Here are three stocks added to the Zacks Rank #5 (Strong Sell) List today:Berkshire Hills Bancorp, Inc. (BHLB) is a bank holding company. The Zacks Consensus Estimate for its current year earnings has been revised 3.4% downward over the last 60 days.Blackstone Inc. (BX) is an alternative asset management firm specializing in real estate, private equity, hedge fund solutions. The Zacks Consensus Estimate for its current year earnings has been revised 7.5% downward over the last 60 days.CNX Resources Corporat ...

Financial Data and Key Metrics Changes - Operating net income for Q4 2023 was $20.2 million, with operating EPS of $0.47, a decline of 6% linked quarter primarily due to a decrease in net interest income [8][31] - Full year 2023 EPS was $2.14, down 2% year-over-year [8] - Net interest margin decreased to 3.11%, down 7 basis points linked quarter, and net interest income declined by $1.9 million or 2% [13][32] - Average loan balances increased by 11% year-over-year but were up less than 1% linked quarter due to lower loan demand [3][14] Business Line Data and Key Metrics Changes - Average deposits increased by $306 million or 3% linked quarter, driven by growth in money market and time deposits [18] - Operating non-interest income was $16.7 million, down 5% linked quarter, with several fee line items below historic quarterly run rates [13][19] - Average loans increased by $38 million linked quarter, with growth in commercial real estate and residential loans, while C&I and consumer loans declined [16] Market Data and Key Metrics Changes - The liquidity position remains robust, with available liquidity coverage of core uninsured deposits at 146% [3] - Non-interest-bearing deposits as a percentage of total deposits decreased to 25% in Q4 from 26% in Q3 [18] - Cumulative total deposit beta was 37% through 525 basis points of Fed tightening [18] Company Strategy and Development Direction - The company aims for expense optimization, deposit growth, and credit management as top priorities for 2024 [2] - Strategic focus includes optimizing the real estate and branch network, with plans to consolidate branches and exit non-strategic office spaces [30] - The company is committed to self-funding investments that support its vision of being a high-performing, relationship-focused community bank [2][30] Management's Comments on Operating Environment and Future Outlook - The management acknowledges a challenging operating environment due to historic increases in interest rates but remains focused on controlling internal factors [35][36] - There is optimism about future deposit growth and the potential for a more normalized banking environment in 2024 and 2025 [36] - The management emphasizes the importance of maintaining revenue generation capabilities while managing expenses [51][66] Other Important Information - The company incurred a severance charge of $3.7 million related to workforce reduction [2][144] - The Board has authorized a new share repurchase program of $40 million for 2024, with plans to continue opportunistic repurchases [24][44] - The company’s ESG score remains in the top quartile nationally, and it was recognized as one of the best regional banks [11] Q&A Session Summary Question: Can you elaborate on the impact of the repositioning on NII and margin? - The security sale occurred late in December and had no significant impact on Q4 margin, which was reported at 3.11% [51] Question: Are there any additional efficiency actions assumed in the expense guidance? - The company had a modest workforce reduction and is focused on targeted expense management as the year progresses [63][66] Question: What is the intrinsic value of the company? - The management believes the stock is undervalued and sees significant growth potential in the Eastern Massachusetts market [76] Question: How do you view the branch rationalization process? - The company plans to continue consolidating branches and optimizing its footprint based on customer service needs [112] Question: What are the plans for cannabis-related services? - Currently, the company is only providing deposit services related to cannabis, with deposit balances under $10 million [117]

Rate environment weighed on earnings1 3 4,385 4,469 1,436 84 38 1,367 2,618 2,656 513 498 3Q23 CRE C&I Resi Consumer 4Q23 8,952 -69 -15 8,990 +38 (+0.4%) CRE C&I Resi Consumer QoQ Accordingly, 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. | --- | --- | --- | --- | |----------------|--------------------------------------------------------- ...

Berkshire Hills Bancorp (BHLB) reported $125.48 million in revenue for the quarter ended December 2023, representing a year-over-year increase of 6.6%. EPS of $0.47 for the same period compares to $0.64 a year ago.The reported revenue compares to the Zacks Consensus Estimate of $109.05 million, representing a surprise of +15.07%. The company delivered an EPS surprise of -6.00%, with the consensus EPS estimate being $0.50.While investors closely watch year-over-year changes in headline numbers -- revenue and ...

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) ...

In its upcoming report, Berkshire Hills Bancorp (BHLB) is predicted by Wall Street analysts to post quarterly earnings of $0.50 per share, reflecting a decline of 21.9% compared to the same period last year. Revenues are forecasted to be $109.05 million, representing a year-over-year decrease of 7.4%.Over the past 30 days, the consensus EPS estimate for the quarter has remained unchanged. This demonstrates the covering analysts' collective reassessment of their initial projections during this period.Ahead o ...

BOSTON, Jan. 12, 2024 /PRNewswire/ -- The Berkshire Hills Bancorp, Inc. (NYSE: BHLB) fourth quarter 2023 earnings release and conference call are scheduled as follows:Earnings Release: Thursday, January 25, 2024, at approximately 7:30 a.m. (Eastern)Conference Call: Thursday, January 25, 2024, at 9:00 a.m. (Eastern)Webcast (listen-only): Register at: https://events.q4inc.com/attendee/627795005Dial-in Number: Toll Free: 888-259-6580; Conference ID: 33077376Webcast Replay: https://ir.berkshirebank.com (for the ...

