• Operating EPS: $0.60, up 3% linked quarter and 28% year over year.
• Operating Net Income: $26 million, up 5% linked quarter and 29% year over year.
• Operating ROTC: 9.93%, up 2 basis points linked quarter and 103 basis points year over year.
• Fee Revenues: Up 8% linked quarter.
• Operating Expenses: Down 2% linked quarter and 6% year over year.
• Net Charge-Offs: 14 basis points of loans.
• Reserve to Loans: 122 basis points, flat linked quarter.
• Delinquencies and Non-Performing Loans: 52 basis points of loans.
• CET1 Ratio: 13.0%.
• TCE Ratio: 9.4%.
• Average Deposits: Up 3% linked quarter.
• Average Loan Balances: Up 0.4% linked quarter.
• Total Deposit Costs: Down 12 basis points linked quarter.
• Total Funding Costs: Down 17 basis points linked quarter.
• Operating Earnings (Annual): $94.9 million or $2.22 per share.
• Net Interest Income: $86.9 million, down 1% linked quarter.
• Operating Interest Income: $23.2 million, up 8% linked quarter.
• Provision Expense for Credit Losses: $24 million, down $8 million from 2023.
• Net Interest Margin: 3.14%, down 2 basis points linked quarter.
• Operating Non-Interest Income: Up 8% linked quarter, 39% year-over-year.
• Operating Expenses: $71 million, down 2% linked quarter and 6% year-over-year.
• Non-Performing Loans: 26 basis points of loans, flat linked quarter.
• Tangible Book Value Per Share: $24.82, up 1% linked quarter and 9% year-over-year.

• Warning! GuruFocus has detected 4 Warning Signs with CSWI.

Release Date: January 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Berkshire Hills Bancorp Inc (NYSE:BHLB) reported a strong quarter with operating EPS of $0.60, up 3% linked quarter and 28% year over year.
• Operating net income increased by 5% linked quarter and 29% year over year, demonstrating robust financial performance.
• The company achieved a significant improvement in asset quality, with delinquencies and non-performing loans at the lowest level in almost 20 years.
• BHLB's strategic initiatives, including expense optimization and branch sales, have led to a 6% year-over-year reduction in operating expenses.
• The merger with Brookline Bancorp is expected to enhance profitability, with an estimated 40% accretion to 2026 EPS on a GAAP basis.

Negative Points

• Net interest income decreased by 1% linked quarter and 2% year over year, indicating pressure on interest margins.
• Average loan growth was lighter this quarter due to higher paydowns in the multifamily portfolio and delayed commercial closings.
• The company faces headwinds from floating rate loans repricing lower in the short term.
• Despite improvements, the normalized net charge-off rate is expected to be around 20 basis points, which could impact future profitability.
• The pending merger with Brookline Bancorp introduces uncertainty, as regulatory and shareholder approvals are still required.

Q & A Highlights

Q: Can you provide insights on the loan growth contribution from new hires over the past year? A: Nitin Mhatre, President and CEO, stated that the bulk of the growth came from the commercial book, particularly C&I, which grew faster than the CRE book. The growth was broad-based, with contributions from both existing and new bankers.

Q: Has the average loan size and relationship changed with the addition of senior bankers? A: Nitin Mhatre noted that the average loan size and relationship have remained steady, as their credit box and holding limits have not changed.

Q: Can you elaborate on the deposit growth opportunity and whether it will offset maturing wholesale funding? A: Nitin Mhatre explained that deposit growth was broad-based across products and channels, with significant contributions from commercial, private bank, retail, and new digital channels. They expect this momentum to continue, potentially offsetting maturing wholesale funding.

Q: What are the expectations for net charge-offs following the disposal of the Upstart portfolio? A: Nitin Mhatre indicated that they expect normalized charge-offs to be around 20 basis points, acknowledging that recent quarters have been better than this rate.

Q: How are you managing the office portfolio, particularly with upcoming maturities? A: Gregory Lindenmuth, Chief Risk Officer, mentioned that there are no significant criticized credits maturing in 2025, and only a small credit of $3 million in 2026, indicating strong management of the office portfolio.

Q: Can you provide details on the digital deposit efforts and their cost compared to the overall deposit portfolio? A: Sean Gray, COO, stated that digital deposits are priced similarly to retail and commercial offerings, with average deposit sizes mirroring retail accounts. The digital deposits have grown to over $60 million, showing good momentum.

Q: What are the near-term expense expectations? A: Brett Brbovic, Chief Accounting Officer, expects the positive momentum in managing expenses to continue into 2025, with no significant changes anticipated.

Q: How should we think about the timing of the merger with Brookline Bancorp? A: Nitin Mhatre noted that while regulatory approvals might be faster under the new administration, the estimated closing remains the end of the third quarter of 2025, though it could be sooner.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.