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spk00: Good morning, ladies and gentlemen, and welcome to the Berkshire Hills Bancorp 4th Quarter 2023 Earnings Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star 0 for the operator. This call is being recorded on Thursday, January 25, 2024. I would now like to turn the conference over to Mr. Kevin Kahn. Please go ahead, sir.
spk05: 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. Here with me today are Nitin Mahatre, Chief Executive Officer, Sean Gray, Chief Operating Officer, David Rosado, Chief Financial Officer, and Greg Lindenmuth, Chief Risk Officer. Our remarks will include forward-looking statements and refer to non-GAAP financial measures. Actual results could differ materially from those statements. Please see our legal disclosure on page two of the earnings presentation referencing forward-looking statements and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in our news release. At this time, I'll turn the call over to Nitin. Nitin?
spk04: Thank you, Kevin. Good morning, everyone, and thank you for joining us today. I'll begin my comments on slide three, where you can see the highlights for the fourth quarter and the full year. While the rate environment remains challenging, we're encouraged by the early trends in deposits balances. We executed a security sale late in the fourth quarter and used those proceeds to pay down wholesale borrowings, eliminating the negative carry associated with those securities. We also incurred a severance charge of 3.7 million related to a workforce reduction across the organization. For 2024, expense optimization, deposit growth, and credit management will be our top priorities. We intend to self-fund investments in strategic priorities that support our vision to be a high-performing, relationship-focused community bank. David will review these items and our 2024 guidance in more detail in a few minutes. Operating net income for the quarter was $20.2 million An operating EPS of 47 cents declined 6% linked quarter, primarily from a decline in net interest income. Full year 2023 EPS of $2.14 was down 2% year over year. We are encouraged by the trends in asset quality and deposit growth in the quarter. Our credit costs have trended down and our loan books are performing well. Non-performing assets and net charge-offs declined 14% linked quarter, and we increased our loan loss allowance by three basis points to 1.17% of loans. Average deposits were up 3% linked quarter, largely driven by an increase in money market and time deposits. Our liquidity position is robust, and our available liquidity coverage of core uninsured deposits was 146%. We've included a page in the appendix with more details. Our average loan balances were up 11% year over year and up less than 1% linked quarter, given lower loan demand and discipline underwriting. Our balance sheet remains strong. We ended the quarter with a common equity tier one ratio of 12% and a tangible common equity ratio of 8%. We repurchased 328,000 shares in the fourth quarter and 1.1 million shares in 2023, which reduced our share count by 3% over the year. Our board has authorized and regulators have approved a new share repurchase program of 40 million in 2024, and we expect to continue share repurchases opportunistically. We've updated pages in our earnings deck on our overall commercial real estate portfolio and the page that provides details on our office portfolio. Both of these pages highlight that our portfolio is granular, geographically diverse, and resultantly less risky. David will cover some of these metrics in more detail in a few moments. We continue to make steady progress on our strategic priorities. optimizing real estate branch network and balance sheet. In 2023, we consolidated four branches and exited two office buildings. We will continue to look for opportunities to lower our occupancy expenses further. Our team successfully converted our digital banking platform for consumer and small business clients to improve the client experience and platform efficiency. Our employee engagement and customer net promoter score were at their highest level in 2023, and we were recognized by Newsweek as one of the best regional banks in the country and were the only bank headquartered in Massachusetts with an overall five-star rating. The disruption in our markets has enabled us to opportunistically hire deposit and relationship-focused frontline bankers. These bankers have strong deposit books and complement our existing teams. Gaining even a small part of the opportunity presented by the market disruption would be meaningful for Berkshire. Slide four shows our progress on five key performance matrix. Our full year 2023, we are near the low end of our target range for operating return on assets at 79 basis points, and our operating return on tangible common equity was 10.1% above the lower end of our target range. Our full-year PPNR grew to 142 million. Our ESG score remains in the top quartile nationally, and our full-year net promoter score improved further to 45. We have made steady progress over the last three years and are energized about significant opportunities for improving our financial performance further. I want to use this opportunity to thank all of my Berkshire Bank colleagues for their continued hard work and commitment to our vision to be a high-performing, relationship-focused community bank. Through this difficult external environment and corresponding changes being made internally, their commitment to our strategy and dedication to our customers and communities is what brings us together and truly sets us apart. With that, I'll turn the call over to David to discuss our financials in more detail. David?
