Q4 2021 Berkshire Hills Bancorp Inc Earnings Call
Thank you for your patience is called is due to begin shortly walk the date for additional participants to join the line.
[music].
Hello, and welcome to the Berkshire Hills Bancorp Q4 earnings release Conference call. My name is Casey and I will be coordinating your call today.
You'd like to ask a question during the presentation you may do so by pressing star one on your telephone keypad I'll now hand over to Joe Hi, It's Kevin Cole head of Investor Relations and corporate development to begin Kevin. Please go ahead.
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 or news release is available in the Investor Relations section of our website, Berkshire Bank Dot com and will be furnished to the SEC.
Mental Investor information is provided in an information presentation at our website at IR Dot Berkshire Bank Dot 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.
Paresh and a reconciliation to GAAP measures is included in our news release on the call today, we have knitting Malhotra, President and Chief Executive Officer of Berkshire Hills Bancorp <unk> Passu, our Chief Financial Officer, Sean Gray, our Chief operating officer, and Greg Lindenmuth, our chief risk Officer.
At this time I'll turn the call over to our CEO knitting moderate.
Thank you Kevin Good morning, everyone happy new year to all and welcome once again to Berkshire Bank fourth quarter, earning call.
I'll begin my remarks on slide three where you can see the highlights for the fourth quarter and full year 2021.
It was another solid quarter with strong financial performance.
<unk> balance sheet and asset quality trends.
<unk> progress on our best strategy.
In terms of financial performance I'll be speaking to the adjusted numbers.
We posted fourth quarter EPS of <unk>, 42 cents up 50% year over year.
EPS was lower than third quarter, but consistent with expectations and the momentum for EPS drivers is encouraging.
Revenues for the quarter little over a year by year, driven by a reduction in our loan balances, including strategic exits that were consistent with our getting better before getting bigger approach outlined at our best program.
Expense discipline remains a focus for us in fourth quarter adjusted expenses were down 4% year over year and full year adjusted expenses were flat in 2021 versus 'twenty 'twenty.
As we've said before we will self fund our best strategy by reinvesting eight figure in cost saves from procurement efficiencies.
State rationalization and other efficiency initiatives and growth initiatives, such as our bankers customer experience and enabling technology that drives revenue and profitability growth.
Our fourth quarter adjusted return on tangible common equity of ROTC improved to 73% from five 5% a year ago.
Another key highlight for the quarter was that consistent with our guidance of seeing growth in average balance sheet in the first half of 2020 do we did see end of BD Cor loan balances grew for the first time this quarter after nine quarters of decline.
This was primarily driven by our organic growth focus that drove over 200% year over year growth in originations.
Yeah.
For full year 2021, we posted adjusted earnings of $1.69 in 2021 versus <unk> 60 in 2020.
Net interest income pressure was partially offset by strong fee revenues, including SBA and wealth management fees.
You made a call that we had a large credit provision in the first half of 2020 in response to the pandemic.
And as you've seen over the last few quarters credit has become a tailwind for book versus a headwind.
Our adjusted 2021 ROTC was seven 7% versus three 2% in 2020.
Our balance sheet remains quite strong.
In both absolute and relative terms.
Our credit trends continue to improve as that risk management actions over the past year or more healthy dividend.
Nonperforming assets were lower year over year and quarter over quarter.
We had a provision benefit of $3 million this quarter, and we remain well reserved.
In 2021, we returned a total of $92 million of capital or 109% all flat adjusted net income to shareholders.
Last night, we announced our next stock repurchase plan of $140 million, representing approximately 9% of our shares at current price levels.
We have ample capital to do both fund expected loan growth and continued stock repurchases.
Given our relatively low stock valuation as a multiple of our tangible book value. We are prioritizing share repurchases, but we will also assess increasing our cash dividend in 2022.
On the strategy front, we just completed the first six months of a three year best friend.
We've made solid progress so far and yet are still in the early part of our journey and profitability growth.
In fourth quarter, we achieved our goal to be in the top quartile of ESG rankings nationally.
We continue to make key hires in frontline and support units, including hiring new head of Treasury and head of enterprise analytics.
We started new partnerships to drive originations and franchise growth and we completed implementation of various foundational components of technology.
Board Refreshment continued in the quarter as well, we added a new independent director Nina Charlie.
We've attached Nina short by on the last page of our earnings deck.
