Berkshire Hills Bancorp(BHLB) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Operating net income for Q1 2024 was $20.9 million, or$0.49 per fully diluted share, up 4% linked quarter [27][14] - Net interest income was flat linked quarter at $88.1 million, down 10$69 million, or 1% linked quarter [3][15] - Average deposit balances increased by $42 million linked quarter [6][15] - Operating expenses decreased by 4$72.4 million [10][15] - Net charge-offs were $4 million, or 18 basis points of average loans, down 14 basis points year-over-year [16][19] Business Line Data and Key Metrics Changes - Operating fee income increased by$636,000, or 4% linked quarter, driven by higher swap fees and commercial loan servicing fees [8][15] - Wealth management income rose by $490,000 due to higher seasonal tax preparation fees and market appreciation [8] - Gain on sale of SBA loans decreased by$683,000 due to lower market premiums [8] Market Data and Key Metrics Changes - Average deposits increased by 3% year-over-year [30] - Non-interest-bearing deposits as a percentage of total deposits decreased from 25% in Q4 to 24% in Q1 [6] - Cumulative total deposit beta was 41% through 525 basis points of Fed tightening [6] Company Strategy and Development Direction - The company intends to self-fund investments in strategic priorities to enhance its position as a high-performing community bank [4] - The strategy includes optimizing the real estate and branch network, with plans to consolidate three additional branches [39][49] - The company aims to deepen relationships with existing clients and selectively extend credit, particularly in commercial real estate [31][64] Management's Comments on Operating Environment and Future Outlook - The management noted that the operating environment remains challenging due to historic interest rate increases and an inverted yield curve [63] - There is an expectation for a more normal banking environment in late 2024 and into 2025 [64] - The management remains focused on expense management, opportunistic hiring, and proactive asset quality management [64] Other Important Information - The company sold branches in New York, which included $485 million in deposits and$58 million in loans, expecting an annualized revenue loss of $4.3 million and an expense reduction of$6.4 million post-transaction [11][12] - The company repurchased 182,000 shares for $4.3 million in Q1 [29] Q&A Session Summary Question: Impact of new senior talent on loan and deposit growth - Management confirmed that new hires are positively impacting both loan and deposit pipelines, with increased referrals in the Wealth Management Group [59] Question: Future capital management targets - Management stated they are pleased with current capital metrics and do not have specific targets for risk-weighted assets [75] Question: Credit losses and potential bulk sale of the Upstart portfolio - Management indicated that the Upstart portfolio is on a runoff mode and they are exploring options to manage and potentially divest it [76] Question: Fee income guidance for 2024 - Management acknowledged that fee income was light in Q1 but expects improvements in subsequent quarters due to seasonal factors and market conditions [86] Question: Future security sales - Management indicated that they do not anticipate further security sales in the near term, having completed two significant sales recently [79] Question: Branch network size and consolidation strategy - Management believes they are close to the right size for their branch network but will continue to evaluate opportunities for consolidation based on performance and market conditions [80][81]