BHLB - Earnings call transcript Q4 2024 | Berkshire Hills Bancorp, Inc.

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Operator

Good morning, ladies and gentlemen, and welcome to the Berkshire Hills Bancorp Fourth Quarter 2024 Earnings Conference Call. [Operator Instructions] This call is being recorded on January 30, 2025. I would now like to turn the conference over to Kevin Kahn, Investor Relations Officer. Please go ahead.

Kevin Conn

Good morning, and thank you for joining Berkshire Bank's fourth quarter earnings call. Khan, 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,

remarks non-GAAP measures. to and financial will include Our statements refer forward-looking

is disclosures earnings measures. could from measures presentation time, release. to statements non-GAAP financial legal referencing reconciliation news results X of and GAAP Please see those call forward-looking in Actual Page statements. X A At non-GAAP turn differ I'll Nitin? our over materially our on included of the and Nitin. to this the

Nitin Mhatre

XXXX. up for Good Kevin. fourth comments you, had joining Slide quarter improvement Operating EPS quarter with us thank year operating I'll morning, quarter-over-quarter X% full up Thank highlights XX% you on all can for and was strong the We everyone, and you linked X, and and my robust begin where earnings today. the a quarter year-over-year. of year-over-year. the in for $X.XX see

linked our we've expenses, expense year-over-year This X% is where fourth in expenses which coupled the quarter income row in by provision quarter, down median net that XXX up up X.XX%, X% was ROTCE operating up points million of outperformed was year-over-year. X% with in quarter The X terms was were revenues lower and basis Operating year-over-year. year-over-year. trend. outperformance points linked and credit stable quarter up and and XX% down basis linked strong X% linked up peer fee the driven quarter $XX year were of Operating a

data appendix peers. the slide trend a included to our show in that to We've relative expense

across of basis XX our of our our remain charge-offs of nonperforming were testament frontline solid loans to XXX loans. was at and in the third culture balance strong. lowest sheet risk the strength collaborative to XX of loans points the loans metrics basis and basis at level Asset to the quality flat teams. XX and Delinquencies years, and risk quarter were reserve loans, points almost Net a bankers points

Capital were Liquidity at an average loan-to-deposit up CETX with solid ratios up quarter. XX% ratio linked with and Average and deposits X.X%. at loan our average basis. were up TCE balances X.X% linked remains at were quarter X% XX.X% on

As linked the previous were and anticipated, second deposit quarters our focus gathering down down strategic Total associated were quarter points for on quarter. funding XXXX. total deposit of traction and gained costs linked basis initiatives XX costs points in half XX the have few basis

banks, costs And cuts expect interest the to fourth move quarter. the further. decline Fed like We to funding deposit rates lower as many we rates continue in

in tighten and on to variety network, steady Net a front, derisk invested strategy York progress remained our of XX the in successfully further XXXX. branches the reflected sheet to above our We've sold technology bankers our in we On Promoter New that quarter. in the executed and expense further XX experience fourth initiatives in made improve balance initiatives, optimization client on Score strategic

Bancorp Brookline December, in the preeminent announced know, merger with create equals franchise. to you As we a of Northeast

basis, high-level the in will XXXX as profitability accretion EPS to estimated improves XX% cash combined Turning XX% overview improves X, Berkshire's bank. on respectively. and meaningfully transaction see you estimate a to The reflected and Slide GAAP of and scale the consensus

get with the Berkshire's below XXXX. saves of X Brookline. lower expected And from lending in stable, Island expected funding Slide more growth and Rhode rationale. markets expense XX% in the merger ratio combines with higher XX.X% X organizations, is synergies Eastern combined base the cost, shows rural the of the Massachusetts efficiency The merger to

to this approvals my of look the in Bank and XXXX, regulatory the support to expect subject I to closing half of second merger of forward their quarter shareholder commitment requisite want the this all to and equals their the clients announced and We through fourth closing in hard our continued for Berkshire and and and work bank continued transition. colleagues and commitment thank conditions.

plan weeks, Berkshire an Bank's over and closing communicating the our be to to the during maintain several in second continue next half integration we employees stand-alone through transitions the of will XXXX. We transaction performance