Nina brings deep industry experience to our board in banking wealth management and financial technology welcome aboard meter.
For full year 2021, as part of our Best program launched in May we streamlined our business model by selling noncore operations, including the sale of our insurance subsidiary and mid Atlantic franchise.
We consolidated 16 branches, we outsource servicing activities for efficiency and centralized procurement activity.
We launched technology initiatives to enhance customer experience and support business growth and commenced new partnerships to drive originations and customer growth.
In 2021, we also announced our brochure and community come back initiative that highlights how about lending investment and philanthropy initiatives in the community will help our customers across the footprint, including those in low to moderate income neighborhoods.
This is consistent with our best plan as well as our vision to become the top performing leading socially responsible community bank in new England and beyond.
In 2021, we added three new directors to our board and they named David now as the chairperson of the board.
As we look back at 2021, it is truly gratifying that our team's progress has been recognized in our stock price.
In 2021, our stocks total return, including dividends was 69%.
Despite that recovery, we still trade close to one three times the tangible book value.
Current profitability is still only about half are best planned targets, which illustrates a significant opportunity for growth in coming years.
Finally, I would like to thank our over 130 <unk> hundred employees for their passion commitment and hard work in 2021, as we implemented our best transformation program.
Our bankers and staff are the reason why we were only come back trail.
And their dedication and commitment to berkshares customers and communities is what will continue to drive our success going forward.
With that I'll turn the call over to <unk> to discuss our financials in more detail shortly.
And it then.
Good morning, everyone.
If you could please turn to slide four of our earnings presentation.
It captures our annual income statements. Please see the appendix for a reconciliation of GAAP and adjusted financials for both the Earth and the quarters.
My comments will be on an adjusted basis.
Revenues were lower about 2% overall has 25% growth in fee income, mostly offset an 8% decline in net interest income.
Fee income grew despite not having the benefit of insurance fees in the fourth quarter of 'twenty one.
Sale of the insurance business.
Fee revenue growth was driven by growth in SBA gain on sale wealth management and asset based lending fees.
Continued disciplined expense management resulted in flat expenses year over year.
Provision for credit losses dropped from $75 9 million in 2020 to just zero point $5 million in 2021 due to improved credit environment and continued economic recovery.
2021 marked a year of significant improvements as highlighted by the key performance indicators.
Our EPS increased from <unk> in $2022 69 in 2021.
<unk> improved from three 2% in 2020 to seven 7% in 2021.
Our our OE improved from 24 basis points in 2020 to 70 basis points in 2021.
Yeah.
Moving on to slide five.
Slide five shows our quarterly results.
For the quarter, we had net restructuring expenses of <unk> $9 million driven by real estate closures from branch consolidation.
On an adjusted basis year over year revenues were down 6% with net interest income down 8% and fees up 4%.
We expect trends that have impacted revenue that is lower loan growth excess liquidity, our NIM pressure to reverse in the first half of 2022.
Our net interest margin was 260 basis points up four basis points from the third quarter and flat year over year.
On an adjusted basis.
Main basis, excluding purchase accounting and PPP, our adjusted NIM was up 10 basis points versus third quarter from 245 basis points to 55 basis points.
Expenses are down 4% year over year, but up 1% versus third quarter on some episodic fourth quarter costs, including technology compensation and other miscellaneous expenses.
Yeah.
We had a provision benefit of $3 million this quarter due to improved credit environment and continued economic recovery.
Including charge offs of $4 million, the ACL decreased by $7 million.
Our adjusted return on tangible common equity was 734% up 184 basis points year over year.
Our adjusted ROE was also up year over year from 45 basis points to 71 basis points.
Yeah.
Turning to slide six let me address changes in our loan portfolio is in earning assets.
Our total average loan portfolio was down year over year, primarily driven by run off of PPD, a nonstrategic portfolios like indirect auto and aircraft sales of mid Atlantic businesses, and lower loan balances for consumer and commercial portfolios.
Excluding those portfolios are adjusted average loans were down 2% sequentially and down 14% year over year.
Driven primarily by our commercial businesses fourth quarter of 2021 originations more than doubled compared to third quarter of 'twenty. One and we are encouraged that on an end of period basis loans are up 51 basis points or 2% on an annualized basis.
We do expect the balance sheet to resume solid growth in the first half of 2022.
Yeah.
