Berkshire Hills Bancorp(BHLB) - 2025 Q1 - Earnings Call Transcript

Financial Performance - The company reported operating net income of $27.6 million, up 6% linked quarter and up 32% year over year [5][6] - Earnings per share remained flat at$ 0.60 compared to the previous quarter but increased by 22% year over year [5] - Operating expenses were approximately $68 million, down 4% linked quarter and down 6% year over year, indicating effective expense optimization [6][18] - The operating ROTCE was 9.66%, down 27 basis points linked quarter but up 93 basis points year over year [6] Business Lines and Key Metrics - Net interest income increased by 3% linked quarter and 2% year over year, with a net interest margin of 3.24%, up 10 basis points linked quarter [12][16] - Average loans rose by$ 118 million or 1% linked quarter and $348 million or 4% year over year [13] - Average deposits increased by$ 188 million or 2% linked quarter but remained flat year over year [14] Market Data and Key Metrics - The loan to deposit ratio was at 5%, down 1% linked quarter, indicating solid liquidity [9] - Total delinquencies and nonperforming loans were at 42 basis points of loans, the lowest level in about twenty years [8][19] Company Strategy and Industry Competition - The company is focused on deposit relationships across business lines and has launched a digital deposit initiative that generated approximately $75 million in new deposits [10][53] - The merger with Brookline Bancorp is expected to enhance profitability and create a preeminent Northeast franchise, with an estimated 23% accretion to Berkshire's 2026 consensus estimates [11][27] Management Comments on Operating Environment and Future Outlook - Management noted a mixed demand environment with some clients increasing inventories while others adopt a wait-and-watch approach [36] - The company remains prepared to adapt to economic uncertainties and is optimistic about the merger's potential benefits [27][28] Other Important Information - The company sold the remaining$ 7 million of upstart loans, significantly derisking its balance sheet [21] - The tangible book value per share was $25.50, with a CET1 ratio of 13.3% and a TCE ratio of 9.9% [24] Q&A Session Summary Question: Update on loan demand and growth outlook - Management indicated a slowing demand in the pipeline, with a current annualized loan growth of about 5% expected to continue [36][37] Question: Expense base growth expectations - Management expressed confidence in maintaining stable expense momentum moving forward [39] Question: Clarification on spot NIM - The spot NIM in March was confirmed to be 3.31% [48][49] Question: Employee retention strategies ahead of merger - Key producers have been identified, and retention grants are being discussed to ensure stability during the transition [51] Question: Plans for aligning product offerings ahead of merger - The company is enhancing digital functionalities but does not plan to launch new products immediately [54][55] Question: TCE ratio and CRE concentration levels - The CRE concentration ratio remains below 300%, with a current level of approximately 290% [57]