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BH

BERKSHIRE HILLS BANCORP INC (BHLB)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered the strongest operating metrics since 2019: Operating EPS $0.69 (+15% QoQ, +25% YoY), GAAP EPS $0.66; net interest margin (FTE) rose to 3.27% (+3 bps QoQ), and the efficiency ratio improved to 56.7% (from 59.5% in Q1) .
  • Total net revenue increased 2.9% QoQ to $113.7M, driven by loan growth and lower deposit costs; operating non-interest expense fell 2% QoQ; provision declined to $4.0M (-$1.5M QoQ) .
  • Credit quality remained solid: net charge-offs 0.14% (annualized), NPLs 0.27% of loans, allowance coverage 462% of NPLs; delinquent and non-performing loans totaled 0.48% of loans at period end .
  • Strategic catalysts: digital deposit program has delivered >$100M of new deposits since inception; Brookline MOE integration tracking to 12.6% cost saves with tech stack favorability; management expects September 2025 close pending approvals—key stock narrative driver .

What Went Well and What Went Wrong

What Went Well

  • Operating leverage and profitability: “Quarterly operating income, operating EPS, and efficiency were the strongest since 2019,” driven by revenue growth and lower expenses; operating ROTCE reached 10.8% .
  • NIM expansion and funding costs: CFO noted NIM rose 3 bps to 3.27% “benefiting from loan growth and lower deposit cost”; operating non-interest income increased $1.1M QoQ and operating non-interest expense decreased $1.3M QoQ .
  • Core funding and growth: End-of-period deposits rose $99M QoQ (ex-payroll/brokered +$66M); loans up $70M QoQ led by C&I (+$56M, +4%); digital deposit initiative has delivered >$100M since inception .

What Went Wrong

  • Non-recurring fee tailwind: Loan-related fees benefited from BOLI gains (~$0.8M above normal), which are nonrecurring and could normalize, tempering fee momentum in coming quarters .
  • SBA gains normalization: After strong Q4/Q1, SBA gains moderated to $2.3M in Q2 (vs. $3.3M in Q1 and $4.6M in Q4), implying a return to trend rather than ongoing upside .
  • Slight uptick in C&I NPLs: Increase driven by a handful of smaller credits; Firestone portfolio balance down 15% QoQ to ~$28M with ~$1.3M NPLs and ~$0.9M net charge-offs in the quarter .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Total Net Revenue ($MM)$108.7 $110.4 $113.7
GAAP Diluted EPS ($)$0.57 $0.56 $0.66
Operating EPS ($)$0.55 $0.60 $0.69
Net Interest Margin (FTE, %)3.20% 3.24% 3.27%
Efficiency Ratio (%)63.40% 59.45% 56.73%
Net Interest Income, non-FTE ($MM)$88.5 $89.8 $91.9
Non-Interest Income ($MM)$20.1 $20.7 $21.8
Provision for Credit Losses ($MM)$6.5 $5.5 $4.0
Balance & Yield MetricsQ2 2024Q1 2025Q2 2025
Average Loans ($B)$9.16 $9.39 $9.48
Average Deposits ($B)$9.30 $9.85 $9.82
EOP Loans ($B)$9.23 $9.43 $9.50
EOP Deposits ($B)$9.62 $9.88 $9.98
Key KPIsQ2 2024Q1 2025Q2 2025
ROA (%)0.82 0.88 1.03
Operating ROA (%)0.79 0.94 1.07
ROTCE (%)9.99 9.02 10.35
Operating ROTCE (%)9.65 9.66 10.76
NPLs / Total Loans (%)0.23 0.25 0.27
Net Charge-offs (QTD annualized, %)0.07 0.15 0.14
ACL / Loans (%)1.22 1.24 1.24
ACL / NPLs (x)5.25x 5.01x 4.62x
TCE / TA (%)8.2 9.9 10.1
TBV per Share ($)$23.18 $25.50 $26.12
Dividend per Share ($)$0.18 $0.18 $0.18

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Effective Tax RateFY 2025+Not provided previouslyNormalize to ~24–25%New disclosure
MOE Close Timing (Brookline)2025“2H 2025” expected (Dec 2024/Q1 materials) September 2025 expected (pending approvals)Narrowed timeframe
Pro Forma Cost Saves (MOE)Post-close12.6% expense reduction target12.6% reiterated; tech stack expenses favorable vs planMaintained/positive bias
Common DividendQ2 2025$0.18 declared in prior quarters$0.18 declared (May 2 payable May 29)Maintained

