BERKSHIRE HILLS BANCORP INC
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
☐ Preliminary Proxy Statement
☐ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☒ Definitive Proxy Statement
☐ Definitive Additional Materials
☐ Soliciting Material Pursuant to §240.14a-12
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
☒ No fee required.
☐ Fee paid previously with preliminary materials.
☐ Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.
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April 5, 2024 | |||||||
| Dear Berkshire Hills Bancorp Shareholder: | ||||||||
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It is our pleasure to invite you to attend the 2024 Annual Meeting of Shareholders, which will be held on
Thursday, May 16, 2024
at 10:00 a.m, Eastern Time at our offices at:
Berkshire Bank
99 North Street
Pittsfield, MA 01201
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| CEO, Nitin J. Mhatre | Please see the Notice of Annual Meeting on the next page for more information about our meeting procedures. | |||||||
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We urge you to vote your proxy online, or by telephone, or by completing and returning a proxy card by mail as soon as possible, even if you plan to attend the Annual Meeting. | |||||||
| Your vote is important to us. Thank you for your attention to the enclosed materials, and for your continued support of our company. | ||||||||
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Chairperson, David M. Brunelle
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| Nitin J. Mhatre, Chief Executive Officer | ||||||||
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| David M. Brunelle, Chairperson of the Board of Directors | ||||||||
| Notice of Annual Meeting of Shareholders |
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Notice of 2024 Annual Meeting of Shareholders of Berkshire Hills Bancorp, Inc.
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When: |
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Where: |
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Record Date: | ||||||||||||
| Thursday, May 16, 2024 |
Berkshire Bank, 99 North Street
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March 21, 2024 | |||||||||||||||
| 10:00 a.m. |
Pittsfield, Massachusetts 01201
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We are holding this meeting for the following purposes:
1. To elect as directors the nominees named in the Proxy Statement each to serve a one-year term or until their successors are duly elected and qualified;
2. To provide an advisory vote on executive compensation practices;
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To ratify the appointment of Crowe LLP as the Company’s independent registered public accounting firm for fiscal year 2024; and
4. To transact any other Company business that may properly come before the meeting.
The Board of Directors unanimously recommends that you vote “FOR” each of the proposed director nominees and “FOR” the other proposals to be presented at the Annual Meeting.
Shareholders of record at the close of business on March 21, 2024 are entitled to vote at the meeting, either in person or by proxy. There are several ways to vote. You can vote your shares online, by telephone, by regular mail or in person at the Annual Meeting.
To access your proxy materials and vote online, please visit
www.proxyvote.com
and follow the instructions. Your proxy card or voting instruction form contains the necessary codes required to vote online. If you wish to vote by telephone, please call 1-800-690-6903 using a touch-tone phone and follow the prompted instructions. You may also vote by mail by completing and returning your proxy card in the envelope provided. Finally, you may vote in person at the Annual Meeting, even if you have previously submitted a proxy.
Whatever method you choose, please vote in advance of the meeting to ensure that your shares will be voted as you direct.
Boston, Massachusetts
April 5, 2024
By order of the Board of Directors
Wm. Gordon Prescott
Senior Executive Vice President, General Counsel and Corporate Secretary
Admission Procedures
The meeting is open to shareholders of Berkshire Hills Bancorp, Inc. Everyone attending the meeting should
bring a photo ID. If your shares are registered in the name of a bank, broker, or other holder of record,
please also bring documentation of your stock ownership as of March 21, 2024 (such as a brokerage
statement).
Whether or not you plan to attend the meeting, we urge you to vote by proxy in advance to ensure your vote is counted if you decide not to attend the meeting.
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IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 16, 2024:
The Notice of Annual Meeting, 2024 Proxy Statement, 2023 Summary Annual Report, and 2023 Annual Report on SEC Form 10-K are each availab
le at
www.proxyvote.com
or
ir.berkshirebank.com
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| Table of Contents |
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Proxy Summary
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2023 Company Highlights
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2023 Executive Compensation Highlights
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| Shareholder Engagement and Responsiveness | |||||||||||
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Corporate Responsibility and Sustainability
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| Proposal 1 - Election of Directors | |||||||||||
| Information Regarding Directors and Director Nominees | |||||||||||
| Corporate Governance | |||||||||||
| Director Compensation | |||||||||||
| Proposal 2 - Advisory (Non-Binding) Vote on Executive Compensation | |||||||||||
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Compensation Discussion and Analysis (CDA)
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| Compensation Committee Report | |||||||||||
| Executive Compensation | |||||||||||
| Summary Compensation and Other Tables | |||||||||||
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Pay Versus Performance
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| Proposal 3 - Ratification of the Appointment of the Independent Registered Public Accountant | |||||||||||
| Audit Committee Report | |||||||||||
| Additional Information | |||||||||||
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Stock Ownership
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| Information About Voting | |||||||||||
| Other Information Relating to Directors and Executive Officers | |||||||||||
| Submission of Business Proposals and Shareholder Nominations | |||||||||||
| Shareholder Communications | |||||||||||
| Miscellaneous | |||||||||||
| Other Matters | |||||||||||
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Appendix A
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A-1 | ||||||||||
| Summary of and Reconciliation of Certain Non-GAAP Financial Measures | A-1 | ||||||||||
1
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
| Berkshire Hills Bancorp, Inc. Proxy Statement |
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Proxy Statement Summary
This summary gives you an overview of selected information in this year’s proxy statement. We encourage you to read the entire proxy statement carefully before voting. We have also provided you with the 2023 Summary Annual Report and the 2023 Annual Report on SEC Form 10-K.
Annual Meeting of Shareholders
Time and Date:
10:00 a.m. Eastern Time, Thursday, May 16, 2024
Place: Berkshire Bank, 99 North Street, Pittsfield, Massachusetts 01201
Record Date:
Shareholders as of the close of business on March 21, 2024 are entitled to vote
We are providing this proxy statement to you in connection with the solicitation of proxies for the 2024 Annual Meeting of Shareholders and to transact any other business that may properly come before the meeting. In this proxy statement, we also refer to Berkshire Hills Bancorp, Inc. as “Berkshire” or the “Company”. We also refer to its subsidiary, Berkshire Bank, as the “Bank". We are mailing a notice of the Annual Meeting and this proxy statement to shareholders of record as of March 21, 2024, beginning on or about April 5, 2024.
Summary of Proposals for 2024
1 - Election of Directors
. The Company’s Board of Directors is presenting eleven (11) nominees for election as directors at our Annual Meeting. Two of the thirteen current directors, Messrs. Adofo-Wilson and Zaitzeff, are not standing for re-election. Director Callahan was appointed by the Board in September 2023. All nominees currently serve as directors on our Board of Directors. In 2023, all director nominees received at least 98% of the votes cast regarding their nomination. Provided with this proposal is information about our directors, director nominees, corporate governance, and director compensation.
2 - Advisory Vote on Executive Compensation
. This advisory vote is for the approval of the Company’s Named Executive Officer compensation as set forth within this proxy statement. Berkshire strives to promote shareholder value and sound risk management by aligning executive pay and company performance. The Compensation Discussion and Analysis (“CDA”) explains the Board’s processes and decisions with respect to executive compensation. In 2023, 97% of the votes cast were in favor of the proposal “FOR” the advisory approval of our Executive Compensation. Provided with this proposal is the Compensation Discussion and Analysis, the Compensation Committee Report, and Summary Compensation and Other Tables.
3 - Ratification of Independent Registered Public Accounting Firm
. This advisory vote ratifies the selection of Crowe LLP (“Crowe”) as the Company’s independent registered public accounting firm for fiscal year 2024. Crowe has served in this capacity since fiscal year 2017. In 2023, 99% of the votes cast were in favor of the proposal for the appointment of Crowe.
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BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
PROXY STATEMENT |
PROXY STATEMENT SUMMARY
2023 Company Highlights
Berkshire had a solid year of performance in 2023, building on core elements of its strategy to strengthen operations, deliver growth, and improve its long-term outlook.
Earnings per share ("EPS") totaled $1.60 in 2023 compared to $2.02 in 2022. Results in 2023 included a $25 million ($0.58 per share) non-operating charge for the sale of securities. The Company's non-GAAP measure of operating earnings totaled $2.14 per share in 2023 compared to $2.19 in 2022. This measure is reconciled to GAAP measures in Exhibit A.
Bank industry operations in 2023 were affected by rising market interest rates and the related impacts on profitability, liquidity and capital, especially following a banking emergency in the first quarter that resulted in the second, third, and fourth largest bank failures in U.S. history. Berkshire maintained steady operations and proactively responded to changing industry conditions while also pursuing its longer term strategic objectives:
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Talent Recruitment.
The Company opportunistically recruited executives and front-line commercial relationship talent with an emphasis on deposit, private banking, and wealth management professionals.
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Balance Sheet Growth.
Total loans increased 8% and total deposits increased 3% year-over-year, producing a 7% increase in net interest income.
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Balance Sheet Strength.
Capital, liquidity, and asset quality metrics all remained solid and supportive of financial soundness, organic growth, and shareholder returns through dividends and buybacks.
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Expense Management.
Ongoing procurement and optimization activities resulted in further branch consolidations, the sales of excess premises, and a workforce realignment.
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Technology.
The Company introduced its new mobile/digital banking platform, which positions the Bank well to respond to changing customer needs and competitive market offerings.
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Corporate Responsibility.
Human capital management practices contributed to record high employee engagement and improved retention. ESG ratings remained in the banking sector top quartile. Berkshire allocated an amount equal to its landmark $100 million sustainability bond to create affordable/workforce housing and green development.
Due to the challenges of the environment, one year and two year total shareholder return was negative for Berkshire, its proxy peers, and the KBW Regional Banking Index (KRX). While Northeastern banks underperformed this national index in both years, Berkshire was favorable to both its proxy peers and the national index for the two year TSR. Over three years, BHLB's 55% TSR exceeded both of these industry groups as well as the SP 500 index (SPX).
2023 Executive Compensation Highlights
Included later in this report are compensation tables, including a Summary Compensation Table which details executive compensation provided in 2023, as well as a Compensation Discussion and Analysis which provides information about the compensation management process and compensation decisions.
The Compensation Committee maintained the same overall balanced structure for compensation management in 2023.
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Direct compensation includes salary, the cash-based short-term incentive, and the equity-based long-term incentive.
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Performance based compensation constitutes the majority of targeted direct compensation.
For those Named Executive Officers who served in their positions for the full year, total targeted direct compensation increased 7% year-over-year, reflecting higher salaries and incentives. Total direct compensation earned by these positions was 1% below target and decreased by 8% year-over-year, including the impact of performance below objectives in 2023.
The Committee’s decisions resulted in a compensation structure that rewarded the achievement of Company objectives and decreased compensation from targets where objectives were not met. Compensation management was aligned with shareholder interests and provides ongoing incentives to improve shareholder value.
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BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
PROXY STATEMENT |
PROXY STATEMENT SUMMARY
Shareholder Engagement and Responsiveness
In addition to its active outreach and interactions with the investment community, the Company also solicits discussion and feedback annually on corporate stewardship with its thirty largest institutional shareholders.
During 2023, the most frequent topics in these discussions included processes for managing board membership and shareholder meetings; governance of corporate sustainability programs; management of growth, efficiency, and employee turnover; and connecting strategy and compensation through the Company.
There is discussion related to these matters in following sections of the proxy statement. Based on the affirmative shareholder vote of 97% or higher for all items on last year’s Annual Meeting agenda and based on investor feedback and recognition of Berkshire's vision, positioning, and initiatives, we believe that our investors are strongly supportive of our programs for governance and company performance.
Corporate Responsibility and Sustainability
Berkshire's Approach
Since its founding in 1846, Berkshire remains a purpose-driven and values-guided institution working to achieve its vision of becoming a high-performing, relationship-driven, community-focused bank. Berkshire empowers the financial potential of its stakeholders by
delivering industry-leading financial expertise and a full suite of tailored banking solutions through its
consumer banking, commercial banking and wealth management divisions
to clients in New England and New York
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For more than 175 years, Berkshire has provided strength, stability and trusted advice to create a positive impact for its clients and communities while upholding equitable, ethical, responsible and sustainable business practices.
Berkshire’s longstanding commitment to operating equitably, responsibly and sustainably is interwoven into the company’s vision, mission, business practices, and strategic goals. Berkshire’s integrated approach to managing environmental, social and governance externalities helps reduce risk and unlock new business opportunities to create an ecosystem of positive impact and value, which in turn drives Berkshire’s commercial performance, creating capacity to invest more in its business, employees, customers, shareholders and communities.
2023 Highlights
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Record high employee engagement contributing to declining turnover
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Allocated an amount equal to the proceeds of Berkshire’s $100MM sustainability bond to create affordable/workforce housing and green building development
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100% on-premises renewable electricity and reduced Greenhouse Gas emissions
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Recognized with the Communitas Award for Leadership in Corporate Social Responsibility, named one of America’s Most Trustworthy Companies and America’s Best Regional Banks by Newsweek and America’s Best Midsize Employers by Forbes.
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Top 20% aggregated ESG rating*, achieving one of five major strategic goals
*National ranking among U.S. banks as of December 31, 2023
Oversight Responsibility
The management of material environmental, social and governance factors is integral to Berkshire’s business practices, risk management program, competitive positioning and its ability to deliver on its strategic priorities and vision. Berkshire was one of the first banks in the country to establish a dedicated committee of its Board of Directors to oversee corporate culture, diversity and sustainability. The Company is a leader among community banks in integrating these practices into its business strategy and operations.
The Company’s strong foundation of governance systems include:
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Board level oversight of Culture, Sustainability, Community, Climate Change, and Diversity
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Environmental, Social and Governance (ESG) Committee
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Responsible Sustainable Business Policy and Climate Risk Management Program
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Lending, credit, deposit and investment policies which incorporate environmental and social considerations along with due diligence requirements
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Active involvement from business unit leaders and front lines in managing externalities and risks
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Senior leadership for corporate responsibility and sustainability
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BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
PROXY STATEMENT |
PROXY STATEMENT SUMMARY
The Board of Directors including its Corporate Responsibility Culture Committee (CRCC) has ultimate oversight responsibility for environmental, social and governance matters. The CRCC meets quarterly to review performance, examine related risks, and approve relevant policies. Berkshire’s comprehensive approach ensures that the board receives regular reports from management on environmental and social dimensions of its business such as human capital management, diversity, stakeholder relations, climate change, community impact, and cybersecurity. It allows the board to develop a sufficient understanding of the Company’s impacts, management’s programs to mitigate those risks and capture opportunities. It helps inform strategic planning, create accountability and, along with management committees and senior leaders, provides visibility throughout the organization.
Berkshire regularly engages directly with its stakeholders to share information about the progress it’s made in its performance, including through its website, corporate annual report, and proxy statement. Additionally, Berkshire’s Sustainability Report, which is informed by Sustainability Accounting Standards Board (“SASB”) and Task Force on Climate-Related Financial Disclosure (TCFD) disclosure standards, details the Company's programs and performance. The report is available at berkshirebank.com/esg
Climate Change
Climate change manifesting in the form of both physical or transition risks could adversely affect either directly or indirectly, Berkshire’s operations, businesses, customers, communities, and its stakeholders. As the transition to a low-carbon economy accelerates, new policies emerge, and market dynamics shift, Berkshire expects that its efforts to manage its environmental footprint, mitigate the risks associated with climate change, and support the transition will allow it to strengthen its competitive positioning. The Company continues to evolve its practices to align with its mission, current and expected regulations as well as the size, scope, and complexity of its operations.
Climate change and its associated physical and transition risks are managed through Berkshire’s formal Climate Risk Management Program which outlines roles and responsibilities for the board, management and all employees, definitions, along with procedures for identifying, measuring and assessing climate risk. The program also lays out Berkshire’s system of controls which include governance mechanisms, formal policies, due diligence and insurance requirements, exclusionary criteria, business continuity planning, external relations, and employee education. Finally, the program sets expectations for responses to risk events or elevated risk levels, reporting and external disclosure. Further information on Berkshire’s environmental sustainability activities and its approach to governance, risk management, strategy, metrics targets and next steps can be found in its most recent Sustainability Report.
Equity Inclusion
Creating a diverse, accessible, inclusive and equitable workplace is an essential enabler to advancing the Company’s strategic goals, social and environmental commitments and vision. Ultimately Berkshire’s goal is to attract and retain individuals from a wide range of backgrounds, cultures and experiences so that the workforce, executives and board composition reflect the diversity of the communities in which it operates. It also seeks to ensure equity, accessibility, fairness and impartiality in all aspects of the Company’s workplace, banking practices and financial solutions while fostering an inclusive environment where all employees feel valued, respected and empowered.
The Company advances those goals through an integrated approach that includes:
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Strong oversight and governance practices through the Corporate Responsibility Culture Committee of the Board of Directors and management committees
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Talent management and recruitment
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Education and training and workplace programming
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Seven employee resource groups
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Workplace programming
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Multicultural community engagement
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Equitable product and service development and supplier diversity
Additional detailed information on Berkshire’s Human Capital Management and Diversity, Equity Inclusion practices can be found in the Company’s annual SEC report on Form 10-K and annual Sustainability Report, which details the company's environmental, social and governance programs.
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BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
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Proposal 1:
Election of Directors for a One-Year Term
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The Company’s Board of Directors has nominated and recommends a vote “FOR” each of the eleven (11) nominees listed below for election as a director. All of the nominees currently serve on the Company’s Board of Directors.
Background
. The Company’s Board of Directors is presenting eleven (11) nominees for election as directors at our Annual Meeting. Two of the thirteen current directors, Messrs. Adofo-Wilson and Zaitzeff, are not standing for re-election. All of the nominees currently serve as directors on the Company's Board of Directors. Each director elected at the meeting will serve for a one-year term until our 2025 Annual Meeting or until a successor is duly elected and qualified. Each director nominee has consented to being named in this proxy statement and to serving as a director if elected. If a nominee is unable to be a candidate when the election takes place, the shares represented by valid p
roxies will be voted in favor of the remaining nominees. The Board of Directors does not currently anticipate that any of the nominees will be unable to be a candidate for election.
Election.
The affirmative vote of a plurality of the Company’s outstanding common stock present at the Annual Meeting or by proxy at the Annual Meeting is required to elect the nominees for directors; provided, however, in the case of an uncontested election of directors, it is the Company’s policy that if a director is elected by a plurality but not a majority of the votes cast for such director, such director must submit his or her resignation to the Board of Directors, which will be subject to review by the Corporate Governance/Nominating Committee of the Board of Directors. The Corporate Governance/Nominating Committee will then make a recommendation to the Board of Directors as to whether to accept or reject the director’s resignation. Unless otherwise instructed, the proxy holders will vote the proxies received by them “FOR” the election of the nominees as directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE ELECTION OF ITS DIRECTOR NOMINEES.
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BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
PROPOSAL 1: ELECTION OF DIRECTORS
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INFORMATION REGARDING DIRECTORS AND DIRECTOR NOMINEES
Information Regarding Directors and Director Nominees
2024 Nominees for Election to the Board of Directors
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DAVID M. BRUNELLE, CHAIRPERSON OF THE BOARD OF DIRECTORS OF BERKSHIRE HILLS BANCORP, INC.,
CO-FOUNDER AND MANAGING DIRECTOR OF NORTH POINTE WEALTH MANAGEMENT
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Mr. Brunelle
is Co-Founder and Managing Director of North Pointe Wealth Management in Worcester, Massachusetts. He has over 20 years of experience in financial services working with businesses, individuals, families and charitable foundations. Mr. Brunelle is a former Director of Commerce Bancshares Corp. and Commerce Bank Trust Company and served on Commerce’s audit and loan committees. He has also served as trustee or corporator for numerous non-profit entities in and around Worcester, including The Nativity School of Worcester, The Worcester Regional Research Bureau, The Worcester Educational Development Foundation, the UMass/Memorial Foundation, Becker College and the Greater Worcester Community Foundation.
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Board Committees:
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Years of Service: 6
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Compensation
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Age: 53
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Corporate Governance/Nominating (Chair)
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Corporate Responsibility Culture
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MARY ANNE CALLAHAN
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Ms. Callahan
has more than 35 years of investment banking expertise, most recently as a Managing Director in the Financial Services Group at Piper Sandler Companies where her responsibilities included advising bank management and boards of directors in the Northeast region on a broad range of strategic and financial topics. Previously she was a principal in Sandler O’Neill Partners, L.P.’s investment banking group advising banks, thrifts and specialty finance companies and worked in the financial institutions group at Merrill Lynch and CIBC World Markets.
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Years of Service: 1
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Compensation | ||||||||||||||||
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Age: 61
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Risk Management, Capital Compliance
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BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
PROPOSAL 1: ELECTION OF DIRECTORS
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INFORMATION REGARDING DIRECTORS AND DIRECTOR NOMINEES
| NINA A. CHARNLEY, FORMER SENIOR MANAGING DIRECTOR, TIAA | |||||||||||||||||
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Ms. Charnley
was Senior Managing Director, Enterprise Customer Experience Executive at TIAA. Ms. Charnley led the strategy, development and execution of a significant portfolio of technology projects launching the company's mobile app and a digital bank, building digital capabilities enabling employees and customers. Previously, she was an executive at Bank of America managing diverse businesses including a de novo sustainable energy lending program and created the strategy, infrastructure, template and accountabilities matrix for Bank of America's Diversity and Inclusion program. Ms. Charnley has been designated by the Board of Directors as a financial expert under the rules of the Securities and Exchange Commission
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Years of Service: 2
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Audit | ||||||||||||||||
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Age: 68
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Corporate Responsibility Culture
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Risk Management, Capital, Compliance
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| MIHIR A. DESAI, PROFESSOR OF FINANCE, HARVARD BUSINESS SCHOOL PROFESSOR OF LAW, HARVARD LAW SCHOOL | |||||||||||||||||
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Dr. Desai
is the Mizuho Financial Group Professor of Finance at Harvard Business School, and Professor of Law at Harvard Law School. Dr. Desai is an accomplished author and expert in finance and tax policy. He is a Research Associate in the National Bureau of Economic Research’s Public Economics and Corporate Finance Programs. In addition to his work at Harvard University, his professional experiences include CS First Boston, McKinsey Co., and advising a number of firms and governmental organizations.
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Years of Service: 2
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Compensation | ||||||||||||||||
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Age: 56
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Risk Management, Capital Compliance
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WILLIAM H. HUGHES III, PRESIDENT AND CEO OF EDUCATION DESIGN LAB
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Mr. Hughes
is President and CEO of Education Design Lab, a national nonprofit focused on expanding opportunity at the intersection of learning and work. He has been a leader, entrepreneur, innovator and board member in educational technology for the past two decades at companies such as Pearson, Cengage, Kaplan, EDC, FineTune Learning (acquired by Prometric) and Intellus Learning (acquired by Macmillan). In his earlier career, he held leadership positions in technology and venture development at Sapient and Cambridge Innovation Center. His more than 30 years of business experience spans strategy, product, services, business development, partnerships, AI and cybersecurity.
