Q4 2023 Berkshire Hills Bancorp Inc Earnings Call
Participants
Kevin Conn; Senior Vice President, Investor Relations & Corporate Development; Berkshire Hills Bancorp Inc
Nitin Mhatre; President, Chief Executive Officer, Director; Berkshire Hills Bancorp Inc
David Rosato; Chief Financial Officer, Senior Vice President; Berkshire Hills Bancorp Inc
Presentation
Operator
Good morning, ladies and gentlemen, and welcome to the Berkshire Hills Bancorp. fourth-quarter 2023 earnings conference call. (Operator Instructions) This call is being recorded on Thursday, January 25, 2024.
I would now like to turn the conference over to Mr. Kevin Conn. Please go ahead, sir.
Kevin Conn
Good morning, and thank you for joining Berkshire Bank's fourth-quarter earnings call. My name is Kevin Kahn, Investor Relations and Corporate Development Officer. Here with me today are Nitin Mhatre, Chief Executive Officer; Sean Gray, Chief Operating Officer; David Rosato, Chief Financial Officer; and Greg Lindenmuth, Chief Risk Officer.
Our remarks will include forward-looking statements and refer to non-GAAP financial measures. Actual results could differ materially from those statements. Please see our legal disclosure on page 2 of the earnings presentation referencing forward-looking statements and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in our news release.
At this time, I'll turn the call over to Nitin. Nitin?
Nitin Mhatre
Thank you, Kevin. Good morning, everyone, and thank you for joining us today. I'll begin my comments on slide 3, where you can see the highlights for the fourth quarter and full year.
While the rate environment remains challenging, we're encouraged by the early trends in deposits balances. 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. We also incurred a severance charge of $3.7 million related to a workforce reduction across the organization.
For 2024, expense optimization, deposit growth, and credit management will be our top priorities. We intend to self-fund investments in strategic priorities that support our vision to be a high-performing, relationship-focused community bank. David will review these items and our 2024 guidance in more detail in a few minutes.
Operating net income for the quarter was $20.2 million, and operating EPS of $0.47 declined 6% linked quarter, primarily from a decline in net interest income. Full-year 2023 EPS of $2.14 was down 2% year over year.
We are encouraged by the trends in asset quality and deposit growth in the quarter. Our credit costs have trended down, and our loan books are performing well. Non-performing assets and net charge-offs declined [14%] linked quarter, and we increased our loan loss allowance by 3 basis points to 1.17% of loans.
Average deposits were up 3% linked quarter, largely driven by an increase in money market and time deposits. Our liquidity position is robust, and our available liquidity coverage of core uninsured deposits was 146%. We've included a page in the appendix with more details. Our average loan balances were up 11% year over year and up less than 1% linked quarter, given lower loan demand and disciplined underwriting.
Our balance sheet remained strong. We ended the quarter with a common equity Tier 1 ratio of 12% and a tangible common equity ratio of 8%. We repurchased 328,000 shares in the fourth quarter and 1.1 million shares in 2023, which reduced our share count by 3% over the year. Our Board has authorized and regulators have approved a new share repurchase program of $40 million in 2024, and we expect to continue share repurchases opportunistically.
We've updated pages in our earnings deck on our overall commercial real estate portfolio and a page that provides details on our office portfolio. Both of these pages highlight that our portfolio is granular, geographically diverse, and resultantly, less risky. David will cover some of these metrics in more detail in a few moments.
We continue to make steady progress on our strategic priorities, optimizing real estate, branch network, and balance sheet. In 2023, we consolidated four branches and exited two office buildings. We will continue to look for opportunities to lower our occupancy expenses further.
Our team successfully converted our digital banking platform for consumer and small business clients to improve the client experience and platform efficiency. Our employee engagement and customer net promoter score were at their highest level in 2023, and we were recognized by Newsweek as one of the best regional banks in the country and were the only bank headquartered in Massachusetts with an overall five-star rating.
