(I)

1,095


1,119


1,130


1,136


986


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

(J)

12,624


12,617


12,930


13,051


11,623














Total common shares outstanding, period-end (thousands)               

(K)

50,199


49,585


50,394


51,045


45,522


Average diluted shares outstanding (thousands)

(L)

50,204


50,702


51,545


49,114


46,261














Core (loss)/earnings per common share, diluted(2)

(A/L)

$        (0.07)


$          0.70


$          0.46


$          0.65


$          0.60














Pre-tax, pre-provision net revenue per common share, diluted (2)


0.20


0.69


0.97


0.70


0.74


Core pre-tax, pre-provision net revenue per common share, diluted (2)

0.61


0.95


1.00


0.89


0.86














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

(I/K)

21.82


22.56


22.42


22.25


21.66


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

(H)/(J)

8.84


9.19


9.05


9.01


8.83














Performance ratios (4)












GAAP return on assets


(0.62)

%

0.78

%

0.67

%

0.79

%

0.78

%

Core return on assets (2)


(0.11)


1.08


0.71


1.01


0.92


GAAP return on equity 


(4.61)


5.90


5.12


6.07


5.97


Core return on equity (2)

(A/E)

(0.85)


8.09


5.35


7.67


7.00


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

(A+O)/(G)

(0.95)


13.12


8.74


12.21


11.44


Pre-tax, pre-provision net revenue to average assets (2)


0.08


0.26


0.37


0.27


0.28


Core pre-tax, pre-provision net revenue to average assets (2)


0.24


0.36


0.38


0.34


0.33


Efficiency ratio (2)(6)                                                                                

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

66.92


53.66


53.37


56.41


59.54


Net interest margin


3.02


3.11


3.22


3.19


3.17














Supplementary data (in thousands)












Tax benefit on tax-credit investments (7)

(M)

$           608


$        2,503


$        2,382


$        2,381


$           684


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

(N)

(486)


(1,996)


(1,942)


(1,938)


(579)


Net income on tax-credit investments

(M+N)

122


507


440


443


105














Intangible amortization

(O)

$        1,580


$        1,582


$        1,526


$        1,475


$        1,200


Fully taxable equivalent income adjustment 

(P)

1,824


1,934


1,826


1,882


1,809






































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


(2) Non-GAAP financial measure.






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


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


(5) Core return on tangible equity is computed by dividing the total core (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. 





 

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SOURCE Berkshire Hills Bancorp, Inc.

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