Berkshire Hills Bancorp(BHLB) - 2025 Q2 - Quarterly Results

Executive Summary & Company Overview Second Quarter 2025 Financial Highlights Berkshire Hills Bancorp reported strong earnings growth for Q2 2025, with GAAP EPS of $0.66 and Operating EPS of $0.69, alongside significant increases in operating EPS, operating revenue, and net interest margin, and an improved efficiency ratio | Metric ($ in millions, except per share data) | June 30, 2025 | Mar. 31, 2025 | June 30, 2024 | | :------------------------------------ | :------------ | :------------ | :------------ | | Net income | $30.4 | $25.7 | $24.0 | | Per share | 0.66 | 0.56 | 0.57 | | Operating earnings | 31.6 | 27.6 | 23.2 | | Per share | 0.69 | 0.60 | 0.55 | | Net interest income, non FTE | $91.9 | $89.8 | $88.5 | | Net interest income, FTE | 93.8 | 91.7 | 90.5 | | Net interest margin, FTE | 3.27% | 3.24% | 3.20% | | Non-interest income | $21.8 | $20.7 | $20.1 | | Operating non-interest income | 21.8 | 20.7 | 20.1 | | Non-interest expense | 68.1 | 70.4 | 70.9 | | Operating non-interest expense | 66.7 | 67.9 | 71.3 | | Efficiency ratio | 56.7% | 59.5% | 63.4% | | Average Loans | $9,484 | $9,389 | $9,157 | | Average Deposits | 9,817 | 9,847 | 9,296 | | Period-end Loans | 9,499 | 9,429 | 9,229 | | Period-end Deposits | 9,979 | 9,880 | 9,621 | - Operating EPS increased 15% linked quarter and 25% year-over-year[2] - Operating revenue increased 3% linked quarter, while operating non-interest expense decreased 2%[2] - Net interest margin (FTE) improved to 3.27%, up 3 bps linked quarter and 7 bps year-over-year[2] - Efficiency ratio improved to 56.7% from 59.5% linked quarter[2] Management Commentary CEO Nitin Mhatre highlighted a 36% year-over-year operating earnings growth driven by revenue growth and lower expenses, noting the strongest quarterly operating income, EPS, and efficiency since 2019, while CFO Brett Brbovic emphasized the 2% linked quarter increase in net interest income, 3 basis point NIM increase, and a decrease in operating non-interest expense and provision for credit losses - CEO Nitin Mhatre reported 36% year-over-year operating earnings growth, attributing it to revenue growth and lower expenses[3] - Quarterly operating income, operating EPS, and efficiency were the strongest since 2019[3] - CFO Brett Brbovic noted a 2% linked quarter increase in net interest income and a 3 basis point increase in net interest margin to 3.27%[4] - Operating non-interest expense decreased $1.3 million linked quarter and $4.7 million year-over-year[4] - The allowance for credit losses on loans remained unchanged at 1.24%[4] Company Profile & Strategic Initiatives Berkshire Hills Bancorp, Inc. is the parent company of Berkshire Bank, a community-focused bank with $12.0 billion in assets, actively pursuing a transformative merger of equals with Brookline Bancorp, Inc., with shareholder approvals already secured and closing expected in 2025 - Berkshire Hills Bancorp, Inc. is the parent company of Berkshire Bank, with $12.0 billion in assets and 83 financial centers in New England and New York[5] - Berkshire has a pending agreement to merge with Brookline Bancorp, Inc., which has $11.6 billion in assets[5] - The merger agreement, unanimously approved by both boards, entails Brookline common stock being exchanged for 0.42 shares of Berkshire common stock[13] - Berkshire stockholders are expected to own approximately 55% and Brookline stockholders 45% of the combined company[13] - The proposed transaction is expected to close in 2025, subject to regulatory approvals, with shareholders of both companies having approved merger-related proposals in May 2025[13] Detailed Financial Performance Income Statement Analysis The second quarter saw GAAP income of $30 million and operating earnings of $32 million, with operating earnings increasing 14% linked quarter and 