BHLB - Earnings call transcript Q2 2018 | Berkshire Hills Bancorp, Inc.

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Operator

Good morning, and welcome to the Berkshire Hills Bancorp Second Quarter 2018 Earnings Release Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I’d now like to turn the conference over to Erin Duggan, Investor Relations Manager. ahead. go Please

Erin Duggan

thank quarter and joining discussion the Good you second results. of morning for

SEC. of furnished Allison our section new berkshirebank.com As helping already of Investor need you some know, Relations the up is to our Corporate Director. will task initiatives and available to EVP the take to you O’Rourke website, growth in release as of her that the our role telling Sales be We news spearhead now is on

remarks statements differ Our forward-looking materially from could include actual results will and those statements.

please on related and our detail most For and recent reports factors, XX-K see Forms earnings on release SEC XX-Q.

addition, measures and comparison Daly. our I’ll as CEO, non-GAAP Berkshire’s performance trends, over In on to projections. measures results discussed are included reconciliation relied be release. and to should to only actual results and turn not assist And financial measures future in non-GAAP measures understanding with certain be that, provided will in is call References this news conference or upon call. A to of the financial Mike? GAAP you Mike

Mike Daly

it Thank call. you, overview and you provide everyone. guidance, Erin. to over the us outlook our for our turn the He up. Jamie wrap through of in and I’ll and it I’ll quarter, then an will specifics our second discuss our Moses, Good today for walk then financials, joining CFO. morning, quarter Thanks will I’ll our

good had quarter. we So

We’re pleased with bottom the line numbers.

return close and we $X.XX about XXX points, in EPS. our came forward our quarterly The at optimistic with internal strategies. We’re results in on We to delivered as the move move we basis XX%. tangible saw ROA

and led C&I a we loan solid sheet, growth growth this balance by quarter, mortgage overall the production. saw strong seasonal On

of Springfield strong annualized C&I solid to across the the commercial out good our we ABL match. a with and mid-single-digit and saw on the of solid where across pipeline, by got This X% we’re loan on loan led particularly the growth. with Boston year strength contributions group side, second out to of Greater lenders growth market our commercial footprint in results footprint, teams. We least Now pace now was and growth annualized produced we at total of deliver half

want I to quality. on to take I and Now touch want a moment, credit

are loans noted that. control be and principles does never are of not accounting kick our loan will in about well flows, Our also our road, the our while of on suggest resolution and say selection unique And accrual. loan to that’s that to metrics delinquent good and there’s I haven’t strongly. this: And in. We loan going demonstrate been we And anyone’s that. performing news and want loans, remain where down This I is local secured, reported managing remain disciplined I’m It concentrations cans will. we some the not details the There all cash the credit asset as a are deal staked share should is are around and situations that say in that the loan prospects the loan. the of company

to turn Now annualized growth deposits. let’s We the for X% quarter. posted

of laser and to in throughout. on with strategies, expect continue are growth deposit the executing deposit this second we our annualized We so the focused momentum mid-single-digit half on year

We by operations. with achieved saves completing final Commerce on budget results, these while the achieved the end of of and completed under this we schedule integration integration the Importantly, our Commerce the quarter. cost

a them earnings right talk partners with accretion and been and to difference finding to of regard this We and makes of part retention and To in it about Day I held Service. our of generate believe how has and the we Xtraordinary and In big that Annual customers quarter, together lot is to A always communities company. we bettering growth example our commitment culture that of strong second the like employees. the putting further the serve. important execution a culture Now importance, value. the

this tackled X,XXX through projects, company-wide XX community employee participation and hours XX% nearly totaling event, Now we rate. volunteer

a appointing to efforts also another Corporate Responsibility Officer We’re our level. Social our bring expand community to to and engagement CSR even

at provide I’ll then Jamie? point, going review I’m Now it He’ll up. or quarter, over Jamie. this it and to to turn wrap you the

Jamie Moses

saw a good We morning, ROTCE. Notably, we reported addition $X.XX, our well. XX% Thanks, Core in increase of GAAP strong EPS ROA, a earnings was came This first in for solid our us. everyone. XX% good the Mike, the and particularly $X.XX saw EPS ratio over improvement our to at quarter profitability efficiency improvement and and year-over-year. quarter profile. increase a in We as to

So clean quarter. pretty that’s a

Our margin second rose reported the in X.XX% net interest to quarter.