spk08: Thank you, Nitin. Slide 5 shows an overview of 2023, but I'll jump to slide 6, which details the fourth quarter. As Nitin mentioned, operating earnings were $20.2 million, or 47 cents per fully diluted share, down 3 cents link quarter. Our net interest margin was 3.11, down 7 basis points link quarter, and net interest income declined 1.9 million, or 2%. Operating non-interest income was $16.7 million, down 5% linked quarter. I note that several fee line items are below historic quarterly run rates and should recover over the coming quarters. Operating expenses were $75.3 million, up 2% linked quarter. Average loans increased $38 million linked quarter, while average deposits increased $306 million, or 3% from Q3. Provision expense for the quarter was $7 million. At the lower end of our July guidance, and down $1 million from the third quarter, and down $5 million year over year. Net charge-offs of $4.4 million, or 20 basis points of average loans, were down 38 basis points year over year. We increased our allowance for credit losses by $2.6 million in the quarter, bringing our allowance for credit losses to 117 basis points of loans. Slide seven shows more detail on our average loan balances, which were up $38 million link quarter. We had growth of $84 million in commercial real estate and $38 million in residential, with a $69 million decline in CNI and a decline of $15 million in consumer, which reflects runoff of non-strategic loan portfolios. Slide 8 provides details of our security sale. We sold $267 million of securities and incurred a pre-tax loss of $25.1 million, or 44 cents, per fully diluted share after tax. Our earn back period is about three years and proceeds were used to pay down wholesale funding. FHLB borrowings were down $419 million and ended the quarter at 385 million, which was down 52% linked quarter. Our securities to total assets was 13% at year end. Slide nine shows our average deposit balances. Average deposits increased $306 million, or 3% in the quarter. As expected, the deposit mix shifted with a modest decline in non-interest-bearing deposits and an increase in money market and time deposits. Non-interest-bearing deposits, as in percentage of total deposits, were 25% in the fourth quarter versus 26% in Q3. Deposit costs were 211 basis points. up 30 basis points from the third quarter. Our cumulative total deposit beta is 37% through 525 basis points of Fed tightening. Borrowings were 6% of total funding, down from 9% in Q3. Turning to slide 10, we showed net interest income. Higher deposit costs contributed to the 1.9 million or 2% decrease in NII. Our net interest margin was 311. Slide 11 shows operating fee income down 791,000, or 5% linked quarter. Loan-related fees were down 821,000 linked quarter, driven primarily by lower swap income. That was about $600,000 below our normal quarterly run rate. Gain on sale of SBA loans were down 166,000, due to lower premiums in the market. A line item that is also running about 900,000 below normal run rate. Other fees were up 594,000 from fair value adjustments on equity securities. Slide 12 shows expenses. Operating expenses were up 2% link quarter to $75.3 million. Importantly, there was a modest fourth quarter technology expense true up. So I'd encourage you to look at our 24 guidance for thoughts on run rate expenses. Compensation expense was flat to the third quarter, and increases in technology and professional services expense were partially offset by declines in occupancy and equipment. Gap expenses of $79 million includes $3.7 million of severance charges, or six cents per share after tax, related to the aforementioned workforce reduction. As I've said previously, we are committed to managing expenses with discipline and transparency. We are taking a very granular approach to expense management that will have the desired impact of reducing our expense base. we are committed to ensuring that every dollar we spend is thoughtful and necessary to run the bank efficiently or to grow our revenue and earnings. Slide 13 is a summary of asset quality metrics. Non-performing loans were down $5.2 million link quarter and $9.7 million year over year. Net charge-offs of $4.4 million, or 20 basis points, were down $1 million versus the third quarter and down 7.3 million year over year. We've included a chart in the appendix with Berkshire's net charge off rates versus the industry since the year 2000. We've moved some of the credit pages from the appendix into the body of our deck. Slide 14 shows that our CREE book is well diversified in terms of geography and collateral type. Credit quality of the CREE portfolio remains solid with non-accrual loans at 10 basis points of period end loans. Slide 15 has more details on our office portfolio. As noted last quarter, the weighted average loan to value ratios are about 60% and a large majority of the portfolio is in suburban and Class A space. We have also shared more granular credit data for the office book. We believe our office portfolio is very well underwritten diversified, and the asset quality of this portfolio remains solid. While current credit quality metrics are benign, we recognize that economic uncertainties exist, and we are monitoring both new originations and existing portfolios carefully, and we have modestly increased our reserves. Slide 16 shows