I'll over more that, With turn talk to Brett? Brett financials to Bubowvic our detail. it in through

Brett Brbovic

Slide versus metrics of X Thank XXXX you, Nitin. shows overview XXXX. an

Our operating X $X.XX an X%. XXXX, all expense credit losses allowance basis fees losses $XX XXX our or points. were was per down while On annual were share. and were up $XX.X Provision basis for noninterest million down operating increasing million credit basis, earnings for to from expense million, up $X XX% points,

million, X, to $X.XX down was X% earnings quarter was down per show quarter share, income $X.XX million were down fourth linked of Slide million or metrics. $XX.X year-over-year. million, linked $X.XX and Operating Net $XX linked year-over-year. were Turning quarter. $XX.X expenses up $XX interest we Operating quarter. X% X% and income Operating quarter linked interest X% up

points continue and ratio Our fee, peers. the or credit expense reserve to basis linked XXX of $X.X points Net trends XX strong in Provision loans. $X million favorably was compare of basis were coverage be was charge-offs and to flat quarter. expense million,

to Our increased ACL to loans XXX%. nonperforming

or a were sold million Slide as to up lighter and was and the balances. linked year-over-year. commercial $XX that our X $XXX quarter. portfolio portfolio, we first higher were the Upstart growth couple average million of up shows of loans pushed million our X% multifamily closings paydowns loan in consumer quarter Average had $XX this Average quarter

real updated the combined to $XX The shows basis, an X% in which Firestone and or million page We've primarily year-over-year XX XX% were loans. appendix, points or growth the down and runoff $XXX On basis portfolios are with portfolios. Upstart loans end-of-period linked runoff up million a of commercial quarter C&I in estate.

deposits linked payroll End-of-period XX quarter. to up primarily million $XXX were increased balances. Slide average money Average due X% seasonally or shows balances. deposits deposit quarter, linked high market

Year-over-year branch which New in closed quarter-over-quarter. deposits X% quarter. deposits third and the payroll were X% primarily the brokered million, Excluding $XXX grew down sale, York end-of-period or CD from balances,

the of at percentage the deposits total Adjusting deposits the year-over-year. sold consistent quarters. sale, remained with for million $XXX X% Average deposits as prior of deposits up a branch from were X noninterest-bearing XX%,

Slide XX, down down interest basis Net X.XX%. was net linked and interest was X.XX% X% X% to income interest quarter margin spot we income. linked year-over-year. quarter was NIM Turning points down X December show Net and to

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

X or of billion $X.X book maturing the months. have CDs in next We XX% of that

that million first of have of $XXX wholesale We over half matures XXXX. the funding

we XXXX And million $XXX in with over about fixed maturing XXXX, swaps have and further, XXXX. half low-yield of received

for PAM to mature growth $X.X yields. Slide million XX year-over-year. Year-over-year at or business. loans The up reflect on our driven the income, up operating SBA Finally, investment higher we shows and reprice credit fees also tax have loan our $X.X low-yield gain comparisons XX% linked million higher and will X% quarter-over-quarter fixed rate was in and sales. securities quarter that noninterest change accounting by primarily or

We the also New had fees quarter run row was came seasonal million above growth overall rate. This $X.X a fees. higher branch sharing to quarter seen due quarter, Deposit-related about solid BOLI and normalized the revenue we've this sale. in fourth fees where in York revenues in which declined linked

marketing occupancy expenses down by expense. broad-based. year-over-year. $XX Operating a expenses. and equipment million down declines higher professional were expense X% quarter Year-over-year and compensation were and quarter, were shows decline XX X% offset Linked service and Slide linked to in

of of metrics. asset which basis quarter loans a loans X up is XX Slide XX were basis quality linked were as points summary points, Nonperforming a flat percent and year-over-year.

down the total mentioned, loans charge-offs XX million loans, delinquencies lowest percentage million of $X.X and basis points year-over-year. were in million quarter As XX were years. down Net $X.X linked nonperforming total in almost Nitin $X.X of

shows that terms in diversified XX geography our well and remains Slide collateral. CRE book of

the portfolio at ratio remains XX period-end solid credit quality XXX% points loans. of concentration CRE basis with loans CRE approximately Our of and was nonaccrual

shows Slide XX our on portfolio. office details

XX%, the is the As ratios average in Class noted suburban quarter, about last a majority and loan-to-value of space. weighted portfolio A large and are

very to exposure no Financial have and limited high-rise We buildings. exposure Boston's office to District

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

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

Turning to capital.

