Berkshire Hills Bancorp, Inc.

Good morning, and welcome to the Berkshire Hills Bancorp First Quarter Earnings Release Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Kevin Kahn, Head of Investor Relations and Corporate Development. Please go ahead.

Thank you, Jason. Good morning, and thank you for joining Berkshire Bank's first quarter earnings call. My name is Kevin Kahn, and I'm the head of investor relations and corporate development at Berkshire Bank. I started in this role about a month ago after spending over 23 years as an institutional investor at Sanford Bernstein, MFS Investments, and Hudson Executive Capital. Our news release is available in the investor relations section of our website, berksherbank.com, and will be furnished to the SEC. Supplemental investor information is provided in an information presentation at our website at ir.berksherbank.com, and we will refer to this in our remarks. Our remarks will include forward-looking statements, and actual results could differ materially from those statements. For details, please see our earnings release and most recent SEC reports on Forms 10-K and 10-Q. In addition, certain non-GAAP financial measures will be discussed in this conference call. References to non-GAAP measures are only provided to assist you in understanding our results and performance trends and should not be relied on as financial measures of actual results or future projections. A comparison and reconciliation to GAAP measures is included in our news release. On the call today, we have Nitin Matre, President and Chief Executive Officer of Berkshire Hills Bancorp, Sean Gray, Chief Operating Officer, Chibideet Basu, our Chief Financial Officer, and our Chief Risk Officer. Greg Lindenmuth is on the call to answer any credit-related questions. At this time, I'll turn the call over to our CEO, Nitin Matre.