The disruption in our markets has enabled us to opportunistically hire deposit and relationship-focused frontline bankers. These bankers have strong deposit books and complement our existing team. Gaining even a small part of the opportunity presented by the market disruption would be meaningful for Berkshire.
Slide 4 shows our progress on five key performance metrics. Our full year 2023, we are near the low end of our target range for operating return on assets at 79 basis points, and our operating return on tangible common equity was 10.1%, above the lower end of our target range. Our full-year PPNR grew to $142 million.
Our ESG score remains in the top quartile nationally, and our full-year net promoter score improved further to 45. We have made steady progress over the last three years and are energized about significant opportunities for improving our financial performance further.
I want to use this opportunity to thank all of my Berkshire Bank colleagues for their continued hard work and commitment to our vision to be a high-performing, relationship-focused community bank. Through this difficult external environment and corresponding changes being made internally, their commitment to our strategy and dedication to our customers and communities is what brings us together and truly sets us apart.
With that, I'll turn the call over to David to discuss our financials in more detail. David?
David Rosato
Thank you, Nitin. And Slide 5 shows an overview of 2023, but I'll jump to Slide six, which details the fourth quarter. As Ned mentioned, operating earnings were 20.2 million or $0.47 per fully diluted share, down $0.03 linked quarter. Our net interest margin was three 11, down seven basis points linked quarter and net interest income declined $1.9 million or 2%. Operating noninterest income was 16.7 million, down 5% linked quarter. I note that several fee line items are below historic quarterly run rates and should recover over the coming quarters.
Operating expenses were $75.3 million, up 2% linked quarter. Average loans increased 38 million linked-quarter, while average deposits increased $306 million or 3% from Q3. Provision expense for the quarter was $7 million at the lower end of our July guidance and down 1 million from the third quarter and down $5 million year over year. Net charge-offs of $4.4 million or 20 basis points of average loans were down 38 basis points year over year. We increased our allowance for credit losses by $2.6 million in the quarter, bringing our allowance for credit losses to 117 basis points of loans.
Slide 7 shows more detail on our average loan balances, which were up 38 million linked quarter. We had growth of 84 million in commercial real estate and $38 million in residential with a 69 million decline in C&I and a decline of $15 million in consumer, which reflects runoff of nonstrategic loan portfolios.
Slide 8 provides details of our security sale. We sold 267 million of securities and incurred a pretax loss of $25.1 million or $0.44 per fully diluted share after tax. Our earn-back period is about three years and proceeds were used to pay down wholesale funding. Fhlb borrowings were down $419 million and ended the quarter at $385 million, which was down 52% linked quarter. Our securities to total assets was 13% at year end.
Slide 9 shows our average deposit balances. Average deposits increased 306 million or 3% in the quarter. As expected, the deposit mix shifted with a modest decline in noninterest-bearing deposits and an increase in money market and time deposits. Bearing deposits as a percentage of total deposits were 25% in the fourth quarter first, 26% in Q. three. Deposit costs were 211 basis points, up 30 basis points from the third quarter. Our cumulative total deposit beta is 37% through 525 basis points of Fed tightening borrowings or 6% of total funding, down from 9% in Q3.
Turning to slide 10, we show net interest income. Higher deposit costs contributed to the $1.9 million or 2% decrease in NII, our net interest margin was three 11.
Slide 11 shows operating fee income down 791,000 or 5% linked quarter loan rate. Loan-related fees were down 821,000 linked quarter, driven primarily by lower swap income that was about $600,000 below our normal quarterly run rate. Gain on sale of SBA loans were down 166,000 due to lower premiums in the market, a line item to a line item that is also running about 900,000 below normal run rate. Other fees were up 594,000 from fair value adjustments on equity securities.
