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Press Release

Berkshire Hills Announces Second Quarter Results

Company Release - 7/29/2020 4:15 PM ET

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

(PRNewsfoto/Berkshire Hills Bancorp, Inc.)

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

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

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

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

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

  • Total deposits up $704 million, or 7%
  • $706 million in PPP loans outstanding at quarter-end
  • Loans to deposits ratio improved to 87% from 92%
  • Book value per share of $22.79; tangible book value per share of $21.94 (non-GAAP)
  • Equity/assets ratio of 8.9%; tangible equity/tangible assets ratio of 8.6% (non-GAAP)
  • Allowance for credit losses on loans of 1.49% (1.61% excluding PPP loans)
  • 0.17% annualized net charge-offs/loans
  • 0.36% non-performing assets/assets

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

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

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

FINANCIAL CONDITION

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

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

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

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

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

RESULTS OF OPERATIONS

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

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

DIVIDEND UPDATE

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

BE FIRST CORPORATE RESPONSIBILITY UPDATE

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

Key developments in the quarter include:

  • Supporting its People: Berkshire launched a series of employee engagement and wellness initiatives including a health and wellness resource group and is providing holistic support through its employee assistance program. In addition, the You FIRST Employee Assistance Fund, launched in May, is providing critical financial support to employees facing hardships.
  • Helping its Customers: As of June 30, Berkshire associates contacted over 16,000 customers to ensure they were healthy, safe and answer any financial questions. In addition, Berkshire continued to provide critical funding to small businesses, including black and brown owned enterprises and non-customers, through the Paycheck Protection Program helping nearly 5,000 organizations with approximately $706 million in loans.
  • Investing in Recovery & Resiliency: Berkshire Bank Foundation, the philanthropic arm of the bank, provided more than $1 million in COVID-19 support, exceeding its previously announced commitment in response to widespread need. Berkshire employees also came together to raise funds to support local non-profit organizations and continued providing virtual volunteer services to address community needs.
  • Fostering Dialogue on Racial Equity: The "Reimagining America Town Hall Series," hosted by Berkshire, featured The Future Of The Black Economy, The Future Of The Latinx Economy and How to be a Strong Ally. The town halls highlighted the significant racial injustices and economic inequities that exist in the country and affirmed Berkshire's commitment to serving and creating economic opportunities for all members of the community, especially those in the Black and Brown communities who have been traditionally underserved by banks.
  • Honoring Juneteenth: The Company dedicatedJune 19th, also known as Juneteenth – the oldest national commemoration of the ending of slavery in the United States, as a day for intentional learning, reflection and a holiday. Bank branches closed at 2PM and employees received a "floating" day off to be used during the year. The Company also hosted a conversation for its people managers on creating safe and inclusive spaces for their teams.
  • Launching ReevxLabs.com: Reevx Labs, powered by Berkshire Bank, announced the launch of its new online hub, ReevxLabs.com. Created for local communities and the people who live and work in them, ReevxLabs.com offers resources and support for emerging entrepreneurs, artists, and small non-profit organizations. The Labs operate with a commitment to banking the underbanked with dignity and a guiding belief that by disrupting the traditional barriers to resources, the Labs can build new economies that change communities and the world. The Reevx Labs ecosystem provides many ways to get involved and support movements. From utilizing the suite of socially responsible 21st century banking products, to unique programs allowing for direct contributions to local communities, Reevx Labs empowers everyone to be part of the solution.
  • ESG Ratings Updates: The Company enhanced its Environmental, Social & Governance (ESG) disclosure scores from prominent third parties, receiving an updated rating of 41.67 from Bloomberg and an Environmental Quality Score of 2 and a Social Quality Score of 1 from ISS. Both scores reflect above average performance compared to peers.

INVESTOR CONFERENCE CALL AND INVESTOR PRESENTATION

Berkshire will conduct a conference call/webcast at 10:00 a.m. eastern time on Thursday, July 30, 2020 to discuss the results for the quarter and provide guidance about expected future results.  Berkshire will also place an investor presentation at its website at ir.berkshirebank.com before the conference call.  Participants are encouraged to pre-register for the conference call using the following link:  http://dpregister.com/10146228.  Callers who pre-register will be given dial-in instructions and a unique PIN to gain immediate access to the call.  Participants may pre-register at any time prior to the call and will immediately receive simple instructions via email.  Additionally, participants may reach the registration link and access the webcast by logging in through the investor section of our website at http://ir.berkshirebank.com.  Those parties who do not have internet access or are otherwise unable to pre-register for this event, may still participate at the above time by dialing 1-844-792-3726 and asking the Operator to join the Berkshire Hills Bancorp (BHLB) earnings call.  Participants are requested to dial-in a few minutes before the scheduled start of the call.   A telephone replay of the call will be available through Thursday, August 6, 2020 by dialing 877-344-7529 and entering access number 10146228.  The webcast will be available on Berkshire's website for an extended period of time.

ABOUT BERKSHIRE HILLS BANCORP

Berkshire Hills Bancorp is the parent of Berkshire Bank which is transforming into a 21st century community bank pursuing purpose driven performance based on its Be FIRST corporate responsibility culture.  Headquartered in Boston, Berkshire operates 130 banking offices in seven Northeastern states, with approximately $13.1 billion in assets. Berkshire Bank serves the underbanked through the Reevx Labs platform. 

