Photo by James Sanna | Commercial Record staff
Berkshire Bank suffered a net loss on a securities sale during the fourth quarter of 2023, the bank reported, dragging it down to a net loss of $1.4 million compared to last quarter’s net profit of $19.5 million.
The Massachusetts bank, which has a significant presence in Connecticut, said it sold $267 million of available-for-sale securities, resulting in a $25.1 million pre-tax loss in operating income. Excluding the loss, Berkshire’s operating income was $20 million.
“We executed a securities sale late in the fourth quarter and used those proceeds to pay down wholesale borrowings, eliminating the negative carry associated with those securities,” Berkshire Bank CEO Nitin Mhatre said during the bank’s earnings call Thursday.
The bank reduced its wholesale funding by 52 percent, which had a credit cost of 5.25 percent in weighted average yield. With the sale, the bank is expecting an improvement in capitalization, projecting an 8 basis points decrease in its common equity tier 1 ratio.
While it hired several wealth managers from Silicon Valley Bank and First Republic Bank last year as part of its strategy to grow more in Boston and East Massachusetts areas, Mhatre said the bank reduced its workforce during the quarter and had to pay off $7 million in severance charges.
David Rosato, Berkshire’s chief financial officer, said the severance charges were due to the bank pursuing efficiency improvements while reinvesting in front-line, revenue-generating teams.
Part of its expense management strategy is reducing its current 96 branches between now and 2026. In 2023, the bank closed down four branches and exited two office buildings.
“Most of the branch networks, in two or three years down the line, it’s gonna be fewer branches that will be more automated, more digitized, and more advisory type of business. We can’t give a number, but it will be more consolidated, and we’ve done that in the last three years, we’re down about 20 to 25 branches. So we will continue to look at options,” Mhatre said.
The bank’s non-interest expense went up by 2 percent quarter on quarter on employee severance payments and a drag in costs for its online banking technology.
Net interest income was lower, ending at $88.4 million from $90.3 million in the third quarter as the 30-basis-point jump in cost of deposits highly influenced the income over the 9-basis-point increase in loan yields.
The bank’s deposits grew to $10.6 billion from $9.9 billion last quarter, due to an increase in money market and time deposits. Total loans were up to $9.04 billion, from $8.9 billion, due to the increases in commercial real estate and residential mortgage loans.
The bank reported it reduced both its non-performing loans and net charge-offs – loans in non-paying status – and increased its provision and allowance for credit losses. The bank said it has 3.9 percent of its class B office loan portfolio in criticized status, meaning a borrower is showing weakness in repayment ability, worth around $6 million.
For this year’s outlook, factoring in the anticipated interest rate cuts by the Federal Reserve, Berkshire is projecting for its loan book to be $9.5 billion to $9.7 billion while deposits may slightly decrease to between $10.2 billion and $10.3 billion.
The bank said it set aside $40 million in funds for share repurchases in 2024.