Slide 12 shows expenses operating expenses were up 2% linked quarter to 75.3 million. Importantly, there was a modest fourth quarter technology expense true up. So so I'd encourage you to look at our 24 guidance for thoughts on run rate expenses, compensation expense was flat to the third quarter and increases on technology and professional services expense were partially offset by declines in occupancy and equipment. Gaap expenses of $79 million includes 3.7 million of severance charges or $0.06 per share after tax related to the aforementioned workforce reduction.
As I've said previously, we are committed to managing expenses with discipline and transparency. We are taking a very granular approach to expense management that will have the desired impact of reducing our expense base. We are committed to ensuring that every dollar we spend is thoughtful and necessary to run the bank efficiently or to grow our revenue and earnings.
Slide 13. As a summary of asset quality metrics. Nonperforming loans were down $5.2 million linked quarter and $9.7 million year over year. Net charge-offs of $4.4 million or 20 basis points were down $1 million versus the third quarter and down $7.3 million year over year. We've included a chart in the appendix with Berkshire heirs net charge-off rates for the industry since the year 2000, we've moved some of the credit pages from the appendix into the body of our deck.
Slide 14 shows that our CRI book is well diversified in terms of geography and collateral types. Credit quality of the credit portfolio remained solid with nonaccrual loans at 10 basis points of period-end loans.
Slide 15 has more details on our office portfolio. As noted last quarter, the weighted average loan to value ratios are about 60% and low and a large majority of the portfolio is in suburban and class-A space. We have also shared more granular credit depth data for the office book. We believe our office portfolio is very well underwritten diversified, and the asset quality of this portfolio remains solid. While current credit quality metrics are benign, we recognize that economic uncertainties exist and we are monitoring both new originations and existing portfolios carefully, and we have modestly increased our reserves.
Slide 16 shows returns over the past five quarters on a GAAP and an operating basis. As you know, the current operating environment is presenting headwinds, but we remain focused on improving our medium-term performance and look forward to a more normal operating environment. Recall we added several new rows to the financial tables starting last quarter. Prior to last quarter, we have been reporting return on tangible common equity with a denominator that excludes the negative AOC. mark from our AFS securities portfolio. We are now also reporting Rossi with a denominator that includes the negative AOC mark, which lowers the denominator and increases broadly most of our peers calculate return on tangible common equity this way. So we have simply aligned our reporting to be more consistent with both peers and larger banks.
Slide 17 shows our capital ratios with the decline in rates and our security sale. Our AOCI. improved by 75 million from a negative 218 million to a negative 143 million. Common Equity Tier one declined 10 basis points to 12%. The TCE ratio improved to 8%, and our tangible book value per share increased 7% at linked quarter to $22.82. Our top capital management priority is to deploy capital to support organic loan growth. Secondly, we remain biased to stock repurchases given that our stock price is trading below intrinsic value. In Q4, we repurchased 6.6 million of stock at an average cost of $20.15. First, our ending tangible book value of $22.82. And in 2023, we repurchased 24 million of stock at an average cost of $20.85. We believe Berkshire stock is undervalued. Given our growth potential and low risk business model, we will continue to opportunistically repurchase shares.
Slide 18 shows our 2024 guidance. Our guidance incorporates five rate cuts, however, one of which is in December of 2024 and does not impact guidance, which in which is in line with current Bloomberg and market consensus. We expect loan growth of 5% to 7% of end-of-period loans. Payroll deposits were elevated at year-end, so we'd encourage you to model deposits off an adjusted ending balance of 10 billion which excludes payroll balances above normal run rate, we expect 2% to 3% normalized deposit growth. Recall that we are also adopting PAM accounting for our tax credit business in 2024, which lowers the amortization expense impacting fee income, thereby increasing fees and increasing our effective tax rate. Our 2023 fees adjusted for PAM would have been 75.9 million and we expect growth of 0% to 3% off that base. We expect provision expense to be 33 to $36 million and expenses be down 1% to up 1%. Our tax rate increases with the change in accounting, and we believe it will be in the range of 20% to 22%. Our Board has authorized and regulators have approved a new $40 million stock repo repurchase program, which we expect to use opportunistically.