FORWARD LOOKING STATEMENTS

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

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

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

NON-GAAP FINANCIAL MEASURES

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

The Company utilizes the non-GAAP measure of core earnings in evaluating operating trends, including components for core revenue and expense.  These measures exclude items which the Company does not view as related to its normalized operations.  These items primarily include securities gains/losses, merger costs, restructuring costs, goodwill impairment, and discontinued operations.  Discontinued operations are the Company's national mortgage banking operations which the Company is exiting pursuant to a sales agreement.  Merger costs consist primarily of severance/benefit related expenses, contract termination costs, systems conversion costs, variable compensation expenses, and professional fees.  Merger costs in 2019 were primarily related to the acquisition of SI Financial Group.  Restructuring costs generally consist of costs and losses associated with the disposition of assets and liabilities and lease terminations, including costs related to branch sales.  Restructuring costs also include severance and consulting expenses related to the Company's strategic review.  They also include costs related to the consolidation of branches, including eight branches for the full year of 2019. 

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

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

CONTACTS

Investor Relations Contact
David Gonci; Capital Markets Director; 413-281-1973

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

 

TABLE

INDEX

 

CONSOLIDATED UNAUDITED FINANCIAL SCHEDULES

F-1

Selected Financial Highlights

F-2

Balance Sheets

F-3

Loan and Deposit Analysis

F-4

Statements of Operations

F-5

Statements of Operations (Five Quarter Trend)

F-6

Average Yields and Costs

F-7

Average Balances

F-8

Asset Quality Analysis

F-9 

Reconciliation of Non-GAAP Financial Measures and
Supplementary Data (Five Quarter Trend)

F-10  

Reconciliation of Non-GAAP Financial Measures and
Supplementary Data (Year-to-Date)

 

BERKSHIRE HILLS BANCORP, INC.

SELECTED FINANCIAL HIGHLIGHTS - UNAUDITED - (F-1)




At or for the Quarters Ended (1)




June 30,


March 31,


Dec. 31,


Sept. 30,


June 30,





2020


2020


2019


2019


2019 (2)















PER SHARE DATA












Net (loss)/earnings per common share, diluted

$ (10.93)


$   (0.40)


$     0.51


$     0.44


$     0.52



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

(0.13)


(0.07)


0.70


0.46


0.65



Total book value per common share

22.79


33.90


34.65


34.36


34.05



Tangible book value per common share (3)

21.94


22.00


22.56


22.42


22.25



Market price at period end

11.02


14.86


32.88


29.29


31.39



Dividends per common share

0.24


0.24


0.23


0.23


0.23



Dividends per preferred share

0.48


0.48


0.46


0.46


0.46















PERFORMANCE RATIOS (4)












Return on assets

(16.38)

%

(0.62)

%

0.78

%

0.67

%

0.79

%


Core return on assets (3)

(0.19)


(0.11)


1.08


0.71


1.01



Return on equity

(131.17)


(4.58)


5.90


5.12


6.07



Core return on equity (3)

(1.54)


(0.84)


8.09


5.35


7.67



Core return on tangible common equity (3)

(2.05)


(0.94)


13.12


8.74


12.21



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

2.62


3.04


3.11


3.22


3.19



Fee income/Net interest and fee income from continuing operations

18.45


15.46


18.11


17.61


16.20



Efficiency ratio (3)

71.01


66.92


53.66


53.37


56.41















CHANGE (Year-to-date)












Total commercial loans (organic, annualized)

12

%

(5)

%

(7)

%

(9)

%

(10)

%


Total loans (organic, annualized)

(3)


(8)


(9)


(9)


(9)



Total deposits (organic, annualized)

9


(10)


0


2


6



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

(14)


(14)


4


4


1



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

(1,200)


(178)


(14)


(26)


(20)



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

(116)


(112)


(14)


(18)


(9)















FINANCIAL DATA (in millions)












Total assets


$ 13,063


$ 13,122


$ 13,216


$ 13,532


$ 13,653



Total earning assets

12,267


11,785


11,916


12,174


12,343



Total securities

1,882


1,837


1,770


1,861


1,905



Total loans


9,370


9,303


9,502


9,719


9,942



Allowance for credit losses

139


114


64


62


62



Total intangible assets

42


598


599


602


603



Total deposits


10,776


10,072


10,336


10,423


10,566



Total shareholders' equity

1,164


1,722


1,759


1,772


1,779



Net (loss)/income

(549.4)


(19.9)


25.8


22.6


25.4



Core (loss)/income (3)

(6.5)


(3.6)


35.3


23.7


32.1



Purchase accounting accretion

2.1


3.1


5.1


4.8


3.2



Goodwill impairment

553.8


-


-


-


-















ASSET QUALITY AND CONDITION RATIOS 












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

0.17

%

0.45

%

0.17

%

0.92

%

0.14

%


Total non-performing assets/total assets

0.36


0.40


0.31


0.28


0.27



Allowance for credit losses/total loans

1.49


1.22


0.67


0.64


0.63



Loans/deposits


87


92


92


93


94



Shareholders' equity to total assets

8.91


13.13


13.31


13.10


13.03



Tangible shareholders' equity to tangible assets (3)

8.61


8.98


9.19


9.05


9.01





























(1)

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

(2)

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

(3)

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


(4)

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

(5)

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

(6)

The effect of purchase accounting accretion for loans, time deposits, and borrowings on the quarterly net interest margin was an increase in all quarters, which is shown sequentially as follows beginning with the most recent quarter and ending with the earliest quarter: 0.07%, 0.11%, 0.17%, 0.16%, 0.11%.