Tangible was X% X% and capital year-over-year. $XX.XX linked and increased have book share levels. value per We quarter strong

XX%, to the due is ratio basis TCE our earnings. XXX higher equity points This CETX Our to ratio points and offering retained rose up X.X%. and XX to basis

the as about merger, discount. improved demand As and know, were The December support narrow issued you we capital encouraged raised million the and equity part in the in announcement. we of MOE shares. to the ratios by for offering X.X% our We million X.X stand-alone $XXX our raise

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

of our half closes. first the in repurchasing do share. tangible completed not done was XXXX year in we repo merger value our book was of going per shares All and forward until Currently, the anticipate below

Given the balance of pending in statement year item past. the the providing sheet income the in and guidance we've second line XXXX, we for as will MOE done not transaction half upcoming be

And it the comfort Nitin? cited with with XX turn net we XXXX. I'll back financial confirm by income merger said, the encouraged comments. that, for That and are our further Nitin in momentum consensus for to presentation in metrics December the

Nitin Mhatre

our and a Brett. ahead had challenging you, credit expectations a quarter in expenses macroeconomic strong and environment. revenues, Thank a year in In year solid from we fourth of ago. a summary, Fee came

is curve tailwind this yield in steepening, coming the meaningful down, a our year. was income will the and and for interest net as NII operating leverage While serve

across of consolidation we've truly estate come along running X optimize well. legacy what by deposit XXXX real we've has processes, We've more a our our streamlined And with operations noncore through are loan gotten We our ago. entering exiting growth with strong growth and team rationalization I our I'm joined engines our metrics. footprint proud footprint. how business branch and of as pruning network, of accomplished CEO corporate and recently, the across far and years since our key momentum businesses

the technology in to The and significantly for the experience excited more digitized profitability and for continued our opportunities Berkshire our will and returns services our We've for franchises. the customers offerings I'm and deepening. client Brookline and shareholders. to potential communities, for commitment combined provide higher growth entity enhanced our employees, about and invested our relationship products combined improve

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

Operator

David Your Group. [Operator comes the Bishop Hovde of first Instructions] with line question from

David Bishop

really a side. growth here and good Brett curious, ad just on company, loan the quarter Nitin

Just curious, hires have some guys how of if new was that, ring-fence over that adding so? don't from it the I year much what you or percent of been maybe contribution the know maybe you could past

Nitin Mhatre

Yes.

I with, pretty balanced. well of to news the the commercial a came in part the level, book. it that, from And begin bulk was our good think within high also at growth was

both from existing grew came a new book. it broad-based actually lot on bankers. CRE a of and our again, So than production this C&I faster was,

give So a but the for wouldn't I all time. think that, cylinders firing at it's same I specific mix

David Bishop

Got it. booking senior as the average of And in these has since the then size added moved appreciably bankers, they're you've beginning just curious, year? loan relationship the

Nitin Mhatre

No. relatively It's been steady.

credit limits Our holding box changed. haven't and

through So steady it's the pretty year.

David Bishop

quarter, impacted by be Got amount, end they it. the you payroll deposits. a to much have I And of of like how can relative as dollar then elevated know were you noted, sort norms? the Do

Brett Brbovic

Yes.

million up we think about billion -- billion. think $XXX I about year-end, I around were on that $X right usually average. probably they on are average, they And were up $X.X from

Nitin Mhatre

consistent. been And Dave, that's

If -- at 'XX, up $X.X they at 'XX, ends 'XX, about billion. look X you years, all payroll

million to So Brett said, that's higher, the as about quarters. compared months normal $XXX and

David Bishop

aggressive like, looks it tailwinds borrowing sounds X.XX%, being and might in margin some it loan but on And December deposits. the the the side, not the like it. fourth with obviously, be at side, the Fed the also quarter there Got here only

the some on you downward still interest-bearing the deposits. see if side curious funding Just progression on cost

