Berkshire Hills Reports Fourth Quarter 2023 Results

Rhea-AI Summary

Berkshire Hills Bancorp, Inc. (NYSE: BHLB) announced a $40 million share repurchase authorization. The fourth quarter resulted in a $1 million loss, with operating income of $20 million. A $267 million securities sale resulted in a $25.1 million pre-tax non-operating loss. Net loan charge-offs and non-performing assets decreased by 18% linked quarter. The TCE ratio was 8.0% and CET1 ratio was 12.0%. Tangible book value per share was $22.82, up $1.57, or 7%, in the quarter.

Positive

• Operating income of $20 million
• Net loan charge-offs and non-performing assets decreased by 18% linked quarter
• TCE ratio of 8.0% and CET1 ratio of 12.0%
• Tangible book value per share of $22.82, up $1.57, or 7%, in the quarter

Negative

• Fourth quarter loss of $1 million
• ($0.03) per share
• $25.1 million pre-tax non-operating loss from securities sale

Insights

Financial Analyst

The announcement of Berkshire Hills Bancorp's $40 million share repurchase authorization signifies a strategic use of capital that may be perceived positively by investors, as share buybacks can be accretive to earnings per share (EPS). This move could also indicate management's confidence in the intrinsic value of the company, potentially signaling undervaluation to the market. It is important to note, however, that the repurchase plan represents approximately 4% of outstanding shares, which is a moderate figure and may not have a dramatic impact on share price or ownership dilution.

Furthermore, the report of a fourth-quarter loss juxtaposed with an operating income presents a nuanced picture. The net loss including non-operating items might raise concerns about the company's core profitability, but the positive operating income suggests that the underlying business remains robust. Investors will need to dissect these figures to understand the one-time impacts versus ongoing business performance.

Market Research Analyst

The reduction in net loan charge-offs and non-performing assets by 18% is a strong indicator of credit quality improvement, which is crucial for investor confidence, especially in a banking institution like Berkshire Hills Bancorp. This improvement is a positive sign in the context of asset quality and risk management, which are key factors for long-term stability. Additionally, the tangible book value per share increase is a solid metric that reflects the company's net asset value, providing a more accurate picture of financial health than simple earnings metrics.

However, the decrease in net interest income and margin compression is concerning, as these are critical drivers of profitability for banks. The reduction in net interest margin, partly due to increased funding costs, may impact future earnings if not offset by loan yield expansion or cost control measures. The CFO's remarks on pursuing further efficiency improvements could be a strategic response to these challenges, which would be important for maintaining profitability.

Economist

The economic implications of Berkshire Hills Bancorp's financial results and strategic decisions, such as the sale of securities and reduction of wholesale borrowings, can be multifaceted. On one hand, these actions can improve the funding profile and reduce interest rate risk, which is particularly relevant in a volatile interest rate environment. On the other hand, the $25.1 million pre-tax non-operating loss from the securities sale might raise questions about the timing and execution of such financial maneuvers, especially considering the impact on net income.

Moreover, the company's capital ratios, such as the CET1 ratio of 12.0%, remain healthy and above regulatory requirements, suggesting a strong capital position that can support future growth or weather economic downturns. The emphasis on recruiting experienced bankers and focusing on deposit gathering activities aligns with a strategy to bolster the funding base and reduce dependency on more volatile or expensive sources of funds.

Announces $40 Million Share Repurchase Authorization

• Fourth quarter loss of $1 million, ($0.03) per share; operating income of $20 million, $0.47 per share
• $267 million securities sale resulting in $25.1 million pre-tax non-operating loss
• Net loan charge-offs and non-performing assets decreased 18% linked quarter
• TCE ratio of 8.0% and CET1 ratio of 12.0%
• Tangible book value per share of $22.82, up $1.57, or 7%, in the quarter

BOSTON, Jan. 25, 2024 /PRNewswire/ -- Berkshire Hills Bancorp, Inc. (NYSE: BHLB) today reported results for the fourth quarter of 2023. These results along with comparison periods are summarized below:

($ in millions, except per share data)		Three Months Ended					Twelve Months Ended
		Dec. 31, 2023		Sep. 30, 2023		Dec. 31, 2022		Dec. 31, 2023		Dec. 31, 2022
Net (loss) income	$	(1.4)	$	19.5	$	30.5	$	69.6	$	92.5
Per share		(0.03)		0.45		0.69		1.60		2.02
Operating earnings1		20.2		21.5		28.3		93.2		100.5
Per share		0.47		0.50		0.64		2.14		2.19
Net interest income, non FTE	$	88.4	$	90.3	$	102.1	$	369.0	$	344.6
Net interest income, FTE		90.4		92.3		103.9		376.9		351.3
Net interest margin, FTE		3.11 %		3.18 %		3.84 %		3.27 %		3.26 %
Non-interest income		(8.4)		17.5		15.7		42.8		68.9
Operating non-interest income1		16.7		17.5		15.5		67.8		71.0
Non-interest expense	$	79.0	$	76.5	$	70.0	$	301.5	$	288.7
Operating non-interest expense1		75.3		73.9		72.6		295.2		279.8
Efficiency ratio1		67.8 %		65.1 %		58.3 %		63.9 %		64.3 %
Average balances
Loans	$	8,990	$	8,952	$	8,082	$	8,814	$	7,612
Deposits		9,936		9,630		9,731		9,704		9,797
Period-end balances
Loans		9,040		8,984		8,335		9,040		8,335
Deposits		10,633		9,981		10,327		10,633		10,327
1. See non-GAAP financial measures and reconciliation to GAAP measures beginning on page 12.