PART I. FINANCIAL INFORMATION [Item 1. Consolidated Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(unaudited)) The unaudited consolidated financial statements present the company's financial position, operations, and cash flows, with total assets increasing to **$12.14 billion** and nine-month net income rising to **$71.0 million** Consolidated Balance Sheet Highlights (in thousands) | Metric | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $12,139,953 | $11,662,864 | | Net Loans | $8,881,585 | $8,239,039 | | Total Deposits | $9,980,544 | $10,327,269 | | Total Liabilities | $11,188,944 | $10,708,802 | | Total Shareholders' Equity | $951,009 | $954,062 | Consolidated Income Statement Highlights (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $90,334 | $92,084 | $280,626 | $242,505 | | Provision for Credit Losses | $8,000 | $3,000 | $24,999 | ($1,000) | | Net Income | $19,545 | $18,717 | $71,043 | $62,028 | | Diluted EPS | $0.45 | $0.42 | $1.63 | $1.34 | Consolidated Statements of Cash Flows Highlights (Nine Months Ended, in thousands) | Cash Flow Category | September 30, 2023 | September 30, 2022 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $104,706 | $88,227 | | Net Cash (Used) by Investing Activities | ($497,083) | ($922,467) | | Net Cash Provided by (Used in) Financing Activities | $412,262 | ($98,654) | | Net Change in Cash and Cash Equivalents | ($21,885) | ($932,894) | [Notes to Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies and financial statement breakdowns, revealing significant unrealized losses in the securities portfolio, growth in loans, increased credit loss allowance, a shift to higher-cost deposits, substantial FHLB borrowings, and capital ratios above regulatory minimums - The company adopted ASU No. 2022-02 regarding Troubled Debt Restructurings and Vintage Disclosures, which did not have a material impact on the financial statements[78](index=78&type=chunk)[107](index=107&type=chunk) Securities Portfolio Summary (Amortized Cost, in thousands) | Security Type | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Securities available for sale | $1,538,851 | $1,661,196 | | Securities held to maturity | $552,981 | $583,453 | - The company holds significant unrealized losses in its AFS and HTM portfolios but expects to recover the amortized cost basis and does not intend to sell these securities before recovery[119](index=119&type=chunk)[140](index=140&type=chunk) Loan Portfolio Composition (in thousands) | Loan Category | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Commercial (CRE, C&I, Construction) | $5,791,594 | $5,521,502 | | Residential real estate | $2,729,411 | $2,312,447 | | Consumer (Home equity, other) | $463,372 | $501,360 | | **Total Loans** | **$8,984,377** | **$8,335,309** | - The Allowance for Credit Losses on Loans (ACLL) increased to **$102.8 million** at September 30, 2023, from **$96.3 million** at year-end 2022, with the allowance as a percentage of total loans at **1.14%**[412](index=412&type=chunk)[471](index=471&type=chunk) - Total borrowings increased significantly to **$925.6 million** from **$125.5 million** at year-end 2022, primarily due to a **$670 million** increase in short-term FHLB advances[210](index=210&type=chunk)[237](index=237&type=chunk) Regulatory Capital Ratios (Company, Consolidated) | Ratio | September 30, 2023 | Minimum Requirement | | :--- | :--- | :--- | | Common equity tier 1 capital | 12.1% | 4.5% | | Tier 1 capital | 12.3% | 6.0% | | Total capital | 14.4% | 8.0% | | Tier 1 leverage | 9.8% | 4.0% | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=64&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%20(MD%26A)) Management attributes Q3 2023 results to a challenging interest rate environment, with declining net interest income and margin due to rising funding costs, strong loan growth funded by increased borrowings, higher provision for credit losses, and rising operating expenses, while maintaining strong capital and liquidity Q3 2023 vs Q3 2022 Performance | Metric | Q3 2023 | Q3 2022 | Change | | :--- | :--- | :--- | :--- | | Net Income (GAAP) | $19.5M | $18.7M | +4.3% | | Diluted EPS (GAAP) | $0.45 | $0.42 | +7.1% | | Operating Income (Non-GAAP) | $21.5M | $27.9M | -22.9% | | FTE Net Interest Income | $92.3M | $93.8M | -1.6% | | Net Interest Margin (FTE) | 3.18% | 3.48% | -30 bps | - The decrease in net interest margin was driven by a **149 basis point** increase in the cost of funding liabilities, which outpaced the **128 basis point** increase in the yield on earning assets[42](index=42&type=chunk)[434](index=434&type=chunk) - Total assets grew by **$477 million** since year-end 2022, primarily from a **$649 million** increase in loans, funded by an **$800 million** increase in borrowings offsetting a **$347 million** decrease in deposits[439](index=439&type=chunk)[452](index=452&type=chunk) - The provision for credit losses was **$8.0 million** in Q3 2023, up from **$3.0 million** in Q3 2022, mainly reflecting growth in the loan portfolio[412](index=412&type=chunk)[435](index=435&type=chunk) - The company's effective tax rate for Q3 2023 was **16.1%**, down from **20.9%** in Q3 2022, due to increased benefits from tax credit investments[450](index=450&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=80&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is Interest Rate Risk, with its profile shifting to modestly liability sensitive as of September 30, 2023, where a 100 basis point upward rate shift would decrease net interest income by **1.5%** and economic value of equity by **2.9%** - The company has shifted from a modestly asset-sensitive position at year-end 2022 to a modestly liability-sensitive position as of September 30, 2023[496](index=496&type=chunk) Net Interest Income (NII) Sensitivity Analysis | Parallel Interest Rate Shock (bps) | Estimated % Change in NII (Sep 30, 2023) | Estimated % Change in NII (Dec 31, 2022) | | :--- | :--- | :--- | | +200 | (3.1)% | 1.8% | | +100 | (1.5)% | 0.8% | | -100 | 1.2% | (1.6)% | Economic Value of Equity (EVE) Sensitivity Analysis | Parallel Rate Shock (bps) | Estimated % Change in EVE (Sep 30, 2023) | Estimated % Change in EVE (Dec 31, 2022) | | :--- | :--- | :--- | | +200 | (6.0)% | 0.0% | | +100 | (2.9)% | 0.0% | | -100 | 2.6% | (1.5)% | [Item 4. Controls and Procedures](index=82&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting during the quarter - The principal executive and financial officers concluded that the Company's disclosure controls and procedures were effective as of September 30, 2023[13](index=13&type=chunk) - No material changes to the Company's internal control over financial reporting occurred during the third quarter of 2023[489](index=489&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=83&type=section&id=Item%201.