Berkshire Hills Bancorp(US:BHLB)2025-07-24 14:00Financial Data and Key Metrics Changes - Operating net income for Q2 2025 was $31.6 million, up 14% linked quarter and up 36% year over year [4][5] - Operating earnings per share increased to $0.69, a rise of 15% from the first quarter and 25% year over year [5] - Operating expenses decreased to $67 million, down 2% linked quarter and down 7% year over year, resulting in positive operating leverage of 5% linked quarter and 11% year over year [5][10] - Net interest margin improved to 3.27%, up three basis points linked quarter [10] Business Line Data and Key Metrics Changes - Average loans increased by $95 million or 1% linked quarter and up $327 million or 4% year over year, with growth led by commercial and industrial (C&I) loans [11] - Average deposits rose by 6% year over year, with a 1% increase linked quarter excluding payroll and broker deposits [11][12] - Operating non-interest income was up $1.1 million or 5% linked quarter and up $1.6 million or 8% year over year [12] Market Data and Key Metrics Changes - Non-performing loans (NPLs) remained low at 27 basis points of total loans, with net charge-offs at 14 basis points [5][14] - The company reported a coverage ratio of 124 basis points for loan reserves to NPLs [14] Company Strategy and Development Direction - The company is focused on a merger of equals with Brookline Bancorp, which is expected to enhance scale and profitability, with an estimated 40% accretion to Berkshire's 2026 consensus estimates [7] - The strategic initiatives include a new digital deposit program that has generated over $100 million in new deposits since its inception earlier in the year [6][7] - The management emphasized a commitment to relationship-focused, personalized solutions for clients, which has contributed to improved financial performance [6][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate macroeconomic headwinds while positioning for long-term strength [15] - The leadership team is actively working on integration planning for the merger, aiming for a seamless transition [8][40] Other Important Information - The company received recognition from Time Magazine as one of the top-performing mid-sized U.S. companies in 2025 [6] - Non-operating expenses of $1.5 million were primarily related to the merger [13] Q&A Session Summary Question: Inquiry about margin and FHLB drop - The spot net interest margin for June was approximately 3.22%, with the FHLB decline coinciding with an increase in deposits throughout the quarter [20][23] Question: Credit quality and C&I non-performers - The increase in C&I non-performers was attributed to a few smaller credits with individual issues, and the Firestone C&I balance is down to $28 million with NPLs at $1.3 million [25][28] Question: Non-interest income and BOLI gains - BOLI gains for the quarter were about $800,000 above normal, considered a nonrecurring benefit [32] Question: Tax rate expectations - The tax rate is expected to normalize to around 24-25% going forward [36] Question: Deal tangible dilution and FASB impact - The final impact of the ASU on tangible book dilution is still being analyzed, and the timing for the merger closing is expected in September pending regulatory approval [39][40]