36% year-over-year, as net interest income grew, non-interest income increased primarily due to higher loan-related fees, and operating non-interest expense decreased Net Interest Income and Margin Net interest income increased by $2.2 million linked quarter to $92 million in 2Q25, and the net interest margin improved by 3 basis points to 3.27%, driven by a 3 basis point increase in earning asset yield and a 1 basis point decrease in the cost of funds - Net interest income increased $2.2 million linked quarter to $92 million in 2Q25[8] - Net interest margin increased 3 basis points to 3.27%[11] - Earning asset yield increased 3 basis points to 5.38%, while the loan yield increased 2 basis points to 5.82%[11] - Cost of funds decreased 1 basis point to 2.29%, and the cost of deposits decreased 3 basis points to 2.15%[11] Non-Interest Income and Expense GAAP and operating non-interest income reached $22 million, increasing $1.1 million linked quarter, primarily due to higher loan-related fee income, while operating non-interest expense decreased $1.3 million linked quarter and $4.7 million year-over-year, with compensation and occupancy expenses seeing a notable reduction - GAAP and operating non-interest income was $22 million, increasing $1.1 million linked quarter primarily due to higher loan related fee income[11] - Operating non-interest expense decreased $1.3 million linked quarter and $4.7 million year-over-year[11] - Compensation and occupancy expense decreased $1.8 million from seasonally higher levels in the linked quarter[11] Non-Interest Income Category (in thousands) | Non-Interest Income Category (in thousands) | June 30, 2025 | Mar. 31, 2025 | June 30, 2024 | | :--------------------------------------- | :------------ | :------------ | :------------ | | Deposit related fees | $8,193 | $7,949 | $8,561 | | Loan related fees | 5,100 | 3,787 | 2,364 | | Gain on SBA loans | 2,288 | 3,276 | 3,294 | | Wealth management fees | 2,657 | 2,955 | 2,613 | | Total non-interest income | 21,752 | 20,672 | 20,133 | Non-Interest Expense Category (in thousands) | Non-Interest Expense Category (in thousands) | June 30, 2025 | Mar. 31, 2025 | June 30, 2024 | | :----------------------------------------- | :------------ | :------------ | :------------ | | Compensation and benefits | $39,303 | $40,635 | $40,126 | | Occupancy and equipment | 7,203 | 7,666 | 8,064 | | Technology | 9,756 | 10,065 | 10,236 | | Total non-interest expense | 68,144 | 70,366 | 70,931 | Earnings and Profitability Metrics GAAP income for Q2 2025 was $30 million, or $0.66 per share, while operating earnings reached $32 million, or $0.69 per share, with operating EPS increasing 25% year-over-year and the efficiency ratio improving to 56.7%, marking the best quarterly result since 2019 - Second quarter GAAP income was $30 million, or $0.66 per share[7] - Operating earnings totaled $32 million, or $0.69 per share, increasing 14% linked quarter and 36% year-over-year[7] - Quarterly operating EPS was up 25% year-over-year, reflecting merger-related share issuance[7] - The efficiency ratio was 56.7% in the second quarter, the best quarterly result since 2019[7] - The effective tax rate was 27% in 2Q25, compared to 26% in the linked quarter[11] Balance Sheet Overview Total loans increased by $70 million, or 1%, to $9.5 billion, primarily driven by commercial and industrial loans, while total end-of-period deposits also grew by $99 million, or 1%, to $10.0 billion, with shareholders' equity increasing and the tangible common equity to tangible assets ratio improving to 10.1% Loans and Deposits Total loans increased by $70 million, or 1%, to $9.5 billion, with commercial and industrial loans showing a 4% growth, and total end-of-period deposits increased by $99 million, or 1%, to $10.0 billion, increasing 7% year-over-year excluding payroll and brokered