BERKSHIRE HILLS BANCORP, INC. B E R K S H I R E H I L L S B AN C O R P ( B H L B )
M AR C H 2 0 2 4
F O R WA R D - L O O K I N G S TAT E M E N T S
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, including statements regarding our outlook for earnings, net interest margin, fees, expenses, tax rates, capital and liquidity levels and other matters regarding or affecting Berkshire and its future business and operations.. You can identify these statements from the use
of the words "may," "will," "should," "could," "would," "outlook," "potential," "estimate," "project," "believe," "intend,"
"anticipate," "expect," "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.
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.
NON-GAAP FINANCIAL MEASURES
This presentation contains both financial measures based on accounting principles generally accepted in the United States ("GAAP") and non-GAAP based financial measures, which are used where management believes them to be helpful in understanding the Company's results of operations or financial position. Reconciliations of these non-GAAP financial measures to the most comparable GAAP measures are included in this presentation and the Company's earnings release available at its investor relations website at ir.berkshirebank.com. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. For additional information, please see reconciliation to GAAP financial measures presented in the Company's News Release.
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B E R K S H I R E AT A G L AN C E
Branches across Massachusetts, New York, Connecticut, Vermont, and Rhode Island
Founded: 1846
Total Assets: $12.4Bn1
Market Cap: ~$952M2
HQ: Boston, MA
Workforce: ~1,300
Ten branches to be sold per March 4th announcement - eight offices in Albany, Schenectady, Saratoga, and Columbia counties; one office in Whitehall; one office in East Syracuse 86 BHLB branches remaining following transaction completion (targeting second half of 2024 subject to regulatory approvals and associated system conversions)
Lines of | • Commercial and Private Banking; Retail Banking; Consumer Lending; SBA Lending; Wealth |
Business | Management |
Retail | • 96 Branches as of 4Q23 (86 Branches pro forma); 114 ATMs |
Footprint | |
DigiTouchSM | • User-friendly Digital Experience, while retaining high-quality personal service and the human |
Service | touch of a Community bank |
3 Source: S&P Global Market Intelligence
Notes: 1 Financial data as of 12/31/23; 2 Market data as of 2/26/24
S AL E O F S E L E C T U P S TAT E AN D E AS T E R N N Y B R AN C H E S S U M M ARY
Sale of Ten Branches in New York Enhances Efficiency and Profitability of BHLB's
Branch Network and Strengthens Focus in Core New York Markets
B H L B N e w Y o r k B r a n c h e s P r o F o r m a | S u m m a r y | |
• Proposed sale includes approx. $485.5M in deposits and $60.5M of related residential mortgage and consumer loans plus all branch premises and equipment
o Ten branches sold to three institutions (Hudson Valley Credit Union, Glens Falls National Bank and Trust Company, and Pathfinder Bank)
• Combined branch and securities sale is neutral to full-year 2024 earnings outlook
o Transaction will not materially increase borrowings
• Transaction expected to add ~35 bps to TCE / TA and lowers CET 1 by ~10 bps
Ten branches to be sold per March 4th announcement - eight offices in Albany, Schenectady, Saratoga, and Columbia counties; one office in Whitehall; one office in East Syracuse
86 BHLB branches remaining following transaction completion (targeting second half of 2024 subject to regulatory approvals and associated system conversions)
- Allows BHLB to concentrate its geographic footprint and lower overall expense run-rate
- Exiting branches without severance or real estate costs, which contributes positively to our long-term profitability
- Agreements provide that buyers intend to offer employment to all associated staff
Source: S&P Global Market Intelligence
4 Note: All deposit, loan, and securities data throughout the rest of the presentation is as of 4Q23 and does not reflect pro forma numbers for pending sale of select branches