With that, I'd like to turn it back to Nitin for further comments.
Nitin Mhatre
Thanks, David. 2023 proved to be a challenging operating environment for the banking industry. Given the historic increases in interest rates to crowd inflation, the industry proved resilient amidst the failures of three large banks, which had idiosyncratic business models. We expect that in 2022 and for the operating environment will continue to be challenging. While we cannot control the macro environment, we are focused on controlling what we can and have several levers, including rigorous expense management, opportunistic hiring for deposits and loan growth and de-risking the balance sheet we look forward to a more normal banking environment later in 2024 and into 2025.
When I started as the CEO and early 2021, we faced rapidly declining loan balances that we steadily turned into loan growth. We will similarly overcome the current challenges, including deposit growth and expense management. We remain focused on selective, responsible and profitable organic growth.
With that, I'll turn it over to the operator for questions. Laura, please open the line for Q&A.
Question and Answer Session
Operator
Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touchtone phone. Again, that's star followed by the number one. You will hear three-tone prompt acknowledging your request, should you wish to decline from the polling process, please press star followed by the number two. If you are using a speakerphone, please lift your handset before pressing any keys. One moment, please, for your first question. Our first question comes from the line of Bill Young from RBC. Please go ahead.
Kevin Conn
Very good morning, guys.
Nitin Mhatre
Can you hear me.
Kevin Conn
Okay, three, good morning, really order. Are you I guess let's just first start on NI and the margin. Can you elaborate first, how much do you think the repositioning this quarter should benefit, you know, kind of 1Q and the run rate going forward?
Yes.
Well, it's some it's about a three year play, but on a three year payback on the securities transaction, it's worth about 7 million on an annualized basis increase in net interest income.
Got it. From that $7 million beginning in 2024?
Yes.
Well, that's a full year number. But yes, so that the security sale occurred very late in December third week in December. So it really had no impact of any significance in and Q4 margin which it was as reported, was three 11 comps. So we'll see a step up from that. As you know, we don't we don't provide net. We don't provide margin margin guidance but it's obviously in the NI guide.
Understood. Thanks. And then and then just to follow up on on that theme, yes, how kind of how does the timing of the rate cuts impact your outlook if we start to seeing more aggressive Fed rate actions earlier in the year versus if you know, the Fed cuts rates less than five, we contemplated kind of how does that impact? Is it a trajectory?
I'm sure let me say a couple of comments. The first is on the transaction obviously occurs what occurred late in the quarter increased asset sensitivity for us because we paid down wholesale borrowings, which were short had longer term on securities. The that's why you also see an elevated cash position at 1231, you saw a large jump in cash on the balance sheet. That's not steady state price arm. So the transaction is accretive to the margin and net interest income dependent on where rates go over the course of 2024, we could we put more securities back on the balance sheet. We've telegraphed I'm rather consistently over the last year that were just I've been plus or minus neutral from an asset liability perspective. So three rate cuts or five, which is really only for from a NI perspective because, yes, the last one of the meeting in December of December 18th, 2024, on will has a very modest impact on us either way, whether it's three or five. I think more importantly, you didn't ask the question. But when we think about the margin over the course of 2024, I think the book our work is basically in line with what we're hearing from a lot of other banks. We still expect the margin to bottom into late in the second or in the third quarter of this year. And then you said you will see margin expansion that's on. That's whether the Fed is this as telegraphed by them or weather a little bit more aggressively by what's the market it has to price them. So that's the real important message, I think, selling.
I appreciate that. That was actually yes, one of the follow-ups I had, but just I guess shifting gears to expenses.
Yes, I appreciate kind of the flat expense guide for this year versus last? And are there any additional efficiency actions being assumed within that guidance? Firstly, and then secondly, is there a target efficiency ratio you'd like to exit this year at when also done?