Berkshire CEO Nitin Mhatre stated, "Through the final quarter of the year, we continued to strengthen our balance sheet while maintaining strong credit performance, cost discipline and capital. Despite industry turbulence earlier in the year, full year operating EPS was relatively unchanged from 2022.  Our year-end securities sale reduced wholesale borrowings, improving our funding profile as we move into 2024. We continue to benefit from disruption in the competitive landscape and have recruited experienced bankers to further support deposit gathering activities. Our Board has authorized additional share repurchases in 2024 to balance return of capital while supporting franchise growth.  I'm confident that Berkshire is well positioned to deliver the benefits of our strategic initiatives to our shareholders and communities."

CFO David Rosato added, "Fourth quarter operating earnings were $20.2 million, decreasing $1.3 million linked quarter. Net interest margin of 3.11 percent decreased 7 basis points as funding cost increases outpaced loan yield expansion. However, our full year margin was steady at 3.27%. Operating non-interest income decreased by 5 percent linked quarter and increased 8 percent year-over-year. Non-interest expense increased 3 percent linked quarter on a GAAP basis and 2 percent on an operating basis.  We continue to improve oversight of our operating costs and are pursuing further efficiency improvements in 2024 while reinvesting in front-line revenue generating teams. Non-operating expenses of $3.7 million were primarily severance charges related to a workforce reduction. We sold lower-yielding securities with a market value of $267 million near period-end and proceeds were used to reduce borrowings by a similar amount. The securities sale resulted in a $25.1 million ($19.0 million after-tax) non-operating loss. Total shareholders' equity was not impacted by the securities sale and our common equity Tier 1 ratio remained a healthy 12.0% percent at year-end."

The Board of Directors has authorized the repurchase of $40 million of common stock through December 31, 2024. This would result in the repurchase of approximately 4% of outstanding shares based on the current share price.

			_ __ ___As of and For the Three Months Ended_________
			Dec. 31, 2023		Sep. 30, 2023		Dec. 31, 2022
Asset Quality
Net loan charge-offs to average loans			0.20 %		0.24 %		0.58 %
Non-performing loans to total loans			0.24 %		0.30 %		0.37 %
Returns
Return on average assets			(0.05) %		0.66 %		1.10 %
Return on tangible common equity,    including unrealized losses on AFS securities 1			(0.24) %		8.45 %		13.36 %
Return on tangible common equity,    excluding unrealized losses on AFS securities 1			(0.18) %		6.76 %		10.59 %
Capital Ratios2
Tangible common equity/tangible assets1			8.0 %		7.7 %		8.0 %
Tier 1 leverage			9.6 %		9.8 %		10.2 %
Common equity Tier 1			12.0 %		12.1 %		12.4 %
Tier 1 risk-based			12.3 %		12.3 %		12.6 %
Total risk-based			14.4 %		14.4 %		14.6 %
1. See non-GAAP measures and reconciliation to GAAP beginning on beginning on page 12. All performance ratios are annualized and are based on average balance sheet amounts, where applicable. 2. Presented as estimated for December 31, 2023 and actual for the remaining periods.

Berkshire Hills Bancorp, Inc. (NYSE: BHLB) is the parent company of Berkshire Bank, a relationship-driven, community-focused bank with $12.4 billion in assets and 96 financial centers in New England and New York. Berkshire is headquartered in Boston and offers commercial, retail, wealth, and private banking solutions.

4Q 2023 Financial Highlights

Income Statement

• GAAP loss of $1.4 million, or $(0.03) per share.
• Operating earnings totaled $20.2 million, or $0.47 per share.
• Net interest income totaled $88.4 million in 4Q23 compared to $90.3 million in 3Q23.
• Net interest margin decreased 7 basis points from 3Q23 to 3.11% reflecting:
  • Includes higher deposit costs (increase of 30 basis points).
• Higher cost of funds (increase of 17 basis points).
• Higher yields on the loan portfolio (increase of 9 basis points).
• Provision for credit losses on loans totaled $7.0 million.
• Allowance for credit losses on loans increased $2.6 million.
• Net loan charge-offs totaled $4.4 million.
• Net annualized loan charge-off ratio of 0.20%.
• Non-interest income excluding the $25.1 million loss on sale of AFS securities totaled $16.7 million in 4Q23 compared to $17.5 million in 3Q23.
• Deposit related fee revenue decreased $311 thousand.
• Loan related fees decreased $821 thousand primarily due to lower swap revenue.
• Gain on SBA loan sales decreased $166 thousand.
• Wealth management revenue decreased $87 thousand. At December 31, 2023, wealth assets under management were $1.4 billion.
• Other non-interest income decreased $641 thousand due to higher tax credit amortization.
• Non-interest expense in 4Q23 totaled $79.0 million on a GAAP basis and $75.3 million on an operating basis. These measures were $76.5 million and $73.9 million in 3Q23.
• Non-operating expense totaled $3.7 million in 4Q23, and was primarily severance charges related to a workforce reduction.
• Compensation and benefits expense decreased $60 thousand.
• Occupancy and equipment expense decreased $263 thousand.
• Technology and communications expense increased $710 thousand.
• Professional services expense increased $994 thousand.
• The efficiency ratio was 67.8% for 4Q23 compared to 65.1% for 3Q23.
• Income tax expense was a benefit of $4.5 million in 4Q23, including a $7.1 million credit related to net non-operating items. The effective tax rate was 11.1% for the year 2023 compared to 18.7% for the year 2022.

Loans

• Commercial real estate loans totaled $4.5 billion at December 31, 2023, a $73 million increase from September 30, 2023.
  
  • Average commercial real estate loans totaled $4.5 billion in 4Q23, an $84 million increase from 3Q23.
    
• Commercial and industrial loans totaled $1.4 billion at December 31, 2023, a $31 million decrease from September 30, 2023.
  
  • Average commercial and industrial loans totaled $1.4 billion in 4Q23, a $69 million decrease from 3Q23.
• Residential mortgage loans totaled $2.7 billion at December 31, 2023, a $32 million increase from September 30, 2023.
  