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Years of Service: 5
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Age: 60
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Corporate Responsibility Culture
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BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
PROPOSAL 1: ELECTION OF DIRECTORS
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INFORMATION REGARDING DIRECTORS AND DIRECTOR NOMINEES
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JEFFREY W. KIP, CHIEF EXECUTIVE OFFICER OF ANGI INTERNATIONAL
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Mr. Kip
is Chief Executive Officer of Angi International which provides internet tools and resources for home improvement, maintenance, and repair projects. Angi International is a subsidiary of IAC/InterActive Corp (NASDAQ: IAC), which owns and manages popular online brands and services. Prior to his role as Chief Executive Officer, Mr. Kip was the Chief Financial Officer of IAC/InterActive Corp from 2012-2016. Mr. Kip's previous positions include Chief Financial Officer of Panera Bread, LLC from 2006 – 2012. Mr. Kip has been designated by the Board of Directors as a financial expert under the rules of the Securities and Exchange Commission
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Years of Service: 2
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Audit | ||||||||||||||||
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Age: 55
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Compensation (Chair)
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DR. SYLVIA MAXFIELD, DEAN OF THE PROVIDENCE COLLEGE SCHOOL OF BUSINESS
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Dr. Maxfield
is Dean of the Providence College School of Business and was previously Chair of the Faculty and MBA Program Director at Simmons University in Boston. Additionally, she serves as voting member of the Rhode Island State Investment Commission, which oversees fund performance, including asset allocation and investment-related contracting. Dr. Maxfield also votes on shareholder proxy activity on behalf of the State. Previously, she has served on the boards of the Greater Providence Chamber of Commerce, Social Enterprise Greenhouse and the 21st Century Fund. Dr. Maxfield has been designated by the Board of Directors as a financial expert under the rules of the Securities and Exchange Commission.
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Years of Service: 4
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Audit (Chair) | ||||||||||||||||
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Age: 65
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Corporate Governance/Nominating
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Risk Management, Capital Compliance
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NITIN J. MHATRE, PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR OF THE COMPANY
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Mr. Mhatre
joined the Company as Chief Executive Officer and a Director in January 2021. He was previously Executive Vice President, Community Banking at Webster Bank, where he was a member of Webster Bank's executive team and led its Consumer and Business Banking groups and Webster Investment Services. Prior to joining Webster, he spent more than 13 years at Citigroup in various leadership roles across consumer-related businesses globally. Mr. Mhatre has served on the Board of the Consumer Bankers Association, headquartered in Washington D.C., since 2014 and was Chairman of the Board from 2019-20. He also serves on the Board of Cradles to Crayons Boston, based in Newton, Massachusetts.
|
||||||||||||||||
| Non-Independent | |||||||||||||||||
|
Years of Service: 3
|
|||||||||||||||||
|
Age: 53
|
|||||||||||||||||
9
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
PROPOSAL 1: ELECTION OF DIRECTORS
|
INFORMATION REGARDING DIRECTORS AND DIRECTOR NOMINEES
|
LAURIE NORTON MOFFATT, DIRECTOR CEO OF THE NORMAN ROCKWELL MUSEUM
|
|||||||||||||||||
|
Ms. Norton Moffatt
is the Director and Chief Executive Officer of the Norman Rockwell Museum, Stockbridge, Massachusetts. Since 1986, Ms. Norton Moffatt has overseen the expansion of the museum’s facilities and the creation of a scholars’ research program. Her efforts resulted in the Museum receiving the National Humanities Medal, America’s highest humanities honor. Ms. Norton Moffatt is also an active community leader. She is a founder of 1Berkshire and Berkshire Creative Economy Council and serves as a trustee of Berkshire Health Systems and a director of Berkshire Health Systems, Inc. and Berkshire Medical Center, Inc.
|
||||||||||||||||
| Independent | Board Committees: | ||||||||||||||||
|
Years of Service: 10
|
Corporate Governance/Nominating
|
||||||||||||||||
|
Age: 67
|
Corporate Responsibility Culture (Chair)
|
||||||||||||||||
| KARYN POLITO, FORMER LIEUTENANT GOVERNOR OF MASSACHUSETTS | |||||||||||||||||
|
Ms. Polito
is currently Principal of Polito Development Corporation, a commercial real estate development firm. Ms. Polito was the 72nd Lieutenant Governor of the Commonwealth of Massachusetts from 2015 to 2023. In that position, she advocated for women’s empowerment and championed renewable energy, climate adaption, workforce development, affordable housing, and the innovation economy. She helped increase aid to local communities and spearheaded efforts to expand offshore wind and educational opportunities for careers in science, technology, engineering and math for women and students. Prior to serving as Lieutenant Governor, Ms. Polito was a member of the Massachusetts House of Representatives and a Partner at Milton, Laurence Dixon, LLP.
|
||||||||||||||||
| Independent |
Board Committees:
|
||||||||||||||||
|
Years of Service: 1
|
Corporate Responsibility Culture
|
||||||||||||||||
|
Age: 57
|
Risk Management, Capital Compliance
|
||||||||||||||||
|
ERIC S. ROSENGREN, FORMER PRESIDENT AND CEO OF THE FEDERAL RESERVE BANK OF BOSTON
|
|||||||||||||||||
|
Mr. Rosengren
is CEO of Rosengren Consulting and Visiting Scholar at the MIT Golub Center for Finance and Policy. He previously served as President and CEO of the Federal Reserve Bank of Boston from 2007 to his retirement in 2021. As a Federal Reserve Bank president, he was a participant and voting member of the Federal Open Market Committee. He also led projects to help rebuild smaller city economies and provide opportunities for diverse populations to prosper. Mr. Rosengren joined the Boston Fed in 1985 and held various roles in the Bank’s Research and Supervision, Regulation, and Credit Departments. He has published numerous papers and articles, and is often cited in leading academic journals and is featured in major media on topics including macroeconomics, monetary policy, international banking, bank supervision, and risk management. Mr. Rosengren has been designated by the Board of Directors as a financial expert under SEC rules.
|
||||||||||||||||
| Independent | Board Committees: | ||||||||||||||||
|
Years of Service: 1
|
Audit
|
||||||||||||||||
|
Age: 66
|
Risk Management, Capital Compliance (Chair)
|
||||||||||||||||
10
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
PROPOSAL 1: ELECTION OF DIRECTORS
|
INFORMATION REGARDING DIRECTORS AND DIRECTOR NOMINEES
Information About Director Nominees
•
73% of our director nominees are female and/or racially or ethnically diverse.
•
40% of our Board committees are chaired by diverse directors.
11
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
PROPOSAL 1: ELECTION OF DIRECTORS
|
CORPORATE GOVERNANCE
Corporate Governance
The Company is committed to strong corporate governance policies, practices, and procedures designed to make the Board more effective in exercising its oversight role. The following sections provide an overview of our corporate governance structure, including independence and other criteria we use in selecting director nominees, our Board leadership structure, and the responsibilities of the Board and each of its Committees. Our Corporate Governance Policy, among other key governance materials, helps guide our Board and management in the performance of their duties and is regularly reviewed by the Board.
|
Key Corporate Governance Documents
|
||||||||
|
Please visit our investor relations website at
ir.berkshirebank.com
to view the following documents:
|
||||||||
| Corporate Governance Policy | ||||||||
| Code of Business Conduct | ||||||||
|
Anonymous (Whistleblower) Reporting Line Policy
|
||||||||
| Board Committee Charters | ||||||||
| Certificate of Incorporation | ||||||||
| Company By-Laws | ||||||||
|
These documents are available free of charge on our website or by writing to Berkshire Hills Bancorp, c/o Wm. Gordon Prescott, Senior Executive Vice President, General Counsel and Corporate Secretary,
60 State Street, Boston, Massachusetts 02109.
|
||||||||
T
he Board and management regularly review best practices in corporate governance and are committed to a program that serves the long-term interests of our shareholders. We believe good governance strengthens accountability and promotes responsible corporate citizenship. Several of our current best practices are highlighted below:
| Independent Oversight | Shareholder Orientation and Accountability | Good Governance | ||||||
|
Majority independent directors
(1)
|
Declassified Board with all directors standing for election each year |
Diverse board membership (skills, tenure, age); annual director education; active board replenishment program
|
||||||
| Strong and engaged independent Board Chair | Robust stock-ownership guidelines | Annual evaluation of CEO and senior management and review of succession plans | ||||||
|
All key committees are fully independent and led by the Board chair
|
Annual shareholder engagement program | Implementation of a Corporate Responsibility Culture Committee at both Board and employee level | ||||||
| Regular executive sessions of independent directors | Plurality voting standard for director elections, with director resignation policy in effect for uncontested elections | Risk oversight by full board and committees | ||||||
| Board Chair or Chair of Corporate Governance can call special meeting of the Board at any time for any reason | No poison pill in place; annual election of all directors | Formal ethics code, reporting hotline and ethics training to all employees | ||||||
(1)
10
out of 11 of the director nominees will be designated as independent directors;
CEO/Director Mhatre is not independent.
12
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
PROPOSAL 1: ELECTION OF DIRECTORS
|
CORPORATE GOVERNANCE
Board of Directors
The primary functions of Berkshire’s Board of Directors are:
•
To oversee management performance on behalf of shareholders;
•
To ensure that the interests of the shareholders are being served;
•
To monitor adherence to Berkshire’s standards and policies;
•
To promote the exercise of responsible corporate citizenship; and
•
To perform the duties and responsibilities assigned to the Board by the laws of Delaware, Berkshire’s state of incorporation.
Customarily, the Board elects its members to serve in identical capacities on the Board of Directors of Berkshire Bank, the Company's main operating subsidiary which is chartered in the Commonwealth of Massachusetts.
Talent Development and Succession Planning
One of the Board's primary responsibilities is to oversee the development and retention of key talent within the Company and to ensure that an appropriate succession plan is in place for our Chief Executive Officer and other senior executives. The Board meets regularly with senior management and periodically reviews the readiness of key employees to potentially assume additional roles and responsibilities, including in the event of unexpected circumstances. In addition, our Chief Executive Officer regularly discusses with our Corporate Governance/Nominating Committee recommendations and evaluations as to potential successors for senior positions. The Committee incorporates this feedback into its leadership development and contingency plans. While the Corporate Governance/Nominating Committee has primary responsibility for developing and maintaining a succession plan, the Committee regularly reports to the Board on this matter, and final decisions on senior leadership succession matters, other than the CEO, are made by the CEO in consultation with the full Board.
Identification of Candidates and Diversity
The Corporate Governance/Nominating Committee regularly reviews the composition of our Board and, as appropriate, recommends steps to be taken to ensure that the Board reflects the desired balance of skills, experience and diversity and meets the requirements of all applicable laws and regulations. The Board maintains an ongoing refreshment program to identify highly qualified candidates that are aligned with our long-term strategy. Our corporate governance guidelines provide age and tenure limits, of 75 and 12 years respectively, to facilitate appropriate transition and renewal. In accordance with our Corporate Governance Policy, the Corporate Governance/Nominating Committee and Board shall take into account diversity considerations. Diversity is broadly construed to mean not only diversity of gender, race, ethnicity and sexual orientation, but also diversity with respect to personal and professional experiences, backgrounds, opinions, beliefs, education and perspectives.
The Corporate Governance/Nominating Committee is committed to fostering an environment of diversity and inclusion, including among our directors, and is tasked as part of its annual evaluation with determining whether or not the Board is appropriately diverse.
Board Meetings
During 2023, the Board of Directors held eleven (11) meetings. The average attendance at meetings of the Board and Board Committees during 2023 was over 90%. During this period, each of the current directors attended at least 75% of the aggregate total number of board meetings and committee meetings held on which such directors served.
In addition, the Board of Directors encourages each director to attend annual meetings of shareholders. 13
out of 14 directors (93%) serving as of the date of the 2023 Annual Meeting of Shareholders attended the 2023 Annual Meeting
.
13
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
PROPOSAL 1: ELECTION OF DIRECTORS
|
CORPORATE GOVERNANCE
Board Leadership Structure
The Board has reviewed the current Board leadership structure of the Company, which consists of a separate Independent Chairperson of the Board and a Chief Executive Officer. The Independent Board Chairperson performs all duties and has all powers which are commonly incident to the office of Chairperson of the Board or which are delegated to that person by the Board of Directors, including presiding at all meetings of the Board of Directors. The Chief Executive Officer has responsibility for the management and control of the business and affairs of the Company and has general supervision of all other officers, employees and agents of the Company. The Board believes that separating these roles enhances the independence of the Board and its effectiveness in discharging its responsibilities and that this procedure is currently the most appropriate Board leadership structure for the Company.
From time to time, the Board may also appoint a Vice Chairperson in the manner and upon the criteria it
deems appropriate.
Director Independence
All of the Company’s directors are independent under the listing requirements of The New York Stock Exchange (the “NYSE”), except for Mr. Mhatre who is an officer of the Company and the Bank. Additionally, all of the members of the Audit, Compensation and Corporate Governance/Nominating Committees are independent in accordance with the listing standards of the NYSE, and, in the case of members of the Audit and Compensation Committees, applicable rules and regulations of the Securities and Exchange Commission (“SEC”) and the Federal Deposit Insurance Corporation (“FDIC”). In determining the independence of its directors, the Board considered transactions, relationships and arrangements between the Company and its directors that are not required to be disclosed in this proxy statement under the heading “Transactions with Related Persons,” including loans or lines of credit that the Bank has directly or indirectly made to Director Norton Moffatt.
Corporate Governance Policy
The Board of Directors has adopted a corporate governance policy to govern certain activities, including: the duties and responsibilities of directors; the composition, responsibilities and operation of the Board of Directors; the selection of a Chairperson of the Board of Directors; the selection from time to time in the Board’s discretion of a Vice Chairperson of the Board of Directors; the operation of board committees; succession planning; convening executive sessions of independent directors; the Board of Directors’ interaction with management and third parties; director age limits; the maximum length of directors’ tenure on the Board; and the evaluation of the performance of the Board of Directors and of the Chief Executive Officer. A copy of the corporate governance policy is available in the Governance Documents portion of the Company’s Investor Relations website (
ir.berkshirebank.com
).
Commitment to Corporate Responsibility and Sustainability
Berkshire Bank’s longstanding commitment to operating equitably, responsibly and sustainably is interwoven into
the
company’s vision, mission, business practices, and
strategic
goals. The Board of Directors including its Corporate Responsibility Culture Committee (CRCC) has ultimate oversight responsibility for environmental, social and governance matters. The CRCC, chaired by Director Laurie Norton Moffatt, meets quarterly to review performance,
examine related risks and approve relevant policies. Additional detailed information on Berkshire’s programs can be found in the introductory section of this proxy statement and in its most recent Sustainability Report, available online at berkshirebank.com/esg.
Director Continuing Education
The Board of Directors conducts annual director education sessions, which include presentations by industry experts based on input from directors regarding topics of interest. Directors also receive an annual update on trending compliance and regulatory matters and new developments from the Bank’s outside compliance advisory firm. Our executive management meets with the Board at every regularly scheduled board meeting and annually to review the Company’s strategic plan.
14
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
PROPOSAL 1: ELECTION OF DIRECTORS
|
CORPORATE GOVERNANCE
Board and Committee Self Evaluation
The Corporate Governance/Nominating Committee oversees the annual self-evaluation of the performance of the Board of directors and its committees, the results of which are discussed with the full Board and each individual committee, as appropriate. The purpose of the evaluations is to improve the performance of the overall Board and each specific committee. The evaluations include a review of any areas in which Board or committee members believe the Board and the committees can make a better contribution to the governance and oversight of the Company. The Corporate Governance/Nominating Committee also utilizes the results of the Board and committee evaluation process in assessing and determining the characteristics and critical skills required of prospective candidates for election to the Board and appointment to each committee. The evaluation survey forms include open-ended questions in which directors are invited to share their written comments on a confidential basis.
Committees of the Board of Directors
The Board currently has five standing committees: the Audit Committee; the Compensation Committee; the Corporate Governance/Nominating Committee; the Corporate Responsibility and Culture Committee; and the Risk Management, Capital and Compliance Committee. The Board reviews the Committee Charters regularly to ensure it has an effective, efficient committee structure. The Board has determined that all members of the Audit Committee, the Compensation Committee and the Corporate Governance/Nominating Committee are independent in accordance with the listing requirements of the NYSE. Each committee operates under a written charter approved by the Board of Directors that governs its composition, responsibilities and operation. Each committee reviews and reassesses the adequacy of its charter annually or biannually. The current charters of all five committees are available in the Governance Documents portion of the Investor Relations section of the Company’s website (
ir.berkshirebank.com
).
The following table shows the structure of the Board of Directors as of the filing date of this Proxy Statement. It also shows the number of times each Committee met in 2023.
Pending the results of the election of directors at the Company’s Annual Meeting on May 16th, the Board will review its committee memberships and Chair assignments.
15
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
PROPOSAL 1: ELECTION OF DIRECTORS
|
CORPORATE GOVERNANCE
Board Structure and Meetings
| Director Name, Age Primary Occupation |
Director
Since |
Director
Category |
Audit
(1)
|
Comp | Corp Gov Nom | Corp Responsibility Culture | Risk Management, Capital Compliance | ||||||||||||||||
|
Baye Adofo-Wilson
(2)
, Age 55
CEO of BAW Development, LLC
|
2019
|
I | O | O | O | ||||||||||||||||||
|
David M. Brunelle, Age 53
Chairperson of the Board of Directors of Berkshire Hills Bancorp, Inc.
Co-Founder and Managing Director of North Pointe Wealth Management
|
2017
|
I | O | C | O | ||||||||||||||||||
|
Mary Anne Callahan
(2)
, Age 61
Former Managing Director in the Financial
Services Group at Piper Sandler Compan
ies
|
2023
|
I
|
O | O | |||||||||||||||||||
|
Nina A. Charnley, Age 68
Former Senior Managing Director TIAA
|
2021
|
I | O | O | O | ||||||||||||||||||
|
Mihir A. Desai, Age 56
Professor of Finance and Law
|
2022
|
I | O | O | |||||||||||||||||||
|
William H. Hughes III, Age 60
President of Education Design Lab
|
2019 | I | O | O | |||||||||||||||||||
|
Jeffrey W. Kip
(1)
, Age 55
Chief Executive Officer Angi International
|
2021 | I | O |
C
|
|||||||||||||||||||
|
Sylvia Maxfield
(1)
, Age 65
Dean Providence College School of Business
|
2020 | I | C | O | O | ||||||||||||||||||
|
Nitin J. Mhatre, Age 53
President and CEO of Berkshire Hills Bancorp, Inc.
|
2021 | N | |||||||||||||||||||||
|
Laurie Norton Moffatt, Age 67
Director CEO of the Norman Rockwell Museum
|
2013 | I | O | C | |||||||||||||||||||
|
Karyn Polito, Age 57
Former Lieutenant Governor of Massachusetts
|
2023 | I | O | O | |||||||||||||||||||
|
Eric S. Rosengren
(1)
, Age 66
Former President and CEO of the Federal Reserve Bank of Boston
|
2023 | I | O | C | |||||||||||||||||||
|
Michael A. Zaitzeff
(2)
, Age 41
Co-founder and managing member of VM GP II LLC
|
2021 | I |
O
|
O | |||||||||||||||||||
| Number of Meetings in 2023 |
11
(Full Board)
|
13 | 4 | 6 | 4 | 6 | |||||||||||||||||
| N = Non-Independent Director | I = Independent Director | C = Chair | O = Committee Member | ||||||||||||||||||||
(1) Directors Charnley, Kip, Maxfield, and Rosengren have been designated by the Board as Financial Experts.
(2) Directors Adofo-Wilson and Zaitzeff are not standing for re-election. Director Callahan was appointed to the Board in 2023 and is now
standing for election.
16
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
PROPOSAL 1: ELECTION OF DIRECTORS
|
CORPORATE GOVERNANCE
Board Committees and Responsibilities
The primary functions of each of the board committees are described below.
| BOARD COMMITTEES |
ROLES AND RESPONSIBILITIES
|
|||||||
| AUDIT COMMITTEE | Assists the Board of Directors in its oversight of the Company’s accounting and reporting practices | |||||||
| All Members Independent | Reviews the quality and integrity of the Company’s financial reports | |||||||
| Chairperson: Dr. Maxfield | Ensures the Company’s compliance with legal and regulatory requirements related to accounting and financial reporting | |||||||
|
The Board of Directors has determined that Ms. Charnley, Dr. Maxfield, Mr. Kip, and Mr. Rosengren qualify as Audit Committee Financial Experts under the rules of the Securities and Exchange Commission.
Please also see the discussion related to the Ratification of the Public Accounting Firm in this proxy statement.
|
Oversees the Company’s internal audit function | |||||||
| Annually reviews and approves the internal and external audit plans | ||||||||
|
Engages with the Company’s independent registered public accounting
firm (Crowe) and monitors its performance, reporting, and independence
|
||||||||
| COMPENSATION COMMITTEE | Approves the compensation objectives for the Company and its subsidiaries and establishes the compensation for the Chief Executive Officer and other Named Executive Officers of the Company | |||||||
| All Members Independent |
Reviews the Company’s incentive compensation and other equity plans and
recommends changes to the plans as needed
|
|||||||
|
Chairperson: Mr. Kip
|
||||||||
|
Reviews all compensation components for the Company’s Chief Executive
Officer and other Named Executive Officers, including base salary, short-term incentive, long-term incentives/equity,
benefits, and other perquisites
|
||||||||
|
See the “Compensation Discussion and Analysis” section for more information regarding the role of the Compensation Committee management and compensation consultants in determining and/or recommending the amount or form of
named executive compensation.
|
||||||||
|
Reviews competitive market factors and examines the total compensation
mix, pay-for-performance relationship, and how all elements, in the aggregate, comprise the named executive officer’s total compensation package
|
||||||||
| Administers CEO employment agreement, change in control agreements, and equity incentive plans | ||||||||
17
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
PROPOSAL 1: ELECTION OF DIRECTORS
|
CORPORATE GOVERNANCE
| BOARD COMMITTEES |
ROLES AND RESPONSIBILITIES
|
|||||||
| CORPORATE GOVERNANCE/NOMINATING COMMITTEE | Identifies qualified individuals to serve as Board members | |||||||
|
Considers and recommends nominees for director to stand for election at the Company’s Annual Meeting of Shareholders
|
||||||||
| All Members Independent | Determines the composition of the Board of Directors and its committees | |||||||
| Chairperson: Mr. Brunelle | ||||||||
| Annually reviews policy, procedures and criteria for identifying candidates for election or appointment to the Board of Directors | ||||||||
| Monitors a process to assess Board effectiveness, including annual Board and committee self-evaluations | ||||||||
| Develops and implements the Company’s corporate governance guidelines, including annual reviews of the Company’s Corporate Governance Policy and Code of Business Conduct | ||||||||
| Periodically receives reports from executive officers heading the Company’s compliance and regulatory programs and from other committee chairpersons regarding the work being done by their committees | ||||||||
| CORPORATE RESPONSIBILITY CULTURAL COMMITTEE |
Oversee management’s implementation of Corporate Social Responsibility/ESG, Diversity Inclusion, and Culture programs to foster belonging, enhance reputation, mitigate risk, promote competitive advantage, engage employees, and meet stakeholder expectations
|
|||||||
| All Members Independent | ||||||||
| Chairperson: Ms. Norton Moffatt |
Review, approve, and recommend programs and policies to the Board that are designed to identify, measure, monitor, control, and enhance Corporate Social Responsibility/ESG, Diversity Inclusion, and Culture performance
|
|||||||
|
Monitor the performance of Corporate Social Responsibility/ESG, Diversity Inclusion, and Culture programs and policies by setting goals, examining social and culture risks, as well as reviewing opportunities and threats that could affect the Company
|
||||||||
|
RISK MANAGEMENT, CAPITAL COMPLIANCE COMMITTEE
|
Oversees management’s program to limit or control the material business risks that confront the Company
|
|||||||
|
Approves policies and procedures designed to lead to an understanding and to identify, control, monitor and measure the material business risks of the Company and its subsidiaries
|
||||||||
| All Members Independent | ||||||||
|
Chairperson: Mr. Rosengren
|
Plans for future capital needs | |||||||
|
Reviews material business risks including, but not limited to, credit risk, interest rate risk, liquidity risk, regulatory risk, legal risk, operational risk, strategic risk, cyber-security risk, and reputation risk
|
||||||||
| Monitors the Company’s enterprise governance, risk management and compliance (“EGRC”) program, including development and implementation of risk management processes in the area of vendor management, data loss prevention, business continuity, policy management and testing and assessment of operational controls | ||||||||
| Ensures compliance with regulations pertaining to capital structure and levels | ||||||||
18
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
PROPOSAL 1: ELECTION OF DIRECTORS
|
CORPORATE GOVERNANCE
Identification and Evaluation of Director Candidates
The Corporate Governance/Nominating Committee is responsible for identifying and recommending to the Board of Directors candidates for Board membership. For purposes of identifying nominees, the Corporate Governance/Nominating Committee may rely on professional networks and contacts of the committee members and other members of the Board of Directors, outside search firms, and its knowledge of members of the communities served by the Company and its subsidiaries. The Corporate Governance/Nominating Committee will also consider director candidates recommended by shareholders in accordance with the policy and procedures set forth below. From time to time the Corporate Governance/Nominating Committee may also use an independent search firm to identify potential nominees.
