[FORM 10-Q Information](index=1&type=section&id=FORM%2010-Q) This section provides the formal filing details for Berkshire Hills Bancorp, Inc.'s Quarterly Report on Form 10-Q for the period ended September 30, 2022, indicating its status as a large accelerated filer and confirming compliance with SEC filing requirements - The filing is a **Quarterly Report on Form 10-Q** for the period ended September 30, 2022[2](index=2&type=chunk) - Berkshire Hills Bancorp, Inc. is designated as a **large accelerated filer**[3](index=3&type=chunk) - As of November 7, 2022, the Registrant had **45,025,062 shares of common stock outstanding**[3](index=3&type=chunk) [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Consolidated Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20%28unaudited%29) This item presents the unaudited consolidated financial statements of Berkshire Hills Bancorp, Inc., including the balance sheets, income statements, comprehensive income statements, statements of changes in shareholders' equity, and cash flow statements for the specified interim periods [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets provide a snapshot of the Company's financial position as of September 30, 2022, compared to December 31, 2021, showing changes in assets, liabilities, and shareholders' equity | Metric | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | Change (in thousands) | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Total assets | $11,317,074 | $11,554,913 | $(237,839) | | Total liabilities | $10,374,512 | $10,372,478 | $2,034 | | Total shareholders' equity | $942,562 | $1,182,435 | $(239,873) | | Asset Category | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | Change (in thousands) | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Total cash and cash equivalents | $694,913 | $1,627,807 | $(932,894) | | Net securities | $2,090,223 | $2,548,590 | $(458,367) | | Total loans | $7,943,481 | $6,825,847 | $1,117,634 | | Net loans | $7,847,468 | $6,719,753 | $1,127,715 | | Liability Category | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | Change (in thousands) | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Total deposits | $9,988,121 | $10,068,953 | $(80,832) | | Total borrowings | $125,495 | $110,844 | $14,651 | - Accumulated other comprehensive (loss) significantly increased from **$(3,243) thousand** at December 31, 2021, to **$(188,494) thousand** at September 30, 2022[11](index=11&type=chunk) [Consolidated Statements of Income](index=7&type=section&id=Consolidated%20Statements%20of%20Income) The consolidated statements of income detail the Company's revenues, expenses, and net income for the three and nine months ended September 30, 2022, compared to the same periods in 2021, highlighting significant shifts in interest income, non-interest income, and expenses | Period | Sep 30, 2022 (3 months, in thousands) | Sep 30, 2021 (3 months, in thousands) | Sep 30, 2022 (9 months, in thousands) | Sep 30, 2021 (9 months, in thousands) | | :----------------------------------- | :------------------------------------ | :------------------------------------ | :------------------------------------ | :------------------------------------ | | Net income | $18,717 | $63,749 | $62,028 | $98,416 | | Metric | 2022 (3 months, in thousands) | 2021 (3 months, in thousands) | Change (in thousands) | % Change | | :----------------------------------- | :---------------------------- | :---------------------------- | :-------------------- | :--------- | | Total interest and dividend income | $103,671 | $79,688 | $23,983 | 30.1% | | Total interest expense | $11,587 | $8,320 | $3,267 | 39.3% | | Net interest income | $92,084 | $71,368 | $20,716 | 29.0% | | Total non-interest income | $16,251 | $73,635 | $(57,384) | (77.9)% | | Total net revenue | $108,335 | $145,003 | $(36,668) | (25.3)% | | Provision/(benefit) for credit losses | $3,000 | $(4,000) | $7,000 | N/A | | Total non-interest expense | $81,677 | $69,460 | $12,217 | 17.6% | | Metric | 2022 (9 months, in thousands) | 2021 (9 months, in thousands) | Change (in thousands) | % Change | | :----------------------------------- | :---------------------------- | :---------------------------- | :-------------------- | :--------- | | Total interest and dividend income | $265,873 | $253,205 | $12,668 | 5.0% | | Total interest expense | $23,368 | $31,351 | $(7,983) | (25.5)% | | Net interest income | $242,505 | $221,854 | $20,651 | 9.3% | | Total non-interest income | $53,283 | $121,839 | $(68,556) | (56.3)% | | Total net revenue | $295,788 | $343,693 | $(47,905) | (13.9)% | | Provision/(benefit) for credit losses | $(1,000) | $2,500 | $(3,500) | N/A | | Total non-interest expense | $218,702 | $216,486 | $2,216 | 1.0% | | Period | 2022 (3 months) | 2021 (3 months) | 2022 (9 months) | 2021 (9 months) | | :----------------------------------- | :-------------- | :-------------- | :-------------- | :-------------- | | Diluted EPS | $0.42 | $1.31 | $1.34 | $1.97 | [Consolidated Statements of Comprehensive (Loss)/Income](index=8&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20%28Loss%29%2FIncome) This statement presents the net income and other comprehensive income (loss) components, primarily focusing on unrealized gains and losses on debt securities available for sale and derivative hedges, to arrive at total comprehensive income (loss) for the specified periods | Period | 2022 (3 months, in thousands) | 2021 (3 months, in thousands) | 2022 (9 months, in thousands) | 2021 (9 months, in thousands) | | :----------------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Net income | $18,717 | $63,749 | $62,028 | $98,416 | | Total other comprehensive (loss) | $(65,495) | $(7,523) | $(185,251) | $(23,622) | | Total comprehensive (loss)/income | $(46,778) | $56,226 | $(123,223) | $74,794 | - Changes in unrealized loss on debt securities available-for-sale (before tax) for the three months ended September 30, 2022, was **$(83,073) thousand**, compared to **$(10,098) thousand** in 2021[14](index=14&type=chunk) - Changes in unrealized loss on debt securities available-for-sale (before tax) for the nine months ended September 30, 2022, was **$(244,933) thousand**, compared to **$(31,718) thousand** in 2021[14](index=14&type=chunk) - Changes in unrealized loss on derivative hedges (before tax) for the three and nine months ended September 30, 2022, was **$(5,555) thousand**, compared to **$0** in 2021 for both periods[14](index=14&type=chunk) [Consolidated Statements of Changes in Shareholders' Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity) This statement details the changes in each component of shareholders' equity for the three and nine months ended September 30, 2022 and 2021, including net income, other comprehensive loss, dividends, and treasury stock transactions | Period | Sep 30, 2022 (in thousands) | Sep 30, 2021 (in thousands) | Dec 31, 2021 (in thousands) | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Balance at period end | $942,562 | $1,178,075 | $1,182,435 | - For the nine months ended September 30, 2022, key changes included **net income of $62,028 thousand**, **other comprehensive loss of $(185,251) thousand**, **cash dividends declared of $(16,414) thousand**, and **treasury shares repurchased of $(104,543) thousand**[16](index=16&type=chunk) - For the nine months ended September 30, 2021, key changes included **net income of $98,416 thousand**, **other comprehensive loss of $(23,622) thousand**, **cash dividends declared of $(18,411) thousand**, and **treasury shares repurchased of $(68,712) thousand**[16](index=16&type=chunk) [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This statement outlines the cash flows from operating, investing, and financing activities for the nine months ended September 30, 2022, compared to the same period in 2021, revealing significant shifts in cash utilization, particularly for loan growth and investment activities | Period | 2022 (9 months, in thousands) | 2021 (9 months, in thousands) | | :----------------------------------- | :---------------------------- | :---------------------------- | | Net change in cash and cash equivalents | $(932,894) | $566,655 | | Cash and cash equivalents at end of period | $694,913 | $2,124,530 | - Net cash provided by operating activities was **$88,227 thousand** in 2022, compared to **$82,548 thousand** in 2021[17](index=17&type=chunk) - Net cash used in investing activities was **$(922,467) thousand** in 2022, a