  • Average residential mortgage loans totaled $2.7 billion in 4Q23, a $38 million increase from 3Q23.
    
• Consumer loans totaled $487 million at December 31, 2023, a $19 million decrease from September 30, 2023.
  
  • Average consumer loans totaled $498 million in 4Q23, a $15 million decrease from 3Q23.
• Non-performing loans to total loans was 0.24% at December 31, 2023 compared to 0.30% at September 30, 2023.
  
• The allowance for credit losses to total loans was 1.17% at December 31, 2023, compared to 1.14% at September 30, 2023.

Deposits

• Non-interest bearing deposits totaled $2.5 billion at December 31, 2023, a $61 million decrease from September 30, 2023.  
• Average non-interest bearing deposits totaled $2.5 billion in 4Q23, a $65 million decrease from 3Q23.
• Time deposits totaled $2.7 billion at December 31, 2023, a $241 million increase from September 30, 2023.
• Average time deposits totaled $2.6 billion in 4Q23, a $118 million increase from 3Q23.

4Q 2023 Corporate Responsibility Highlights

• Berkshire was named one of America's Best Regional Banks by Newsweek and listed in the Human Rights Campaign's Corporate Equality Index. 
• Berkshire maintained its top quartile ESG rating performance and announced an innovative new partnership between Berkshire Bank's Center for Women, Wellness & Wealth and the Massachusetts General Hospital's Dementia Care Collaborative.  
• Berkshire implemented a climate risk management program to strengthen governance of climate matters and achieved 100% renewable electricity use at its premises as of year-end.  

Conference Call and Investor Presentation. Berkshire will conduct a conference call/webcast at 9:00 a.m. eastern time on Thursday, January 25, 2024 to discuss results for the quarter and provide guidance about expected future results. Instructions for listening to the call may be found at the Company's website at ir.berkshirebank.com. Additional materials relating to the call may also be accessed at this website. The call will be archived at the website and will be available for an extended period of time.

Forward Looking Statements:  This document contains "forward-looking statements" within the meaning of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. You can identify these statements from the use of the words "may," "will," "should," "could," "would," "plan," "potential," "estimate," "project," "believe," "intend," "anticipate," "expect," "remain," "target" and similar expressions. There are many factors that could cause actual results to differ significantly from expectations described in the forward-looking statements. For a discussion of such factors, please see Berkshire's most recent reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission and available on the SEC's website at www.sec.gov. You should not place undue reliance on forward-looking statements, which reflect our expectations only as of the date of this document. Berkshire does not undertake any obligation to update forward-looking statements.

INVESTOR CONTACT
Kevin Conn
Investor Relations
617.641.9206
kaconn@berkshirebank.com

MEDIA CONTACT
Gary Levante
Corporate Communications
413.447.1737
glevante@berkshirebank.com

BERKSHIRE HILLS BANCORP, INC.
SELECTED FINANCIAL HIGHLIGHTS (1)
				At or for the Quarters Ended
				Dec. 31,		Sept. 30,		June 30,		March 31,		Dec. 31,
				2023		2023		2023		2023		2022
	NOMINAL AND PER SHARE DATA
		Net (loss)/earnings per common share, diluted		$   (0.03)		$     0.45		$     0.55		$      0.63		$     0.69
		Operating earnings per common share, diluted (2)(3)		0.47		0.50		0.55		0.63		0.64
		Net (loss)/income, (thousands)		(1,445)		19,545		23,861		27,637		30,505
		Operating net income, (thousands) (2)(3)		20,190		21,516		23,878		27,608		28,254
		Net interest income, (thousands) non FTE		88,421		90,334		92,759		97,533		102,092
		Net interest income, FTE (5)		90,442		92,314		94,721		99,441		103,937
		Total common shares outstanding, end of period (thousands)		43,501		43,822		44,033		44,411		44,361
		Average diluted shares, (thousands)		43,101		43,347		43,532		44,036		44,484
		Total book value per common share, end of period		23.27		21.70		22.11		22.42		21.51
		Tangible book value per common share, end of period (2)(3)		22.82		21.23		21.60		21.89		20.95
		Dividends per common share		0.18		0.18		0.18		0.18		0.18
		Dividend payout ratio		(543.94)	%	40.56	%	33.47	%	28.98	%	26.59	%
	PERFORMANCE RATIOS (4)
		Return on equity, including unrealized losses on AFS securities		(0.60)	%	7.91	%	9.51	%	11.31	%	12.63	%
		Return on equity, excluding unrealized losses on AFS securities		(0.47)		6.35		7.82		9.11		10.06
		Operating return on equity, including unrealized losses on AFS securities (2)(3)		8.36		8.71		9.51		11.30		11.70
		Operating return on equity, excluding unrealized losses on AFS securities (2)(3)		6.51		6.99		7.82		9.10		9.32
		Return on tangible common equity, including unrealized losses on AFS securities (2)(3)		(0.24)		8.45		10.09		11.96		13.36
		Return on tangible common equity, excluding unrealized losses on AFS securities (2)(3)		(0.18)		6.76		8.26		9.59		10.59
		Operating return on tangible common equity, including unrealized losses on AFS securities (2)(3)		8.90		9.27		10.09		11.96		12.40
		Operating return on tangible common equity, excluding unrealized losses on AFS securities (2)(3)		6.91		7.41		8.27		9.59		9.83
		Return on assets		(0.05)		0.66		0.79		0.96		1.10
		Operating return on assets (2)(3)		0.68		0.73		0.79		0.95		1.02
		Net interest margin, FTE (5)		3.11		3.18		3.24		3.58		3.84
		Efficiency ratio (3)		67.77		65.05		63.57		59.51		58.25
	FINANCIAL DATA (in millions, end of period)
		Total assets		$ 12,431		$ 12,140		$ 12,090		$  12,320		$ 11,663
		Total earning assets		11,705		11,400		11,370		11,615		10,913
		Total loans		9,040		8,984		8,882		8,682		8,335
		Total deposits		10,633		9,981		10,068		10,068		10,327
		Loans/deposits (%)		85	%	90	%	88	%	86	%	81	%
		Total accumulated other comprehensive (loss) net of tax, end of period		$    (143)		$    (218)		$    (186)		$     (159)		$    (181)
		Total shareholders' equity		1,012		951		973		995		954
	ASSET QUALITY
		Allowance for credit losses, (millions)		$      105		$      103		$      100		$         98		$        96
		Net charge-offs, (millions)		(4)		(5)		(6)		(7)		(12)
		Net charge-offs (QTD annualized)/average loans		0.20	%	0.24	%	0.26	%	0.32	%	0.58	%
		Provision (benefit)/expense, (millions)		$          7		$          8		$          8		$           9		$        12
		Non-performing assets, (millions)		24		29		31		29		33
		Non-performing loans/total loans		0.24	%	0.30	%	0.32	%	0.31	%	0.37	%
		Allowance for credit losses/non-performing loans		492		386		353		363		309
		Allowance for credit losses/total loans		1.17		1.14		1.13		1.13		1.15
	CAPITAL RATIOS
		Risk weighted assets, (millions)(6)		$   9,549		$   9,594		$   9,523		$    9,454		$   9,151
		Common equity Tier 1 capital to risk weighted assets (6)		12.0	%	12.1	%	12.1	%	12.1	%	12.4	%
		Tier 1 capital leverage ratio (6)		9.6		9.8		9.6		9.9		10.2
		Tangible common shareholders' equity/tangible assets (3)		8.0		7.7		7.9		7.9		8.0