returns over the past five quarters on a gap in an operating basis. As you know, the current operating environment is presenting headwinds, but we remain focused on improving our medium-term performance and look forward to a more normal operating environment. Recall, we added several new rows to the financial tables starting last quarter. Prior to last quarter, we had been reporting return on tangible common equity with a denominator that excludes the negative AOC mark from our AFS securities portfolio. We are now also reporting ROTC with a denominator that includes the negative AOC mark, which lowers the denominator and increases ROTC. Most of our peers calculate return on tangible common equity this way, so we have simply aligned our reporting to be more consistent with both peers and larger banks. Slide 17 shows our capital ratios with the decline in rates and our security sale, our AOCI improved by $75 million from a negative $218 million to a negative $143 million. Common equity tier one declined 10 basis points to 12%. The TCE ratio improved to 8%, and our tangible book value per share increased 7% at link quarter to $22.82. Our top capital management priority is to deploy capital to support organic loan growth. Secondly, we remain biased to stock repurchases given that our stock price is trading below intrinsic value. In Q4, we repurchased $6.6 million of stock at an average cost of $20.15 versus our ending tangible book value of $22.82. And in 2023, we repurchased $24 million of stock at an average cost of $20.85. We believe Berkshire stock is undervalued given our growth potential and low risk business model. We will continue to opportunistically repurchase shares. Slide 18 shows our 2024 guidance. Our guidance incorporates five rate cuts, however, one of which is in December, of 2024 and does not impact guidance, which is in line with current Bloomberg and market consensus. We expect loan growth of 5% to 7% off end-of-period loans. Payroll deposits were elevated at year end, so we'd encourage you to model deposits off an adjusted ending balance of $10 billion, which excludes payroll balances above normal run rates. We expect two to 3% normalized deposit growth. Recall that we are also adopting PAM accounting for our tax credit business in 2024, which lowers the amortization expense impacting fee income, thereby increasing fees and increasing our effective tax rate. Our 2023 fees adjusted for PAM would have been 75.9 million, and we expect growth of 0 to 3% off that base. We expect provision expense to be 33 to 36 million, and expenses to be down 1% to up 1%. Our tax rate increases with the change in accounting, and we believe it will be in the range of 20 to 22%. Our board is authorized and regulators have approved a new $40 million stock repurchase program, which we expect to use opportunistically. With that, I'd like to turn it back to Nitin for further comments.
spk04: Thanks, David. 2023 proved to be a challenging operating environment for the banking industry, given the historic increases in interest rates to quell inflation. The industry proved resilient amidst the failures of three large banks, which had idiosyncratic business models. We expect that in 2024, the operating environment will continue to be challenging. While we cannot control the macro environment, we are focused on controlling what we can and have several levers, including rigorous expense management, opportunistic hiring for deposits and loan growth, and de-risking the balance sheet. We look forward to a more normal banking environment later in 2024 and into 2025. When I started as the CEO in early 2021, we faced rapidly declining loan balances that we steadily turned into loan growth. We will similarly overcome the current challenges, including deposit growth and expense management. We remain focused on selective, responsible, and profitable organic growth. With that, I'll turn it over to the operator for questions. Laura, please open the line for Q&A.
spk00: Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touchstone phone. Again, that's star followed by the number one. You will hear a three-tone prompt acknowledging your request. Should you wish to decline from the polling process, please press star followed by the number two. If you are using a speakerphone, please lift your hands up before pressing any keys. One moment please for your first question. Our first question comes from the line of Billy Young from RBC. Please go ahead.
spk11: Hey, good morning, guys. Can you hear me okay?
spk10: Yes, we can. Morning, Billy. Morning.
spk11: How are you? I guess let's just first start on NII and the margin. Can you elaborate first how much do you think the repositioning this quarter should benefit, you know, kind of 1Q and the runway going forward?
spk08: Yeah, well, it's about a three-year payback on the securities transaction. It's worth about $7 million on an annualized basis increase in net interest income.
spk10: Got it. That's $7 million beginning in 2024?
spk08: Yeah, well, that's a full year number, but yes. So the security sale occurred very late in December, third week in December. So it really had no impact of any significance in Q4 margin, which, you know, as reported, was 3-11. So we'll see a step up from that. As you know, we don't provide margin guidance, but it's obviously in the NII guide.
