BHLB - Earnings call transcript Q3 2024 | Berkshire Hills Bancorp, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the Berkshire Hills Bancorp Third Quarter 2024 Earnings Conference Call. [Operator Instructions] This call is being recorded on October 24, 2024.

I would now like to turn the conference over to Kevin Conn, Investor Relations Officer. Please go ahead.

Kevin Conn

Good morning, and thank you for joining Berkshire Bank's third quarter earnings call. Conn, and Kevin Development is name Investor Corporate Relations Officer. My

and Mhatre, me Brett Officer; Officer; Risk today with Chief Brbovic, Lindenmuth, Officer. are Financial Officer; Here Operating Nitin Executive Chief Chief Sean Chief Greg Gray,

non-GAAP statements remarks A X non-GAAP measures. GAAP to news presentation of to from stated. the Actual and legal reconciliation our forward-looking materially financial Please differ earnings will see included include and could disclosure is Our measures. in statements those release. refer of non-GAAP forward-looking financial results on measures referencing Page our

over At this time, to I'll Nitin. turn the call Nitin?

Nitin Mhatre

was Thank quarter. begin thank earnings you my I'm that year-over-year. we and quarter pleased was up Operating Kevin. highlights XX link income strong you all I'll Slide morning, and of quarter-over-quarter on quarter the linked today. and basis where year-over-year. to with operating basis X.XX% $X.XX up X, report us you, in million and everyone, a X% robust improvement X% year-over-year. comments can was had Good Operating points Operating third for points quarter the and ROTCE net see XX% joining for up year-over-year. up EPS linked XX% up of XX $XX.X up quarter

balance Asset metrics sheet quality and strong. remain

upstart loans, at the XXX points. XX and sales basis was were loan to of Excluding quarter second charge-off, our points loans basis charge-offs net flat reserve to

TCE risky. increased the Liquidity points reserve of is geographically those portfolio our lowest with We is X.X%. quarter strong. Of note, XX% for its The basis on looks those deposits less our on points total slides The XXX our information portfolios. and remains and total XX%. XX.X% at and total CETX basis overall at slides linked updated the We've average diverse ratios solid about nonperforming at XX percentage our remains loans highlight noninterest-bearing past loan-to-deposit remained granular, in and with at office losses XX at performance due capital level CRE multifamily steady remains Xx on percentage loans. ratio and years, at deposits resultantly a as at that our

were year-over-year. and X% year-over-year. up X% up were X% quarter down X% Average linked quarter up linked Average loan balances and deposits

Our loans up was in and increase X were XX% quarter points stable Deposit of costs quarter, reduction versus rate third in was pipeline and in beta. up year-over-year. the reflecting a basis the deposit costs

and We we've funding rates, lower decline as Fed cut expect already deposit the late to like continues banks, quarter. third costs the to moved rates many interest in

lower sale steady XX. strategic to XX gain March, make branches the The expectations. retention selected to transaction our bringing York on and this transaction was our pretax $XX our that was footprint The that our in $XX on tightens than this progress million, exceeded expected of initiatives. was million network. given branches New and continue deposit total client March, the enhances efficiency in in slightly We of completed quarter, we announced This profitability

that resulting the XXX, remaining for related against our weighted in the sale. and charge-off million $XX $X.X book Upstart Upstart loan our at ago, our size the sale XX% portfolio. are million $XX.X The of were week book We of loans The average that credit we approximately loans branch million announced sufficient. are to at score we value, for is network. the priced now about right believe of A reserves

how when, want we We ever. easier to make than banking where with and it continue Berkshire,

Berkshire to customers. an roll continue for suite expanded digital We out One products deposit of our of

together of while colleagues to the I commitment and investing customers digitizing to and commitment is continue us bankers what our Bank to our my to dedication customer continued work bank. accelerate in us continues experience apart. to hard to Their invest and in their in growth to bring for want the truly our relationships. strategy set all deposits led will We client thank Berkshire

Brett? to detail. it in financials now more through over Brett I'll talk to our turn

Brett Brbovic

X Thank the shows of you, Nitin. an third overview Slide quarter.