significant change from **$828,069 thousand** provided in 2021[17](index=17&type=chunk) - Net cash used in financing activities was **$(98,654) thousand** in 2022, an improvement from **$(343,962) thousand** used in 2021[18](index=18&type=chunk) [Notes to Consolidated Financial Statements (Unaudited)](index=13&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20%28Unaudited%29) This section provides detailed notes to the unaudited consolidated financial statements, offering explanations and additional information on the Company's accounting policies, specific financial instruments, and other relevant financial disclosures [Note 1. Basis of Presentation](index=13&type=section&id=Note%201%20Basis%20of%20Presentation) This note clarifies that the consolidated financial statements are prepared in accordance with GAAP and SEC regulations for interim reporting, outlining the Company's structure and the principles of consolidation - The financial statements are prepared in conformity with **accounting principles generally accepted in the United States of America (\"GAAP\")** and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X[19](index=19&type=chunk)[20](index=20&type=chunk) - Berkshire Hills Bancorp, Inc. is a Delaware corporation and the holding company for Berkshire Bank, a Massachusetts-chartered trust company[19](index=19&type=chunk) - The Company is evaluating **ASU No. 2022-01 (Derivatives and Hedging)** and **ASU No. 2022-02 (Financial Instruments – Credit Losses)**, but neither is expected to have a material impact on its Consolidated Financial Statements[25](index=25&type=chunk)[26](index=26&type=chunk) [Note 2. Trading Security](index=14&type=section&id=Note%202%20Trading%20Security) This note describes the Company's single trading security, a tax-advantaged economic development bond, which is accounted for at fair value - The Company holds a single **tax-advantaged economic development bond** as a trading security, accounted for at fair value[27](index=27&type=chunk) | Metric | Sep 30, 2022 (in millions) | Dec 31, 2021 (in millions) | | :----------------------------------- | :------------------------- | :------------------------- | | Fair Value | $6.8 | $8.4 | | Amortized Cost | $7.3 | $7.9 | - A swap contract is used to exchange the fixed rate of the security for a variable rate[27](index=27&type=chunk) [Note 3. Securities Available for Sale, Held to Maturity, and Marketable Equity Securities](index=15&type=section&id=Note%203%20Securities%20Available%20for%20Sale%2C%20Held%20to%20Maturity%2C%20and%20Marketable%20Equity%20Securities) This note provides a detailed breakdown of the Company's investment securities portfolio, including available-for-sale, held-to-maturity, and marketable equity securities, along with their amortized cost, unrealized gains/losses, and fair values | Category | Amortized Cost (in thousands) | Fair Value (in thousands) | Gross Unrealized Gains (in thousands) | Gross Unrealized Losses (in thousands) | | :----------------------------------- | :-------------------------- | :-------------------------- | :------------------------------------ | :------------------------------------- | | Securities available for sale | $1,719,126 | $1,470,949 | $175 | $(248,352) | | Securities held to maturity | $592,503 | $503,262 | $304 | $(89,545) | | Marketable equity securities | $15,035 | $12,790 | $0 | $(2,245) | | **Total (Sep 30, 2022)** | **$2,326,664** | **$1,987,001** | **$479** | **$(340,142)** | | Category | Amortized Cost (in thousands) | Fair Value (in thousands) | Gross Unrealized Gains (in thousands) | Gross Unrealized Losses (in thousands) | | :----------------------------------- | :-------------------------- | :-------------------------- | :------------------------------------ | :------------------------------------- | | Securities available for sale | $1,881,813 | $1,877,585 | $18,168 | $(22,396) | | Securities held to maturity | $636,503 | $647,236 | $19,741 | $(9,008) | | Marketable equity securities | $15,689 | $15,453 | $67 | $(303) | | **Total (Dec 31, 2021)** | **$2,534,005** | **$2,540,274** | **$37,976** | **$(31,707)** | - The Company expects to recover its amortized cost basis on all debt securities in its **AFS and HTM portfolios** and does not intend to sell them prior to recovery, supported by strong capital and liquidity[42](index=42&type=chunk) - As of September 30, 2022, none of the Company's investment securities were **delinquent or in non-accrual status**[38](index=38&type=chunk) [Note 4. Loans and Allowance for Credit Losses](index=21&type=section&id=Note%204%20Loans%20and%20Allowance%20for%20Credit%20Losses) This note details the Company's loan portfolio by segment, the allowance for credit losses (ACLL), and credit quality information, including risk ratings, past due status, nonaccrual loans, and troubled debt restructurings (TDRs) | Loan Type | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | Change (in thousands) | % Change | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :--------- | | Construction | $367,997 | $324,282 | $43,715 | 13.5% | | Commercial multifamily | $612,890 | $515,817 | $97,073 | 18.8% | | Commercial real estate owner occupied | $632,001 | $606,477 | $25,524 | 4.2% | | Commercial real estate non-owner occupied | $2,285,770 | $2,156,929 | $128,841 | 6.0% | | Commercial and industrial | $1,395,172 | $1,284,429 | $110,743 | 8.6% | | Residential real estate | $2,128,039 | $1,489,248 | $638,791 | 42.9% | | Home equity | $234,027 | $252,366 | $(18,339) | (7.3)% | | Consumer other | $287,585 | $196,299 | $91,286 | 46.5% | | **Total loans** | **$7,943,481** | **$6,825,847** | **$1,117,634** | **16.4%** | - The **Allowance for Credit Losses for Loans (ACLL)** decreased to **$96,013 thousand** at September 30, 2022, from **$106,094 thousand** at December 31, 2021[52](index=52&type=chunk) - Total criticized loans decreased to **$196,032 thousand** at September 30, 2022, from **$241,957 thousand** at December 31, 2021[89](index=89&type=chunk) - The balance of **Troubled Debt Restructurings (TDRs)** decreased to **$10,010 thousand** at September 30, 2022, from **$27,102 thousand** at the beginning of the nine-month period[98](index=98&type=chunk) [Note 5. Deposits](index=34&type=section&id=Note%205%20Deposits) This note provides a breakdown of the Company's deposit base, including demand, NOW, money market, savings, and time deposits, and highlights the presence of brokered and reciprocal deposits | Deposit Type | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | Change (in thousands) | % Change | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :--------- | | Demand deposits | $2,896,659 | $3,008,461 | $(111,802) | (3.7)% | | NOW and other deposits | $1,045,970 | $976,401 | $69,569 | 7.1% | | Money market deposits | $3,388,932 | $3,293,526 | $95,406 | 2.9% | | Savings deposits | $1,111,304 | $1,111,625 | $(321) | (0.0)% | | Time deposits | $1,545,256 | $1,678,940 | $(133,684) | (8.0)% | | **Total deposits** | **$9,988,121** | **$10,068,953** | **$(80,832)** | **(0.8)%** | - Brokered deposits totaled **$163.5 million** at September 30, 2022, down from **$228.1 million** at December 31, 2021[103](index=103&type=chunk) - Reciprocal deposits totaled **$71.3 million** at September 30, 2022, down from **$89.2 million** at December 31, 2021[103](index=103&type=chunk) [Note 6. Borrowed Funds](index=34&type=section&id=Note%206%20Borrowed%20Funds) This note outlines the Company's short-term and long-term borrowings, including Federal Home Loan Bank (FHLB) advances and subordinated debt, detailing their principal amounts, weighted average rates, and available borrowing capacities | Category | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | Weighted Average Rate (Sep 30, 2022) | Weighted Average Rate (Dec 31, 2021) | | :----------------------------------- | :-------------------------- | :-------------------------- | :----------------------------------- | :----------------------------------- | | Short-term borrowings | $0 | $0 | — | — | | Long-term FHLB advances and other | $4,494 | $13,331 | 0.71% | 1.75% | | Subordinated borrowings | $98,038 | $74,590 | 5.50% | 7.00% | | Junior subordinated borrowing - Trust I | $15,464 | $15,464 | 4.81% | 2.01% | | Junior subordinated borrowing - Trust II | $7,499 | $7,459 | 4.99% | 1.90% | | **Total borrowings** | **$125,495** | **$110,844** | **5.21%** | **5.33%** | - The Bank's available borrowing capacity with the FHLB was **$1.2 billion** at September 30, 