Executive Summary

Q3 2024 delivered solid operating performance: operating EPS rose to $0.58 (+5% q/q, +16% y/y) on modest fee-driven revenue growth and lower provisioning, while GAAP EPS of $0.88 included a $16.0M pre-tax non-operating gain from the NY branch sale (~$0.30 after-tax per share) .
Net interest margin (FTE) declined 4 bps sequentially to 3.16% as deposit/funding costs rose, partially offset by higher loan yields; management guided Q4 NIM to 3.10–3.20% and revenue flat-to-slightly down with modestly lower expenses .
Asset quality remained resilient: NPLs/loans of 0.26% (vs. 0.23% in Q2) and annualized NCOs of 0.24%; excluding the Upstart sale, NCOs were ~0.16%. Tangible common equity/TA improved to 9.1% (from 8.2%) and CET1 to 11.9% .
Strategic actions: completed sale of 10 NY branches (driving the non-operating gain) and sold ~$46.5M of Upstart-related consumer loans at 96% of book (recording ~$1.9M charge-off), with ~$10M remaining; both are aimed at tightening footprint, improving efficiency, and de-risking consumer exposure .

What Went Well and What Went Wrong

What Went Well
- Operating momentum: “Operating EPS of $0.58 was up 5% linked quarter and up 16% year-over-year,” supported by higher operating revenue and lower provisioning .
- Fee growth: Operating non-interest income rose 7% q/q, led by stronger loan-related fees (swaps, servicing) and broad-based fee gains (ex-SBA gains) .
- Capital and book value: Tangible common equity/TA increased to 9.1% (from 8.2%); tangible book value/share rose 6% q/q to $24.53; CET1 improved to 11.9% .
What Went Wrong
- Margin pressure: NIM fell 4 bps q/q to 3.16% as the cost of funds rose 11 bps and cost of deposits rose 7 bps; management expects near-term headwinds from floating-rate assets repricing lower .
- Fraud-driven expense volatility: “Other expense increased $1.6 million primarily due to one commercial check fraud,” boosting operating expenses 1% q/q .
- Slight uptick in NPLs: Non-performing loans/total loans increased to 0.26% (from 0.23%) including one isolated multi-use property in Upstate NY, though overall asset quality remains strong .

Financial Results

Metric	Q3 2023	Q2 2024	Q3 2024
Total net revenue ($M)	$107.8	$108.7	$125.6
Operating revenue ($M)	$107.8	$108.7	$109.6
Diluted EPS ($)	$0.45	$0.57	$0.88
Operating EPS ($)	$0.50	$0.55	$0.58
Net interest income, non-FTE ($M)	$90.3	$88.5	$88.1
NIM (FTE, %)	3.18%	3.20%	3.16%
Non-interest income ($M)	$17.5	$20.1	$37.6 (incl. $16.0M gain)
Operating non-interest income ($M)	$17.5	$20.1	$21.5
Non-interest expense ($M)	$76.5	$70.9	$72.0
Operating non-interest expense ($M)	$73.9	$71.3	$72.3
Efficiency ratio (Operating, %)	65.1%	63.4%	63.7%
Consensus revenue ($M)	N/A (S&P Global consensus unavailable)	N/A (S&P Global consensus unavailable)	N/A (S&P Global consensus unavailable)
Consensus EPS ($)	N/A (S&P Global consensus unavailable)	N/A (S&P Global consensus unavailable)	N/A (S&P Global consensus unavailable)

KPIs and Balance Sheet

KPI	Q3 2023	Q2 2024	Q3 2024
Loans (period-end, $B)	$8.98	$9.23	$9.21
Deposits (period-end, $B)	$9.98	$9.62	$9.58
Average deposits ($B)	$9.63	$9.30	$9.36
NPLs/Total loans (%)	0.30%	0.23%	0.26%
Net loan charge-offs (annualized, %)	0.24%	0.07%	0.24% (0.16% ex-Upstart sale)
Provision for credit losses ($M)	$8.0	$6.5	$5.5
Allowance/Total loans (%)	1.14%	1.22%	1.22%
CET1 (%)	12.1%	11.6%	11.9%
Tangible common equity/TA (%)	7.7%	8.2%	9.1%
ROA (%)	0.66%	0.82%	1.28%
ROTCE (Operating, %)	9.27%	9.65%	9.91%
Loan-to-deposit ratio (%)	90%	96%	96%

