Berkshire Hills Bancorp Q1 2025 Earnings Report

Berkshire Hills Bancorp EPS Results

• Actual EPS: $0.60
• Consensus EPS: $0.54
• Beat/Miss: Beat by +$0.06
• One Year Ago EPS: $0.49

Berkshire Hills Bancorp Revenue Results

• Actual Revenue: $110.44 million
• Expected Revenue: $109.71 million
• Beat/Miss: Beat by +$732.00 thousand
• YoY Revenue Growth: +4.70%

Berkshire Hills Bancorp Announcement Details

• Quarter: Q1 2025
• Date: 4/24/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, April 24, 2025
• Conference Call Time: 9:00AM ET

Berkshire Hills Bancorp (NYSE:BHLB) operates as the bank holding company for Berkshire Bank that provides various banking products and services in the United States. The company provides various deposit accounts, including demand deposit, interest-bearing checking, regular savings, money market savings, time certificates of deposit, and retirement deposit accounts. It offers loans, such as commercial real estate, commercial and industrial, residential mortgage, and consumer loans. In addition, the company provides wealth management services comprising investment management, trust administration, tax return preparation, and financial planning; and investment products and brokerage services. Further, it offers commercial cash management, online banking and mobile banking, small business banking, and asset based lending services; and debit cards and other electronic fee producing payment services to transaction account customers. It serves its products to personal, commercial, non-profit, and municipal deposit customers. Berkshire Hills Bancorp, Inc. was founded in 1846 and is headquartered in Boston, Massachusetts.

Berkshire Hills Bancorp Q1 2025 Earnings Call Transcript

Key Takeaways

• Operating net income of $27.6 million rose 32% year-over-year (6% linked quarter), with EPS of $0.60 up 22% YoY, driven by improved net interest income and 5% linked-quarter operating leverage.
• Expenses fell 4% quarter-over-quarter and 6% YoY to $68 million, yielding a 59.5% efficiency ratio and reflecting broad-based discipline in expense optimization.
• Asset quality remained strong, with net charge-offs at 15 bps of loans, total delinquencies and nonperforming loans at 42 bps (a 20-year low), and reserves covering roughly 500% of nonperforming loans.
• Strategic progress included $75 million of new digital deposits, non-strategic runoff portfolios down 76% YoY to $34 million, and on-track integration planning for the Brookline Bancorp merger, which is expected to drive ~40% GAAP and ~23% cash EPS accretion by 2026.
• Balance sheet trends saw net interest margin up 10 bps to 3.24% (3.31% in March), average loan growth of about 5% annualized, and a loan-to-deposit ratio of 95% supporting liquidity.

Presentation

[Operator]

This call is being recorded on 04/24/2025. I would now like to turn the conference over to Kevin Investor Relations Officer.

[Operator]

Please go ahead.

[Kevin Conn, IR and Corporate Development Officer at Berkshire Hills Bancorp]

Good morning, and thank you for joining Berkshire Bank's first quarter earnings call. My name is Kevin Khan, Investor Relations and Corporate Development Officer. Here with me today are Nitin Mahatre, Chief Executive Officer Sean Gray, Chief Operating Officer Brett Berbobic, Chief Financial Officer and Greg Lindenmuth, Chief Risk Officer. Our remarks will include forward looking statements and refer to non GAAP financial measures. Actual results could differ materially from those statements.

[Kevin Conn, IR and Corporate Development Officer at Berkshire Hills Bancorp]

Please see our legal disclosures on Page two and three of the earnings presentation referencing forward looking statements and non GAAP financial measures. A reconciliation of non GAAP to GAAP measures is included in our news release. At this time, I'll turn

[Kevin Conn, IR and Corporate Development Officer at Berkshire Hills Bancorp]

the call over to Nitin. Nitin?

[Nitin Mhatre, President and CEO at Berkshire Hills Bancorp]

Thank you, Kevin. Good morning, everyone, and thank you all for joining us today. I'll begin my comments on Slide four where you can see the highlights for the first quarter.