2022, down from **$1.5 billion** at December 31, 2021[104](index=104&type=chunk) - The Company issued **$100.0 million** in ten-year subordinated notes in June 2022, with a fixed interest rate of **5.50%** for the first five years[108](index=108&type=chunk) - The Company called and repaid **$75 million** in fifteen-year subordinated notes in September 2022[109](index=109&type=chunk) [Note 7. Derivative Financial Instruments and Hedging Activities](index=36&type=section&id=Note%207%20Derivative%20Financial%20Instruments%20and%20Hedging%20Activities) This note details the Company's use of derivative financial instruments for risk management, including cash flow hedges, economic hedges, and non-hedging derivatives, and provides information on their notional amounts, fair values, and collateral arrangements - As of September 30, 2022, the Company held derivatives with a total notional amount of **$4.0 billion**[111](index=111&type=chunk) | Category | Notional Amount (in thousands) | Estimated Fair Value (Liability) (in thousands) | | :----------------------------------- | :----------------------------- | :-------------------------------------------- | | Cash flow hedges | $400,000 | $(5,555) | | Economic hedges | $3,640,550 | $(43,187) | | Non-hedging derivatives | $3,132 | $16 | | **Total (Sep 30, 2022)** | **$4,043,682** | **$(48,726)** | - The Company pledged **$14.9 million** in cash and **$22.5 million** in securities as collateral to derivative counterparties as of September 30, 2022[113](index=113&type=chunk) - The Company entered into three interest rate swap contracts and three forward-starting interest rate swap contracts with a combined notional value of **$400.0 million**, designated as cash flow hedges, to convert commercial variable rate loans to fixed interest rates[118](index=118&type=chunk) [Note 8. Leases](index=43&type=section&id=Note%208%20Leases) This note provides information on the Company's lease arrangements, primarily for real estate, classifying them as operating or finance leases and detailing their right-of-use assets, lease liabilities, weighted-average terms, and discount rates | Classification | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :----------------------------------- | :-------------------------- | :-------------------------- | | Operating lease right-of-use assets | $48,467 | $52,180 | | Finance lease right-of-use assets | $6,282 | $6,674 | | **Total Lease Right-of-Use Assets** | **$54,749** | **$58,854** | | Classification | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :----------------------------------- | :-------------------------- | :-------------------------- | | Operating lease liabilities | $55,269 | $55,674 | | Finance lease liabilities | $9,448 | $9,862 | | **Total Lease Liabilities** | **$64,717** | **$65,536** | - The weighted-average remaining lease term for operating leases was **9.1 years** and for finance leases was **12.1 years** as of September 30, 2022[140](index=140&type=chunk) - Operating lease expense for the nine months ended September 30, 2022, was **$7.3 million**[141](index=141&type=chunk) [Note 9. Other Commitments, Contingencies, Off-Balance Sheet Activities, and Pandemic Impact](index=45&type=section&id=Note%209%20Other%20Commitments%2C%20Contingencies%2C%20Off-%20Balance%20Sheet%20Activities%2C%20and%20Pandemic%20Impact) This note discusses the potential impacts of the COVID-19 pandemic on the Company's business, financial condition, and operations, including details on payment deferrals offered to customers and the expiration of related regulatory relief - The impact of the COVID-19 pandemic is fluid and continues to evolve, potentially causing material adverse effects on business operations, asset valuations, financial condition, and results of operations[147](index=147&type=chunk)[149](index=149&type=chunk) - As of September 30, 2022, the Company had **2 active modified loans outstanding** with a carrying value of **$12.5 million** due to COVID-19 payment deferrals[150](index=150&type=chunk) - Section 4013 of the CARES Act, which provided temporary relief from **Troubled Debt Restructurings (TDRs)** for short-term deferrals, expired on **December 31, 2021**[150](index=150&type=chunk) [Note 10. Capital Ratios and Shareholders' Equity](index=46&type=section&id=Note%2010%20Capital%20Ratios%20and%20Shareholders%27%20Equity) This note presents the Company's and the Bank's regulatory capital ratios, demonstrating compliance with minimum capital requirements and "well capitalized" status, and details the components and changes in accumulated other comprehensive loss | Ratio | Company (Consolidated) | Minimum Capital Requirement | | :----------------------------------- | :--------------------- | :-------------------------- | | Total capital to risk-weighted assets | 15.1% | 8.0% | | Common equity tier 1 capital to risk-weighted assets | 12.7% | 4.5% | | Tier 1 capital to risk-weighted assets | 13.0% | 6.0% | | Tier 1 capital to average assets | 10.1% | 4.0% | | Ratio | Bank | Regulatory Minimum to be Well Capitalized | | :----------------------------------- | :----- | :---------------------------------------- | | Total capital to risk-weighted assets | 13.6% | 10.0% | | Common equity tier 1 capital to risk-weighted assets | 12.7% | 6.5% | | Tier 1 capital to risk-weighted assets | 12.7% | 8.0% | | Tier 1 capital to average assets | 9.9% | 5.0% | - Both the Company and the Bank exceeded all regulatory capital requirements and the Bank met the conditions to be classified as **"well capitalized"** at September 30, 2022[153](index=153&type=chunk)[155](index=155&type=chunk) - **Accumulated other comprehensive loss (AOCL)** increased significantly to **$(188,494) thousand** at September 30, 2022, from **$(3,243) thousand** at December 31, 2021, primarily due to unrealized losses on AFS securities and cash flow hedging derivatives[157](index=157&type=chunk) [Note 11. Earnings per Share](index=51&type=section&id=Note%2011%20Earnings%20per%20Share) This note provides the calculation of basic and diluted earnings per common share for the three and nine months ended September 30, 2022 and 2021, detailing the weighted average shares outstanding and the dilutive effects of stock awards and options | Period | 2022 (3 months) | 2021 (3 months) | 2022 (9 months) | 2021 (9 months) | | :----------------------------------- | :-------------- | :-------------- | :-------------- | :-------------- | | Net income (in thousands) | $18,717 | $63,749 | $62,028 | $98,416 | | Average number of diluted shares outstanding (in thousands) | 45,034 | 48,744 | 46,396 | 49,963 | | Diluted EPS | $0.42 | $1.31 | $1.34 | $1.97 | - For the three months ended September 30, 2022, **440 thousand shares of unvested restricted stock** and **68 thousand options outstanding** were anti-dilutive and excluded from EPS calculation[165](index=165&type=chunk) - For the nine months ended September 30, 2022, **448 thousand shares of unvested restricted stock** and **69 thousand options outstanding** were anti-dilutive and excluded from EPS calculation[165](index=165&type=chunk) [Note 12. Stock-Based Compensation Plans](index=52&type=section&id=Note%2012%20Stock-Based%20Compensation%20Plans) This note summarizes the activity in the Company's stock award and stock option plans for the nine months ended September 30, 2022, including grants, exercises, vested shares, forfeitures, and the total stock-based compensation expense recognized | Period | 2022 (3 months, in thousands) | 2021 (3 months, in thousands) | 2022 (9 months, in thousands) | 2021 (9 months, in thousands) | | :----------------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Stock-based compensation expense | $1,700 | $1,400 | $5,700 | $3,700 | | Metric | Non-Vested Stock Awards (Number of Shares in thousands) | Stock Options (Number of Shares in thousands) | | :----------------------------------- | :-------------------------------------------- | :------------------------------------ | | Balance at Dec 31, 2021 | 710 | 80 | | Granted | 321 | — | | Exercised | — | (12) | | Vested | (230) | — | | Forfeited | (75) | — | | Expired | — | (6) | | Balance at Sep 30, 2022 | 726 | 62 | - Proceeds from stock option exercises totaled **$270 thousand** for the nine months ended September 30, 2022, compared to **$162 thousand** in 2021[167](index=167&type=chunk) [Note 13. Fair Value Measurements](index=53&type=section&id=Note%2013%20Fair%20Value%20Measurements) This note describes the valuation