Q2 2024 Berkshire Hills Bancorp Inc Earnings Call

Good morning ladies and gentlemen and welcome to the Berkshire Hills Bancorp second quarter 2024 earnings conference call. At this time our lines are in a listen-only mode. Following the presentation we will conduct a question and answer session.

Operator: for earnings conference call. At the time of lines on the list in only mode, following the presentation, we will conduct a question and answer session. To ask a question, please press star one on your touch-tone phone.

Operator: At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. To ask a question, please press star 1 on your touchtone phone. If at any time during this call you need assistance, please press star zero for the operator. This call is being recorded on July 18, 2024. I would now like to turn the conference over to Kevin Conn, Investor Relations Officer. Please go ahead.

Operator: If at any time during this call you need assistance, please press star zero for the operator. This call is being recorded on July 18th, 2024.

Kevin Conn: To ask a question, please press star 1 on your touchtone phone. If at any time during this call you need assistance, please press star 0 for the operator. This call is being recorded on July 18th, 2024. I would now like to turn the conference over to Kevin Conn, Investor Relations Officer. Please go ahead.

Kevin Conn: I would now like to turn a conference over to Kevin Conn and Best of Relations Officer. Please go ahead.

Kevin Conn: Good morning, and thank you for joining Berkshire Banc's second quarter earnings call. My name is Kevin Conn, and best of Relations and Corporate Development Officer. Here with me today are Nitin Mhatre, Chief Executive Officer; Sean Gray, Chief Operating Officer; Brett Brbovic, Chief Financial Officer; and Greg Lindinmuth, 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.

Kevin Conn: Good morning, and thank you for joining Berkshire Bank's second quarter earnings call. My name is Kevin Conn, Investor Relations and Corporate Development Officer. Here with me today are Nitin Mhatre, 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 stated. 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-gap-to-gap measures is included in our news release. At this time, I'll turn the call over to Nitin. Nitin? Thank you.

Kevin Conn: Good morning, and thank you for joining Berkshire Bank's second quarter earnings call. My name is Kevin Conn, Investor Relations and Corporate Development Officer.

Speaker Change: Here with me today are Nitin Mhatre, Chief Executive Officer, Sean Gray, Chief Operating Officer, Brett Berbovic, Chief Financial Officer, and Greg Lindenmuth, Chief Risk Officer.

Speaker Change: Our remarks will include forward-looking statements and refer to non-GAAP financial measures. Actual results could differ materially from those statements.

Kevin Conn: Please see our legal disclosure on page two of the earnings presentation. We're referencing forward-looking statements and non-GAAP financial measures. A reconciliation, a non-gap-to-gap measures is included in our news reports.

Speaker Change: Please see our legal disclosure on page 2 of the earnings presentation referencing forward-looking statements and non-GAAP financial measures.

Speaker Change: A reconciliation of non-gap-to- GAAP measures is included in our news release. If it's time, I'll turn the call over to Nitin. Nitin?

Nitin Mhatre: If this time, I'll turn the call over to Nitin. Nitin?

Nitin J. Mhatre: Thank you, Kevin. Good morning, everyone, and thank you all for joining us today.

Nitin Mhatre: Thank you, Kevin.

Nitin Mhatre: 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 second quarter. Overall, I'm pleased to report that we had a strong quarter with solid improvement in operating earnings quarter over quarter. Operating EPS of 55 cents was up 12% linked quarter. Operating net income of 23.2 million was up 11% linked quarter. ROTC was 9.65%, up 92 basis points linked quarter, and operating ROA was 79 basis points, up 8 basis points linked quarter. We are encouraged by the trends in key performance matrix, especially credit and expenses.

Nitin J. Mhatre: I'll begin my comments on slide three, where you can see the highlights for the second quarter. Overall, I'm pleased to report that we had a strong quarter with solid improvement in operating earnings quarter over quarter. Operating EPS of $0.55 was up 12% compared to the previous quarter. Operating net income of $23.2 million was up 11% compared to the previous quarter.

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 second quarter.

Nitin: Overall, I'm pleased to report that we had a strong quarter with solid improvement in operating earnings quarter over quarter. Operating EPS of $0.55 was up 12% linked quarter. Operating net income of $23.2 million was up 11% linked quarter.

Nitin J. Mhatre: Roth C was 9.65%, up 92 basis points linked quarter, and operating ROA was 79 basis points, up 8 basis points linked quarter. We are encouraged by the Transient Key Performance Matrix, especially credit and expenses. Credit costs continue to trend down, with net charge-offs at seven basis points of loans, the sixth consecutive quarter of declining net charge-offs. The loan loss allowance closed at 1.22% of loans, modestly above the upper end of our guidance range.

Nitin: ROTC was 9.65% up 92 basis points linked quarter and operating ROA was 79 basis points up 8 basis points linked quarter.

Nitin: We are encouraged by the Trends and Key Performance Matrix, especially credit and expenses.

Nitin Mhatre: Credit costs continue to trend down, with net charge offs at seven basis points of loans, the six consecutive quarter of declining net charge offs. Lone loss allowance closed at 1.2% of loans, modestly about the upper end of our guidance range. We updated the slides on overall free office and multifamily portfolios. The information on those slides highlights that our portfolio remains granular, geographically diverse, and resultantly less risky. The performance of those loan books remains strong. Our expense optimization focus continues to gain traction, operating expenses of 71.3 million, but down 2% linked quarter, reflecting lower compensation, occupancy, and equipment expense.

Nitin: Credit costs continued to trend down, with net charge-offs at seven basis points of loans, the sixth consecutive quarter of declining net charge-offs.

Nitin: Loan Loss Allowance closed at 1.22% of loans, modestly above the upper end of our guidance range.

Nitin J. Mhatre: We've updated the slides on the overall Cree office and multifamily portfolio. The information on those slides highlights that our portfolio remains granular, geographically diverse, and resultantly, less risky. The performance of those loan books remains strong. Our expense optimization focus continues to gain traction; operating expenses of $71.3 million were down 2% in the linked quarter, reflecting lower compensation, occupancy, and equipment expense.

Nitin: We've updated the slides on overall Cree office and multifamily portfolios.

Nitin: The information on those slides highlights that our portfolio remains granular, geographically diverse, and resultantly less risky.

Nitin: The performance of those loan brooks remains strong.

Nitin: Our expense optimization focus continues to gain traction.

Nitin: Operating expenses of $71.3 million were down 2% in Q1, reflecting lower compensation, occupancy, and equipment expense.

Nitin J. Mhatre: Our balance sheet remains strong, and capital ratios remain robust with a common equity tier one ratio of 11.6% and a tangible common equity ratio of 8.2%. We repurchased about 600,000 shares in the second quarter for $13 million.