mentioned, Net interest was million, linked than income $XX.X of Nitin less million million down X% X% was As expenses operating up up operating operating income earnings X% linked quarter. interest $X.XX share, quarter. linked were X%. Operating $XX.X up per down and or and revenue Total was million, $XX.X $X.XX year-over-year. $XX.X quarter, linked X% up were quarter

related charge-offs to of Provision quarter at was and $X.X reserve points. average the loan included sale. XXX million of were points or XX loans basis expense $X.X the flat ratio million basis Net million, and $X.X linked Upstart coverage was charge-offs

and the sales, runoff million shows performing recent $XX were was or This the on page Upstart XX X down growth combined Including portfolios million linked a Firestone basis Upstart lending. portfolio. of runoff loan in expected. million the by $XX updated in to We've loans are the loan loans quarter total our and as shows balances. which are Average points commercial primarily driven by X%. $XX data appendix, up Slide average or the

costs shows but branch cumulative were bearing down XXX up XX%. or XX%, balances, the from quarter beta the our deposits X% X linked deposits total points total year-over-year. as our up at deposit deposit deposits and is Non-interest a sales. deposits quarters. of loan quarter. X%, excluding Average consistent were sale basis with X deposits percentage million Slide prior Year-over-year, Deposit basis deposits the linked $XX were X remained average points, year X% prior

the rate expect to betas way the a While on environment we down cycle, focused we remain as deposit it's up deposit in higher in early than be the beta on interest costs. managing

second down first X% Net Net X basis down was margin X.XX% down net interest and the interest show year-over-year. the to points we linked quarter versus quarter X.XX% X% in income. X, Slide income was to X.XX% in Turning quarter linked and interest quarter.

excluding range X.XX% between for Our X.XX%. and historical pandemic been NIM, has years, the

NIM expect quarter between to X.XX%. We and X.XX% be the fourth

of While term, headwinds we repricing several also floating rate we tailwinds. have loans short lower have

have book of funding $XXX matures that that XX% maturing same fixed and loans yield CDs rate the yield received fixed Further, we of we over or reprice will in and next time at have we about mature And have of months. million $X.X the FHLB $XXX low We million yields. higher XXXX maturing period. over securities and X billion and have low of swaps 'XX that

up This in where operating overall and row X or $X Slide million related noninterest X% The seen million to linked fees. shows or quarter, $X.X income in fees solid volumes. year-over-year. quarter up primarily was in third higher growth growth our swap a was we've the XX%

were to compensation expense. and linked industry Other and impacts expenses expense entire the other services $XX.X slightly quarter X expenses. Operating Slide year-over-year. and offset line by check X% higher include expenses, higher a shows can Occupancy be quarter volatile. up professional declined expenses X% linked down fraud and which million that were

item million X of higher line that quarters This X isolated to $X.X than average quarter, the the due incident. was prior

charge-off were the chart quarter excluding Slide multiuse the loan quality XXXX, versus year-over-year. $X.X loans related Charge-offs loans. the Nonperforming pre and included $X.X The year-over-year. industry were down points over net XX% one Net in of a appendix that charge-offs quarter the Upstart XX industry Berkshire's XX million property to basis were than New $XXX,XXX is linked relatively linked Net since nonperforming linked reflects rates and York. million in up quality included with time. a million XX% increase or was charge-offs summary better sale, loans up metrics. We've $X.X isolated Upstate, of of million sales. asset asset in quarter by driven $X

nonaccrual solid XX well CRE with shows quality credit is our basis portfolio of collateral the remains that geography Slide book and terms of CRE points period-end XX loans of in diversified The loans. type. at

portfolio. office details Slide our XX shows on

much last the financial weighted suburban district to are we noted properties our A majority are office and XX% a default lower portfolio probabilities. portfolio of and very Class limited space, XXX,XXX about was XX% in of Boston's the suggesting under feet, financed loan-to-value quarter, As square large ratios average exposure that our and has

details portfolio. a $XXX of of multifamily The or average footprint to well multifamily loan weighted with Slide is book XX shows across loans. portfolio X.X% our XX%. of our The diversified value was million

new we are we and monitoring both uncertainties portfolios current existing metrics While that economic recognize strong, credit exist, are quality originations and carefully.