	(1)	All financial tables presented are unaudited.
	(2)	Reconciliations of non-GAAP financial measures, including all references to operating and tangible amounts, appear on pages 13 and 14.
	(3)	Non-GAAP financial measure. Operating measurements are non-GAAP financial measures that are adjusted to exclude net non-operating charges primarily related to acquisitions and restructuring activities. See pages 13 and 14 for reconciliations of non-GAAP financial measures.
	(4)	All performance ratios are annualized and are based on average balance sheet amounts, where applicable.
	(5)	Fully taxable equivalent considers the impact of tax advantaged investment securities and loans.
	(6)	Presented as projected for December 31, 2023 and actual for the remaining periods.

 

BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
	December 31,	September 30,	December 31,
(in thousands)	2023	2023	2022
Assets
Cash and due from banks	$               148,148	$               120,634	$           145,342
Short-term investments	1,055,096	542,836	540,013
Total cash and cash equivalents	1,203,244	663,470	685,355
Trading securities, at fair value	6,142	6,171	6,708
Equity securities, at fair value	13,029	12,325	12,856
Securities available for sale, at fair value	1,022,285	1,260,391	1,423,200
Securities held to maturity, at amortized cost	543,351	552,981	583,453
Federal Home Loan Bank stock	22,689	38,912	7,219
Total securities	1,607,496	1,870,780	2,033,436
Less: Allowance for credit losses on investment securities	(68)	(69)	(91)
Net securities	1,607,428	1,870,711	2,033,345
Loans held for sale	2,237	2,342	4,311
Commercial real estate loans	4,527,012	4,453,573	4,095,079
Commercial and industrial loans	1,352,834	1,384,038	1,473,316
Residential mortgages	2,672,677	2,640,210	2,216,410
Consumer loans	487,163	506,556	550,504
Total loans	9,039,686	8,984,377	8,335,309
Less: Allowance for credit losses on loans	(105,357)	(102,792)	(96,270)
Net loans	8,934,329	8,881,585	8,239,039
Premises and equipment, net	68,915	70,042	85,217
Other intangible assets	19,664	20,869	24,483
Other assets	584,066	619,777	587,854
Assets held for sale	10,938	11,157	3,260
Total assets	$          12,430,821	$          12,139,953	$      11,662,864
Liabilities and shareholders' equity
Non-interest bearing deposits	$            2,469,164	$            2,530,441	$        2,852,127
NOW and other deposits	858,644	843,032	1,054,596
Money market deposits	3,565,516	3,075,307	3,723,570
Savings deposits	1,053,810	1,086,329	1,063,269
Time deposits	2,686,250	2,445,435	1,633,707
Total deposits	10,633,384	9,980,544	10,327,269
Federal Home Loan Bank advances	385,223	804,295	4,445
Subordinated borrowings	121,363	121,300	121,064
Total borrowings	506,586	925,595	125,509
Other liabilities	278,630	282,805	256,024
Total liabilities	11,418,600	11,188,944	10,708,802
Common shareholders' equity	1,012,221	951,009	954,062
Total shareholders' equity	1,012,221	951,009	954,062
Total liabilities and shareholders' equity	$          12,430,821	$          12,139,953	$      11,662,864

 

BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
	Three Months Ended				Years Ended
	December 31,				December 31,
(in thousands, except per share data)	2023		2022		2023		2022
Interest income	$        150,537		$        121,384		$         576,299		$          387,257
Interest expense	62,116		19,292		207,252		42,660
Net interest income, non FTE	88,421		102,092		369,047		344,597
Non-interest income
Deposit related fees	8,481		8,293		34,155		32,026
Loan related fees	2,058		2,123		10,595		9,467
Gain on SBA loan sales	2,382		2,979		10,334		12,494
Wealth management fees	2,394		2,255		10,197		10,008
Other	591		(159)		2,045		6,973
Total non-interest income excluding (losses)/gains	15,906		15,491		67,326		70,968
Fair value adjustments on securities	768		163		513		(2,037)
(Loss)/gain on sale of AFS securities	(25,057)		-		(25,057)		6
Total non-interest income	(8,383)		15,654		42,782		68,937
Total net revenue	80,038		117,746		411,829		413,534
Provision expense for credit losses	7,000		12,000		31,999		11,000
Non-interest expense
Compensation and benefits	40,095		37,968		159,281		152,741
Occupancy and equipment	8,553		9,431		35,718		37,638
Technology and communications	11,326		9,729		41,878		35,586
Professional services	3,417		3,153		11,643		12,043
Other expenses	11,932		12,350		46,727		41,799
Merger, restructuring and other non-operating expenses	3,669		(2,617)		6,261		8,909
Total non-interest expense	78,992		70,014		301,508		288,716
Total non-interest expense excluding merger, restructuring and other	75,323		72,631		295,247		279,807
Income before income taxes	$          (5,954)		$          35,732		$           78,322		$          113,818
Income tax (benefit)/expense	(4,509)		5,227		8,724		21,285
Net (loss)/income	$          (1,445)		$          30,505		$           69,598		$            92,533
Basic (loss)/earnings per common share	$            (0.03)		$              0.69		$               1.61		$                2.03
Diluted (loss)/earnings per common share	$            (0.03)		$              0.69		$               1.60		$                2.02
Weighted average shares outstanding:
Basic	42,852		44,105		43,288		45,564
Diluted	43,101		44,484		43,504		45,914

 

BERKSHIRE HILLS BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (5 Quarter Trend)
		Dec. 31,		Sept. 30,		June 30,		March 31,		Dec. 31,
(in thousands, except per share data)		2023		2023		2023		2023		2022
Interest income		$     150,537		$     148,021		$     145,425		$     132,316		$     121,384
Interest expense		62,116		57,687		52,666		34,783		19,292
Net interest income, non FTE		88,421		90,334		92,759		97,533		102,092
Non-interest income
Deposit related fees		8,481		8,792		8,571		8,311		8,293
Loan related fees		2,058		2,879		3,189		2,469		2,123
Gain on SBA loan sales		2,382		2,548		2,910		2,494		2,979
Wealth management fees		2,394		2,481		2,583		2,739		2,255
Other		591		1,232		(137)		359		(159)
Total non-interest income excluding (losses)/gains		15,906		17,932		17,116		16,372		15,491
Fair value adjustments on securities		768		(467)		(22)		234		163
Loss on sale of AFS securities		(25,057)		-		-		-		-
Total non-interest income		(8,383)		17,465		17,094		16,606		15,654
Total net revenue		80,038		107,799		109,853		114,139		117,746
Provision expense for credit losses		7,000		8,000		8,000		8,999		12,000
Non-interest expense
Compensation and benefits		40,095		40,155		39,960		39,071		37,968
Occupancy and equipment		8,553		8,816		8,970		9,379		9,431
Technology and communications		11,326		10,616		10,465		9,471		9,729
Professional services		3,417		2,423		2,526		3,277		3,153
Other expenses		11,932		11,896		12,106		10,793		12,350
Merger, restructuring and other non-operating expenses		3,669		2,607		21		(36)		(2,617)
Total non-interest expense		78,992		76,513		74,048		71,955		70,014
Total non-interest expense excluding merger, restructuring and other		75,323		73,906		74,027		71,991		72,631
Income before income taxes		$       (5,954)		$       23,286		$       27,805		$       33,185		$       35,732
Income tax (benefit)/expense		(4,509)		3,741		3,944		5,548		5,227
Net (loss)/income		$       (1,445)		$       19,545		$       23,861		$       27,637		$       30,505
Diluted (loss)/earnings per common share		$         (0.03)		$           0.45		$           0.55		$           0.63		$           0.69
Weighted average shares outstanding:
Basic		42,852		43,164		43,443		43,693		44,105
Diluted		43,101		43,347		43,532		44,036		44,484

 

BERKSHIRE HILLS BANCORP, INC.
AVERAGE BALANCES AND AVERAGE YIELDS AND COSTS
	Quarters Ended
		December 31, 2023					September 30, 2023					December 31, 2022
(in millions)		Average Balance	Interest (1)	Average Yield/Rate			Average Balance	Interest (1)	Average Yield/Rate			Average Balance	Interest (1)	Average Yield/Rate
Assets
Commercial real estate		$         4,469	$         74	6.45	%		$         4,385	$         71	6.32	%		$         3,934	$         55	5.46	%
Commercial and industrial loans		1,367	26	7.60			1,436	27	7.48			1,471	25	6.62
Residential mortgages		2,656	27	4.06			2,618	26	3.97			2,114	19	3.56
Consumer loans		498	9	7.31			513	9	7.33			563	10	7.00
Total loans		8,990	136	5.97			8,952	133	5.88			8,082	109	5.28
Securities (2)		2,080	12	2.40			2,171	13	2.40			2,294	13	2.20
Short-term investments and loans HFS		350	4	4.22			267	3	4.76			267	2	3.05
Total earning assets		11,420	152	5.26			11,390	149	5.19			10,643	123	4.56
Goodwill and other intangible assets		20					21					25
Other assets		422					449					406
Total assets		$         11,862					$         11,860					11,074
Liabilities and shareholders' equity
Non-interest-bearing demand deposits		$         2,488	$         0	-	%		$         2,553	$         0	-	%		$         2,876	$         0	-	%
NOW and other		833	3	1.38			858	2	1.15			1,395	4	1.11
Money market		2,995	23	3.08			2,697	18	2.69			2,819	8	1.16
Savings		1,062	2	0.90			1,082	2	0.77			1,086	-	0.03
Time		2,558	25	3.77			2,440	22	3.43			1,555	5	1.21
Total deposits		9,936	53	2.11			9,630	44	1.81			9,731	17	0.69
Borrowings (3)		668	9	5.45			1,010	14	5.32			169	2	5.56
Total funding liabilities		10,604	62	2.32			10,640	58	2.15			9,900	19	0.77
Other liabilities		292					232					208
Total liabilities		10,896					10,872					10,108
Common shareholders' equity (4)		966					988					966
Total shareholders' equity		966					988					966
Total liabilities and shareholders' equity		$         11,862					$         11,860					11,074
Net interest margin, FTE				3.11					3.18					3.84
Supplementary data
Net Interest Income, non FTE		88.421					90.334					102.092
FTE income adjustment		2.021					1.980					1.845
Net Interest Income, FTE		90.442					92.314					103.937

(1)  Interest income and expense presented on a fully taxable equivalent basis.