Nitin Mhatre: Our balanced sheet remains strong. Capital ratio is remained robust with company equity tier 1 ratio of 11.6% and a tangible common equity ratio of 8.2%. We reap what is just about 600,000 shares in the second quarter for 30 million dollars. As it quality remains strong, with a modest decline in non-performing loans, with net charge loss at a low point of 7 basis points and ACL2 loans at a high point of 1.2%. Liquidity remains solid, and loans to deposit ratio was at 96% and 92%, respectively, excluding and including New York Health for sale balance. Average deposits were down 2% linked quarter and up 2.2% year over year.

Nitin: Our balance sheet remains strong.

Nitin: Capital ratios remain robust with common equity tier one ratio of eleven point six percent and a tangible common equity ratio of eight point two percent.

Nitin: We repurchased about 600,000 shares in the second quarter for $13 million.

Nitin J. Mhatre: Asset quality remains strong, with a modest decline in non-performing loans, with net charge-offs at a low point of 7 basis points and ACL to loans at a high point of 1.22%. Liquidity remained solid, and loans to deposit ratio was at 96% and 92%, respectively, excluding and including New York Health for Sale balance. Average deposits were down 2% in the latest quarter and up 2.2% year-over-year. Deposit costs were up by six basis points in the quarter, while reflecting a reduction in the rate of increase in deposit costs and beta. Average loan balances were up 2% last quarter and up 5% year-over-year, reflecting solid loan growth versus a relatively soft first quarter.

Nitin: Asset quality remains strong, with a modest decline in non-performing loans, with net charge-offs at a low point of 7 basis points, and ACL to loans at a high point of 1.22%.

Nitin: Liquidity remained solid and loans to deposit ratio was at 96% and 92% respectively, excluding and including New York Health for Sale balances.

Nitin: Average deposits were down 2% link quarter and up 2.2% year-over-year.

Nitin Mhatre: The deposit costs were up by six basis points in the quarter while reflecting a reduction in the rate of increase in the bulk costs and beta. Average loan balances were up 2% linked quarter and up 5% year of course. We continue to make steady progress on optimizing our branch network. We announced the sale of 10 branches in New York in March, which tightens our footprint and enhances the efficiency and profitability of our network. We remain fully committed to and invested in our remaining presence in New York. The transaction remains on track to close in the third quarter.

Nitin: Deposit costs were up by six basis points in the quarter while reflecting a reduction in the rate of increase in deposit costs and beta.

Nitin: Average loan balances were up 2% link quarter and up 5% year-over-year, reflecting solid loan growth versus a relatively soft first quarter.

Nitin J. Mhatre: We continue to make steady progress on optimizing our branch network. We announced the sale of 10 branches in New York in March, which tightens our footprint and enhances the efficiency and profitability of our network. We remain fully committed to and invested in our remaining presence in New York. The transaction remains on track to close in the third quarter. I'd note that we also consolidated three additional branches in the second quarter, bringing our total branch count to 93 today and projecting to 83 by the end of the third quarter. We believe that we are now at about the right size for a branch network.

Nitin: We continue to make steady progress on optimizing our branch network. We'd announced the sale of 10 branches in New York in March, which tightens our footprint and enhances the efficiency and profitability of our network.

Nitin: We remain fully committed to and invested in our remaining presence in New York.

Nitin Mhatre: I note that we also consolidated three additional branches in the second quarter, bringing our total branch count to 93 today and projecting to 83 by the end of the third quarter. We believe that we are now at about the right size for our branch network. We launched Berkshire 1 and expanded suite of digital deposit product proposition for our customers. We intend to make banking with Berkshire when, where, and how you wanted easier than ever. We continue to invest to digitize the client experience, which is reflected in our net promoters scores that reached a record high of 60, and mobile app readings which averaged over 4.5 stars for iOS and Android devices, with the latter reaching 4.8 stars for the first time.

Nitin: The transaction remains on track to close in the third quarter.

Nitin: I'd note that we also consolidated three additional branches in the second quarter, bringing our total branch count to 93 today and projecting to 83 by the end of third quarter.

Nitin J. Mhatre: We launched Berkshire One, an expanded suite of digital deposit product propositions for our customers. We intend to make banking with us when, where, and how you want it easier than ever. We continue to invest in digitizing the client experience, which is reflected in our net promoter scores that reached a record high of 60 and mobile app ratings, which averaged over 4.5 stars for iOS and Android devices, with the latter reaching 4.8 stars for the first time.

Nitin: We believe that we are now at about the right size for a branch network.

Nitin: We launched Berkshire One, an expanded suite of digital deposit product propositions for our customers.

Nitin: We intend to make banking with Berkshire when, where and how you want it, easier than ever.

Nitin: We continue to invest to digitize the client experience which is reflected in our net promoter scores that reached a record high of 60 and mobile app ratings which averaged over 4.5 stars for iOS and Android devices with the latter reaching 4.8 stars for the first time.

Nitin J. Mhatre: I want to thank all of my Berkshire Bank colleagues for their continued hard work and commitment to the bank. In this challenging environment for the banking sector, their commitment to our strategy and dedication to our customers is what continues to bring us together and truly set us apart. We had previously announced Brett Burbowick's promotion to the CFO position after David Rosado's departure in the second quarter. Brett has been with the bank for over 12 years and has deep institutional knowledge.

Nitin Mhatre: I would thank all of my Berkshire Bank colleagues for their continued hardware and commitment to the bank. Through this challenging environment for the banking sector, their commitment to our strategy and dedication to our customers is what continues to bring us together and truly set us apart.

Speaker Change: I want to thank all of my Berkshire Bank colleagues for their continued hard work and commitment to the bank.

Speaker Change: Through this challenging environment for the banking sector, their commitment to our strategy and dedication to our customers is what continues to bring us together and truly set us apart.

Nitin Mhatre: We had previously announced Berkshire's promotion to the CFO position after David Resort's departure in the second quarter. Red has been with the bank for over 12 years and has deep institutional knowledge. Red's prior role was a steep accounting officer for us, and prior to Berkshire Bank, Red worked at KPMG for about nine years.

Speaker Change: We had previously announced Brett Burbowick's promotion to the CFO position after David Rosado's departure in the second quarter.

Speaker Change: Brett has been with the bank for over 12 years and has deep institutional knowledge.

Nitin J. Mhatre: Brett's prior role was as Chief Accounting Officer for us, and prior to Berkshire Bank, he worked at KPMG for about nine years. I'd like to formally welcome Brett as our new CFO and thank him for stepping up to guide us through our journey ahead. I'll now turn it over to Brett to cover our financials in more detail and share our updated outlook for 2024.