4 Q 2 3 AN D F Y 2 0 2 3 H I G H L I G H T S
4Q23 | FY2023 | ||
Rate environment weighed on earnings1 | |||
• Net Income $20.2M (-6% QoQ) | • Net Income $93.2M (-7% YoY) | ||
Financial | • EPS of $0.47 (-6% QoQ) | • EPS of $2.14 (-2% YoY) | |
Performance | |||
• ROTCE (including unrealized losses on AFS | • ROTCE (including unrealized losses on AFS | ||
securities) of 8.90% (-37 bps QoQ) | securities) of 10.05% (-2 bps YoY) | ||
Maintained strong liquidity, capital, and asset quality | |||
• Improved Deposit balance momentum | • Solid liquidity position through turbulent year | ||
- Average Deposit balances +3% QoQ | |||
- Period end Liquidity / Uninsured Deposits at 146% | |||
Balance | - Non-Interest Bearing 25% of Total Average Deposits | ||
Sheet | • Maintained solid Capital levels | • Returned significant capital back to shareholders | |
Strength | |||
- ~$56M (Dividends plus Repurchases) in FY23 | |||
- CET1 ratio ~12.0%2; TCE/TA up 30 bps to 8.0% | |||
• Increased loan loss allowance | • Credit trends remain strong | ||
- Year-to-date NCOs / Avg. Loans of 26 bps | |||
- ACL to Loans up 3 bps QoQ to 1.17% | |||
Continued progress on strategic initiatives | |||
• | Continued expense rationalization with reduction in | • Continued rationalization of real estate and branches | |
- Exited two office buildings, consolidated four | |||
workforce across the organization | |||
branches | |||
Strategic | • | Successfully executed a securities sale which reduced | • Successful conversion of Digital Banking platform |
Progress | our wholesale borrowings and improved funding | for Consumer and Small Business clients | |
profile moving into 2024 | - Improved client experience & platform efficiency | ||
• Recognized as one of America's Best Regional Banks | • Highest Employee Engagement & Customer Net | ||
Promoter Score; Continued hiring of Commercial | |||
by Newsweek (only bank headquartered in MA with a | |||
and Private Bankers with high focus on deposit | |||
Five-Star Rating) | |||
relationships | |||
Notes: 1 Numbers and comparisons are on an operating basis. See Appendix for discussion and reconciliation of non-GAAP financial measures.
5 Numbers and percent changes may not add / equate precisely due to rounding. Securities sale loss of $25.1M pre-tax or $0.44 per share and severance expense of $3.7M pre-tax or $0.06 per share. 2 4Q23 Capital & Ratios are estimated and subject to change.
F Y 2 0 2 3 - " B E S T " P R O G R E S S V S . TAR G E T S
BEST
3 YEAR TARGETS for JUNE 2024
10-12%100-105 bps $180-200MTop 25%Top 25%
ROTCE2 | ROA | PPNR3 | ESG | NPS®4 |
Increase ROTCE | Increase ROA | Increase PPNR | Become top quartile | Become top quartile |
by 700-900bps* | by 75-80bps* | by $80-100M* | bank by leading | Net Promoter Score |
ESG indexes in | bank in New England | |||
US** |
FY231 | 10.1 | 79 | 142 | 20 | 45 |
FY22 | 10.1 | 90 | 136 | 17 | 43 |
FY21 | 7.6 | 70 | 102 | 24 | |
FY20 | 3.1 | 24 | 109 | 39 | |
% | bps | $M | Percentile | NPS |
* Improvement over FY2020 baseline, driven by BEST program over 3 years starting Q3'21; ** ESG Index ratings are on an end of period basis: MSCI, ISS-ESG, Sustainalytics, Bloomberg; lower percentile is better;
1All numbers on an operating basis. See appendix for reconciliation of GAAP & Operating financials; 2 Represents ROTCE including unrealized losses on AFS securities. Operating ROTCE excluding unrealized losses on AFS securities was 8.0% for FY' 23; 3 Each quarter operating PPNR annualized ($M); 4 Customer Net Promoter Score (NPS) averaged 44.9% in 4Q23 - according to JD Power NPS data in JPM's June 2023 U.S. Mid- and Small-Cap Banks Money Making Playbook Update the Top Quartile NPS was ~41 based on the syndicated research methodology
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N O TAB L E " B E S T " AC H I E V E M E N T S
- 26 branch consolidations1 with annual expense saves redeployed strategically
- Exited Mid-Atlantic geography
- Insurance business divestment ~$37MM+ pre-tax gain
- Sold securities in 4Q23, reduced borrowings and improved overall funding profile
