Banker & Tradesman photo / file

After a tough second quarter, Berkshire Bank says it’s back to profitability based on its third-quarter results.

When presenting second-quarter earnings earlier this year, former CEO Richard Marotta announced the bank was taking a $554 million goodwill impairment charge – the entire accumulated goodwill from the bank’s many mergers in recent years – as a result of the pandemic’s impact on all bank stocks. The decision created a $549 million loss for the bank in the second quarter, or $10.93 per share, despite net pre-tax core revenue of $24 million once the goodwill impairment was excluded.

Marotta departed the bank shortly afterwards.

The bank’s third-quarter earnings announcement presented a much more positive view. Net income was $21 million compared to $23 million in the third quarter of 2019, while core earnings totaled $26 million compared to $24 million in the third quarter of 2019. Compared to the second quarter, revenue was up 2 percent, fee income was up 9 percent and core non-interest expenses – which excludes the goodwill impairment charge – dropped 4 percent.

Overall, the bank reported higher revenues as it continues to cut expenses in an effort to improve profitability. The bank’s efficiency ratio improved from 71 percent to 65 percent while the equity-assets ratio improved to 9.3 percent from 8.9 percent.

“During the quarter, we continued our focus on managing our expenses and further strengthening our capital and liquidity metrics. We’re working closely with our borrowers as they progress in normalizing their operations and meeting their credit obligations. This is reflected in our stable loan performance and resumption of regular payment schedules for most of the borrowers who initially requested deferrals at the outset of the pandemic,” Acting CEO Sean Gray said in a statement. “Berkshire is evolving and adapting to the current environment, by having made investments that will support our customers and our Company today and into the future. We recently launched a best-in-class digital account opening experience that will extend our market outreach, improve customer experience, reduce fraud and allow us to operate more cost effectively.  This is another step in building a 21st-century community bank that provides everyone equal access to the products and services they need to bank with dignity, achieve upward economic mobility and live healthier financial lives.”

The bank’s balance sheet was dominated by runoffs across all major loan categories. Total assets dropped 3 percent to $12.6 billion, largely due to a $388 million drop in loans, including a $198 million or – 9 percent – decrease in residential mortgage balances as borrowers accelerated repayments. Total deposits decreased by 3 percent, or $309 million, to $10.5 billion due to a $270 million drop in brokered balances, to $814 million.

The bank also dropped its provision for credit losses to $1 million due to what it said was an improving economic outlook. Only 0.45 percent of Berkshire’s loans were accruing and delinquent during the third quarter, down from 0.51 percent last quarter. Non-accruing increased to 0.53 percent from 0.48 percent. Loans with payment modifications are expected to decrease further in the fourth quarter from levels previously reported.  The allowance for credit losses on loans was little changed, measuring 1.50 percent of total loans at quarter-end, and 1.62 percent of loans excluding government-guaranteed PPP loans.

At the same time as announcing its quarterly financial results, the bank also announced several promotions:

• Jason White was promoted to executive vice president and chief information officer.
• Wealth Management Director Kate Hersey was promoted to head the Boston region, replacing departed Executive Vice President Malia Lazu.
• Foundation Director Lori Gazzillo Kiely now leads the Berkshire County region.