Sign in

You're signed outSign in or to get full access.

BH

BERKSHIRE HILLS BANCORP INC (BHLB)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered solid operating leverage: net interest margin expanded 10 bps to 3.24% and operating efficiency improved to 59.5%, the best in two years; operating EPS was $0.60 (flat sequentially, +22% YoY) and GAAP EPS was $0.56 .
  • Credit remained strong with annualized net charge-offs at 0.15%, NPLs at 0.25% of loans, and total delinquent + non-performing loans at 0.42%—lowest in nearly two decades; ACL rose to 1.24% and coverage to 501% of NPLs .
  • Deposits ended at $9.88B (down $495M linked quarter due to payroll/brokered items), while core deposits excluding payroll and brokered increased $11M QoQ and +6% YoY; average deposits rose 2% QoQ to $9.85B .
  • Management refrained from line-item guidance given the pending Brookline MOE but indicated expense base should remain relatively stable and SBA gains likely normalize near ~$2.9M; March spot NIM was 3.31% .
  • Near-term stock catalysts: continued NIM expansion from lower deposit costs, disciplined OpEx, and progress on the Brookline merger (shareholder/regulatory approvals expected mid-year to 2H25) .

What Went Well and What Went Wrong

What Went Well

  • Net interest income and margin expanded: NII up $2.9M QoQ to $89.8M; NIM +10 bps to 3.24% on a 12 bps decline in deposit costs to 2.18% .
  • Efficiency and operating leverage improved: efficiency ratio 59.5% (best in two years); operating non-interest expense down $3.1M QoQ and $4.5M YoY, driving positive operating leverage of 5% QoQ/11% YoY; CEO: “Operating leverage was a positive 5% quarter-over-quarter and 11% year-over year” .
  • Credit quality strong and balance sheet de-risked: sale of remaining Upstart loans completed; delinquent + NPLs at 0.42% of loans; ACL coverage of NPLs at 501% .

What Went Wrong

  • GAAP non-interest income declined QoQ by $2.6M (operating measure down $2.5M) as SBA gains normalized from elevated 4Q24 levels; CFO noted near-term SBA gains expected to align with 8-quarter average amidst tariff uncertainty .
  • End-of-period deposits fell $495M QoQ to $9.88B due to payroll and brokered deposit dynamics, despite core deposit growth excluding those items .
  • Management withheld detailed forward guidance due to MOE, limiting visibility for modeling line items; however, they expressed comfort with 2025 consensus net income cited in the merger presentation .

Financial Results

Core P&L and EPS vs Prior Periods and Year-Over-Year

MetricQ3 2024Q4 2024Q1 2025
Total Net Revenue ($USD Millions)$125.6 $110.2 $110.4
Net Interest Income, non-FTE ($USD Millions)$88.1 $86.9 $89.8
Non-Interest Income, GAAP ($USD Millions)$37.6 $23.3 $20.7
Operating Non-Interest Income ($USD Millions)$21.5 $23.2 $20.7
GAAP Diluted EPS ($)$0.88 $0.46 $0.56
Operating Diluted EPS ($)$0.58 $0.60 $0.60
Net Interest Margin (FTE, %)3.16% 3.14% 3.24%
Efficiency Ratio (%)63.7% 62.4% 59.5%

Revenue Components and Expense Trend

ComponentQ3 2024Q4 2024Q1 2025
Net Interest Income (non-FTE, $MM)$88.1 $86.9 $89.8
Non-Interest Income (GAAP, $MM)$37.6 $23.3 $20.7
Operating Non-Interest Income ($MM)$21.5 $23.2 $20.7
Non-Interest Expense (GAAP, $MM)$72.0 $77.6 $70.4
Operating Non-Interest Expense ($MM)$72.3 $71.0 $67.9