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

(3) Average balances for borrowings includes the financing lease obligation which is presented under other liabilities on the consolidated balance sheet.

(4) Unrealized gains and losses, net of tax, are included in average equity. Prior period balances and financial metrics have been updated to reflect the current presentation.

 

BERKSHIRE HILLS BANCORP, INC.
ASSET QUALITY ANALYSIS
	At or for the Quarters Ended
	Dec. 31,		Sept. 30,		June 30,		March 31,		Dec. 31,
(in thousands)	2023		2023		2023		2023		2022
NON-PERFORMING ASSETS
Commercial real estate	$             4,453		$             5,288		$             1,509		$             2,546		$             2,434
Commercial and industrial loans	8,712		11,028		15,597		12,155		17,023
Residential mortgages	6,404		8,060		8,722		9,442		8,612
Consumer loans	1,838		2,260		2,560		2,848		3,045
Total non-performing loans	21,407		26,636		28,388		26,991		31,114
Repossessed assets	2,601		2,548		2,549		2,462		2,209
Total non-performing assets	$           24,008		$           29,184		$           30,937		$           29,453		$           33,323
Total non-performing loans/total loans	0.24 %		0.30 %		0.32 %		0.31 %		0.37 %
Total non-performing assets/total assets	0.19 %		0.24 %		0.26 %		0.24 %		0.29 %
PROVISION AND ALLOWANCE FOR CREDIT LOSSES ON LOANS
Balance at beginning of period	$         102,792		$         100,219		$           97,991		$           96,270		$           96,013
Adoption of ASU No. 2022-02	-		-		-		(401)		-
Balance after adoption of ASU No. 2022-02	102,792		100,219		97,991		95,869		96,013
Charged-off loans	(6,891)		(6,744)		(7,686)		(7,936)		(12,995)
Recoveries on charged-off loans	2,456		1,317		1,914		1,059		1,252
Net loans charged-off	(4,435)		(5,427)		(5,772)		(6,877)		(11,743)
Provision (benefit)/expense for loan credit losses	7,000		8,000		8,000		8,999		12,000
Balance at end of period	$         105,357		$         102,792		$         100,219		$           97,991		$           96,270
Allowance for credit losses/total loans	1.17 %		1.14 %		1.13 %		1.13 %		1.15 %
Allowance for credit losses/non-performing loans	492 %		386 %		353 %		363 %		309 %
NET LOAN CHARGE-OFFS
Commercial real estate	$                316		$                  97		$                664		$                122		$                187
Commercial and industrial loans	(2,309)		(3,345)		(4,146)		(5,695)		(10,914)
Residential mortgages	55		23		(143)		305		192
Home equity	83		208		126		16		(128)
Auto and other consumer	(2,580)		(2,410)		(2,273)		(1,625)		(1,080)
Total, net	$           (4,435)		$           (5,427)		$           (5,772)		$           (6,877)		$         (11,743)
Net charge-offs (QTD annualized)/average loans	0.20 %		0.24 %		0.26 %		0.32 %		0.58 %
Net charge-offs (YTD annualized)/average loans	0.26 %		0.28 %		0.29 %		0.32 %		0.27 %
DELINQUENT AND NON-PERFORMING LOANS	Balance	Percent of Total Loans	Balance	Percent of Total Loans	Balance	Percent of Total Loans	Balance	Percent of Total Loans	Balance	Percent of Total Loans
30-89 Days delinquent	$           22,140	0.24 %	$           18,700	0.21 %	$           15,147	0.17 %	$           14,210	0.16 %	$           12,162	0.15 %
90+ Days delinquent and still accruing	5,537	0.06 %	5,744	0.06 %	7,812	0.09 %	6,937	0.08 %	7,038	0.08 %
Total accruing delinquent loans	27,677	0.30 %	24,444	0.27 %	22,959	0.26 %	21,147	0.24 %	19,200	0.23 %
Non-performing loans	21,407	0.24 %	26,636	0.30 %	28,399	0.32 %	26,991	0.31 %	31,114	0.37 %
Total delinquent and non-performing loans	$           49,084	0.54 %	$           51,080	0.57 %	$           51,358	0.58 %	$           48,138	0.55 %	$           50,314	0.60 %

NON-GAAP FINANCIAL MEASURES

This document contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles ("GAAP"). These non-GAAP measures are intended to provide the reader with additional supplemental perspectives on operating results, performance trends, and financial condition. 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. A reconciliation of non-GAAP financial measures to GAAP measures is provided below. 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 operating earnings can be of substantial importance to the Company's results for any particular quarter or year. 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. The Company utilizes the non-GAAP measure of operating earnings in evaluating operating trends, including components for operating revenue and expense. These measures exclude amounts which the Company views as unrelated to its normalized operations. These items primarily include restructuring costs. Restructuring costs generally consist of costs and losses associated with the disposition of assets and liabilities and lease terminations, including costs related to branch consolidations. The Company also calculates operating earnings per share based on its measure of operating earnings and diluted common shares. The Company views these amounts as important to understanding its operating trends, particularly due to the impact of accounting standards related to merger and acquisition activity. Analysts also rely on these measures in estimating and evaluating the Company's performance. Adjustments in 2023 were primarily related to branch consolidations, severance charges related to a workforce reduction, and loss on sale of AFS securities. Expense adjustments in 2022 were primarily related to branch consolidations. For 2022, fair value adjustments on securities were primarily due to unrealized equity securities losses due to changes in market conditions. Starting March 31, 2023 fair value adjustments on securities are included in operating income. Management 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. The Company also adjusts certain equity related measures to exclude intangible assets due to the importance of these measures to the investment community.