[Nitin Mhatre, President and CEO at Berkshire Hills Bancorp]

We had a very strong quarter with operating net income of $27,600,000 up 6% linked quarter and up 32% year over year. Earnings per share of $0.60 was flat to the fourth quarter including the full quarter impact of higher share count from our December equity raise and up 22% year over year. Our rigorous expense optimization initiatives continued to drive expenses lower with quarterly operating expense of about 68,000,000 down 4% linked quarter and down 6% year over year. Ongoing momentum of improving revenues and declining expenses led to a positive operating leverage of 5% linked quarter and 11% year over year. Operating ROTCE of 9.66 was down 27 basis points linked quarter and up 93 basis points year over year.

[Nitin Mhatre, President and CEO at Berkshire Hills Bancorp]

Overall strong financial performance was primarily driven by improved net interest income, lower expenses and disciplined credit management. Brett will provide more details in a few moments. Asset quality and balance sheet metrics remain strong. Net charge offs were 15 basis points of loans and our reserve to loans was up two basis points to 1.24%. Total loss reserves of 1.24% are now at about 500% of our total non performing loans.

[Nitin Mhatre, President and CEO at Berkshire Hills Bancorp]

Total delinquencies and non performing loans were 42 basis points of loans, the lowest level in about twenty years, a solid testament to the strength of our collaborative risk culture across frontline bankers and risk teams. Liquidity remains solid with our loan to deposit ratio at 95% that was down 1% linked quarter. On strategy front, we made steady progress on our strategic initiatives in the first quarter. Our focus on the deposits relationships across business lines continued and a relatively new digital deposit initiative has gained momentum and delivered approximately $75,000,000 of new deposits. We sold the remaining 7,000,000 upstart book and further derisked our balance sheet with total non strategic runoff portfolios down by 76% year over year to just $34,000,000 Brett will share more details on the portfolio sale in a moment.

[Nitin Mhatre, President and CEO at Berkshire Hills Bancorp]

As you know, in December, we announced a merger of equals with Brookline Bancorp to create a preeminent Northeast franchise. This transaction improves scale and meaningfully improves profitability as reflected in the estimated 4023% accretion to Berkshire's twenty twenty six consensus estimate on GAAP and cash basis respectively. Our team continues to work proactively on requisite integration planning for a seamless transition. With that, I'll turn over the call to Brett to cover our financials in more detail. Brett?

[Brett Brbovic, Executive VP & CFO at Berkshire Hills Bancorp]

Thank you, I'll begin on Slide five, which shows an overview of the first quarter metrics. As Nitin mentioned, our operating earnings were $27,600,000 or $0.60 per share. Our net interest margin was 3.24%, up 10 basis points linked quarter and our net interest income was up $2,900,000 or 3% linked quarter. Operating expenses were down $3,100,000 or 4% linked quarter and our efficiency ratio was 59.5%. Slide six shows our average loan balances.

[Brett Brbovic, Executive VP & CFO at Berkshire Hills Bancorp]

Average loans were up $118,000,000 or 1% linked quarter and up three forty eight million dollars or 4% year over year. We've updated a page in the appendix which shows data on the Upstart and Firestone runoff portfolios. The combined runoff portfolios including the Upstart loan sales are down $110,000,000 or 76% year over year to $34,000,000 or just 40 basis points of loans. Slide seven shows average deposit balances. Average deposits increased $188,000,000 or 2% linked quarter and were flat year over year.

[Brett Brbovic, Executive VP & CFO at Berkshire Hills Bancorp]

Excluding payroll deposits and brokered CD balances, average deposits were flat linked quarter and flat year over year. If you recall, our year over year deposits were impacted by the sale of 10 branches in Upstate New York in the third quarter of twenty twenty four. Average non interest bearing deposits as a percentage of total deposits was 23, down 1% linked quarter. Turning to Slide eight. Net interest income was up 3% linked quarter and up 2% year over year.