Yes, you are the two questions there. One, one of which I'll answer in detail, one of which I'll not answer the The first part is the important part. So Milton alluded to in his opening comments, our focus on expenses and other initiatives. So we had a modest workforce reduction, which was broad-based across the organization at the beginning of this year. Going forward, we still recognize the need for EXPENSES. We should think about that in a more targeted manner as the year progresses. So thinking about how we do things and how we're staffed so that there, it's technology, it's process, it's a lot more granular. And I think that the end results it can be significant, but it's there they take more time to achieve. So that's what we're focused on in 2024 on that. Some of our thoughts around that is obviously embedded in the expense guide, holding expenses flat year over year. When you think about merit increases and escalators in real estate contracts and other contracts, software contracts, et cetera, is a lot. And we're one of our focuses besides making sure that we continue to get more efficient and manage costs. And I've talked about that every quarter since I've been here, the granular approach we're taking is to make sure we don't hurt the revenue generation capabilities of the Company. So we spend also a lot of time making sure as we as we continue to work on controlling expenses and lowering expenses that we don't damage the growth potential of the Company.
So Billy, the So your second question was essentially a targeted efficiency ratio I think at this point I will just decline to to put that number out there. What I would say is our efficiency ratio has been going up and went up in 2023. We're not excited at all about it. We need we recognize it needs to come down and improve, and we're very committed to that.
Nitin Mhatre
I believe if I may just add a little bit of accommodating David laid it out well, and I just want to connect it to what you heard us say before as part of our BEST plan where we talked about optimization as being our key lever. And within those we talked about, we have we believe and we still do have significant opportunities on rationalizing real estate procurement optimizing our channels, processes and deploying business process automation to improve efficiency. So all of those levers have been deployed and will continue to deploy. So this is a ongoing thing. It's not a one activity. It's a ongoing activity at Berkshire.
Kevin Conn
Understood. Thank you for taking my questions.
Thank you, Frankie.
Operator
Our next question comes from the line of Chris O'Connell from KBW.
Please go ahead.
Kevin Conn
Good morning. I wanted to appreciate all of the detailed guidance was hoping to just start off on the fees and the tax credit fees and the change in accounting on a year-over-year basis? And where do you think that just start to offer kind of averages out through the year on that line item within the fees on the contracts but I'm not exactly sure what you're asking, Chris, what I would say I would just say two things. The economic effect, the EPS effect of the change in accounting is zero it's just the geography between showing higher fee income but also showing a higher tax rate. If you look back in the tables in the press release, we actually provide each quarter of the details, some of expense savings and the fee contra fee revenue that runs through on the fee income line. And you'll see that that business timing makes the numbers move around a little bit more, but the core is probably 600,000, $650,000 of positive economic benefit each quarter.
So did I have a great group of Have I answered your question.
Okay. I'm all set, makes them. And then just following up on the expense discussion, I appreciate the full year guide in the comments that you guys made and talk a little bit about just the cadence. You know that given the charges that were taken in the fourth quarter, is that an immediate drop to start the year? Or is there some offsetting factors here in the first quarter?
Well, as you know, the first quarter usually fill the comp were up. Comp line runs high just because some FTIC. expense in oh four, oh one K matches, et cetera. So yes, that's just in the comp line. What the I guess the way I think about it is if you look at our numbers, the quarter-over-quarter our comp line was actually marginally down and occupancy and equipment was down. That's to Nittany comments around the brand and at the top where we talked about two office buildings and some branch consolidations, what was up linked quarter and which is where the opportunity lies. But where things take more time is technology and communication expense, sub 710,000 linked quarter and professional and others services, which was and 994,000. So in professional fit in professional services we also have regulatory examination fees and FDIC expense. And everyone knows how the pressure banks have been under on FDIC., but what's also in there is use of consultants outside help. So that's where we're highly focused is core operating expenses and professional service expenses. That's changing the way we do things that's changing, whether we do it internally or externally with partners, et cetera. That was our the comment I was trying to make with there's opportunity there. It will improve our efficiency ratio to billings question. However, it's not just a quick fix it ties.