Brett Brbovic

do. definitely We

as forward expecting on are We the primarily NIM expansion some through the we funding in into QX, side. modest decreases move

Operator

Billy Young The next is from question RBC. of

Bill Young

on up question kind It Understanding efforts. from still follow deposits. gathering seems some looked on your to growth on core of pretty just the payrolls, the like seasonal David's Just gaining deposit good. traction lift the you're

is? year So the maybe you of some this think kind elaborate on mentioned deposit maturing just year. kind fundings opportunity later of of can the wholesale You this you what

just So core able deposit growth deposit momentum to It do gaining be the like you that? here generate think to kind you're kind side. a you'll of lot of on offset enough of feels some of

Nitin Mhatre

you a I'll of growth just Billy, view give macro Yes. itself. the

And different normalizes so X average the at at the right, the was ways, the view growth, X%. end quarter. that So could of product spikes look The average you for growth then it X% money and the market, And by CDs, growth products, Products channel to savings, much including all about view. growth, there was the pretty X%. DDAs across about DDA, was between X%. growing

X%. So of blended kind to that that

product So broad-based growth.

channel and also over deposit channels, payroll came launched the private the commercial generation And bank, in and that terms of was of in new outside XX% retail roughly digital from retail contributed growth the biggest of the that quarter.

of kind growth, momentum hoping that, broad-based very continues. we're that So and

Bill Young

just Great. growth of the drivers And just kind of to of side -- kind going the on sheet, at other year. maybe loan for back the balance looking

a mentioned are pretty headwinds modest there. up of for growth picking side things but solid on You couple also like quarter, seems looked this the underlying It XXXX. commercial

Brookline to in So can you're of maybe the underlying do you seeing control general talk balance a on sentiment and kind concentrations of of deal? of estate the C&I how underlying building little of kind strength -- real of the just a bit you activity maybe commercial on just against need some and customer ahead commentary what of bit in little terms kind

Nitin Mhatre

and could color provide off more the start I'll on Brett look. Yes. forward

in growth, We broad-based lending C&I part grew I offload the the faster the the actually CRE. So a of portfolio portfolio. at loan in pace quarter. -- than the think did again, actually consumer

of I rates think down. that brought So growth the kind

So end-of-period X% in on to was growth quarter closer basis. an normalized, about or X%, or so it X% the

momentum do the expect we see going. to So

pipeline higher. actually about lower was it XX% but quarter-over-quarter, year-over-year, The was

So basis, it feels there like momentum. is on a seasonal

Our teams judicious. are being very

our has sheet team the clients exceptional managing serving that managing CRE balance done the Our judiciously. job an while

below guideline. and risk-based remain to our We continue that that I kind the of XXX% it to operating think at be keep of will or capital,

between And C&I, C&I teams. ABL real some good momentum we're and seeing

continue, could give the we the Brett expand margins should that expect going color momentum and forward. more that to think how I around So --

Brett Brbovic

that think Yes. see do And quarter. we first the I happening in

allowing and I in some XXXX, to QX the think balance expand decent NIM we growth expect into sheet quarter. our first heading

Bill Young

Great. expense just commentary Any And just expectations? near-term kind one of follow-up on question.

Brett Brbovic

Yes.

on momentum last we've I side good over shown pretty expense few the think the quarters.

real that into see XXXX forward. momentum to with continue changes move expect that We we no in significant as

Operator

with KBW. comes The question O'Connell from next Chris

Christopher O'Connell

So I below good of the the on all just trends. this really recent out Obviously, after wanted credit. quarter, kind to actions came start recent off and

Given the do progress bit going the recent of net a rate just is Upstart normalized quarters? you the guys few think disposal kind kind of the the than of here, and the portfolio charge-off of majority forward past down

Nitin Mhatre

think points. for we normalized of should in XX I basis believe, the be charge-offs us, the range

Chris. normalizes basis than XX had we we've believe a that, couple better of So but around quarters it at points range

Christopher O'Connell

Great. I very the 'XX, Okay. the in but strong maturing portfolio know another performing office and and is I -- within XX% sense ' maturities? And has XX% for too that been or big 'XX. and of a it of much X.X% isn't then guys, you looks like criticized. And Can us 'XX are portion think portfolio about XX how the 'XX is give entire about you criticized just the

Nitin Mhatre

want Greg, you color some do to there? give

Gregory Lindenmuth

none actually, Yes. It's XXXX. at all in

Christopher O'Connell

either? Okay. Great. And on 'XX nothing

Gregory Lindenmuth

credit $X in small There is a XXXX, million.