Speaker Change: Brett's prior role was as Chief Accounting Officer for us, and prior to Berkshire Bank, Brett worked at KPMG for about nine years.

Nitin Mhatre: I'd like to formally welcome Brett as our new CFO and thank him for stepping up to guide us through our journey ahead.

Speaker Change: I'd like to formally welcome Brett as our new CFO and thank him for stepping up to guide us through our journey ahead. I'll now turn it over to Brett to cover our financials in more detail and share our updated outlook for 2024. Brett.

Brett Brbovic: I'll now turn it over to Brett to cover our financials in more detail and share our updated outlook for 2024. Brett?

Brett Berbovic: Thank you, Nitin. I'm excited to step into the new role and energized to work with my team to help us achieve our vision to be a high-performing, relationship-driven, community-focused bank. With that, I'll turn to the slides. Slide four shows an overview of the second quarter. As Nitin mentioned, operating earnings were $23.2 million, or $0.55 per share, up $0.06 compared to the linked quarters. Net interest income of $88.5 million increased $400,000 compared to the linked quarter. Operating non-interest income was $20.1 million, up 16% from the linked quarter.

Brett Brbovic: Thank you, then.

Brett Brbovic: I'm excited to step into the new role and energize to work with my team to help us achieve our vision to be a high-performing, relationship-driven, community-focused bank. With that, I'll turn to the slides. Slide 4 shows an overview of the second quarter. As Neon mentioned, operating earnings were 23.2 million, or 55 cents per share, of six sense linked quarter. Net interest income of 88.5 million increased 400,000 linked quarter. Operating non-interest income was 21 million, up 16 percent linked quarter. Total operating revenue was up 3% linked quarter. Operating expenses were 71.3 million, down 2% linked quarter and down 4% year over year, delivering operating leverage of 5% linked quarter.

Brett: Thank you, Nitin. I'm excited to step into the new role and energized to work with my team to help us achieve our vision to be a high-performing, relationship-driven, community-focused bank.

Speaker Change: With that, I'll turn to the slides.

Brett: Slide 4 shows an overview of the second quarter. As Nitin mentioned, operating earnings were $23.2 million, or $0.55 per share, up $0.06 linked quarter.

Brett: Net interest income of $88.5 million, increased $400,000 linked quarter.

Brett: Operating non-interest income was $20.1 million, up 16% linked quarter.

Brett Berbovic: Total operating revenue was up 3% linked quarter. Operating expenses were $71.3 million, down 2% linked quarter and down 4% year over year, delivering operating leverage of 5% linked quarter. Net charge-offs were 1.7 million or seven basis points of average loans, and we're down 11 basis points linked quarter. Provision expense was $6.5 million, up half a million linked quarter, bringing our coverage ratio to 122 basis points of loans.

Brett: Total operating revenue is up 3% linked quarter.

Brett: Operating expenses were $71.3 million, down 2% linked quarter, and down 4% year-over-year, delivering operating leverage of 5% linked quarter.

Brett Brbovic: Net charge offs were 1.7 million, or 7 basis points of average loans, and were down 11 basis points linked quarter. Provision expense was 6.5 million, up half a million linked quarter, bringing our coverage ratio to 122 basis points of loans. Slide 5 shows our average loan balances. Average loans were up 155 million linked quarter, or 2%, primarily driven by organic, by growth, and decree, and CNI. The modest declining consumer balances year over year reflect the continued runoff of the upstart portfolio. We've updated a page in the appendix, which shows the data on Upstart and Firestone.

Speaker Change: Net charge-offs were $1.7 million, or 7 basis points of average loans, and we're down 11 basis points linked quarter.

Speaker Change: Provision expense was 6.5 million, up half a million linked quarter, bringing our coverage ratio to 122 basis points of loans.

Brett Berbovic: Slide five shows our average loan balance. Average loans were up $155 million linked quarter, or 2%, primarily driven by growth in CRE and C&I. The modest decline in consumer balances year over year reflects the continued runoff of the upstart portfolio. We've updated a page in the appendix which shows the data on Upstart and FIERS.

Speaker Change: Slide five shows our average loan balances.

Speaker Change: Average loans were up $155 million linked quarter, or 2%, primarily driven by growth in CRE and C&I.

Speaker Change: The modest decline in consumer balances year over year reflects the continued runoff of the Upstart portfolio.

Brett Brbovic: The books combined are down to 124 million, or 1.3% of total loans, and are performing as expected. Slide 6 shows average deposit balances. Average deposits decreased $199 million, or 2% linked quarter, primarily driven by lower payroll deposits. Year over year, deposits were up 211 million, or 2%. I'd note that payroll deposits can move higher or lower depending on the day of the week that the quarter ends. Payroll deposits have generally risen over time, but we expect lower payroll deposits in the third and fourth quarter, given that those quarters end on a Monday and Tuesday, respectively, which are typically lower balance days for the business.

Speaker Change: We've updated a page in the appendix which shows the data on Upstart and Firestone.

Brett Berbovic: The books combined are down to $124 million, or 1.3% of total loans, and are performing as expected. Slide six shows the average deposit balance. Average deposits decreased $199 million, or 2%, linked quarter, primarily driven by lower payroll deposits. Year-over-year deposits were up $211 million, or 2%.

Speaker Change: The books combined are down to $124 million, or 1.3% of total loans, and are performing as expected.

Speaker Change: Slide 6 shows average deposit balances.

Speaker Change: Average deposits decreased $199 million, or 2% linked quarter, primarily driven by lower payroll deposits.

Speaker Change: Year-over-year, deposits were up $211 million, or 2%.

Brett Berbovic: I'd note that payroll deposits can move higher or lower depending on the day of the week that the quarter ends. Payroll deposits have generally risen over time, but we expect lower payroll deposits in the third and fourth quarters, given that those quarters end on a Monday and Tuesday, respectively, which are typically lower balance days for the business. Non-interest bearing deposits as a percentage of total deposits remained at 24%, consistent with last quarter. Deposit costs were 235 basis points, up 6 basis points compared to the previous quarter. The pace of the increase in deposit costs has dropped meaningfully over the last three quarters.

Speaker Change: I'd note that payroll deposits can move higher or lower depending on the day of the week that the quarter ends.

Speaker Change: Payroll deposits have generally risen over time, but we expect lower payroll deposits in the third and fourth quarter, given that those quarters end on a Monday and Tuesday respectively, which are typically lower balance days for the business.

Brett Brbovic: Non-interesting deposits as a percentage of total deposits remained at 24%, consistent with last quarter. Deposit costs were 235 basis points, up 6 basis points linked quarter. The increase in deposit costs has dropped meaningfully over the last three quarters. Our cumulative total deposit rate is 42% through 525 basis points of Fed tightening.