 

BERKSHIRE HILLS BANCORP, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA
		At or for the Quarters Ended
			Dec. 31,		Sept. 30,		June 30,		March 31,		Dec. 31,
(in thousands)			2023		2023		2023		2023		2022
Total non-interest income			$      (8,383)		$      17,465		$      17,094		$      16,606		$      15,654
Adj: Fair value adjustments on securities (1)			-		-		-		-		(163)
Adj: Loss on sale of AFS securities			25,057		-		-		-		-
Total operating non-interest income (2)			$      16,674		$      17,465		$      17,094		$      16,606		$      15,491
Total revenue	(A)		$      80,038		$    107,799		$    109,853		$    114,139		$    117,746
Adj: Fair value adjustments on securities (1)			-		-		-		-		(163)
Adj: Loss on sale of AFS securities			25,057		-		-		-		-
Total operating revenue (2)	(B)		$    105,095		$    107,799		$    109,853		$    114,139		$    117,583
Total non-interest expense	(C)		$      78,992		$      76,513		$      74,048		$      71,955		$      70,014
Adj: Merger, restructuring and other non-operating expenses			(3,669)		(2,607)		(21)		36		2,617
Operating non-interest expense (2)	(D)		$      75,323		$      73,906		$      74,027		$      71,991		$      72,631
Pre-tax, pre-provision net revenue (PPNR)	(A-C)		$        1,046		$      31,286		$      35,805		$      42,184		$      47,732
Operating pre-tax, pre-provision net revenue (PPNR) (2)	(B-D)		29,772		33,893		35,826		42,148		44,952
Net (loss)/income			$      (1,445)		$      19,545		$      23,861		$      27,637		$      30,505
Adj: Fair value adjustments on securities (1)			-		-		-		-		(163)
Adj: Loss on sale of AFS securities			25,057		-		-		-		-
Adj: Restructuring expense and other non-operating expenses			3,669		2,607		21		(36)		(2,617)
Adj: Income taxes (expense)/benefit			(7,091)		(636)		(4)		7		529
Total operating income (2)	(E)		$      20,190		$      21,516		$      23,878		$      27,608		$      28,254
(in millions, except per share data)
Total average assets	(F)		$      11,862		$      11,860		$      12,057		$      11,569		$      11,074
Total average shareholders' equity, including unrealized losses on AFS securities	(G)		966		988		1,004		978		966
Total average shareholders' equity, excluding unrealized losses on AFS securities	(H)		1,240		1,231		1,221		1,214		1,213
Total average tangible shareholders' equity, including unrealized losses on AFS securities (2)	(I)		946		967		981		954		941
Total average tangible shareholders' equity, excluding unrealized losses on AFS securities (2)	(J)		1,220		1,210		1,198		1,190		1,188
Total accumulated other comprehensive (loss) net of tax, end of period			(143)		(218)		(186)		(159)		(181)
Total tangible shareholders' equity, end of period (2)	(K)		993		930		951		972		930
Total tangible assets, end of period (2)	(L)		12,411		12,119		12,068		12,297		11,638
Total common shares outstanding, end of period (thousands)	(M)		43,501		43,822		44,033		44,411		44,361
Average diluted shares outstanding (thousands)	(N)		43,101		43,347		43,532		44,036		44,484
Earnings per common share, diluted (2)			$        (0.03)		$          0.45		$          0.55		$          0.63		$          0.69
Operating earnings per common share, diluted (2)	(E/N)		0.47		0.50		0.55		0.63		0.64
Tangible book value per common share, end of period (2)	(K/M)		22.82		21.23		21.60		21.89		20.95
Total tangible shareholders' equity/total tangible assets (2)	(K/L)		8.00		7.68		7.88		7.91		7.99
Performance ratios (3)
Return on equity, including unrealized losses on AFS securities			(0.60)	%	7.91	%	9.51	%	11.31	%	12.63	%
Return on equity, excluding unrealized losses on AFS securities			(0.47)		6.35		7.82		9.11		10.06
Operating return on equity, including unrealized losses on AFS securities (2)	(E/G)		8.36		8.71		9.51		11.30		11.70
Operating return on equity, excluding unrealized losses on AFS securities	(E/H)		6.51		6.99		7.82		9.10		9.32
Return on tangible common equity, including unrealized losses on AFS securities (2)(4)			(0.24)		8.45		10.09		11.96		13.36
Return on tangible common equity, excluding unrealized losses on AFS securities (2)(4)			(0.18)		6.76		8.26		9.59		10.59
Operating return on tangible common equity, including unrealized losses on AFS securities (2)(4)	(E+Q)/(I)		8.90		9.27		10.09		11.96		12.40
Operating return on tangible common equity, excluding unrealized losses on AFS securities (2)(4)	(E+Q)/(J)		6.91		7.41		8.27		9.59		9.83
Return on assets			(0.05)		0.66		0.79		0.96		1.10
Operating return on assets (2)	(E/F)		0.68		0.73		0.79		0.95		1.02
Efficiency ratio (2)	(D-Q)/(B+O+R)		67.77		65.05		63.57		59.51		58.25
Supplementary data (in thousands)
Tax benefit on tax-credit investments (5)	(O)		$        2,252		$        1,979		$        2,735		$        2,897		$        3,068
Non-interest income tax-credit investments amortization (6)	(P)		(2,060)		(1,463)		(2,210)		(2,285)		(2,355)
Net income on tax-credit investments	(O+P)		193		516		525		612		713
Intangible amortization	(Q)		$        1,205		$        1,205		$        1,205		$        1,205		$        1,277
Fully taxable equivalent income adjustment	(R)		2,021		1,980		1,962		1,908		1,845

(1) Starting March 31, 2023, fair value adjustments on securities are included in operating income.