%20Legal%20Proceedings) The company is not involved in any material pending legal proceedings, though two non-material cases are disclosed: a wrongful termination suit proceeding to arbitration and a **$16.0 million** complaint against Pioneer Bank for alleged breaches of loan participation agreements - Management does not believe any pending legal proceedings are material to the Company's financial condition or results of operations[499](index=499&type=chunk) - A wrongful termination complaint by a former employee of subsidiary FCLS was dismissed by the court in favor of compelling arbitration, which is expected in the second half of 2023[9](index=9&type=chunk) - The Bank is in litigation with Pioneer Bank, seeking damages of approximately **$16.0 million** related to alleged breaches of loan participation agreements, with the Company writing down the credit loss in 2019 but recognizing a partial recovery of **$1.7 million** in 2020[14](index=14&type=chunk) [Item 1A. Risk Factors](index=84&type=section&id=Item%201A.%20Risk%20Factors) No new risk factors are disclosed in this report, with the company referring to those previously detailed in its 2022 Annual Report on Form 10-K and subsequent 10-Q filings - The report directs readers to the risk factors detailed in the Company's 2022 Annual Report on Form 10-K and subsequent 10-Q filings, indicating no material changes or additions in this period[15](index=15&type=chunk)[500](index=500&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities](index=85&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%20and%20Issuer%20Purchases%20of%20Equity%20Securities) During Q3 2023, the company had no unregistered security sales and repurchased **178,747** shares at an average price of **$20.02**, with **1,687,014** shares remaining available under the **$50 million** repurchase program - No unregistered securities were sold during the three months ended September 30, 2023[10](index=10&type=chunk) Issuer Purchases of Equity Securities (Q3 2023) | Period | Total Shares Purchased | Average Price Paid per Share | Maximum Shares Remaining for Purchase | | :--- | :--- | :--- | :--- | | July 1-31, 2023 | 7,821 | $20.36 | 1,857,940 | | August 1-31, 2023 | — | — | 1,857,940 | | September 1-30, 2023 | 170,926 | $20.00 | 1,687,014 | | **Total** | **178,747** | **$20.02** | **1,687,014** | - On January 25, 2023, the Board of Directors approved a stock repurchase program authorizing up to **$50 million** in share repurchases through December 31, 2023[17](index=17&type=chunk) [Item 3. Defaults Upon Senior Securities](index=85&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the reporting period - None[19](index=19&type=chunk) [Item 4. Mine Safety Disclosures](index=85&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[20](index=20&type=chunk) [Item 5. Other Information](index=85&type=section&id=Item%205.%20Other%20Information) During the third quarter of 2023, none of the company's directors or executive officers adopted or terminated any Rule 10b5-1 trading plans or any non-Rule 10b5-1 trading arrangements - No directors or executive officers adopted or terminated any Rule 10b5-1(c) trading plans or other non-Rule 10b5-1 trading arrangements during the third quarter of 2023[18](index=18&type=chunk) [Item 6. Exhibits](index=86&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the Amended and Restated Certificate of Incorporation, Bylaws, CEO and CFO certifications pursuant to the Sarbanes-Oxley Act, and financial statements formatted in Inline XBRL - The exhibits filed include CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906, and financial statements formatted in Inline XBRL[21](index=21&type=chunk)[24](index=24&type=chunk) [Signatures](index=87&type=section&id=Signatures) The report was duly signed on November 9, 2023, by Nitin J. Mhatre, President and Chief Executive Officer, and R. David Rosato, Senior Executive Vice President and Chief Financial Officer - The report was duly signed on November 9, 2023, by Nitin J. Mhatre, President and Chief Executive Officer, and R. David Rosato, Senior Executive Vice President and Chief Financial Officer[23](index=23&type=chunk)[34](index=34&type=chunk)[504](index=504&type=chunk)

Financial Data and Key Metrics Changes - Operating earnings for Q3 2023 were $21.5 million or $0.50 per fully diluted share, down $0.05 linked quarter and down $0.12 year-over-year [10] - Average loans increased by $161 million or 2% linked quarter, while average deposits increased by $62 million or 1% [11] - Net interest margin (NIM) was 3.18%, down 6 basis points linked quarter and down 30 basis points year-over-year [34] - Net interest income declined by $2.4 million or 3% linked quarter and was down $1.8 million or 2% year-over-year [34] Business Line Data and Key Metrics Changes - Average loan balances showed balanced growth across commercial and consumer loans [7] - Operating noninterest income was up 2% in the quarter and up 7% year-over-year [11] - Deposit-related fees increased by $221,000, while loan and other fees decreased by $310,000 [37] Market Data and Key Metrics Changes - Deposits were stable, up 1% linked quarter on an average balance basis, but down 1% on an end-of-period basis [4] - Noninterest-bearing deposits as a percentage of total average deposits decreased to 26% in Q3 from 27% in Q2 [13] - The deposit cost was 181 basis points, up 30 basis points from the second quarter [36] Company Strategy and Development Direction - The company is focused on rationalizing its real estate footprint, including the consolidation of four branches and the sale of one office building [31] - The company is committed to managing expenses with discipline and transparency, instituting biweekly meetings to review vendor expenses and hiring requests [16] - The company aims to improve its medium-term performance despite the current operating environment presenting headwinds [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability of the Northeast markets and acknowledged typical banking industry cyclicality issues such as NIM compression [20] - The company is focused on controlling its operational environment through opportunistic hiring and rigorous expense management [21] - Management expects credit costs to increase modestly but significantly lower than during the Global Financial Crisis [43] Other Important Information - The company repurchased $3.9 million of stock at an average cost of $20.01, believing its stock is undervalued [42] - The company’s ESG score remains in the top quartile at the 19th percentile nationally [9] - The company has added a new ROTCE calculation to align its reporting with peers [32] Q&A Session Summary Question: Should we expect more branch consolidations and restructuring charges in coming quarters? - Yes, the company is constantly evaluating opportunities for consolidation while retaining clients and bankers [45] Question: Where would you expect the effective rate to settle out? - The company anticipates a mid single-digit decline in NIM due to competitive pressures around deposits [26] Question: What are your thoughts on growing or shrinking tax credit investments over time? - The company is still working through tax credit investments and will provide more clarity in January [47] Question: What is your outlook on loan growth for the second half of the year? - The company expects to be on the lower end of the $9.2 billion to $9.4 billion target due to a slowdown in pipelines [71] Question: Can you provide updates on the overall office portfolio and market conditions? - The company has not seen early signs of weakness in the office portfolio and is monitoring credit quality closely [110]

Part I [Consolidated Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(unaudited)) Unaudited consolidated financial statements conform to US GAAP, include all necessary adjustments, and reflect the non-material impact of ASU No. 2022-02 adoption - Interim financial statements are prepared under US GAAP and should be read with the **2022 Annual Report on Form 10-K**[331](index=331&type=chunk)[351](index=351&type=chunk)[352](index=352&type=chunk) - Effective January 1, 2023, the Company adopted ASU No. 2022-02, eliminating the TDR accounting model, which **did not materially impact** financial statements[354](index=354&type=chunk)[379](index=379&type=chunk) [Note 1. Basis of Presentation](index=13&type=section&id=Note%201%20Basis%20of%20Presentation) Consolidated financial statements are prepared under US GAAP, include all necessary adjustments, and reflect the non-material impact of ASU No. 2022-02 adoption - The financial statements consolidate the Company and its subsidiaries, eliminating all significant intercompany transactions[351](index=351&type=chunk) - The adoption of ASU No. 2022-02 on January 1, 2023, eliminated the TDR accounting model without **materially affecting** the Company's financial statements[354](index=354&type=chunk)[379](index=379&type=chunk) [Note 2. Trading Securities](index=14&type=section&id=Note%202%20Trading%20Securities) The Company holds a single tax-advantaged economic development bond as a trading security, hedged with an interest rate swap to mitigate risk Trading Security Details (in thousands) | Date | Amortized Cost | Fair Value | | :--- | :--- | :--- | | June 30, 2023 | $6,600 | $6,400 | | December 31, 2022 | $7,100 | $6,700 | - The Company entered into a swap contract to convert the fixed rate of the trading security into a variable rate as a risk management strategy[358](index=358&type=chunk) [Note 3. Securities Available for Sale, Held to Maturity, and Equity Securities](index=14&type=section&id=Note%203%20Securities%20Available%20for%20Sale,%20Held%20to%20Maturity,%20and%20Equity%20Securities) The securities portfolio includes **$1.34 billion** AFS and **$0.56 billion** HTM, with unrealized losses primarily from interest rate changes, not credit deterioration Securities Portfolio Summary as of June 30, 2023 (in thousands) | Security Type | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | | :--- | :--- | :--- | :--- | :--- | | **Available for Sale** | **$1,578,544** | **$404** | **($238,617)** | **$1,340,331** | | **Held to Maturity** | **$563,765** | **$408** | **($76,213)** | **$487,960** | | **Marketable Equity** | **$15,035** | **$—** | **($2,167)** | **$12,868** | Securities with Unrealized Losses by Duration as of June 30, 2023 (in thousands) | Duration of Loss | Gross Unrealized Losses | Fair Value | | :--- | :--- | :--- | | **AFS Securities** | | | | Less Than Twelve Months | $52,392 | $1,257,842 | | Over Twelve Months | $235,691 | $1,310,234 | | **HTM Securities** | | | | Less Than Twelve Months | $123,807 | $288,625 | | Over Twelve Months | $72,794 | $412,432 | - The Company does not intend to sell securities in an unrealized loss position and anticipates it will not be required to sell them before recovery of the amortized cost basis, supported by the company's **strong capital and liquidity**[423](index=423&type=chunk) - Unrealized losses in the AFS and HTM portfolios are **primarily driven by changes in market interest rates rather than credit deterioration**, with contractual cash flows of all mortgage-backed securities **guaranteed by FNMA, FHLMC, and