Speaker Change: Non-interest bearing deposits as a percentage of total deposits remained at 24% consistent with last quarter.

Speaker Change: Deposit costs were 235 basis points, up 6 basis points linked quarter.

Speaker Change: The pace of the increase in deposit costs has dropped meaningfully over the last three quarters.

Brett Berbovic: Our cumulative total deposit beta is 42% through 525 basis points of FedTitan. Turning to slide seven, we show net interest income. Net interest income was up modestly linked quarter and down 5% year over year. Net interest margin was up five basis points linked quarter to $3.20 versus $3.15 in the first quarter and $3.11 in 4Q23. While we expect continued funding cost pressure, the worst of the NIM compression is behind us, and we're seeing NIM tailwinds emerging, such as fixed-rate assets maturing and repricing higher.

Speaker Change: Our cumulative total deposit beta is 42% through 525 basis points of Fed tightening.

Brett Brbovic: Turning to slide 7, we show net interest income. Net interest income was up modestly linked quarter, and down 5% year over year. Net interest margin was up 5 basis points linked quarter to 320, versus 315 in the first quarter, and 311 in 4Q23. While we expect continued funding cost pressure, the worst of the nymph compression is behind us, and we're seeing nymph tailwinds emerging, such as fixed rate assets maturing and repricing higher. Also, our received fixed swaps will roll off in the medium term and provide another tailwind to Nymph. Slide 8 shows operating non-interesting income up 2.8 million or 16% linked quarter.

Speaker Change: Turning to slide 7, we show net interest income.

Speaker Change: Net interest income was up modestly linked quarter and down 5% year over year.

Speaker Change: Net interest margin was up 5 basis points length quarter to $3.20 versus $3.15 in the first quarter and $3.11 in 4Q23.

Speaker Change: While we expect continued funding cost pressure, the worst of the NIM compression is behind us, and we're seeing NIM tailwinds emerging, such as fixed-rate assets maturing and repricing higher.

Brett Berbovic: Also, our received fixed swaps will roll off in the medium term and provide another tailwind to NIMS. Slide 8 shows operating non-interest income up $2.8 million or 16% compared to the linked quarter. The growth was primarily driven by gains on SBA loan sales given higher volume. The growth in other fee revenues year over year was primarily driven by the reversal of tax credit amortization under new tax credit investment accounting.

Speaker Change: Also, our received fixed swaps will roll off in the medium term and provide another tailwind to NIM.

Speaker Change: Slide 8 shows operating non-interest income up $2.8 million or 16% linked quarter.

Brett Brbovic: The growth was primarily driven by gains on SBA loan sales, given higher volumes. The growth in other fee revenues year over year was primarily driven by the reversal of tax credit amortization under new tax credit investment accounting. The modest drop in loan related fees linked quarter was caused by a high level of swap fees recognized in the first quarter, and wealth management fees were also down linked quarter due to seasonal tax prep fees recognized in the first quarter. Slide 9 shows expenses. Operating expenses were down 2% linked quarter to 71.3 million and down 4% year over year.

Speaker Change: The growth was primarily driven by gains on SBA loan sales given higher volumes.

Speaker Change: The growth in other fee revenues year over year was primarily driven by the reversal of tax credit amortization under new tax credit investment accounting.

Brett Berbovic: The modest drop in loan-related fees linked quarter was caused by a high level of swap fees recognized in the first quarter, and wealth management fees were also down linked quarter due to seasonal tax prep fees recognized in the first quarter. Slide nine shows expenses. Operating expenses were down 2% quarter over quarter to $71.3 million, and down 4% year over year. Part of the sequential drop is due to seasonally higher payroll taxes in the first quarter, but we also had a nice drop in occupancy and equipment due to our expense initiative. Technology expense was up compared to the linked quarter on investments and digitizing the bank's offering. GAAP expenses of $70.9 million include an expense reversal relating to buildings sold during the quarter, which added $0.02 to GAAP earnings.

Speaker Change: The modest drop in loan-related fees linked quarter was caused by a high level of swap fees recognized in the first quarter and Wealth management fees were also down linked quarter due to seasonal tax prep fees recognized in the first quarter

Speaker Change: Slide 9 shows expenses.

Speaker Change: Operating expenses were down 2% linked quarter to $71.3 million and down 4% year-over-year.

Brett Brbovic: Part of the sequential drop is due to seasonally higher payroll taxes in the first quarter, but we also had a nice drop in occupancy and equipment due to our expense initiatives. Technology expense was up linked quarter on investments and digitizing the bank's offerings.

Speaker Change: Part of the sequential drop is due to seasonally higher payroll taxes in the first quarter, but we also had a nice drop in occupancy and equipment due to our expense initiatives.

Speaker Change: Technology expense was up linked quarter on investments and digitizing the bank's offerings.

Speaker Change: GAAP expenses of $70.9 million include an expense reversal relating to buildings sold during the quarter, which added $0.02 to GAAP earnings.

Brett Berbovic: Slide 10 is a summary of asset quality metrics. Non-performing loans are flat at the linked quarter and down 25% year over year. Net charge-offs were $1.7 million, and we're down $2.4 million in the linked quarter and down $4.1 million year-over-year. I note that our 10-year average net charge-offs to loans is 26 basis points. We've included a chart in the appendix with Berkshire's net charge-off rates versus the industry since 2000. Slide 11 shows that our Cree book is well diversified in terms of geography and collateral.

Brett Brbovic: It is a summary of asset quality metrics. Non-performing loans are flat at linked quarter and down 25% year over year. Net chargeoffs were 1.7 million and were down 2.4 million linked quarter and down 4.1 million year over year. I note that our 10-year average net charge-offs to loans is 26 basis points. We've included a chart in the appendix with Berkshire's net charge-off rates versus the industry since 2000.

Speaker Change: Slide 10 is a summary of asset quality metrics.

Speaker Change: Non-performing loans are flat at linked quarter and down 25% year-over-year. Net charge-offs were $1.7 million and we're down $2.4 million linked quarter and down $4.1 million year-over-year.

Speaker Change: I note that our 10-year average net charge-offs to loans is 26 basis points.

Speaker Change: We've included a chart in the appendix with Berkshire's net charge-off rates versus the industry since 2000.

Brett Brbovic: Slide 11 shows that our Cree book is well diversified in terms of geography and collateral. The credit quality of the Cree portfolio remains solid, with non-accrual loans at 13 basis points of period and loans. Slide 12 details our office portfolio. As noted last quarter, the weighted average loan to value ratios are about 60%, and a majority of the portfolio is in suburban and class A space. I want to highlight an office study published by the Kansas City Federal Reserve in April. The Fed data, which we've included in an appendix slide, shows that the probability of default rises meaningfully as the square footage of the property finance increases.