methodologies and hierarchy used for financial assets and liabilities measured at fair value on a recurring and non-recurring basis, including trading securities, available-for-sale securities, loans, derivatives, and capitalized servicing rights | Instrument | Total Fair Value (in thousands) | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | | :----------------------------------- | :-------------------------- | :--------------------- | :--------------------- | :--------------------- | | Trading security | $6,812 | $0 | $0 | $6,812 | | Securities available for sale | $1,470,949 | $0 | $1,467,029 | $3,920 | | Marketable equity securities | $12,790 | $12,790 | $0 | $0 | | Loans held for investment at fair value | $796 | $0 | $0 | $796 | | Loans held for sale | $550 | $0 | $550 | $0 | | Derivative assets | $53,019 | $0 | $52,997 | $22 | | Capitalized servicing rights | $2,026 | $0 | $0 | $2,026 | | Derivative liabilities | $101,745 | $0 | $101,745 | $0 | **Recurring Fair Value Measurements (Sep 30, 2022)** - **Level 3 inputs** are used for valuing the trading security, certain AFS securities, loans held for investment, commitments to lend, forward commitments, and capitalized servicing rights, indicating reliance on unobservable inputs[172](index=172&type=chunk)[174](index=174&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk)[184](index=184&type=chunk)[188](index=188&type=chunk) | Asset | Level 3 Inputs (in thousands) | | :----------------------------------- | :---------------------------- | | Individually evaluated loans | $2,944 | | Loans held for sale | $3,574 | | Capitalized servicing rights | $11,793 | | **Total (Non-Recurring Fair Value Measurements, Sep 30, 2022)** | **$18,311** | [Note 14. Net Interest Income after Provision for Credit Losses](index=62&type=section&id=Note%2014%20Net%20Interest%20Income%20after%20Provision%20for%20Credit%20Losses) This note presents the Company's net interest income and the provision for credit losses, showing the resulting net interest income after provision for credit losses for the three and nine months ended September 30, 2022 and 2021 | Period | 2022 (3 months, in thousands) | 2021 (3 months, in thousands) | 2022 (9 months, in thousands) | 2021 (9 months, in thousands) | | :----------------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Net interest income | $92,084 | $71,368 | $242,505 | $221,854 | | Provision/(benefit) for credit losses | $3,000 | $(4,000) | $(1,000) | $2,500 | | Net interest after provision for credit losses | $89,084 | $75,368 | $243,505 | $219,354 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=63&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and operating results, offering a detailed analysis of performance trends, strategic initiatives, and key financial metrics for the periods presented [Selected Financial Data](index=63&type=section&id=Selected%20Financial%20Data) This section presents a summary of key nominal and per share data, performance ratios, and financial data at period-end, including both GAAP and non-GAAP adjusted measures, for the three and nine months ended September 30, 2022 and 2021 | Metric | Sep 30, 2022 (3 months) | Sep 30, 2021 (3 months) | Sep 30, 2022 (9 months) | Sep 30, 2021 (9 months) | | :----------------------------------- | :---------------------- | :---------------------- | :---------------------- | :---------------------- | | Net earnings per common share, diluted | $0.42 | $1.31 | $1.34 | $1.97 | | Adjusted earnings per common share, diluted (non-GAAP) | $0.62 | $0.53 | $1.56 | $1.28 | | Net income (in thousands) | $18,717 | $63,749 | $62,028 | $98,416 | | Adjusted net income (in thousands) (non-GAAP) | $27,928 | $25,695 | $72,279 | $63,814 | | Total common shares outstanding (in thousands) | 45,040 | 48,657 | 45,040 | 48,657 | | Dividends per common share | $0.12 | $0.12 | $0.36 | $0.36 | | Metric | Sep 30, 2022 (3 months) | Sep 30, 2021 (3 months) | Sep 30, 2022 (9 months) | Sep 30, 2021 (9 months) | | :----------------------------------- | :---------------------- | :---------------------- | :---------------------- | :---------------------- | | Return on equity | 6.30% | 22.18% | 6.97% | 11.30% | | Adjusted return on equity (non-GAAP) | 9.40% | 8.94% | 8.12% | 7.33% | | Return on assets | 0.66% | 2.14% | 0.73% | 1.07% | | Adjusted return on assets (non-GAAP) | 0.99% | 0.86% | 0.85% | 0.69% | | Net interest margin, fully taxable equivalent (FTE) | 3.48% | 2.56% | 3.05% | 2.60% | | Efficiency ratio (non-GAAP) | 62.01% | 68.76% | 66.75% | 69.32% | | Metric | Sep 30, 2022 (in millions) | Sep 30, 2021 (in millions) | | :----------------------------------- | :------------------------- | :------------------------- | | Total assets | $11,317 | $11,846 | | Total loans | $7,943 | $6,836 | | Total deposits | $9,988 | $10,365 | | Loans/deposits (%) | 80% | 66% | [Average Balances and Average Yields/Rates](index=65&type=section&id=Average%20Balances%20and%20Average%20Yields%2FRates) This section provides detailed average balances, yields, and rates for the Company's interest-earning assets and interest-bearing liabilities, offering insights into net interest spread and net interest margin for the specified periods | Period | 2022 (3 months, in millions) | 2021 (3 months, in millions) | 2022 (9 months, in millions) | 2021 (9 months, in millions) | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Average Balance (Total interest-earning assets) | $10,630 | $11,220 | $10,680 | $11,540 | | Yield/Rate (FTE basis) | 3.91% | 2.86% | 3.36% | 2.96% | | Period | 2022 (3 months, in millions) | 2021 (3 months, in millions) | 2022 (9 months, in millions) | 2021 (9 months, in millions) | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Average Balance (Total interest-bearing liabilities) | $7,007 | $7,596 | $7,069 | $8,035 | | Cost | 0.66% | 0.43% | 0.44% | 0.52% | | Metric | 2022 (3 months) | 2021 (3 months) | 2022 (9 months) | 2021 (9 months) | | :----------------------------------- | :-------------- | :-------------- | :-------------- | :-------------- | | Net interest spread | 3.25% | 2.43% | 2.92% | 2.44% | | Net interest margin | 3.48% | 2.56% | 3.05% | 2.60% | | Cost of funds | 0.46% | 0.31% | 0.31% | 0.38% | | Cost of deposits | 0.33% | 0.22% | 0.22% | 0.28% | [Non-GAAP Financial Measures](index=67&type=section&id=Non-GAAP%20Financial%20Measures) This section explains the Company's use of non-GAAP financial measures, such as adjusted earnings and adjusted earnings per share, to provide supplemental insights into operating results by excluding items deemed unrelated to normalized operations - Non-GAAP measures are used to provide additional supplemental perspectives on operating results, performance trends, and financial condition, excluding items such as **securities gains/losses, merger costs, restructuring costs, goodwill impairment, and discontinued operations**[211](index=211&type=chunk)[212](index=212&type=chunk) | Period | 2022 (3 months, in thousands) | 2021 (3 months, in thousands) | 2022 (9 months, in thousands) | 2021 (9 months, in thousands) | | :----------------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | GAAP Net income | $18,717 | $63,749 | $62,028 | $98,416 | | Adjustments (net) | $9,211 | $(38,054) | $10,251 | $(34,602) | | **Total adjusted income (non-GAAP)** | **$27,928** | **$25,695** | **$72,279** | **$63,814** | | Period | 2022 (3 months) | 2021 (3 months) | 2022 (9 months) | 2021 (9 months) | | :----------------------------------- | :-------------- | :-------------- | :-------------- | :-------------- | | Adjusted EPS (non-GAAP) | $0.62 | $0.53 | $1.56 | $1.28 | - Key adjustments include net (gains) on sale of business operations and assets (e.g., **$(51,885) thousand in 2021**), restructuring and other expenses (e.g., **$11,473 thousand in Q3 2022**), and net losses on securities (e.g., **$476 thousand in Q3 2022**)[216](index=216&type=chunk) [General Overview](index=70&type=section&id=GENERAL) This section provides a general introduction to Berkshire Hills Bancorp, Inc., outlining its history, mission, vision, and core banking services, emphasizing its focus on being a socially responsible omni-channel community bank - Berkshire Hills Bancorp, Inc. is a Delaware corporation headquartered in Boston and the holding company for Berkshire Bank, a Massachusetts-chartered trust company[220](index=220&type=chunk) - The Bank's vision is to be a leading socially responsible omni-channel community bank in New England and beyond, providing