GNMA**[367](index=367&type=chunk)[370](index=370&type=chunk)[392](index=392&type=chunk) [Note 4. Loans and Allowance for Credit Losses](index=20&type=section&id=Note%204%20Loans%20and%20Allowance%20for%20Credit%20Losses) Total loans grew to **$8.88 billion**, with ACLL at **$100.2 million** or **1.13%**, based on a static pool migration analysis and qualitative factors Total Loans (in thousands) | Category | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Construction | $443,856 | $319,452 | | Commercial multifamily | $597,472 | $620,088 | | Commercial real estate owner occupied | $696,771 | $640,489 | | Commercial real estate non-owner occupied | $2,557,036 | $2,496,237 | | Commercial and industrial | $1,438,062 | $1,445,236 | | Residential real estate | $2,677,053 | $2,312,447 | | Home equity | $225,434 | $227,450 | | Consumer other | $246,718 | $273,910 | | **Total loans** | **$8,882,402** | **$8,335,309** | Allowance for Credit Losses on Loans (ACLL) Activity - Six Months Ended June 30, 2023 (in thousands) | | Amount | | :--- | :--- | | Balance at Beginning of Period | $96,270 | | Adoption of ASU No. 2022-02 | ($401) | | Charge-offs | ($15,621) | | Recoveries | $2,952 | | Provision for Credit Losses | $17,019 | | **Balance at End of Period** | **$100,219** | - The Allowance for Credit Losses for Loans (ACLL) is management's estimate of expected credit losses over the life of the loans, using a static pool migration analysis, a **7-quarter** forecast period, and qualitative overlays[12](index=12&type=chunk) Loans Past Due Status as of June 30, 2023 (in thousands) | Days Past Due | Amount | | :--- | :--- | | 30-59 Days | $9,219 | | 60-89 Days | $5,928 | | 90+ Days | $36,200 | | **Total Past Due** | **$51,347** | | Current | $8,831,055 | | **Total Loans** | **$8,882,402** | [Note 5. Deposits](index=34&type=section&id=Note%205%20Deposits) Total time deposits increased to **$2.44 billion** from **$1.63 billion**, with significant growth in the **$100,000** to **$250,000** tranche Time Deposits Breakdown (in thousands) | Category | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Time less than $100,000 | $669,592 | $549,265 | | Time $100,000 through $250,000 | $1,102,571 | $642,600 | | Time more than $250,000 | $663,455 | $441,842 | | **Total time deposits** | **$2,435,618** | **$1,633,707** | [Note 6. Borrowed Funds](index=34&type=section&id=Note%206%20Borrowed%20Funds) Total borrowed funds significantly increased to **$795.6 million**, driven by FHLB advances, with **$3.6 billion** in total available borrowing capacity Borrowed Funds Summary (in thousands) | Category | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Short-term borrowings** | **$470,000** | **$—** | | FHLB Advances | $470,000 | $— | | **Long-term borrowings** | **$325,583** | **$125,509** | | FHLB Advances and other | $204,345 | $4,445 | | Subordinated borrowings | $121,238 | $121,064 | | **Total Borrowings** | **$795,583** | **$125,509** | - The Bank's available borrowing capacity was **$2.2 billion** with the FHLB and **$1.4 billion** with the Federal Reserve Bank as of **June 30, 2023**[456](index=456&type=chunk)[483](index=483&type=chunk) - In June 2022, the Company issued **$100.0 million** in ten-year subordinated notes with a fixed rate of **5.50%** for the first five years, after which it becomes callable and switches to a floating rate[486](index=486&type=chunk) [Note 7. Derivative Financial Instruments and Hedging Activities](index=36&type=section&id=Note%207%20Derivative%20Financial%20Instruments%20and%20Hedging%20Activities) The Company held **$4.5 billion** in derivatives, including cash flow and economic hedges, to mitigate interest rate risk, with a net fair value liability of **$41.9 million** Derivative Portfolio Summary as of June 30, 2023 (in thousands) | Derivative Type | Notional Amount | Estimated Fair Value (Asset/(Liability)) | | :--- | :--- | :--- | | **Cash flow hedges** | **$800,000** | **$1,495** | | Interest rate swaps | $600,000 | $714 | | Interest rate collars | $200,000 | $781 | | **Economic hedges** | **$3,730,449** | **($43,452)** | | **Non-hedging derivatives** | **$9,369** | **$37** | | **Total** | **$4,539,818** | **($41,920)** | - The Company uses interest rate swaps as cash flow hedges to convert variable-rate commercial loans to fixed rates, protecting against interest rate variability[492](index=492&type=chunk) - Economic hedges are used to facilitate customer needs, such as converting a variable-rate loan to a fixed rate, with the Company entering into offsetting mirror-image derivatives with third-party institutions to hedge its own risk[494](index=494&type=chunk) - The Company is party to master netting arrangements with its financial institution counterparties, which provide for a single net settlement in the event of default, though assets and liabilities are not offset for presentation purposes[55](index=55&type=chunk) [Note 8. Leases](index=44&type=section&id=Note%208%20Leases) The Company's leases, primarily operating, had ROU assets of **$54.2 million** and liabilities of **$63.3 million**, with an **8.7-year** weighted-average term Lease Assets and Liabilities (in thousands) | Category | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Lease Right-of-Use Assets** | | | | Operating lease ROU assets | $48,305 | $46,411 | | Finance lease ROU assets | $5,857 | $6,151 | | **Total Lease ROU Assets** | **$54,162** | **$52,562** | | **Lease Liabilities** | | | | Operating lease liabilities | $54,315 | $53,736 | | Finance lease liabilities | $8,979 | $9,306 | | **Total Lease Liabilities** | **$63,294** | **$63,042** | Weighted-Average Lease Term and Discount Rate | Category | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Remaining Lease Term (years)** | | | | Operating leases | 8.7 | 9.3 | | Finance leases | 11.3 | 11.8 | | **Discount Rate** | | | | Operating leases | 2.78% | 2.56% | | Finance leases | 5.00% | 5.00% | [Note 9. Capital Ratios and Shareholders' Equity](index=46&type=section&id=Note%209%20Capital%20Ratios%20and%20Shareholders'%20Equity) Both