Berkshire Hills Bancorp, Inc.

Good morning, and thank you for joining Berkshire Bank's third quarter earnings call. My name is Kevin Kahn, Investor Relations and Corporate Development Officer. Here with me today are Nitin Mahatrey, Chief Executive Officer, Sean Gray, Chief Operating Officer, Brett Berbovic, 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 states. 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? Thank you, Kevin. Good morning, everyone, and thank you all for joining us today. I'll begin my comments on slide three, where you can see the highlights for the third quarter. I'm pleased to report that we had a strong quarter with robust improvement in operating earnings quarter over quarter and year over year. Operating EPS of 58 cents was up 5% linked quarter and up 16% year-over-year. Operating net income of 24.8 million was up 7% linked quarter and up 15% year-over-year. Operating ROC was 9.91%, up 26 basis points linked quarter and up 64 basis points year-over-year. Asset quality and balance sheet metrics remain strong. Excluding the upstart loan sale charge-off, net charge-offs were 16 basis points of loans, and our reserve to loans was flat to second quarter at 122 basis points. Of note, our total past two loans percentage at 53 basis points is at its lowest level in 15 years. and our reserve for losses at 122 basis points is about five times the total non-performing loans. We increased our capital ratios link order with CET1 at 11.9% and TCE at 9.1%. Liquidity remains solid with our loan to deposit ratio at 96% and average non-interest bearing deposits as a percentage of total deposits remains steady at 24%. We've updated the slides on overall tree, office, and multifamily portfolios. The information on those slides highlight that our portfolio remains granular, geographically diverse, and resultantly less risky. The performance on those loan books remains strong. Average loan balances were up 1% length quarter and up 3% year-over-year. Average deposits were up 1% length quarter and down 3% year-over-year. Our loans pipeline was stable versus third quarter and was up 20% year-over-year. Deposit costs were up 7 basis points in the quarter, reflecting a reduction in the rate of increase in deposit costs and beta. We expect funding costs to decline as the Fed continues to cut interest rates And like many banks, we've already moved deposit rates lower late in the third quarter. We continue to make steady progress on strategic initiatives. The sale of 10 branches in New York that was announced in March was completed this quarter, bringing our total branches to 83. The pre-tax gain on this transaction was $16 million, slightly lower than the $19 million we expected in March. given that client selected deposit retention exceeded our expectations this transaction tightens our footprint and enhances the efficiency and profitability of our network we are now at about the right size for our branch network a week ago we announced the sale of 46.5 million of our upstart loan portfolios The loans were priced at 96% of book value, resulting in 1.9 million charge-off related to the sale. The weighted average credit score for the remaining approximately 10 million upstart loans is 682, and we believe that our reserves against that book are sufficient. We continue to make banking with Berkshire when, where, and how we want it easier than ever. We continued the rollout of Berkshire One, an expanded suite of digital deposit products for our customers. We will continue to invest in digitizing the customer experience while investing in our bankers to accelerate growth in deposits-led client relationships. I want to thank all of my Berkshire Bank colleagues for their continued hard work and commitment to the bank. Their commitment to our strategy and dedication to our customers is what continues to bring us together and truly set us apart. I'll now turn it over to Brett to talk through our financials in more detail. Brett? Thank you, Nitin.