In evaluating potential nominees, the Corporate Governance/Nominating Committee determines whether the candidate is eligible and qualified for service on the Board of Directors by evaluating the candidate under certain criteria, which are described below under “Director Eligibility Requirements.” If an individual fulfills these criteria, the Corporate Governance/Nominating Committee will conduct a background check and interview the candidate to further assess the qualities of the prospective nominee and the contributions they would make to the Board.
Criteria for Nomination to the Board of Directors
The Corporate Governance/Nominating Committee has adopted a set of criteria that it considers when it selects individuals to be nominated for election to the Board of Directors. A candidate must meet the eligibility requirements set forth in the Company’s bylaws, including a requirement that the candidate not have been subject to certain criminal or regulatory actions. A candidate also must meet any qualification requirements set forth in any Board or committee governing documents.
If the candidate is deemed eligible and qualified for election to the Board of Directors, the Corporate Governance/Nominating Committee will then evaluate the following criteria in selecting nominees:
•
financial, regulatory, and business experience;
•
expertise in areas that the board considers important to advancing the company’s strategies;
•
in most cases,
familiarity with and participation in the local communities;
•
integrity, honesty, and reputation in connection with upholding a position of trust with respect to customers;
•
dedication to the Company and its shareholders; and
•
independence.
The Committee will consider a candidate’s background, training, leadership ability and related skills across a broad spectrum of business, professional, entrepreneurial, educational and creative endeavors, as well as technical skills, experience and know-how in fields and professions outside the financial services industry (such as, by way of example, but without limitation, cyber-security, information technology and management, marketing, business and human capital development) that may assist the Company in strengthening, protecting or promoting its business. The Committee also will consider any other factors the Corporate Governance/Nominating Committee deems relevant, including age, diversity, size of the Board of Directors and regulatory disclosure obligations. We do not maintain a specific diversity policy, but diversity is considered in our review of candidates. Diversity is considered in terms of how a candidate’s background, experience, qualifications, attributes, and skills may complement, supplement or duplicate those of the Board.
With respect to nominating an existing director for re-election to the Board of Directors, the Corporate Governance/Nominating Committee will consider and review an existing director’s Board and committee attendance and performance; length of Board service; the experience, skills, and contributions that the existing director brings to the Board; and independence.
19
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
PROPOSAL 1: ELECTION OF DIRECTORS
|
CORPORATE GOVERNANCE
Director Eligibility Requirements:
•
No person shall be eligible for election or appointment to the Board of Directors: (i) if such person has, within the previous ten years, been the subject of supervisory action by a financial regulatory agency that resulted in a cease and desist order or an agreement or other written statement subject to public disclosure under 12 U.S.C. 1818(u), or any successor provision; (ii) if such person has been convicted of a crime involving dishonesty or breach of trust which is punishable by imprisonment for a term exceeding one year under state or federal law; or (iii) if such person is currently charged in any information, indictment, or other complaint with the commission of or participation in such a crime.
•
No person shall be eligible for election or appointment to the Board of Directors if such person is the nominee or representative of a company, as that term is defined in Section 10 of the Home Owners’ Loan Act or any successor provision, of which any director, partner, trustee or shareholder controlling more than 10% of any class of voting stock would not be eligible for election or appointment to the Board of Directors.
•
No person may serve on the Board of Directors and at the same time be a director of more than two other public companies, or their subsidiaries.
•
No person shall be eligible for election to the Board of Directors if such person is the nominee or representative of a person or group, or of a group acting in concert (as defined in 12 C.F.R Section 303.81(b)), that includes a person who is ineligible for election to the Board of Directors.
•
The Board of Directors shall have the power to construe and apply the provisions of the Company’s bylaws and other governance documents, and to make all determinations necessary or desirable to implement such provisions, including but not limited to determinations as to whether a person is a nominee or representative of a person, a company or a group, whether a person or company is included in a group, and whether a person is the nominee or representative of a group acting in concert.
•
Pursuant to our Corporate Governance Policy, individuals first appointed or elected to the Board of Directors on or after January 1, 2019 will no longer be eligible for re-election to the Board of Directors after their 75
th
birthday or the completion of their 12
th
year of service on the Board. For Directors serving before January 1, 2019, who have surpassed or are approaching either or both of these age and service time limits, the Chairperson of the Board and the Corporate Governance/Nominating Committee shall work with any such Board members approaching mandatory retirement to ensure that timing issues are given due consideration and an appropriate transition and renewal of the Board occurs.
Consideration of Recommendations by Shareholders.
It is the policy of the Corporate Governance/ Nominating Committee of the Board of Directors of the Company to consider director candidates recommended by shareholders who appear to be qualified to serve on the Company’s Board of Directors. The Corporate Governance/Nominating Committee may choose not to consider an unsolicited recommendation if no vacancy exists on the Board of Directors and the Corporate Governance/ Nominating Committee does not perceive a need to increase the size of the Board of Directors. Recommended candidates will generally be considered along with other potential nominees as part of the Board’s annual review process. To avoid the unnecessary use of the Corporate Governance/Nominating Committee’s resources, the Corporate Governance/Nominating Committee will consider only those director candidates recommended in accordance with the procedures set forth below.
20
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
PROPOSAL 1: ELECTION OF DIRECTORS
|
CORPORATE GOVERNANCE
Procedures to be Followed by Shareholders.
To submit a recommendation of a director candidate to the Corporate Governance/Nominating Committee, a shareholder must submit the following information in writing, addressed to the Chairman of the Corporate Governance/Nominating Committee, care of the Corporate Secretary, at 60 State Street, Boston, Massachusetts 02109:
1. The name of the person recommended as a director candidate;
2. All information relating to such person that is required to be disclosed in solicitations of proxies for election of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934;
3. The written consent of the person being recommended as a director candidate to being named in the proxy statement as a nominee and to serving as a director if elected;
4. As to the shareholder making the recommendation, the name and address of such shareholder as it appears on the Company’s books; provided, however, that if the shareholder is not a registered holder of the Company’s common stock, the shareholder should submit their name and address along with a current written statement from the record holder of the shares that reflects ownership of the Company’s common stock; and
5. A statement disclosing whether such shareholder is acting with or on behalf of any other person and, if applicable, the identity of such person.
In order for a director candidate to be considered for nomination at the Company’s Annual Meeting of Shareholders, the recommendation must be received by the Corporate Governance/Nominating Committee at least 120 calendar days before the date the Company’s proxy statement was released to shareholders in connection with the previous year’s Annual Meeting, advanced by one year. The Company has not received any recommendations from shareholders for director candidates to be considered for election at the Company’s 2024 Annual Meeting of Shareholders.
Board Risk Oversight
The Board oversees the Company’s risk profile and management’s processes for assessing and managing risk, both as a whole board and through its committees. At least annually, the Board reviews strategic risks and opportunities facing the company and certain of its businesses. Other important categories of risk are assigned to designated Board committees that report back to the full Board. In general, the committees oversee the following risks:
| Audit Committee | Accounting and Financial Reporting | |||||||
| Compliance with Legal and Regulatory Requirements Related to Accounting and Financial Reporting | ||||||||
| Compensation Committee | Compensation Programs | |||||||
| Corporate Governance/ Nominating Committee | Governance Policies and Procedures | |||||||
| Board Organization and Membership | ||||||||
| Committee Membership and Periodic Rotation of Chairpersons | ||||||||
| Corporate Responsibility Culture Committee | Customer, Community, and Employee Engagement | |||||||
| Reputational Risk and Business Development | ||||||||
| Talent and Culture Development | ||||||||
|
Environmental Sustainability, Including Climate Risk
|
||||||||
|
Risk Management, Capital Compliance Committee
|
Credit Risk | |||||||
| Interest Rate Risk | ||||||||
| Liquidity and Capital Risk | ||||||||
| Operational and Strategic Risk | ||||||||
| Cyber-security | ||||||||
| Legal, Regulatory, and Compliance Risk | ||||||||
| Information Security | ||||||||
21
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
PROPOSAL 1: ELECTION OF DIRECTORS
|
CORPORATE GOVERNANCE
Code of Business Conduct and Anonymous (Whistleblower) Reporting Line Policy
The Company has adopted a Code of Business Conduct that is designed to promote the highest standards of ethical conduct by the Company’s directors, executive officers and employees. The Code of Business Conduct, sets forth the ethical rules and standards ("code of ethics") by which all employees, officers and directors of the Company and its subsidiaries must conduct themselves, and addresses, among other things, conflicts of interest, the treatment of confidential information, general employee conduct and compliance with applicable laws, rules and regulations. The Code of Business Conduct, which also strictly prohibits harassment of any kind in the workplace, is designed to deter wrongdoing and promote honest and ethical conduct, the avoidance of conflicts of interest, a zero tolerance culture and safe environment free from harassment of any kind, full and accurate disclosure and compliance with all applicable laws, rules and regulations.
Paired with the Code of Business Conduct, the Company has also adopted a related Whistleblower Reporting Line Policy,under which the Audit Committee maintains and monitors an anonymous “whistleblower” reporting hotline service that all Berkshire personnel are encouraged to use for reporting actual or potential wrongdoing, apparent or suspected violations of the Code of Business Conduct, or other misconduct by any corporate actors. Both the Code of Business Conduct and the Whistleblower Reporting Line Policy are reviewed and acknowledged annually by all of Berkshire’s directors, officers and employees, and both are written and implemented to ensure that no retaliation is permitted against any Company personnel who report an incident of harassment or any other misconduct in good faith. Copi
es of the Company’s Code of Business Conduct and Whistleblower Reporting Line (Whistleblower Reporting Line) Policy are available at the Company’s investor relations website (
ir.berkshirebank.com
).
Anti-Hedging and Pledging Restriction Policy
The Company has adopted a policy that prohibits hedging of Company common stock for all officers of the Company with the title of vice president or higher, all directors, and all persons in the accounting, executive, finance and legal departments (the “Restricted Group”). While there is no prohibition against employees who are not in the Restricted Group to hedge Company common stock, these employees are prohibited from trading Company common stock while in the possession of material non-public information. Under the policy, no person in the Restricted Group may at any time engage in (i) any short sale of Company common stock or other sale of any equity securities of the Company that they do not own, or (ii) any transactions in publicly-traded options, such as puts, calls and other derivative securities based on Company common stock, including, but not limited to, any hedging, monetization or similar transactions designed to decrease the risks associated with holding Company common stock, such as zero-cost collars and forward sales contracts. Generally, a short sale means any transaction whereby one may benefit from a decline in the Company's stock price. In addition, employees, officers and directors are discouraged from pledging Company common stock as collateral for margin purchases or a loan. However, exceptions to this pledging limitation may be granted, if good cause is shown.
22
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
PROPOSAL 1: ELECTION OF DIRECTORS
|
DIRECTOR COMPENSATION
Director Compensation
The Company uses a combination of cash and restricted stock to attract and retain qualified candidates to serve on the Board. Restricted stock grants are intended to align directors’ interests with those of the Company’s shareholders. The Compensation and Corporate Governance/Nominating Committees review director compensation and benefits annually and make recommendations to the Board. The following table provides the compensation received by individuals who served as directors of the Company during the 2023 fiscal year. Mr. Mhatre does not receive separate compensation for his service on the Board.
| Name |
Fees Earned or Paid in Cash
($)
(1)
|
Stock Awards
($)
(1)(2)
|
Option Awards
($) |
All Other Compensation
($)
(3)
|
Total
($) |
||||||||||||
| Baye Adofo-Wilson | 60,000 | 65,000 | — | 3,281 | 128,281 | ||||||||||||
|
David M. Brunelle
(4)
|
125,000 | 65,000 | — | 3,412 | 193,412 | ||||||||||||
|
Mary Anne Callahan
|
16,877 | 19,500 | — | — | 36,377 | ||||||||||||
| Nina A. Charnley | 68,000 | 65,000 | — | 1,446 | 134,446 | ||||||||||||
|
John B. Davies
(5)
|
31,000 | 65,000 | — | 3,281 | 99,281 | ||||||||||||
| Mihir A. Desai | 56,000 | 65,000 | — | 633 | 121,633 | ||||||||||||
| William H. Hughes III | 56,000 | 65,000 | — | 3,281 | 124,281 | ||||||||||||
| Jeffrey W. Kip | 63,000 | 65,000 | — | 469 | 128,469 | ||||||||||||
| Sylvia Maxfield | 81,000 | 65,000 | — | 2,862 | 148,862 | ||||||||||||
| Laurie Norton Moffatt | 62,000 | 65,000 | — | 3,281 | 130,281 | ||||||||||||
| Karyn Polito | 50,707 | 59,150 | — | — | 109,857 | ||||||||||||
| Eric S. Rosengren | 48,195 | 48,239 | — | — | 96,434 | ||||||||||||
|
Jonathan I. Shulman
(5)
|
33,000 | 65,000 | — | 2,862 | 100,862 | ||||||||||||
| Michael A. Zaitzeff | 60,000 | 65,000 | — | 1,645 | 126,645 | ||||||||||||
(1)
On December 10, 2020, the Board of Directors, acting at the recommendation of the Compensation Committee, adopted a New Director Compensation Program, pursuant to which the Board has the discretion to award newly elected or appointed directors pro rata cash fees and equity compensation as of the date they begin their service on the Board. As a result of this program, the following directors received additional cash fees and stock awards in either July 2023 or January 2024 that are reported in this table:
a. Following her appointment to the Board for the first time on September 13, 2023, Ms. Callahan was paid a pro rata amount of cash fees in the amount of $16,877 on January 15, 2024, for the period from September 13 to December 31, 2023, and awarded 779 shares of Company stock on January 30, 2024, at a value of $19,500, for the period from September 13 to December 31, 2023, which shares all vested on January 30, 2024.
b. Following her appointment to the Board for the first time on February 3, 2023, Ms. Polito was paid a pro rata amount of cash fees in the amount of $22,707 on July 15, 2023, for the period from February 3 to June 30, 2023, and awarded 2,854 shares of Company stock on July 1, 2023, at a value of $59,150, for the period from February 3 to December 31, 2023, which shares all vested on January 30, 2024.
c. Following his appointment to the Board for the first time on April 5, 2023, Mr. Rosengren was paid a pro rata amount of cash fees in the amount of $15,195 on July 15, 2023, for the period from April 5 to June 30, 2023, and awarded 2,327 shares of Company stock on July 1, 2023, at a value of $48,239, for the period from April 5 to December 31, 2023, which shares all vested on January 30, 2024.
(2) Represents the grant date fair value of the restricted stock awards. Since January 30, 2004, no stock options have been granted to any directors. Directors serving as of December 31, 2023 had the following number of unvested shares of restricted stock and stock options outstanding as of that date:
23
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
PROPOSAL 1: ELECTION OF DIRECTORS
|
DIRECTOR COMPENSATION
| Name | Unvested Restricted Stock | Stock Options Outstanding | ||||||
| Baye Adofo-Wilson | 3,147 | — | ||||||
| David M. Brunelle | 3,147 | — | ||||||
|
Mary Anne Callahan
|
— | — | ||||||
| Nina A. Charnley | 2,534 | — | ||||||
| Mihir A. Desai | 2,099 | — | ||||||
| William H. Hughes III | 3,147 | — | ||||||
| Jeffrey W. Kip | 2,578 | — | ||||||
| Sylvia Maxfield | 3,147 | — | ||||||
|
Laurie Norton Moffatt
|
3,147 | — | ||||||
|
Karyn Polito
|
2,854 | — | ||||||
|
Eric S. Rosengren
|
2,327 | — | ||||||
| Michael A. Zaitzeff | 2,665 | — | ||||||
(3)
Reflects dividends paid when restricted stock becomes vested.
(4) Includes $130.50 in imputed income on split dollar insurance recognized by Mr. Brunelle.
(5) Messrs. Davies and Shulman retired from the Company and the Bank Boards of Directors, effective as of the 2023 Annual Meeting on May 18, 2023.
Retainers for Non-Employee Directors.
The following table sets forth the applicable retainers that will be paid to our non-employee directors for their service on our Board of Directors during 2024.
| Annual Cash Retainer for Board Service | $ | 40,000 | ||||||
| Annual Cash Retainer for Board Chair | $ | 95,000 | ||||||
|
Annual Cash Retainer for Board Vice Chair
(1)
|
$ | 65,000 | ||||||
|
Annual Equity Retainer for Board Service
(2)
|
$ | 65,500 | ||||||
| Annual Cash Retainer for Audit Committee Chair | $ | 13,000 | ||||||
| Annual Cash Retainer for all other Committee Chairs | $ | 6,000 | ||||||
| Annual Cash Retainer for Attendance at Audit Committee Meetings | $ | 12,000 | ||||||
| Annual Cash Retainer for Attendance at all other Committee Meetings | $ | 8,000 | ||||||
(1) This role is not filled at this time.
(2) Restricted equity grants awarded to non-employee directors vest in full after one year.
24
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
|
Proposal 2:
Advisory Vote on Executive Compensation
|
|
||||||||||||||||
|
|
|||||||||||||||||
Background.
In accordance with Section 14A of the Securities Exchange Act of 1934, shareholders are being given the opportunity to vote on an advisory (non-binding) resolution at the Annual Meeting to approve our executive compensation as described below in the Compensation Discussion and Analysis, compensation tables and narrative discussion of NEO compensation presented in this proxy statement. This proposal, commonly known as a “say-on-pay” proposal, gives shareholders the opportunity to endorse or not endorse the Company’s executive pay program.
The purpose of our compensation policies and procedures is to attract and retain experienced, highly qualified executives critical to the Company’s long-term success and enhancement of shareholder value. The Board of Directors believes the Company’s compensation policies and procedures achieve this objective, and therefore recommend shareholders vote “FOR” the proposal.
“Resolved, that the compensation paid to the Company’s Named Executive Officers, as disclosed in this proxy statement pursuant to Item 402 of Securities and Exchange Commission Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby approved.”
Is the Shareholder Vote Binding on the Company?
This is an advisory vote only, and neither the Company nor the Board of Directors will be bound to take action based upon the outcome. The Compensation Committee will consider the vote of the shareholders when considering future executive compensation arrangements.
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THIS PROPOSAL.
25
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
|
Compensation Discussion and Analysis
|
|
||||||||||||||||
In this section we explain our compensation philosophy, describe the material components of our executive compensation program, and review the 2023 compensation for our Named Executive Officers (“NEOs”) listed below. Their compensation is set forth in the Summary Compensation Table and other compensation tables contained in this Proxy Statement, which should be reviewed in conjunction with this discussion and analysis.
|
Named Executive Officers
(1)
|
|||||
| Nitin J. Mhatre | President, Chief Executive Officer, and Director | ||||
|
R. David Rosato
|
Senior Executive Vice President, Chief Financial Officer
|
||||
| Sean A. Gray | Senior Executive Vice President, Chief Operating Officer | ||||
|
James Brown
|
Senior Executive Vice President, Head of Commercial Banking | ||||
| Gregory D. Lindenmuth | Senior Executive Vice President, Chief Risk Officer | ||||
|
Brett Brbovic
|
Senior Managing Director, Former Interim Chief Financial Officer
|
||||
(1)
On February 6, 2023, David Rosato joined the Company as SEVP/CFO and Mr. Brbovic returned to his duties as Chief Accounting Officer. James Brown joined the Company on January 18, 2023.
Overview.
The compensation program is designed so that overall pay levels reflect performance over the short-term and long-term. Performance metrics are chosen to align with our strategic priorities and drive shareholder value. The Compensation Committee (“the Committee”) considers market data and advice from its independent compensation consultant, Meridian Compensation Partners, LLC ("Meridian") when making its decisions.
2023 Performance Summary
The Committee seeks to improve operational performance over the long-term and carefully selects performance metrics consistent with this goal in the NEOs' incentive programs. The Company’s 2023 operational performance was mixed given rapidly rising interest rates, which increased the cost of funds and reduced loan growth. Additionally, bank failures impacted deposits and depressed stock valuations for the sector. Despite these challenges,
Berkshire’s
year-over-year performance was favorable on all metrics used in its incentive plans compared to the median of its peer group
.
|
Year-Over-Year Change
|
||||||||
|
Measure
|
Berkshire
|
Peers
|
||||||
| Operating Return on Tangible Common Equity (ROTCE) | (0.02)% | (3.78)% | ||||||
| Operating Return on Assets (ROA) | (0.11)% | (0.26)% | ||||||
|
Operating Pre-Tax Pre-Provision Net Income (PPNR, $ millions)
|
+$5.88
|
$(37.38) | ||||||
|
Net Loan Charge-offs/Average Loans
|
(0.01)% | +0.08% | ||||||
|
ESG Ratings and Impact
|
Top quartile | NA | ||||||
Note: The Company’s financial incentive metrics are non-GAAP operating measures which are reconciled to GAAP measures in Appendix A. For comparison purposes, the operating ROTCE measure includes unrealized losses on AFS securities. Peer operating PPNR is estimated. Peer data source - SP Global Market Intelligence. Peer group is the compensation peer group discussed below.
26
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
2023 Say on Pay Voting Results
|
At the last Annual Meeting of Shareholders on May 18, 2023,
shareholders voted 97% in support of our advisory Say on Pay proposal
indicating their approval of the NEO compensation as set forth in the Proxy Statement. The Compensation Committee values shareholder feedback and considers such feedback as part of its review and considerations related to executive pay programs.
|
||
Summary of 2023 Compensation Decisions
Our executive compensation philosophy is to target median NEO pay compared to our peer group when we achieve our goals, with actual pay designed to vary above and below target based on our actual performance. The Compensation Committee believes the compensation program provided appropriate compensation levels to incent achieving goals that drive shareholder value.
•
Salaries were increased in a range of 3-8% over 2022 for those NEOs who were employed in both years.
•
Short-term and long-term incentive opportunities were established as a percentage of salary.