business and consumer banking, mortgage, wealth management, and investment services[220](index=220&type=chunk) - Berkshire has approximately **$11.3 billion in assets** and operates **100 branch offices** in New England and New York[220](index=220&type=chunk) [Forward-Looking Statements](index=70&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section advises readers that the document contains forward-looking statements regarding future financial performance and operations, which are subject to significant risks, assumptions, and uncertainties - Statements regarding outlook for earnings, net interest margin, fees, expenses, tax rates, capital and liquidity levels, and other future business matters are considered forward-looking statements[221](index=221&type=chunk) - These statements are subject to significant risks, assumptions, and uncertainties, including changes in general economic and business conditions, increased competitive pressures, inflation, interest rate environment changes, legislative and regulatory changes, and the effects of the COVID-19 pandemic[222](index=222&type=chunk) - Readers are cautioned not to place undue reliance on forward-looking statements, and the Company does not undertake to update them except as required by federal securities law[223](index=223&type=chunk) [Executive Summary](index=71&type=section&id=SUMMARY) This summary highlights Berkshire's improved quarterly revenue and operating earnings in 2022, driven by its BEST strategic plan, a strong credit environment, and rising interest rates, noting the impact of prior year asset sales on GAAP figures and the strong performance of adjusted non-GAAP metrics - Berkshire's quarterly revenue and operating earnings advanced in 2022, reflecting growth and profitability under its **BEST strategic plan**, a strong credit environment, and market interest rate increases[224](index=224&type=chunk) - Third quarter GAAP earnings per share decreased by **68% to $0.42**, while adjusted earnings per share increased by **18% to $0.62**[226](index=226&type=chunk) - Key financial highlights for Q3 2022 include a **9.9% adjusted return on tangible common equity**, a **3.48% net interest margin**, a **62% efficiency ratio**, and **16% year-over-year loan growth**[229](index=229&type=chunk) - The Company issued the first **Sustainability Bond** by a U.S. community bank with assets under **$150 billion**, with proceeds financing social and environmental projects[230](index=230&type=chunk) [Comparison of Financial Condition](index=73&type=section&id=COMPARISON%20OF%20FINANCIAL%20CONDITION%20AT%20SEPTEMBER%2030%2C%202022%20AND%20DECEMBER%2031%2C%202021) This section analyzes the changes in Berkshire's financial condition between September 30, 2022, and December 31, 2021, focusing on assets, liabilities, and equity, and highlighting the impact of loan growth, investment portfolio changes, and capital management [Investments](index=73&type=section&id=Investments) The investment securities portfolio decreased by 18% in the first nine months of 2022, primarily due to unrealized losses on available-for-sale securities resulting from rising interest rates, with proceeds from maturities funding loan growth - The investment securities portfolio decreased by **$458 million**, or **18%**, to **$2.09 billion** during the first nine months of 2022[235](index=235&type=chunk) - The unrealized loss on securities available for sale increased from **$4 million (0.2% of book value)** at year-end 2021 to **$248 million (14.4% of book value)** at September 30, 2022[235](index=235&type=chunk) - Proceeds from securities maturities and amortization totaled **$483 million** for the first nine months of 2022, contributing funding for loan portfolio growth[235](index=235&type=chunk) [Loans](index=73&type=section&id=Loans) Total loans increased by 16% in the first nine months of 2022, driven by significant growth in residential mortgages and commercial loans, reflecting the Company's BEST initiatives and talent recruitment - Total loans increased by **$1.12 billion**, or **16%**, to **$7.94 billion** in the first nine months of 2022[236](index=236&type=chunk) - Loan growth was concentrated in a **$641 million (46%) increase in residential mortgages** and a **$409 million (8%) increase in commercial loans**[236](index=236&type=chunk) - Overall loan yields increased, with commercial real estate loans rising by **1.04% to 4.53%** and commercial and industrial loans by **0.83% to 5.21%** in the most recent quarter compared to Q4 2021[241](index=241&type=chunk) - The Company ceased originating new loans in its Firestone Financial specialty lending operation to focus on core markets and products[242](index=242&type=chunk) [Asset Quality and Credit Loss Allowance](index=74&type=section&id=Asset%20Quality%20and%20Credit%20Loss%20Allowance) Asset quality metrics remained strong, with non-accruing loans and net charge-offs at favorable levels, while the allowance for credit losses on loans decreased due to improved asset quality and reduced economic disruption risks - Non-accruing loans measured **0.48% of total loans** at Q3-end 2022, compared to **0.52%** at year-end 2021[244](index=244&type=chunk) - Annualized net loan charge-offs measured **0.16% of average loans** for the first nine months of 2022, down from **0.29%** in fiscal year 2021[244](index=244&type=chunk) - The allowance for credit losses on loans decreased to **$96 million** from **$106 million** in the first nine months of 2022, with the ratio to total loans decreasing to **1.21%** from **1.55%**[245](index=245&type=chunk) [Deposits and Borrowings](index=75&type=section&id=Deposits%20and%20Borrowings) Total deposits slightly decreased, with a shift from non-interest-bearing to interest-bearing accounts, reflecting increased customer spending and market competition, while the Company issued new subordinated debt and prepaid existing debt - Total deposits decreased by **$81 million**, or **1%**, to **$9.99 billion** during the first nine months of 2022[247](index=247&type=chunk) - The cost of deposits increased to **0.33%** in the third quarter of 2022, compared to **0.19%** in the fourth quarter of 2021, driven by rising market interest rates[248](index=248&type=chunk) - The Company issued **$100 million** in subordinated notes (Sustainability Bond) at a fixed rate of **5.5%** and prepaid **$75 million** of existing subordinated debt bearing **6.875%** interest[251](index=251&type=chunk)[252](index=252&type=chunk) [Derivative Financial Instruments](index=75&type=section&id=Derivative%20Financial%20Instruments) The Company added $400 million in cash flow hedges in September 2022 to mitigate earnings exposure to downward interest rate movements, responding to increased interest rate sensitivity, with the fair value of derivatives shifting from an asset to a liability due to interest rate changes - The Company added **$400 million** of receive fix/pay SOFR interest rate swaps (cash flow hedges) in September 2022 to reduce earnings exposure to downward rate movements[253](index=253&type=chunk) - The estimated fair value of derivatives shifted from an asset of **$43 million** at year-end 2021 to a liability of **$49 million** at September 30, 2022, due to changes in interest rates[253](index=253&type=chunk) [Shareholders' Equity](index=75&type=section&id=Shareholders%27%20Equity) Total shareholders' equity decreased by 20% in the first nine months of 2022, primarily due to a significant net other comprehensive loss from unrealized losses on available-for-sale debt securities and substantial share repurchases, though regulatory capital remained strong - Total shareholders' equity decreased by **$240 million**, or **20%**, to **$943 million** in the first nine months of 2022[254](index=254&type=chunk) - This decrease was primarily due to a **$185 million net other comprehensive loss** (mostly from **$245 million unrealized loss on debt securities available for sale**) and **$105 million in common share repurchases**[254](index=254&type=chunk) - The common equity Tier 1 capital ratio decreased from **15.0% to 12.7%**, and the risk-based capital ratio decreased from **17.3% to 15.0%**, remaining relatively strong[255](index=255&type=chunk) - Book value per share decreased by **14% to $20.93**, and tangible book value per share decreased by **14% to $20.36**[256](index=256&type=chunk) [Comparison of Operating