spk11: Understood. Thanks. And then just to follow up on that theme, you know, kind of how does, you know, timing of the rate cuts impact your outlook? You know, if we started seeing more aggressive Fed rate actions earlier in the year versus if, you know, the Fed cuts rates less than the five being contemplated, you know, kind of how does that impact, you know, the NII trajectory?
spk08: Sure. Let me, so a couple comments. The first is the transaction obviously occurs, occurred late in the quarter. it increased asset sensitivity for us because we paid down wholesale borrowings, which were short, had longer term securities. That's why you also see an elevated cash position at 1231. You saw a large jump in cash on the balance sheet. That's not steady state, right? So the transaction is accretive to the margin and net interest income. dependent on where rates go over the course of 2024, we could put more securities back on the balance sheet. We've telegraphed rather consistently over the last year that were just have been plus or minus neutral from an asset liability perspective. So three rate cuts or five, which is really only four from a NII perspective, because, you know, the last one, the meeting in December, December 18, 2024, will, has a very modest impact on us. Either way, whether it's three or five. I think more importantly, you didn't ask the question, but when we think about the margin over the course of 2024, I think the, our work is basically in line with what we're hearing from a lot of other banks. We expect the margin to bottom into late in the second or in the third quarter of this year, and then you will see margin expansion. That's whether the Fed eases as telegraphed by them or whether a little bit more aggressively by what the market has priced in. So that's a real important message, I think, Billy.
spk11: I appreciate that. That was actually, you know, one of the follow-ups I had. But just, I guess, shifting gears to just expenses, I appreciate kind of the flat expense guide for this year versus last. Are there any additional efficiency actions being assumed within that guidance firstly and then secondly you know is there a target efficiency ratio you'd like to exit this year at when all said done thanks you are um two questions there um one one of which I'll answer in detail one of which I'll um not answer the
spk08: the first part is is the important part so nitin alluded to in his opening comments our focus on expenses and other initiatives so we had a a modest workforce reduction which was broad-based across the organization at the beginning of this year going forward we still recognize the need for um expenses, we should think about that in a more targeted manner as the year progresses. So thinking about how we do things and how we're staffed. So it's technology, it's process, it's a lot more granular. And I think the end results can be significant, but they take more time to achieve. So that's what we're focused on in 2024. Some of our thoughts around that is obviously embedded in the expense guide. Holding expenses flat year over year, when you think about merit increases and escalators real estate contracts and other contracts, software contracts, et cetera, is a lot. And one of our focuses, besides making sure that we continue to get more efficient and manage costs, and I've talked about that every quarter since I've been here, the granular approach we're taking, is to make sure we don't hurt the revenue generation capabilities of the company. So we spend also a lot of time making sure as we continue to work on controlling expenses and lowering expenses that we don't damage the growth potential of the company. So Billy, so your second question was essentially a targeted efficiency ratio. I think at this point we'll just decline to to put that number out there. What I would say is our efficiency ratio has been going up. It went up in 2023. We're not excited at all about it. We need, we recognize it needs to come down and improve, and we're very committed to that.
spk04: Hey, Billy, if I may just add a little bit of comment. I think David laid it out well, and I just want to connect it to what you heard us say before as part of our best plan where we talked about optimization as being our key lever. And within those, we talked about we have, we believe, and we still do have significant opportunities on rationalizing real estate procurement, optimizing our channels, processes, and deploying business process automation to improve efficiency. So all of those levers have been deployed and will continue to deploy. So this is an ongoing thing. It's not a one activity. It's an ongoing activity at Berkshire.
spk11: Understood. Thank you for taking my questions. Thank you.
spk00: Thank you. Our next question comes from the line of Chris O'Connell from KPW. Please go ahead.
spk07: Hey, good morning. I appreciate all the detailed guidance. I was hoping to just start off on the fees, you know, for the tax credit fees and the change in accounting on a year-over-year basis, where do you think that just starts off or kind of averages out for the year on that line item within the fees on the contra item?
spk08: I'm not exactly sure what you're asking, Chris. What I would, I would just say two things. The economic effect. the EPS effect of the change in accounting is zero. It's just the geography between showing higher fee income but also showing a higher tax rate. If you look back in the tables in the press release, we actually provide each quarter the details of the expense savings and the fee contra fee revenue that runs through the fee income line. And you'll see that that business timing makes the numbers move around a little bit more, but the core is probably $600,000, $650,000 of positive economic benefit each quarter. So did I? Okay, great. Have I answered your question?