The investment portfolio is up 35% year over year.
In fourth quarter of 'twenty, one we deployed cash into higher yielding securities, while retaining asset sensitivity and credit quality.
We stand to benefit from the rising rate environment, as we deploy excess cash to support loan growth in 2022.
Moving on to slide seven slide seven shows our average liabilities.
Our funding mix continues to meaningfully improve as lower cost funding funding replaces higher cost funding.
Year over year, our cost of funds have dropped 34 basis points from 60 basis points to 26 basis points and our cost of deposits has dropped 28 basis points from 47 basis points to 19 basis points.
Declines in our funding costs has had a significant positive impact on our net interest income.
Moving on to slide eight.
Slide eight provides more detail on the improvement in our funding profile.
Our total deposits excluding broker deposits are up 2% year over year and the mix is improving.
Noninterest bearing deposits are up 18% year over year to over $3 billion.
Our high price customer Cds are down 24% year over year to $1 $4 billion.
We have significantly lowered our reliance on wholesale funding year over year, our wholesale funding is down 72%.
We paid down our <unk> borrowings in third quarter of 'twenty, one and ended the year at 13 million $13 $4 million.
Broker Cds are down 55% year over year, and we expect our brokerage Cds declined by over 75% by end of second quarter 2022.
Our borrowings also includes $75 million of expensive subordinated debt with a coupon of 685%.
It is redeemable and we plan to redeem it no later than third quarter of 2022, and further lower our funding costs.
Yes.
Turning to slide nine we show our fee revenues.
I would like to note that our fee revenues for fourth quarter of 2020 and third quarter of 2021 include insurance fee revenues due to the timing of the sale of the insurance business in the third quarter.
Excluding insurance, our fee revenues were up 18% year over year, and 1% quarter over quarter.
Loan fees and revenues were up 88% year over year, and 10% quarter over quarter, driven primarily by higher gain on sale from strong SBA lending swap in commercial servicing fees.
Gain on sale fee revenues and wealth management fee revenues, which are up double digits year over year.
Okay.
On the other fee bucket includes tax credit impairments and episodic items like boldly and other miscellaneous items.
On slide 10, we show our expenses.
We continue to maintain expense discipline, while we execute on our best strategy.
We continue to self fund our best transformation that is reinvesting meaningful expense saves to drive growth, while maintaining overall expenses at or near current levels.
Adjusted expenses were down 4% year over year, and marginally up by 1% versus third quarter.
We continue to benefit from expense saves for market exits and branch consolidations, we consolidated 16 branches in 2021 and Theyre looking at additional but modest number of brand sponsor elevations.
We have reduced our professional services expenses significantly down 42% year over year, and 26% quarter over quarter.
On other focus areas like procurement and real estate, we've already realized saves in 2021, and we expect to continue to make good progress towards rationalizing our procurement expenses and real estate footprint in 2022, and further reduce our expense base.
Yeah.
Slide 11 is a summary of our asset quality metrics.
Credit quality continues to remain strong.
Net charge offs in the fourth quarter were $4 million with a provision benefit of $3 million.
Allowance for credit losses to loans.
Ended the quarter at 156%.
I would note that the increase in delinquency ratio in the fourth quarter of 'twenty. One is driven by one commercial credit moving into accruing delinquency status.
And it does continue to make payments as agreed.
It was driven by one matured commercial credit which is in the process of getting refinanced.
We expect that credit to refinance in the first half of 2022 likely in the first quarter.
As we have done in prior quarters. We've included credit data on Covid sensitive industries in the appendix. Please take a look at your convenience.
Sure.
Slide 12 shows detail on our capital and liquidity positions.
Our capital levels remain very strong.
Our common equity tier one capital ratio ended the fourth quarter at an estimated 15%.
In line with our capital deployment strategy, we're very pleased to announce a new $140 million worth of stock repurchases that we plan to execute in 2022.
Combined with the $68 million buyback, we executed in third quarter of 2021, we intend to return a total of about $208 million in capital to our shareholders.
We are focused on opportunistic stock repurchases, given our low stock valuation, but also expect to enhance dividend yield and grow our cash dividends over time.
So in summary, we had another solid quarter solid momentum in fee income early signs of loan growth and importantly balance sheet and NIM infection.
Strong credit performance and strong expense and capital management.
Now I would like to close with comments on our outlook for 2022 on slide 13.