Christopher O'Connell

is cost portfolio? of that and deposit is was overall balance just you compared overall And digital Okay. what what then that just deposit mentioned I the efforts. to guys the wondering the

Nitin Mhatre

there. ask color give I'll to Sean Yes. some

Sean Gray

Sure. We're pleased also to that the our trends. is much similar the mirroring on opening, we have both bank. retail focused size portfolio retail also and in the deposit than average DDA very and national average account offerings We're that is size commercial our better pricing

new. relatively is program the So

the and good We growth deposits some are digital quarter. with in this mentioned $XX -- up Nitin over million rates

we that pleased we're good that So and into next got hope we've momentum, year. continues pipeline

Nitin Mhatre

color to this. little add just a Chris, And maybe more to

allows leverages do we also stack. effectively. of technology kind the us think some And that this in program made I investments more think to that team by I this launched the that was part of our

struggled higher the right digital banks or a balances of in have of fraud. keep to or historically, seen have have So higher attrition amount you've deposits most

And those I stack a leveraged addressed program. think tech learnings, robust built all we have our that. took pretty We and

Sean we're like pretty across said, As about we good momentum the metrics. feel seeing those

Christopher O'Connell

I as but no kind past Okay. given just know going branch full shell there's of next moves year just then expense little thinking how guidance, I just a of are rate? And about you the far into guys the bit quarter, into getting quarters. more various the mean, to up. QX, couple follow as over granular and run wanted

Brett Brbovic

Yes.

of we've momentum had positive recent expenses lot over history. think a with I our

were we we obviously going dollar as that that focus as forward. to and us. of a continue for think We to That's every meet I make sure move spending point as effectively regularly possible. we're efficiently

continue. So I to momentum see expect would that

Operator

Research comes question Seaport with from next The Partners. Laura Hunsicker

Laura Havener Hunsicker

other your over $X.X the how benefit was million, starting much just debt in Maybe of income, there? that BOLI

Brett Brbovic

million than was BOLI higher think rate I almost normal quarter-over-quarter. our run $X about

Laura Havener Hunsicker

anything else in was nonrecurring there that? Okay. And

Brett Brbovic

revenue high quarter seasonally comes the that some thing every in of fees, usually the seasonal -- end is have that a sharing year. did We that's but at fourth

I most But anything pieces are Another thing that. was of -- drove that the significant X increase. the of would quarter-over-quarter, I say wouldn't BOLI those say kind the probably component

Laura Havener Hunsicker

And about, quarters combined, actually have charge-offs normalized you quarters Okay. X to detail. happy have provide the help single even Great. of sort which more just That's guys charge-offs and to digits. to then right? these just books and think it's you helpful. tracking going though, half, been continue your also your So Firestone, very been as Upstart I'm and of back Can some that, charge-offs, us X

them rearview about that's the done So mirror? the completely including reserves refresh that, you them MOE, Brookline is in of us headache write Firestone off, before normalized points? you are I a are that on that the the thinking it great that? on so charge-offs. And see them How what you to those for we're looking close and get And Upstart that XX and books? was on question bleed, October that stripping the the just why number ahead guess in not X Is XX. out again, But or then basis sale can at sell Upstart whatever, just when

Nitin Mhatre

don't Greg, start in you -- well? it jump why and I'll as you off

Gregory Lindenmuth

expectation normalized than are that performing charge-offs. expected. those in really Firestone Laurie, of embedded Sure. better has been

So of are the selling Upstart we book, actively don't see possibly as in looking really any at and we book the Firestone the remaining well. issues

reserves of are of that are outstanding Our Upstart XX% now. the excess for the probably in balances

Laura Havener Hunsicker

Okay. Great.

number, charge-offs, basis single think not digits. normalized points. So it's that we if It's XX so basically, about still

Nitin Mhatre

rate. -- I normalized XX no, I to we're what points basis think there. what is run we be think Laurie, believe No, the yes,

XX, think I about stronger. has quality XX-year believe been our is average credit We basis XX points.

don't and XX to I So basis continue of see we type points -- X expect charge-offs. think

think I rate basis could XX points. run So the be normalized

Laura Havener Hunsicker

Okay. I mean notwithstanding the after quarter your quarter fact Upstart of X/X been like has after charge-offs quarter.