spk07: Okay. Yeah, I'm all set. Thanks. And then just following up on the expense discussion, you know, I appreciate the full year guide in the comments that you guys made. Talk a little bit about just the cadence, you know, of that given, you know, the charges that were taken in the fourth quarter. Is that an immediate drop, you know, to start the year? Or is there some offsetting factors here in the first quarter?
spk08: Well, as you know, the first quarter usually the comp line runs high just because FDIC expense, you know, 401k matches, et cetera. So, you know, that's just in the comp line. I guess the way I think about it is if you look at our numbers, the quarter over quarter, our comp line was actually marginally down, and occupancy and equipment was down. You know, that's to Nitin's comments around, and at the top where we talked about two office buildings and some branch consolidations. What was up link quarter, and which is where the opportunity lies, but where things take more time is technology and communication expense sub 710,000 link water and professional and others services, which was 994,000. So, in professional services, we also have you know, regulatory examination fees and FDIC expense. And everyone knows, you know, the pressure banks have been under on FDIC. But what's also in there is use of consultants, outside help. So that's where we're highly focused is core operating expenses and professional service expenses. That's changing the way we do things. That's changing whether we do it internally or externally with partners, et cetera. That was our, the comment I was trying to make was there's opportunity there. It will improve our efficiency ratio to Billy's question. However, it's not just a quick fix.
spk04: Chris, I would also add, David made that point earlier in his comments as well. Our outlook is calling for flat expenses like you pointed out. And I know I think the consensus was about 3% growth. So I think this is certainly better than that. And I think that's where maybe the industry will be. But for us, the most important part is it's an ongoing focus. And secondly, we also self-fund the investments that we will continue to make. That will improve our revenue line as well. So that will cumulatively impact favorably our efficiency ratio.
spk08: Yeah, and just last comment, Chris, is, I mean, you did ask about essentially quarterly expenses and what is it, are they going up or going down, right? I would peg it as very steady would be our thought. You know, there may be a million plus or minus, maybe even, you know, a million and a quarter variation Quarter to quarter, that's kind of the way we see it, but nothing significant in that from our perspective.
spk07: Helpful. Thanks, David. And just last one for me, if I could, can you just remind us of the percentage of loans that are, you know, floating or, you know, would reprice immediately? Any Fed funds with it?
spk08: Well, the whole book is 57% floating, 43% fixed. A vast majority of that 57% is SOFR and prime. So almost immediately, right? SOFR tends to be one month. There's a little bit, there's a few hundred million dollars of one year T-bill based there, but for all intents and purposes, think of it as one month, overnight to one month repricing on that, I'm sorry, 57%.
spk10: Great. Thank you. Thanks, Ray. You're welcome. Thanks.
spk00: Our next question comes from the line of Mark Fitzgibbon from Piper Sandler. Please go ahead.
spk06: Hey, guys. Good morning. Morning, Mark. Morning, Mark. David, in your comments, you said that you've been buying back the stock below your estimate of intrinsic value. Could you share with us what you perceive the intrinsic value of the company to be?
spk08: I won't put a firm number on it, Mark. I mean, as you know, we all come up with different numbers. values, we all have different valuation techniques and methodologies. What I will say is we, and I try to say this in my comments around growth potential, low risk business model. I really believe that. I think layered on top of that is a significant ability to, There is an ability for us to continue to improve the efficiency of this company on the cost side. I have learned that we have a very resilient deposit base. That was proved back in March. I see opportunities in the eastern mass market and I think will be effective as we get bigger and stronger in this large market. Remember, a lot of our markets are smaller towns west of the major population center of this state. When I put all that together and think about the next couple years, we see our stock at much higher levels than where we're trading today. So that's my high level definition of intrinsic value for you.
spk06: Okay, great. And then you mentioned potential efficiency improvements. Can you help us think about what might be the bigger pieces of those? Not necessarily the numbers, but what are kind of the pieces of the expense synergies that you see?