 

BERKSHIRE HILLS BANCORP, INC.

CONSOLIDATED BALANCE SHEETS - UNAUDITED - (F-2)


June 30,


March 31,


December 31,


(in thousands)

2020


2020


2019


Assets







Cash and due from banks

$          102,105


$            90,280


$          105,447


Short-term investments

942,047


515,140


474,382


Total cash and short-term investments

1,044,152


605,420


579,829









Trading security

9,519


9,829


10,769


Marketable equity securities, at fair value

33,263


32,283


41,556


Securities available for sale, at fair value

1,458,036


1,403,858


1,311,555


Securities held to maturity, at amortized cost

334,895


336,802


357,979


Federal Home Loan Bank stock and other restricted securities

46,139


54,306


48,019


Total securities

1,881,852


1,837,078


1,769,878


Less: Allowance for credit losses on investment securities

(113)


(141)


-


Net securities

1,881,739


1,836,937


1,769,878









Loans held for sale

62,881


4,252


36,664









Total loans

9,370,271


9,303,177


9,502,428


Less: Allowance for credit losses on loans 

(139,394)


(113,510)


(63,575)


Net loans

9,230,877


9,189,667


9,438,853









Premises and equipment, net

118,722


120,667


120,398


Other real estate owned

40


224


-


Goodwill 

-


553,762


553,762


Other intangible assets

42,477


44,035


45,615


Cash surrender value of bank-owned life insurance

229,812


228,447


227,894


Other assets

430,592


398,038


288,945


Assets from discontinued operations

21,692


140,064


154,132


Total assets 

$     13,062,984


$     13,121,513


$     13,215,970









Liabilities and shareholders' equity







Demand deposits

$       2,573,786


$       1,922,490


$       1,884,100


NOW and other deposits

1,453,397


1,546,626


1,492,569


Money market deposits

2,525,761


2,391,835


2,528,656


Savings deposits

932,243


867,024


841,283


Time deposits

3,290,721


3,343,700


3,589,369


Total deposits

10,775,908


10,071,675


10,335,977









Senior borrowings

719,638


944,053


730,501


Subordinated borrowings

97,165


97,107


97,049


Total borrowings

816,803


1,041,160


827,550









Other liabilities 

280,843


255,846


267,398


Liabilities from discontinued operations

25,290


30,554


26,481


Total liabilities

11,898,844


11,399,235


11,457,406









Preferred shareholders' equity

20,325


20,325


40,633


Common shareholders' equity

1,143,815


1,701,953


1,717,931


Total shareholders' equity

1,164,140


1,722,278


1,758,564


Total liabilities and shareholders' equity

$     13,062,984


$     13,121,513


$     13,215,970









Net common shares outstanding 

50,192


50,199


49,585









 

BERKSHIRE HILLS BANCORP, INC.

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

LOAN ANALYSIS

































Annualized Growth %

(in millions)


June 30, 2020
Balance


March 31, 2020
Balance


December 31, 2019
Balance


Quarter ended
June 30, 2020


Year to Date  


























Total commercial real estate


$         3,996


$            3,986


$                  4,034


1

%

(2)

%

Commercial and industrial loans 


2,222


1,812


1,841


90


42


Total commercial loans 


6,218


5,798


5,875


29


12














Total residential mortgages


2,320


2,604


2,685


(44)


(27)














Home equity 


364


378


381


(15)


(9)


Auto and other


468


523


561


(42)


(33)


Total consumer loans


832


901


942


(31)


(23)


Total loans


$         9,370


$            9,303


$                  9,502


3

%

(3)

%





























































DEPOSIT ANALYSIS




















Annualized Growth %

(in millions)


June 30, 2020
Balance


March 31, 2020
Balance


December 31, 2019
Balance


Quarter ended
June 30, 2020


Year to Date


Demand


$         2,574


$            1,922


$                  1,884


136

%

73

%

NOW and other


1,453


1,547


1,493


(24)


(5)


Money market


2,526


2,392


2,529


22


(0)


Savings


932


867


841


30


22


Time deposits


3,291


3,344


3,589


(6)


(17)


Total deposits 


$       10,776


$          10,072


$                10,336


28

%

9

%

 

BERKSHIRE HILLS BANCORP, INC.