an mentioned, XX% we Nitin Tangible book was strong have and levels. X% quarter year-over-year. value $XX.XX increased share As per capital linked

points lower ratio XX retained to points up XX.X%, rose and basis to due was ratio basis bond higher markup TCE to a our securities. on CET Our and earnings our X.X% XX AFS

loan Our is organic to million top repurchased at an growth. support we've Year-to-date, stock capital of cost $XX.XX. management of $XX.X priority average

our the third repo this stock per support has All expected to sheet book expected loan quarter of completed balance share. in tangible -- paused below We value growth. repurchase year our been

to count to stock continue opportunistic that XXXX, by we've be note fourth of We I'd since repurchases. And with reduced our share quarter XX%. expect

it for turn I'll further Nitin? comments. Nitin over With to that, back

Nitin Mhatre

The environment. for macroeconomic is Brett. Thank industry comments on you, Quick environment banking operating improving.

longest as the has history for noted yield curve lowers normalize substantial. its last steepening the quarter, net The but increase the interest recorded I period in is of of curve As potential in during starting to is industry inversion rates income yield starting been periods last interest month. short-term Fed

not to cost, generation and gain do. we're of rate how A new just mentioned, funding reduce a has the values already but loan traction Brett come. come. initiatives. Notably, proud our As far operating environment property quarters improve in lowered more and environment interest increased starting team and will help to we've raise lower expect also our still our to it have cost funding accomplished starting We normal I'm the credit, deposit work demand. what we're on to

client our experience is expenses client term further improve and deposit through growth tightly acquisition credit our digital near to continue accelerate and retention banking and focus offerings. manage enhanced to and Our engine,

headwinds towards long-term quarter, was it value. to managing tailwinds further focus closing, on In shareholder and the we'll profitability improving and a strong continue and

operator turn for Operator? to I'll With it that, the over questions.

Operator

first [Operator Instructions] KBW. from Christopher O'Connell Your with question comes

Christopher O'Connell

valid? last from guidance for updated in XXXX just in was was guess, the check deck. the to not I still quarter? guidance guidance provided the I Is included hoping the slide --

Brett Brbovic

Yes.

charge-off with sale Upstart this And in it down a slightly expecting I QX X.XX% we're see be to down. revenue to call, from for our think net the we're when expecting between expecting exclude expenses be We're be think still in loan X.XX%. stable to the to quarter NIM or flat quarter. the I expecting we're modestly said and from fourth we So standpoint, you then charge-offs to

Christopher O'Connell

deposit of just on achieve That's somewhat beta cycle be than feel which or why helpful. peers. expected the cutting how Any commentary that is is, of way to up, expect to Great. And on the you different you higher kind way your Okay. the the down about way I the and just many that? than color on curious around think, then guys

Nitin Mhatre

Yes.

that manage that to number opportunity and have in I speaking, we've Chris, margins the identified where we have the deposit qualitatively think, better a of do down we cycle. beta could tailwinds the

up for our forth. portfolio next Almost in coming X CDs We and the and off of a maturity. X/X We've have for maturities rolling significant got amount quarters. so comes so up of swaps some on

tailwinds. So we believe we those have

hard the manage of line, teams then to volume the the pricing ball And on a are good front sharply, working spreads. keeping versus deposit

to So beginning will as to in this I there see opportunities be we're market cycle. react think And more well. that

it more peers and more and beginning Some on outliers, of deposit are September. late there the beginning the competition always reacts, of see we're our down how see but depends we're bringing rates to starting -- to

Christopher O'Connell

Great. you total a moves? after a and costs moved deposit those spot, or interest-bearing sale And you rate already have rates. the bit guys you've mentioned post the on either Do

Nitin Mhatre

think X.XX% and X.XX%, for I spot for quarter, about X.XX%. believe, with spot for be we and the between should September The I X.XX% think was September. fourth And our we NIM

Christopher O'Connell

you on costs? spot Do deposit anything overall the have

Nitin Mhatre

costs. Deposit

us give one Just second, Chris.

Christopher O'Connell

No problem.