Slide 4 shows an overview of the third quarter. As Nitin mentioned, operating earnings were $24.8 million, or $0.58 per share, up $0.03 linked quarter. Net interest income of $88.1 million was down less than 1% linked quarter. Operating interest income was 21.5 million up 7% linked quarter. Total operating revenue was up 1% linked quarter and operating expenses were 72.3 million up 1% linked quarter and down 2% year over year. Net charge-offs were 5.6 million or 24 basis points of average loans and included 1.9 million of charge-offs related to the upstart loan sale. Provision expense was 5.5 million And the reserve coverage ratio was flat linked quarter at 122 basis points. Slide five shows our average loan balances. Average loans were up 76 million linked quarter or 1%. This was primarily driven by growth in the commercial lending. We've updated a page in the appendix, which shows data on the upstart and Firestone runoff portfolio, including the recent upstart loan sales. The combined runoff portfolios are down by $66 million to $58 million, or 60 basis points of total loans, and are performing as expected. Slide 6 shows average deposit balances. Average deposits increased to $64 million, or 1% linked quarter. Year-over-year deposits were down 3%, but excluding the New York branch sale deposits from prior year balances, our deposits were up 1% year-over-year. Non-interest-bearing deposits as a percentage of total deposits remained at 24%, consistent with the prior two quarters. Deposit costs were 242 basis points, seven basis points linked quarter, and our cumulative total deposit beta is 44%. While it's early in the cycle, we expect deposit betas in a down interest rate environment to be higher than the beta on the way up as we remain focused on managing deposit costs. Turning to slide seven, we show net interest income. Net interest income was down 1% linked quarter and down 3% year over year. Net interest margin was down four basis points linked quarter to 316 versus 320 in the second quarter and 315 in the first quarter. Our historical range for NIM excluding the pandemic years has been between 310 and 340. We expect the fourth quarter NIM to be between 310 and 320. While we have had winds of floating rate loans repricing lower short term, we also have several tailwinds. We have 1.6 billion of CDs or 67% of that book maturing in the next six months. And we have about 400 million of FHLB funding that matures over the same time period. Further, we have 600 million of low yield received fixed swaps maturing over 2025 and 2026. And we have low-yield fixed-rate securities in loans that will mature and reprice at higher yields. Slide 8 shows operating non-interest income up $1.4 million, or 7% linked quarter, and up $4 million, or 23% year-over-year. The growth in fees was primarily related to higher swap volume. This was the third quarter in a row where we've seen solid growth in overall fees. Slide 9 shows expenses. Operating expenses were up 1% linked quarter to $72.3 million and down 2% year over year. Occupancy and professional services expense declined linked quarter and were offset by slightly higher compensation and higher other expense. Other expenses include check fraud expenses, a line that impacts the entire industry and which can be volatile. This quarter, that line item was $1.5 million higher than the average of the prior eight quarters due to one isolated incident. Slide 10 is a summary of asset quality metrics. Non-performing loans were up 12% linked quarter and down 10% year over year. The increase in CREE non-performing loans linked quarter was driven by one isolated multi-use property in upstate New York. Net charge-offs of 5.6 million were up 4 million linked quarter and 193,000 year-over-year. Net charge-offs included 1.9 million related to the upstart loan sales. Charge-offs excluding that sale were 3.8 million, or 16 basis points of loans. We've included a chart in the appendix with Berkshire's net charge-off rates versus the industry since 2000, which reflects relatively better asset quality than the industry over time. Slide 11 shows that our Cree book is well diversified in terms of geography and collateral type. The credit quality of the Cree portfolio remains solid with non-agro loans at 22 basis points of period end loans. Slide 12 shows 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 was in suburban and Class A space. We have very limited exposure to Boston's financial district, And 80% of our office properties financed are under 150,000 square feet, suggesting our portfolio has much lower default probabilities. Slide 13 shows details of our multifamily portfolio. The multifamily portfolio is $664 million, or 7.2% of loans. The book is well diversified across our footprint, with a weighted average loan-to-value of 65%. While current credit quality metrics are strong, we recognize that economic uncertainties exist and we are monitoring both new originations and existing portfolios carefully. As Nitin mentioned, we have strong capital levels. Vangible book value per share was $24.53, an increased 6% linked quarter and 16% year over year. Our CET ratio was up 30 basis points to 11.9%. And our TCE ratio rose 94 basis points to 9.1% due to higher retained earnings and a lower bond mark on our AFS securities. Our top capital management priority is to support organic loan growth. Here to date, we've repurchased $17.4 million of stock at an average cost of $21.94. All of our repo this year has been completed below tangible book value per share. We paused our stock repurchase in the third quarter to support expected balance sheet growth. We expect to continue to be opportunistic with stock repurchases, and I'd note that since fourth quarter of 2020, we've reduced our share count by 18%. With that, I'll turn it back over to Nitin for further comments. Nitin?