Segment breakdown: Not applicable (no segment disclosure provided in the Q3 2024 press release/8-K) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
NIM (FTE)	Q4 2024	Not specified in sourced docs	3.10%–3.20%	New/Restated on call
Total revenue	Q4 2024	Not specified in sourced docs	Flat to slightly down q/q	New/Restated on call
Operating expenses	Q4 2024	Not specified in sourced docs	~ $71M (“give or take”)	New/Restated on call
Net charge-offs	Q4 2024	Not specified in sourced docs	Stable q/q ex-Upstart sale	New/Restated on call
Dividend/share	Q4 2024	$0.18 (Sep 17 declaration)	$0.18 (Nov 1 declaration)	Maintained

Notes: Management expects funding costs to decline as the Fed cuts rates and is already repricing deposits lower late-Q3; a large CD book (~$1.6B, ~67% of CDs) and ~$400M FHLB maturities over the next ~6 months are tailwinds .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 2024, Q1 2024)	Current Period (Q3 2024)	Trend
NIM and funding costs	Q2: NIM up 5 bps to 3.20% on loan growth and prior securities sales; deposit cost +6 bps; cumulative deposit beta 44% . Q1: NIM up 4 bps to 3.15% after securities sales; deposit cost +18 bps .	NIM 3.16% (−4 bps); deposit cost +7 bps; Q4 NIM guide 3.10–3.20%; expect funding cost relief with Fed cuts and CD/FHLB maturities .	Stabilizing; near-term headwinds offset by identified tailwinds .
Deposit strategy and betas	Q2: Branch consolidation pending sale; deposit decreases tied to assets held for sale . Q1: Announced 10-branch sale; focusing on core markets .	Teams lowering deposit rates; believe down-cycle betas may be higher than up-cycle but manageable given CDs/swaps roll-offs and pricing discipline .	Active repricing; selective growth .
Asset quality (CRE/office, multifamily)	Q2: NPLs/loans 0.23%; allowance 1.22% . Q1: NPLs 0.24%; allowance 1.18% .	NPLs/loans 0.26% (one isolated multi-use asset); office LTVs ~60%, mostly suburban/Class A, limited Boston CBD; no specific reserves on criticized office; office reserve ≈1.5% .	Stable overall; selective watch items .
Consumer runoff (Upstart/Firestone)	Q2: Runoff performing as expected; balances declining (appendix ref). Q1: Consumer balances declined; risk normalization .	Sold $46.5M Upstart loans at 96% (recorded $1.9M charge-off); ~$10M remains; Firestone in runoff with net recovery this quarter .	De-risking executed; tail risk reduced .
Expense discipline	Q2: Operating expenses −2% q/q; efficiency 63.4% . Q1: Operating expenses down vs 4Q; efficiency 66.3% .	Operating opex +1% q/q; other expense +$1.6M from check fraud; Q4 opex target ~ $71M .	Generally improving, with one-off noise .
Capital and buybacks	Q2: TBVPS to $23.18; repurchased ~$13M at avg $21.94; TCE/TA 8.2% . Q1: TCE/TA 8.2%; CET1 11.6% .	TBVPS $24.53 (+6% q/q); TCE/TA 9.1%; paused buybacks in Q3 to support growth; cumulative share count down 18% since 4Q20 .	Stronger capital; opportunistic buybacks ahead .
Digital and product initiatives	Q2: Strengthened cash management and gov’t banking; org changes . Q1: Strategic hires across commercial/private banking .	Rolling out Berkshire One (expanded digital deposit suite) to support deposit-led growth and client experience .	Ongoing investment to drive deposit growth .