Nitin Mhatre

XXX whole for points, the quarter. That's right, basis

Brett Brbovic

it spot XXX. alone, Per was just September for

Christopher O'Connell

out. just piece swap last for type It of the And rate seems one this a product? like quite Are in Great. increased I'll general the bit picked the demand change for guys environment, seeing quarter. with step me, just you up in that and

Nitin Mhatre

holding the predict I relatively demand the beyond that quarter. think that see in it the yes, going pipeline suggest we -- Difficult to will because The the But what's momentum pipeline. quarter. be flat it the in fourth into to to think pipeline. seems I in fourth be seems the

Operator

Hunsicker The with Research. question Laurie Seaport from comes next

Laura Havener Hunsicker

about million. what's fraud we line, maybe your the all XX expenses of should expenses, to Maybe are going $XX expenses. closures, million So fourth quarter, up the million $X.X help so think if to the just were about could help of sense. said can what's then wondered had quarter? in line how gave, Just be But $XX branch go The expense in just in quarter, terms What's comments us dropping in at bottom back the then take us being us thinking this out think they $X.X the that you which the quarter right? we and look expense you previously, $X.X Chris, to the makes reinvested? about just million would million you reinvested that down savings, or we dollars, comes

Brett Brbovic

I Yes. from we that Laurie, branches expenses an the current say in to this is expense those of were already would Brett. captured had some standpoint, the related quarter.

be line. So some to there the will bottom falling

the we remove million losses that saw. do $X.XX You the of fraud

looking to around approximately we're of in range give QX be think the operating or of right $XX expenses, I million take.

Laura Havener Hunsicker

and Okay. Great. details it in and of you office, specifically, your in million you to Can just to things just that provide. appreciate with million looks B. going on respect $XX the update $XX like Class then Class a A criticized And over here million $XX guys all I couple book

And specific that they that those? you're then there? same that's nonperformer, concerns B mature? Class do on Any the seeing does occupancies occupancy What's and when there the are reserves? Are what $X.X million? on any when mature? And Just

Nitin Mhatre

Greg, that? to Sure. want you do take

Gregory Lindenmuth

On A and thing. -- with to Sure credit be basically the that improved it's likely December working will credit, It for an does XX% in we're structure. client mature the and closely the XXXX, single occupancy. refinance Class

As of happens in mature of and occupancy. far as XX% couple Class to And of credits B, 'XX XXXX. the to NPLs one from handful the those be as that XX% it's a in to credits well, one occupancy those range

Laura Havener Hunsicker

Got it.

whole And reserve it. then office the Got on Okay. what's book? your

Gregory Lindenmuth

none question, on of criticized of warrant the approximate office prior off specific that about And reserves are those your no reserves. specific assets, lower our answer would to them X.X% based I risk just And profile book. there

Laura Havener Hunsicker

it. it. Got Got

when FICO I last bit that great then $X.XX dollar. us that on then Okay. the the I'm Great. at And got remind how That's at Obviously, what here little this. want price about on just the closed? as a a helpful. And just And you question, just looking Upstart. those? Can you've And in came to too, together? quarter was then just specifically confirm, talk

Then $X on Upstart sale to XXX. in charge-offs. your million you and So had set the had book you your FICO related that million $X.X in was charge-offs another

I little too. that want understand just a to bit, So

Gregory Lindenmuth

Sure.

got... You

Nitin Mhatre

Greg. ahead, Go No.

Gregory Lindenmuth

Yes.

sale basically the purchasers due and So were criteria, anything the past policies nothing XXX. investment over and

in late, Now there's due one intricacy, past was not think, the an the sale. even I was that piece day with if included it

around profile, average you credit a average on a past our X sold book due, was book. XX% And we actually, closed weighted a has that's So average their are the loans that the risk the retaining in above at in was period, of including that we're and existing Of our that to XX -- in book risk right why slightly sale October similar middle similar of XXX. the XX/XX. that weighted FICO see days grace XXX. of of profile that overall loans credits the And

our million losses book -- the As our the rate for for losses, end far of was our was losses, quarter. our in basically at $X run as quarterly That million XQ. the whole that the $XX

