BHLB - Is a Big Writedown Looming for Berkshire Hills Bancorp?
The $13.1 billion asset Berkshire Hills Bancorp (NYSE: BHLB) began to struggle in late 2018, after its CEO Michael Daly abruptly left the company due to what some analysts believed were workplace culture issues. The stock price had already come down to just shy of $33 per share at the end of 2019. But when the coronavirus pandemic really hit the economy hard in late February, the company's stock tumbled from a little more than $27 per share to about $11 per share now, and it's trading way below book value. In fact, it's so far below book value, at this point I'm wondering if the bank may consider taking goodwill impairment in the second quarter. Here's why.
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Goodwill is an intangible asset on the balance sheet, and it represents the premium a company pays over the fair value of an asset it is acquiring. Most banks accumulate goodwill when they acquire another bank for more than book value, which has been very common in recent years. Goodwill impairment occurs when the value of an asset declines below the book value of that asset.