◦
Targeted short-term incentive opportunities were increased compared to 2022 for the Chief Financial Officer, Head of Commercial Banking, and Chief Risk Officer positions, reflecting greater market-based opportunities.
◦
Targeted long-term incentive opportunities were little changed from 2022.
•
Short-term incentive goals reflected both strategic improvement objectives and industry conditions. Management did not fully achieve targets and the incentive pool was funded at 93% of target.
•
Long-term financial incentive goals for improvement were mostly unchanged from the prior year.
•
For the three NEOs employed in their positions for 2023 and 2022, total targeted direct compensation increased 7% year-over-year, and incentivized further strategic progress. For the above three NEOs, total direct compensation earned was 1% below target and represented an 8% decrease from 2022 levels.
27
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
Highlights of our Compensation and Governance Programs
| WHAT WE DO | ||
|
Pay for Performance:
A significant portion of each NEO’s annual direct compensation target is at-risk and tied to Company and individual performance results. Our incentive plans represent a balance of performance metrics that reflect annual and three-year performance periods.
|
||
|
Link Performance Measures with Strategic Objectives:
Performance measures and individual goals for incentive compensation are linked to strategic, operating, and financial goals approved by our Board and designed to create long-term shareholder value.
|
||
|
Annual Say-on-Pay Vote:
We conduct an annual Say-on-Pay advisory vote and evaluate voting results.
|
||
|
Shareholder Engagement:
As part of the Company’s shareholder outreach program, members of the Committee welcome engagement with shareholders and management solicits shareholder input to better understand their perceptions and views on our executive compensation program.
|
||
|
Independent Compensation Consultant:
The Committee engages its own independent compensation consultant to review the Company’s executive compensation program and practices.
|
||
|
Stock Ownership Guidelines:
We have significant stock ownership guidelines requiring our executives and directors to hold substantial equity ownership.
|
||
|
Clawback Policy:
The new mandatory clawback policy we adopted in 2023 allows the Board to recover incentive compensation paid to an executive if the financial results that the compensation was based on are restated due to material noncompliance with financial reporting requirements or misconduct by an executive officer.
|
||
|
Incentivize Sound Risk Management:
Our compensation program includes features intended to discourage employees from taking unnecessary and excessive risks, including balanced performance metrics, emphasis on long-term shareholder value creation, and clawback provisions. The Chief Risk Officer conducts an annual risk assessment which is used by the Committee in assessing the soundness of the compensation program.
|
||
| WHAT WE DON'T DO | ||
|
Gross-ups for Excise Taxes:
We have not provided change-in-control tax gross-up clauses since 2009, nor do we intend to include this feature in future contracts. At this time, one legacy NEO change in control agreement remains in place; the potential impact of this contract clause is not material.
|
||
|
Hedging and Pledging:
All of our officers with the title of vice president or higher, non-employee directors, and all persons in the accounting, executive, finance and legal departments are prohibited from engaging in hedging, monetization, derivative or similar transactions with Company securities. We also have a policy that discourages pledging of company securities, with very limited exceptions.
|
||
|
Employment Contracts:
Our executives, with the exception of the CEO, are all employed “at will” and the relationship may be terminated by the Company or the employee at any time without any severance payments. The CEO is employed under a three-year contract. Documented change-in-control arrangements align management and shareholder interests.
|
||
|
Dividends on Unvested Equity Awards:
We do not pay dividends on any restricted stock compensation until vested.
|
||
28
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
Compensation Philosophy and Decision Making Process
The primary philosophy and objective of our compensation program is to align the interests of our executives with shareholders by rewarding performance against established corporate financial and strategic goals, solid executive leadership and strong individual executive performance. We strive to attract, motivate and retain a highly qualified and talented team of executives who will lead Berkshire to maximize long-term performance and earnings growth. The Committee regularly reviews executive compensation program elements to ensure they are consistent with safe and sound business practices, regulatory requirements, emerging industry best practices and shareholder interests.
Executive Compensation Key Principles
Our philosophy is to provide an executive compensation program that rewards long-term value for our shareholders and promotes sound risk management. The key principles that support our philosophy are:
ü
Attract and retain highly talented executives committed to our success
ü
Pay for performance
ü
Align executive interests with those of our shareholders
ü
Manage risk through oversight and compensation design features and practices
Important features of our program are:
ü
A significant portion of direct pay is at-risk and performance-based
ü
A meaningful portion of pay is in the form of Company stock to align our executives
with shareholder interests
ü
Sixty percent (60%) of the NEOs’ long-term incentive value is granted in the form of performance-based restricted stock (performance shares), which vests at the end of a three-year period based on financial performance.
The remaining 40% of NEO’s long-term incentive value is granted in restricted stock vesting on a pro-rata basis over three years.
The time-based portion of the award is meant to support executive retention and support meaningful stock ownership by our NEOs.
The information below illustrates our 2023 target direct compensation for the three NEOs who served the full year in their positions and illustrates that at-risk and equity compensation is slightly higher than the average of our peer group.
| CEO |
Other Full Year NEOs
|
|||||||||||||
|
At-Risk
|
Equity-Based |
At-Risk
|
Equity-Based | |||||||||||
| Berkshire | 64% | 37% | 55% | 31% | ||||||||||
| Peer Average | 62% | 33% | 53% | 29% | ||||||||||
29
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
Key Principles That Support Our Philosophy
| Attract and retain highly talented executives committed to our success | l |
Provide competitive total compensation that enables us to attract and retain highly talented executives with experience and leadership abilities to grow and sustain our business
|
||||||
| l |
Target total compensation opportunities to reflect the median of market; defined as banks similar in size and business model to Berkshire
|
|||||||
| Pay for performance alignment | l | Measure our success through a balanced portfolio of performance metrics that rewards corporate and individual success | ||||||
| l |
A significant portion of total compensation is “at-risk” and based on short and long-term performance
|
|||||||
| l | Financial performance results fund our annual incentive plan and determine a portion of long-term equity vesting | |||||||
| l | Long-term equity compensation was granted with 60% of the grant tied to 3-year performance and 40% time-based with vesting over 3 years | |||||||
| Align executive interests with those of our shareholders | l | Performance goals are directly aligned with our strategic and operating objectives targeted towards long-term shareholder value | ||||||
| l | Rigorous stock ownership requirements to ensure our executives hold stock throughout their tenure as executives | |||||||
| l | A significant portion of executive compensation, consisting of our long-term incentive, is in the form of Company shares | |||||||
| Manage risk through oversight and compensation design features and practices | l | Total compensation program incorporates a balanced approach that includes pay that is fixed and variable, short- and long-term, and in the form of both cash and equity | ||||||
| l | Multiple goals in our incentive plans to reinforce financial, operational, risk, and shareholder considerations | |||||||
| l | Committee can apply discretion to negatively adjust incentive compensation in consideration of risk management objectives | |||||||
| l | Balance of short-term and long-term incentives, cash and equity, annual and multi-year performance periods, with 3-year performance in the long-term plan | |||||||
| l | Incentive plan caps for maximum payments | |||||||
| l |
Clawback policy that allows for recoupment of compensation for financial restatement
|
|||||||
|
Compensation
Drivers |
l |
Incentive plans designed to encourage achievement of our strategic business goals and reinforce our business values and support growth in shareholder value
|
||||||
| l | Pay levels that are fair, competitive, and internally equitable | |||||||
| l | A focus on the attainment of our vision, business strategy, operating imperatives, and results | |||||||
| l | Recognition of Company and individual performance | |||||||
| l | Consideration of market and best practices | |||||||
30
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
Factors Considered in Compensation Decision Process
The Committee considers many factors when making pay decisions throughout the year. The Committee considers various analyses, information, and input, which routinely include:
Peer compensation market data provided by the independent consultant
Overall operational and financial performance
Total shareholder return on an absolute and relative basis and stock price performance
Executive individual performance results relative to their individual financial and strategic goals
Strategic plan progress and performance relative to annual budget
Demonstration of behaviors that support our culture and brand
Sustainability, community impact, and broader environment, social and governance (ESG) programs
Support of human capital
Executive stock ownership levels
Qualitative input from the Committee and other independent directors
External influences, economic conditions, and industry factors
Risk review considerations
Income tax factors
Internal equity
Compensation trends and best practices
Advisory Say on Pay voting results
Benchmarking Analysis - Compensation Peer Group
The Committee considers the structure of compensation programs and pay levels at other publicly traded banks similar in size and business model to Berkshire when evaluating our compensation program. The Committee’s independent compensation consultant conducts a comprehensive competitive market analysis annually using the peer group and other industry survey data to provide reference for the Committee in setting pay and making pay decisions.
2023 Peer Group:
In July 2022 the consultant updated the peer group to be used in the fall of 2022 to benchmark executive pay in preparation for setting 2023 pay levels. As in the past, the criteria reflected exchange traded banks in the Northeast of similar size (i.e. approximately 0.5x to 2x Berkshire's size).
Banks involved with mergers, banks with different business models, and smaller banks were excluded. The result was a peer group of 18 banks with a median asset size of $12.1 billion, positioning Berkshire at the 50
th
percentile based on asset size. The peer group is listed below:
| Brookline Bancorp | Independent Bancorp, Inc. | ||||
| Community Bank System | Lakeland Bancorp, Inc. | ||||
| Connect One | NBT Bancorp Inc. | ||||
| Customers Bancorp, Inc. | OceanFirst Financial Corp. | ||||
| Dime Community | Provident Financial Services | ||||
|
Eagle Bancorp, Inc.
|
ST Bancorp | ||||
| Eastern Bankshares | Sandy Spring Bancorp Inc. | ||||
| First Commonwealth Financial | Tompkins Financial Corporation | ||||
| Flushing Financial Corporation | WSFS Financial Corporation | ||||
31
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
Compensation Program Elements and Pay Decisions
Direct compensation consists of three main components: Base Salary, cash based Short-Term Incentive (“STI”), and stock-based Long-Term Incentive (“LTI”).
The total of these three components is referred to as Direct Compensation.
Total compensation includes a fourth component of Other Compensation which includes Benefits and Perquisites. Incentive-based compensation includes the use of non-GAAP performance measures. For a reconciliation of non-GAAP measures to their most directly comparable GAAP financial measures, please see Appendix A. Compensation program elements and pay decisions are determined in a balanced framework to achieve program objectives.
Base Salary
|
The Company’s base salary program is designed to provide competitive base pay reflective of an executive’s role, responsibilities, contributions, experience, leadership, and performance. Salaries are generally targeted to be within the range of market median and are expected to sufficiently discourage inappropriate risk-taking by executives. Incentive compensation targets are tied to base salary, so salary changes flow through to other compensation program components.
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||
2023 Salary Summary
. Base salaries are typically reviewed at the beginning of each year based on the Committee’s review of market data, executive performance and internal equity. Based on the market analysis conducted by the Committee’s independent consultant, the Committee adjusted salaries in the 3% to 8% range. The Chief Financial Officer was hired on February 6, 2023 at an annual salary of $500,000. The Head of Commercial Banking was hired on January 18, 2023 at an annual salary of $470,000. For these two positions, base salaries in the table reflect actual salaries paid in 2023.
| 2022 | 2023 | Percent | |||||||||
|
Role
|
Salary
|
Salary
|
Change | ||||||||
| President and Chief Executive Officer | $775,000 | $835,000 | 8% | ||||||||
| Chief Financial Officer | NA | $432,692 | NA | ||||||||
| Chief Operating Officer | $566,500 | $584,000 | 3% | ||||||||
| Head of Commercial Banking | NA | $430,231 | NA | ||||||||
| Chief Risk Officer | $345,000 | $355,350 | 3% | ||||||||
Note: The salary of the former Interim Chief Financial Officer was increased by 3% to $253,575 in 2023 from $245,000 in 2022.
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BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
Short-Term Incentive Program (STI)
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The Company’s short-term incentive compensation program is designed to compensate executives for executing the Company’s strategic plan and achieving critical annual performance goals. The STI program provides meaningful “pay-at-risk” that is earned each year based on performance results. It also seeks to motivate and reward achievement of specific Company, business unit and individual performance goals with competitive compensation when performance goals are achieved; above or below median pay when performance results are above or below goals.
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2023 Short-Term Incentive Summary:
Target incentive opportunities are set as a percentage of base salaries.
Target incentive opportunities were unchanged from the prior year for the Chief Executive Officer and Chief Operating Officer positions and were increased for the other NEO positions.
Performance metrics and goals were established at the beginning of the year.
In the second quarter of 2023, the Committee determined that the macroeconomic environment and related bank failures had a profound effect on the banking industry - beyond the scope of the planning assumptions originally used to develop the Company’s forecasts and budgets.
The Committee thoroughly discussed the following: 1) whether management reasonably should have been able to forecast the current environment; 2) the impact of non-achievable goals on potential business performance; and 3) alternatives to ensure that the management team remained focused on financial performance and shareholder value throughout 2023.
The Committee determined that it was not in the best interests of shareholders to have what was perceived as non-achievable goals for the remainder of 2023 that were for the most part outside of the NEOs' span of control. The Committee also recognized management's leadership in positioning the Company favorably in response to the challenges facing the industry. Therefore, the Committee used the following approach to the short-term incentive program for 2023:
•
Performance for January 1 through June 30, 2023 was measured using the goals established at the beginning of the year. Overall performance was achieved at 78.2% of target.
•
Performance for July 1 through December 31, 2023 was measured using goals that reflected the interest rate environment and the impact of bank failures on certain elements of business performance such as deposits.
Overall performance was achieved at 108.5% of target.
•
The performance outcomes were averaged, resulting in 93.3% goal achievement for the year. If average performance on the Corporate Scorecard had been over target, the Committee would have capped the STI funding pool to 100% of target.
The Committee considers these actions appropriate given the bank failures and industry funding challenges in 2023.
It does not anticipate using this approach in the normal course of its compensation design or ongoing decision making.
Overview of Process.
Participation in the Company’s executive STI program includes a group of executives, including the NEOs. The Committee sets and approves incentive award target payments for each participant (defined as a percentage of salary) at the start of each year, based on competitive market data. An incentive pool is established based on the total of the target payments of plan participants.
The actual STI pool funding is primarily determined based on a formulaic calculation of Company performance against defined quantitative financial measures, without discretion (“the Corporate Scorecard”). The same five measures were used in 2023 and 2022.
The Committee sets threshold, target, and stretch goals for each financial measure based on the business plan and Board approved budget. Target performance goals (reflective of our budget) are expected to have some stretch and not be “guaranteed”. Threshold performance goals and awards are intended to reward solid performance but at reduced payout levels. Stretch performance is expected to represent strong performance that is unlikely, but possible, if we exceed our goals. Thresholds are generally set at 80% of target and stretch goals are generally set at 120% of target.
Each performance measure (see tables below) is equally weighted (i.e. 20% for each of the five performance measures) The incentive pool funding at year-end is based on actual corporate performance against the
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BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
performance targets, with the total pool funding ranging from 0% - 150% of the payment target. The weighted measures are referred to as the Corporate Scorecard. Performance below threshold receives no compensation. Performance at threshold receives 50% of targeted compensation. Performance at stretch receives 150% of target, which is the maximum for each performance goal. Performance between threshold and stretch is compensated proportionately to the variance from target.
The Committee approves the Corporate Scorecard as well as the President and Chief Executive Officer’s individual goals. Goals are developed for the other NEOs to support the Corporate Scorecard. Once the Corporate Scorecard results and pool funding are known, individual performance is assessed to determine and allocate the actual awards from the amount that has been funded to the incentive pool. The Committee determines individual awards in consideration of the executive's performance. The Committee may use discretion to consider other factors including Company performance shortfalls; regulatory and safety and soundness concerns; and risk management considerations.
The maximum award for any participant, in consideration of Corporate and Individual performance, is capped at 150% of that participant’s payment target. The total awards for all participants do not exceed the total incentive pool. Given the changes to the incentive program for 2023, the Committee decided that the overall STI funding pool would be capped at 100% of target-level performance.
Target Incentive Opportunities.
The table below illustrates the annual incentive target payment amounts, expressed as a percentage of salary.
| 2022 | 2023 | |||||||
| Role | Target % of Salary | Target % of Salary | ||||||
| President and Chief Executive Officer | 75% | 75% | ||||||
| Chief Operating Officer | 60% | 60% | ||||||
|
Chief Financial Officer
|
45% | 55% | ||||||
| Head of Commercial Banking | 45% | 55% | ||||||
| Chief Risk Officer | 30% | 45% | ||||||
Note: The former Interim CFO was not a participant in the executive incentive program. His incentive compensation was based on his ongoing responsibilities as Chief Accounting Officer.
Company Goals and Funding of the Incentive Pool
The Committee establishes performance goals for the Corporate Scorecard that determine the pool available for payout of incentive compensation. In 2023, as in prior years, the Committee established plan goals near the start of the year based on its 2023 performance expectations, which generally targeted improvements over year-end 2022 run rate levels. During the first quarter, a number of large bank failures led to concerns about the stability of banking industry deposits, and the Federal Reserve Bank created an emergency funding facility to support the industry. In this environment, funding costs increased in the industry, leading to lower profitability through the rest of the year. As a result, the Committee established new goals for the second half of 2023, reflecting lowered expectations for financial performance and providing an incentive for initiatives to mitigate the earnings impact of industry conditions.
During the first half of 2023, the Company's financial performance was generally in the midrange between threshold and target for the four financial measures in the STI scorecard. The banking industry crisis described earlier began to affect funding costs and margins in March, with continuing impact through the rest of the year. Based on the scorecard achievement, a pool funding rate of 78.2% was achieved for the first half of the year.
Significant management actions included:
•
Increased collateral pledging and lengthening of funding maturities to further enhance liquidity.
•
Maintained momentum of diversified loan growth.
•
Talent recruitment taking advantage of opportunities resulting from bank failures, as well as ongoing impacts of bank mergers.
•
Early in 2023, the Company also completed the recruitment of a new Chief Financial Officer and Head of Commercial Banking, which were two NEO positions which were vacant at the start of the year. These new hires brought considerable talent and expertise and integrated well with the existing team.
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BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
During the second half of 2023, the Company's financial performance was at or above target based on the revised goals for the financial measures in the scorecard. Based on the scorecard achievement, a pool funding rate of 108.5% was achieved for the second half of the year. Significant management actions included:
•
Through careful pricing disciplines, the pace of margin erosion declined in the second half of the year.
•
Loan growth was continued, albeit at a reduced rate.
•
Focused risk management resulted in problem asset resolutions and increased recoveries, with the net charge-off rate declining to a five-quarter low in the fourth quarter.
•
Procurement and expense management procedures were intensified.
•
Management pursued a number of initiatives to help mitigate earnings pressures, including:
◦
Consolidating four branches
◦
Disposing of excess back-office premises
◦
Establishing a plan for a company-wide workforce realignment implemented after year-end
◦
Executing a securities sale near year-end with proceeds used to reduce higher costing borrowed funds, benefiting future net interest income.
The pool funding rates for the two halves of the year were equally weighted, with the result being that the pool funding rate for the full year 2023 was 93.3%.
In addition to the financial metrics discussed above the pool funding included ESG programs, which were qualitatively evaluated as meeting target in both halves of the year. ESG performance was demonstrated in several ways at the bank:
•
Maintained Berkshire's ranking based on its ESG index in the top quartile in all quarters.
•
Improved human capital performance, declining employee turnover, and record high employee engagement.
•
Allocated amounts equivalent to the full $100 million sustainability bond to create affordable/workforce housing and enable green building development.
•
Achieved 100% on-premise renewable electricity goal and implemented Climate Risk Management Program.
•
Exceeded targets for low-moderate income, minority, and green lending
The plan goals and results for the first and second halves of 2023 are shown below.
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2024 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
Note: The measures identified as Operating are non-GAAP financial measures. They exclude items not viewed as related to ongoing operations. Their use, definitions, and reconciliations to GAAP measures are discussed more fully in the Form 10-K. For a summary of the reconciliation of these non-GAAP performance measures, please see Appendix A. ESG represents Environmental, Social, and Governance programs.
The pool funding rates for the two halves of the year were equally weighted, with the result that the pool funding rate for the full year 2023 was 93.34%. Together with assessing financial performance results, the Committee also considered any risk, regulatory or shareholder issues and determined that there was no basis for adjusting the pool funding downward in 2023.
Individual Payout Considerations.
Once the pool funding was determined, the Committee evaluated individual payouts for each of the NEOs. As it did in recent years, the Committee decided to provide all NEO awards at the 93% STI pool funding rate. The Committee recognized:
•
Mr. Mhatre's executive recruitment and executive and management leadership through the challenges of the year while maintaining focus on the Company's strategic transformation initiatives.
•
Mr. Gray's oversight of branch and premises consolidation and implementation of new digital/mobile technology supporting improved customer and employee engagement.
•
Mr. Rosato's introduction of enhanced expense management and product pricing disciplines, strengthening of financial planning, and oversight of liquidity and balance sheet management strategies.
•
Mr. Brown's oversight of ongoing balanced loan growth, opportunistic recruitment of seasoned frontline deposit focused talent, and integration of private banking with the overall commercial team.
•
Mr. Lindenmuth's oversight of credit management, strong asset quality management, and solid compliance and regulatory relations management.
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BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
Long-term Incentive Plan (LTI)
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The Company’s long-term incentive/equity compensation program is designed to align senior executives with long-term interests of the Company and shareholders through stock-based compensation. The program also seeks to provide rewards for targeted multi-year performance, encourage stock ownership, and enhance our ability to retain our top performers.
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2023 Long-Term Incentive Summary.
As in recent years, the 2023 long-term incentive program was comprised of 60% performance shares that cliff-vest after three years based on pre-defined goals, and 40% time-based restricted shares which vest over three years, with 1/3 vesting at each grant date anniversary. Target opportunities were mostly unchanged as a percentage of base salary. Actual grant amounts were near target opportunities. Performance goals were unchanged from the prior year.
LTI Program Overview.
Each year in the first quarter the Committee determines the terms of the long-term incentive program, including participants, target opportunities for each role (defined as % of base salary), and the form and amount of compensation granted. These determinations included input and consideration of peer market data and practices as well as recommendations provided by the compensation consultant.
Long-term incentive compensation is intended to:
•
Provide a meaningful portion of total compensation in stock-based awards
•
Align executives with our shareholders
•
Reward long-term performance and avoid excessive risk taking
•
Encourage retention of our key senior executives
•
Balance compensation rewards with risk through long-term vesting tied to performance
The Committee also considered incentives provided by different award types, shareholder returns, avoiding excessive risk-taking and encouraging and maximizing employee retention. As in recent years, the Committee decided that performance shares and time-based restricted stock grants with three-year vesting schedules were the most appropriate form of equity compensation for the long-term incentive grant. The total award granted is split into two components: 60% performance shares and 40% time-based shares.
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BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
Compensation Targets and Grants.
The target long-term incentive compensation is set as a percentage of salary utilizing peer market data and input from the compensation consultant. The program provides the flexibility to vary the grant value +/- 25% of target value, based on the Committee’s assessment of a variety of factors, including Company performance, individual performance, retention considerations and affordability. The actual grants were near the target amounts for participating NEOs as shown in the table below.