the Company and Bank exceeded all regulatory capital requirements, with the Bank 'well capitalized' and CET1 at **12.1%**, despite increased AOCL Company (Consolidated) Capital Ratios | Ratio | June 30, 2023 | Dec 31, 2022 | Minimum Requirement | | :--- | :--- | :--- | :--- | | Common equity tier 1 capital | 12.1% | 12.4% | 4.5% | | Tier 1 capital to risk-weighted assets | 12.3% | 12.6% | 6.0% | | Total capital to risk-weighted assets | 14.4% | 14.6% | 8.0% | | Tier 1 capital to average assets | 9.6% | 10.2% | 4.0% | - At **June 30, 2023**, the capital levels for both the Company and the Bank **exceeded all regulatory requirements**, including the **2.5%** capital conservation buffer, with the Bank's ratios above the minimums to be considered **'well capitalized'**[65](index=65&type=chunk)[509](index=509&type=chunk) Changes in Accumulated Other Comprehensive Loss (AOCL) - Six Months Ended June 30, 2023 (in thousands) | Component | Beginning Balance | Other Comprehensive Loss | Ending Balance | | :--- | :--- | :--- | :--- | | Net unrealized loss on Securities | ($175,557) | ($717) | ($176,274) | | Net effective loss on cash flow hedging derivatives | ($4,878) | ($4,471) | ($9,349) | | Net unrealized loss on pension plans | ($617) | $— | ($617) | | **Total AOCL** | **($181,052)** | **($5,188)** | **($186,240)** | [Note 10. Earnings per Share](index=51&type=section&id=Note%2010%20Earnings%20per%20Share) For H1 2023, basic and diluted EPS were **$1.18** and **$0.92** respectively, with anti-dilutive stock awards excluded from diluted EPS calculation Earnings Per Share Calculation (Six Months Ended) | (in thousands, except per share data) | 2023 | 2022 | | :--- | :--- | :--- | | Net Income | $51,498 | $43,311 | | Average basic shares outstanding | 43,564 | 46,733 | | Dilutive effect of stock awards/options | 216 | 341 | | **Average diluted shares outstanding** | **43,780** | **47,074** | | **Basic EPS** | **$1.18** | **$0.93** | | **Diluted EPS** | **$1.18** | **$0.92** | - For the six months ended **June 30, 2023**, **563 thousand** shares of unvested restricted stock and **49 thousand** outstanding options were **anti-dilutive** and excluded from the EPS calculation[102](index=102&type=chunk) [Note 11. Stock-Based Compensation Plans](index=52&type=section&id=Note%2011%20Stock-Based%20Compensation%20Plans) Stock-based compensation expense was **$3.5 million** for H1 2023, with **392,000** non-vested awards granted and **178,000** shares vested Stock Award and Option Activity (Shares in thousands) | | Non-Vested Stock Awards | Stock Options | | :--- | :--- | :--- | | **Balance at Dec 31, 2022** | **704** | **49** | | Granted | 392 | — | | Vested | (178) | — | | Forfeited | (49) | — | | **Balance at June 30, 2023** | **869** | **49** | - Stock-based compensation expense was **$3.5 million** for the six months ended **June 30, 2023**, compared to **$3.9 million** for the same period in **2022**[519](index=519&type=chunk) [Note 12. Fair Value Measurements](index=53&type=section&id=Note%2012%20Fair%20Value%20Measurements) The Company uses a fair value hierarchy, with most instruments valued using Level 2 inputs, and Level 3 inputs for certain assets like capitalized servicing rights Recurring Fair Value Measurements as of June 30, 2023 (in thousands) | Category | Level 1 Inputs | Level 2 Inputs | Level 3 Inputs | Total Fair Value | | :--- | :--- | :--- | :--- | :--- | | **Assets** | | | | | | Trading securities | $— | $— | $6,708 | $6,708 | | Securities available for sale | $11,973 | $1,324,335 | $4,000 | $1,340,308 | | Derivative assets | $— | $54,216 | $25 | $54,241 | | **Liabilities** | | | | | | Derivative liabilities | $— | $97,030 | $— | $97,030 | - Level 1 inputs are quoted prices in active markets, Level 2 inputs are based on models using standard factors like dealer quotes and yield curves, and Level 3 inputs are unobservable to market participants[134](index=134&type=chunk)[520](index=520&type=chunk) - Non-recurring fair value adjustments are periodically recorded for certain assets, such as collateral-dependent loans, based on the fair value of underlying collateral, generally classified as **Level 3** due to significant judgment and unobservable data in appraisals[117](index=117&type=chunk)[143](index=143&type=chunk) Non-Recurring Fair Value Measurements (Level 3) (in thousands) | Assets | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Individually evaluated loans | $5,773 | $14,571 | | Capitalized servicing rights | $11,223 | $11,201 | | **Total** | **$16,996** | **$29,141** | [Note 13. Net Interest Income after Provision/(Benefit) for Credit Losses](index=62&type=section&id=Note%2013%20Net%20Interest%20Income%20after%20Provision/(Benefit)%20for%20Credit%20Losses) Net interest income increased to **$190.3 million** for H1 2023, with a **$17.0 million** provision for credit losses compared to a **$4.0 million** benefit in H1 2022 Net Interest Income & Provision Summary (in thousands) | | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net interest income | $190,292 | $150,421 | | Provision/(benefit) for credit losses | $16,999 | ($4,000) | | **Net interest after provision** | **$173,293** | **$154,421** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=63&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Net income rose to **$51.5 million** for H1 2023, driven by higher net interest income and expanded NIM, with strong capital and completed sustainability bond allocation - The company's vision is to be a leading socially responsible omni-channel community bank in New England and beyond, providing a range of banking, mortgage, and wealth management services[164](index=164&type=chunk) - The discussion and analysis should be read in conjunction with the consolidated financial statements in this report and the **2022 Annual Report on Form 10-K**[190](index=190&type=chunk) [Financial Overview](index=71&type=section&id=Financial%20Overview) Net income increased to **$23.9 million** in Q2 2023 and **$51.5 