Management Commentary

“Operating EPS of $0.58 was up 5% linked quarter and up 16% year-over-year… Asset quality and balance sheet metrics remain strong… CET1 at 11.9% and TCE at 9.1%.” — Nitin Mhatre, CEO .
“Net interest margin was down 4 bps linked quarter to 3.16%… We expect the fourth quarter NIM to be between 3.10% and 3.20%… we have $1.6B of CDs (67% of that book) maturing in the next 6 months and ~$400M of FHLB funding maturing over the same period.” — Brett Brbovic, CFO .
“Operating revenue grew 1% linked quarter… Provision for credit losses decreased $1.0 million… Capital strength improved, with the tangible common equity ratio improving to 9.1% from 8.2%.” — CFO commentary from the release .
“We completed the sale of ten branch offices… After quarter-end, the Company’s balance sheet was further strengthened through the sale of $46.5 million in consumer loans.” — CEO .

Q&A Highlights

Guidance reaffirmed: Q4 NIM 3.10–3.20%; revenue flat-to-slightly down; expenses modestly down; NCOs stable excluding Upstart sale .
Deposit betas down-cycle: Management expects higher down-cycle betas than up-cycle but sees tailwinds (CD maturities, swaps rolling off) and has already begun lowering deposit rates late-Q3; spot deposit cost in September ~2.41% .
Expense outlook: Excluding ~$1.6M fraud impact, Q4 operating expenses targeted around ~$71M .
Office exposure details: Class A criticized credit ~80% occupied, maturing Dec-2024; Class B criticized portfolio 25–50% occupied, maturities 2026–2028; no specific reserves; office reserve ≈1.5% .
Consumer runoff: Upstart sale closed 10/16 at 96% of book (avg sold FICO ~711); ~$10M remains with weighted average FICO ~682; Firestone portfolio in runoff and exceeded performance expectations with net recovery in Q3 .

Estimates Context

S&P Global/Capital IQ Wall Street consensus EPS and revenue estimates were unavailable for BHLB due to a missing mapping in our data source; therefore, we cannot quantify beats/misses versus consensus for Q3 2024. Management guided Q4 NIM to 3.10–3.20%, revenue flat-to-slightly down, and operating expenses around ~$71M, which may prompt modest near-term estimate adjustments on margin and expense run-rate .

Key Takeaways for Investors

Core profitability improved: operating EPS rose to $0.58 on higher operating revenue and lower provisioning; GAAP EPS of $0.88 includes a non-operating branch-sale gain (~$0.30 after tax), which should be stripped out for run-rate analysis .
Margin outlook appears bounded: Q4 NIM guided to 3.10–3.20% with identified funding cost tailwinds (CD and FHLB maturities, swaps rolling off) partially offsetting floating-rate loan repricing headwinds .
Asset quality remains a strength with low NPLs (0.26%), stable reserve coverage (1.22% of loans), and manageable office exposure; watch-lists are granular and diversified .
Balance sheet optimization ongoing: branch sale and Upstart loan sale reduce cost and risk, and focus the footprint—supporting long-term efficiency and ROTCE improvement .
Capital trajectory improved: TCE/TA to 9.1% and CET1 to 11.9%; buybacks paused in Q3 to prioritize balance sheet growth, but management remains opportunistic longer term .
Expense run-rate manageable: excluding fraud-related noise, operating expenses expected around ~$71M in Q4 as branch actions flow through; monitor for sustained efficiency gains into 2025 .
Dividend stable at $0.18/share (Sep and Nov declarations), supported by resilient earnings and capital .

Appendices

Additional Q3 data points:
- Average loans +1% q/q; average deposits +1% q/q; loan pipeline stable q/q and +20% y/y .
- Operating fee income +7% q/q, with strong swap fees and commercial loan servicing .
- Effective tax rate ~22% for the quarter and YTD .
Strategic and sustainability highlights:
- Branch count reduced ~14% YTD to 83; ESG accolades maintained; continued community program progress .

BERKSHIRE HILLS BANCORP INC (BHLB)·Q3 2024 Earnings Summary