Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Berkshire Hills Bancorp Inc (BHLB, Financial) reported a strong quarter with operating earnings per share up 5% quarter-over-quarter and 16% year-over-year.
- Asset quality metrics remain robust, with total past due loans at their lowest level in 15 years.
- The company successfully completed the sale of 10 branches in New York, enhancing network efficiency and profitability.
- Capital ratios improved, with CET1 at 11.9% and TCE at 9.1%, indicating strong capital management.
- The loan pipeline was stable quarter-over-quarter and up 20% year-over-year, suggesting potential for future growth.
Negative Points
- Net interest income decreased by 1% quarter-over-quarter and 3% year-over-year, reflecting pressure on margins.
- Deposit costs increased by seven basis points during the quarter, indicating rising funding expenses.
- Non-performing loans increased by 12% quarter-over-quarter, driven by an isolated multi-use property.
- The pre-tax gain from the branch sale was lower than expected due to higher-than-anticipated deposit retention.
- A significant check fraud incident resulted in $1.5 million in expenses, highlighting operational risk.
Q & A Highlights
Q: Is the guidance from the previous quarter still valid for 2024?
A: Yes, we expect the net interest margin (NIM) for the fourth quarter to be between 310 and 320 basis points. Revenue is expected to be flat to slightly down in Q4, with expenses modestly down. Net charge-offs are expected to be stable, excluding the upstart loan sale charge-off from this quarter. - Brett Brbovic, Chief Accounting Officer
Q: Can you explain why you expect deposit betas to be higher on the way down than on the way up?
A: We have identified several tailwinds, such as significant CD maturities and swaps rolling off, which provide opportunities to manage deposit betas and margins better in a down cycle. We are also seeing peers begin to lower deposit rates, which supports our strategy. - Nitin Mhatre, President, Chief Executive Officer, Director
Q: What are your expectations for operating expenses in the fourth quarter?
A: We expect Q4 operating expenses to be approximately $71 million, considering some expenses related to branch closures have already been captured in the current quarter. - Brett Brbovic, Chief Accounting Officer
Q: Can you provide details on the criticized office loans and their reserves?
A: The criticized office loans include a class A credit with 80% occupancy maturing in December 2024 and class B credits with occupancies ranging from 25% to 50%, maturing between 2026 and 2028. There are no specific reserves on these criticized assets, and the overall reserve for the office book is approximately 1.5%. - Greg Lindenmuth, Chief Risk Officer
Q: Will there be more sales of upstart or Firestone loans in the future?
A: No, we believe the upstart portfolio is sufficiently provided for and Firestone is performing well, exceeding expectations. Both portfolios are in runoff mode and represent a small portion of our total loans. - Nitin Mhatre, President, Chief Executive Officer, Director
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
