Berkshire Hills Reports Fourth Quarter 2023 Results

News provided by

Berkshire Hills Bancorp, Inc.

Jan 25, 2024, 13:23 ET

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:
    • Higher cost of funds (increase of 17 basis points).
      • Includes higher deposit costs (increase of 30 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

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
[email protected]

MEDIA CONTACT
Gary Levante
Corporate Communications
413.447.1737
[email protected]

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. 

SOURCE Berkshire Hills Bancorp, Inc.