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


Three Months Ended


Six Months Ended


June 30,


June 30,

(in thousands, except per share data)

2020


2019


2020


2019

Interest and dividend income from continuing operations    








Loans

$    90,876


$ 113,990


$  192,571


$ 219,641

Securities and other    

12,812


15,248


27,312


30,706

Total interest and dividend income    

103,688


129,238


219,883


250,347

Interest expense from continuing operations 








Deposits

20,552


28,273


44,390


54,895

Borrowings

5,546


9,370


11,475


18,398

Total interest expense    

26,098


37,643


55,865


73,293

Net interest income from continuing operations

77,590


91,595


164,018


177,054

Non-interest income from continuing operations 








Mortgage banking originations

1,644


278


2,603


324

Loan related income

5,717


4,822


7,019


10,825

Deposit related fees

5,373


7,525


13,320


14,383

Insurance commissions and fees    

2,767


2,738


5,791


5,591

Wealth management fees    

2,057


2,348


4,627


4,789

Total fee income    

17,558


17,711


33,360


35,912

Other

(999)


(216)


(1,435)


754

Securities gains/(losses), net     

822


17


(8,908)


2,568

Total non-interest income      

17,381


17,512


23,017


39,234

Total net revenue from continuing operations

94,971


109,107


187,035


216,288

Provision for credit losses   

29,871


3,467


64,678


7,468

Non-interest expense from continuing operations








Compensation and benefits

39,403


34,779


76,312


68,279

Occupancy and equipment     

10,195


9,449


21,327


18,895

Technology and communications

7,755


6,715


15,836


12,972

Marketing and promotion     

902


1,155


2,067


2,422

Professional services

2,565


3,953


5,285


6,228

FDIC premiums and assessments

1,658


1,751


3,140


3,390

Other real estate owned and foreclosures

14


(2)


41


-

Amortization of intangible assets     

1,558


1,475


3,138


2,675

Goodwill impairment

553,762


-


553,762


-

Merger, restructuring and other expense 

-


11,155


-


18,170

Other

6,463


6,138


14,692


15,528

Total non-interest expense     

624,275


76,568


695,600


148,559









(Loss)/income from continuing operations before income taxes       

$(559,175)


$   29,072


$(573,243)


$   60,261

Income tax (benefit)/expense

(16,130)


5,118


(18,126)


12,035

Net (loss)/income from continuing operations

$(543,045)


$   23,954


$(555,117)


$   48,226









(Loss)/income from discontinued operations before income taxes

$    (8,635)


$     2,082


$  (19,264)


$     1,228

Income tax (benefit)/expense

(2,299)


588


(5,130)


371

Net (loss)/income from discontinued operations

$    (6,336)


$     1,494


$  (14,134)


$        857









Net (loss)/income

$(549,381)


$   25,448


$(569,251)


$   49,083

Preferred stock dividend

130


240


255


480

(Loss)/income available to common shareholders

$(549,511)


$   25,208


$(569,506)


$   48,603









Basic (loss)/earnings per common share:








Continuing Operations

$    (10.80)


$       0.49


$    (11.05)


$       1.01

Discontinued Operations

(0.13)


0.03


(0.28)


0.02

Total

$    (10.93)


$       0.52


$    (11.33)


$       1.03









Diluted (loss)/earnings per common share:








Continuing Operations

$    (10.80)


$       0.49


$    (11.05)


$       1.01

Discontinued Operations

(0.13)


0.03


(0.28)


0.02

Total

$    (10.93)


$       0.52


$    (11.33)


$       1.03









Weighted average shares outstanding:      








Basic

50,246


48,961


50,228


47,550

Diluted

50,246


49,114


50,228


47,700









 

BERKSHIRE HILLS BANCORP, INC.

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




June 30,


March 31,


Dec. 31,


Sept. 30,


June 30,


(in thousands, except per share data)

2020


2020


2019


2019


2019


Interest and dividend income from continuing operations    











Loans

$       90,876


$     101,695


$     110,915


$     118,371


$ 113,990


Securities and other    

12,812


14,500


14,526


15,354


15,248


Total interest and dividend income    

103,688


116,195


125,441


133,725


129,238


Interest expense from continuing operations











Deposits

20,552


23,838


28,797


31,501


28,273


Borrowings

5,546


5,929


5,311


5,353


9,370


Total interest expense    

26,098


29,767


34,108


36,854


37,643


Net interest income from continuing operations

77,590


86,428


91,333


96,871


91,595


Non-interest income from continuing operations











Mortgage banking originations

1,644


959


172


292


278


Loan related income

5,717


1,302


7,056


6,493


4,822


Deposit related fees

5,373


7,947


8,264


8,705


7,525


Insurance commissions and fees    

2,767


3,024


2,471


2,895


2,738


Wealth management fees    

2,057


2,570


2,239


2,325


2,348


Total fee income    

17,558


15,802


20,202


20,710


17,711


Other

(999)


(436)


75


609


(216)


Securities gains/(losses), net     

822


(9,730)


1,734


87


17


Gain on sale of business operations and assets, net

-


-


1,351


-


-


Total non-interest income      

17,381


5,636


23,362


21,406


17,512


Total net revenue from continuing operations

94,971


92,064


114,695


118,277


109,107


Provision for credit losses   

29,871


34,807


5,351


22,600


3,467


Non-interest expense from continuing operations











Compensation and benefits

39,403


36,909


35,355


37,272


34,779


Occupancy and equipment     

10,195


11,132


10,798


9,893


9,449


Technology and communications

7,755


8,081


6,702


6,849


6,715


Marketing and promotion  

902


1,165


1,046


1,006


1,155


Professional services

2,565


2,720


2,288


2,282


3,953


FDIC premiums and assessments

1,658


1,482


471


-


1,751


Other real estate owned and foreclosures

14


27


4


150


(2)


