Berkshire Hills Bancorp (BHLB)

Regional bank holding company Berkshire Hills Bancorp (NYSE:BHLB) met Wall Street’s revenue expectations in Q2 CY2025, with sales up 4.6% year on year to $113.7 million. Its GAAP profit of $0.69 per share was 23.2% above analysts’ consensus estimates.

Company Overview

Founded in 1846 as a community financial institution in Massachusetts, Berkshire Hills Bancorp (NYSE:BHLB) is a regional bank holding company that provides commercial banking, retail banking, wealth management, and lending services through branches across the Northeast.

Regional banks, financial institutions operating within specific geographic areas, serve as intermediaries between local depositors and borrowers. They benefit from rising interest rates that improve net interest margins (the difference between loan yields and deposit costs), digital transformation reducing operational expenses, and local economic growth driving loan demand. However, these banks face headwinds from fintech competition, deposit outflows to higher-yielding alternatives, credit deterioration (increasing loan defaults) during economic slowdowns, and regulatory compliance costs. Recent concerns about regional bank stability following high-profile failures and significant commercial real estate exposure present additional challenges.

Berkshire Hills Bancorp competes with other regional banks operating in the Northeast, including People's United Financial (acquired by M&T Bank, NYSE:MTB), Webster Financial (NYSE:WBS), and Eastern Bankshares (NASDAQ:EBC), as well as larger national banks like Bank of America (NYSE:BAC) and JPMorgan Chase (NYSE:JPM) that have significant presence in its markets.

From lending activities to service fees, most banks build their revenue model around two income sources. Interest rate spreads between loans and deposits create the first stream, with the second coming from charges on everything from basic bank accounts to complex investment banking transactions.

Unfortunately, Berkshire Hills Bancorp struggled to consistently increase demand as its $443.7 million of revenue for the trailing 12 months was close to its revenue five years ago. This was below our standards and is a sign of lacking business quality.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Just like its five-year trend, Berkshire Hills Bancorp’s revenue over the last two years was flat, suggesting it is in a slump. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Berkshire Hills Bancorp grew its revenue by 4.6% year on year, and its $113.7 million of revenue was in line with Wall Street’s estimates.

Net interest income made up 81% of the company’s total revenue during the last five years, meaning Berkshire Hills Bancorp barely relies on non-interest income to drive its overall growth.

Our experience and research show the market cares primarily about a bank’s net interest income growth as non-interest income is considered a lower-quality and non-recurring revenue source.

Topline growth alone doesn't tell the complete story - the profitability of that growth shapes actual earnings impact. Banks track this dynamic through efficiency ratios, which compare non-interest expenses such as personnel, rent, IT, and marketing costs to total revenue streams.

Investors place greater emphasis on efficiency ratio movements than absolute values, understanding that expense structures reflect revenue mix variations. Lower ratios represent better operational performance since they show banks generating more revenue per dollar of expense.

Over the last four years, Berkshire Hills Bancorp’s efficiency ratio has decreased by 8.2 percentage points, clocking in at 60% for the past 12 months. Said differently, the company’s expenses have grown at a slower rate than revenue, which is always a positive sign.

In Q2, Berkshire Hills Bancorp’s efficiency ratio was 56.7%, beating analysts’ expectations by 8.4%. This print was 6.7 percentage points better than the same quarter last year.

For the next 12 months, Wall Street expects Berkshire Hills Bancorp to rein in some of its expenses as it anticipates an efficiency ratio of 56.2%.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Berkshire Hills Bancorp’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

Berkshire Hills Bancorp’s EPS grew at an astounding 6.6% compounded annual growth rate over the last two years, higher than its flat revenue. This tells us management responded to softer demand by adapting its cost structure.

Diving into the nuances of Berkshire Hills Bancorp’s earnings can give us a better understanding of its performance. Berkshire Hills Bancorp’s efficiency ratio has improved by 6.8 percentage points over the last two years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q2, Berkshire Hills Bancorp reported EPS at $0.69, up from $0.57 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Berkshire Hills Bancorp’s full-year EPS of $2.59 to shrink by 13.5%.

Banks profit by intermediating between depositors and borrowers, making them fundamentally balance sheet-driven enterprises. Market participants emphasize balance sheet quality and sustained book value growth when evaluating these institutions.

This is why we consider tangible book value per share (TBVPS) the most important metric to track for banks. TBVPS represents the real, liquid net worth per share of a bank, excluding intangible assets that have debatable value upon liquidation. On the other hand, EPS is often distorted by mergers and flexible loan loss accounting. TBVPS provides clearer performance insights.

Berkshire Hills Bancorp’s TBVPS grew at a tepid 3.4% annual clip over the last five years. However, TBVPS growth has accelerated recently, growing by 9.1% annually over the last two years from $21.96 to $26.12 per share.

Over the next 12 months, Consensus estimates call for Berkshire Hills Bancorp’s TBVPS to shrink by 12% to $22.98, a sour projection.

Leverage is core to the bank’s business model (loans funded by deposits) and to ensure their stability, regulators require certain levels of capital and liquidity, focusing on a bank’s Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a bank holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all banks must maintain a Tier 1 capital ratio greater than 4.5% On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, banks generally must maintain a 7-10% ratio at minimum.

Over the last two years, Berkshire Hills Bancorp has averaged a Tier 1 capital ratio of 12.5%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

Return on equity, or ROE, quantifies bank profitability relative to shareholder equity — an essential capital source for these institutions. Over extended periods, superior ROE performance drives faster shareholder wealth compounding through reinvestment, share repurchases, and dividend growth.

Over the last five years, Berkshire Hills Bancorp has averaged an ROE of 8.1%, respectable for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired.

We were impressed by how significantly Berkshire Hills Bancorp blew past analysts’ EPS and efficiency ratio expectations this quarter. We were also happy its tangible book value per share narrowly outperformed Wall Street’s estimates. Overall, we think this was still a solid quarter with some key areas of upside. The market seemed to be hoping for more, and the stock traded down 1.6% to $25.78 immediately following the results.

Updated: October 30, 2025 at 12:50 AM EDT

Before investing in or passing on Berkshire Hills Bancorp, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

Berkshire Hills Bancorp isn’t a terrible business, but it doesn’t pass our bar. To begin with, its revenue growth was uninspiring over the last five years. And while its astounding EPS growth over the last five years shows its profits are trickling down to shareholders, the downside is its net interest income growth was weak over the last five years. On top of that, its declining net interest margin shows its loan book is becoming less profitable.

Berkshire Hills Bancorp’s forward price-to-sales ratio is 1.4x. The market typically values companies like Berkshire Hills Bancorp based on their anticipated profits for the next 12 months, but there aren’t enough published estimates to arrive at a reliable number. You should avoid this stock for now - better opportunities lie elsewhere.