deposits - Total loans increased $70 million, or 1%, to $9.5 billion, primarily in commercial and industrial loans (up $56 million, or 4%)[9] - Total end of period deposits increased $99 million, or 1%, to $10.0 billion[10] - Total end of period deposits excluding payroll and brokered deposits increased $66 million (1%) linked quarter and $541 million (7%) year-over-year[10] Deposit Type (in thousands) | Deposit Type (in thousands) | June 30, 2025 | Mar. 31, 2025 | Dec. 31, 2024 | June 30, 2024 | | :-------------------------- | :------------ | :------------ | :------------ | :------------ | | Non-interest bearing deposits | $2,296,268 | $2,295,040 | $2,324,879 | $2,222,012 | | NOW and other deposits | 814,600 | 789,418 | 841,406 | 766,641 | | Money market deposits | 3,153,241 | 3,197,331 | 3,610,521 | 3,278,753 | | Savings deposits | 1,105,009 | 1,065,530 | 1,021,716 | 1,004,320 | | Time deposits | 2,609,913 | 2,532,558 | 2,576,682 | 2,349,733 | | Total deposits | 9,979,031 | 9,879,877 | 10,375,204 | 9,621,459 | Equity and Capital Total shareholders' equity increased by $26 million, or 2%, linked quarter to $1.2 billion, with the ratio of tangible common equity to tangible assets improving to 10.1% from 9.9% linked quarter, and tangible book value per share growing 13% year-over-year to $26.12 - Total shareholders' equity increased $26 million, or 2%, linked quarter to $1.2 billion[12] - The ratio of tangible common equity to tangible assets measured 10.1%, increasing from 9.9% linked quarter[12] - Tangible book value per share grew 13% year-over-year to $26.12 at period-end[12] Capital Metric | Capital Metric | June 30, 2025 | Mar. 31, 2025 | June 30, 2024 | | :------------- | :------------ | :------------ | :------------ | | Tangible common equity/tangible assets | 10.1% | 9.9% | 8.2% | | Book value per share | $26.40 | $25.81 | $23.58 | | Tangible book value per share | $26.12 | $25.50 | $23.18 | Asset Quality Review The provision for credit losses decreased by $1.5 million linked quarter to $4.0 million, net loan charge-offs totaled $3.3 million, and the allowance for credit losses on loans remained stable at 1.24% of total loans, with non-performing loans at 0.27% and delinquent and non-performing loans at 0.48% of total loans - Provision for credit losses totaled $4.0 million, decreasing $1.5 million linked quarter[11] - Net loan charge-offs totaled $3.3 million, compared to $3.5 million linked quarter[11] - The quarter-end allowance for credit losses on loans was unchanged at 1.24% of total loans[11] - Non-performing loans were 0.27% of total loans at period-end, and delinquent and non-performing loans were 0.48% of total loans[11] Asset Quality Metric | Asset Quality Metric | June 30, 2025 | Mar. 31, 2025 | June 30, 2024 | | :------------------- | :------------ | :------------ | :------------ | | Net loan charge-offs to average loans | 0.14% | 0.15% | 0.07% | | Non-performing loans to total loans | 0.27% | 0.25% | 0.23% | | Allowance for credit losses/total loans | 1.24% | 1.24% | 1.22% | | Allowance for credit losses/non-performing loans | 462% | 501% | 525% | Selected Financial Highlights (Multi-Quarter Trend) Key Financial and Performance Ratios This section provides a comprehensive multi-quarter overview of key financial metrics, including nominal and per share data, performance ratios, financial data (end of period), asset quality, and capital ratios, highlighting trends in EPS, net interest income, efficiency, and asset quality over the past five quarters Key Financial and Performance Ratios | Metric | June 30, 2025 | Mar. 31, 2025 | Dec. 31, 2024 | Sept. 30, 2024 | June 30, 2024 | | :------------------------------------ | :------------ | :------------ | :------------ | :------------- | :------------ | | Net earnings per common share, diluted | $0.66 | $0.56 | $0.46 | $0.88 | $0.57 | | Operating