Due to their hire dates in early 2023, the Chief Financial Officer and Head of Commercial Banking did not participate in the LTI plan in 2023. The Chief Financial Officer received a three-year award of time-based shares totaling $200,000. The Head of Commercial Banking received a two-year award of time-based shares totaling $150,000. These awards have annual incremental vesting over the term of the award.
|
Title
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2023 Long-Term Incentive (Target Grant % of Salary)
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2023 Long-Term Incentive (Actual Grant % of Salary)
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||||||
| President and CEO | 105% | 108% | ||||||
| Chief Operating Officer | 85% | 88% | ||||||
|
Chief Financial Officer
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NA | NA | ||||||
| Head of Commercial Banking | NA | NA | ||||||
| Chief Risk Officer | 45% | 45% | ||||||
Note: The Former Interim CFO was not a participant in the executive incentive program. His incentive compensation target was based on his ongoing responsibilities as Chief Accounting Officer.
He received a $50,002 grant on January 30, 2023 and a $61,272 grant on April 1, 2023. Both were time based grants with 50% annual incremental vesting over three years and 50% cliff vesting after three years.
LTI Vesting
Once the grant value is determined, 60% is granted as performance shares and 40% is granted as time-based restricted stock. Time-based restricted stock vests 1/3 each year over three years. Performance shares cliff-vest at the end of the three-year performance period based on actual performance compared to predefined goals as described below.
Performance Share Metrics and Goals
The performance shares are tied to financial metrics and goals approved by the Committee for a three-year performance period (i.e., 2023 - 2025). In 2023, the Committee maintained the same two performance goal categories compared to the previous year: absolute Operating Return on Tangible Common Equity ("Operating ROTCE") and relative Total Shareholder Return ("TSR"). Each performance metric was assigned a 50% weighting. The actual number of performance shares that vest is determined at the end of the three-year period depending on Company performance against the three-year goals. TSR performance is measured relative to a defined Industry Index comprised of all exchange-traded banks and thrifts between $7 billion and $25 billion in assets located in the United States.
The first measure is average annual increase in Operating ROTCE, which is a non-GAAP measure and is reconciled to the GAAP measure in Appendix A. The goal is an average annual increase in the range of 75 -142 basis points compared to the base year. The Company will calculate the year-over-year increase in its Operating ROTCE in each of the three years. The average for these three years will be compared to the performance goal. The targeted average annual increase is 109 basis points.
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2024 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
The second measure, relative TSR, measures our ability to deliver stock price appreciation and dividends relative to an index group over the three-year performance period. The target is the 50
th
percentile. The Company ranked in the 47th percentile of this group of 81 banks based on total assets when it was defined. In order to be counted in the final calculations, a company must remain a publicly traded institution at the end of the performance period ending at year-end 2025. The Committee did not significantly change the index criteria for the 2023 grant from the criteria used for the 2022 program.
The table below shows the performance measures, as well as the threshold, target, and stretch performance goals established by the Committee.
For the ROTCE measure, the threshold and stretch goals were each set at approximately a 30% difference from the target.
| Performance Goals | ||||||||||||||
| Performance Measure | Weight | Threshold | Target | Stretch | ||||||||||
|
Average Annual Increase in Operating ROATCE
|
50% | 75 basis points | 109 basis points | 142 basis points | ||||||||||
| TSR | 50% | 25th percentile | 50th percentile | 75th percentile | ||||||||||
| Payout (% of shares granted) | 100% | 50% | 100% | 150% | ||||||||||
2021 to 2023 Long-Term Incentive Plan Results
The terms of the 2021 LTI grant were discussed in the 2022 Proxy Statement and covered a three-year performance period, 2021 - 2023. The two equally weighted performance measures were relative improvement in Operating ROTCE and relative TSR. The Company’s relative performance based on these two measures was compared to the Industry Index.
The Company's Operating ROTCE increased by 0.49% more than the Industry Index during the performance period. This result was near the target and demonstrated that the Company was improving profitability more strongly than the Index banks compared to the 2020 base period.
The Company's relative TSR placed in the 82nd percentile during the performance period, which exceeded stretch goals. The total payout was 124.54% as shown in the table below.
|
Long Term Incentive Plan
2021 - 2023 Performance and Payout
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|
Performance Measures
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Weight
|
Threshold | Target | Stretch |
Actual
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% Funding
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Pool Allocation
|
||||||||||||||||
|
Relative Change in
Operating ROTCE
|
50% |
-0.20%
|
0.50% | 1.20% | 0.49% | 99.07% | 49.54% | ||||||||||||||||
| TSR | 50% | 25th percentile |
50th
percentile |
75th percentile | 82.6th percentile | 150.00% | 75.00% | ||||||||||||||||
| Payout (% of shares granted) | 100.0% | 50% | 100% | 150% | Total Payout | 124.54% | |||||||||||||||||
The actual shares which were vested under the 2021 three year performance incentive were as follows:
2021 Performance Shares Vesting
|
Participants
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Grant Date
|
Share Grant
|
Cliff Vesting -
3-Year Results
|
||||||||
|
Mhatre
|
1/30/2021 | 24,925 | 31,042 | ||||||||
|
Gray
|
1/30/2021 | 20,804 | 25,910 | ||||||||
|
Lindenmuth
|
1/30/2021 | 4,342 | 5,408 | ||||||||
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BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
Benefits and Perquisites
The Company’s benefits program is designed to be competitive and cost-effective. All employees are provided core benefits including medical, retirement, life insurance, paid time off, and leaves of absence.
In 2019, the Company entered into a supplemental executive retirement agreement with Mr. Gray and in 2021 the Company entered into a supplemental executive retirement agreement with Mr. Mhatre. The Company does not offer other NEOs or any other executive a supplemental retirement arrangement or other non-qualified deferred compensation program. For additional information regarding the supplemental retirement arrangements, please see the section headed “Executive Compensation - Non-qualified Deferred Compensation.”
Certain NEOs are eligible for modest perquisites such as automobile allowance, financial planning and membership fee
s. No membership fees were paid in 2023. The C
ompany also maintains a long-term care insurance plan to supplement the Company’s disability plan for Mr. Gray. Overall perquisites are a relatively modest element of the compensation program. Benefits and perquisites are reported under All Other Compensation in the Summary Compensation Table.
Potential Post Termination or Change in Control Benefits
An important consideration in our ability to attract and retain key personnel is our ability to minimize the impact on our
management team of the possible disruption associated with our analysis of strategic opportunities and to be completely aligned with shareholder interests. Accordingly, we believe that it is in the best interest of the Company and its shareholders to provide our NEOs with reasonable financial arrangements in the event of termination of employment following a change in control or involuntary termination of employment for reasons other than cause following a change in control. The Company maintains an employment agreement with its Chief Executive Officer and change in control arrangements with the other NEOs. The employment agreement was intended to ensure that the CEO devotes his energy and attention to the long-term interest of the shareholders. The Company does not have any employment agreements with any other NEO or employee.
Since 2009, the Company no longer enters into an employment or change in control agreement that provides for a tax indemnification payment in the event that the payment under the agreement results in additional tax liability under Section 280G of the Internal Revenue Code (a “Tax Indemnification Payment”). However, the Company maintains one legacy change in control agreement, with Mr. Gray, which was entered into in 2008, prior to the 2009 change, which provides for a potential Tax Indemnification Payment. For additional details, please see section titled “Potential Payments upon Termination of Employment or a Change-In-Control” of this proxy statement.
Additional Compensation Information
Risk Assessment and Related Considerations
The Chief Risk Officer conducts an annual risk review of the Company’s incentive compensation plans (the short-term and long-term incentive plans) as approved by the Committee for all eligible employees within the Company. This review for 2023 reported that the plans fit within established risk parameters and strategic plans. The Committee concluded that the incentive compensation plans do not motivate excessive risk-taking and are not reasonably likely to have a material adverse effect on the Company.
The review determines if these plans encourage behaviors that expose the Company to unacceptable levels of risk. The review evaluates the balance of compensation elements between cash, performance shares, restricted stock grants, fixed versus variable compensation, and long-term versus short-term compensation. The plans consider the level of potential cash incentive compensation as compared to base salary, the focus of individual and corporate goals, as well as the weighting and balance of goals, and internal controls in place to mitigate possible excessive risk taking. Additionally, the plans include mechanisms for “deferral of payment” and/or “forfeiture of payment” relating to ethical business standards and clawback policies, as approved by the Committee, under which the Company may recover and/or revoke payments of incentive compensation attributable to certain trigger events, including employee misconduct and/or financial restatement.
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BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
During 2023 the Committee continued to reinforce its risk-based approach to total compensation in various ways, such as incenting on operating profitability metrics and shareholder return, retaining a risk-based performance measure for Asset Quality and providing risk adjustment features that allows the Committee to reduce incentive awards in light of risk or regulatory concerns. The Committee remains committed to continuing to review and evolve compensation plans and ensure they represent sound and balanced risk management practices. The proper application of risk and governance, within the context of established strategic objectives, remain the driving factors in establishing the incentive compensation plans.
Role of the Compensation Committee, Management and Compensation Consultant
Role of the Compensation Committee
.
At year-end 2023, the Committee consisted of six members, all of whom are independent.
The Chairperson of the Committee regularly reports on material committee actions at Board meetings.
The Committee ensures that the total compensation paid to the senior executives is fair, reasonable and performance-based while aligning with shareholder interests. The Committee is responsible for establishing, implementing and continually monitoring all elements of compensation for the NEOs. Elements of compensation are reviewed individually and in the aggregate, including base salary, annual cash incentives, long-term incentives/equity awards, total direct compensation, and benefits and perquisites. Additionally, the Committee biennially reviews its charter, philosophy and executive compensation practices, as well as industry compensation trends and best practices using market data and input from the compensation consultant.
The Committee has the sole authority and resources to obtain advice and assistance from internal or external legal, human resource, accounting, compensation or other advisors or consultants as it deems desirable or appropriate. The Committee has direct access to, communicates, and meets regularly with the compensation consultant independently of management.
The Committee’s major duties and responsibilities are as follows:
•
Review and benchmarking of overall compensation, benefit and perquisites
•
Review all compensation components for CEO and each NEO
•
Evaluate CEO and other NEOs’ individual performance
•
Ensure executive overall pay is aligned with corporate performance results
•
Review, evaluate and modify as needed, executive compensation plans
•
Ensure executives are not encouraged or rewarded for taking excessive risk
•
Approve annual cash incentive payments, annual equity grants, and vesting of performance shares for the CEO and other NEOs in accordance with the terms of the Executive Short-Term and Executive Long-Term Incentive Plans
•
Provide oversight to ensure compliance with all regulations related to executive compensation
•
Approve the annual Compensation Discussion and Analysis and make a Report to the Board
•
Participate with the Board in matters relating to management succession
Role of Management.
Although the Committee makes independent determinations on all matters related to compensation of the NEOs, certain members of management may be requested to attend or provide input to the Committee. Input may be sought from the CEO, Chief Operating Officer, Chief Human Resources and Culture Officer, Chief Financial Officer, Chief Risk Officer, Investor Relations Officer, or others to ensure the Committee has the information and perspective it needs to carry out its duties.
In particular, the Committee seeks input from the CEO on matters relating to strategic objectives, Company performance goals and annual business plan. In addition, the CEO provides the Committee summaries of senior executive officer performance and recommendations relating to their compensation. The CEO is not present when the Committee discusses his performance and decides on his compensation. The Committee meets with the CEO to present its compensation decisions and discuss the evaluation of his performance.
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BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
The Chief Human Resources and Culture Officer assists the Committee on matters of design, administration and operation of the Company’s compensation programs. The Chief Human Resources and Culture Officer may be requested, on the Committee’s behalf, to provide proposals or work with their independent compensation consultant to develop proposals for the Committee’s consideration. The Chief Human Resources and Culture Officer reports to the Committee directly on such matters. The Committee also receives updates from the Company’s Chief Risk Officer, Chief Financial Officer and Investor Relations Officer throughout the year as appropriate. Senior executives may provide insight, suggestions or recommendations regarding senior executive compensation. The Committee regularly meets in executive session without management present. Only Committee members vote on decisions regarding NEO compensation.
Role of the Compensation Consultant.
The Committee has the authority to retain a compensation consultant to advise on executive compensation matters, as well as access to outside legal counsel and other experts as needed. For 2023, the Committee renewed the engagement with Meridian Compensation Partners, LLC (“Meridian” or “the Consultant”) to serve as independent advisor to the Committee. During 2023, Meridian provided data, advice and counsel on executive compensation matters and responded to other ad hoc requests of the Committee.
The Consultant reported directly to the Committee and carried out its responsibilities to the Committee in coordination with the Company’s Human Resources Department, as requested by the Committee. The Committee Chair has regular contact with the Consultant outside of meetings as appropriate. The Committee has reviewed Meridian’s services and determined that Meridian is independent with respect to SEC standards, as well as Company policy, and provides no other services to the company other than compensation consulting.
Other Compensation and Governance Policies and Practices
Stock Ownership and Retention Guidelines
.
The Company maintains Stock Ownership Guidelines for its SEC-reporting senior executives and directors and all other executives, which requires the following minimum investment in Company common stock:
| Independent Directors | Five times (5.0x) annual cash retainer | ||||
| President and Chief Executive Officer | Four and a half times (4.5x) annual base salary | ||||
| Chief Operating Officer | Three and a half times (3.5x) annual base salary | ||||
| Senior Executive Vice Presidents | Two and a half times (2.5x) annual base salary | ||||
| Executive Vice Presidents | One and a half times (1.5x) annual base salary | ||||
Shares that satisfy the stock ownership guidelines include Company stock owned outright and time-based restricted stock whether or not vested. Unexercised stock options and unvested performance shares do not count toward the guidelines.
Newly hired senior executives, executives, directors and current employees of the Company are expected to satisfy the stock ownership guidelines within five years of the date such individual first became subject to the guidelines, unless the Committee determines otherwise. The guidelines include a retention policy which requires a
minimum of 50% of shares (net of taxes) to be held upon each vesting until the ownership guidelines are met. Should covered individuals no longer meet the stock ownership guidelines, they will have 18 months to acquire additional Company stock in order to satisfy the ownership guidelines. The Committee reserves the right to make exceptions as appropriate.
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BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
COMPENSATION DISCUSSION AND ANALYSIS
Clawback Policies.
Our Board of Directors has adopted a clawback policy that complies with the New York Stock Exchange listing standards as mandated by the SEC. The policy requires the clawback of incentive-based compensation erroneously received by current or former executive officers after an accounting restatement (calculated based on an error that was subsequently corrected in the accounting restatement), regardless of any misconduct or knowledge of the officer who received the compensation. This policy is intended to supplement any other clawback provisions implemented by the Company in effect now, or in the future
.
In addition to the SEC compliant clawback policy, equity awards granted under the Company’s 2022 Equity Incentive Plan are subject to clawback if the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the federal securities laws, and the automatic forfeiture provisions under Section 304 of the Sarbanes-Oxley Act of 2002 apply as a result. The equity awards granted under the Company’s 2022 Equity Incentive Plan are also subject to cancellation upon a termination of employment for cause.
Impact of Taxation on the Form of Compensation.
The Committee considers a variety of factors, including the Company’s tax position, the materiality of the payments and tax deductions involved, the objectives of the executive compensation programs and the Company’s compensation philosophy in structuring compensation programs and making compensation decisions. In general, Section 162(m) of the Code generally limits to $1.0 million the deduction that a company is permitted to take for annual compensation paid to each “covered employee.” A “covered employee” includes any person who served as CEO or CFO of a company at any time during a fiscal year and the three other most highly compensated executive officers for that fiscal year and any other person who was a covered employee in a previous taxable year after December 31, 2016. Due to the continued importance and benefit to the Company and our shareholders of awarding compensation that is structured to properly incentivize our executive officers, the Committee believes that it is in our best interests to retain flexibility in awarding compensation, even if some awards may be non-deductible compensation expenses to the Company.
The Compensation Committee Report
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis that is required by the rules established by the Securities and Exchange Commission and has discussed it with management. Based on such review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
The Compensation Committee of the Board of Directors of Berkshire Hills Bancorp, Inc.
Jeffrey W. Kip, Chair
Baye Adofo Wilson
David M. Brunelle
Mary Anne Callahan
Mihir A. Desai
Michael A. Zaitzeff
43
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
|
Executive Compensation
|
|
||||||||||||||||
|
|
|||||||||||||||||
Summary Compensation Table
The following table provides the total compensation earned by or paid to the Named Executive Officers for the fiscal years ended December 31, 2023, 2022, and 2021, respectively.
|
Name and Principal Position
(1)
|
Year
|
Salary ($) | Bonus ($) |
Stock Awards ($)
(2)
|
Option Awards
($) |
Non-Equity Incentive Plan Compensation ($) |
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
(3)
($)
|
All Other Compensation
(4)
($)
|
Total
($) |
|||||||||||||||||||||||
| Nitin J. Mhatre, President, Chief Executive Officer |
2023
|
835,000 | — | 905,934 | — | 584,542 | — | 307,905 | 2,633,381 | |||||||||||||||||||||||
| 2022 | 775,000 | — | 813,751 | — | 871,875 | — | 148,974 | 2,609,600 | ||||||||||||||||||||||||
|
2021
|
644,135 | — | 688,766 | — | 815,625 | — | 144,326 | 2,292,852 | ||||||||||||||||||||||||
|
R. David Rosato, Senior Executive Vice President, Chief Financial Officer
|
2023
|
432,692 | — | 200,000 | — | 256,685 | — | 94,503 | 983,880 | |||||||||||||||||||||||
| Sean A. Gray, Senior Executive Vice President, Chief Operating Officer |
2023
|
584,000 | — | 516,664 | — | 327,063 | — | 167,736 | 1,595,463 | |||||||||||||||||||||||
|
2022
|
566,500 | — | 577,851 | — | 509,850 | — | 166,652 | 1,820,853 | ||||||||||||||||||||||||
| 2021 | 550,000 | — | 574,895 | — | 495,000 | — | 193,561 | 1,813,456 | ||||||||||||||||||||||||
|
James C. Brown, Senior Executive Vice President, Head of Commercial
|
2023
|
430,231 | — | 150,000 | — | 241,284 | — | 20,154 | 841,669 | |||||||||||||||||||||||
| Gregory D. Lindenmuth, Senior Executive Vice President, Chief Risk Officer |
2023
|
355,350 | — | 160,000 | — | 149,258 | — | 16,351 | 680,959 | |||||||||||||||||||||||
| 2022 | 345,000 | — | 165,625 | — | 155,250 | — | 15,534 | 681,409 | ||||||||||||||||||||||||
| 2021 | 300,000 | — | 120,006 | — | 135,000 | — | 14,648 | 569,654 | ||||||||||||||||||||||||
|
Brett Brbovic, Senior Managing Director, Former Interim Chief Financial Officer
|
2023
|
253,575 | 111,274 | — | 59,172 | 12,163 | 436,184 | |||||||||||||||||||||||||
| 2022 | 245,000 | — | 32,019 | — | 75,000 | — | 6,851 | 358,870 | ||||||||||||||||||||||||
(1)
Messrs. Rosato and Brown were Named Executive Officers for the first time in 2023. Mr. Brbovic was a Named Executive Officer for the first time in 2022. Pursuant to SEC rules, compensation for prior years is not required to be reported for these individuals.
(2)
The amounts reported are the aggregate grant date fair value of the awards computed in accordance with FASB ASC Topic 718 and represent an award under the Company’s performance-based, long-term incentive compensation program. Awards consist of restricted stock, a portion of which vests ratably over three years and a portion that vests based on the achievement of certain performance criteria. Since all awards vest after the year in which they are granted, none of the Named Executive Officers recognized any income from the awards in the year they were made. Amounts shown are the aggregate grant date fair value of restricted stock awards. For those restricted stock awards that are subject to performance conditions, the grant date fair values are based on the outcome of such conditions at target level. Total shares and values for stock awards reported in this table may not match other tables due to rounding. See Note 18 of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the Year Ended December 31, 2023. Based on the fair value at grant date, the following are the maximum potential values of the performance shares for the 2023-2025 performance period assuming maximum level of performance is achieved: Mr. Mhatre, $832,752; Mr. Gray, $474,929; and Mr. Lindenmuth, $143,315. Messrs. Rosato, Brown, and Brbovic were not granted performance shares in 2023. For each year shown in the above table, the amounts in the Stock Awards column are determined by multiplying the number of restricted stock awards granted on a particular date by the fair value at that date, and a breakdown for each individual is as follows:
44
BERKSHIRE HILLS BANCORP, INC. |
2023 Proxy Statement
EXECUTIVE COMPENSATION
| Number of Restricted Stock Awards Granted | |||||||||||||||||||||||
| Grant Date |
Grant Date Closing Price
|
Nitin J. Mhatre | Sean A. Gray | R. David Rosato | James C. Brown | Gregory D. Lindenmuth | Brett Brbovic | ||||||||||||||||
| April 1, 2023 | $25.06 | — | — | 7,981 | — | — | 2,445 | ||||||||||||||||
| January 30, 2023 | $30.36 | 28,879 | 16,470 | — | 4,941 | 5,271 | 1,647 | ||||||||||||||||
| April 1, 2022 | $28.82 | — | — | — | — | — | 1,111 | ||||||||||||||||
| January 30, 2022 | $28.92 | 28,138 | 19,981 | — | — | 5,727 | — | ||||||||||||||||
| January 30, 2021 | $16.58 | 41,542 | 34,674 | — | — | 7,238 | — | ||||||||||||||||
(3)
The Supplemental Executive Retirement Agreements do not provide for above-market earnings and therefore amounts are not included in this column.
(4)
Details of the amounts reported in the “All Other Compensation” column for 2023 are provided in the following table:
| Name | 401(k) Employer Contribution ($) |
Dividends on Restricted Stock
($) |
Automobile
($) |
Financial Planning
($) |
Membership Fees
($) |
Long-Term Care Premiums and Imputed Income on Life Insurance*
($) |
Long-Term Disability
($) |
Other **
($) |
Total
($) |
||||||||||||||||||||
| Nitin J. Mhatre | — | 7,782 | 18,000 | — | — | — | 4,131 | 277,992 | 307,905 | ||||||||||||||||||||
| R. David Rosato | 8,846 | — | 12,981 | 1,500 | — | — | 405 | 70,771 | 94,503 | ||||||||||||||||||||
| Sean A. Gray | 13,107 | 10,282 | 15,000 | — | — | 26,902 | 2,445 | 100,000 | 167,736 | ||||||||||||||||||||
| James C. Brown | — | — | 13,731 | 6,000 | — | — | 423 | — | 20,154 | ||||||||||||||||||||
| Gregory D. Lindenmuth | 13,200 | 2,709 | — | — | — | — | 442 | — | 16,351 | ||||||||||||||||||||
| Brett Brbovic | 10,038 | 2,125 | — | — | — | — | — | — | 12,163 | ||||||||||||||||||||
*
Amount shown reflects long-term care premiums in the amount of $26,429 and split dollar life imputed income in the amount of $446.
** The Company credited Mr. Mhatre and Mr. Gray’s Supplemental Executive Retirement Agreement account balances with $125,000 and $100,000, respectively, pursuant to the terms of the agreements.
In addition, the amounts shown for Messrs. Mhatre and Rosato include a housing relocation reimbursement, which was increased to cover income taxes, in the amount of $152,993 and $70,771, respectively.