Earnings Call Themes & Trends

TopicQ4 2024 (Q-2)Q1 2025 (Q-1)Q2 2025 (Current)Trend
NIM trajectory3.14% (down 2 bps QoQ) 3.24% (+10 bps QoQ) 3.27% (+3 bps QoQ); June spot ~3.22% Stabilizing to modestly improving
Deposits/fundingAvg deposits +3% QoQ; L/D improved Cost of deposits down 12 bps QoQ to 2.18% EOP deposits +$99M QoQ; digital deposits >$100M since inception Improving funding mix/cost
Credit qualityNPL 0.26%, NCO 0.14% NPL 0.25%, NCO 0.15% NPL 0.27%, NCO 0.14%; C&I NPL uptick small-credits driven Still strong; slight C&I noise
FeesSBA gains strong ($4.6M) SBA robust ($3.3M) SBA normalized ($2.3M); BOLI +$0.8M nonrecurring Normalizing from elevated
MOE integrationAnnounced MOE & $100M raise Integration planning progressing 12.6% cost saves reiterated; tech stack favorable; Sept close expected Execution momentum
Tax rate26% for Q4 2024 26% in Q1 2025 27% in Q2 (timing/merger); guide to 24–25%Elevated near-term; normalizing

Management Commentary

  • “Quarterly operating income, operating EPS, and efficiency were the strongest since 2019. Second quarter 2025 operating return on tangible common equity advanced to 10.8%.” – Nitin Mhatre, CEO .
  • “Net interest margin increased 3 basis points to 3.27%, benefiting from loan growth and lower deposit cost... Operating non-interest expense decreased $1.3 million linked quarter and $4.7 million year-over-year... Quarterly results were very solid across the board.” – Brett Brbovic, CFO .
  • “The combined organization's leadership team... continues to work towards our pro forma cost save goal of 12.6%... very pleased with the favorable outcome of where our tech stack expense is showing up.” – Sean Gray, President & COO .

Q&A Highlights

  • NIM detail: June spot NIM ~3.22%; FHLB decline matched deposit growth throughout the quarter, not a single event; no significant near-term CD/borrowing maturities flagged .
  • Credit: C&I NPL increase reflects “a handful of... smaller credits”; Firestone C&I portfolio balance ~$28M (down 15% QoQ), ~$1.3M NPLs, and ~$0.9M net charge-offs in Q2 .
  • Fees: BOLI gains were ~$0.8M above normal, nonrecurring; SBA gains expected to sit between Q1 and Q2 run rates as Q4/Q1 strength normalizes .
  • Taxes: Elevated in Q2 due to timing/merger; guidance to normalize at ~24–25% going forward .
  • MOE timing and accounting: ASU on CECL purchase accounting still pending; management analyzing potential impact; deal closing targeted for September, pending regulatory approvals .

Estimates Context

  • S&P Global consensus estimates were unavailable via our tool mapping for BHLB; as a result, we cannot quantify EPS and revenue beats/misses relative to Wall Street consensus this quarter (S&P Global consensus unavailable).
  • Actuals for Q2 2025: GAAP EPS $0.66, Operating EPS $0.69; Total net revenue $113.7M .
MetricQ2 2025 ActualWall St. Consensus (S&P Global)
GAAP EPS ($)$0.66 N/A (unavailable)
Operating EPS ($)$0.69 N/A (unavailable)
Total Net Revenue ($MM)$113.7 N/A (unavailable)

Key Takeaways for Investors

  • Momentum intact: sequential operating EPS, NIM, and efficiency improvements with broad-based cost discipline; operating leverage remains a core part of the narrative .
  • Funding tailwinds: deposit growth (ex-brokered) and digital deposits help lower cost of funds, supporting NIM resilience even as rates shift .
  • Credit steady: low NCOs and contained NPLs underpin earnings durability; C&I credit noise appears idiosyncratic and manageable with robust reserve coverage .
  • Fee normalization: SBA gains stepping down from elevated Q4/Q1 and nonrecurring BOLI benefit in Q2 reduce upside volatility in fee income—watch trajectory into 2H .
  • Capital/returns: TBV/share up 13% YoY; TCE/TA at 10.1% supports flexibility heading into MOE close; ROTCE trending to double-digits .
  • MOE catalyst path: tech stack favorability vs plan and 12.6% cost saves underpin pro forma earnings accretion; anticipated September close is a key stock catalyst pending regulatory approvals .
  • Tactical lens: near-term trading likely to focus on regulatory milestones and updated integration checkpoints; medium-term thesis hinges on sustained NIM stability, expense capture from MOE synergies, and credit normalization post-integration .