Amortization of intangible assets     

1,558


1,580


1,582


1,526


1,475


Goodwill impairment

553,762


-


-


-


-


Merger, restructuring and other expense 

-


-


5,713


4,163


11,155


Other

6,463


8,229


6,328


7,870


6,138


Total non-interest expense     

624,275


71,325


70,287


71,011


76,568













(Loss)/income from continuing operations before income taxes

$   (559,175)


$     (14,068)


$       39,057


$       24,666


$   29,072


Income tax (benefit)/expense

(16,130)


(1,996)


6,421


4,007


5,118


Net (loss)/ income from continuing operations

$   (543,045)


$     (12,072)


$       32,636


$       20,659


$   23,954













(Loss)/income from discontinued operations before income taxes

$       (8,635)


$     (10,629)


$       (9,514)


$         2,747


$     2,082


Income tax (benefit)/expense

(2,299)


(2,831)


(2,629)


790


588


Net (loss)/income from discontinued operations

$       (6,336)


$       (7,798)


$       (6,885)


$         1,957


$     1,494













Net (loss)/income

$   (549,381)


$     (19,870)


$       25,751


$       22,616


$   25,448


Preferred stock dividend

130


125


240


240


240


(Loss)/income available to common shareholders

$   (549,511)


$     (19,995)


$       25,511


$       22,376


$   25,208
























Basic (loss)/earnings per common share:











Continuing Operations

$       (10.80)


$         (0.24)


$           0.65


$           0.40


$       0.49


Discontinued Operations

(0.13)


(0.16)


(0.14)


0.04


0.03


Total

$       (10.93)


$         (0.40)


$           0.51


$           0.44


$       0.52










Diluted (loss)/earnings per common share:











Continuing Operations

$       (10.80)


$         (0.24)


$           0.65


$           0.40


$       0.49


Discontinued Operations

(0.13)


(0.16)


(0.14)


0.04


0.03


Total

$       (10.93)


$         (0.40)


$           0.51


$           0.44


$       0.52













Weighted average shares outstanding:      











Basic

50,246


50,204


50,494


51,422


48,961


Diluted

50,246


50,204


50,702


51,545


49,114














 

BERKSHIRE HILLS BANCORP, INC.

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



Quarters Ended



June 30,


March 31,


Dec. 31,


Sept. 30,


June 30,




2020


2020


2019


2019


2019














Earning assets 












Loans:












Commercial real estate


3.78

%

4.41

%

4.80

%

4.92

%

5.01

%

Commercial and industrial loans


4.02


5.03


5.35


5.58


5.79


Residential mortgages


3.78


3.77


3.61


3.73


3.74


Consumer loans


3.72


4.28


4.38


4.55


4.52


Total loans


3.83


4.33


4.52


4.67


4.76


Securities


3.07


3.32


3.31


3.41


3.38


Short-term investments and loans held for sale


0.50


1.78


3.15


4.11


3.37


Total earning assets


3.50


4.08


4.27


4.45


4.51














Funding liabilities












Deposits:












NOW and other


0.30


0.46


0.54


0.61


0.66


Money market


0.58


0.98


1.18


1.27


1.27


Savings


0.10


0.13


0.14


0.13


0.15


Time


1.84


1.87


1.97


2.02


2.06


Total interest-bearing deposits


1.01


1.18


1.35


1.43


1.44


Borrowings


2.38


2.60


2.77


3.12


2.92


Total interest-bearing liabilities


1.16


1.33


1.48


1.57


1.66














Net interest spread


2.34


2.75


2.79


2.88


2.85


Net interest margin


2.62


3.04


3.11


3.22


3.19














Cost of funds (1)


0.92


1.11


1.23


1.32


1.41


Cost of deposits 


0.79


0.96


1.11


1.18


1.18














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

 

BERKSHIRE HILLS BANCORP, INC.

AVERAGE BALANCES - UNAUDITED - (F-7)


Quarters Ended


June 30, 


March 31, 


Dec. 31, 


Sept. 30, 


June 30, 


(in thousands)

2020


2020


2019


2019


2019


Assets











Loans











Commercial real estate

$   4,005,018


$   4,000,461


$   4,056,244


$   3,998,144


$   3,716,130


Commercial and industrial loans

2,152,820


1,795,813


1,768,039


1,951,205


2,056,384


Residential mortgages

2,452,622


2,654,224


2,758,676


2,849,216


2,711,348


Consumer loans

865,318


921,810


974,889


1,035,893


1,064,579


Total loans (1) 

9,475,778


9,372,308


9,557,848


9,834,458


9,548,441


Securities (2)

1,793,381


1,744,635


1,752,968


1,846,985


1,893,298


Short-term investments and loans held for sale

697,138


374,894


444,622


309,897


117,029


Total earning assets (3)

