Beacon Financial Corporation · NYSE:BBT
Beacon Financial — Berkshire Hills Bancorp — IPO Roadshow (June 2022)
32 slides from Beacon Financial's IPO roadshow presentation, Jun 28, 2022
Slide 1: Berkshire Hills Bancorp Investor Presentation June 2022
BERKSHIRE HILLS BANCORP INVESTOR PRESENTATION JUNE 2022
Slide 2: Legal Disclosure
LEGAL DISCLOSURE FORWARD - LOOKING STATEMENTS This presentation contains “forward - looking statements” within the meaning of section 27A of the Securities Act of 1933, as amen ded, and section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding our outlook for ear
Slide 3: Offering Summary
ESG STRUCTURING AGENT PNC FIG Advisory, part of PNC Capital Markets LLC The Company intends to use an amount equal to the net proceeds from this offering to finance or refinance new or existing assets consistent with the Company’s Sustainable Financing Framework, as may be modified from time to time
Slide 4: Franchise Overview
BERKSHIRE HILLS BANCORP FRANCHISE OVERVIEW 4
Slide 5: Company Overview
COMPANY OVERVIEW • Berkshire Hills Bancorp, Inc. (NYSE: BHLB, or “Berkshire”) operates as the bank holding company for Berkshire Bank (the “Bank”), which was founded in 1846 • Berkshire’s vision is to be a high - performing, leading socially responsible community bank in New England, Upstate New Yor
Slide 6: Investment Highlights
BEST Program Designed to Make Berkshire Bank a High - Performing, Leading Socially Responsible Community Bank in New England, Eastern New York & Beyond Top Quartile ESG Ranked Nationally Among All Banks Steady Progress on “BEST” Strategic Program Initiatives (Optimize, Digitize, Enhance) Towards Hig
Slide 7: Management Team
Nitin Mhatre oversees the vision and strategic direction of the Company as President and Chief Executive Officer . Prior to joining Berkshire in January 2021 , spent 25 years in banking at Webster Bank as Head of Community Banking and at Citigroup as Managing Director . George Bacigalupo is responsi
Slide 8: Business Lines Overview
• $5.7B Retail Deposits • 25 MyBankers with $415M Deposits – concierge banking to committed relationships • 105 branches – Year - end target of 100 branches, down from 130 at beginning of 2021 • Narmi fintech relationship – mobile account opening; mobile and web “single pane of glass” interface (202
Slide 9: Key Fee Business Revenue
KEY FEE BUSINESS REVENUE Berkshire is recruiting talent and expanding key fee revenue businesses to support modest fee income growth in 2022 and to offset possible overdraft fee reduction • Consistently ranked as a top 20 national SBA 7a originator • Headquartered in Pennsylvania with primary market
Slide 10: BEST Three-Year Strategic Plan
“BEST” THREE - YEAR STRATEGIC PLAN We are ahead of plan at the one - year anniversary mark of our three - year “BEST” strategic plan that was announced in May 2021 • Optimize Physical Footprint • Optimize Processes & Procurement • Optimize Products / Pricing & Balance Mix for Improved Return on Equi
Slide 11: BEST Progress vs. Goal