Speaker Change: Slide 11 shows that our Cree book is well diversified in terms of geography and collateral.

Brett Berbovic: The credit quality of the CRE portfolio remains solid, with non-accrual loans at 13 basis points of period on loan. Slide 12 details our office portfolio. As noted last quarter, the weighted average loan-to-value ratios are about 60 percent, and a majority of the portfolio is in suburban and Class A space. I want to highlight an office study published by the Kansas City Federal Reserve in April.

Speaker Change: The credit quality of the CRE portfolio remains solid with non-accrual loans at 13 basis points of period end loans.

Speaker Change: Slide 12 details our office portfolio.

Speaker Change: As noted last quarter, the weighted average loan-to-value ratios are about 60%, and a majority of the portfolio is in suburban and Class A space.

Speaker Change: I want to highlight an office study published by the Kansas City Federal Reserve in April . The Fed data, which we've included in an appendix slide, shows that the probability of default rises meaningfully as the square footage of the property finance increases, that is, tall towers in central business districts.

Brett Berbovic: The Fed data, which we've included in an appendix slide, shows that the probability of default rises meaningfully as the square footage of the property finance increases, that is, Tall Towers and Central Business District. As you know, 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 a lower default probability. Slide 13 shows details of our multifamily portfolio, which is $665 million or 7.2% of loans.

Brett Brbovic: That is tall towers and central business districts. As you know, we have very limited exposure to Boston's Financial District and 80% of our office properties finance are under 150,000 square feet, suggesting our portfolio has lower default probabilities.

Speaker Change: As you know, 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 lower default probabilities.

Brett Brbovic: Slide 13 shows details of our multifamily portfolio. The multifamily portfolio is 665 million or 7.2% of loans. The book is well diversified across our footprint, and we currently do not have any non performing loans or net charge offs, and criticize assets are 1.2%. While current credit quality metrics are strong, we recognize that economic uncertainties exist, and we're monitoring both new originations and existing portfolios carefully.

Speaker Change: Slide 13 shows details of our multifamily portfolio. The multifamily portfolio is $665 million, or 7.2% of loans.

Brett Berbovic: The book is well diversified across our footprint, and we currently do not have any non-performing loans or net charge-offs, and criticized assets are 1.2%. While current credit quality metrics are strong, we recognize that economic uncertainties exist, and we're monitoring both new originations and existing portfolios carefully. Slide 14 shows our available liquidity versus uninsured deposits. Coverage of uninsured deposits was 128% at the end of the second quarter.

Speaker Change: The book is well diversified across our footprint, and we currently do not have any non-performing loans or net charge-offs, and criticized assets are 1.2%.

Speaker Change: While current credit quality metrics are strong, we recognize that economic uncertainties exist, and we're monitoring both new originations and existing portfolios carefully.

Brett Brbovic: Slide 14 shows our available liquidity versus uninsured deposits. Coverage of uninsured deposits was 128% at the end of the second quarter. As Nathan mentioned, we have strong capital levels. Our tap capital management priority is to support organic loan growth. In Q2, we did repurchase 13.4 million of stock at an average cost of $21.88. Year 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. Our tangible book value per share increased 7% year over year. And if you adjust to add back the AOC I bond mark, on our adjusted tangible book value per share would be 25.85.

Speaker Change: Slide 14 shows our available liquidity versus uninsured deposits.

Speaker Change: Coverage of uninsured deposits was 128% at the end of second quarter.

Brett Berbovic: As Nitin mentioned, we have strong capital. Our top capital management priority is to support organic loan growth. In Q2, we repurchased $13.4 million of stock at an average cost of $21.88. Year 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. Our tangible book value per share increased 7% year over year

Speaker Change: As Nitin mentioned, we have strong capital levels. Our top capital management priority is to support organic loan growth.

Nitin: In Q2, we did repurchase $13.4 million of stock at an average cost of $21.88.

Nitin: Year-to-date, we've repurchased $17.4 million of stock at an average cost of $21.94.

Nitin: All of our repo this year has been completed below tangible book value per share.

Brett Berbovic: And if you adjust to add back the AOCI bond mark, our adjusted tangible book value per share would be $25.85. Slide 15 shows our outlook for the rest of 2024. We plan to give annual guidance in detail in January and each year and provide updated guidance on each mid-year earnings call. In the third quarter, we expect to book a $19 million non-operating gain on the branch sale. We do expect loan growth to be closer to the low end of the range provided in January and our NIM to be stable around $320.

Nitin: Our tangible book value per share increased 7% year-over-year and if you adjust to add back the AOCI bond mark on our adjusted tangible book value per share would be $25.85.

Brett Brbovic: Slide 15 shows our outlook for the rest of 2024. We plan to give annual guidance in detail in January and each year and provide updated guidance on each mid-year earnings call. In the third quarter, we expect to book a $19 million non-operated game on the branch sale. And payroll balances normalize for period end. We expect net interest income to be down modestly between $352 million and $354 million. Despite a strong second quarter, we expect non-interesting income to be between $75 million and $77 million. Offsetting the modest revenue weakness, we anticipate both provision expense and operating expenses to be below January guidance.

Nitin: Slide 15 shows our outlook for the rest of 2024. We plan to give annual guidance in detail in January and each year and provide updated guidance on each mid-year earnings call.

Nitin: In the third quarter, we expect to book a $19 million non-operating gain on the branch sale.

Nitin: We do expect loan growth to be closer to the low end of the range provided in January and our NIM to be stable around $320.

Brett Berbovic: We expect deposits to be lower than January guidance, largely driven by the New York branch sale and payroll balances normalized for period S. We expect net interest income to be down modestly between $352 million and $354 million. Additionally, despite a strong second quarter, we expect non-interest income to be between $75 million and $77 million. Offsetting the modest revenue weakness, we anticipate both provision expense and operating expenses to be below January guidance. We expect the provision to be between $25 and $27 million, and we expect operating expenses to be between $287 and $290 million. Taxes for the year will be closer to the high end of the range of 20 to 22 percent.

Nitin: We expect deposits to be lower than January guidance largely driven by the New York branch sale and payroll balances normalized for period end.

Nitin: We expect net interest income to be down modestly between $352 million and $354 million.

Nitin: Despite a strong second quarter, we expect non-interest income to be between $75 million and $77 million.

Nitin: Offsetting the modest revenue weakness, we anticipate both provision expense and operating expenses to be below January guidance.

Brett Brbovic: We expect the provision to be between $25 and $27 million, and we expect expenses to be between $287 and $290 million. Taxes for the year will be closer to the high end of the range of 20% to 22%.