The bond market features and forwards markets are now predicting for fed funds rate hikes in 2022 and another three in 2023.
Our 2022 guidance is based on market implied forward rates for 2022.
We expect low to mid single digit loan and low single digit deposit growth in 2022.
We expect our NIM to trend higher.
On a reported basis, we expect net interest income.
To be up in the mid single digit percentage range.
As you know our net interest income was impacted by PPP and included mid Atlantic balances in 2021.
Excluding pvp and mid Atlantic from 'twenty, and 'twenty, one and using market implied rate increases we would expect our net interest income to be up high single digits in 2022.
Our analysis conservatively assumes lower deposit betas for the first two hikes and an average deposit beta of 40% after the first two hikes.
We expect low single digit decline in fee revenues, reflecting the sale of insurance business.
We expect the improved credit environment to continue overtime, and we expect to get to the one seasonal results two loans by third quarter of 2022.
I'd like to note that our credits can be lumpy. So we don't expect a straight line on provision expenses or charge offs.
We expect expenses for the rest of the year to be stable at about 68% to $70 million quarterly run rate.
Expenses can be lumpy from quarter to quarter.
Our tax rate for 2022 should be in the high teens.
Finally, we expect to Opportunistically execute on our newly announced $140 million stock repurchase program in 2022.
With that I'll turn it back to net <unk> for further comments Nathan.
Thanks <unk>.
On slide 14, we have our best Northstar chart, which shows the five key performance metrics of our best strategic plan.
We're encouraged by our progress against financial ESC, and net promoter score targets and we generally trending ahead of schedule as of end of period 2021.
We recognize that the progress won't be linear every quarter for every metric, but we are confident that directionally, we will be making progress towards our north star objectives outlined and we're committed to sharing these metrics on an ongoing basis.
We are encouraged that we've already achieved top quartile ESG scores and we are just starting our best community come back initiative that will improve it further.
Based on our better than expected performance in 2021, and the new significantly higher interest rate environment, we will be providing revised best targets at the next quarterly earnings call.
In 2021, we have experienced renewed investor interest in our stock and based on the discussions with them Here's how we believe our story is being perceived from the outside in.
Berkshire Bank is being looked at as a unique comeback story and the key tenants of that comeback story, our strong capital position that will support loan growth as well as enhanced capital return to our shareholders.
Above average asset sensitivity, which will drive improved profitability and higher return on equity.
Organic growth focus as we start getting bigger after getting better this year.
A combination of frontline hires productivity growth, enabling technology initiatives and partnerships will reignite, our organic originations growth engine and we will start seeing growth in average balance sheet in the first half of 2022.
CSC NPS Lucas differentiating us for our bankers customers communities and investors.
Hiding advantage, we have a unique opportunity to hire talented purpose driven community dedicated bankers in our footprint from banks impacted by the M&A employee and other such activities.
Continued efficiency ratio focus.
<unk> created by our commitment to reinvest savings from procurement real estate and other efficiency initiatives and growth initiatives supporting customer experience banker productivity and technology enablers.
In summary.
Solid quarter and a year across many fronts improved financial returns core loan growth checking in deposit balances growth.
<unk> momentum and disciplined expense control.
And we are starting 2020 do with good momentum on balance sheet and return of capital through share buyback.
With that I'll turn it over to the operator for questions.
Thank you if you'd like to ask a question. Please press star followed by one <unk>.
Thank you Pat now.
You'd like to remove your question. Please press star followed by <unk>.
When preparing to ask a question. Please ensure your phone is on mute.
Locally we report.
Let's briefly walk me collect questions.
Our first question comes from Mark Fitzgibbon from Piper Sandler Mark Your line is now open.
Hey, guys good morning.
Good morning, Mark good morning.
I was wondering I had heard your guidance on loan growth sort of.
Low to mid single digit and I guess I'm curious is that likely to be driven by C&I and commercial real estate and also I was curious if you think we're getting kind of to the end of the CRE prepayment activity that you and everybody has been saying.
Yes, Hi, Mark good morning, Great to hear your voice.
So on the prepayment.
Activity I would say consistent with what we are seeing in the industry. We are noticing definitely a downward trend on that so I think.
That's helpful for us.
And then.
Overall, I think the balance sheet.
<unk> seen in terms of growth is going to be spread across from.
From a balance sheet mix perspective, we're going to stay fairly consistent.
