Berkshire Hills Reports Second Quarter Net Income of $24 Million, or $0.55 Earnings per Share

10% EPS Growth Year-over-Year

• Period-end loan growth of 2%; total deposits unchanged
• Net loan charge-offs decreased $1.1 million; credit loss allowance increased $2.2 million commensurate with loan growth
• TCE ratio of 7.9 percent and CET1 ratio of 12.1 percent
• Repurchased $12 million of stock in 2Q23

BOSTON, July 20, 2023 /PRNewswire/ -- Berkshire Hills Bancorp, Inc. (NYSE: BHLB) today reported results for the second quarter of 2023. These results along with comparison periods are summarized below:

Berkshire CEO Nitin Mhatre stated, "I'm pleased with our progress, as we continue to grow the company strategically while posting higher earnings per share year-over-year. In this dynamic banking environment, Berkshire's teams are serving clients and communities with focus and discipline. Reflecting the quality of our underwriting and business model, credit performance remains strong and deposits have been resilient. In the second quarter, we allocated our $100 million sustainability bond issuance to targeted social and environmental projects. We're proud to be a leader promoting strong support to the communities in our footprint"

CFO David Rosato added, "Second quarter GAAP net income of $23.9 million increased 3% year-over-year, generating an 8.3 percent return on average tangible common equity. The cumulative impact of Federal Reserve Bank interest rate hikes has resulted in higher funding costs for Berkshire Bank and the industry, compressing net interest margins and operating profitability. Net income decreased 14 percent linked quarter, primarily reflecting lower net interest income. Net interest margin of 3.24 percent improved 13 basis points from a year ago, but declined 34 basis points linked-quarter. Further expansion of average loan yields was more than offset by higher deposit and borrowing costs. Period-end loan balances grew 2 percent while deposits were unchanged. The period-end loan to deposit ratio measured 88 percent and the ratio of tangible common equity to tangible assets stood at 7.9 percent. Common stock repurchases totaled $12 million for the quarter."

Headquartered in Boston, Berkshire Hills Bancorp is the parent of Berkshire Bank. Providing a wide range of financial solutions through its consumer banking, commercial banking and wealth management divisions, the Bank has approximately $12.1 billion in assets and a community-based footprint of 100 financial centers in Massachusetts, New York, Vermont, Connecticut and Rhode Island. Access more information about Berkshire Hills Bancorp at ir.berkshirebank.com.

2Q 2023 Financial Highlights

Income Statement

• GAAP and operating earnings totaled $23.9 million, or $0.55 per share.
• Net interest income totaled $92.8 million in 2Q23 compared to $97.5 million in 1Q23.
  • One additional calendar day in 2Q23 (1% increase in net interest income).
• Net interest margin decreased 34 basis points from 1Q23 to 3.24% reflecting:
  • Higher cost of funds (increase of 58 basis points).
    • Includes higher deposit costs (increase of 41 basis points).
    • Includes $600 million increase in higher cost average borrowings.
  • Higher yields on the loan portfolio (increase of 20 basis points).
• Provision for credit losses on loans totaled $8.0 million.
  • Allowance for credit losses on loans increased $2.2 million.
  • Net loan charge-offs totaled $5.8 million.
  • Net annualized loan charge-off ratio of 0.26%.
• Non-interest income totaled $17.1 million in 2Q23 compared to $16.6 million in 1Q23.
  • Deposit related fees included $215 thousand in higher commercial cash management fees.
  • Loan related non-interest revenue included $754 thousand in higher interest rate swap income.
  • Gain on SBA loan sales increased $416 thousand.
  • Wealth management revenue seasonally decreased $156 thousand. At June 30, 2023, wealth assets under management were $1.4 billion.
• Non-interest expense totaled $74.0 million in 2Q23, compared to $72.0 million in 1Q23.
  • Compensation and benefits expense increased $889 thousand.
  • Occupancy and equipment expense decreased $409 thousand.
  • Technology and communications expense increased $994 thousand.
  • The efficiency ratio was 63.6% for 2Q23 compared to 59.5% for 1Q23.
• The effective income tax rate was 14.2% for 2Q23 and 15.6% for the first six months of 2023 compared to 18.7% for the full year of 2022.

Loans

• Commercial real estate loans totaled $4.3 billion at June 30, 2023, an $84 million increase from March 31, 2023.
  • Average commercial real estate loans totaled $4.3 billion in 2Q23, a $117 million increase from 1Q23.
• Commercial and industrial loans totaled $1.5 billion at June 30, 2023, an $88 million decrease from March 31, 2023.
  • Average commercial and industrial loans totaled $1.5 billion in 2Q23, a $31 million decrease from 1Q23.
• Residential mortgage loans totaled $2.6 billion at June 30, 2023, a $215 million increase from March 31, 2023.
  • Average residential mortgage loans totaled $2.5 billion in 2Q23, a $205 million increase from 1Q23.
• Consumer loans totaled $517 million at June 30, 2023, a $10 million decrease from March 31, 2023.
  • Average consumer loans totaled $524 million in 2Q23, a $15 million decrease from 1Q23.
• Total non-performing loans to total loans was 0.32% at June 30, 2023 compared to 0.31% at March 31, 2023.
• The allowance for credit losses to total loans was 1.13% at June 30, 2023, unchanged from March 31, 2023.

Deposits

• Non-interest bearing deposits totaled $2.6 billion at June 30, 2023, a $56 million decrease from March 31, 2023.
  • Average non-interest bearing deposits totaled $2.6 billion in 2Q23, a $112 million decrease from 1Q23.
• Time deposits totaled $2.4 billion at June 30, 2023, $323 million increase from March 31, 2023.
  • Average time deposits totaled $2.3 billion in 2Q23, a $479 million increase from 1Q23.

2Q 2023 ESG & CORPORATE RESPONSIBILITY HIGHLIGHTS

Berkshire is a performance and purpose-driven, values-guided, community-centered bank. Berkshire's ESG activities are central to its strategy. Key highlights in the quarter include:

• The Company announced the allocation of its inaugural $100 million sustainability bond which helped create 330 units of affordable and workforce housing along with more than 200,000 square feet of green building development. Further details can be found in Berkshire's Sustainability Bond Report which highlights how proceeds were allocated to support affordable housing, workforce housing, green building and financial access and inclusion projects in communities across New England and New York.

• Berkshire maintained its top quartile ESG rating performance and was named the recipient of the LGBT Corporate Ally Award from the Boston Business Journal.

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," "remain," "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. 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.