Operator

comes Piper next Fitzgibbon Sandler. Your question with Mark from

Mark Fitzgibbon

follow First question, about. those a I'm of plan asked up we'll curious, more colleague, likely Firestone is Upstart Laurie question, loan my sales coming or it just sale sort to fire in esteemed out? quarters? on Is to the see just

Nitin Mhatre

No.

to is expectations. this actually a and of performance we that terms point sufficiently in in Mark, Firestone recovery. believe quarter think, liquidating runoff for And portfolios it's at provided this net we've is of $XX in it its those exceeding And down off. run performance, Upstart kind fact, our is really of mode, is had while I million time.

roughly done, loan XX of about points think XX, I piece of we've portfolio. very tiny our entire basis the it's portfolio, a So

in and it's the So we mode, don't see any in really runoff difference anymore. direction

Mark Fitzgibbon

still check how I And but wonder -- in on a Okay. I $XXX you to I I And $X.X color going a it's prevent curious or of industry, the could you're it of why million? then share fraud wondered know secondly, little could us mentioned. all million happened be guess the I'm if you things situation dig and occurring? thing similar guess that any million. unique from what I if kind $XX I for bit you give kinds to downplayed couldn't as

Nitin Mhatre

on the trend of is is escaped And fraudsters It what all the check to those This every kind ia check there one was it to we've things the be through. are think you an one a the It controls, really losses increase marginally kind phone in off consistent somehow of fraud better. you slip washing. washing able really And of controls. across But through are but that where our is check some fraud, protected will industry be those large, situations commercial will insurance. extent attend, activity. just that I the coming that in seen have this of odd our of the that and by because with there one is

Mark Fitzgibbon

Okay.

what is going a kind diligence through of to to figure so there happened again? out how process occur process doesn't you're thing that change this and So like

Nitin Mhatre

good repeat think significant the have such XX updating the certainly incidences. is the some And have been noticing been of last in everything that fraud platforms. have months so, part prevent the number industry made, changes processes that there we news of over help the been and including and have of now that we Yes. or a increase I should And in

Mark Fitzgibbon

your you for with next, of Nitin, priorities capital And then us share Okay. if today. could I was kind curious,

buybacks, think on growth, of M&A, thoughts bit little excess a got your You've you as prioritizing? dividends, capital about

Nitin Mhatre

Yes.

to organic the growth, I to remains -- right? allocated Mark. first And the want sequence momentum. similar, to We think beginning we're to see be the want dollar

of about loan was XX% quarter, in remarks, mentioned As was but the year-over-year. pipeline in roughly growth up X% our my I loans our

just selective there. fact, with as leading a We're relationships the that So have well clients pipeline judicious, we being being and have across deposit careful, board. in

growth all, dividends, So And then those it yes, of organic as opportunities well. followed to outside by buybacks. But are sequence. of there first the that's that, we'll and goes if explore

Mark Fitzgibbon

like Do Berkshire feel along, an opportunity where you to kind place at this that? feel capitalize positioned came in house a acquisition if consider be an like Have on your is to you ready Hills point? you'd got you of

Nitin Mhatre

done I think, does that like We through everything we've transformation. have, our it feel through

be currency is situation team our on the We currency, our able are to do grow But something look look in we best our right comes focused pretty the right outside. for continue improve to and much now, at improve to take possible the earn a how to along, that. we opportunities -- if performance, and improve

Mark Fitzgibbon

question then expect when on sort BEST I last we had goals? And Okay. can an update is, of your

Nitin Mhatre

I guidance look could annual at point we think guidance. And of guidance time, that that some at to give midterm part going we're even of as January. in

Operator

now will no Nitin over are at ahead. There I Please this questions the call go turn further to time. Mhatre.

Nitin Mhatre

all thank Joel, call call close joining in great and Have a Thank Berkshire. today can you, day well. the and you us and now. for our you Joel, interest your for be continued on

Operator

this and your and the lines. thank Thank you. disconnect for gentlemen, conference concludes you Ladies participating please call today. you that ask We

Berkshire Hills Bancorp (BHLB) 24 Oct 242024 Q3 Earnings call transcript