<unk>.
With some marginal changes here between commercial and consumer balances.
Okay, Great and then should we think on the margin I thought your comments were that it should trend upward can you help us think about the magnitude of the margin expansion in that same vein I am curious if you were deploying some of the cash that you have on the balance sheet into securities.
Is that likely to pressure the margin a little bit and also reduce asset sensitivity.
So thanks, Mark So I think first of all if you notice our balance sheet and we already are we even we.
Invested a whole bunch of cash.
In the last quarter, but we are still have a significant cash position that we have left in the balance sheet, we plan to deploy those.
Between loan growth and that we have.
A growing balance sheet to fund as well as investments are going to see a balanced approach and obviously our objective will be to sort of maximize our returns so that would be what is the strategy going forward.
And then as we sort of go to reported earnings and you'll see that play out.
In terms of name I think at this point, we'd like to see with the guidance that NIM is going to trend higher during.
During the course of the year as we sort of have more actuals and quarterly results.
Maybe we can consider giving some more specific ranges.
Okay, Great and then I think you mentioned in the release that you've hired a number of commercial seasoned commercial bankers.
I Wonder if you could share with us how many you hired say in the fourth quarter.
Yeah, Mark of the slip in here I'll take that I think we've highlighted that as part of the best plan, we're going to grow our frontline hires by about 40% over the three year period.
<unk>.
Kind of on that.
<unk> as we speak.
The momentum for hires has improved in the fourth quarter hires were the highest hires we've made in 2021, so I wouldn't be able to give you the specific number but the momentum is on par with what we had anticipated.
Okay, Great and then originations growth.
Remark and big part of the originations growth that we outlined.
One of the fact that there was that some of the new hires.
Started bringing in a new pipeline of production.
Okay and then last question is on the buyback.
I guess I am curious, how you think about the valuation of the buyback and.
Is there a price level at which you sort of say this doesn't make sense.
Hey, Hey, Mark.
So the sugar deep so you know we have.
If I sort of intrinsic valuation sort of what we think our stock should be valued at I think Nathan in his earlier comments talked about a price to tangible and where we're valued if you look at sort of peer medians ballpark and it takes sort of those two some of our key indicators, we make those decisions around buybacks and what price it makes.
It makes sense for us to buy those and I think as we said we're going to be very opportunistic in terms of.
Getting to the.
The buyback program.
Thank you.
Thanks Mark.
Our next question comes from David <unk> from C Corp Research partners. David. Please go ahead.
Yes, good morning, gentlemen, how are you.
Very well, David how are you doing hi, David.
Good good thanks for taking my question, Hey, I wanted to circle back to Mark's first question in terms of the.
The NIM guidance here, the net interest income guidance here.
Your first bullet says it's up mid single digits on a reported basis.
Using what we're seeing in terms of the spot forward curve here what are you using as the base net interest income margin.
On a fully tax equivalent basis somewhere around 297 million should we should we assume that growth mid single digit talk about that $297 million number just curious how we should think about that from a modeling perspective.
Yes, I think you know the our projection was based off of.
290.
$8 million.
And I think I would be sort of that.
The clarification to sort of I would like to make gains on the adjusted versus reported.
Adjusted is simply just taking into account.
The impact of the PPP and the mid Atlantic sale, and then where we are actually going to likely end up from an NII basis at the end of 2022 and that's high.
High single digit number that I referred to in the guidance.
Do you have that number off the top of your head.
In terms of what the adjusted NII is for 2021.
Yeah.
So at this point, so I think without giving out a specific number as we staying consistent to the guidance I think we can sort of and I would say mid single digit growth.
Hi.
Okay, maybe also just sticking with that topic.
I think you had said that.
That guidance assumes for fed rate hikes.
From an interest rate risk perspective asset sensitivity position.
Any sense of what a 25 basis point move.
Move in the fed would have from a margin perspective, I know, it's a high level question, but maybe rough ballpark, what each with each 25 basis points translates to on the margin.
So do I think I can probably sort of give you.
Some of the other analytics around sort of the trucks and the impact on NII, So 100 basis points parallel shock.
That has about a 5.6%.
Positive impact on our.
NII and so we'll have more disclosures and a 200 basis point parallel shock has about 13, 1% impact.
The impact on our NII.
One year.
Over one year okay.
Got it.