Results](index=77&type=section&id=COMPARISON%20OF%20OPERATING%20RESULTS%20FOR%20THE%20THREE%20AND%20NINE%20MONTHS%20ENDED%20SEPTEMBER%2030%2C%202022%20AND%20SEPTEMBER%2030%2C%202021) Berkshire's third-quarter net income decreased significantly due to prior-year asset sale gains, but adjusted net income increased, driven by higher net interest income, achieving positive operating leverage with an improved efficiency ratio [Net Interest Income](index=77&type=section&id=Net%20Interest%20Income) Net interest income increased significantly in the third quarter and first nine months of 2022, driven by a substantial increase in net interest margin, reflecting the benefit of rising interest rates and the reinvestment of excess cash into loan growth - Third quarter net interest income increased by **29% to $92 million**, and nine-month net interest income increased by **9% to $243 million**[262](index=262&type=chunk) - The third quarter net interest margin increased year-over-year by **91 basis points to 3.48%** from **2.56%**, marking the highest quarterly net interest margin in four years[263](index=263&type=chunk) - The increase in net interest margin primarily reflects the benefit of a **36% loan beta** compared to a **6% deposit beta** in an environment of rapidly rising market interest rates[263](index=263&type=chunk) [Non-Interest Income](index=77&type=section&id=Non-Interest%20Income) Total fee income decreased year-over-year, primarily due to lower loan fees and reduced SBA originations income, despite an increase in deposit-related fees - Total fee income decreased year-over-year by **29% to $15 million** for the third quarter and by **26% to $48 million** for the nine months[265](index=265&type=chunk) - The decrease was mostly due to lower loan fees (**$5 million for Q3, $9 million for 9 months**), primarily from reduced SBA originations income[265](index=265&type=chunk) - Deposit-related fees increased by **9% and 6%** for the respective periods, reflecting increased consumer transaction activity[265](index=265&type=chunk) [Provision for Credit Losses on Loans](index=78&type=section&id=Provision%20for%20Credit%20Losses%20on%20Loans) The Company recorded a provision expense in the third quarter of 2022, contrasting with a benefit in the prior year, as improvements in asset quality and forecast conditions were offset by loan portfolio growth and increased consumer lending - The third quarter provision for credit losses was a **$3 million expense** in 2022, compared to a **$4 million benefit** in 2021[266](index=266&type=chunk) - For the first nine months, the provision was a **$1 million benefit** in 2022, compared to a **$2 million expense** in 2021[266](index=266&type=chunk) - The Company has steadily reduced the coverage of its allowance for credit losses on loans based on improvements in asset quality and forecast conditions, generally offsetting the impact of loan portfolio growth[266](index=266&type=chunk) [Non-Interest Expense and Tax Expense](index=78&type=section&id=Non-Interest%20Expense%20and%20Tax%20Expense) Total non-interest expense increased year-over-year for the third quarter but adjusted non-interest expense showed a more modest increase or decrease, benefiting from prior restructuring actions and branch consolidations, with the effective income tax rate remaining stable - Total non-interest expense increased year-over-year by **18%** for the third quarter and by **1%** for the first nine months[267](index=267&type=chunk) - The non-GAAP financial measure of adjusted non-interest expense increased by **3%** for the third quarter and decreased by **2%** for the first nine months[267](index=267&type=chunk) - The total branch count decreased from **130** at the start of 2021 to **100** at Q3-end 2022, and full-time equivalent staff decreased from **1,505 to 1,300** over the same period[267](index=267&type=chunk) - The effective income tax rate was **21%** for the first nine months of 2021 and **22%** for 2022[268](index=268&type=chunk) [Total Comprehensive Income](index=78&type=section&id=Total%20Comprehensive%20Income) Total comprehensive income for the first nine months of 2022 was a significant loss, contrasting with income in the prior year, primarily due to the impact of rising medium-term interest rates on the bond portfolio, leading to unrealized losses on available-for-sale debt securities - Total comprehensive income for the first nine months of 2022 was a **loss of $123 million**, compared to **income of $75 million** in 2021[269](index=269&type=chunk) - This change reflects the impact of rising medium-term interest rates on the bond portfolio, leading to unrealized losses on debt securities available for sale[269](index=269&type=chunk) [Liquidity and Cash Flows](index=78&type=section&id=Liquidity%20and%20Cash%20Flows) Loan growth was the primary use of cash in the first nine months of 2022, funded mainly by short-term investments and investment securities, leading to a decrease in cash and cash equivalents, though the Company maintains sufficient liquidity through its securities portfolio and wholesale funding - Loan growth was the primary use of cash for the first nine months of 2022, mainly sourced from short-term investments and investment securities[271](index=271&type=chunk) - The ratio of cash and cash equivalents to total assets decreased to **6%** from **14%** over the period[271](index=271&type=chunk) - The Company maintains sufficient liquidity with a high-quality securities portfolio, well-positioned wholesale funding sources, and **$1.2 billion** in unused FHLBB borrowing availability[271](index=271&type=chunk) - The ratio of loans to deposits measured **80%** at period-end, compared to **68%** at the start of the year[272](index=272&type=chunk) [Capital Resources](index=79&type=section&id=Capital%20Resources) The Company's capital optimization strategy, part of its BEST plan, involved significant loan growth and share repurchases, alongside a subordinated debt issuance and increased shareholder dividends, with regulatory capital measures remaining the primary focus - The Company's **BEST plan** includes capital optimization, evidenced by **16% loan growth** and **$105 million in share repurchases** during the first nine months of 2022[276](index=276&type=chunk) - The **common equity Tier 1 capital ratio** stood at **12.7%** at period-end, which is the primary focus of the Company's capital management[277](index=277&type=chunk) - The Company announced a **50% increase in the quarterly shareholder dividend** from **$0.12 to $0.18 per share** on November 4, 2022[277](index=277&type=chunk) - Unrealized available-for-sale securities losses reduce book value of equity but are not deducted from regulatory capital[278](index=278&type=chunk) [LIBOR Transition](index=79&type=section&id=LIBOR%20Transition) The Company is actively managing its LIBOR transition, primarily for commercial and mortgage loans, by converting them to one-month term SOFR, with approximately $1.8 billion in LIBOR-based commercial loans maturing after the mid-2023 cessation date - The Company's primary exposure in managing the **LIBOR transition** relates to LIBOR-based commercial and mortgage loans[280](index=280&type=chunk) - New loan documentation has switched from **LIBOR to one-month term SOFR** for new commercial loans originated in 2022[280](index=280&type=chunk) - As of September 30, 2022, approximately **$2.0 billion in LIBOR-based commercial loans** remained, with **$1.8 billion** maturing after the mid-2023 cessation date; **$258 million** in outstanding loans have been converted[280](index=280&type=chunk) [Corporate Responsibility Update](index=79&type=section&id=CORPORATE%20RESPONSIBILITY%20UPDATE) Berkshire is committed to purpose-driven, community-centered banking, integrating ESG factors into its vision, mission, and strategic plan, focusing on fueling small businesses, community financing, financial access, and environmental sustainability [Our Commitment to ESG & Corporate Responsibility](index=80&type=section&id=Our%20Commitment%20to%20Environmental%2C%20Social%2C%20Governance%20%28ESG%29%20%26%20Corporate%20Responsibility) Berkshire emphasizes its commitment to purpose-driven, community-centered banking by integrating ESG factors into its core strategy, risk management, and sustainable finance activities, aiming to be a leading socially responsible community bank - Berkshire is committed to purpose-driven, community-centered banking that enhances value for all stakeholders, pursuing a vision of being a high-performing, leading socially