Nitin: We expect the provision to be between $25 and $27 million, and we expect expenses to be between $287 and $290 million.

Nitin Mhatre: And with that, I'll turn it back to Nitin for further comments.

Nitin: Taxes for the year will be closer to the high end of the range of 20 to 22 percent.

Nitin J. Mhatre: And with that, I'll turn it back to Nitin for further comments. Nitin. Thank you, Brett.

Nitin Mhatre: Thank you, Brett. Second quarter marks the end of our three-year best plan. I'm proud of what our team has accomplished and how far we've come. We've streamlined the bank's footprint, channels, and businesses, including the sale of Berkshire Insurance Group, the sale of Mid-Atlantic and New York branches. We reactivated our organic growth muscle by restarting our loan growth engine starting 2021 and by implementing new deposit generation initiatives subsequently, including the addition of new bankers to supplement our strong existing team of bankers. We've digitized many of our services to enhance client experience and position the bank better for the future.

Nitin: And with that, I'll turn it back to Nitin for further comments. Nitin? Thank you, Brett.

Nitin J. Mhatre: The second quarter marks the end of our three-year best plan. I'm proud of what our team has accomplished and how far we've come.

Nitin: Second quarter marks the end of our three-year best plan.

Nitin J. Mhatre: We've streamlined the bank's footprint, channels, and businesses, including the sale of Berkshire Insurance Group, the sale of Mid-Atlantic, and New York Ranch. We reactivated our organic growth muscle by restarting our loan growth engine starting 2021 and by implementing new deposit generation initiatives, including the addition of new bankers to supplement our strong existing team of bankers. We've digitized many of our services to enhance the client experience and position the bank better for the future.

Nitin: I'm proud of what our team has accomplished and how far we've come.

Nitin: We've streamlined the bank's footprint, channels, and businesses, including the sale of Berkshire Insurance Group, the sale of Mid-Atlantic and New York branches.

Nitin: We reactivated our organic growth muscle by restarting our loan growth engine starting 2021 and by implementing new deposit generation initiatives subsequently, including the addition of new bankers to supplement our strong existing team of bankers.

Nitin: We have digitized many of our services to enhance client experience and position the bank better for the future.

Nitin Mhatre: In a difficult macroeconomic environment, we achieved the low end of our ROTC target with 10.1% ROTC for fully at 2023. We had a few misses too. We missed our R08 target by a small amount, and we decided to run off our upstart book, mid-at 2022 to de-risk our balance sheet. We also outsourced facilities management and reversed course to ensure that function about 18 months ago.

Nitin J. Mhatre: In a difficult macroeconomic environment, we achieved the low end of our ROTC target with 10.1% ROTC for full year 2023. We had a few misses, too. We missed our ROA target by a small amount, and we decided to run off our upstart book mid-year 2022 to de-risk our balance. We also outsourced facilities management and reversed course to insource that function about 18 months ago. We still have work to do

Nitin: In a difficult macroeconomic environment, we achieved the low end of our ROTC target with 10.1% ROTC for full year 2023.

Nitin: We had a few misses too.

Nitin: We missed our ROA target by a small amount and we decided to run off our upstart book mid-year 2022 to de-risk our balance sheet.

Nitin: We also outsourced facilities management and reversed course to insource that function about 18 months ago.

Nitin Mhatre: We still have work to do. Our focus near term is to accelerate our deposit growth engine, tightly manage expenses and credit, and expanding our digital banking offerings. The operating environment for the banking industry continues to be challenging given historic increases in interest rates to quail inflation. As noted last quarter, the yield curve is in its longest period of inversion in recorded history. We've included a slide in the appendix which provides historic context for the current unusual period. It highlights that the yield curve has been positively sloped for 83% of the time since 1976. The slide also sizes the potential net interest margin and net interest income increase for the industry during the periods of yield curves steepening.

Nitin J. Mhatre: Our focus near term is to accelerate our deposit growth engine, tightly manage expenses and credit, and expand our digital banking offer. The operating environment for the banking industry continues to be challenging, given historic increases in interest rates to quell inflation. As noted last quarter, the yield curve is in its longest period of inversion in recorded history. We've included a slide in the appendix which provides historical context for the current unusual period.

Nitin: We still have work to do.

Nitin: Our focus near term is to accelerate our deposit growth engine, tightly manage expenses and credit, and expanding our digital banking offerings.

Nitin: The operating environment for the banking industry continues to be challenging, given historic increases in interest rates to quell inflation.

Nitin: As noted last quarter, the yield curve is in its longest period of inversion in recorded history.

Nitin: We've included a slide in the appendix which provides historic context for the current unusual period.

Nitin J. Mhatre: It highlights that the yield curve has been positively sloped for 83% of the time since 1976. The slide also sizes the potential net interest margin and net interest income increase for the industry during periods of yield curve steepening. While no one can call interest rates, you can see from the historic data that the revenue left for the industry could easily be $100 billion or more when the yield curve normalizes. We look forward to a more normal banking environment heading into 2025 and 2026. With that, I'll turn it over to the operator for questions. Operator.

Nitin: It highlights that the yield curve has been positively sloped for 83% of the time since 1976.

Nitin: The slide also sizes the potential net interest margin and net interest income increase for the industry during the periods of yield curve steepening.

Nitin Mhatre: While no one can call interest rates, you can see from the historic data that the revenue left for the industry could easily be $100 billion or more when the yield curve normalizes.

Nitin: While no one can call interest rates, you can see from the historic data that the revenue left for the industry could easily be $100 billion or more when the yield curve normalizes.

Nitin Mhatre: We look forward to a more normal banking environment heading into 2025 and 26.

Nitin: We look forward to a more normal banking environment heading into 2025 and 2026.

Operator: With that, I'll turn it over to the operator for questions.

Operator: Operator. Thank you. Ladies and gentlemen, as a reminder, should you have any questions, please press store one on your touchstone phone.

Speaker Change: With that, I'll turn it over to operator for questions. Operator.

Speaker Change: Thank you. Ladies and gentlemen, as a reminder, should you have any questions, please press star 1 on your touchtone phone.

Operator: Thank you. The first question comes from Lori Hunsicker from Seaport Research Partners. Please go ahead.

Speaker Change: First question comes from Laurie Hunsicker from Seaport Research Partners. Please go ahead.

Laura Katherine Havener Hunsicker: Yeah, hi, good morning. And Brett, I just want to say congratulations and welcome in your new role.

Laura Hunsicker: Good morning, and Brett, I just want to say congratulations and welcome in your new role. Thank you.

Laura Katherine Havener Hunsicker: Yeah, hi, good morning. And Brett, I just want to say congratulations and welcome in your new role.