Then sticking with that theme.
Same chart there.
The same question in terms of the fee revenue.
What base are you using there would that be revenues adjusted to exclude.
Insurance fees or is that the all in about $91 million in terms of.
Fee income.
Yes.
So the fee revenue guidance is sort of obviously excludes insurance revenues and Thats one of the principal reasons, we maintain the guidance around.
What we have.
Today.
Got it got it and then.
Remind us again, what the opportunity is on the sub debt retirement.
Yes, so our sub debt $75 million of it.
It's redeemable in third quarter of 2022, so our intention is to call that when when the right time comes in the third quarter.
Got it and that had a high 6% coupon it correct.
$6 87, 5% coupon.
Got it and then maybe one more.
I noted that the downward trend in terms of C. D. How much is left in terms of near term repricing on the time deposit front.
Yes, so we have around one point in our total CD book just to give you some ideas around $1 $7 billion right.
And so we have from a maturity perspective.
One 2 billion maturing.
After that you know we have retail Cds around that.
So $1 2 billion maturing in 2022 of that we have around a couple of hundred million dollars of sub brokered and the rest of $1 billion of.
Retail Cds that gets repriced in the course of 2022.
Great I appreciate the color.
Hey, David just to add little more color on that just to highlight the success on the retail CD front.
Even while we've brought down our cost to deposits.
The runoff to CD balances, we've been able to retain about 92% of our customers in the bank.
92% Okay.
Our next question comes from Christopher O'connor from Tobey Tobey Christopher Your line is now open.
Hey, good morning, gentlemen.
Good morning, Chris morning, Chris.
So just wanted to sorry.
Ill follow up on the fees.
To make sure I'm understanding it correctly.
Do you guys have a number for what the baseline is that low single digit decline is also.
Yeah.
So that would be based off our own.
Overall total year C number that we disclose as part of our earnings release Cris.
Okay got it so that $90 million to $91 million is about right correct because the base correct.
Alright, great.
And then with.
Hoping to drill down a little bit more on the NII guide.
<unk>.
And specifically you guys deployed a bunch of cash this quarter.
Pretty high balances here.
<unk>.
What's the timing or level.
Where you guys wanted to get the cash too.
Percentage of assets.
Overtime.
So I think.
We have sort of the essence.
Actively considered part of our balance sheet strategy in terms of what those levels should be you know, we obviously consider into that all scenarios around sort of you know.
On liquidity stress situations in and all of that I would say, probably you know, but by the end of the year will end up somewhere in the range of maybe $600 million to $700 million of cash.
But that's you know.
That's what we anticipate for now.
We will have further details and further sort of modifications to that as warranted.
And you can find out more in our subsequent quarterly earnings calls.
Got it great.
Assuming.
The vast majority are outside of the loan growth guidance thats going into securities what is.
What's the yield that you guys are putting on.
For new Securities at this point.
So Chris we typically don't give out sort of yields.
The onset of new securities or loans that we book.
But happy to talk about sort of overall yield on the book and I think.
We have published some of the.
Information here I think.
It's sort of I think worthwhile, probably within sort of as expected rising interest rates, you're going to see like an uptick in yields, but obviously you know that has to be balanced by sort of the liquidity that we have in the environment.
And all of that.
Yeah.
Okay got it.
And then just wanted to confirm the guide around.
Credit and trending toward day, one seasonal reserves.
$302 22.
<unk>.
I guess just trying to parcel in.
What worked.
Like what are the what's the process or what's going into.
Uh huh.
Getting you down to close to that 1% level and is that 1% level, where you think you can get to or will it end up settling a little bit higher.
Given some of the newer types of consumer loans that you guys are putting on.
For this year.
Sure Chris Great question, So I think consistent with what we have maintained.
All along I think we will hit our sort of <unk> reserves and I would like to clarify that's sort of I would consider our core portfolio basically our portfolio composition at the end of the year.
That's why we expect to end up let's say 100, a little over 100 basis points. However, as you correctly pointed out.
We are putting on consumer loans right and.
And again sort of the tire margins.
Sort of in a higher probably in the losses, so you'll see some of that balance playing out.
Towards the latter half of the year again, it's a gradual ramp up it's not going to be a significant portion of the balance sheet.
During the course of our transformation, but having said that.
Or are you going to see that.
Ratio creep up as we put on more consumer balances.