spk08: Sure. I'll take a whack at it, then I'll I give it to Nitin. So I think about the process. There are certain parts of our organization that are very nimble and leading edge. The work long before I got here that Nitin and Sean would talk about about NARMI. You've heard that name. So our online consumer and business platform. Very leading-ed project allows us to get off the core, right? We still have to talk to the core every day via APIs, but really nice platform that has led to decreases in operating expenses. I talked about this in the second and third quarter. So, More things like that, where we go from the old way of doing business, more dependent on a large vetted provider, to being more nimble, meaning customer-centric to me, but also cheaper. So I see we have opportunities like that across the bank to make things faster, simpler, less paper-based. We just have to execute on them. And there are things that take a lot of work.
spk04: Yeah, Mark, I would just add on to that. You heard us talk about this previously as well. We have unique opportunities for optimization. Through our legacy acquisitions, we do have excess real estate that I think we can easily rationalize. We have channels that we can rationalize. We have procurement opportunities that we're exploring and deploying more technology in there. Automation opportunities that are kind of there for most organizations, we believe we have some of those as well. And on a day-to-day basis, we have what I think David had referred to in the last quarter, an internal process. We call it MBRAC. It's an expense management and resource allocation kind of council that looks at every dollar of spend in pretty low thresholds that we track to make sure every dollar is spent thoughtfully and where there are opportunities to rationalize that and make it more efficient. the team is coming back with solutions to do that. So I think it's just the culture of efficiency that we're building that's going to create more opportunities for us.
spk08: Just one thought. I was just going to say the follow up to what Nitin was saying kind of tied into the point I was trying to make about we don't want to flash and burn expenses here and hurt the revenue momentum of the company. So that's what I was trying to allude to in the script about we're thoughtful on expenses, but we're also going to be careful to make sure that the momentum that's happened over the last three years needs to not only continue, but it needs to accelerate.
spk06: Okay. And then it strikes me that one of the challenges on the expense side for you all is just the spread of the geography that you have branches in. Would you consider selling a piece of that geography or some branches in a particular area to try to create more density in the footprint and improve efficiency?
spk04: Mark, the short answer would be yes, and I think that's been part of the ongoing process. We were a much broader network, as you know, which we have consolidated. And we, as a team, continue to look at opportunities for footprint rationalization based on the customer footprint kind of footfalls and our ability to service them. And as we leverage more of digital services, I think that creates more opportunities. But we do that all with the lens of what's best value for customers and how they're getting serviced and then creating opportunities for consolidation and rationalization as it comes along.
spk10: Thank you. Thanks, Mark.
spk00: Our next question comes from the line of Lori Hunsicker from Seaport. Please go ahead.
spk02: Yeah. Hi. Thanks. Good morning. Just staying on expenses here, so your branch footprint, it's currently 96. Is that right?
spk04: Correct.
spk02: Okay. And so, Nitin, when you think about that branch rationalization over the course of the next year, is that 96 going to 90, 96 going to 80? I mean, how do we think about that a little bit to sort of Mark's question?
spk04: Yeah, I think the answer would be it'll be fewer. And I think that's broadly true of the entire sector. And I think most of the branch networks. If you think about how it'll look like, you know, two, three years down the line, it's going to be fewer branches. There'll be more automated, more digitized, and more advisory services. So we're no different there. If we're not going to give a specific number, we can just tell you that it's going to be more consolidated as the opportunities get created. And we've done that, I think, over the last three years itself. We're down by about 25, 26 branches. and we'll continue to look at opportunities.
spk02: Okay. And then the tech true-up expense in the fourth quarter that you mentioned, how much was that? It was $800,000. Okay.
spk10: And was that in that $3.7 million restructure number, or was that separate?
spk02: It was separate. Okay, great. And then, how should we be thinking about your restructuring charges going forward? When do we look to see that line item be closer to zero? How should we think about that?
spk08: Well, I mean, the expectation today, that restructuring charge, as we said, was employee-driven. across the company, a reduction in force, we termed it. So there's no additional actions like that. So severance charges from that particular type of activity shouldn't be, we shouldn't see that going forward. Yeah. What we were talking about, about how do we further improve efficiencies the organization as i said some of that it's more detailed it's systems it's technology oriented you try there i i wouldn't say there won't ever be or there won't be in 2024 further severance charges like that but there's nothing anticipated today those types of projects um are either The employee side is via attrition or redeployment into other parts of the company.
spk02: Okay. That's very helpful. Okay. And then, David, the tax rate, I just want to make sure that I've got this right. So as we think about it, that line item in non-interest income, that tax advantage commercial project number that was $2.06 million, basically that's going to be dropping down now to the tax line. Is that the right way to be thinking about this?