11,966,297


11,491,837


11,755,438


11,991,340


11,558,768


Goodwill and other intangible assets

590,672


598,347


601,192


603,762


555,606


Other assets

751,702


663,056


737,396


668,218


593,917


Assets from discontinued operations

109,923


98,528


176,251


204,339


192,466


Total assets

$ 13,418,594


$ 12,851,768


$ 13,270,277


$ 13,467,659


$ 12,900,757













Liabilities and shareholders' equity











Deposits 











NOW and other

$   1,183,839


$   1,159,388


$   1,085,485


$   1,111,637


$   1,053,335


Money market

2,672,066


2,752,465


2,688,766


2,624,639


2,474,071


Savings

901,218


846,942


835,209


838,445


780,797


Time

3,399,222


3,333,070


3,827,175


4,158,688


3,593,022


Total interest-bearing deposits

8,156,345


8,091,865


8,436,635


8,733,409


7,901,225


Borrowings

942,033


949,316


853,911


805,035


1,415,614


Total interest-bearing liabilities

9,098,378


9,041,181


9,290,546


9,538,444


9,316,839


Non-interest-bearing demand deposits

2,343,173


1,849,295


1,898,045


1,864,964


1,673,560


Other liabilities 

272,690


203,797


304,504


267,922


215,704


Liabilities from discontinued operations

28,988


23,799


30,446


28,206


18,434


Total liabilities

11,743,229


11,118,072


11,523,541


11,699,536


11,224,537













Preferred shareholders' equity

20,325


20,548


40,633


40,633


40,633


Common shareholders' equity

1,655,040


1,713,148


1,706,103


1,727,490


1,635,587


Total shareholders' equity

1,675,365


1,733,696


1,746,736


1,768,123


1,676,220


Total liabilities and shareholders' equity

$ 13,418,594


$ 12,851,768


$ 13,270,277


$ 13,467,659


$ 12,900,757
























Supplementary data











Total average non-maturity deposits

$   7,100,296


$   6,608,090


$   6,507,505


$   6,439,685


$   5,981,763


Total average deposits 

10,499,518


9,941,160


10,334,680


10,598,373


9,574,785


Fully taxable equivalent income adjustment

1,580


1,824


1,934


1,826


1,882


Total average tangible equity (4)

1,084,693


1,135,349


1,145,544


1,164,361


1,120,614





(1)

Total loans include non-accruing loans.

(2)

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

(3)

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

(4)

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

 

BERKSHIRE HILLS BANCORP, INC.

ASSET QUALITY ANALYSIS - UNAUDITED - (F-8)



At or for the Quarters Ended



June 30,


March 31,


Dec. 31,


Sept. 30,


June 30,


(in thousands)


2020


2020


2019


2019


2019


NON-PERFORMING ASSETS












Non-accruing loans:












Commercial real estate


$   12,486


$   16,938


$ 20,119


$  15,829


$ 19,366


Commercial and industrial loans


15,045


18,370


11,373


12,224


9,256


Residential mortgages


9,840


9,636


3,343


3,062


3,579


Consumer loans


7,513


6,172


4,805


5,191


3,570


Total non-accruing loans


44,884


51,116


39,640


36,306


35,771


Other real estate owned


517


224


-


-


154


Repossessed assets


1,581


1,316


858


1,003


874


Total non-performing assets


$   46,982


$   52,656


$ 40,498


$  37,309


$ 36,799














Total non-accruing loans/total loans


0.48%


0.55%


0.42%


0.37%


0.36%


Total non-performing assets/total assets


0.36%


0.40%


0.31%


0.28%


0.27%














PROVISION AND ALLOWANCE FOR CREDIT LOSSES ON LOANS










Balance at beginning of period


$ 113,510


$   63,575


$ 62,230


$  62,156


$ 62,038


Adoption of ASU No. 2016-13 (1)


-


25,434


-


-


-


Balance after adoption of ASU No. 2016-13


113,510


89,009


62,230


62,156


62,038


Charged-off loans


(7,274)


(12,432)


(4,485)


(23,524)


(3,966)


Recoveries on charged-off loans


3,259


1,958


479


998


617


Net loans charged-off


(4,015)


(10,474)


(4,006)


(22,526)


(3,349)


Provision for loan credit losses


29,899


34,975


5,351


22,600


3,467


Balance at end of period


$ 139,394


$ 113,510


$ 63,575


$  62,230


$ 62,156














Allowance for credit losses/total loans


1.49%


1.22%


0.67%


0.64%


0.63%


Allowance for credit losses/non-accruing loans


311%


222%


160%


171%


174%














NET LOAN CHARGE-OFFS












Commercial real estate


$   (1,679)


$   (5,990)


$ (1,419)


$  (2,759)


$ (1,235)


Commercial and industrial loans


(1,059)


(3,728)


(1,495)


(18,850)


(995)


Residential mortgages


(966)


(19)


(351)


(140)


(139)


Home equity 


(10)


(107)


(67)


(71)


(300)


Auto and other consumer


(301)


(630)


(674)


(706)


(680)


Total, net


$   (4,015)


$ (10,474)


$ (4,006)


$(22,526)


$ (3,349)














Net charge-offs (QTD annualized)/average loans 


0.17%


0.45%


0.17%


0.92%


0.14%


Net charge-offs (YTD annualized)/average loans 


0.31%


0.45%


0.35%


0.41%


0.15%














DELINQUENT AND NON-ACCRUING LOANS/TOTAL LOANS










30-89 Days delinquent


0.37%


0.43%


0.25%


0.26%


0.20%


90+ Days delinquent and still accruing


0.14%


0.05%


0.29%


0.29%


0.28%


Total accruing delinquent loans


0.51%


0.48%


0.54%


0.55%


0.48%


Non-accruing loans


0.48%


0.55%


0.42%


0.37%


0.36%


Total delinquent and non-accruing loans


0.99%


1.03%


0.96%


0.92%


0.84%


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


 

BERKSHIRE HILLS BANCORP, INC.