*Improvement over FY2020 baseline, driven by “BEST” program over 3 years starting Q3’21; ** ESG Index ratings: MSCI, ISS - ESG, Sustainalytics, Bloomberg; 1 Numbers are on an adjusted basis. See appendix for discussion and reconciliation of non - GAAP financial measures. 2 Each quarter adjusted PPNR
Slide 12: A Leader in Social Responsibility
BERKSHIRE HILLS BANCORP – A LEADER IN SOCIAL RESPONSIBILITY 1 As of 3/31/2022, U.S. Small Business Administration. 2 Originated and referred loans 3 Balances as of 12/31/2021 4 Offered through Berkshire Bank Wealth Management. 5 Mighty Deposits: $64 of every $100 is reinvested back in local communit
Slide 13: Sustainable Financing Framework
Social Green Sustainability Green Uses Renewable Electricity Generation Green Buildings Renewable Energy Technology Energy Efficiency Social Uses 1 Affordable Housing Workforce Housing Financial Inclusion & Access BERKSHIRE’S SUSTAINABLE FINANCING FRAMEWORK 1 Capex must be used towards a targeted po
Slide 14: Financial Highlights
BERKSHIRE HILLS BANCORP FINANCIAL HIGHLIGHTS 14
Slide 15: Financial Performance
Financial Performance Solid improvement in EPS and ROTCE QoQ and YoY 1 • Adj EPS $0.43 (+4% and +37% QoQ and YoY respectively) • Adj Non - Interest Expenses of $68.5m (flat QoQ and - 8% YoY respectively) • Adj ROTCE 7.49% (+15bps and +145bps QoQ and YoY respectively) • PPNR of $22.0M (+3% QoQ and -
Slide 16: Increased Originations Drive Loan Growth Inflection Point
5,495 5,230 4,947 4,847 5,024 2,374 2,186 2,044 1,919 1,950 1Q21 2Q21 7,869 3Q21 1Q22 4Q21 7,416 6,991 6,766 6,974 +3% Consumer & Residential Commercial 170 220 193 424 511 64 90 38 84 294 1Q21 2Q21 3Q21 4Q21 1Q22 311 234 232 508 805 +245% +58% 1 Balances exclude Mid - Atlantic loans which were sold
Slide 17: Historical Asset Quality
NON - ACCRUING LOANS / LOANS (%) NET CHARGE - OFFS / AVERAGE LOANS 2 (%) ALLOWANCE FOR CREDIT LOSSES ($M) ACL / LOANS 1 (%) HISTORICAL ASSET QUALITY $52 $61 $64 $89 $127 $106 $99 2017Y 2018Y 2019Y CECL Adoption @ 1/1/20 2020Y 2021Y 1Q22 0.62% 0.68% 0.67% 0.94% 1.71% 1.56% 1.37% 2017Y 2018Y 2019Y CEC
Slide 18: Historical and Pro-Forma Capitalization
9.5% 9.5% 9.9% 10.5% 10.3% 14.2% 14.3% 15.3% 15.0% 13.9% 14.4% 14.6% 15.6% 15.3% 14.2% 16.6% 16.7% 17.7% 17.3% 16.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% 1Q21 2Q21 3Q21 4Q21 1Q22 Leverage Ratio CET1 Ratio Tier 1 Ratio Total Capital Ratio Pro - Forma with $100M Raise HISTORICA
Slide 19: Loan and Deposit Composition
BERKSHIRE HILLS BANCORP LOAN AND DEPOSIT COMPOSITION 19
Slide 20: Diversified Loan Portfolio
DIVERSIFIED LOAN PORTFOLIO Total: $7.3B Category Balance ($M) % of Total C&I 1,318.4 18.1% Real Estate: CRE - Owner Occupied 609.5 8.4% CRE - Non - Owner Occupied 2,026.8 27.9% Multifamily 604.5 8.3% Land & Construction 310.8 4.3% Home Equity 244.6 3.4% Residential Mortgage 1,697.8 23.4% Consumer &
Slide 21: Deposit Franchise
DDA/NOW 44% Money Market 29% Time 14% Savings 11% Brokered 2% Note: Financial metrics as of 3/31/22 unless otherwise indicated. 1 Deposit mix by geography as of June 2021 FDIC data. DEPOSIT FRANCHISE MIX BY CUSTOMER TYPE MIX BY ACCOUNT TYPE MIX BY GEOGRAPHY 1 COST OF DEPOSITS Peak 1.19% Current 0.17
Slide 22: 1Q 2022 Highlights
BERKSHIRE HILLS BANCORP 1Q 2022 HIGHLIGHTS 22
Slide 23: 1Q 2022 Financial Highlights – Income Statement