Nitin Mhatre
I would also add that when David made that point earlier in his comments as well, our outlook is calling for flat expenses like you pointed out and I know I think the consensus was about 3% growth. So I think this is certainly better than that. And I think that's where maybe the I the industry will be. But for us, the most important part is it's an ongoing focus. And secondly, we also self-fund the investments that we will continue to make that will improve our revenue line as well. So that will cumulatively impact favorably our efficiency ratio.
Kevin Conn
And yes, and just last comment, Chris, is I mean, you did ask about essentially quarterly expenses and sentiment was what is a are they going up or going down, right? That I would I would peg it as Asbury steady would be our thought out there may be a million plus or minus maybe even $1 million in a quarter variation quarter to quarter. That's kind of the way we see it, but nothing significant in that from our perspective.
Helpful, David, and just last one for me, if I could. Can you just remind us of the percentage of loans that are floating or would reprice immediately and probably feta Fed funds would have been well, the whole book is 57% floating, 43% fixed, a vast majority of that 57% is from So four and prime. So almost immediately, right so for it tends to be one month on. There's a little bit there's a few hundred million dollars of a one-year T-bill base there. But for all intents and purposes, think of it as one month free overnight to one month repricing on that 43 or 50?
I'm sorry, 57%.
Great.
Thank you.
Nitin Mhatre
Thanks, Ray, and welcome.
Kevin Conn
Thanks.
Operator
Our next question comes from the line of Mark Fitzgibbon from Piper Sandler.
Kevin Conn
Please go ahead, figures.
Nitin Mhatre
Good morning.
Kevin Conn
One thing about Cinemark. I'm David, in your comments you said that you've been buying back the stock below your estimate of intrinsic value. Could you share with us what you perceive the intrinsic value of the company to be? And I've I won't put a firm number on it, Mark. I mean, as you know, we all come up with different some values that we all have different valuation techniques on and methodologies. What I will say is we and I tried to say this in my comments around growth potential low risk business model. I really believe that I think layered on top of that is a significant ability to or there's an ability for us to continue to improve the efficiency of this company.
On the cost side, high, I've learned that we have a very resilient deposit base that was proved proved fit back in March. I see opportunities in the Eastern Mass Market, and I think it will be effective. And as we get bigger and stronger in this large market. Remember, a lot of our our our markets are smaller towns, west of populations that major population center of this state. When I put all that together and think about the next couple of years, we can we see our stock at much higher levels than where we're trading today on it. So that's my high level. The definition of intrinsic value for you.
Okay, great. And then you mentioned potential efficiency improvements. Can you help us think about what might be the bigger pieces of those, not necessarily numbers, but what are kind of the pieces of the expense synergies that you see?
I'm sure I'll take a whack at it that I give it to Internet and cell type. Think about the process. There's certain parts of our organization that are very nimble and leading-edge the work long before I got here that net and Sean would talk about out about normally you've heard that name. So our online consumer and business platform, very leading-edge product project allows us to yet off the core right. We still have to talk to the core every day via API.s but really nice platform that has led to decreases in operating expenses. I talked about this in the second and third quarter or so more things like that where we go from the old way of doing business whole more dependent on a large, better provider to being more nimble, meaning customers centric to me, but also cheaper. So I see could we we have opportunities like that across the bank to make things faster, simpler, less paper-based. We just have to execute on them. And there are things that take a lot of work.
Nitin Mhatre
Yes, Mark.
I would just add onto that. You've heard us talk about this previously as well, how we have unique opportunities for optimization. We have been out to our legacy acquisitions. We do have excess real estate that I think we can easily rationalize. We have channels that we can rationalize. We have a procurement opportunities that we're exploring and deploying more technology in there automation opportunities that are kind of there for most organizations. We believe we have some of those as well. And on a day-to-day basis, we have what I think David had referred to in the last quarter, a internal process, we call it in brackets and expense management and resource allocation kind of counsel that looks at every dollar of spend grow in pretty low thresholds that we track to make sure every dollar spent thoughtfully and where there are opportunities to rationalize that and make it more efficient. The team is coming back with solutions to do that. So I think it's just the culture of efficiency that we're building, that's going to create more opportunities for us.