Balance Sheet and Credit KPIs

KPIQ3 2024Q4 2024Q1 2025
Total Loans (Period-End, $MM)$9,212 $9,385 $9,429
Total Deposits (Period-End, $MM)$9,577 $10,375 $9,880
Loans/Deposits (%)96% 90% 95%
NPLs/Total Loans (%)0.26% 0.26% 0.25%
Net Charge-offs (QTD annualized)/Avg Loans (%)0.24% 0.14% 0.15%
ACL/Total Loans (%)1.22% 1.22% 1.24%
ACL/NPLs (%)467% 469% 501%
CET1 Ratio (%)11.9% 13.0% 13.3%
TCE/TA (%)9.1% 9.4% 9.9%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Line-item income statement and balance sheet guidanceFY 2025Not provided due to MOENot provided due to MOE; management “encouraged” and “confirm comfort with consensus net income cited in the Dec 16 merger presentation” Maintained (no line-item guidance)
Operating expensesNear termN/A“Expect it to remain relatively stable… generally consistent with this quarter” New qualitative color
SBA loan sale gainsNear termElevated in 4Q24“Expect SBA gains to be in line with prior 8-quarter average of $2.9M due to uncertainty from tariffs” Normalization expected
Net interest marginNear termN/AMarch spot NIM at 3.31% (informal datapoint, not formal guidance) Trend datapoint
DividendQ2 2025$0.18 per share in prior quarters$0.18 per share declared (record 5/15, payable 5/29) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Digital deposits/technologyBranch sale completed; focus on efficiency and digital enhancements Digital deposit initiative delivered ~$75M; 1 in 5 new relationships via digital; introduced direct deposit API Strengthening digital acquisition
Tariffs/macro uncertaintyN/AManagement monitoring volatility from tariffs/policy; SBA gains expected to normalize due to tariffs Emerging headwind to fee line
Net interest marginNIM 3.16% in Q3; 3.14% in Q4 NIM 3.24%; March spot NIM 3.31% Improving
Expense disciplineQ3/Q4 operating expenses broadly managed; efficiency ratio improved Operating non-interest expense down $3.1M QoQ; efficiency 59.5% Improving
Credit normalizationNet charge-offs 0.24% (Q3), 0.14% (Q4) 0.15% in Q1; normalized ~20 bps over time (management view) Stable to normalize
CRE exposureCRE concentration ratio ~290% of RBC in Q1; diversified collateral Continued discipline; nonaccrual CRE at 19 bps Managed exposure
Merger integration (Brookline MOE)MOE announced Dec; capital raise $100M Proxy filed; approvals targeted May (shareholders) and 3Q (regulatory); close 2H25 On/above plan
DepositsAvg deposits +1% in Q3; +3% in Q4 End-of-period deposits down $495M due to payroll/brokered; core up $11M QoQ and +6% YoY (ex-sales) Mixed headline; core improving

Management Commentary

  • CEO: “Operating leverage was a positive 5% quarter-over-quarter and 11% year-over year… Credit performance remains strong… operating ROTCE improved to 9.7% from 8.7% year-over-year” .
  • CEO on strategy: “Digital deposit initiative has gained momentum and delivered approximately $75 million of new deposits… one out of five new client relationships are coming through digital channels” .
  • CFO: “Net interest margin increased 10 basis points to 3.24%, benefiting from a 12 basis point decrease in the cost of deposits to 2.18%… operating non-interest expense decreased $3.1 million… ACL on loans increased 2 bps to 1.24%” .
  • CFO on SBA gains: “In the near term, we expect SBA gains to be in line with our prior 8-quarter average of $2.9 million due to uncertainty from the impact of tariffs” .
  • CFO on capital: “Tangible book value per share was $25.50. Our CET1 ratio was 13.3% and our TCE ratio was 9.9%” .

Q&A Highlights

  • Loan demand: Pipeline slowed with mixed client behavior (inventory build, wait-and-see, expense rationalization); standalone annualized loan growth around ~5% seen this quarter may persist, but macro will dictate .
  • Expense outlook: Management expects expense base to remain relatively stable, consistent with Q1 levels as they progress toward the merger .
  • Credit normalization: Net charge-offs expected to normalize to ~20 bps over time given macro uncertainty; recent five quarters ranged 7–24 bps; Q1 at 15 bps .
  • NIM datapoint: March spot NIM reported at 3.31% .
  • Talent retention: Identified key producers; retention plans in place across both organizations ahead of MOE closing .
  • Deposit/product alignment: No new products pre-close; continuing to refine digital functionalities (e.g., direct deposit API) .

Estimates Context

  • Wall Street consensus (S&P Global Capital IQ) for Q1 2025 EPS and revenue could not be retrieved via our SPGI feed for BHLB at this time; as a result, explicit beat/miss vs consensus is not included. Management indicated comfort with 2025 consensus net income cited in the Dec 16 merger presentation, but did not provide line-item guidance .

Key Takeaways for Investors

  • Margin tailwind: Lower deposit costs (2.18%) and improving NIM (3.24%; March spot 3.31%) support earnings resilience even as loan yields dipped; watch deposit mix normalization post payroll/brokered effects .
  • Core OpEx control: Operating non-interest expense fell QoQ and YoY; sub-60% efficiency ratio is a notable milestone—sustainability of discipline is a medium-term value driver .
  • Credit quality anchor: Low NPLs/NCOs and rising ACL coverage reduce tail risk; normalization to ~20 bps NCOs appears manageable against current reserve levels .
  • Fee normalization: Expect SBA gains to revert towards ~$2.9M average given tariff uncertainty; monitor fee volatility and any macro-policy developments .
  • Deposit optics vs core: Headline end-of-period deposits declined on transient items, but core deposits excluding payroll/brokered increased QoQ and YoY—indicator of relationship depth .
  • Capital and TBV accretion: CET1 at 13.3% and TBV/share at $25.50 provide optionality through the merger and potential future growth initiatives .
  • MOE as catalyst: Integration progress and expected close in 2H25 (subject to approvals) should re-rate profitability; track shareholder and regulatory milestones .

Additional Disclosures and Notes

  • Non-GAAP operating results exclude primarily merger-related and restructuring items; reconciliations provided in Q1 materials .
  • Dividend maintained at $0.18 per share for Q2 2025 (record 5/15, payable 5/29) .
  • Proposed Brookline MOE exchange ratio of 0.42 BHLB shares per BRKL share; expected close in 2H25, subject to customary approvals .