[Brett Brbovic, Executive VP & CFO at Berkshire Hills Bancorp]

Net interest margin was up 10 basis points linked quarter to 3.24% and our March spot NIM was 3.31 Slide nine shows operating non interest income, which was down $2,500,000 or 11% linked quarter and up $3,400,000 or 19% year over year. Other non interest income was down compared to the prior quarter. During the fourth quarter, we had strong SBA gains and unusually high BOLI income. In the near term,

[Brett Brbovic, Executive VP & CFO at Berkshire Hills Bancorp]

we expect SBA gains to be

[Brett Brbovic, Executive VP & CFO at Berkshire Hills Bancorp]

in line with our prior August average of $2,900,000 due to uncertainty from the impact of tariffs. Slide 10 shows expenses. Operating expenses were down $3,100,000 or 4% linked quarter to $68,000,000 and down $4,500,000 or 6% year over year. Year over year expense reductions were broad based including our other expenses which are an assortment of smaller items. Non operating expenses of $2,500,000 were primarily related to the merger announced in December.

[Brett Brbovic, Executive VP & CFO at Berkshire Hills Bancorp]

Slide 11 shows our expense outperformance versus proxy peers over the last four years. This slide highlights the disciplined approach to expense management we've undertaken over that time. Slide 12 shows a summary of asset quality metrics. Nonperforming loans as a percentage of total loans was 25 basis points. Total delinquencies and non performing loans were 42 basis points of total loans.

[Brett Brbovic, Executive VP & CFO at Berkshire Hills Bancorp]

Net charge offs of $3,500,000 were up $200,000 linked quarter and down $500,000 year over year. We added $2,000,000 to our loss reserve increasing our coverage ratio to 124 basis points. Our loss reserves to non performing loans are now about 500%. Our $5,500,000 provision reflects the most recent Moody's baseline economic outlook in our ACL assumptions. During the quarter, we sold the remaining $7,000,000 of Upstart loans for net proceeds of $5,300,000 or $0.76 on the dollar.

[Brett Brbovic, Executive VP & CFO at Berkshire Hills Bancorp]

With the sale of the Upstart book, we have significantly derisked our balance sheet. Our other loan books are below normal net charge off levels and we do expect those to normalize over time based on the macroeconomic environment and outlook. Slide 13 shows that our CRE book remains well diversified in terms of geography and collateral. Our CRE concentration ratio was approximately 290% of risk based capital and credit quality of the CRE portfolio remains solid with non accrual loans at 19 basis points of period end loans. Slide 14 shows details on our office portfolio.

[Brett Brbovic, Executive VP & CFO at Berkshire Hills Bancorp]

As noted last quarter, the weighted average loan to value ratios are about 60% and a large majority of the portfolio is in suburban and Class A space. We have very limited exposure to Boston's Financial District and no exposure to high rise office buildings. Turning to capital. We have strong capital levels. Tangible book value per share was $25.5 Our CET1 ratio was 13.3% and our TCE ratio was 9.9%.

[Brett Brbovic, Executive VP & CFO at Berkshire Hills Bancorp]

Our AOCI bond mark improved modestly from a negative $106,000,000 to a negative 95,000,000 Given the pending MOE transaction in the second half of twenty twenty five, we did not provide line item income statement and balance sheet guidance for the upcoming year. That said, we are encouraged by the momentum in our financial metrics and confirm comfort with consensus net income cited in the December 16 merger presentation for 2025. And with that, I'll turn it back over to Nitin for further comments. Nitin?

[Nitin Mhatre, President and CEO at Berkshire Hills Bancorp]

Thank you, Brett. Overall, we had a very strong first quarter driving a solid start to the year. Many of our multi year initiatives are clearly bearing fruit. While the economic environment is uncertain given the volatility driven by tariffs and other policy initiatives, we continue to monitor the situation and communicate with clients to better understand potential impacts to their businesses. It's still very early, and the fluidity of the news from Washington makes it difficult to predict the potential outcomes at this point, but our teams remain prepared to pivot as needed to maintain our momentum.

[Nitin Mhatre, President and CEO at Berkshire Hills Bancorp]

We're excited about the potential for the combined Berkshire and Brookline franchises. The combined entity will provide growth opportunities for our employees, continued commitment to our communities, enhanced products for our customers, and significantly higher profitability and returns for our shareholders. I want to thank all of my Berkshire Bank colleagues for their continued hard work and commitment to the bank and our clients and look forward to their continued support and commitment through this transition. On slide 15, we summarize our progress on the merger integration and next steps. In short, everything is on or slightly ahead of plan.