recoveries the points If you purchased both loan the exceeding the a of relatively increased Purchased million QX. provision accretion, X.XX%. to quarter, accretion exclude NIM was to coming than flat In X earlier the in to we third net return anticipate in in loan at third level in in second loss $X.X expected. handful $X.X to We and charge-offs. to the basis provision million due came quarter, remain loan NIM quarter. seen the The accretion anticipate

gains the loan in in commercial pickup and gains, X% deposit fees quarter over loan sale with SBA were commercial the reflecting fee income Our and good activity. loan prior up

by continue towards a revenue online was in our specialty opportunities advantage see purchase other reflecting prior cross-sell operations competition and in quarter our are We lower as franchise full flat of channels. and to Mortgage seasonal to margins, activity shift SBA teams. with in the good a lending was volume industry results taking offset and pickup

our business EPS mortgage have minimal impact. know, shifts you As revenue in

expect non-interest to quarter income second third relatively in quarter, the we from For flat come results.

see of moving equates we in fees $X.XX $X.XX give-up begin Now a third quarter. the forward. remember, to This Durbin per interchange to on to impact roughly the quarter

brought saves guidance and were that with just in you. we So you drag operating expenses Operating leverage the we are cost can positive sheet growth. balance flat expecting see that to Commerce as delivered on that strong we gave overcome mostly

we Our down to focused rate efficiency tax in The up expense operating to and the third to pick the slightly. ratio slightly expect quarter, expenses a second In efficiency come the in quarter XX%. to disciplines contributed sub-XX% flat was ratio.

core rate for full expect around to remain half to year be of range We XX% back tax XXXX that the XX% our and year. to in

in Turning to noted we profitability and results. as achieved record we earnings quarterly our release,

GAAP XXX rose ROA ROA basis XX% year-over-year Our match. core to increase with a points, to

balance Our quarter. which that dividend provided common the core and growth in improved XX.X% our announced return in to first higher quarter, tangible support for equity on strong the sheet the solid we

for newer gratifying as report strategic to show we potential. that It’s with the future growth was building ROE costs benefits of X.X% the the results out GAAP our higher in markets absorb quarter. of teams Our initiatives even

it quarter, With third and expect turn that, core I’ll EPS Mike. GAAP between over the For of core $X.XX we difference results. $X.XX to little or very back with

Mike Daly

you. Jamie, thank

to core the ongoing out it’s So that important to certainly company recent EPS second I build from as $X.XX deliver and core quarter, traditionally for our through quarter in strong $X.XX high $X.XX third Jamie a quarter in is to we’re said, expecting is our $X.XX broken we’ve an had point and we’ve EPS think recognizing watermark $X.XX, or now the also mark. the this of years a another $X.XX in quarterly to for year.

XX%, XX% moderate that also EPS our franchise an again to higher core from While with we potential us full to we gives We to our run next core some even for on of target the XX% below EPS and QX our growth rate for ratio year. year. above expect X% expect generate ROA efficiency results, the remain year

many on rating quality, CBR you believe And noted capital of It our for highlighted our profile, rated strong our Rating asset we positive new for As sound deposit became management earning A- time, and in commented know, rating our performance initiatives. markets. first be on of report deposits. publicly will particularly our our this we improvement. the also a

the vision Now And powers its mentality a me franchise. deliverable. point our organic critical Sean And deposits about heard of of banking. his for relationship COO, the this strategy as is an of has core to part this execution that strategy future you’ve engine and Gray, and at our focal our talk build

virtual banking into the program, bridge we customers think team and MyBanker continue traditional I able we’ve our those to his and to be to that the like resources these banking branches, branch consolidate efforts, world. thanks digital reallocating he As proprietary from programs given to to mobile champion And while distribution.

questions. strategic performance I’m and all what say we up going XXX% to the we’re proud With toward our giving But built shareholders. to our So overall goals. performance our also we’re committed and any expected everything to that by that, it have of to progress open we I’d

Operator

Fitzgibbon Mark session. We [Operator will first Please The with ahead. O’Neill. question from now go the Instructions] Sandler question-and-answer comes begin

Mark Fitzgibbon

have second you lending quarter. loans Good geographies a there strong? your pipelines from lot booked rebuilding any well especially of the I’m if particular are curious guys doing or a And remained standpoint? loan are that morning. Mike, in are

Mike Daly

Sean?

Sean Gray

are pipelines Mark, continuously Hey strong.