Okay got it.
Thank you.
Thanks, Chris.
We'll take our next question from Laurie <unk>.
Hunsicker from Compass point research your line is open.
Great. Thanks, good morning.
I'm wondering if we can good morning.
Where we are with consumer growth.
On the last call you said you plan to add $100 million.
Sell in and I'll start my own.
Can you just give us a refresh is that still the plan for this year any changes.
Any other consumer buckets that you're adding.
Help us think about that.
No Laurie you're right. It is about 100 million a year and that stays the same but just for a context. There it is going to be less than 3% of our originations overall as a bank and I think what we're going to generate out of that is tremendous learnings out of deployment of new technologies for.
Search to servicing as we call it using technology. So the volume remains the same it's relatively small and I think the learnings from the program are enormous.
Okay and are there any other consumer option right now that you are considering adding on balance sheet or how are you thinking about that.
Oh, Yeah, we're looking at different ways to do that one through our digital account opening process.
<unk>.
Our workforce and incentive plans and also looking at other partnership so I think it's multiple distribution channel kind of approach to this.
Okay. Okay, and then when we spoke I guess on the last earnings call.
Back in October .
You had mentioned a potential net.
Net charge off guide around that 100 million dollar per year bucket at 4% to 5% is that still a big number or have you tightened that down.
How should we think about that could you repeat that.
Lori you were breaking up a little bit could you repeat the.
The numbers again.
Yes, sure on the under 100 million or so.
Got you.
Had mentioned back in October a potential net charge off guide.
Those loans of 4% to 5% is that a good number or do you have a tightened number around that.
So that still stays the same.
That's okay. At this time, Okay. Perfect and then can you just remind me that the sale of business operations or assets that took place this quarter are $1 $1 million gain what was that.
Uh huh.
So there are so there's a there's a loss to be recorded.
A restructuring charge, that's basically what's technology assets.
Server than others.
So upgraded to sort of obviously the newer generations.
Okay. So right. So the $864000 that was actually that was another question I had so that was the restructuring charge related to the what sorry.
Sorry, so laurie so the $851000 in restructuring charges that you were looking at that with us.
We don't think all of that was related to real estate charges.
That we pertaining to branch consolidation and then the write off we took and then Mike I just wanted to clarify I saw him talk to you were referring to sort of expense.
Part of the chart.
With $1 $1 million write down in technology assets.
Okay.
Okay I'm, so sorry, I thought you had a gain gain on sale of businesses of 157 million.
Did I read that wrong.
Yes.
It was a big yes, yes, youre right Laurie.
It was the big.
Sort of employee benefits.
That business that we sold before that's sort of that's as per our contracts will be since that's a game that you want to record this year.
Yes, it was the earn out from that basically.
Got it okay, great. Thanks, and then just going back to your restructuring charges.
Obviously, we've wrapped up 2021, how should we think about that in 2022 are we likely to announce.
Our clean luck or argued.
Thanks, how are you thinking about that.
Hi, Larry So I think I cant comment on sort of the exact nature of what the restructuring charges could be if there is any I think as a company. We obviously our preference is to keep.
Sort of on a go forward basis as clean as possible and it will be guided by sort of are in our strategy and the actions that might have to undertake in the coming quarters, but.
That's kind of where our thoughts are at this point.
Great. Okay. Thanks, and then one last question just going back to your net interest income guide.
Can you refresh us on what Youre thinking about in terms of accretion income in that number.
And then I mean comparatively your accretion income it looks like it was about $7 5 million for 2021.
Can you help us think about that.
Sorry Laurie.
Audio is a little bit.
You speak a bit louder, maybe but.
On the question.
So our accretion income can you help us think about what that looks like.
22, yes, yes sure sure I think you know.
What you see in the sort of the parent.
Quarter, that's kind of reflect you're going to see probably $1 million to $2 million per quarter.
On that.
And barring any sort of.
Surprises, but that's going down so also.
Great. Thanks, I'll leave it there.
Thank you thanks Laurie.
This now concludes our Q&A portion of the call I will hand, it back to United Monterey CEO for any closing remarks.
Thank you for joining us today on our call and for your interest in Berkshire Bank wishing everyone, a happy healthy and prosperous new year have a great day and be route Katy you can close the call now.
Thank you. So this now concludes today's call. Thank you all for joining you may now disconnect your lines.
Yeah.