million** in H1 2023, driven by higher net interest income despite increased credit loss provisions Key Performance Metrics - Q2 2023 vs Q2 2022 | Metric | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | Net Income (millions) | $23.9 | $23.1 | | Diluted EPS | $0.55 | $0.50 | | Return on Average Assets (GAAP) | 0.78% | 0.82% | | Return on Avg. Tangible Common Equity (Operating) | 8.27% | 8.48% | Key Performance Metrics - H1 2023 vs H1 2022 | Metric | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Net Income (millions) | $51.5 | $43.3 | | Diluted EPS | $1.18 | $0.92 | | Return on Average Assets (GAAP) | 0.86% | 0.76% | | Return on Avg. Tangible Common Equity (Operating) | 8.92% | 7.99% | [Net Interest Income](index=72&type=section&id=Net%20Interest%20Income) Net interest margin (FTE) expanded to **3.24%** in Q2 2023 and **3.40%** in H1 2023, driven by rising rates and loan growth funded by increased borrowings - The increase in net interest margin was attributed to reinvesting funds into higher-yielding loans and the positive impact of rising market interest rates, as the Federal Funds rate increased from **0.25%** in Q1 **2022** to **5.16%** in Q2 **2023**[174](index=174&type=chunk)[198](index=198&type=chunk) - In Q2 **2023** vs Q2 **2022**, average earning assets increased by **$998 million**, driven by a **$1.30 billion** increase in average loans, funded by a **$941 million** increase in average funding liabilities, **primarily a $1.13 billion increase in borrowings**, which offset a **$187 million** decrease in average deposits[168](index=168&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) - Deposit mix shifted towards higher-cost time deposits, which grew to **24%** of average deposits in Q2 **2023** from **15%** in Q2 **2022**, while non-interest-bearing deposits decreased from **30%** to **27%** of the mix[177](index=177&type=chunk)[178](index=178&type=chunk) [Provision for Credit Losses](index=73&type=section&id=Provision%20for%20Credit%20Losses) The Company recorded a **$8.0 million** provision for credit losses in Q2 2023 and **$17.0 million** in H1 2023, reflecting loan portfolio growth - The provision expense in **2023** was **primarily driven by** growth in the loan portfolio[220](index=220&type=chunk) - The provision benefit in **2022** reflected a notable improvement in pandemic-related expected credit losses[197](index=197&type=chunk)[220](index=220&type=chunk) [Non-Interest Income and Expense](index=73&type=section&id=Non-Interest%20Income%20and%20Expense) Non-interest income increased by **$0.7 million** in Q2 2023, while expenses rose by **$5.6 million**, yet the efficiency ratio improved to **63.6%** due to revenue growth - Q2 **2023** non-interest income increased due to higher deposit-related fees and commercial loan interest rate swap activity, partially offset by lower gains on SBA loan sales and wealth management fees[179](index=179&type=chunk) - Non-interest expense increased year-over-year due to hiring of frontline bankers, investments in technology to digitize the bank, and higher FDIC deposit insurance premiums, partially offset by lower occupancy costs from branch consolidation[221](index=221&type=chunk)[222](index=222&type=chunk) - The efficiency ratio **improved to** **63.6%** in Q2 **2023** from **66.6%** in Q2 **2022**, and **61.5%** in H1 **2023** from **69.5%** in H1 **2022**, because operating revenue growth outpaced operating expense growth[170](index=170&type=chunk)[223](index=223&type=chunk) [Comparison of Financial Condition](index=74&type=section&id=Comparison%20of%20Financial%20Condition) Total assets grew to **$12.1 billion**, driven by **$547 million** loan growth funded by increased borrowings, while nonaccrual loans decreased - Total assets grew by **$427 million** to **$12.1 billion** in the first half of **2023**, **primarily due to a $547 million increase** in total loans[207](index=207&type=chunk) - Total liabilities increased by **$408 million**, reflecting a **$670 million** increase in borrowings (mainly FHLB advances) that **more than offset a $259 million decrease** in total deposits[208](index=208&type=chunk)[212](index=212&type=chunk) - Nonaccrual loans decreased by **$2.7 million** to **$28.4 million** during the first half of **2023**, and the allowance for credit losses as a percentage of nonaccrual loans **improved to** **353%** from **309%** at year-end **2022**[225](index=225&type=chunk) [Shareholders' Equity, Capital Resources, and Liquidity](index=75&type=section&id=Shareholders'%20Equity,%20Capital%20Resources,%20and%20Liquidity) Shareholders' equity increased to **$973 million**, supported by net income, with strong liquidity and capital ratios exceeding regulatory requirements - Shareholders' equity increased by **$19 million** to **$973 million** in H1 **2023**, driven by **$51 million** in net income, offset by **$16 million** in dividends and **$14 million** in share repurchases[257](index=257&type=chunk) - The Company's long-term goal is to maintain an efficient capital structure, support organic growth, and provide shareholder returns through dividends and stock repurchases[236](index=236&type=chunk)[260](index=260&type=chunk) - The Company has **strong liquidity**, with **$0.6 billion** in cash, **$1.3 billion** in AFS securities, and **$3.6 billion** in unused borrowing capacity from the FHLB and Federal Reserve Bank as of **June 30, 2023**[214](index=214&type=chunk)[259](index=259&type=chunk) - The Company manages capital based on regulatory ratios, focusing on the Common Equity Tier 1 (CET1) ratio, and excludes changes in Accumulated Other Comprehensive Income (AOCI) from regulatory capital calculations[261](index=261&type=chunk)[262](index=262&type=chunk) [Environmental, Social, Governance (ESG)](index=77&type=section&id=Environmental,%20Social,%20Governance%20(ESG)) Berkshire integrates ESG, fully allocated its **$100 million** Sustainability Bond to green buildings, affordable housing, and financial inclusion, and maintains a top-quartile ESG