responsible community bank[282](index=282&type=chunk) - **ESG factors** are integral to the Company's vision, mission, risk management practices, sustainable finance activities, and BEST strategic transformation[283](index=283&type=chunk) - The Company was the first U.S. community bank holding company with under **$150 billion in assets** to issue a **Sustainability Bond** and is a leader in integrating ESG standards[283](index=283&type=chunk) [Climate Change & Sustainability](index=80&type=section&id=Climate%20Change%20%26%20Sustainability) Berkshire recognizes climate change as a significant risk and opportunity, actively managing its environmental footprint and financing the transition to a low-carbon future to strengthen its position as a socially responsible community bank - Berkshire recognizes that **Climate Change** poses unprecedented risks and opportunities[285](index=285&type=chunk) - The Company's efforts to manage its environmental footprint, mitigate climate change risks, and finance the transition to a low-carbon future are expected to strengthen its positioning as a socially responsible community bank[285](index=285&type=chunk) [Key ESG & Corporate Responsibility Quarterly Developments](index=81&type=section&id=Key%20ESG%20%26%20Corporate%20Responsibility%20Quarterly%20Developments) Recent developments include steady progress towards "BEST Community Comeback" goals, maintaining a top 23% composite ESG performance, and receiving recognition as a top corporate charitable contributor for the tenth consecutive year - The Company is making steady progress towards its **"BEST Community Comeback" goals**, focusing on fueling small businesses, community financing, financial access, and environmental sustainability[286](index=286&type=chunk) - As of September 30, 2022, the Company maintained a **top 23% composite performance in leading ESG indexes** in the U.S., with ratings including MSCI ESG-BBB and Bloomberg ESG Disclosure-62.81[286](index=286&type=chunk) - Berkshire was named one of Massachusetts' **Top Corporate Charitable Contributors for the tenth consecutive year** and made over **$600,000** in third-quarter philanthropic contributions[286](index=286&type=chunk) [Application of Critical Accounting Policies](index=81&type=section&id=APPLICATION%20OF%20CRITICAL%20ACCOUNTING%20POLICIES) This section identifies the Company's most critical accounting policies as those related to the Allowance for Credit Losses on Loans and Fair Value Measurements, emphasizing their importance to financial condition and results due to the subjective and complex judgments required - The Company's most critical accounting policies are related to the **Allowance for Credit Losses on Loans** and **Fair Value Measurements**[288](index=288&type=chunk) - These policies are critical because they require management's subjective and complex judgment due to the inherent uncertainty in making estimates[288](index=288&type=chunk) [Enterprise Risk Management](index=81&type=section&id=ENTERPRISE%20RISK%20MANAGEMENT) Enterprise risk management is overseen by the Chief Risk Officer and the Board's Risk Management, Capital, and Compliance Committee, covering material business risks such as credit, interest rate, price, liquidity, operational, compliance, strategic, and reputation risk, with credit risk having the highest weighting - Enterprise risk management is overseen by the Company's **Chief Risk Officer** and the **Board's Risk Management, Capital, and Compliance Committee**[289](index=289&type=chunk) - Material business risks include **credit risk (highest weighting), interest rate risk, price risk, liquidity risk, operational risk, compliance risk, strategic risk, and reputation risk**[289](index=289&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=82&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This item discusses the Company's market risk, primarily interest rate risk, and its objective to maintain a neutral or asset-sensitive profile, detailing the sensitivity of net interest income to interest rate changes - Berkshire's objective is to maintain a **neutral or asset-sensitive interest rate risk profile**, measured by the sensitivity of net interest income to market interest rate changes[290](index=290&type=chunk) | Parallel Interest Rate Shock | 1-12 Months % Change in Net Interest Income | 13-24 Months % Change in Net Interest Income | | :----------------------------------- | :------------------------------------------ | :------------------------------------------- | | +200 basis points | 5.0% | 9.9% | | +100 basis points | 2.4% | 4.7% | | -100 basis points | (4.9)% | (7.5)% | **At September 30, 2022** - The Company became less asset sensitive in the first nine months of 2022 due primarily to the reinvestment of cash into longer-duration loans, and its sensitivity to decreases in interest rates has become more pronounced[291](index=291&type=chunk) - The actual deposit beta compared to fed funds was approximately **12%** for the third quarter of 2022 compared to the second quarter of 2022, and approximately **6%** for the third quarter of 2022 compared to the fourth quarter of 2021, which is less sensitive than traditional modeling assumptions[294](index=294&type=chunk) [Item 4. Controls and Procedures](index=84&type=section&id=Item%204.%20Controls%20and%20Procedures) This item confirms that the Company's disclosure controls and procedures were effective as of September 30, 2022, and reports no material changes in internal control over financial reporting during the last fiscal quarter - The principal executive officers, including the principal financial officer, concluded that the Company's **disclosure controls and procedures were effective** as of September 30, 2022[298](index=298&type=chunk) - There were no changes in the Company's internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting during the last fiscal quarter[299](index=299&type=chunk) [PART II. OTHER INFORMATION](index=85&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=85&type=section&id=Item%201.%20Legal%20Proceedings) This item discloses that the Company and Bank are not involved in any material pending legal proceedings as of September 30, 2022, but provides updates on specific unsettled litigation - As of September 30, 2022, neither the Company nor the Bank was involved in any pending legal proceedings believed to be material to the Company's financial condition or results of operations[301](index=301&type=chunk) - The Bank filed a complaint against Pioneer Bank in 2020 seeking approximately **$16.0 million** for breach of loan participation agreements and fraud; discovery is currently underway[301](index=301&type=chunk) - A wrongful termination lawsuit by a former employee against a subsidiary, FCLS, is proceeding to arbitration, expected in the first half of 2023[302](index=302&type=chunk) - The Chapter 11 Trustee for Interlogic Outsourcing, Inc. (IOI) has threatened an adversary proceeding against the Bank, with a 2-day mediation scheduled for November 2022[303](index=303&type=chunk) [Item 1A. Risk Factors](index=86&type=section&id=Item%201A.%20Risk%20Factors) This item refers readers to the risk factors discussed in the Company's most recent Annual Report on Form 10-K, noting that there have been no material changes to these risks - Readers should carefully consider the risk factors discussed in the Company's most recent Annual Report on Form 10-K[305](index=305&type=chunk) - There have been no material changes in risk factors from those identified in the Form 10-K[305](index=305&type=chunk) - Additional risks and uncertainties not currently known or deemed immaterial may materially adversely affect the Company's business, financial condition, and/or operating results[305](index=305&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=87&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item reports on the Company's stock repurchase program, under which it repurchased 705,221 shares of common stock for approximately $20.2 million in the third quarter of 2022, at an average price of $28.71 per share - The Company's Board of Directors approved a stock repurchase program authorizing repurchases of up to **$140 million** in common stock through December 31, 2022[307](index=307&type=chunk) | Period | Total number of shares purchased | Average price per share | | :----------------------------------- | :------------------------------- | :---------------------- | | July 1-31, 2022 | 54,921 | $27.21 | | August 1-31, 2022 | 392,800 | $29.06 | | September 1-30, 2022 | 257,500 | $28.50 | | **Total (Q3 2022)** | **705,221** | **$28.71** | - As of September 30, 2022, **1,298,773 shares** may yet be purchased under the program[307](index=307&type=chunk) - There were no unregistered sales of equity securities during the three months ended September 30, 2022 and 2021[306](index=306&type=chunk) [Item 3. Defaults Upon Senior Securities](index=87&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item states that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities were reported[308](index=308&type=chunk) [Item 4. Mine Safety Disclosures](index=87&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item states that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company[308](index=308&type=chunk) [Item 5. Other Information](index=87&type=section&id=Item%205.