Mark Fitzgibbon

you right? this Richard, got too, one

Richard Marotta

really Mark, inroads the million $XXX Eastern corridor. really and $XXX million range in what probably pipelines to Boston is, some finding the are strong, Worcester making very in Massachusetts we’re we’re good around

Mark Fitzgibbon

accounting can gave similar? accretion third fourth you of Is I assumptions, likely look the about a guidance purchase fourth on – the to and think know us it’s secondly, for dependent then, you help in And Jamie, but the Okay. to lot quarter. quarter? quarter

JamieMoses

little a higher down, I go likely just it’s starts bit accretion then as look probably forward. right, off similar, and would say rolls purchase as you that to

Mark Fitzgibbon

the referenced to and extracted room then, savings from the in there the you Commerce XX% further, do think, that release you deal. Is you cost And think? had some Okay. squeeze I press

Jamie Moses

that. always guys you Boy, ask for

Mike Daly

A little Jamie. more,

Jamie Moses

yes. Oh, right. That’s

quarter be mean, we’re the expenses. So is to to here in third that slightly guidance I think on flat I down our going

franchise. that a make mobile to in lot on there invest But that we’ve a Mark. think to of There’s sure things there, bit So is little in I maybe, here. There got more the is going again, we’re distribution. is, room continuing

there wouldn’t too a expect the of decline I efficiency ratio. So in big

Mark Fitzgibbon

if a Okay. give sense wish for list what top Hills your And And at you Berkshire of to us then, acquisitions? ready potential additional can maybe, the of are do characteristics target? for kinds is Mike,

Mike Daly

it this answer of would way. I we I mean, mean, we’re kind Sure. I are prepared? prepared. Well, always

anybody’s we’ve deals I think as amount done. just based good on an of staff that’s as the got we’ve integration here

we’re We’re right now machine to concentrating our on create. the efforts that organic trying

I efforts what organic at Having will that, up, come just an said towards that really can deal here look and be to for them. there’s here that a we say the doubt I they deals would moving us because our become small now I from us. our see move us that take When we’re available don’t always opportunities. doing standpoint. right agenda small want off you’ll deals for of deal So minds

So going as to you say never, I’m know. never

Mark Fitzgibbon

Great. Thank you.

Operator

Please Point. ahead. Compass The with go from next question comes Laurie Hunsicker

Laurie Hunsicker

good Hi, morning.

Mike Daly

Laurie, you? Hey, how are

Laurie Hunsicker

wondered just C&I jump commercial I’m talk looks real could Good. just of estate and your Certainly, your specifically, But about your charge-offs. saw a credit. credit little we overall great. generally a if we there? anything just there Is bit in

Mike Daly

Richard?

Richard Marotta

actually, a Laurie, good that’s thing.

certain As went non-accruals know, you down.

what in you the the liquidity And as some when so of felt market, and analysis. deals a know, We actually of took you we of of moved time, you some out do we quicker, actually that looking at cost advantage you’d collection. look we at was kind transaction, that look so

out So quicker, of we resulted loss. which assets some some basically the in moved

Laurie Hunsicker

the Taxi? within any of Okay. C&I And that specifically, then, was

Richard Marotta

No.

Laurie Hunsicker

– Taxi? just none you Can was Okay. that of

Richard Marotta

No.

Laurie Hunsicker

Taxi still XXX? around is book your sitting right And

Richard Marotta

you some numbers. give I’ll Well,

Medallion mark portfolio per the was million. $XX this, time talked of credit price metrics that net net is that now And about less the under remain or of market $XX $XX,XXX. I mark The So stable. under million. in the portfolio the last post average is we net mark said portfolio than the The

Laurie Hunsicker

I’m round And the part earmark deal, talking Okay. number you’re is million? assuming the that so was $XX special about of

Richard Marotta

Yes.

Laurie Hunsicker

Okay.

about numbers million? So it’s round $XX or something

Richard Marotta

Well, little lower.