45
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
EXECUTIVE COMPENSATION
Grants of Plan-Based Awards
The following table provides information concerning the award opportunities granted to the Company’s NEOs in 2023, and the amounts, if any, that may be paid in future years.
|
Estimated Future Payouts
Under Non-Equity Incentive Plan Awards(1) |
Estimated Future Payouts Under
Equity Incentive Plan Awards(2) |
All Other
Stock Awards: Number of Shares of Stock or Units (#) |
Grant Date
Fair Value of Stock and Option Awards(3) ($) |
||||||||||||||||||||||||||
| Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||
|
Nitin J. Mhatre
|
1/30/2023 | — | 626,250 | — | — | — | — | — | — | ||||||||||||||||||||
| 1/30/2023 | — | — | — | — | — | — | 11,552 | 350,719 | |||||||||||||||||||||
| 1/30/2023 | — | — | — | 8,664 | 17,327 | 25,991 | — | 555,157 | |||||||||||||||||||||
| R. David Rosato | 1/30/2023 | — | 275,000 | — | — | — | — | — | — | ||||||||||||||||||||
| 4/1/2023 | — | — | — | — | — | — | 7,981 | 200,004 | |||||||||||||||||||||
| 1/30/2023 | — | — | — | — | — | — | — | — | |||||||||||||||||||||
| Sean A. Gray | 1/30/2023 | — | 350,400 | — | — | — | — | — | — | ||||||||||||||||||||
| 1/30/2023 | — | — | — | — | — | — | 6,588 | 200,011 | |||||||||||||||||||||
| 1/30/2023 | — | — | — | 4,941 | 9,882 | 14,823 | — | 316,619 | |||||||||||||||||||||
| James C. Brown | 1/30/2023 | — | 258,500 | — | — | — | — | — | — | ||||||||||||||||||||
| 1/30/2023 | — | — | — | — | — | — | 4,941 | 150,009 | |||||||||||||||||||||
| 1/30/2023 | — | — | — | — | — | — | — | — | |||||||||||||||||||||
| Gregory D. Lindenmuth | 1/30/2023 | — | 159,908 | — | — | — | — | — | — | ||||||||||||||||||||
| 1/30/2023 | — | — | — | — | — | — | 2,109 | 64,029 | |||||||||||||||||||||
| 1/30/2023 | — | — | — | 1,581 | 3,162 | 4,473 | — | 101,310 | |||||||||||||||||||||
| Brett Brbovic | 1/30/2023 | — | 63,394 | — | — | — | — | 1,647 | 50,002 | ||||||||||||||||||||
| 4/1/2023 | — | — | — | — | — | — | 2,445 | 61,272 | |||||||||||||||||||||
(1)
Amount represents awards granted for future payment to the Named Executive Officers under the Short-Term Incentive Plan (STI). Please see the section titled “Compensation Discussion and Analysis – Short-Term Incentive Compensation” for a discussion of the STI.
(2)
Amount shown reflects the number of restricted stock awards, subject to performance-based vesting, that may be earned under the Long-Term Incentive Plan (LTI). Performance below threshold may result in no award payable to the Named Executive Officer. Please see the section titled “Compensation Discussion and Analysis – Long-term Incentive Plan” for a discussion of the LTI.
(3)
The amounts reported are the aggregate grant date fair value of the awards computed in accordance with FASB ASC Topic 718.
46
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
EXECUTIVE COMPENSATION
Outstanding Equity Awards at December 31, 2023
The following table provides information concerning unvested stock awards for each Named Executive Officer as of December 31, 2023. The NEOs do not hold any stock options.
| Option Awards | Stock Awards | ||||||||||||||||||||||||||||||||||||||||
| Name | Grant Date |
Number of
Securities Underlying Unexercised Options Exercisable (#) |
Number of
Securities Underlying Unexercised Options Unexercisable (#) |
Number of
Shares or Units of Stock That Have Not Vested (#) |
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested($)
(11)
|
||||||||||||||||||||||||||||||||||
| Nitin J. Mhatre | 1/30/2021 | — | — |
5,539
(1)
|
137,533 |
24,925
(7)
|
618,888 | ||||||||||||||||||||||||||||||||||
| 1/30/2022 | — | — |
7,504
(2)
|
186,324 |
16,882
(8)
|
419,180 | |||||||||||||||||||||||||||||||||||
| 1/30/2023 | — | — |
11,552
(3)
|
286,836 |
17,327
(9)
|
430,229 | |||||||||||||||||||||||||||||||||||
|
R. David Rosato
|
4/1/2023 | — | — |
7,981
(4)
|
198,428 | — | — | ||||||||||||||||||||||||||||||||||
| Sean A. Gray | 1/30/2021 | — | — |
4,624
(1)
|
114,814 |
20,804
(7)
|
516,563 | ||||||||||||||||||||||||||||||||||
| 1/30/2022 | — | — |
5,329
(2)
|
132,319 |
11,988
(8)
|
297,662 | |||||||||||||||||||||||||||||||||||
| 1/30/2023 | — | — |
6588
(3)
|
163,580 |
9,882
(9)
|
245,370 | |||||||||||||||||||||||||||||||||||
|
James C. Brown
|
1/30/2023 | — | — |
4,941
(5)
|
122,685 | — | — | ||||||||||||||||||||||||||||||||||
| Gregory D. Lindenmuth | 1/30/2021 | — | — |
996
(1)
|
24,731 |
4,342
(7)
|
107,812 | ||||||||||||||||||||||||||||||||||
| 1/30/2022 | — | — |
1,528
(2)
|
37,940 |
3,436
(8)
|
85,316 | |||||||||||||||||||||||||||||||||||
| 1/30/2023 | — | — |
2,109
(3)
|
52,366 |
3,162
(9)
|
78,512 | |||||||||||||||||||||||||||||||||||
|
Brett R. Brbovic
|
4/1/2021 | — | — |
953
(10)
|
23,663 | — | — | ||||||||||||||||||||||||||||||||||
|
|
7/1/2021 | — | — |
1,439
(10)
|
35.703 | — | — | ||||||||||||||||||||||||||||||||||
| 4/1/2022 | — | — |
926
(10)
|
22,993 | — | — | |||||||||||||||||||||||||||||||||||
|
|
1/30/2023 | — | — |
1,647
(6)
|
40,895 | — | — | ||||||||||||||||||||||||||||||||||
| 4/1/2023 | — | — |
2,445
(6)
|
60,709 | — | — | |||||||||||||||||||||||||||||||||||
(1)
Remaining shares granted on January 30, 2021 will vest ratably on each January 30
th
through 2024.
(2)
Remaining shares granted on January 30, 2022 will vest ratably on each January 30
th
through 2025.
(3)
Remaining shares granted on January 30, 2023 will vest ratably on each January 30
th
through 2026.
(4)
Remaining shares granted on April 1, 2023 will vest ratably on each April 1
st
through 2026.
(5)
Remaining shares granted on January 30, 2023 will vest ratably on each January 30th through 2025.
(6)
Fifty percent (50%) of the shares granted on January 30, 2023 and April 1, 2023 will vest ratably over three years and the other 50% are subject to a three year cliff vesting schedule.
(7)
These shares are subject to vesting based upon the achievement of specific goals. The amounts shown assume the target level of performance is achieved. The actual award, if any, will be determined and vest on the first compensation committee meeting following January 30, 2024 based on the 2021-2023 performance period.
(8)
These shares are subject to vesting based upon the achievement of specific goals. The amounts shown assume the target level of performance is achieved. The actual award, if any, will be determined and vest on the first compensation committee meeting following January 30, 2025 based on the 2022-2024 performance period.
(9)
These shares are subject to vesting based upon the achievement of specific goals. The amounts shown assume the target level of performance is achieved. The actual award, if any, will be determined and vest on the first compensation committee meeting following January 30, 2026 based on the 2023-2025 performance period.
(10)
Remaining shares granted on April 1, 2021 will vest on April 1, 2024; remaining shares granted on July 1, 2021 will vest on July 1, 2024; and remaining shares granted on April 1, 2022 will vest 50% ratably on each April 1
st
through 2025 and 50% will cliff vest on April 1, 2025.
(11)
Computed using the fair market value of the awards.
47
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
EXECUTIVE COMPENSATION
Option Exercises and Stock Vesting
The following table provides information concerning the vesting of restricted stock awards for each Named Executive Officer, on an aggregate basis, during 2023. The NEOs do not hold any stock options.
| Option Awards | Stock Awards | |||||||||||||
| Name |
Number of
Shares Acquired on Exercise (#) |
Value Realized
on Exercise ($) |
Number of Shares Acquired on Vesting
(#) |
Value Realized on Vesting
(1)
($)
|
||||||||||
| Nitin J. Mhatre | — | — | 9,291 | 282,075 | ||||||||||
| R. David Rosato | — | — | — | — | ||||||||||
| Sean A. Gray | — | — | 9,579 | 290,818 | ||||||||||
| James C. Brown | — | — | — | — | ||||||||||
| Gregory D. Lindenmuth | — | — | 2,461 | 74,718 | ||||||||||
| Brett Brbovic | — | — | 1,470 | 32,305 | ||||||||||
(1)
Represents the aggregate value realized in 2023 upon the vesting of restricted stock awards granted in prior years under the Company’s long-term incentive plan and based on the value of the Company’s stock on the applicable vesting dates for each award. The value realized by the NEO upon vesting is also the amount reported as 2023 taxable income.
Employment and Change in Control Arrangements
Employment Agreement
.
The Company, the Bank and Mr. Mhatre entered into an employment agreement effective as of January 21, 2024 (the “Employment Agreement”). The term of the Employment Agreement is three years and the term may be extended by mutual consent. The base salary for Mr. Mhatre is $835,000 in 2024. In addition to base salary, the Employment Agreement provides for, among other things, participation in bonus programs and other benefit plans and arrangements applicable to executive employees.
The Bank may terminate Mr. Mhatre’s employment for “cause” (as defined in the Employment Agreement) at any time, in which event Mr. Mhatre would have no right to receive compensation or other benefits for any period after his termination of employment. Certain events resulting in Mr. Mhatre’s termination of employment entitle him to severance benefits.
In the event of Mr. Mhatre’s involuntary termination of employment without “cause” or in the event of a voluntary termination for “good reason” (as defined in the Employment Agreement), Mr. Mhatre would become entitled to a severance payment in the form of a cash lump sum payment equal to Mr. Mhatre’s base salary for the remaining unexpired term of the Employment Agreement, plus annual cash bonuses for each year (prorated in the event of a partial year) remaining under the unexpired term of the Employment Agreement. For purposes of determining the bonus(es), the amount of the annual cash bonus shall be equal to the greater of (i) the average cash incentive earned in the prior three calendar years, or (ii) the cash incentive that would be paid or payable to Mr. Mhatre receiving the annual incentive at target for the fiscal year in which such termination occurs. In addition, Mr. Mhatre and his dependents would become entitled, at no expense to him, to the continuation of non-taxable medical and dental coverage for the remaining unexpired term of the Employment Agreement, or if the coverage is not permitted by applicable law or if providing the benefits would subject the Bank to penalties, Mr. Mhatre will receive a cash lump sum payment equal to the value of the benefits.
In the event of a “change in control” (as defined in the Employment Agreement) of the Company or Bank followed within twenty-four months by the executive’s involuntary termination of employment for a reason other than for cause or upon his voluntary termination for good reason, Mr. Mhatre would become entitled to a severance payment in the form of a cash lump sum equal to three times his base salary and three times the greater of the (i) average cash incentive earned in the prior three calendar years, or (ii) the cash incentive that would be paid at target for the fiscal year in which such termination occurs and full vesting of any equity awards.
In addition, Mr. Mhatre would become entitled, at no expense to him, to the continuation of life insurance and non-taxable medical and dental coverage for thirty-six (36) months following his termination of employment, or if the coverage is not permitted by applicable law or if providing the benefits would subject the Bank to penalties, he will receive a cash lump sum payment equal to the value of the benefits.
Upon termination of the executive’s employment (other than following a change in control), Mr. Mhatre will be subject to certain restrictions on his ability to compete or to solicit business or employees of the Bank and the
48
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
EXECUTIVE COMPENSATION
Company for a period of one year following his termination of employment. The Employment Agreement also includes provisions protecting the Company’s and Bank’s confidential business information.
Change in Control Arrangements
.
The Company and Berkshire Bank entered into a change in control agreement with Mr. Gray. The change in control agreement has a term of three years and is renewable annually for an additional year at the sole discretion of the boards of directors of the Company and Berkshire Bank. Messrs. Rosato, Brown, Lindenmuth and Brbovic participate in the Berkshire Bank Enhanced Change in Control Severance Plan.
See “Potential Payments Upon Termination or Change in Control” for a discussion of the benefits and payments under these agreements.
Non-qualified Deferred Compensation
The following table provides information for the nonqualified deferred compensation plans in which Messrs. Mhatre and Gray participated in 2023. No other named executive officer participated in a nonqualified deferred compensation plan.
| Name | Plan Name |
Registrant
Contributions
in Last Fiscal
Year ($)
(1)
|
Aggregate
Earnings
in 2023 ($)
|
Aggregate Balance at
Last Fiscal Year End
($)
(2)
|
||||||||||
|
Nitin J. Mhatre
|
Supplemental Executive Retirement Agreement | 125,000 | — | 375,000 | ||||||||||
|
Sean A. Gray
|
Supplemental Executive Retirement Agreement | 100,000 | — | 500,000 | ||||||||||
(1)
Contributions included in the “Registrant Contributions in Last Fiscal Year” column are included as compensation for the Named Executive Officer in the Summary Compensation Table.
(2)
Amounts included in the “Aggregate Balance at Last Fiscal Year End” have been reported as compensation for the Named Executive Officer in the Summary Compensation Table.
Supplemental Executive Retirement Agreements
On April 1, 2021, Berkshire Bank entered into a supplemental executive retirement agreement with Mr. Mhatre. Under the terms of the agreement, Mr. Mhatre is entitled to the value of the vested account balance upon his termination of employment or death. Berkshire Bank will credit the account balance with an annual amount of $125,000 as of April 1, 2021, and each subsequent April 1, commencing April 1, 2022, provided that Mr. Mhatre is employed with the Berkshire Bank on the date of such contribution.
The account balance is subject to a five year vesting schedule, with 20% of the account balance vesting each year, commencing on April 1, 2022, subject to full vesting in the event of death, disability or a termination of employment within two years following a change in control.
In the event of Mr. Mhatre’s termination of employment for a reason other than for cause prior to normal retirement age (age 65) and in connection with or within two years following a change in control (as defined in the agreement), Mr. Mhatre’s account balance shall become fully vested and the amount of the account balance shall be increased to equal the amount that Berkshire Bank would have otherwise credited Mr. Mhatre’s account through the calendar year in which Mr. Mhatre would have attained normal retirement age.
Upon a termination of employment or death, the account balance will be paid in a lump sum payment to Mr. Mhatre or his beneficiary, as applicable.
See “Potential Payments Upon Termination or Change-in-Control” for a discussion of payments under this agreement.
49
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
EXECUTIVE COMPENSATION
Berkshire Bank and Sean A. Gray entered into a supplemental executive retirement agreement effective as of January 1, 2019. Under the terms of the agreement, Berkshire Bank will credit the account balance with $100,000 commencing on January 1, 2019 and on each January 1st through 2028, provided that the executive is employed with Berkshire Bank on the date of such contribution. Berkshire Bank will make a final contribution as of January 1, 2028 for a total potential contribution of $1.0 million. Mr. Gray is entitled to the value of the vested account balance upon his termination of employment or death. Upon a termination of employment or death, the account balance will be paid in a lump sum payment to the Executive or his beneficiary, as applicable. In the event the Executive's employment is terminated within two years following a change in control (as defined in the agreement), an amount equal to $1.0 million will be paid to the Executive in a single payment. See “Potential Payments Upon Termination or Change-in-Control” for a discussion of payments under this agreement.
Potential Payments Upon Termination or Change-in-Control
The following table summarizes the estimated payments that would be made to the NEOs upon termination of employment as of December 31, 2023, pursuant to each executive’s employment agreement, change in control arrangement, equity awards, benefit plans and other arrangements. The amounts shown do not include the executive’s vested account balance in the Bank’s 401(k) Plan, non-qualified deferred compensation plans and the value of continued long-term care insurance, if applicable. The amounts shown relating to unvested restricted stock awards are based on the fair market value of the Company’s common stock on December 29, 2023, which was $24.83. The actual amounts to be paid to an executive can only be determined at the time of such executive’s separation from service with the Company.
The following table provides the estimated amount of compensation payable to Mr. Mhatre for each of the termination events listed below.
|
Termination for Cause ($)
(1)
|
Termination Without Cause or for Good Reason ($)
(2)
|
Payments Due Upon Change in Control With Termination of Employment ($)
(3)
|
Disability($)
(4)
|
Death($)
(5)
|
|||||||||||||
| Cash severance | — | 4,689,626 | 4,689,626 | — | — | ||||||||||||
| In-kind benefits | — | 73,548 | 76,129 | 49,032 | — | ||||||||||||
|
Restricted stock vesting
(7)
|
— | — | 2,078,991 | 2,078,991 | 2,078,991 | ||||||||||||
|
SERP
|
— | 150,000 | 1,850,000 | — | — | ||||||||||||
The following table provides the estimated amount of compensation payable to Messrs. Rosato, Gray, Brown, Lindenmuth, and Mr. Brbovic upon their termination of employment in connection with a change in control. The change in control agreements entered into with the executives do not provide for any severance payments or benefits in the event of a termination of employment that is not in connection with or subsequent to a change in control.
1)
for
Cause ($)
(1)
|
R. David Rosato
(6)
($)
|
Sean A. Gray
(6)(9)
($)
|
James Brown
(6)
($)
|
Gregory D.
Lindenmuth
(6)
($)
|
Brett Brbovic
(6)
($)
|
|||||||||||||
| Cash severance | 2,325,000 | 3,449,373 | 2,185,501 | 1,545,773 | 320,661 | ||||||||||||
| In-kind benefits | — | 48,693 | — | 30,613 | 25,312 | ||||||||||||
|
Restricted stock vesting
(7)
|
198,168 | 1,470,308 | 122,685 | 428,193 | 101,604 | ||||||||||||
|
SERP
(8)
|
— | 600,000 | — | — | — | ||||||||||||
(1)
Upon a termination for “cause” (as defined in the applicable agreements), the executive will have no right to receive compensation or other benefits under the employment agreement and SERP. In addition, he will forfeit all non-vested restricted stock awards.
(2)
Under the executive’s employment agreement, upon an involuntary termination for a reason other than for cause or if the executive voluntarily resigns for “good reason” (as defined in the employment agreement), the executive (or, upon death, his beneficiary) would be entitled to receive a severance payment in the form of a cash lump sum payment equal to the base salary for the remaining unexpired term of the employment agreement plus annual cash bonuses for each year (prorated in the event of a partial year) remaining under the unexpired term of the employment agreement. In addition, he and his dependents would become entitled, at no cost to the executive, to the continuation of non-taxable medical and dental coverage for the remaining unexpired term of the employment agreement. Upon termination of the executive’s employment under these circumstances, the executive must adhere to a one-year non-competition and non-solicitation restriction. The amount shown in this column assumes the remaining term of the contract is three years. Under the executive’s supplemental executive retirement agreement, if Mr. Mhatre separates from service for a reason other than cause, he will receive his vested benefit at the time of separation from service in a lump sum. If Mr. Mhatre is a “specified employee” (as defined in Section 409A of the Code), the amounts payable under the employment agreement and supplemental executive retirement agreement will be paid six months after his separation from service.
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BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
EXECUTIVE COMPENSATION
(3)
Under the executive’s employment agreement, upon an involuntary termination, other than for cause, or voluntary termination (upon the occurrence of circumstances specified in the agreements) in connection with or following a change in control of the Company or the Bank, the executive would be entitled to a cash severance payment equal to three times base salary and cash incentive, plus the annual cash incentive pro-rated through the date of termination, and life insurance and non-taxable medical and dental coverage substantially identical to the coverage maintained for the executive prior to termination of employment for 36 months at no cost to the executive. Under the supplemental executive retirement agreement, in the event of Mr. Mhatre separates from service for a reason other than for cause prior to normal retirement age (age 65) and in connection with or within two years following a change in control (as defined in the agreement), Mr. Mhatre’s account balance will become fully vested and the amount of the account balance shall be increased to equal the amount that the Bank would have otherwise credited Mr. Mhatre’s account through the calendar year in which Mr. Mhatre would have attained normal retirement age and the amount shown reflects the non-vested portion that would become vested upon a qualifying termination of employment following a change in control. If Mr. Mhatre is a “specified employee” (as defined in Section 409A of the Code), the amounts payable under the employment agreement and supplemental executive retirement agreement will be paid six months after his separation from service.
(4)
Under the executive’s employment agreement, upon a termination due to “disability” (as defined in the employment agreement), the executive would be entitled to continued non-taxable medical and dental insurance, at no cost to the executive, until the earlier of the second anniversary of the date of termination or age sixty-five (65). This column shows the value of two years of continued insurance. Additionally, the executive would be entitled to receive benefits under the provisions of disability insurance coverage in effect for Berkshire Bank employees and executives. Upon termination due to disability, restricted stock awards granted pursuant to our equity incentive plans automatically vest. The executive does not hold any stock options.
(5)
Under the executive’s employment agreement, upon death, the executive’s beneficiary will receive any earned but unpaid compensation and vested benefits due the executive as of the date of death. In addition, the executive’s estate or beneficiary would be entitled to receive benefits under the provisions of any life insurance coverage in effect for Berkshire Bank employees and executives. Upon termination due to death, restricted stock awards granted pursuant to our equity incentive plans automatically vest. The executive does not hold any stock options.
(6)
Mr. Gray’s change in control agreement provides that upon an involuntary termination, other than for cause, or voluntary termination (upon the occurrence of circumstances specified in the agreements) following a change in control of the Company or the Bank, the executive would be entitled to a cash severance payment equal to three times his average annual compensation for the five years preceding the change in control, and life insurance and non-taxable medical, dental and disability coverage substantially identical to the coverage maintained for the executive prior to his termination of employment for 36 months following the executive’s termination of employment. The executive would also be entitled to receive a tax indemnification payment if payments under the change in control agreement trigger liability under Section 280G of the Code for the excise tax applicable to “excess parachute payments.” The estimated amount of the tax indemnification payment is $2,685,496 and this amount is not reflected in the above table. Beginning in 2009, the Company determined that it would no longer enter into change in control agreements that provide for a tax gross-up for any taxes as a result of “excess parachute payments” under Section 280G of the Code and Mr. Gray’s change in control agreement was entered into before the Company adopted this position. The change in control arrangements entered into with Messrs. Brbovic, Brown, Lindenmuth, and Rosato provide that upon an involuntary termination, other than for cause, or voluntary termination (upon the occurrence of circumstances specified in the agreements) in connection with or following a change in control of the Company or the Bank, the executive would be entitled to a cash severance payment equal to three times (one times for Mr. Brbovic) base salary and cash incentive, plus the annual cash incentive pro-rated through the date of termination, and life insurance and non-taxable medical and dental coverage substantially identical to the coverage maintained for the executive prior to termination of employment for 36 months following termination of employment, with the executive paying his share of the premiums. For Messrs. Brbovic, Brown, Lindenmuth, and Rosato, severance payments will be reduced to avoid liability under Section 280G of the Code for the excise tax applicable to “excess parachute payments” and it is estimated that Messrs. Brown, Lindenmuth, and Rosato's payments will be reduced by $811,315, $534,492, and $727,400, respectively, which is not shown in the above table, and Mr. Brbovic’s payments would not be reduced under this provision. None of the change in control arrangements entitle the executives to any tax indemnification payment (a “tax gross-up”) if payments trigger liability under Sections 280G and 4999 of the Internal Revenue Code for an excise tax on “excess parachute payments.”