earnings per common share, diluted | 0.69 | 0.60 | 0.60 | 0.58 | 0.55 | | Net interest income, non FTE (thousands) | 91,921 | 89,771 | 86,855 | 88,059 | 88,532 | | Net interest margin, FTE | 3.27% | 3.24% | 3.14% | 3.16% | 3.20% | | Efficiency ratio | 56.73% | 59.45% | 62.43% | 63.74% | 63.40% | | Total loans (millions) | $9,499 | $9,429 | $9,385 | $9,212 | $9,229 | | Total deposits (millions) | 9,979 | 9,880 | 10,375 | 9,577 | 9,621 | | Non-performing loans/total loans | 0.27% | 0.25% | 0.26% | 0.26% | 0.23% | | Tangible common shareholders' equity/tangible assets | 10.1% | 9.9% | 9.4% | 9.1% | 8.2% | Consolidated Financial Statements Consolidated Balance Sheets This section presents the consolidated balance sheets for Berkshire Hills Bancorp, Inc. as of June 30, 2025, March 31, 2025, December 31, 2024, and June 30, 2024, detailing assets, liabilities, and shareholders' equity - The consolidated balance sheets provide a detailed breakdown of assets, liabilities, and shareholders' equity across four quarters[24][25] Consolidated Balance Sheets (in thousands) | Balance Sheet Item (in thousands) | June 30, 2025 | Mar. 31, 2025 | Dec. 31, 2024 | June 30, 2024 | | :-------------------------------- | :------------ | :------------ | :------------ | :------------ | | Total assets | $12,034,748 | $12,013,199 | $12,273,408 | $12,219,454 | | Total loans | 9,498,849 | 9,428,885 | 9,384,994 | 9,228,526 | | Total deposits | 9,979,031 | 9,879,877 | 10,375,204 | 9,621,459 | | Total liabilities | 10,812,437 | 10,816,439 | 11,105,984 | 11,206,512 | | Total shareholders' equity | 1,222,311 | 1,196,760 | 1,167,424 | 1,012,942 | Consolidated Statements of Operations This section presents the consolidated statements of operations, including a five-quarter trend, detailing interest income and expense, non-interest income and expense, provision for credit losses, and net income, providing a comprehensive view of the company's profitability over time - The consolidated statements of operations provide a detailed breakdown of revenues and expenses for the three and six months ended June 30, 2025 and 2024[26][27] - A five-quarter trend of the consolidated statements of operations is also presented, showing changes in interest income, interest expense, non-interest income, non-interest expense, and net income[28][29] Consolidated Statements of Operations (in thousands) | Income Statement Item (in thousands) | June 30, 2025 | Mar. 31, 2025 | Dec. 31, 2024 | Sept. 30, 2024 | June 30, 2024 | | :----------------------------------- | :------------ | :------------ | :------------ | :------------- | :------------ | | Interest income | $151,469 | $148,330 | $150,555 | $157,268 | $154,109 | | Interest expense | 59,548 | 58,559 | 63,700 | 69,209 | 65,577 | | Net interest income, non FTE | 91,921 | 89,771 | 86,855 | 88,059 | 88,532 | | Total non-interest income | 21,752 | 20,672 | 23,325 | 37,555 | 20,133 | | Total net revenue | 113,673 | 110,443 | 110,180 | 125,614 | 108,665 | | Provision expense for credit losses | 4,000 | 5,500 | 6,000 | 5,500 | 6,499 | | Total non-interest expense | 68,144 | 70,366 | 77,575 | 71,960 | 70,931 | | Net income | $30,366 | $25,719 | $19,657 | $37,509 | $24,025 | Average Balances and Average Yields and Costs This section details the average balances, interest income/expense, and average yields/rates for earning assets and funding liabilities across three quarters, highlighting the composition of the balance sheet and the profitability of various asset and liability categories - The table provides average balances, interest, and yield/rate for various asset and liability categories for the quarters ended June 30, 2025, March 31, 2025, and June 30, 2024[30][31] Average Balances and Average Yields and Costs (in millions) | Item (in millions) | June 30, 2025 Avg Balance | June 30, 2025 Avg Yield/Rate | Mar. 31, 