• On an adjusted basis: o Expenses flat QoQ and - 8% YoY as a result of continued focus on expense management o Provision benefit of $4M driven by improved credit performance and continued economic recovery o EPS +4% QoQ and +37% YoY o PPNR +3% QoQ and - 18% YoY 1 Numbers and comparisons are on an a
Slide 24: 1Q 2022 Financial Highlights – Expenses
74.7 68.5 68.5 - 8% 0% Adj Expenses 1Q 2022 FINANCIAL HIGHLIGHTS – EXPENSES • Continued expense discipline resulting in flat expenses QoQ and - 8% YoY o Expenses have remained flat/in range of ~$68M per quarter since 2Q21 o Continuing to manage headwinds from wage inflation • Self - funding investme
Slide 25: 1Q 2022 Financial Highlights – Fee Revenue
26.2 20.5 21.4 - 18% 5% 1 Adjusted income excludes securities and other gains (losses). 1Q21 includes three quarters of the insurance business revenues . Numbers and comparisons are on an adjusted basis. See appendix for discussion and reconciliation of non - GAAP financial measures. Percent cha nge
Slide 26: 1Q 2022 Financial Highlights – Asset Quality
119 1Q21 113 1.72% 1.69% 2Q21 1.66% 4Q21 1.56% 3Q21 1.37% 1Q22 124 106 99 10 5 2 4 3 0.15% 0.26% 0.51% 0.21% 1Q21 2Q21 0.12% 3Q21 4Q21 1Q22 - 74% - 32 % Allowance for Credit Losses (ACL) ACL / Total Loans Ex PPP Net Charge Offs QTD Annualized NCO/Average Loans 35 19 22 43 20 0.92% 48 2Q21 35 56 37 1
Slide 27: 1Q 2022 Financial Highlights – Funding Trends
413 294 165 649 489 444 360 306 383 609 783 1,062 1Q22 1Q21 3Q21 331 24 2Q21 4Q21 - 69% - 14% FHLB Borrowings & Other Brokered Deposits DEPOSITS (AVG BAL) 1 WHOLESALE FUNDING (AVG BAL) 2 2,537 2,787 2,901 3,038 2,968 1,705 1,610 1,528 1,469 1,401 5,042 5,109 5,065 5,083 5,361 1Q22 1Q21 9,494 4Q21 2Q
Slide 28: Appendix
BERKSHIRE HILLS BANCORP APPENDIX 28
Slide 29: Debt Ratings and Sustainability Designation
DEBT RATINGS 1 AND SUSTAINABILITY DESIGNATION Type Moody’s Kroll Berkshire Hills Bancorp Inc. (Holdco) Senior Unsecured Debt BBB Baseline Credit Assessment Baa2 Subordinated Debt Baa3 BBB - Short - Term Debt K3 Outlook Positive Stable Berkshire Bank (Bank) Deposit A3 BBB+ Senior Unsecured Debt BBB+
Slide 30: Offering and Debt Refinancing Assumptions
Offering Assumptions Debt Refinancing Assumptions Gross Proceeds ($000): $75,000 Total Sub - Debt Called $75,000 Coupon: 5.500% Sub - Debt Coupon 6.875% Double Leverage 1Q'22 Equity Investment in Subsidiaries $1,067,783 Consolidated Equity $1,093,861 Current Double Leverage Ratio 97.6% Pro - Forma E
Slide 31: Non-GAAP Reconciliation
March 31, June 30, Sept. 30, Dec. 31, March 31, (in thousands) 2021 2021 2021 2021 2022 Total revenue (A) 101,286$ 97,404$ 145,003$ 90,721$ 89,744$ Adj: Net securities losses (1) 31 484 166 106 745 Adj: Net (gains) on sale of business operations and assets - - (51,885) (1,057) - Total adjusted reven
Slide 32: Non-GAAP Reconciliation – Notes
NON - GAAP RECONCILIATION – NOTES (1) Net securities losses/(gains) include the change in fair value of Berkshire’s equity securities in compliance with Berkshire' s a doption of ASU 2016 - 01. (2) Non - GAAP financial measure. (3) Total tangible shareholders' equity is computed by taking total shar