Kevin Conn
So I've got just one contract book, how is just going to say the follow up to wide net. And we're saying and kind of tied into the point I was trying to make about we don't want to slash and burn expenses here and hurt the revenue momentum of the Company. So that that's what I was trying to allude to in the script about or thought upon expenses. But we're also going to be careful to make sure that the momentum that's happened over the last three years needs to not only continue, but it needs to accelerate.
Okay. And then it strikes me that one of the challenges on the expense side for you all is just the spread of the geography that you you have branches. And would you consider selling a piece of that geography or some branches in a particular area trying to create more density in the footprint and improve efficiency?
Nitin Mhatre
So, Mark, the short answer would be yes. And I think that's been part of the ongoing process, though we were a much broader network, as you know, which we have consolidated and we, as a team, continue to look at opportunities for our footprint rationalization based on the customer footprint that kind of footfalls and our ability to service them. And as we leverage more of digital services, I think that creates more opportunities. But we do that all with the lens of what's the best value for customers and assess how they're getting serviced and then creating opportunities for consolidation and rationalization as it comes along.
Kevin Conn
Thank you.
Thanks, Mark.
Operator
Our next question comes from the line of Laurie Hunsicker from Seaport. Please go.
Yes, hi, thanks. Good morning and Baneygo in London. Just staying on expenses here. So your branch footprint, if it's currently 96, is that right?
Nitin Mhatre
Correct.
Okay.
And so when you think about that branch rationalization over the course of the next year, that 96 go into 1996, 28. I mean, how do we how do we think about that a little bit to the sort of Mark's question?
Yes.
I think the answer would be it would be fewer. And I think that's broadly true of the entire sector that I think most of the of the branch networks, if you think about how it will look like in two, three years down the line, it's going to be fewer branches. They'll be more automated, more digitized and more advisory services. So we're no different there. If you've been able to give a specific number, we can just tell you that it's going to be more consolidated as the opportunities get created. And we've done that I think over the last three years itself down by about 25, 26 branches, and we'll continue to look at opportunities.
Okay. And then the true-up expense in the fourth quarter that you mentioned. How much how much was that?
Kevin Conn
Yes, it be it was $800,000.
Okay.
And was that in that CAD3.7 million restructure number was that separate? It was separate separate ethnic grain? And then how should we be thinking about your restructuring charges going forward? When do we look to see that line item be closer to zero? How should we think about?
Well, I mean, the expectation today and that restructuring charge, as we said, was was employee driven from now across the company, a reduction in force, we've termed it. So there's no additional actions like that.
So severance charges from that particular type of activities shouldn't be we shouldn't see that going forward.
Yes. What we were talking about about how do we further improve efficiencies in the organization. As I said, some of that, it's more detailed systems. It's technology oriented. You tried there are I wouldn't say there won't ever be or there won't be in 2020 for further severance charges like that. But there's nothing anticipated today. Those types of projects are either the employee side is via attrition or redeployment into other parts of the Company.
And that's that's very helpful. And then, David, the tax rate, I just want to make sure that I've got this right. So as we think about it, that line item in noninterest income, tax-advantaged commercial projects number, that was 2.06 million. Basically that's going to be dropping down out the tax line. Is that the right way to be thinking about that?
Yes, yes. So if you go to you got it, you know, we tried we tried to be crystal clear in the outlook, you know, making the 23 adjustment for both fee income and the tax rate.
That's great now, but that's more transparent.