2025 Avg Balance | Mar. 31, 2025 Avg Yield/Rate | June 30, 2024 Avg Balance | June 30, 2024 Avg Yield/Rate | | :----------------- | :------------------------ | :--------------------------- | :------------------------ | :--------------------------- | :------------------------ | :--------------------------- | | Total loans | $9,484 | 5.82% | $9,389 | 5.80% | $9,157 | 6.05% | | Total earning assets | 11,323 | 5.38% | 11,235 | 5.35% | 11,143 | 5.57% | | Total deposits | 9,817 | 2.15% | 9,847 | 2.18% | 9,296 | 2.35% | | Total funding liabilities | 10,407 | 2.29% | 10,310 | 2.30% | 10,389 | 2.53% | | Net interest margin, FTE | | 3.27% | | 3.24% | | 3.20% | Asset Quality Analysis (Detailed) This section provides a detailed breakdown of asset quality metrics over five quarters, including non-performing assets, provision and allowance for credit losses on loans, net loan charge-offs by loan type, and delinquent and non-performing loans - The asset quality analysis provides a five-quarter trend for non-performing assets, provision and allowance for credit losses, and net loan charge-offs[33][34] Asset Quality Metric (in thousands) | Asset Quality Metric (in thousands) | June 30, 2025 | Mar. 31, 2025 | Dec. 31, 2024 | Sept. 30, 2024 | June 30, 2024 | | :---------------------------------- | :------------ | :------------ | :------------ | :------------- | :------------ | | Total non-performing loans | $25,404 | $23,280 | $24,447 | $23,969 | $21,348 | | Total non-performing assets | 27,788 | 25,568 | 26,727 | 26,532 | 23,897 | | Provision expense for loan credit losses | 4,000 | 5,500 | 6,000 | 5,500 | 6,499 | | Net loans charged-off | (3,334) | (3,522) | (3,347) | (5,620) | (1,663) | | Allowance for credit losses/total loans | 1.24% | 1.24% | 1.22% | 1.22% | 1.22% | | Total delinquent and non-performing loans | $45,342 | $39,921 | $48,455 | $48,775 | $51,514 | Non-GAAP Financial Measures and Reconciliations Explanation of Non-GAAP Measures This section clarifies the use of non-GAAP financial measures, such as operating earnings and operating EPS, which are adjusted to exclude non-operating charges primarily related to acquisitions, restructuring activities, and branch consolidations, as management uses these measures to evaluate operating trends and facilitate comparisons within the financial services industry - Non-GAAP measures provide supplemental perspectives on operating results and financial condition, but are not a substitute for GAAP measures[35] - Operating earnings and operating EPS exclude amounts unrelated to normalized operations, primarily restructuring costs, which include disposition of assets/liabilities and lease terminations[36] - Adjustments in 2025 were primarily related to the pending merger, while 2024 adjustments included the merger, branch sales/consolidations, and loss on sale of securities[37] - Management believes non-GAAP measures facilitate comparison to other companies and adjusts equity-related measures to exclude intangible assets for the investment community[38] Quarterly Non-GAAP Reconciliation This section provides a detailed reconciliation of GAAP to non-GAAP financial measures for the past five quarters, including adjustments for non-operating items to derive operating non-interest income, operating revenue, operating non-interest expense, and total operating income, along with various adjusted performance ratios - The table reconciles GAAP financial measures to non-GAAP operating measures for five quarters, from June 30, 2025, to June 30, 2024[40] Quarterly Non-GAAP Reconciliation (in thousands) | Metric (in thousands) | June 30, 2025 | Mar. 31, 2025 | Dec. 31, 2024 | Sept. 30, 2024 | June 30, 2024 | | :-------------------- | :------------ | :------------ | :------------ | :------------- | :------------ | | Total revenue (GAAP) | $113,673 | $110,443 | $110,180 | $125,614 | $108,665 | | Total operating revenue (Non-GAAP) | $113,673 | $110,443 | $110,015 | $109,566 | $108,665 | | Total non-interest expense (GAAP) | $68,144 | $70,366 | $77,575 | $71,960 | $70,931 | | Operating non-interest expense (Non-GAAP) | $66,653 | $67,912 | $71,018 | $72,257 | $71,315 | | Net income (GAAP) | $30,366 | $25,719 | $19,657 | $37,509 | $24,025 | | Total operating income (Non-GAAP) | $31,587 | $27,621 | $25,982 | $24,789 | $23,168 | | Operating earnings per common share, diluted | 0.69 | 0.60 | 0.60 | 0.58 | 0.55 | | Operating return on tangible common equity | 10.76% | 9.66% | 9.93% | 9.91% | 9.65% | | Efficiency ratio (Non-GAAP) | 56.73% | 59.45% | 62.43% | 63.74% | 63.40% | Six-Month Non-GAAP Reconciliation This section provides a reconciliation of GAAP to non-GAAP financial measures for the six months ended June 30, 2025, and June 30, 2024, detailing adjustments for non-operating items to present operating revenue, operating non-interest expense, and total operating income, along with key performance ratios on an operating basis - The table reconciles GAAP financial measures to non-GAAP operating measures for the six months ended June 30, 2025, and June 30, 2024[44] Six-Month Non-GAAP Reconciliation (in thousands) | Metric (in thousands) | June 30, 2025 | June 30, 2024 | | :-------------------- | :------------ | :------------ | | Total revenue (GAAP) | $224,116 | $164,206 | | Total operating revenue (Non-GAAP) | $224,116 | $214,115 | | Total non-interest expense (GAAP) | $138,510 | $146,951 | | Operating non-interest expense (Non-GAAP) | $134,565 | $143,718 | | Net income (GAAP) | $56,085 | $3,837 | | Total operating income (Non-GAAP) | $59,208 | $44,102 | | Operating earnings per common share, diluted | 1.29 | 1.03 | | Operating return on tangible common equity | 10.22% | 9.19% | | Efficiency ratio (Non-GAAP) | 58.07% | 64.81% | Corporate Information Conference Call Details Berkshire Hills Bancorp, Inc. held a conference call/webcast on Thursday, July 24, 2025, at 9:00 a.m. Eastern time to discuss the second quarter results and company outlook, with details and archived materials available on the company's investor relations website - A conference call/webcast was held on Thursday, July 24, 2025, at 9:00 a.m. Eastern time to discuss Q2 results and company outlook[14] - Instructions for listening and additional materials are available on the Company's website at ir.berkshirebank.com, with the call archived for an extended period[14] Forward-Looking Statements This section contains forward-looking statements, identifiable by terms like 'may,' 'will,' 'expect,' and 'anticipate,' which are subject to various risks and uncertainties, including merger-related risks, regulatory approvals, and operational challenges during the pendency of the Brookline merger, that could cause actual results to differ significantly - The document contains forward-looking statements, identifiable by specific terminology, which are subject to significant risks and uncertainties[15] - Factors that could cause actual results to differ include risks related to the proposed merger with Brookline, such as termination rights, legal proceedings, delays in closing, failure to obtain regulatory approvals, and operational impacts during the transaction[15] - Readers are cautioned not to place undue reliance on these statements, which reflect expectations only as of the document's date, and Berkshire does not undertake any obligation to update them[15] Investor & Media Contacts Contact information for investor relations and corporate communications is provided for inquiries regarding Berkshire Hills Bancorp, Inc.'s financial performance and corporate affairs - Investor Relations contact: Kevin Conn at 617.641.9206 or kaconn@berkshirebank.com[17] - Media Relations contact: Gary Levante at 413.447.1737 or glevante@berkshirebank.com[17]