Laura Katherine Havener Hunsicker: Can you just take us through, in terms of non-interest income, can you just help us think a little bit about what SBA loan sales will look like. You know, wealth management fees, obviously down a little bit, just what that will look like. And then that other line that was $3.3 million, was there anything non-recurring in that? Comment on those three.

Brett Brbovic: Can you just take us through in terms of non-interest income, you need to help us think a little bit about what SBA loan sales will look like, you know, wealth management fees, obviously down a little bit. But just with that will look like, and then that other other line that was 3.3 million, is there anything non-recurring in that, if you could just comment on those three in any order, that's okay. I'll start with the other line, Lori, that's driven by our tax credit amortization, the change in the accounting that we did in Q1. So if you recall, we used to have tax credit amortization as a contra fee income or contra non-interest income.

Laura Katherine Havener Hunsicker: Can you just take us through, in terms of non-interest income, can you just help us think a little bit about what SBA loan sales will look like?

Speaker Change: You know, wealth management fees obviously down a little bit, just what that will look like. And then that other other line that was $3.3 million, was there anything non-recurring in that? If you could just comment on those three in any order, that would be great.

Brett Berbovic: I'll start with the other line, Lori. That's driven by our tax credit amortization, the change in accounting that we did in Q1. So, if you recall, we used to have tax credit amortization as a contra fee income or contra non-interest income. So now under the new accounting, that goes away and goes all below the line. So that's why we're seeing an uplift there. Plus, in the first quarter, we also had a one-time adjustment for the change in accounting.

Speaker Change: I'll start with the other line, Lori. That's driven by our tax credit amortization, the change in the accounting that we did in Q1.

Speaker Change: So if you recall, we used to have tax credit amortization as a contra fee income or contra non-interest income.

Brett Brbovic: So now, under the new accounting, that goes away and goes all below the line. So that's why we're seeing an uplift there. Plus, in the first quarter, we also had a one-time adjustment for the change in accounting. So now we believe, you know, the tax credit amortization portion of that line is right-sized for FDA.

Speaker Change: So now under the new accounting, that goes away and goes all below the line.

Speaker Change: So that's why we're seeing an uplift there. Plus in the first quarter we also had a one-time adjustment for the change in accounting. So now we believe you know the tax credit amortization portion of that line is right sized.

Brett Berbovic: So now we believe the tax credit amortization portion of that line is the right size for SBA. Sorry, Brett, what was the one-time adjustment there? That was a drop of about 700,000 in Q1. So it was negative non-interest income. Oh, obviously.

Brett Brbovic: Sorry, what was the one-time adjustment there? That was a; it was a drop of about 700,000 in Q1. So it was negative non-interest income. Oh, that obviously didn't reoccurring to you too. Gotcha. Okay, so the 3.3 million roughly is a good run rate; the 1.27, the one-time item adjustment was a 700,000 in one Q. Gotcha. Thanks.

Speaker Change: for SBA. Sorry, Brett, what was the one-time adjustment there?

Brett: That was a drop of about $700,000 in Q1, so it was negative non-interest income.

Brett Berbovic: Gotcha, gotcha. Okay, so the $3.3 million roughly is a good run rate, the $1.87. The one-time item adjustment was $700,000, in one cue.

Brett: That obviously didn't reoccur in Q2.

Brett: Gotcha, gotcha. Okay, so the $3.3 million roughly is a good run rate. The $1.87, sort of, the one PEM item adjustment was a $700,000 in one queue. Correct.

Brett Berbovic: Gotcha. Okay, gotcha. Thanks. And then the sorry, I didn't mean to cut you off the SBA. Oh, no, no, no problem.

Brett Brbovic: And then, sorry to me to cut you off, the SBA. No problem. The SBA side, you know, we really like the business they had a they had a good quarter. It was slightly above our, you know, kind of a quarter average, but they have strong momentum going forward. So we look forward to seeing the results in the next quarter. Great. And then the last eight quarters, it's average closer to 2.7 million. Of course, they had a really good quarter. But, as Brett said, they got a really, really strong momentum. So we're optimistic about that, that business.

Speaker Change: Gotcha, okay, gotcha.

Brett Berbovic: The SBA side, you know, we really like the business they had; they had a good quarter. It was slightly above our, you know, kind of quarterly average, but they have strong momentum going forward. So we look forward to, you know, seeing the results in the next quarter. Laurie, over the last eight quarters, it's averaged closer to $2.7 million a quarter, so they had a really good quarter, but as Brett said, they have really strong momentum, so we're optimistic about that business. That's great. That's very helpful. And then just the wealth management line.

Brett: [inaudible]

Brett: Sorry, I didn't mean to cut you off.

Speaker Change: The SBA side, you know, we really like the business. They had a good quarter. It was slightly above our, you know, kind of eight quarter average, but they have strong momentum going forward. So we look forward to, you know, seeing the results in the next quarter.

Speaker Change: Great, and then the last 8 quarters, Lori, over the last 8 quarters, it's averaged closer to $2.7 million a quarter, so they had a really good quarter, but as Brett said, they got a really, really strong momentum, so we're optimistic about that business.

Brett Brbovic: That's great. That's helpful.

Brett Brbovic: And then just the wealth management line. I mean, it's moved around any just any general comments with the drop between March and small drop, but how should we be thinking about that? First quarter, I'm sorry now. Yeah, I'm just going to say the drop is really corresponding to the tax prep fees in the first quarter that season. So I think that just normalizes for it, but outside of that, I think the business is moving along quite well. The assets and the management or administration were up about six to seven percent year over years. So we believe the momentum is there.

Laura Katherine Havener Hunsicker: I mean, it's moved around. Any just any general comments on the drop between March and June? It's a small drop, but how should we be thinking about that?

Speaker Change: That's great. That's helpful. And then just the wealth management line. I mean, it's it's moved around. Any just any general comments with the drop between March and June ? It's a small drop, but how should we be thinking about that?

Nitin J. Mhatre: First quarter, oh, I'm sorry, Nitin.

Nitin J. Mhatre: I'm sorry, Nan. Yeah, I was just going to say the drop is really corresponding to tax prep fees in the first quarter, which is seasonal. So I think that just normalizes for it. But outside of that, I think the business is moving along quite well. The assets and the management or administration were up about 6% to 7% year over year. So we believe the momentum is there. We just have to see how that plays out in fees and revenues.

Speaker Change: I'm sorry, Nitin. Yeah, I was just going to say the drop is really corresponding to the tax prep fees in the first quarter that's seasonal, so I think that just normalizes for it, but outside of that, I think the business is moving along quite well. The assets under management or administration were up about six to seven percent year over year, so we believe the momentum is there. We just have to see how that plays out in the fees and revenues.