That's great. Okay. And then on just going back to margin here, billings question, do you have a December spot margin? And maybe also, do you have a December spot margin, if you appreciate that the restructure occurred in the in the third third week here of December. I mean, do you have a December spot margin? And do you have a December spot margin may be adjusted with the securities restructure.
And honestly, I haven't bothered to do the adjustment. I've been so focused on 2024. So our December spot margin was roughly three, 10, three times.
Okay. That's great.
Yes.
Right.
Okay.
Great. And then last question on net and view and or maybe, David, whoever can you just very high-level take us through your cannabis plans? I realize this is newer, but just how you're thinking about it and what the loan and deposit balances look like?
Thank you.
Nitin Mhatre
You're up, Laurie. I'd say a deposit service really to support deposit generation activities. It's a early stage pilot. We're not doing any lending and the deposit balances are less than 10 million at this point.
Okay. And any any plans to do lending or is it just deposits only in terms of how you're looking at us at this point of time, it's only deposits and cash management type of activity.
Kevin Conn
It's great.
Thanks for taking my questions.
Nitin Mhatre
Thank you, Bart.
Operator
Our next question comes from the line of Dave Bishop from Hub Group. Please go ahead.
Kevin Conn
Yes, good morning, InPhonic, Dave Thornton, um, I hopped on late. So I apologize for that, but you guys have been, you know, adding and augmenting the ranks of the senior executives, senior commercial lenders within the market, given the disruption just curious on where you start to see green shoots or growth out of these hires of either on the loan or deposit side or both, are they contributing to the bottom line growth through the pipeline. Just curious and sort of the so the impact they're having to date from the higher spec?
Nitin Mhatre
Yes, Dave, we are we clearly are and I think not only are we seeing a significant improvement in the pipeline and the deposit and some of the loan balances that have come in. But the quality of client base is also changing and we're bringing in a significant number of high-value relationships as a result of this transition. And I think what's what's that doing is improving the overall quality of production that we're seeing over the last, you know, a couple of quarters and we believe that it will accelerate as we move forward.
Kevin Conn
Got it. And they are you see that on both sides of the house or their fee income from the wealth management side opportunities cross-sell as well?
Yes, Dave, Bob mentioned there's the new hires are definitively focused on deposit generation deposit acquisition. Private Banking, which blends very well with wealth management. They are green shoots right now, but we think there are future opportunities.
Great.
Nitin Mhatre
Appreciate the color.
Kevin Conn
Yes, I would.
Yes, I would have to obviously agree with everything that said, I would think and I think of this in a multiyear time frame Fried, if we are successful in bringing in the right people we are successful in a more balanced or even skewed towards deposit type of some lift in activity and that that has huge long-term ramifications for us. And that opportunity is really looking out the window from this conference room. It's all the people. The economic engine of growth in this state is primarily in this market right here where we're Boston headquartered, but we need to be bigger in Boston than we are today. And that's what we're focused on. And that's not a, you know, tell me how much to take up to one earnings because of that. That's how do I think about Berkshire Bank over it next couple of years if they are successful.
Nitin Mhatre
And Dave, you you'd asked this previously as well, a bit of how large is this opportunity?
We believe it's significant. I made that remark in my prepared remarks as well. So we have bankers that have been with us for a long period of time have deep client relationships that we continue to harvest. And now we're bringing in new new folks that are coming to us through the market disruptions to the whole of First Republic, Silicon Valley, you know, events have benefited us to that extent. We're bringing new players that are bringing new relationships that we didn't have before, and they're looking to grow it. And I think when we dimensioned it at one point, it looked like a bit of significant about over $20 billion of deposit opportunity to be captured. So if you get a fraction of that, help us up quite a bit.
Perfect.
Kevin Conn
Appreciate all that color.
Thanks.
Operator
As there are no further questions at this time, I'd now like to turn the call back over to Mr. Malhotra for final closing comments.
Nitin Mhatre
Thank you all for joining us today and for your interest in Versera. Have a good day and be well thank you, sir.
Operator
Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines and have a good day.