spk08: Yeah. Yeah. So if you go to, you got it, you know, we tried, we tried to be crystal clear in the outlook, you know, making the 23 adjustment for both the income and the tax rate.
spk02: That's great. Nope. That's more transparent. That's great. Okay. And then just going back to margin here, you know, Billy's question, do you have a December spot margin? And maybe also, do you have a December spot margin if you, I appreciate that the restructure occurred in the third week here of December. I mean, do you have a December spot margin, and do you have a December spot margin maybe adjusted with the securities restructure?
spk08: Honestly, I haven't bothered to do the adjustment. I've been so focused on 2024. So our December spot margin was roughly 310.
spk02: Okay. That's great.
spk08: Okay.
spk02: Okay. Great. And then last question, um, Nitin to you and, or maybe David, whoever, um, can you just very high level, take us through your, your cannabis plans? I realize this is newer, but just how you're thinking about it and what the loan and deposit balances look like. Thank you.
spk04: Sure. Blurry is a deposit service really to support deposit generation activities. It's an early stage pilot. We're not doing any lending, and the deposit balances are less than $10 million at this point.
spk02: Okay. And any plans to do lending, or is it just deposit only in terms of how you're looking at this?
spk04: At this point of time, it's only deposits and cash management type of activities.
spk02: Great. Thanks for taking my questions.
spk10: Thank you, Lars.
spk00: Our next question comes from the line of Dave Bishop from Hoptic Group. Please go ahead.
spk10: Yeah, good morning. Good morning, Dave. Morning.
spk09: Hey, I hopped on late, so I apologize for that. But, you know, you guys have been, you know, adding and augmenting the ranks You know, the senior executives, senior commercial lenders within the market, given the disruption. Just curious, are you starting to see, you know, green shoots or growth out of these hires, either on the loan or deposit side or both? And are they contributing to the, you know, the bottom line growth or the pipeline? Just curious, sort of the, you know, sort of the impact they're having to date from the hires. Thanks.
spk04: Yes, Dave, we are. We clearly are. And I think not only are we seeing significant improvement in the pipeline and the deposit and some of the loan balances that have come in, but the quality of client base is also changing. And we're bringing in a significant number of high value relationships as a result of this transition. And I think what they're doing is it's improving the overall quality of production that we're seeing over the last couple of quarters, and we believe that will accelerate as we move forward.
spk10: Got it.
spk09: And are you seeing that on both sides of the house, too? Are there fee income on the wealth management side opportunities to cross out as well?
spk01: Yeah, Dave. As Nitin mentioned, the new hires are definitively focused on deposit generation, deposit acquisition, private banking, which blends very well with wealth management. They are green shoots right now, but we think there are future opportunities.
spk10: Great. Appreciate the call.
spk08: Yeah, I would obviously agree with everything that's said. I think of this in a multi-year timeframe, right? If we are successful in bringing in the right people, we are successful in a more balanced or even skewed towards deposit type of lifting activity, that has huge long-term ramifications for us. And that opportunity is really looking out the window from this conference room. It's all the people, the economic engine of growth in this state is primarily in this market right here. We're Boston headquartered, but we need to be bigger in Boston than we are today. And that's what we're focused on. And that's not a, you know, tell me how much to take up Q1 earnings because of that. That's how do I think about Berkshire bank over a next couple of years if they are successful?
spk04: And Dave, you'd asked us this previously as well, you know, how large is this opportunity? We believe it's significant. I made that remark in my prepared remarks as well. So we have, Bankers that have been with us for a long period of time have deep client relationships that we continue to harvest. And now we're bringing in new folks that are coming to us through the market disruptions. So the whole First Republic, Silicon Valley, you know, events have benefited us to that extent. We're bringing in new players that are bringing new relationships that we didn't have before, and they're looking to grow it. And I think when we mentioned it, at one point it looked like a, you know, significant, about over $20 billion of deposit opportunity to be captured. So, even if we get a fraction of that, it's going to help us quite a bit.
spk10: Perfect. Appreciate all that color, guys. Thanks.
spk00: Thank you. There are no further questions at this time. I'd now like to turn the call back over to Mr. Mahatre for final closing comments.
spk04: Thank you all for joining us today and for your interest in Berkshire. Have a good day and be well.
spk00: Thank you, sir. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a lovely day. Thank you, sir. Ladies and gentlemen, this concludes your conference call for
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