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



At or for the Quarters Ended



June 30,


March 31,


Dec. 31,


Sept. 30,


June 30,


(in thousands)


2020


2020


2019


2019


2019


Net (loss)/income


$ (549,381)


$  (19,870)


$    25,751


$    22,616


$    25,448


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


(822)


9,730


(1,734)


(87)


(17)


Adj: Goodwill impairment


553,762


-


-


-


-


Adj: Merger and acquisition expense


-


-


3,611


3,802


9,711


Adj: Restructuring expense and other expense


-


-


2,102


361


1,444


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

8,635


10,629


9,514


(2,747)


(2,082)


Adj: Income taxes


(18,658)


(4,134)


(3,910)


(281)


(2,385)


Total core (loss)/income (2)

(A)

$     (6,464)


$    (3,645)


$    35,334


$    23,664


$    32,119














Total revenue from continuing operations


$     94,971


$    92,064


$  114,695


$  118,277


$  109,107


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


(822)


9,730


(1,734)


(87)


(17)


Total core revenue (2)

(B)

$     94,149


$  101,794


$  112,961


$  118,190


$  109,090














Total non-interest expense from continuing operations


$   624,275


$    71,325


$    70,287


$    71,011


$    76,568


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


-


-


(5,713)


(4,163)


(11,155)


Less: Goodwill impairment


(553,762)


-


-


-


-


Core non-interest expense (2)                                    

(C)

$     70,513


$    71,325


$    64,574


$    66,848


$    65,413














Total revenue


$     90,383


$    93,869


$  116,860


$  134,067


$  123,109


Total non-interest expense


628,322


83,759


81,966


84,054


88,488


Pre-tax, pre-provision net revenue (PPNR)


$ (537,939)


$    10,110


$    34,894


$    50,013


$    34,621














Total revenue from continuing operations


$     94,971


$    92,064


$  114,695


$  118,277


$  109,107


Total non-interest expense from continuing operations


624,275


71,325


70,287


71,011


76,568


Pre-tax, pre-provision net revenue (PPNR) from continuing operations 

$ (529,304)


$    20,739


$    44,408


$    47,266


$    32,539














Total core revenue (2)


$     94,149


$  101,794


$  112,961


$  118,190


$  109,090


Core non-interest expense (2)                                    


70,513


71,325


64,574


66,848


65,413


Core pre-tax, pre-provision net revenue (PPNR)


$     23,636


$    30,469


$    48,387


$    51,342


$    43,677














(in millions, except per share data)












Total average assets                                                

(D)

$     13,419


$    12,852


$    13,270


$    13,468


$    12,901


Total average shareholders' equity                         

(E)

1,675


1,734


1,747


1,768


1,676


Total average tangible shareholders' equity (2)                        

(F)

1,085


1,135


1,146


1,164


1,121


Total average tangible common shareholders' equity (2)                        

(G)

1,064


1,115


1,105


1,124


1,080


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

(H)

1,122


1,124


1,159


1,170


1,176


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

(I)

1,101


1,104


1,119


1,130


1,136


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

(J)

13,021


12,524


12,617


12,930


13,051














Total common shares outstanding, period-end (thousands)               

(K)

50,192


50,199


49,585


50,394


51,045


Average diluted shares outstanding (thousands)

(L)

50,246


50,204


50,702


51,545


49,114














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

(A/L)

$       (0.13)


$      (0.07)


$        0.70


$        0.46


$        0.65














PPNR per common share, diluted (2)


(10.71)


0.20


0.69


0.97


0.70


PPNR from continuing operations per common share, diluted (2)


(10.53)


0.41


0.88


0.92


0.66


Core PPNR per common share, diluted (2)


0.47


0.61


0.95


1.00


0.89














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

(I/K)

21.94


22.00


22.56


22.42


22.25


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

(H)/(J)

8.61


8.98


9.19


9.05


9.01














Performance ratios (4)












GAAP return on assets


(16.38)

%

(0.62)

%

0.78

%

0.67

%

0.79

%

Core return on assets (2)


(0.19)


(0.11)


1.08


0.71


1.01


GAAP return on equity 


(131.17)


(4.58)


5.90


5.12


6.07


Core return on equity (2)

(A/E)

(1.54)


(0.84)


8.09


5.35


7.67


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

(A+O)/(G)

(2.05)


(0.94)


13.12


8.74


12.21


PPNR/assets (2)


(16.04)


0.31


1.05


1.49


1.07


Core PPNR/assets (2)


0.71


0.96


1.48


1.55


1.37


Efficiency ratio (2)(6)                                                                                

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

71.01


66.92


53.66


53.37


56.41


Net interest margin


2.62


3.04


3.11


3.22


3.19














Supplementary data (in thousands)












Tax benefit on tax-credit investments (7)

(M)

$       1,379


$         608


$      2,503


$      2,382


$      2,381


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

(N)

(1,097)


(486)


(1,996)


(1,942)


(1,938)


Net income on tax-credit investments

(M+N)

282


122


507


440


443














Intangible amortization

(O)

$       1,558


$      1,580


$      1,582


$      1,526


$      1,475


Fully taxable equivalent income adjustment 

(P)

1,580


1,824


1,934


1,826


1,882















(1)

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

(2)

Non-GAAP financial measure.