Laurie Hunsicker

me Firestone. then, give Can What quick balance the on there? update a okay. and was was also originated? Okay, what And quickly just nonperforming, just charge-off? What’s you

Richard Marotta

quarter. And that were quarter-over-quarter. so up versus at about find in balance ROA about The – $XXX,XXX Charge-offs that’s about million $XXX,XXX about $XX the $XXX the $X.X $X.X then, end million to got in the non-accruals of versus Sure. I were XQ. million, and the were is this million first quarter

it’s So stable. been very

Laurie Hunsicker

quarter. the Okay. that? Inventory, for you last originations have question around that. The Do

Jamie Moses

million. and The were $XX about $XX originations the payoffs about Yes. million were so

the $XXX So million. that netted to the million from $XXX

Laurie Hunsicker

great. Super Okay, helpful.

through And We obviously, in core go just saw, the then, a can Jamie, the little Okay. you rise bit? deposits. deposits,

where should be stand? we and a how is Boston maybe, Just, I then, on how you is currently guess, deposits Boston, And just of about have much of that? also breakdown if update thinking that Boston Thanks. if an this growth

Jamie Moses

Laurie. Thanks, Sure. Yes.

way I one forward. I here accelerate too I guess, to would beta, to I saw don’t expect much we a about think guess, about QX. So beta that say, it a as in XX% going

as may that So rise. be point here few basis to there pickup a rates and equates

for I as what seeing, of was the don’t that’s you again terms of on that can on offline. I can are that can, have We maybe, what know, markets. you around you Boston that part work increase that, just see. our deposits. effect can costs. the is deposits in do increased – to broken in back Boston deposit What of competition I But out growth in strong in maybe good, some say seen we’ve we get I core

to of will that are that’s in going And course, little bit pleased rise with how and, a we so rates. that contribute

Laurie Hunsicker

circle that or line or Okay. linked we growth Boston the you $XXX that the just quarter. saw NOW in Is know all And back? don’t just million in

Jamie Moses

No.

in in place, to we that. program wealth account there have the we increase to tied put sweep didn’t So that is their that NOW a prior

our have overnight are their So into now we our customers wealth sweeping NOW customers, accounts line. our

well And the there why also increase see so in is costs in as reason as main – that you the that increase deposit balances. that

Laurie Hunsicker

Thank thanks. you. Okay,

Operator

from go Please with next ahead. Jaffray. The Piper comes Brody question Preston

Brody Preston

morning, How guys. are Good you?

Mike Daly

how Brody, you? are Good.

Brody Preston

earlier I’m same? for still forward decline doing you a that QX to critical guidance well. about yield the in million revert mentioned critical Thanks. back $X.X is Is levels. yield going the to Jamie, the

Jamie Moses

But how number. a accretable I to right. from good can Obviously, probably to it think perspective, through. mean, Yes, is it’s that an is Brody. tough a to so actually yes, going that quarter think or that’s you come $XXX,XXX I about predict about $XXX,XXX way,

Brody Preston

slightly Okay. outlook And maybe the little a then, core is flat just sort I guess, with that, up margin to bit? of similar,

Jamie Moses

good I betas obviously exactly deposit of that is that’s that’s on think, this slightly going moment. I flat at But Brody, a our And forward. think to right, outlook – depend course, to going up. that’s

Brody Preston

mortgage weak, XQ do Okay. in million if expect is like sort right, And seasonally $XX be similar revenues? banking, flattish, I to – some XQ guess, how is XQ we sort given to XQ think if you like about of is you of – that

Jamie Moses

I I think that’s fair, think fair yes. a I mean Brody. – that’s number,

Brody Preston

Okay.

do that bit little – now? Or just guess, you you I that to looking to back environment think you million banking is do revenues? So do $XX XXXX, think you mortgage the can maybe, million forward to think the $XX right get a in challenging

Jamie Moses

Yes. into is for the to out forecast out mortgage as banking. you really next And way Brody, that tough it’s know, future. stuff way week future into the

I point is think number. that XXXX think almost anything at forecast – – I I possible there, time, but in focus a that this can’t

You down see impact, small a or there. could up

Brody Preston

just is one-offs efforts continue to on mentioned the any branches. given here going Great. for progress formal question. there? have guys All to made you Mike, working you’ve to plan look in right. it online and then last if sort earlier you’re or And prepared you remarks, you banking, with wanted just of to your I consolidate see be

Mike Daly

You take want the shot? to

Richard Marotta

The formal branches six do months. next XX plan have the six Sure. is a over to plan. We

Brody Preston

Okay, great. Thank guys. you

Operator

comes The Collyn KBW. Please next from go ahead. Gilbert with question

Collyn Gilbert

Thanks, good morning, guys.

on your just opening So make I to just, correctly. I sure, comments heard you Mike, fees,

So in even or quarter? to reduction sorry. maybe, offset the fees Jamie, reduction the with you so it, said you But You of said expect flat that? Durbin, third the to – I’m related

Jamie Moses

Collyn. right, that’s Yes,

Collyn Gilbert

Okay.

from the than come other optimism the on does where – side? fee what So line items

Jamie Moses

Yes.

