Berkshire Hills Bancorp ((BHLB)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Berkshire Hills Bancorp’s recent earnings call revealed a positive sentiment, underpinned by strong operating earnings growth, enhanced asset quality, and significant deposit growth. Strategic initiatives and a merger announcement were key drivers, although the company faces challenges with net interest income declines, modest loan growth, and an elevated tax rate due to merger expenses.
Strong Operating Earnings Growth
Berkshire Hills Bancorp reported operating earnings per share (EPS) of $0.60, reflecting a 3% increase from the previous quarter and a significant 28% rise year-over-year. The operating net income reached $26 million, up 5% linked quarter and 29% year-over-year, showcasing robust financial performance.
Improved Asset Quality Metrics
The company highlighted improved asset quality, with delinquencies and non-performing loans at 52 basis points of loans, marking the lowest level in nearly two decades. Net charge-offs were reported at 14 basis points of loans, indicating strong loan performance.
Significant Deposit Growth
Average deposits saw an increase of $299 million or 3% linked quarter. Excluding payroll and brokered CD balances, end-of-period deposits grew 3% quarter over quarter, showcasing the company’s ability to attract and retain customers.
Successful Strategic Initiatives
Berkshire Hills completed the sale of 10 branches in New York, de-risked its balance sheet, and invested in banking personnel and technology. The Net Promoter Score remained impressive, above 60 in the fourth quarter, indicating strong customer satisfaction.
Merger with Brookline Bancorp
The announcement of a merger with Brookline Bancorp aims to create a Northeast franchise, expected to close in the second half of 2025. This merger is anticipated to improve scale and profitability with estimated accretion to EPS.
Decline in Net Interest Income
Net interest income of $86.9 million saw a 1% decline linked quarter and a 2% drop year-over-year. The net interest margin decreased by 2 basis points linked quarter to 3.14%, reflecting challenges in maintaining interest income levels.
Headwinds in Loan Growth
Loan growth faced headwinds, with average loan balances increasing only 0.4% linked quarter. Growth was mainly in commercial and industrial (C&I) and commercial real estate sectors, but the pipeline was lower quarter over quarter.
Elevated Tax Rate
The tax rate was elevated at 26% in the fourth quarter due to non-deductible merger expenses, compared to the expected 22-23% in 2025, impacting the company’s net earnings.
Forward-Looking Guidance
Berkshire Hills Bancorp provided optimistic guidance, highlighting an anticipated decline in funding costs due to adjusted deposit rates following Federal Reserve interest rate cuts. The merger with Brookline Bancorp is expected to enhance profitability with significant EPS accretion by 2026 and achieve an efficiency ratio below 50%.
In summary, Berkshire Hills Bancorp’s earnings call conveyed a positive outlook with strong earnings growth and strategic advancements despite facing certain financial challenges. The anticipated merger with Brookline Bancorp is poised to further bolster the company’s market position and profitability in the coming years.