[Nitin Mhatre, President and CEO at Berkshire Hills Bancorp]

We filed regulatory applications in March and our shareholder proxy with the SEC in early April. We anticipate stockholder approvals at our annual meeting on May 21 and our regulatory approvals sometime in the third quarter. So a lot of progress so far while there's more work to do. In closing, I'm proud of what Berkshire team has accomplished over the last four years in terms of financial performance improvement while delivering exceptional client experience and positive impact on the communities that we operate in. It is their hard work that continues to be recognized across various forums, including the most recent recognition by Newsweek magazine that listed Berkshire Bank amongst the most trustworthy banks in America for the fourth consecutive year.

[Nitin Mhatre, President and CEO at Berkshire Hills Bancorp]

Thank you team Berkshire for everything you do to serve our clients and earn their trust. With that, I'll turn it over to the operator for questions. Operator?

[Operator]

Thank you. We are now opening the floor for question and answer session. Your first question comes from the line of Chris O'Connell of KBW. Your line is now open.

[Brett Brbovic, Executive VP & CFO at Berkshire Hills Bancorp]

Hey, good morning.

[Nitin Mhatre, President and CEO at Berkshire Hills Bancorp]

Good morning, Chris.

[Christopher O'Connell, Director - Equity Research at Keefe, Bruyette & Woods (KBW)]

So just wanted to start it off with the balance sheet side. I appreciate no guidance from here and it's become a little bit more shaky economic environment. So I was hoping to get an update on loan demand. Has that changed as you guys have come into the year and over the past couple of months? And how you guys are thinking about standalone growth going forward?

[Nitin Mhatre, President and CEO at Berkshire Hills Bancorp]

Yeah. Chris, that's a good question. Like you said, there's a lot of uncertainty out there. And, broadly speaking, what we're hearing from the clients, there's, like, three different themes that are emerging. One is where there's some clients, especially commercial clients that are loading up on the inventories, you know, in in in kind of anticipation of the prices going up.

[Nitin Mhatre, President and CEO at Berkshire Hills Bancorp]

There's the other group that's kind of wait and watch approach and just kind of staying put where they are. And there is a third group that is actually looking at, rationalizing and, you know, reducing expenses and so on and so forth. So it's a mixed bag, but what we what we see in the pipeline is our pipeline has slowed down compared to the previous quarter just like the origination slowed down. So I think there's a net indication of slowing demand. I think we still I think this quarter was about 5% annualized loan growth.

[Nitin Mhatre, President and CEO at Berkshire Hills Bancorp]

I think we still probably expect to be in that range, but I will tell how the economy turns out.

[Christopher O'Connell, Director - Equity Research at Keefe, Bruyette & Woods (KBW)]

Great. That's helpful. And then you know, on the expense side, you you said there's kind of a number of small items here. Just just hoping to, you know, get your guys' thoughts about, how the expense base grows throughout the rest of the year on a standalone basis or if it is able to remain pretty steady.

[Brett Brbovic, Executive VP & CFO at Berkshire Hills Bancorp]

Yes. I think we're very pleased with our expense momentum that we're seeing currently and that we've seen over the last few quarters. I am expecting it to remain relatively stable, consistent with generally consistent with this quarter, I would say. We do hope to continue that momentum as we move forward and progress towards the merger.

[Christopher O'Connell, Director - Equity Research at Keefe, Bruyette & Woods (KBW)]

Okay. Got it. And then, you know, with the final upstart sale, between, you know, this quarter, last quarter, and just to the overall progress on the runoff portfolios in general, you're talking about kind of normalized net charge offs. I mean, where do you think that range is now? Like, know, now that you guys have kind of changed the balance sheet, do you think that, you know, that's a different level than it's been historically?

[Nitin Mhatre, President and CEO at Berkshire Hills Bancorp]

Yep. Chris, in a normalized environment, that would have been the case. So if you look at our last five quarters, our charge off rate has ranged between seven basis points and 24 basis points. This quarter was about 15. So I think on the last, earnings call, we did say that we expect it to normalize to around 20 basis points level.

[Nitin Mhatre, President and CEO at Berkshire Hills Bancorp]

And I think that's where we're staying at the moment because there's so much uncertainty out there, so it's tough to say. I think Brett mentioned in his remarks that we expect it to normalize, and we believe that's the normalized level.