- Real Estate optimization, procurement streamlining, and outsourcing for scale (e.g. DMI)
- Run-offnon-strategic loan portfolios (e.g. Firestone, Upstart)
- Launched new Mobile App and Online Banking capabilities for personal and small business customers in partnership with Narmi
- Building API middleware infrastructure through Mulesoft for ease of connectivity for existing and new applications
- Developing data warehouse through Snowflake
- Enhancing salesforce / client experience through hiring of deposit-oriented bankers, Relationship Managers, Wealth Managers, and MyBankers
- Robust capital level supporting loan growth and returns to shareholders
- Announced $40MM repurchase authorization for 2024
- Maintained high customer NPS score (~45) and achieved top- quartile ESG score nationally
7 Notes: 1 As of 4Q23 - figure does not include announced sale of select NY branches
C L O S I N G T H E G AP V S P E E R S O V E R L AS T 3 Y E AR S - AC C E L E R AT I N G O U R M O M E N T U M G O I N G F O R WAR D
O p e r a t i n g R O T C E ( % )
20.0 | |
15.0 | |
10.4 | |
10.0 | |
5.0 | |
0.0 | 3.1 |
75% | |||
15.1 | 15.3 | ||
11.5 | |||
50% | |||
10.1 | 10.1 | ||
7.6 | |||
31% | |||
25% | |||
-1.4 | |||
-5.2 |
BEST Target: 10 - 12%
BHLB vs. Peer ROTCE has narrowed from ~730 bps in 2020 to ~140 bps FY'23
-5.0 | -7.3 | -7.5 | ||
-10.0 | 0% | 1% | 1% | 0% |
FY'20 | FY'21 | FY'22 | FY'23 | |
BHLB | Peer Median | BHLB vs Peers | BHLB % Rank |
O p e r a t i n g R O A A ( % )
1.501.321.3075%
0.90 | 0.89 | BEST Target: 100 - 105 bps | |||||||
1.00 | |||||||||
0.90 | 0.79 | 50% | BHLB vs. Peer ROAA has narrowed | ||||||
0.50 | 0.70 | from ~66 bps in 2020 to ~10 bps FY'23 | |||||||
0.00 | 0.24 | -0.10 | |||||||
-0.40 | 25% | ||||||||
21% | |||||||||
-0.62 | |||||||||
-0.50 | -0.66 | ||||||||
-1.00 | 0% | 0% | 0% | 0% | |||||
FY'20 | FY'21 | FY'22 | FY'23 | ||||||
BHLB | Peer Median | BHLB vs Peers | BHLB % Rank | ||||||
8 | Notes: Peer data is sourced from S&P Global Market Intelligence; Peers include BRKL, CBU, CNOB, CUBI, DCOM, EGBN, EBC, FCF, FFIC, INDB, |
NBTB, OCFC, PFS, STBA, SASR, TMP and WSFS; BHLB ROTCE above includes losses on AFS Securities | |
K E Y I N V E S T M E N T H I G H L I G H T S
1
- Inexpensive valuation; trading around TBV and ~85% of TBV excluding AOCI1
2
- Robust Capital position supports loan growth and continued share repurchases in 2024
3
- Earnings and returns momentum; closing the gap vs peers and consensus EPS of +19% in 2025 vs 2024
4
- Differentiated Expense control; 2024 expenses ~flat vs peers at low to mid-single digit growth
5
- High market shares, low deposits beta and lower cost of operations in smaller cities across New England and Eastern NY
6
- Solid credit quality trends, coupled with de-risking of relatively higher risk segments
9 Note: 1 Price as of 2/26/24
B L E N D O F N E W AN D S E AS O N E D E X E C U T I V E S
Nitin J. Mhatre | Sean A. Gray | David Rosato | Jim Brown | Gregory D. Lindenmuth | Jacqueline Courtwright |
Chief Executive Officer | President and Chief Operating | SEVP, Chief Financial Officer | SEVP, Commercial Banking | SEVP, Chief Risk Officer | SEVP, Chief Human Resources |
Officer | and Culture Officer | ||||
At Berkshire since | At Berkshire since | At Berkshire since | At Berkshire since | At Berkshire since | At Berkshire since |
2021 | 2006 | 2023 | 2023 | 2016 | 2012 |
Ashlee Flores | Philip Jurgeleit | Andrew R. Plumridge | Wm. Gordon Prescott | Sumant Pustake | Ellen Steinfeld | Jason White |
EVP, Chief | EVP, Chief Credit | EVP, Chief Internal Audit | SEVP, General Counsel | EVP, Chief Strategy | SEVP, Consumer | SEVP, Chief |
Compliance Officer | Officer | Officer | and Corporate | and Marketing | Lending and | Information Officer |
Secretary | Officer | Payments | ||||
At Berkshire since | At Berkshire since | At Berkshire since | At Berkshire since | At Berkshire since | At Berkshire since | At Berkshire since |
2018 | 2023 | 2023 | 2008 | 2017 | 2021 | 2019 |
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Berkshire Hills Bancorp Inc. published this content on 04 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 04 March 2024 22:08:01 UTC.
