Berkshire Hills reports Q3 net income of $20 million, declares dividend

Operating Income of $22 Million, or $0.50 per Share

• Average loan growth of 2% linked quarter; average deposit growth of 1%
• Operating expense flat linked quarter
• Net loan charge-offs decreased $0.3 million linked quarter
• TCE ratio of 7.7% and CET1 ratio of 12.1%; stock repurchases were $4 million

Vermont Business Magazine Berkshire Hills Bancorp, Inc (NYSE: BHLB), parent of Berkshire Bank with branches in southern Vermont, has reported results for the third quarter of 2023. Berkshire Hills has also announced that its Board of Directors has approved a quarterly cash dividend of $0.18 per common share to shareholders of record at the close of business on November 16, 2023, payable on November 30, 2023. 

These results along with comparison periods are summarized below:

Berkshire CEO Nitin Mhatre stated, "We continue to make steady progress in a challenging interest rate environment. We posted modest balance sheet growth in the quarter and recorded higher year-to-date net income and operating earnings compared to last year. Economic activity continues to expand in our markets albeit at a slower pace, and our teams are generating attractive new business and improving the Bank's market position. We maintained strong asset quality, liquidity and capital levels, and continued expense optimization initiatives. During the quarter, we continued to recruit experienced talent following the industry disruption, and we also welcomed Mary Anne Callahan to our Board of Directors. Mary Anne brings a deep industry knowledge and has close familiarity with our markets."

CFO David Rosato added, "Third quarter operating earnings were $21.5 million, decreasing $2.4 million linked quarter.  Net interest margin of 3.18 percent decreased 6 basis points linked quarter, which improved from the 34 basis point decrease posted in the prior quarter.   Net interest income decreased $2.4 million, as funding cost increases outpaced loan yield expansion and average earning assets decreased 2%. Operating non-interest income advanced 2 percent quarter-over-quarter while operating non-interest expense was flat. GAAP non-interest expense included $2.6 million in non-operating restructuring charges primarily for branch consolidations.  I'm pleased that several of the cost saving initiatives we've instituted to-date are starting to have an impact and will continue to provide benefits in 2024 and beyond."

Headquartered in Boston, Berkshire Hills Bancorp is the parent of Berkshire Bank. Providing a wide range of financial solutions through its consumer banking, commercial banking and wealth management divisions, the Bank has approximately $12.1 billion in total assets and a community-based footprint of 96 financial centers in Massachusetts, New York, Vermont, Connecticut and Rhode Island. 

3Q 2023 Financial Highlights

Income Statement

• GAAP earnings totaled $19.5 million, or $0.45 per share.
  
  • Operating earnings totaled $21.5 million, or $0.50 per share.
• Net interest income totaled $90.3 million in 3Q23 compared to $92.8 million in 2Q23.
  
  • One additional calendar day in 3Q23 (1% increase in net interest income).
• Net interest margin decreased 6 basis points from 2Q23 to 3.18% reflecting:
  
  • Higher cost of funds (increase of 21 basis points).
  • Includes higher deposit costs (increase of 30 basis points).
  • Higher yields on the loan portfolio (increase of 11 basis points).
• Provision for credit losses on loans totaled $8.0 million.
  
  • Allowance for credit losses on loans increased $2.6 million.
  • Net loan charge-offs totaled $5.4 million.
  • Net annualized loan charge-off ratio of 0.24%.
• Non-interest income totaled $17.5 million in 3Q23 compared to $17.1 million in 2Q23.
  
  • Deposit related fee revenue increased $221 thousand.
  • Loan related non-interest revenue decreased $310 thousand.
  • Gain on SBA loan sales decreased $362 thousand.
  • Wealth management revenue decreased $102 thousand. At September 30, 2023, wealth assets under management were $1.4 billion.
  • Other non-interest income increased $1.4 million due primarily to lower tax credit amortization charges (offset by lower income tax benefit).
• Non-interest expense in 3Q23 totaled $76.5 million on a GAAP basis and $73.9 million on an operating basis. Both GAAP and operating non-interest expense in 2Q23 totaled $74.0 million.
  
  • Non-operating expense totaled $2.6 million in 3Q23, and was primarily related to the consolidation of four Massachusetts branches. 
  • Compensation and benefits expense increased $195 thousand.
  • Occupancy and equipment expense decreased $154 thousand.
  • Technology and communications expense increased $151 thousand.
  • Professional services expense decreased $103 thousand.
  • The efficiency ratio was 65.1% for 3Q23 compared to 63.6% for 2Q23.
• The effective income tax rate was 16.1% for 3Q23 and 15.7% for the first nine months of 2023 compared to 18.7% for the full year of 2022.

Loans

• Commercial real estate loans totaled $4.5 billion at September 30, 2023, a $138 million increase from June 30, 2023.
  
  • Average commercial real estate loans totaled $4.4 billion in 3Q23, a $102 million increase from 2Q23.
• Commercial and industrial loans totaled $1.4 billion at September 30, 2023, an $81 million decrease from June 30, 2023.
  
  • Average commercial and industrial loans totaled $1.4 billion in 3Q23, a $60 million decrease from 2Q23.
• Residential mortgage loans totaled $2.6 billion at September 30, 2023, a $55 million increase from June 30, 2023.
   
  
  • Average residential mortgage loans totaled $2.6 billion in 3Q23, a $129 million increase from 2Q23.
• Consumer loans totaled $507 million at September 30, 2023, an $11 million decrease from June 30, 2023.
   
  
  • Average consumer loans totaled $513 million in 3Q23, an $11 million decrease from 2Q23.
• Non-performing loans to total loans was 0.30% at September 30, 2023 compared to 0.32% at June 30, 2023.
• The allowance for credit losses to total loans was 1.14% at September 30, 2023, compared to 1.13% at June 30, 2023

Deposits

• Non-interest bearing deposits totaled $2.5 billion at September 30, 2023, a $64 million decrease from June 30, 2023.  
  
  • Average non-interest bearing deposits totaled $2.6 billion in 3Q23, a $41 million decrease from 2Q23.
• Time deposits totaled $2.4 billion at September 30, 2023, $10 million increase from June 30, 2023.
  
  • Average time deposits totaled $2.4 billion in 3Q23, a $154 million increase from 2Q23.

3Q 2023 ESG & Corporate Responsibility Highlights

Berkshire is a performance and purpose-driven, values-guided, community-centered bank. Berkshire's corporate responsibility and sustainability activities are integral to its mission.

• Berkshire launched a new Down Payment Assistance Program to increase homeownership amongst low-to-moderate income and first-time homebuyers.
• Berkshire's annual Xtraordinary Day of Service featured 47 volunteer events in which more than 1,000 employees contributed 4,000 hours of service to lift-up local communities.
• Berkshire maintained its top quartile ESG rating performance and was named a Top Charitable Contributor by the Boston Business Journal for the 11^th consecutive year.

Conference Call and Investor Presentation.  Berkshire will conduct a conference call/webcast at 9:00 a.m. eastern time on Friday, October 20, 2023 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.

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. Expense adjustments in 2023 and 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.

SOURCE BOSTON, Nov 3 & Oct 20 2023 /PRNewswire/ -- Berkshire Hills Bancorp, Inc. Access more information about Berkshire Hills Bancorp at ir.berkshirebank.com.