[Christopher O'Connell, Director - Equity Research at Keefe, Bruyette & Woods (KBW)]

Great. I appreciate the time. Thank you.

[Nitin Mhatre, President and CEO at Berkshire Hills Bancorp]

Thank you, Chris.

[Operator]

Your next question comes from the line of Gregory Zengong of Piper Sandler. Your line is now open.

[Gregory Zingone, Research Analyst at Piper Sandler Companies]

Hey, guys. It's Greg stepping in for Mark. How are you?

[Nitin Mhatre, President and CEO at Berkshire Hills Bancorp]

Hey, Greg. Good. How are you?

[Gregory Zingone, Research Analyst at Piper Sandler Companies]

Good. Just a quick clarifying question. Did you say the spot NIM in March was 3.31%?

[Brett Brbovic, Executive VP & CFO at Berkshire Hills Bancorp]

That's correct. Yes.

[Gregory Zingone, Research Analyst at Piper Sandler Companies]

Okay. Awesome. And is there any update you could give us on how you're managing employee retention ahead of the MOE closing, especially for some of your key producers?

[Brett Brbovic, Executive VP & CFO at Berkshire Hills Bancorp]

Sure. Sean here. We've identified all of those key producers. We've had those conversations, and, both organizations have discussed, you know, meaningful retention and retention grants as they move towards the pro form a company. So, we feel we've got a good handle, but a lot of work left to do.

[Gregory Zingone, Research Analyst at Piper Sandler Companies]

Okay. Thank And then is there any plan to align your product offerings, your deposit related strategies ahead of the legal close?

[Nitin Mhatre, President and CEO at Berkshire Hills Bancorp]

So I think we, we'd, in my remarks, I talked about the digital deposit initiative that we launched that's programmed to date about $75,000,000 in deposits. And I think even more exciting outside of the absolute numbers is roughly one out of five new client relationships are coming through digital channels now, which was our, you know, original goal. So I think we're pleased with that. I don't think we're gonna launch new products per se, but I think the team continues to fine tune the functionalities. So just as an example, last quarter, we have launched what we call as the direct deposit API, whereby if you open a deposit relationship with Berkshire Bank and wanna move your direct deposit from another bank, it's really a couple of clicks of buttons on your phone.

[Nitin Mhatre, President and CEO at Berkshire Hills Bancorp]

And I think those kind of functionalities will continue to be added to create that, digital first type of experience.

[Gregory Zingone, Research Analyst at Piper Sandler Companies]

Awesome. Thank you. And last question for me. Is there a TCE ratio or a CRE concentration level you guys are keeping in mind as you approach the MOE?

[Nitin Mhatre, President and CEO at Berkshire Hills Bancorp]

For CRE, our we've continued to stay below 300% mark. And I think this quarter, ended at about two ninety. TC, Brett, I don't know if you have a comment on that.

[Brett Brbovic, Executive VP & CFO at Berkshire Hills Bancorp]

Yeah. No. I would expect TC to remain relatively stable from now basically to the merger. You know, just trying to make sure that we put ourselves in the best position possible for, you know, once the merger occurs, to continue going forward and grow.

[Gregory Zingone, Research Analyst at Piper Sandler Companies]

Awesome. Thanks so much, guys.

[Nitin Mhatre, President and CEO at Berkshire Hills Bancorp]

Thank you, Ben.

[Kevin Conn, IR and Corporate Development Officer at Berkshire Hills Bancorp]

Thank you.

[Operator]

I'd now like to hand the call back to Nathin Motre for final remarks.

[Nitin Mhatre, President and CEO at Berkshire Hills Bancorp]

Thank you, Ali, and thank you all for joining us today on our call and for your continued interest in Berkshire. Have a great day and be well. Ali, you can close the call now.

[Operator]

Thank you for attending today's call. You may now disconnect. Goodbye.

Participants

Executives

• Kevin Conn, IR and Corporate Development Officer
• Nitin Mhatre, President and CEO
• Brett Brbovic, Executive VP & CFO

Analysts

• Christopher O'Connell, Director - Equity Research at Keefe, Bruyette & Woods (KBW)
• Gregory Zingone, Research Analyst at Piper Sandler Companies