And approvals, Okay. approvals just this is but faster AUB/SASR in weeks of quarter third then we announced if latest Carl the approval The know deal, -- and closing, rolling merger don't largest a about right? the they state of to third the thinking Fed seeing supposed filing the after Paul the and even much, 'XX. XXXX, in through. So close they last question. application, much get I question, X ahead their were are

X, Are bit timing? thinking little Now you that? going we about here? think we be closing How about the April us a they're a should Can closing XXXX. help to faster see

Nitin Mhatre

Yes.

believe just to is same the the I the It's yes, impossible to this, a in good you is. numbers. that approvals and we feeling especially predict think, lens new previous compared have one. how I look much faster, at of that Laurie, administration the be regulatory the might general And

parties well us be we both forecast -- can't of think to but very estimated but that. I the it be that quarter, sooner, of just are third could end combined both

Operator

with Mark from The Fitzgibbon next question Piper comes Sandler.

Gregory Zingone

to Greg see Could in that might MOE? actions you prepare Quick for other Zingone balance sheet guys Mark. for is the stepping questions. we do This any

Nitin Mhatre

there nothing No, the radar. on is

Gregory Zingone

for thinking I us give kind it idea was be just for that secondly, looking in you on the XQ. able should Would next And Okay. few how be of saw rate XQ XQ, elevated tax quarters, the and to an XQ? we about

Brett Brbovic

bit in merger here nondeductible little of obviously, rate this elevated, a up because some the were Taxes quarter expenses sure. QX. drove that Yes,

be and think around believe I going to the tax drove forward, XX%. so. it rate still the much expecting XX%, pretty for XX% XXXX to that's we're what I

Operator

is from Hovde follow-up The Bishop David next Group. a question of

David Bishop

Yes.

of Just follow-ups, Nitin couple for a or either Greg.

favor real potential as to change within been terms that a downsizing affected in the the of lot by your the to pertains government, be to or especially the here. could estate. downsizing Any alluded You obviously, in the it agencies there's federal of footprint? exposure GSA rattling administration federal government And

Nitin Mhatre

Greg?

Gregory Lindenmuth

leases The payment. question. positive of term. very good is I a leases clauses with equal agencies. cases part The government in do mean that's they're the the No, will a we the have of amount lot termination that of long

very steep clause. termination a So

protection So we into loans with the have government built that any embedded associated leases.

David Bishop

question. on Got sort loan sticking it. then of And the

they've Just curious, versus and originations new or either last post quarter if this down moved up appreciably quarter?

Nitin Mhatre

just let you on -- originations as one of and as numbers new in well So the terms exact they me second consumer Yes, modestly there. commercial were about give commitments higher were the side side.

So quarter modestly fourth third compared higher quarter. the in to

David Bishop

they know the early it's quarter, movement And much post first quarter? much? there but in I moved been has

Nitin Mhatre

in the think of couple pushed on side deals a first that But mentioned the got the Brett into quarter. No. as script, there commercial I were

a So up of was start there'll But XX%. head the little again, be year-over-year pipeline, there. bit a

a quarter of we think So in I first the be year. normal. think similar that's saw of last should it trajectory We as kind

Operator

turn closing remarks. question-and-answer the call the I'll concludes Mhatre session. This to for Nitin

Nitin Mhatre

and all well. interest for our and us Berkshire. in great your call be you on joining continued Have a day Thank today

Operator

Thank concludes conference call. you. today's This for you joining. Thank

now disconnect. You may

Berkshire Hills Bancorp (BHLB) 30 Jan 252024 Q4 Earnings call transcript