rating - The company was one of the **first U.S. banks to establish a dedicated Board committee for ESG** and the **first community bank holding company under $150 billion in assets to issue a Sustainability Bond**[241](index=241&type=chunk) - The company completed the allocation of its **$100 million** sustainability bond, with proceeds funding green buildings, affordable/workforce housing, and financial access/inclusion projects[243](index=243&type=chunk)[268](index=268&type=chunk)[269](index=269&type=chunk) - Berkshire maintained its **top quartile ESG rating** and received the LGBT Corporate Ally Award from the Boston Business Journal[270](index=270&type=chunk) [NON-GAAP FINANCIAL MEASURES](index=67&type=section&id=NON-GAAP%20FINANCIAL%20MEASURES) The Company uses non-GAAP measures like operating earnings to provide supplemental performance insights, excluding non-recurring items for better trend analysis - Management uses non-GAAP measures to evaluate operating trends by excluding items like restructuring costs and, in prior periods, certain fair value adjustments, which they believe facilitates comparison with peers[129](index=129&type=chunk)[158](index=158&type=chunk)[186](index=186&type=chunk) Reconciliation of GAAP to Non-GAAP Net Income (in thousands) | | H1 2023 | H1 2022 | | :--- | :--- | :--- | | **GAAP Net income** | **$51,498** | **$43,311** | | Adj: Fair value adjustments on securities | — | $1,718 | | Adj: Restructuring and other expense | ($15) | $53 | | Adj: Income taxes | $3 | ($731) | | **Total operating income (non-GAAP)** | **$51,486** | **$44,351** | [Quantitative and Qualitative Disclosures about Market Risk](index=79&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The Company manages Interest Rate Risk (IRR) using NII and EVE simulations, showing a neutral risk profile as of **June 30, 2023**, due to portfolio shifts - The company's main market risk is Interest Rate Risk (IRR) resulting from its core business of making loans and accepting deposits, managed using Net Interest Income (NII) at Risk and Economic Value of Equity (EVE) at Risk simulations[246](index=246&type=chunk)[289](index=289&type=chunk) Estimated Percent Change in Net Interest Income (NII) | Rate Shock (bps) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | +200 | (0.3)% | 1.8% | | +100 | (0.3)% | 0.8% | | -100 | (0.5)% | (1.6)% | | -200 | (2.5)% | (5.2)% | Estimated Percent Change in Economic Value of Equity (EVE) | Rate Shock (bps) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | +200 | (3.1)% | —% | | +100 | (1.5)% | —% | | -100 | 0.4% | (1.5)% | | -200 | (1.0)% | (5.4)% | - The NII risk profile **shifted from modestly asset sensitive** at year-end **2022** to a **neutral interest rate risk profile** by **June 30, 2023**, due to growth in the residential mortgage portfolio and a shift in deposit mix towards interest-bearing accounts[274](index=274&type=chunk) [Controls and Procedures](index=81&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the last quarter - The principal executive and financial officers concluded that the Company's disclosure controls and procedures were **effective** as of the end of the period covered by the report[277](index=277&type=chunk) - **No changes occurred** in the Company's internal control over financial reporting during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, these controls[252](index=252&type=chunk) Part II [Legal Proceedings](index=82&type=section&id=Item%201.%20Legal%20Proceedings) The Company is not involved in material legal proceedings but is **actively defending** a **$16.0 million** lawsuit against Pioneer Bank and an arbitration with a former employee - The Bank filed a complaint against Pioneer Bank seeking approximately **$16.0 million** in damages related to alleged breaches of loan participation agreements, with the case ongoing and discovery in progress[297](index=297&type=chunk) - A former employee of subsidiary FCLS filed a complaint alleging wrongful termination, with the case compelled to arbitration, expected to occur in the second half of **2023**[279](index=279&type=chunk) [Risk Factors](index=83&type=section&id=Item%201A.%20Risk%20Factors) Stakeholders should review risk factors in the Company's Annual Report on Form 10-K and subsequent quarterly reports, as unforeseen risks may arise - Readers are directed to review the risk factors set forth in the Company's **Annual Report on Form 10-K** for the fiscal year ended **December 31, 2022**, and subsequent quarterly reports[280](index=280&type=chunk) [Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities](index=84&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities,%20Use%20of%20Proceeds%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The Company repurchased **580,730** shares at **$21.16** average price in Q2 2023 under a **$50 million** program, with **1.8 million** shares remaining Issuer Purchases of Equity Securities - Q2 2023 | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Program | Max Shares Remaining Under Program | | :--- | :--- | :--- | :--- | :--- | | April 1-30, 2023 | 208,563 | $22.42 | 208,563 | 2,156,125 | | May 1-31, 2023 | 317,562 | $20.24 | 317,562 | 1,838,563 | | June 1-30, 2023 | 54,605 | $21.68 | 54,605 | 1,783,958 | | **Total** | **580,730** | **$21.16** | **580,730** | **1,783,958** | - On **January 25, 2023**, the Board of Directors approved a stock repurchase program authorizing the repurchase of up to **$50 million** of common stock through **December 31, 2023**[301](index=301&type=chunk) [Exhibits](index=85&type=section&id=Item%206.%20Exhibits) This section lists exhibits, including corporate documents, stock certificates, CEO/CFO certifications, and financial statements in Inline XBRL format - The report includes certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections **302** and **906** of the Sarbanes-Oxley Act of **2002**[286](index=286&type=chunk) - Financial statements from the Form **10-Q** are provided in Inline XBRL format[286](index=286&type=chunk)