Thank you, Kevin. Good morning, everyone, and welcome to Berkshire's first quarter earnings call. For those of you who are new to our story or new to me, let me first share some of my background prior to joining Berkshire Bank. I've worked in banking for 25 years in very large and mid-sized organizations, and I've had the opportunity to turn around, transform, and grow business units over that time. I believe that my experience positions me well to work with my team at Berkshire Bank to significantly improve financial performance and stakeholder value. I must say I'm deeply humbled by and grateful for the warm welcome and support that I've received from my Berkshire colleagues and the board of directors, and also from various partners and well-wishers across the industry, including many of you on the call. Thank you so much. I'm confident that with new leadership, our new strategic plan in the making, which I'll address later, and the collective resolve of the organization to maximize value for all stakeholders, we will fulfill our promise while meaningfully improving financial performance of this community-dedicated institution. Before I provide the highlights of the quarter, I'd like to share some of my early observations as I complete three months today as Berkshire's CEO. First, I want to salute what I know to be exceptionally good about the organization, starting with its core, its strong 175-year history of being a purpose-driven, community-dedicated bank that truly cares about its customers, bankers, and the communities. And we have some remarkably talented bankers who know our markets really well, have built strong relationships with the customers and communities in those markets, and are non-customer-facing bankers who are passionate about delivering high-quality experience to all our customers. Building from that strong core, we clearly have opportunities for improvement. beginning with developing a clearer strategic imperative, specifically identifying the businesses, markets, and products we will invest in to grow. We need to double down on what we are best at and most passionate about and what drives our economic engine, because there and nowhere else is where we'll allocate capital and key resources as we drive for economic profit. As we consider our strategic choices, there is much to be done right away. One, we need to significantly improve channels and processes to jumpstart our revenue engine. Our current levels of originations and relationship deepening are not commensurate with our potential. Two, we need to accelerate our roadmap to digitize customer journeys and from loan originations through servicing to integrating state-of-the-art platforms that are built as platform as a service. Three, we need to reorient all of our programs to be singularly focused on delivering exceptional customer experience and driving to industry-leading customer satisfaction and net promoter scores, all of which I believe will ultimately lead to improved shareholder value. With that, let's turn to our earnings presentation beginning on slide three and a few important quarterly highlights. First, and driving home the points I just communicated, is a new leadership team at the helm, infusing energy into the culture, executing on near-term priorities, and building together a transformational strategy. I'll touch on our new executive leadership in a few minutes and where we are in our strategic journey towards the end of my prepared remarks. Second is the improving income and strengthening balance sheet. Some of the highlights that you see on the slide include gap EPS of 26 cents compared to a loss of 40 cents in the year-ago period. Core or adjusted EPS was 32 cents in the first quarter. Non-interest-bearing deposits were up 37% year-over-year, while the cost of funds were down to 48 basis points versus 111 basis points in Q120. Loan balances were down due to pay-downs and portfolio run-outs exceeding new originations. We are rebuilding our organic growth muscle by improving originations and building our pipeline with quality opportunities, as Sean will highlight later. The third highlight is the strides we've made in trends in credit and asset quality. Overall trends in credit and asset quality were highly encouraging. Loan modifications were down by 86% from their peak at second quarter of last year and by 39% quarter over quarter. Non-performing assets were up modestly year over year but improved on a sequential basis down 14% quarter over quarter. Net charge-offs declined by 5 and 42% year-over-year and quarter-over-quarter, respectively. During the quarter, we also completed a comprehensive bottoms-up credit review of our COVID-sensitive portfolios, along with a thorough external validation of critical segments of the Firestone portfolio. Fourth highlight is our laser focus on enhancing customer experience, especially through our digital channels. While we have ways to go, we're gaining traction and drove some early improvements in the first quarter. For example, online banking and mobile banking users increased by 11% and 14% year over year, and our mobile app rating increased significantly to about four and a half stars on iOS and Android platforms. Digital deposit account openings as a percentage of total accounts open grew from below 2% in Q120 to over 7% this quarter. Like I said earlier, we have ways to go, but are certainly headed in the right direction on this front. Finally, we focused on our capital levels and sustaining our financial flexibility to invest for growth and returns. Capital levels remain very strong with one Q21 common equity tier one ratio of 14%. As part of our transformational plan, we'll sharpen our focus on capital allocations and fund those businesses with the highest potential for return on equity in excess of cost of capital. As you saw in our 8K release last night, we also plan to return capital to shareholders in the form of share buybacks. Over time, we expect to deploy capital to profitable balance sheet growth. However, given our capital levels, the Board and I believe that returning capital to shareholders via share buyback is a prudent course of action. I'm pleased to report that the Board has authorized a share buyback of up to 2.5 million shares, equal to about 5% of outstanding shares. With that, please turn to slide four. to review some of the organizational highlights. I'm excited to introduce Shubhadeep Basu, who joined as our new CFO in March. Prior to joining Berkshire Bank, he worked at Bank of America, Citigroup, and most recently at State Street. Over his 23 years of banking experience, Shubhadeep earned increasing roles of responsibility across finance functions. A key executive leader and a partner, he will play an important role in our strategic transformation and driving improved financial performance. Next is Kevin Korn, who you heard from earlier in the call, and who joined as our new head of investor relations and corporate development. Kevin has served on the buy side for over 23 years and will play an important role as we strengthen our investor relations program. In addition, we've hired several senior leaders or promoted new high-potential candidates to key roles. Selected examples of the ongoing talent infusion include Stella Gigan-McConaghy, who joined us from State Street as the new head of FP&A, and Angela Dixon, who joined as our new chief diversity officer, leading our DE&I initiatives. Previously, Angela was the president of Dixon Consulting, a management consulting firm focused on diversity, equity, and inclusion. Additionally, we're making a few changes in the board. As you may have seen in our proxy, the board has nominated two new directors as set forth in a cooperation agreement between Berkshire and Holco Asset Management, under which we agreed to nominate Misha Zaitsev from Holco and a new independent director, Deborah Bailey, selected by Berkshire. Misha is the co-founder and managing director of Holco's general partner, and has served on numerous corporate boards, oversight committees, and creditor committees. Deborah Bailey has a distinguished career in both public and private sectors. She currently sits on the FINRA Board of Governors. Her prior government regulatory experience with the OCC and Federal Reserve Bank Board includes her role as the Deputy Director of Banking, Supervision, and Regulation, where she was a direct report to Federal Reserve Chairman Ben Bernanke. She has also held positions as the managing director at KPMG and Deloitte & Touche. We're grateful that Misha and Deborah have agreed to serve on our board and look forward to their contributions. I also wanted to share that David Brunel has been promoted to vice chair of the board. David served on our board for three years and has over 20 years of business experience in financial services. In addition, he's current chair of our audit committee and member of our governance and nominating committee. Finally, I'd like to express my sincere thanks to Neil Mahoney and Jeff Templeton who are retiring as of May 20th, 2021. Both Neil and Jeff have been on our board since 2005 and we're deeply grateful for their contributions to Berkshire Bank. We wish them well always. With that, I'll turn it over to Shubhadeep to review the financials in more detail.