(7)
In the event of a change in control of the Company or the Bank, equity awards subject to time-based vesting automatically vest only if an executive experiences a qualifying termination of employment following a change in control (a “double trigger”). The amount shown reflects the value of such awards as well as equity awards subject to performance-based vesting.
(8)
The supplemental executive retirement agreement entered into with Mr. Gray provides that upon an involuntary termination, other than for cause, or voluntary termination (upon the occurrence of circumstances specified in the agreement) in connection with or following a change in control of the Company or the Bank, death or disability, the executive would become entitled to a payment in the amount of $1 million. The executive’s benefit is subject to a five-year vesting schedule, with twenty percent (20%) of the account vesting each year, commencing on January 1, 2020. The amount shown reflects the non-vested portion that would become vested upon a qualifying termination of employment following a change in control.
(9)
To supplement the Bank’s disability programs, the Bank implemented a long-term care plan (“LTC Plan”) in 2015. Mr. Gray participates in the LTC Plan. Mr. Gray will become vested upon the earliest of (i) the executive attaining age 62 with ten years of service; (ii) the executive attaining age 55 with 20 years of service; (iii) a change in control; (iv) or disability. Once vested, an individual and his spouse are generally eligible for long-term care benefits during their lifetime, at no cost to the covered individual, and with the Bank paying the cost of such coverage. The above table does not reflect the value of such continued coverage.
51
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
EXECUTIVE COMPENSATION
CEO Pay Ratio
Pursuant to Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are providing the following information about the relationship of the annual total compensation of our median compensated employee and the annual total compensation of Nitin J. Mhatre, our CEO as of December 31, 2023.
The 2023 annual total compensation of our median employee, other than Mr. Mhatre, was $59,792 and the 2023 annual total compensation of Mr. Mhatre, as reported in the Summary Compensation Table, was $2,633,381. Based on this information, for 2023, we estimate the ratio of the annual total compensation of Mr. Mhatre to the annual total compensation of our median employee was 44 to 1. As of December 31, 2022, the date we selected to identify our median employee, we identified our median employee based on compensation paid during 2022 to all our employees, other than Mr. Mhatre, who were employed by us on December 31, 2022. We have elected to use the same median employee that we identified in 2022 for the determination of 2023 pay ratio since there has not been a change to our employee population or compensation arrangements that would significantly impact this pay ratio disclosure. Further, we determined the annual total compensation of our median employee based on total cash compensation, which included base pay, commissions and bonuses, and we included all employees, whether employed on a full-time, part-time or seasonal basis, and no full-time equivalent adjustments were made for part-time employees. We then identified and calculated the elements of this employee’s total compensation in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K.
The SEC’s rules regarding the identification of the median compensated employee and the process of the calculating the pay ratio, allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
52
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
EXECUTIVE COMPENSATION
Pay Versus Performance Table
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive compensation actually paid (as defined by SEC rules) and certain financial performance of the Company. The Compensation Committee did not consider the pay versus performance disclosure when making its incentive compensation decisions. For further information about how we align executive compensation with the Company’s performance, see the “Compensation Discussion and Analysis” above. The amounts in the table below are calculated in accordance with SEC rules and do not represent amounts actually earned or realized by Principal Executive Officers (“PEOs”) and non-PEO NEOs, including with respect to restricted stock compensation.
| PEO | ||||||||||||||||||||||||||||||||||||||
|
Summary Compensation Table Total
(1)
|
Compensation Actually Paid
(2)
|
Average Summary Compensation Table Total for Non-PEO NEOs
(3)
($)
|
Average Compensation Actually Paid to Non-PEO NEOs
(4)
($)
|
Value of Initial Fixed $100 Fixed Investment from 12/31/19 | Company-Selected Performance Measure | |||||||||||||||||||||||||||||||||
| Year |
PEO 1
Nitin Mhatre ($) |
PEO 2
Sean Gray ($) |
PEO 3
Richard Marotta ($) |
PEO 1
Nitin Mhatre ($) |
PEO 2
Sean Gray ($) |
PEO 3
Richard Marotta ($) |
Total Shareholder Return ($)
(5)
|
Peer Group Total Shareholder Return ($)
(6)
|
Net Income
($M)
|
Operating ROTCE
(7)
|
||||||||||||||||||||||||||||
| 2023 |
|
N/A | N/A |
|
N/A | N/A |
|
|
|
|
|
|
||||||||||||||||||||||||||
| 2022 |
|
N/A | N/A |
|
N/A | N/A |
|
|
|
|
|
|
||||||||||||||||||||||||||
| 2021 |
|
|
N/A |
|
|
N/A |
|
|
|
|
|
|
||||||||||||||||||||||||||
| 2020 | N/A |
|
|
N/A |
|
|
|
|
|
|
(
|
|
||||||||||||||||||||||||||
(1)
The dollar amounts reported for the PEOs
Mr. Mhatre
,
Mr. Gray
and
Mr. Marotta
under “Summary Compensation Table Total” are the amounts of total compensation reported for those persons for each corresponding year in the “Total” column of the Summary Compensation Table.
(2) The dollar amounts reported for Mr. Mhatre, Mr. Gray, and Mr. Marotta under “Compensation Actually Paid” represent the amount of “compensation actually paid” to those persons, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual amount of compensation earned by or paid to them during the applicable year.
(3)
The dollar amounts reported under Average Summary Compensation Total for non-PEO NEOs represent the average of the amounts reported for the Company’s named executive officers (NEOs) as a group (excluding any individual serving as our CEO during such year) in the “Total” column of the Summary Compensation Table in each applicable year. The NEOs included for purposes of calculating the average amounts in each applicable year are as follows: (i) for 2023, Sean Gray, David Rosato, James Brown, Gregory Lindenmuth, and Brett Brbovic); (ii) for 2022, Sean Gray, Brett Brbovic, George Bacigalupo, Gregory Lindenmuth, and Subhadeep Basu; (iii) for 2021, Subhadeep Basu, George Bacigalupo, Gregory Lindenmuth, Deborah Stephenson and James Moses; and (iv) for 2020, James Moses, George Bacigalupo, Gregory Lindenmuth, and Tami Gunsch.
(4) The dollar amounts reported under Average Compensation Actually Paid for non-PEO NEOs represent the average amount of “compensation actually paid” to the NEOs as a group (excluding the CEO), as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual average amount of compensation earned by or paid to the NEOs as a group during the applicable year.
(5)
Cumulative TSR is calculated by dividing the sum of the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and the difference between the Company’s share price at the end and the beginning of the measurement period by the Company’s share price at the beginning of the measurement period which is December 31, 2019.
(6)
Represents the weighted peer group TSR, weighted according to the respective companies’ stock market capitalization at the beginning of each period for which a return is indicated. The peer group used for this purpose is the following published industry index: KBW NASDAQ Regional Banking Index. The measurement period is from December 31, 2019.
(7)
Operating
Return on Tangible Common Equity
is based on earnings on an operating basis as adjusted for notable items as disclosed in Appendix A. The specific measure used is the Operating Return on Tangible Common Equity, excluding unrealized losses on AFS securities.
In accordance with the requirements of Item 402(v) of Regulation S-K, the adjustments in the table below were made to the PEO's and non-PEO NEOs’ total compensation to determine the compensation actually paid in 2023:
53
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
EXECUTIVE COMPENSATION
|
PEO
|
Average Non-PEO NEOs
|
|||||||
|
2023
|
2023
|
|||||||
| Total Compensation as reported in Summary Compensation Table (SCT) |
$
|
$
|
||||||
| Pension values reported in SCT |
|
|
||||||
| Fair value of equity awards granted during fiscal year |
(
|
(
|
||||||
|
Pension value attributable to current year’s service and any change in pension value attributable to plan amendments made in the current year
|
|
|
||||||
| Fair value of equity compensation granted and vested in current year—value at vesting date |
|
|
||||||
| Fair value of equity compensation granted and outstanding in current year—value at year-end |
|
|
||||||
| Change in fair value for end of prior fiscal year to vesting date for awards made in prior fiscal years that vested during current fiscal year |
|
(
|
||||||
| Change in fair value from end of prior fiscal year to end of current fiscal year for awards made in prior fiscal years that were unvested at end of current fiscal year |
(
|
(
|
||||||
| Dividends or other earnings paid on stock or options awards in the covered fiscal year prior to the vesting date that are not otherwise included in the total compensation for the covered fiscal year |
|
|
||||||
| Fair value of awards forfeited in current fiscal year determined at end of prior fiscal year |
|
(
|
||||||
| Compensation Actually Paid to NEOs |
$
|
$
|
||||||
Financial Performance Measures
As described in greater detail in “Proposal 2: Advisory Vote on Executive Compensation—Compensation Discussion Analysis”, our approach to executive compensation is designed to directly link pay to performance, recognize both corporate and individual performance, promote long-term stock ownership, attract, retain and motivate talented executives, and balance risk and reward while taking into consideration stakeholder feedback as well as market trends and practices. The most important financial measures used by the Company in determining performance based compensation for the Company’s named executive officers for the most recently completed fiscal year are:
•
Operating Return on Tangible Common Equity
•
Operating Return on Assets
•
Operating Pre-tax Pre-Provision Net Revenue
•
Net Charge-offs/Average Loans
The operating measures above are non-GAAP financial measures used in the Company's incentive compensation plans and are described in Appendix A.
54
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
EXECUTIVE COMPENSATION
Analysis of the Information Presented in the Pay versus Performance Table
While we utilize several performance measures to align executive compensation with performance, all of those measures are not presented in the Pay versus Performance table. Moreover, the Company generally seeks to incentivize long-term performance, and therefore does not specifically align the Company’s performance measures with compensation that is actually paid (as defined by SEC rules) for a particular year. In accordance with Item 402(v) of Regulation S-K, we are providing the following graphic descriptions of the relationships between information presented in the Pay versus Performance table.
Compensation Actually Paid and TSR
Compensation Actually Paid and Net Income
55
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
EXECUTIVE COMPENSATION
Compensation Actually Paid and Operating ROTCE
56
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
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Proposal 3:
Ratification of the Appointment of the Independent Registered Public Accounting Firm
|
|
||||||||||||||||
|
|
|||||||||||||||||
The Board of Directors recommends ratification of the Audit Committee’s appointment of Crowe LLP as our independent registered public accounting firm for fiscal year 2024.
Background.
The Company’s independent registered public accounting firm (“Accounting Firm”) for the year ended December 31, 2023 was Crowe LLP (“Crowe”). The Audit Committee has appointed Crowe as the independent registered public accounting firm for the year ending December 31, 2024, subject to ratification by the shareholders at the Annual Meeting. A representative of Crowe is expected to be present at the Annual Meeting to respond to appropriate questions from shareholders and will have the opportunity to make a statement should they desire to do so.
Shareholder ratification of the appointment of Crowe is not required by the Company’s bylaws or otherwise. However, the Board of Directors is submitting the appointment of the Accounting Firm to the shareholders for ratification as a matter of good corporate practice. If the ratification of the appointment of the firm is not approved by a majority of the votes cast by shareholders at the Annual Meeting, other independent registered public accounting firms may be considered by the Audit Committee of the Board of Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF CROWE LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE 2024 FISCAL YEAR
.
Audit Committee Pre-Approval Policies and Procedures
The Audit Committee is responsible for selecting and managing compensation of the accounting firm and overseeing its work. The Audit Committee approves, in advance, all audit and permissible non-audit services to be performed by the Accounting Firm. This process is intended to ensure that the accounting firm does not provide any non-audit services that are prohibited by law or regulation. Requests for services by the Accounting Firm must be specific as to the particular services to be provided for compliance with the auditor services policy. The request may be made with respect to either specific services or a type of service for predictable or recurring services. During the years ended December 31, 2023 and 2022, respectively, all services were approved, in advance, by the Audit Committee in compliance with these procedures.
Audit Fees
The following table sets forth the fees billed to the Company for the fiscal years ended December 31, 2023 and 2022, respectively, by Crowe:
| Fees |
2023
|
2022 | ||||||
|
Audit Fees
(1)
|
$ | 1,201,000 | $ | 1,310,000 | ||||
|
Audit-Related Fees
(2)
|
122,000 | 259,000 | ||||||
|
Tax Fees
(3)
|
243,000 | 319,000 | ||||||
| All Other Fees | — | — | ||||||
|
Total
|
$ | 1,566,000 | $ | 1,888,000 | ||||
(1)
Includes fees for audit of the financial statements and internal control over financial reporting, as well as quarterly reviews.
(2)
Fees in 2023 and 2022 related to HUD audit, 401(k) plan audit, and Consent and Registration statement filings.
(3)
Fees in 2023 and 2022 consist of tax return and estimated payment preparation services.
57
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
PROPOSAL 3: RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
AUDIT COMMITTEE REPORT
Audit Committee Report
The Company’s management is responsible for the Company’s internal controls and financial reporting process, and for preparing the Company’s consolidated financial statements (“financial statements”). The Company’s independent registered public accounting firm performs an independent audit of the financial statements and issues an opinion on the fair presentation of those financial statements in conformity with generally accepted accounting principles. The Accounting Firm also issues an opinion on the Company’s internal control over financial reporting based on criteria issued by the Committee on Sponsoring Organizations of the Treadway Commission. The Audit Committee meets with the Accounting Firm, with and without management present, to discuss the results of its examination, its evaluation of the Company’s internal controls, and the overall quality of the Company’s financial reporting. The Audit Committee oversees the Company’s internal controls and financial reporting process on behalf of the Board of Directors.
In this context, the Audit Committee reviewed and discussed the financial statements with management. Management has represented that these statements were prepared in accordance with generally accepted accounting principles and provided its Report on Internal Control over Financial Reporting, as well as the certifications of the CEO and CFO.
The Audit Committee has reviewed and discussed the financial statements with the Accounting Firm, and has discussed matters required to be discussed under the applicable standards of Public Company Accounting Oversight Board, including Auditing Standard No. 1301,
Communications with Audit Committees
. These matters include the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of the disclosures in the financial statements. The Audit Committee also discussed with the Accounting Firm the overall scope and plans for its audit.
The Audit Committee has received and discussed the written disclosures and the letter from the Accounting Firm as required by the Public Company Accounting Oversight Board regarding the Accounting Firm’s communications with the Committee concerning the Accounting Firm’s independence. The Audit Committee considered, among other factors, the non-audit services provided by the Accounting Firm, in concluding that the firm is independent.
In performing all of these functions, the Audit Committee acts only in an oversight capacity. It relies on the work and assurances of the Company’s management, which has the primary responsibility for financial statements and reports, and of the Accounting Firm that, in its report, expresses an opinion on the fairness and conformity of the financial statements to generally accepted accounting principles. The Audit Committee’s oversight does not provide it with an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or policies, or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The Audit Committee’s processes do not assure that the Company’s financial statements are presented fairly in accordance with generally accepted accounting principles or that the audit of the financial statements has been carried out in accordance with generally accepted auditing standards.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors, and the Board has approved, that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 for filing with the Securities and Exchange Commission. The Audit Committee also has approved, subject to shareholder ratification, the selection of Crowe LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2024.
Audit Committee of the Board of Directors of Berkshire Hills Bancorp, Inc.
Sylvia Maxfield, Chair
Baye Adofo-Wilson
Nina A. Charnley
Jeffrey W. Kip
Eric S. Rosengren
58
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
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Berkshire Hills Bancorp, Inc.
Proxy Statement
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Additional Information
Stock Ownership
Five-Percent Shareholders
The following table provides information as of March 21, 2024, with respect to persons known by the Company to be the beneficial owners of 5% or more of the Company’s outstanding common stock. A person may be considered to own any shares of common stock over which they have, directly or indirectly, sole or shared voting or investing power. Percentages are based on 43,463,525 shares outstanding at March 21, 2024.
| Name and Address | Number of Shares Owned | Percent of Common Stock Outstanding | ||||||
|
BlackRock, Inc.
50 Hudson Yards
New York, New York 10001
|
6,338,165
(1)
|
14.6% | ||||||
|
The Vanguard Group
100 Vanguard Blvd. Malvern, Pennsylvania 19355 |
5,025,964
(2)
|
11.6% | ||||||
|
Dimensional Fund Advisors LP
6300 Bee Cave Road
Austin, Texas 78746
|
2,525,556
(3)
|
5.8% | ||||||
(1)
Based on information contained in a Schedule 13G/A filed with the U.S. Securities and Exchange Commission on January 23, 2024.
(2)
Based on information contained in a Schedule 13G/A filed with the U.S. Securities and Exchange Commission on February 13, 2024.
(3)
Based on information contained in a Schedule 13G/A filed with the U.S. Securities and Exchange Commission on February 9, 2024.
Stock Ownership of Directors and Executive Officers
The following table provides information about the shares of Company common stock that are owned by each director or nominee for director of the Company, by Named Executive Officers and the aggregate number of shares owned by all directors, nominees for director and Named Executive Officers as a group as of March 21, 2024. A person may be considered to own any shares of common stock over which they have, directly or indirectly, sole or shared voting or investment power. Unless otherwise indicated, each of the named individuals has sole voting and investment power with respect to the shares shown and none of the shares has been pledged. The number of shares and options exercisable within 60 days owned by all directors, nominees for director and Named Executive Officers as a group totaled 443,947 of our outstanding common stock as of March 21, 2024. Each director, nominee for director, and Named Executive Officer owned less than 1.0% of our outstanding common stock as of that date. Percentages are based on 43,463,525 shares outstanding at March 21, 2024. The correspondence address for each individual is 60 State Street, Boston, Massachusetts 02109.
59
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
ADDITIONAL INFORMATION
|
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
| Name |
Number of Shares Owned (Excluding Options)
(1)
|
Options
Exercisable Within 60 Days |
Total | ||||||||
| Directors | |||||||||||
| Baye Adofo-Wilson | 2,595 | — | 2,595 | ||||||||
|
David M. Brunelle
(2)
|
23,390 | — | 23,390 | ||||||||
|
Mary Anne Callahan
|
29,374 | — | 29,374 | ||||||||
| Nina A. Charnley | 8,430 | — | 8,430 | ||||||||
| Mihir A. Desai | 6,835 | — | 6,835 | ||||||||
| William H. Hughes III | 12,905 | — | 12,905 | ||||||||
| Jeffrey W. Kip | 18,293 | — | 18,293 | ||||||||
| Sylvia Maxfield | 11,484 | — | 11,484 | ||||||||
| Nitin J. Mhatre | 113,153 | — | 113,153 | ||||||||
| Laurie Norton Moffatt | 20,771 | — | 20,771 | ||||||||
| Karyn Polito | 5,449 | — | 5,449 | ||||||||
| Eric S. Rosengren | 4,992 | — | 4,992 | ||||||||
|
Michael A. Zaitzeff
|
2,595 | — | 2,595 | ||||||||
| Named Executive Officers Who Are Not Directors | |||||||||||
| Brett Brbovic | 14,505 | — | 14,505 | ||||||||
|
James C. Brown
|
10,040 | — | 10,040 | ||||||||
| Sean A. Gray | 115,911 | — | 115,911 | ||||||||
| Gregory D. Lindenmuth | 28,896 | — | 28,896 | ||||||||
|
R. David Rosato
|
14,329 | — | 14,329 | ||||||||
| All Named Executive Officers and Directors, and Nominees for Directors as a Group (18 persons) | 443,947 | — | 443,947 | ||||||||
(1)
This column includes the following shares held in trust for such directors and Named Executive Officers:
| Name |
Shares of Granted but
Unvested Restricted Stock Held In Trust |
Shares Held In Trust
in the Berkshire Bank 401(k) Plan |
||||||
| Directors | ||||||||
| Baye Adofo-Wilson | 2,595 | — | ||||||
| David M. Brunelle | 2,595 | — | ||||||
|
Mary Anne Callahan
|
2,595 | |||||||
| Nina A. Charnley | 2,595 | — | ||||||
|
Mihir A. Desai
|
2,595 | — | ||||||
| William H. Hughes III | 2,595 | — | ||||||
| Jeffrey W. Kip | 2,595 | — | ||||||
| Sylvia Maxfield | 2,595 | — | ||||||
| Nitin J. Mhatre | 25,454 | — | ||||||
| Laurie Norton Moffatt | 2,595 | — | ||||||
| Karyn Polito | 2,595 | — | ||||||
| Eric S. Rosengren | 2,595 | — | ||||||
|
Michael A. Zaitzeff
|
2,595 | — | ||||||
|
Named Executive Officers Who Are Not Directors
|
||||||||
| Brett Brbovic | 8,457 | 550 | ||||||
|
James C. Brown
|
8,438 | — | ||||||
|
Sean A. Gray
|
14,984 | 2,639 | ||||||
| Gregory D. Lindenmuth | 4,724 | 10,304 | ||||||
|
R. David Rosato
|
14,329 | — | ||||||
(2) Includes 4,000 shares held in Mr. Brunelle’s individual retirement account.
60
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
ADDITIONAL INFORMATION
|
INFORMATION ABOUT VOTING
Information About Voting
Who Can Vote at the Meeting
You are entitled to vote the shares of Berkshire’s common stock that you owned as of the close of business on March 21, 2024. As of the close of business on March 21, 2024, a total of 43,463,525 shares of Company common stock was outstanding. Each share of common stock owned by a shareholder has one vote.
The Company’s Certificate of Incorporation provides that a record owner of the Company’s common stock who beneficially owns, either directly or indirectly, in excess of 10% of the Company’s outstanding shares, is not entitled to any vote in respect of the shares held in excess of the 10% limit.
Ownership of Shares; Attending the Meeting
You may own shares of Berkshire Hills in one of the following ways:
•
Directly in your name as the shareholder of record;
•
Indirectly through a broker, bank or other holder of record in “street name”; or
•
Indirectly in the Berkshire Hills Bancorp, Inc. Stock Fund of our 401(k) Plan, or through the trust that holds restricted stock awards issued to directors and employees under our equity plans.
If your shares are registered directly in your name, you are the holder of record of these shares. As the holder of record, you have the right to give your proxy directly to us, either through voting by mail, the Internet, or telephone, or to vote i
n
perso
n
at the meeti
n
g. If you wish to vote at the meeti
n
g, you will
n
eed to bri
n
g proof of ide
n
tity.
If you hold your shares indirectly in street name, your broker, bank or other nominee is the holder of record and you are the beneficial owner of the shares. As the beneficial owner, you have the right to direct your broker, bank or other nominee how to vote by filling out a voting instruction form. Your broker, bank or other nominee may allow you to provide voting instructions by telephone or by the Internet in addition to by mail. Please see the form provided by your broker, bank or other nominee.
If you hold your shares indirectly in street name and wish to atte
n
d the meeti
n
g, you will
n
eed to bri
n
g proof of ow
n
ership to be admitted to the meeti
n
g. A rece
n
t brokerage stateme
n
t or letter from a ba
n
k or broker are examples of proof of ow
n
ership. If you wa
n
t to vote your shares of Berkshire’s commo
n
stock held i
n
street
n
ame i
n
perso
n
at the meeti
n
g, you must obtai
n
a writte
n
proxy i
n
your
n
ame from the broker, ba
n
k or
n
omi
n
ee who is the record holder of your shares. You will also
n
eed to bri
n
g proof of ide
n
tity to vote at the meeti
n
g.
