Berkshire Hills Bancorp, Inc.

Good morning or good afternoon all and welcome to the Berkshire Hills Bancorp fourth quarter 2022 earnings conference call. My name is Adam and I'll be your operator for today. If you'd like to ask a question during the Q&A portion of today's call, you may do so by pressing star followed by one on your telephone keypad. I will now hand the floor over to Kevin Kahn to begin. So Kevin, please go ahead when you are ready.

Good morning and thank you for joining Berkshire Bank's fourth quarter earnings call. My name is Kevin Kahn, Investor Relations and Corporate Development Officer. Our news release is available in the investor relations section of our website, berkshirebank.com, and will be furnished to the SEC. Supplemental investor information is provided in an information presentation at our website at ir.berkshirebank.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 Mahatre, President and Chief Executive Officer of Berkshire Hills Bancorp, Sean Gray, our Chief Operating Officer, Brett Brubovic, our Chief Accountant and Interim CFO, Greg Lindenmuth, our Chief Risk Officer, and Steve Finocchio, our Treasurer. At this time, I'll turn the call over to our CEO, Nitin Mahathir. Nitin.

Thank you, Kevin. Good morning, everyone, and wishing all of you a Happy New Year. I'll begin my comments on slide three, where you can see the highlights of the fourth quarter and full year 2022. Overall, this was another solid quarter, continuing the momentum and capping a strong year with robust improvement across all key financial matrix. Adjusted revenues were up 8% quarter over quarter and up 31% year over year, driven by strong net interest income growth. This strong growth in revenues was driven by solid loan growth and improved margins, which more than offset the headwinds in non-interest incomes. Adjusted expenses were up 3% quarter over quarter and 6% year over year, resulting in positive operating leverage of 5% quarter over quarter and 25% year over year. Resultant adjusted PPNR of 45 million was up 16% quarter over quarter and up 112% year over year. Adjusted earnings per share of 64 cents was up 2% quarter over quarter and up 52% year over year. This quarter was our highest quarterly adjusted earnings per share since 2019. Adjusted return on tangible common equity was 9.83%, and adjusted return on assets was 100 basis points, both of which are close to the lower end of the best program targets we set for mid 2024. On the capital front, our balance sheet continues to remain strong. We ended the quarter with a common equity tier one ratio of 12.4% and a tangible common equity ratio of 8%. We continue to have ample capital to both fund our loan growth and continue stock repurchases. We increased our dividend in the fourth quarter by 50% from 12 cents to 18 cents and will target a prudent dividend payout ratio of 30 to 40% of net income over time. We returned about $28 million of capital to shareholders this quarter via dividends and stock repurchases, and we have authorization for a new $50 million share repurchase program in 2023. As we remain vigilant, our overall asset quality remains strong. charge-offs and provision expense for this quarter increased primarily to absorb additional charge-offs from the same credit that we partially charged off in the third quarter. This was and remains an isolated credit and does not reflect any broad deterioration in credit. In fact, most of leading indicators on credit are remarkably strong, and our loan delinquencies and classified assets to risk-based capital are at a 10-year low. Separately, and accelerated through our best program launch, we have been actively de-risking the balance sheet for the last few years. We've continued to run off non-strategic credit books, including indirect auto and aircraft lending, both of which are down 50% year over year. At mid last year, we also de-risked the balance sheet further by announcing the runoff of Firestone and Upstart loan books. Credit in both of these books is tracking ahead of plan And we've included data in the appendix page which details how we've de-risked our loan book over the last several years. While it is an uncertain environment, we feel reasonably good about credit for 2023 based on the leading indicators, proactive credit management, and high quality of new originations in recent years. Brett will review our credit matrix and provide overall 2023 outlook in more detail in a moment. On the best strategy front, we made significant progress in 2022. We continued optimization of our physical footprint, accelerated our programs to enhance our digital banking capabilities, tracked ahead of best community comeback program goals, issued a sustainability bond in the second quarter, and along with improvements in our financial performance, have significantly improved our ESG ranking, customer experience, and employee engagement. We started the best plan with a guiding idea to get better before we get bigger. With resumed loan growth, we've now transitioned our guiding idea to getting bigger while getting better. What this means is we will not sacrifice credit or pricing to grow. We will continue to be focused on organic growth that is differentiated, profitable, and responsible. central to responsible growth is a durable lower cost deposit base we are well positioned with very high deposit shares in six out of eight of our msas and we are in many relatively less competitive smaller city and rural markets as part of our best strategy we also change incentive plans to encourage deposit generation as well as loan generation we also have several niche deposit strategies including our my banker program and our digital banking platform enhancements while it is an uncertain environment we feel good about our relative deposit volumes and costs in the coming quarters we continue to add talented frontline bankers to bring new customers and relationships to us we have also recently hired pre-seasoned executives to supplement our talented leadership team David Rosado, who many of you may know, will join us as CFO in early February. David was on finance team at People's United for 15 years and served as their CFO for the last nine years. Prior to People's, they was the treasurer at Webster Bank for eight years. We also replaced two senior executives who have been planning on retiring. George Bachigalopo, our head of commercial banking, and Giorgio Melis, our chief credit officer. We thank them immensely for their many years of service and significant contributions to Berkshire Bank and wish them the very best for their future. Jim Brown has joined us as our head of commercial banking. Jim successfully ran commercial banking at Boston Private, where he was instrumental in growing commercial banking business from less than half a billion in loans and deposits to over $5 billion in loans and $6 billion in deposits. He brings over 30 years of commercial banking experience to Berkshire. Phil Gergelight has joined us as our new chief credit officer, reporting to Greg Lindenmuth, our chief risk officer. Phil also brings over 30 years of banking experience, including his last assignment as senior vice president of credit risk at Santander. We've included short bios in an appendix page for each executive. We're excited to have these seasoned executives join our leadership team. David, Jim, and Phil, welcome to the Berkshire team. Slide four shows our best program North Star chart, which details our progress on five key performance metrics. We're happy to report that we've achieved three of our five targets well ahead of plan. We're at the low end of our target range on return on assets at 100 basis points, and our fourth quarter PPNR of 45 million annualizes to 180 million, also at the low end of our 2024 target range. We've achieved our top quartile ESG score back in 2021 and ended 2022 in the 17th percentile, a steady improvement and solidly in the top quartile. We're just a bit under the lower end of our 10 to 12% ROTC target this quarter at 9.83% and are encouraged by the momentum in this critical performance matrix. As we mentioned on our prior earning calls, we're working on our net promoter score rating process with J.D. Power and expect to show improving NPS over time. In summary, we are pleased with our momentum through 2022. and are energized about the momentum that will drive further improvements. As I always do, I would like to thank all of our Berkshire Bank colleagues for their continued hard work and commitment to our vision of becoming a high performing, leading, socially responsible community bank. Their commitment to our strategy and dedication to our customers is what is driving our ongoing performance improvement and continued progress. I would also like to thank Brett Burbowick for his 10 years of service at Berkshire and for his leadership of the finance team as the interim CFO during this transition. With that, I'll turn the call over to Brett to discuss our financials in more detail. Brett.