%20Other%20Information) This item states that there is no other information to report - No other information is reported in this section[309](index=309&type=chunk) [Item 6. Exhibits](index=88&type=section&id=Item%206.%20Exhibits) This item lists the exhibits filed as part of the Form 10-Q, including organizational documents, transition agreements, certifications, and XBRL-formatted financial statements - Exhibits include Amended and Restated Certificate of Incorporation and Bylaws, Common Stock Certificate, Certificate of Designations of Series B Non-Voting Preferred Stock, Transition Agreements, Certifications (302 and 906), and XBRL-formatted financial statements[310](index=310&type=chunk) [Signatures](index=89&type=section&id=Signatures) This section contains the required signatures of the registrant's authorized officers, including the President and Chief Executive Officer, and the Senior Vice President and Interim Chief Financial Officer, certifying the filing of the report - The report is signed by **Nitin J. Mhatre, President and Chief Executive Officer**, and **Brett Brbovic, Senior Vice President and Interim Chief Financial Officer**[312](index=312&type=chunk) - The report was dated **November 9, 2022**[312](index=312&type=chunk)

Berkshire Hills Bancorp, Inc. (NYSE:BHLB) Q3 2022 Earnings Conference Call October 20, 2022 10:00 AM ET Company Participants Kevin Conn - IR, Corporate Development Officer Nitin Mhatre - President, CEO Brett Brbovic - Chief Accounting Officer and Interim CFO Greg Lindenmuth - CRO Sean Gray - COO Conference Call Participants Billy Young - RBC Mark Fitzgibbon - Piper Sandler David Bishop - Hovde Group LLC Laurie Hunsicker - Compass Point Chris O'Connell - KBW Operator Hello everyone, and welcome to today's Be ...

BERKSHIRE HILLS BANCORP 3Q 2022 EARNINGS PRESENTATION October 20, 2022 F ORWAR D -L OOK I N G S TAT E M E N T S 2 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, including statements regarding our outlook for earnings, net interest margin, fees, expenses, tax rates, capital and liquidity levels and other matters regarding or affecting Berkshire and its future b ...

Table of Contents Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $0.01 per share BHLB The New York Stock Exchange UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 2022 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from t ...

Berkshire Hills Bancorp, Inc. (NYSE:BHLB) Q2 2022 Earnings Conference Call July 20, 2022 10:00 AM ET Company Participants Kevin Conn - IR, Corporate Development Officer Nitin Mhatre - President, CEO Subhadeep Basu - CFO Greg Lindenmuth - CRO Conference Call Participants Mark Fitzgibbon - Piper Sandler Bill Young - RBC Chris O'Connell - KBW Laurie Hunsicker - Compass Point Operator Hello, and welcome to today's Berkshire Hills Bancorp Second Quarter 2022 Earnings Conference Call. My name is Elliot, and I wil ...

Table of Contents Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, par value $0.01 per share BHLB The New York Stock Exchange UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 2022 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ...

Berkshire Hills Bancorp, Inc. (NYSE:BHLB) Q1 2022 Earnings Conference Call April 20, 2022 10:00 AM ET Company Participants Kevin Conn - SVP, IR & Corporate Development Nitin Mhatre - President, CEO & Director Subhadeep Basu - Senior EVP & CFO Conference Call Participants Mark Fitzgibbon - Piper Sandler & Co. Bill Young - RBC Capital Markets Chris O'Connell - KBW Operator Good morning or good afternoon all, and welcome to the Berkshire Hills Bancorp Q1 Earnings Release Conference Call. My name is Adam, and I ...

BERKSHIRE HILLS BANCORP 1Q 2022 EARNINGS PRESENTATION April 20, 2022 F ORWAR D -L OOK I N G S TAT E M E N T S 2 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, including statements regarding our outlook for earnings, net interest margin, fees, expenses, tax rates, capital and liquidity levels and other matters regarding or affecting Berkshire and its future bus ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 2021 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-15781 BERKSHIRE HILLS BANCORP, INC. (Exact name of registrant as specified in its charter) Delaware 04-3510455 (State or other ...

Financial Performance and Key Metrics - The company reported a fourth quarter EPS of $0.42, up 50% year-over-year, although it was lower than the third quarter [5] - Revenues for the quarter decreased year-over-year due to a reduction in loan balances, with adjusted expenses down 4% year-over-year [6][15] - The adjusted return on tangible common equity (ROTCE) improved to 7.3% from 5.5% a year ago [6] Business Line Performance - The company experienced over 200% year-over-year growth in loan origination, marking the first quarter of growth in core loan balances after nine quarters of decline [7] - Fee income grew by 25%, offsetting an 8% decline in net interest income, driven by strong performance in SBA and Wealth Management fees [15][23] Market Data and Key Indicators - The total average loan portfolio decreased year-over-year, primarily due to the runoff of PPP and non-strategic portfolios [19] - The investments portfolio increased by 35% year-over-year, with cash deployed into high-yielding securities [20] Company Strategy and Industry Competition - The company is focused on a three-year BEST plan, which includes streamlining operations and enhancing customer experience through technology [12][10] - The company aims to become a top-performing, socially responsible community bank in New England and beyond, with a focus on organic growth and efficiency [13][31] Management's Comments on Operating Environment and Future Outlook - Management expects low to mid-single-digit loan growth and low single-digit deposit growth in 2022, with net interest income projected to increase in the mid-single-digit percentage range [27][26] - The company anticipates continued improvement in the credit environment and plans to reach Day 1 CECL reserves to loans by the third quarter of 2022 [28] Other Important Information - The company returned a total of $92 million in capital to shareholders in 2021, representing 109% of adjusted net income, and announced a new stock repurchase plan of $140 million [9][12] - The company consolidated 16 branches and outsourced servicing activities to enhance efficiency [12][24] Q&A Session Summary Question: Loan growth guidance and drivers - Management indicated that loan growth is expected to be driven by commercial and industrial (C&I) and commercial real estate, with a downward trend in prepayment activity noted [33][34] Question: Net interest margin (NIM) expansion - Management confirmed that NIM is expected to trend higher, with a balanced approach to deploying cash between loan growth and investments [35] Question: Hiring of commercial bankers - The company plans to grow frontline hires by about 40% over the three-year BEST plan, with the fourth quarter seeing the highest number of hires in 2021 [36][37] Question: Stock buyback valuation - Management stated that buyback decisions are based on intrinsic valuation and peer comparisons, with an opportunistic approach to executing the buyback program [38] Question: Net interest income guidance - The guidance for net interest income growth is based on a projection of approximately $290 million, with expectations for mid-single-digit growth [41][42] Question: Consumer loan growth and charge-off guidance - The company plans to add about $100 million in Upstart loans, maintaining a net charge-off guide of 4% to 5% for those loans [58][62]