Quorum and Vote Required
Quorum
. We will have a quorum and will be able to conduct the business of the Annual Meeting if the holders of a majority of the outstanding shares of common stock entitled to vote are present at the meeting, either in person or by proxy. At this year’s Annual Meeting, shareholders will elect certain directors as proposed. In voting on the election of directors, you may vote in favor of the nominees, withhold votes as to all nominees, or withhold votes as to specific nominees. There is no cumulative voting for the election of directors. Directors must be elected by a plurality of the votes cast at the Annual Meeting. This means that the nominees receiving the greatest number of votes will be elected. However, if a director is elected by a plurality but less than a majority of the votes cast for such director, such director must submit their resignation to the Board of Directors, which resignation may then be accepted or rejected by the Board following a review by the Corporate Governance/Nominating Committee.
In voting on the non-binding proposal to give advisory approval of our executive compensation, you may vote in favor of the proposal, vote against the proposal or abstain from voting. To approve the proposal, the affirmative vote of a majority of the votes cast at the Annual Meeting is required. While this vote is required by law, it will neither be binding on us or the Board of Directors, nor will it create or imply any change in the fiduciary duties of, or impose any additional fiduciary duty on us or the Board of Directors.
61
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
ADDITIONAL INFORMATION
|
INFORMATION ABOUT VOTING
In voting on the ratification of the appointment of Crowe LLP as the Company’s independent registered public accounting firm, you may vote in favor of the proposal, vote against the proposal or abstain from voting. To ratify the selection of Crowe as our independent registered public accounting firm for fiscal year 2024, the affirmative vote of a majority of the votes cast at the Annual Meeting is required.
Routine and Non-Routine Proposals
. Applicable rules determine whether proposals presented at shareholder meetings are routine or non-routine. If a proposal is routine, a broker or other entity holding shares for an owner in street name may vote on the proposal without receiving voting instructions from the owner. If a proposal is non-routine, the broker or other entity may vote on the proposal only if the owner has provided voting instructions. The NYSE allows its member-brokers to vote shares held by them for their customers on matters the NYSE determines are routine, even though the brokers have not received voting instructions from their customers. The NYSE currently considers the ratification of our independent auditors (Proposal 3) as a routine matter. Your broker, therefore, may vote your shares in its discretion on this routine matter if you do not instruct your broker how to vote on it. If the NYSE does not consider a matter routine, then your broker is prohibited from voting your shares on the matter unless you have given voting instructions on that matter to your broker. The NYSE does not consider the election of directors or executive compensation matters to be routine (Proposals 1 and 2). Therefore, brokers holding shares for their customers will not have the ability to cast votes with respect to the election of directors or the Company’s executive compensation unless they have received instructions from their customers.
It is important, therefore, that you provide instructions to your broker if your shares are held by a broker so that your vote with respect to these non-routine matters is counted
.
How We Count Votes
. If you return valid proxy instructions or attend the Annual Meeting, we will count your shares to determine whether there is a quorum, even if you abstain from voting. A broker non-vote occurs when a broker returns a proxy to the Company and the proxy reflects a vote on routine Company proposals but does not reflect a vote on non-routine Company proposals. Broker non-votes will be counted to determine the existence of a quorum.
In the election of directors, votes that are withheld and broker non-votes will have no effect on the outcome of the election.
In counting votes on the proposals to give advisory approval of our executive compensation and to ratify the selection of the independent registered public accounting firm we will not count abstentions or broker non-votes as votes cast on these proposals. Therefore, abstentions and broker non-votes will have no impact on the outcome of these proposals
Solicitation of Proxies.
The Company will bear the entire cost of soliciting proxies from you. In addition, we will request that banks, brokers and other holders of record send notice of the Annual Meeting to the beneficial owners of Berkshire Hills Bancorp, Inc. common stock and secure their voting instructions, if necessary
.
62
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
ADDITIONAL INFORMATION
|
INFORMATION ABOUT VOTING
How to Vote
We are making our proxy materials available to our shareholders on the Internet. You may read, print and download our 2023 Annual Report to Shareholders and our proxy statement at
www.proxyvote.com
or through our investor relations website at
ir.berkshirebank.com
.
If you are a holder of record, you may vote your shares by Internet, by telephone, by regular mail or in person at the Annual Meeting. You should vote using the Internet or telephone voting options, or by completing and returning your proxy card, in order to ensure that your vote is counted at the Annual Meeting, or at any adjournment of the Annual Meeting, regardless of whether you plan to attend.
If you return an executed proxy card without marking your instructions, your executed proxy card will be voted “FOR” the election of each of the director nominees named in this proxy statement under Proposal 1, “FOR” the advisory resolution to approve our executive compensation as described in this proxy statement, and “FOR” the ratification of the appointment of Crowe LLP as the Company’s independent registered public accounting firm for fiscal year 2024.
To access your proxy materials and vote online, please visit
www.proxyvote.com
and follow the on-screen instructions. Your proxy card contains the necessary codes required to access materials and vote online or by telephone. If you wish to vote by telephone, please call 1-800-690-6903 using a touch-tone phone and follow the prompted instructions. You may also vote by mail by completing and returning your proxy card using the envelope provided. Finally, you may vote in person at the Annual Meeting.
If you hold your shares indirectly in street name, your broker, bank or other nominee is the holder of record and you are the beneficial owner of the shares. As the beneficial owner, you have the right to direct your broker, bank or other nominee how to vote by filling out a voting instruction form. Your broker, bank or other nominee may allow you to provide voting instructions by telephone or by the Internet in addition to by mail. Please see the form provided by your broker, bank or other nominee.
If your shares are held in an Employee Stock Plan, you will receive separate instructions for voting your shares.
Unvoted shares in the plans will be voted by the Plans in the same proportion as shares for which each Plan received voting instructions.
If any matters not described in this proxy statement are properly presented at the Annual Meeting, the persons named as proxies will use their judgment to determine how to vote your shares. This includes a motion to adjourn or postpone the meeting to solicit additional proxies. If the Annual Meeting is postponed or adjourned, your Company common stock may be voted by the persons named in the proxy card on the new meeting date, provided such new meeting occurs within 30 days of the Annual Meeting and you have not revoked your proxy. The Company does not currently know of any other matters to be presented at the meeting.
You may revoke your proxy at any time before the vote is taken at the meeting. To revoke your proxy, you must either advise the Corporate Secretary of the Company in writing before your common stock has been voted at the Annual Meeting, deliver a later dated proxy or attend the meeting and vote your shares. Attendance at the Annual Meeting will not in itself constitute revocation of your proxy. You may advise the Company’s Corporate Secretary of your revocation in writing to Berkshire Hills Bancorp, Inc. at 60 State Street, Massachusetts 02109, in care of Wm. Gordon Prescott, Corporate Secretary.
63
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
ADDITIONAL INFORMATION
|
OTHER INFORMATION RELATING TO DIRECTORS AND EXECUTIVES
Other Information Relating to Directors and Executive Officers
Delinquent Section 16(a) Reports
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s executive officers and directors, and persons who own more than 10% of any registered class of the Company’s equity securities, to file reports of ownership and changes in ownership with the SEC. These individuals are required by regulation to furnish the Company with copies of all Section 16(a) reports they file.
Based solely on its review of the copies of the reports it has received and written representations provided to the Company from the individuals required to file the reports, the Company identified no delinquent Section 16(a) reports during 2023.
Transactions with Related Persons
The Sarbanes-Oxley Act of 2002 generally prohibits loans by the Company to its executive officers and directors. However, the Sarbanes-Oxley Act contains a specific exemption from such prohibition for loans by the Bank to its executive officers and directors in compliance with federal banking regulations. Federal regulations require that all loans or extensions of credit to executive officers and directors of insured financial institutions must be made on substantially the same terms, including interest rates and collateral requirements, as those prevailing at the time for comparable transactions with other persons and must not involve more than the normal risk of repayment or present other unfavorable features. The Bank is therefore generally prohibited from making any new loans or extensions of credit to executive officers and directors at different rates or terms than those offered to the general public. Notwithstanding this rule, federal regulations permit the Bank to make loans to executive officers and directors of the Bank at reduced interest rates if the loan is made under a benefit program generally available to all other employees and does not give preference to any executive officer or director over any other employee.
The disinterested members of the Board of Directors periodically review, no less frequently than quarterly, a summary of the Company’s transactions with directors and executive officers of the Company and with firms that employ directors, as well as any other related person transactions, for the purpose of determining that the transactions are fair, reasonable and within Company policy and should be ratified and approved. For the 2023 fiscal year, the Company was not engaged in any transactions with related persons of a type or in such amount that was required to be disclosed pursuant to applicable Securities and Exchange Commission rules and regulations.
Also, in accordance with banking regulations, the Board of Directors reviews all loans made to a director or executive officer in an amount that, when aggregated with the amount of all other loans to such person and their related interests, exceeds $500,000 and such loan must be approved in advance by a majority of the disinterested members of the Board of Directors. Additionally, pursuant to the Company’s Code of Business Conduct, all executive officers and directors of the Company must disclose any existing or emerging conflicts of interest to the Company’s General Counsel. Such potential conflicts of interest include, but are not limited to, the following: (i) the Company conducting business with or competing against an organization in which a family member of an executive officer or director has an ownership or employment interest and (ii) the ownership of more than 1% of the outstanding securities or 5% of total assets of any business entity that does business with or is in competition with the Company.
Procedures Governing Related Persons Transactions
We maintain Procedures Governing Related Person Transactions, which are a written set of procedures for the review and approval of transactions involving related persons. Under these procedures, related persons consist of directors, director nominees, executive officers, persons or entities known to us to be the beneficial owner of more than 5% of any outstanding class of the voting securities of the Company or immediate family members or certain affiliated entities of any of the foregoing persons.
64
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
ADDITIONAL INFORMATION
|
OTHER INFORMATION RELATING TO DIRECTORS AND EXECUTIVES
Transactions covered by the procedures consist of any financial transaction, arrangement or relationship or series of similar transactions, arrangements or relationships, in which:
•
the aggregate amount involved will or may be expected to exceed $120,000 in any calendar year;
•
the Company is, will, or may be expected to be a participant; and
•
any related person has or will have a direct or indirect material interest
.
The procedures exclude certain transactions, including:
•
any compensation paid to an executive officer of the Company if such compensation is disclosed according to the proxy rules of the Securities and Exchange Commission or the Compensation Committee of the Board approved (or recommended that the Board approve) such compensation;
•
any compensation paid to a director of the Company if such compensation is disclosed according to the proxy rules of the Securities and Exchange Commission;
•
any transaction with a related person involving the extension of credit provided in the ordinary course of the Company’s business and on substantially the same terms as those prevailing at the time for comparable services provided to unrelated third parties. However, loans on nonaccrual status or that are past due, restructured or potential problem loans are not considered excluded transactions;
•
any transaction with a related person in which the amounts due from the related person are for purchases of goods and services subject to usual trade terms, for ordinary business travel and expense payments and for other transactions in the ordinary course of business;
•
any transaction with a related person in which the rates or charges involved are determined by competitive bids;
•
any transaction with a related person involving services as a bank depository of funds, transfer agent, registrar, trustee under a trust indenture or similar services;
•
any transaction with a related person involving the rendering of services as a common or contract carrier or public utility, at rates or charges fixed in conformity with law or governmental authority; and
•
any transaction in which the interest of the related person arises solely from the ownership of a class of equity securities and all holders of that class of equity services received the same benefit on a pro rata basis.
Related person transactions will be reviewed by the Board of Directors. In connection with its review, the Board will consider all relevant factors, including:
•
whether the terms of the proposed transaction are at least as favorable to the Company as those that might be achieved with an unaffiliated third party;
•
the size of the transaction and the amount of consideration payable to the related person;
•
the nature of the interest of the related person;
•
whether the transaction may involve a conflict of interest as defined in the Company’s Code of Business Conduct; and
•
whether the transaction involves the provision of goods and services to the Company that are available and from unaffiliated third parties
.
For each periodic review of related persons transactions, the disinterested members of the Board will determine if the transactions were fair, reasonable, and within Company policy and they should be ratified and approved.
Submission of Business Proposals and Shareholder Nominations
The Company must receive proposals that shareholders seek to include in the proxy statement for the Company’s 2025 Annual Meeting no later than December 7, 2024. If next year’s Annual Meeting is held on a date more than 30 calendar days from May 16, 2025, a shareholder proposal must be received by a reasonable time before the Company begins to print and distribute its proxy solicitation for such Annual Meeting. Any shareholder proposals will be subject to the requirements of the proxy rules adopted by the Securities and Exchange Commission.
Additionally, a shareholder intending to engage in a director election contest at next year’s Annual Meeting must give the Company notice of their intent to solicit proxies by providing the names of its nominees and certain other information by March 17, 2025. If next year’s Annual Meeting is held on a date more than 30 calendar days from May 16, 2025, the shareholder must provide such information no later than the 10th day following public announcement of the date of the Annual Meeting.
65
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
ADDITIONAL INFORMATION
The Company’s bylaws provide that, in order for a shareholder to make nominations for the election of directors or proposals for business to be brought before the Annual Meeting, a shareholder must deliver notice of such nominations and/or proposals to the Corporate Secretary not less than 90 days before the date of the Annual Meeting. However, if less than 100 days’ notice or prior public disclosure of the date of the Annual Meeting is given to shareholders, such notice must be received not later than the close of business of the tenth day following the day on which notice of the date of the Annual Meeting was mailed to shareholders or prior public disclosure of the meeting date was made. A copy of the bylaws may be obtained through our website at
ir.berkshirebank.com
.
Shareholder Communications
The Company encourages shareholder communications to the Board of Directors and/or individual directors. All communications from shareholders and other interested parties should be addressed to Berkshire Hills Bancorp, Inc., 60 State Street, Boston, Massachusetts 02109. Communications to the Board of Directors should be in the care of Wm. Gordon Prescott, Corporate Secretary. Communications to individual directors should be sent to such directors at the Company’s address. Shareholders who wish to communicate with a committee of the Board should send their communications to the care of the Chair of the particular committee, with a copy to David M. Brunelle, the Chairperson of the Board of Directors of the Company. The Corporate Governance/Nominating Committee determines, in its discretion, whether any communication sent to the full Board should be brought before the full Board.
Miscellaneous
The Company will reimburse brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending notice of the Annual Meeting to the beneficial owners of the Company. Additionally, directors, officers and other employees of the Company may solicit proxies personally or by telephone. None of these persons will receive additional compensation for these activities.
The Company’s Summary Annual Report to Shareholders and its Annual Report on SEC Form 10-K are available at
www.proxyvote.com
and also through our Investor Relations website at
ir.berkshirebank.com
. The Annual Report is not to be treated as part of the proxy solicitation material or as having been incorporated by reference into this proxy statement. You and others who share your address may receive only one notice of the Annual Meeting and/or proxy statement at your address. This practice, known as “householding,” is designed to reduce our printing and postage costs
.
This consolidated method of delivery will continue unless one or more of the shareholders listed at the same address notifies us that they would like to receive individual copies of proxy materials. Shareholders who participate in householding will continue to receive separate proxy cards or notices that include each shareholder’s unique control number for voting the shares held in each account. Registered shareholders who wish to discontinue householding and receive separate copies of proxy materials may notify Broadridge by calling 1-866-540-7095, or send a written request to our Corporate Secretary at the address of our principal office. Beneficial shareholders may request information about householding from your bank, broker or other holder of record. Whether or not you plan to attend the Annual Meeting, please vote through the Internet, by telephone, or by completing and returning your proxy card using the envelope provided.
Other Matters
The Board of Directors is not aware of any business to come before the Annual Meeting other than the matters described above in the proxy statement. However, if any matters should properly come before the Annual Meeting, it is intended that the holders of the proxies will act in accordance with their best judgment.
66
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
ADDITIONAL INFORMATION
| Appendix A |
|
||||||||||||||||
|
|
|||||||||||||||||
Summary and Reconciliation of Certain Non-GAAP Financial Measures
This appendix contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles (“GAAP”). Non-GAAP performance measures are referred to as “adjusted” in the Company’s Annual Report on Form 10-K and are identified either as “core” or “adjusted” in this document. These non-GAAP measures are intended to provide the reader with additional supplemental perspectives on operating results, performance trends, and financial condition of the Company. Non-GAAP financial measures are not a substitute for GAAP measures; they should be read and used in conjunction with the Company’s GAAP financial information, which is included in the Company’s Form 10-K. A reconciliation of non-GAAP financial measures to GAAP measures is provided below, as well as definitions for certain non-GAAP financial measures referenced in the proxy statement. In all cases, it should be understood that non-GAAP measures do not depict amounts that accrue directly to the benefit of shareholders. An item which management excludes when computing non-GAAP adjusted earnings can be of substantial importance to the Company’s results for any particular period. The Company’s non-GAAP operating earnings information set forth is not necessarily comparable to non-GAAP information which may be presented by other companies. Each non-GAAP measure used by the Company in this report as supplemental financial data should be considered in conjunction with the Company’s GAAP financial information and discussion of non-GAAP measures in its Form 10-K.
Operating earning
is defined as GAAP net income less net non-operating charges. Net non-operating charges are the after-tax amount of revenues and expenses which are deemed by the Company as not related to normalized operations. These include net losses/(gains) on securities, goodwill impairment, net gains on the sale of business operations, merger costs, and restructuring costs, and designated dispute settlement costs. The Company utilizes the non-GAAP measure of operating earnings in evaluating operating trends, including components for operating revenue and expense. Non-GAAP adjustments are presented net of an adjustment for income tax expense.
Operating EPS
is a non-GAAP measure defined as operating net income as a percentage of average diluted shares outstanding during the period.
Operating ratio
is a non-GAAP measurement defined as adjusted non-interest expense as a percentage of adjusted total revenue, excluding also amortization of intangibles and reflecting tax credit adjustments.
Operating return on tangible common equity
is a non-GAAP measure defined as operating net income as a percentage of total average tangible common shareholders’ equity.
Operating return on assets
is a non-GAAP measure defined as operating net income as a percentage of total average assets.
Operating Pre-Tax Pre-Provision Net Revenue (“Operating PPNR”)
is a non-GAAP measure defined as operating earnings before credit loss provision expense and tax expense. The Company views measures related to operating earnings and operating PPNR as important to understanding its operating trends. Analysts also rely on these measures in estimating and evaluating the Company’s performance. Management also believes that the computation of non-GAAP operating earnings and operating earnings per share may facilitate the comparison of the Company to other companies in the financial services industry.
A-1
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
APPENDIX A
The following table summarizes the reconciliation of non-GAAP items recorded for the time periods indicated:
| (Dollars in thousands) |
December 31,
2023
|
December 31,
2022 |
December 31,
2021 |
||||||||
| GAAP Net income | $ | 69,598 | $ | 92,533 | $ | 118,664 | |||||
| Non-GAAP measures | |||||||||||
| Adj: Fair value adjustments on securities (1) | — | 2,037 | 787 | ||||||||
| Adj: Loss/(gain) on sale of AFS securities | 25,057 | (6) | — | ||||||||
| Adj: Net gains on sale of business operations and assets | — | — | (52,942) | ||||||||
| Adj: Acquisition, restructuring and other | 6,261 | 8,909 | 5,781 | ||||||||
| Adj: Income taxes | (7,723) | (2,940) | 11,696 | ||||||||
| Net non-operating charges | 23,595 | 8,000 | (34,678) | ||||||||
|
Operating net income (non-GAAP)
|
$ | 93,193 | $ | 100,533 | $ | 83,986 | |||||
|
Total revenue
|
$ | 411,829 | $ | 413,534 | $ | 434,414 | |||||
|
Total non-interest expense
|
301,508 | 288,716 | 285,893 | ||||||||
|
Pre-tax, pre-provision net revenue (PPNR)
|
$ | 110,321 | $ | 124,818 | $ | 148,521 | |||||
|
Total operating revenue
|
$ | 436,886 | $ | 415,565 | $ | 382,259 | |||||
|
Operating non-interest expense
|
295,247 | 279,807 | 280,112 | ||||||||
|
Operating pre-tax, pre-provision net revenue (PPNR)
|
$ | 141,639 | $ | 135,758 | $ | 102,147 | |||||
| (dollars in millions, except share related data) | |||||||||||
|
Total average assets
|
$ | 11,838 | $ | 11,216 | $ | 12,081 | |||||
|
Total average shareholders’ equity, including unrealized losses on AFS securities
|
984 | 1,063 | 1,191 | ||||||||
|
Total average shareholders’ equity, excluding unrealized losses on AFS securities
|
1,226 | 1,193 | 1,166 | ||||||||
|
Total average tangible shareholders equity, including unrealized losses on AFS securities
|
962 | 1,036 | 1,159 | ||||||||
|
Total average tangible shareholders equity, excluding unrealized losses on AFS securities
|
1,204 | 1,166 | 1,134 | ||||||||
| Average diluted shares outstanding - GAAP (thousands) | 43,504 | 45,914 | 49,554 | ||||||||
| Earnings per share, diluted | $ | 1.60 | $ | 2.02 | $ | 2.39 | |||||
| Plus: Net adjustments per share, diluted | (0.54) | (0.17) | (0.70) | ||||||||
| Adjusted earnings per share, diluted | 2.14 | 2.19 | 1.69 | ||||||||
| Performance Ratios | |||||||||||
| Return on equity, including unrealized losses on AFS securities | 7.07 | % | 8.70 | % | 9.96 | % | |||||
| Return on equity, excluding unrealized losses on AFS securities | 5.68 | 7.76 | 10.18 | ||||||||
| Operating return on equity, including unrealized losses on AFS securities | 9.47 | 9.46 | 7.05 | ||||||||
| Operating return on equity, excluding unrealized losses on AFS securities | 7.60 | 8.43 | 7.20 | ||||||||
|
Return on tangible common equity, including unrealized losses on AFS securities
|
7.60 | 9.29 | 10.57 | ||||||||
|
Return on tangible common equity, excluding unrealized losses on AFS securities
|
6.07 | 8.26 | 10.80 | ||||||||
|
Operating return on tangible common equity, including unrealized losses on AFS securities
|
10.05 | 10.07 | 7.58 | ||||||||
|
Operating return on tangible common equity, excluding unrealized losses on AFS securities
|
8.03 | 8.94 | 7.74 | ||||||||
| Return on assets | 0.59 | 0.82 | 0.98 | ||||||||
| Operating return on assets | 0.79 | 0.90 | 0.70 | ||||||||
|
Efficiency ratio
|
63.88 | 64.31 | 69.96 | ||||||||
(1)
Starting in 2023, fair value adjustments on securities are included in operating income.
A-1
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
BERKSHIRE HILLS BANCORP, INC. |
2024 Proxy Statement
TABLE OF CONTENTS
Proxy Summary2023 Company Highlights2023 Executive Compensation HighlightsShareholder Engagement and ResponsivenessCorporate Responsibility and SustainabilityProposal 1 - Election of DirectorsInformation Regarding Directors and Director NomineesCorporate GovernanceDirector CompensationProposal 2 - Advisory (Non-Binding) Vote on Executive CompensationCompensation Discussion and Analysis (CDA)Compensation Committee ReportExecutive CompensationSummary Compensation and Other TablesPay Versus PerformanceProposal 3 - Ratification of the Appointment of the Independent Registered Public AccountantAudit Committee ReportAdditional InformationStock OwnershipInformation About VotingOther Information Relating to Directors and Executive OfficersSubmission of Business Proposals and Shareholder NominationsShareholder CommunicationsMiscellaneousOther Matters