(2) Non-GAAP financial measure.

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

(4) Amortization of intangible assets is adjusted assuming a 27% marginal tax rate.

(5) The tax benefit is the direct reduction to the income tax provision due to tax credit investments.

(6) The non-interest income amortization is the reduction to the tax-advantaged investments and are incurred as the tax credits are generated.

 

BERKSHIRE HILLS BANCORP, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES AND SUPPLEMENTARY DATA- UNAUDITED
		At or for the Years Ended
			Dec. 31,		Dec. 31,
(in thousands)			2023		2022
Total non-interest income			$                  42,782		$                  68,937
Adj: Fair value adjustments on securities (1)			-		2,037
Adj: Loss on sale of AFS securities			25,057		(6)
Total operating non-interest income (2)			$                  67,839		$                  70,968
Total revenue	(A)		$                411,829		$                413,534
Adj: Fair value adjustments on securities (1)			-		2,037
Adj: Loss/(gain) on sale of AFS securities			25,057		(6)
Total operating revenue (2)	(B)		$                436,886		$                415,565
Total non-interest expense	(C)		$                301,508		$                288,716
Less: Merger, restructuring and other non-operating expenses			(6,261)		(8,909)
Operating non-interest expense (2)	(D)		$                295,247		$                279,807
Pre-tax, pre-provision net revenue (PPNR)	(A-C)		$                110,321		$                124,818
Operating pre-tax, pre-provision net revenue (PPNR) (2)	(B-D)		141,639		135,758
Net income			$                  69,598		$                  92,533
Adj: Fair value adjustments on securities (1)			-		2,037
Adj: Loss/(gain) on sale of AFS securities			25,057		(6)
Adj: Restructuring expense and other non-operating expenses			6,261		8,909
Adj: Income taxes (expense)/benefit			(7,723)		(2,940)
Total operating income (2)	(E)		$                  93,193		$                100,533
(in millions, except per share data)
Total average assets	(F)		$                  11,838		$                  11,216
Total average shareholders' equity, including unrealized losses on AFS securities	(G)		984		1,063
Total average shareholders' equity, excluding unrealized losses on AFS securities	(H)		1,226		1,193
Total average tangible shareholders' equity, including unrealized losses on AFS securities (2)	(I)		962		1,036
Total average tangible shareholders' equity, excluding unrealized losses on AFS securities (2)	(J)		1,204		1,166
Total accumulated other comprehensive (loss) net of tax, end of period			(143)		(181)
Total tangible shareholders' equity, end of period (2)	(K)		993		930
Total tangible assets, end of period (2)	(L)		12,411		11,638
Total common shares outstanding, end of period (thousands)	(M)		43,501		44,361
Average diluted shares outstanding (thousands)	(N)		43,504		45,914
Earnings/(loss) per common share, diluted (2)			$                      1.60		$                      2.02
Operating earnings per common share, diluted (2)	(E/N)		2.14		2.19
Tangible book value per common share, end of period (2)	(K/M)		22.82		20.95
Total tangible shareholders' equity/total tangible assets (2)	(K/L)		8.00		7.99
Performance ratios (3)
Return on equity, including unrealized losses on AFS securities			7.07	%	8.70	%
Return on equity, excluding unrealized losses on AFS securities			5.68		7.76
Operating return on equity, including unrealized losses on AFS securities (2)	(E/G)		9.47		9.46
Operating return on equity, excluding unrealized losses on AFS securities (2)	(E/H)		7.60		8.43
Return on tangible common equity, including unrealized losses on AFS securities (2)(4)			7.60		9.29
Return on tangible common equity, excluding unrealized losses on AFS securities (2)(4)			6.07		8.26
Operating return on tangible common equity, including unrealized losses on AFS securities (2)(4)	(E+Q)/(I)		10.05		10.07
Operating return on tangible common equity, excluding unrealized losses on AFS securities (2)(4)	(E+Q)/(J)		8.03		8.94
Return on assets			0.59		0.82
Operating return on assets (2)	(E/F)		0.79		0.90
Efficiency ratio (2)	(D-Q)/(B+O+R)		63.88		64.31
Net interest margin, FTE			3.27		3.26
Supplementary data (in thousands)
Tax benefit on tax-credit investments (5)	(O)		$                    9,863		$                    4,880
Non-interest income charge on tax-credit investments (6)	(P)		(8,018)		(3,508)
Net income on tax-credit investments	(O+P)		1,845		1,372
Intangible amortization	(Q)		$                    4,820		$                    5,134
Fully taxable equivalent income adjustment	(R)		7,870		6,644

(1) Starting March 31, 2023, fair value adjustments on securities are included in operating income.

(2) Non-GAAP financial measure.

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

(4) Amortization of intangible assets is adjusted assuming a 27% marginal tax rate.

(5) The tax benefit is the direct reduction to the income tax provision due to tax credit investments.

(6) The non-interest income amortization is the reduction to the tax-advantaged investments and are incurred as the tax credits are generated.

 

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SOURCE Berkshire Hills Bancorp, Inc.

FAQ

What is the ticker symbol for Berkshire Hills Bancorp, Inc.?

The ticker symbol for Berkshire Hills Bancorp, Inc. is BHLB.

What was the operating income in the fourth quarter?

The operating income in the fourth quarter was $20 million.

What was the net loan charge-offs and non-performing assets decrease in the fourth quarter?

The net loan charge-offs and non-performing assets decreased by 18% linked quarter.

What was the TCE ratio in the fourth quarter?

The TCE ratio was 8.0% in the fourth quarter.