(3)

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

(4)

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

(5)

Core return on tangible equity is computed by dividing the total core (loss)/income adjusted for the tax-effected amortization of intangible assets, assuming a 27% marginal rate, by tangible equity.

(6)

Efficiency ratio is computed by dividing total core tangible non-interest expense by the sum of total net interest income on a fully taxable equivalent basis and total core non-interest income adjusted to include tax credit benefit of tax shelter investments.  The Company uses this non-GAAP measure to provide important information regarding its operational efficiency.

(7)

The tax benefit is the direct reduction to the income tax provision due to tax credits and deductions generated from investments in historic rehabilitation and low-income housing.

(8)

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

 

BERKSHIRE HILLS BANCORP, INC.

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



At or for the Six Months Ended



June 30,


June 30,


(Dollars in thousands)


2020


2019


Net income 


$(569,251)


$   49,083


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


8,908


(2,568)


Adj: Goodwill impairment


553,762


-


Adj: Merger and acquisition expenses


-


11,320


Adj: Restructuring expense and other


-


6,850


Adj: Loss from discontinued operations before income taxes


19,264


(1,228)


Adj: Income taxes


(22,792)


(3,608)


Total core income (2)

(A)

$  (10,109)


$   59,849








Total revenue from continuing operations


$  187,035


$ 216,288


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


8,908


(2,568)


Total core revenue(2)

(B)

$  195,943


$ 213,720


Total non-interest expense from continuing operations


$  695,600


$ 148,559


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


-


(18,170)


Less: Goodwill impairment


(553,762)


-


Core non-interest expense (2)                                    

(C)

$  141,838


$ 130,389








Total revenue


$  184,252


$ 239,563


Total non-interest expense


712,081


170,606


Pre-tax, pre-provision net revenue (PPNR)


$(527,829)


$   68,957








Total revenue from continuing operations


$  187,035


$ 216,288


Total non-interest expense from continuing operations


695,600


148,559


Pre-tax, pre-provision net revenue (PPNR) from continuing operations 


$(508,565)


$   67,729








Total core revenue (2)


$  195,943


$ 213,720


Core non-interest expense (2)                                    


141,838


130,389


Core pre-tax, pre-provision net revenue (PPNR)


$    54,105


$   83,331








(in millions, except per share data)






Total average assets                                                

(D)

$    13,173


$   12,546


Total average shareholders' equity                         

(E)

1,705


1,630


Total average tangible shareholders' equity (2)                        

(F)

1,110


1,077


Total average tangible common shareholders' equity (2)                        

(G)

1,090


1,036


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

(H)

1,122


1,176


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

(I)

1,101


1,136


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

(J)

13,021


13,051


Total common shares outstanding, period-end (thousands)               

(K)

50,192


51,045


Average diluted shares outstanding (thousands)

(L)

50,228


47,700


Core earnings per common share, diluted(2)

(A/L)

$      (0.20)


$       1.25








PPNR per common share, diluted (2)


(10.51)


1.45


PPNR from continuing operations per common share, diluted (2)


(10.13)


1.42


Core PPNR per common share, diluted (2)


1.08


1.75








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

(I/K)

21.94


22.25


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

(H)/(J)

8.61


9.01








Performance ratios (4)






GAAP return on assets


(8.67)

%

0.78

%

Core return on assets (2)

(A/D)

(0.15)


0.97


GAAP return on equity 


(66.79)


6.02


Core return on equity (2)

(A/E)

(1.19)


7.34


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

(A+O)/(G)

(1.48)


11.84


PPNR/assets (2)


(8.01)


1.10


Core PPNR/assets (2)


0.82


1.33


Efficiency ratio (2)(6)                                                                               

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

68.89


57.93


Net interest margin


2.82


3.18








Supplementary data






Tax benefit on tax-credit investments (7)

(M)

$      1,987


$     3,065


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

(N)

(1,583)


(2,517)


Net income on tax-credit investments

(M+N)

404


548








Intangible amortization

(O)

3,138


2,675


Fully taxable equivalent income adjustment

(P)

3,404


3,691




(1)

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

(2)

Non-GAAP financial measure.

(3)

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

(4)

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

(5)

Core return on tangible equity is computed by dividing the total core income adjusted for the tax-effected amortization of intangible assets, assuming a 27% marginal rate, by tangible equity.

(6)

Efficiency ratio is computed by dividing total core tangible non-interest expense by the sum of total net interest income on a fully taxable equivalent basis and total core non-interest income adjusted to include tax credit benefit of tax shelter investments.  The Company uses this non-GAAP measure to provide important information regarding its operational efficiency.

(7)

The tax benefit is the direct reduction to the income tax provision due to tax credits and deductions generated from investments in historic rehabilitation and low-income housing.

(8)

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

 

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SOURCE Berkshire Hills Bancorp, Inc.

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