– we likely loan are in strong So SBA we’re going see to a sale see to pickup gains.

strong has the that and very, pleased company there, how become into very really a entire have We we’re company. with pipeline integrated

lot a referrals of internally. seeing we’re So

So we’re very excited about that.

Collyn Gilbert

of to just that – third suggest see you fees – keep kind you mostly fourth timing level? even at of the quarter? could the in you quarter what level visibility this do kind that issue have in Is Or this at Okay. a for that

Jamie Moses

tough a That’s one.

so at. In down. going But down how some we’re I obviously think they Collyn. that that’s mortgages – would guess, I seasonal effects that, quarter, probably answer be and go there’s from fourth levels there will the I to the likely

Collyn Gilbert

kind your And NIM, the to okay. up. core about just then, on of NIM, Okay, slightly comment flat specifically

total you impact it provide or was this the the mortgages commercial blended yield on offer those have additionally, the the do should loans this yield of you quarter? put you on Just could if on with guys we about Maybe, on quarter? you if originations that you quarter curious, how of was think put residential what blended that this

Jamie Moses

Yes.

residential then the at mortgage just on or and So loans X% on X%. around came commercial was And coming so. over –

X% is and have I here number the like X%. So

Collyn Gilbert

been that’s that’s talk just this But think, to going it Okay, And going the that okay, so ask okay, helpful. about press. back, comments appreciate I’m not I credit you in I more put there, then Mike, to, it. you’re out your

Mike Daly

course, Of Collyn.

Collyn Gilbert

just delinquent – was balance credit had portfolio. the indicated Is you you So within the right? that that

Mike Daly

Yes, it’s there. in

Collyn Gilbert

in then just the do added? And curious, that I’m when there, balance I credit? Okay. was what’s if that’s the

Richard Marotta

Richard. it’s and it’s million. bucket, XX-day It’s Collyn, Yes, in the about over $XX

Collyn Gilbert

added? Okay. And when was that

Richard Marotta

It migrate started in first to quarter. the

in first just the XX to then day it the migrated bucket was to and XX believe, in So into quarter, XX the I it XX bucket.

Collyn Gilbert

Okay. But mean, you and on great guys you almost to quick do not And it, I – just I curious, answer Mike, right? as great you guys within And resolution going I’m you said, everything credit ask choose credit can mean, history. mean, are the have conservative, it. bank. I you to

would I assumed sort on disposal process right? book. moving the less, be credit the going I’m we the if your So manage I right, I is it you is foreclosure a into a foreclosure, that troubled there credits. your surprised that in imagine to mean, with credit little is credit discipline some terms in way then the guess, guess, of of wouldn’t think what of were write-down, a be just broadly, generally that weakening about or of sort to I

understand discipline historically So your about of broadly, I’m waste and you history trying how on sort do time more thinking you’re great issues? to guys resolving just credit given not

Richard Marotta

Yes, Collyn. Richard. This is

all But that does is in transaction. that there an foreclosure, specifically mean necessarily from certain a sort general standpoint, one, move not you that because down of but this unique we collateral. going not So may and write-down situations, of I’m that abundance specific have path, in a to discuss at not to when situations

other So collateral, below may valuations you. have showing debt of you of new that’s you’ve abundance levels

again, you what’s you decide, really, kind as you collections, those Laurie get it’s and and end, asked through question, and when the work the you So all way money time. to I the time, value, the the it, decisions start indicated of to make as

the because is just So necessitate not foreclosure a deal not in – or is in write-down. does

Collyn Gilbert

Okay. All right.

I think that all Thanks, I there. leave was it I had. guys.

Operator

session. would back turn concludes question-and-answer conference like any to Daly I remarks. for This our the to closing Mike

Mike Daly

look thanks quarter Okay. forward call. get to everyone joining us. with then. when our See to again you we Well, for third We speaking

Operator

The conference presentation. Thank concluded. attending has for today’s now you

now may You disconnect.

Berkshire Hills Bancorp (BHLB) 19 Jul 182018 Q2 Earnings call transcript