Brett Brbovic: We just have to see how that plays out in the fees and revs. Gotcha, okay, that's helpful.

Laura Katherine Havener Hunsicker: Gotcha. Okay, that's helpful. And then on the expense side, the $384,000 in sort of merger, restructuring, and charge reversal you had mentioned that was related to a building sale. Do you have any other color on that?

Brett Brbovic: And then on the expense side, the 384,000 of sort of merger, restructuring, charge reversal, you had mentioned that was related to a building sale or do you have any other color on that? So we had previously moved three buildings to help for sale, probably about a year ago. Those sales just closed this quarter, and we realized a small gain.

Speaker Change: Gotcha. Okay, that's helpful. And then on the expense side, the $384,000 of merger, restructuring, charge reversal, you had mentioned that was related to a building sale. Do you have any other color on that?

Brett Berbovic: So we had previously moved three buildings to be held for sale, probably about a year ago. Those sales just closed this quarter, and we realized a small gain.

Speaker Change: So we had previously moved three buildings to held for sale probably about a year ago. Those sales just closed this quarter and we realized a small gain.

Brett Brbovic: Okay, were those the Connecticut branches that you closed, or was that something different? No, these were other office buildings that had been previously moved to help for sale.

Laura Katherine Havener Hunsicker: Okay, and were those the Connecticut branches that you closed, or was that something different?

Brett Berbovic: No, these were other office buildings that had been previously moved out for sale.

Speaker Change: Okay and were those the Connecticut branches that you closed or was that something different? No these were other office buildings that had been previously moved out for sale.

Brett Brbovic: Gotcha, okay, and then just in terms of merger and restructuring charges going forward, at the moment, that's looking completely clean; there's nothing on the horizon. Is that right? That's about right; we should see a little, a little bit in Q3 as we close on the New York branch sales, but shouldn't be overly significant.

Laura Katherine Havener Hunsicker: Gotcha. Gotcha. Okay. And then just in terms of merger and restructuring charges going forward at the moment, that's looking completely clean. There's nothing on the horizon, is that right?

Speaker Change: Gotcha. Gotcha. Okay. And then, just in terms of merger and restructuring charges going forward at the moment, that's looking completely clean. There's nothing on the horizon. Is that right? Yes. Okay.

Brett Berbovic: That's about right. We should see a little bit in Q3 as we close on the New York branch sales, but it shouldn't be too significant.

Speaker Change: That's about right. We should see a little a little bit in Q3 as we close on the New York branch sales.

Brett Brbovic: Okay, perfect, and then the CFO transition, were there any one-time classes associated with that in this quarter or will there be next quarter? How should we think about that? No, Laura, they weren't there any.

Laura Katherine Havener Hunsicker: Okay, perfect. And then the CFO transition, were there any one-time costs associated with that in this quarter? Or will there be next quarter? How should we think about that?

Speaker Change: But shouldn't it be overly significant?

Speaker Change: Okay, perfect. And then the CFO transition, were there any one-time costs associated with that in this quarter, or will there be next quarter? How should we think about that? No, Laura, there weren't any.

Brett Berbovic: No, Laura, they weren't any.

Laura Katherine Havener Hunsicker: Okay, okay, great. And then the tax rate, and I appreciate the refreshed guidance here, but your tax rate of 23% this quarter seems to be over that high end of the guide. How should we think about that? (inaudible)

Brett Brbovic: Okay, okay, great, and then tax rate, and I appreciate the refresh guidance here, but your tax rate of 23% this quarter seems to be over that high end of the guide. How should we think about that? Just an anomaly and come down. Yes, we have another tax credit coming in later in the second half of this year that will help drive the tax rate down to kind of the high end of our guidance between 20 and 22%.

Speaker Change: Okay, okay, great. And then tax rate, and I appreciate the refreshed guidance here, but your tax rate of 23% this quarter seems to be over that that high end of the guide. How should we think about that?

Brett Berbovic: Yes, we have another tax credit coming in later in the second half of this year that will help drive the tax rate down to kind of the high end of our guidance between 20 and 22 percent. Okay.

Speaker Change: Yes, we have another tax credit coming in later in the second half of this year that will help drive the tax rate down to kind of the high end of our guidance between 2022 percent.

Laura Katherine Havener Hunsicker: Okay, okay, great. And then, um, just, um... Two more for me.

Brett Brbovic: Okay, okay, great, and then just two more for me. Margin, can you just comment a little bit? I mean, you obviously made some comments, but it does seem like it still might be under a little bit of pressure just because of the funding side. Can you help us think about what that looks like from that relative to the 320 level is just as we look toward next quarter? Yeah, we feel strongly that you will be able to maintain the 320 level. Like I mentioned, we have some tailwinds coming; our fixed receive fixed assets repricing over the next 12 months.

Speaker Change: Okay, okay, great. And then, um, just, um,

Laura Katherine Havener Hunsicker: Margin, can you just comment a little bit? I mean, you obviously made some comments, but it does seem like it might still be under a little bit of pressure just because of the funding side. Can you help us think about what that looks like from the relative to the 320 level as we look towards next?

Speaker Change: Two more for me. Margin, can you just comment a little bit? I mean, you obviously made some comments, but it does seem like it still might be under a little bit of pressure just because of the funding side. Can you help us think about what that looks like?

Speaker Change: from the relative to the 320 level is just as we look towards next quarter.

Brett Berbovic: Yeah, we feel strongly that you will be able to maintain the 320 level. Like I mentioned, we have some tailwinds coming, our received fixed assets repricing over the next 12 months. We also have our fixed hedges rolling off over the near moderate term, so we believe those tailwinds will help maintain the 320 guidance.

Speaker Change: Yeah, we feel strongly that you will be able to maintain the 320 level.

Speaker Change: Like I mentioned, we have some tailwinds coming, our received fixed assets repricing over the next 12 months.

Brett Brbovic: We also have our fixed hedges rolling off over the near moderate term, so we believe those tailwinds will help maintain the 320 guidance.

Speaker Change: We also have our FICS...

Speaker Change: Rolling off over the over the near moderate term, so we believe those tailwinds will help maintain the 320 guidance.

Brett Brbovic: Okay, great, and then just last question here on office. Really, really appreciate all your details here. The 8%, and I'm looking at side 12 here, the 8% that's maturing in 2024. Is that 8% maturing for the rest of 2024? Was that still your 2024? I guess round numbers, that's about 40 million. Can you help us think about what that's looking like for the next two quarters? And, you know, any color you can give us on. and vacancies in that bucket or class ABC, any other details you can provide on that.

Laura Katherine Havener Hunsicker: Okay, okay, great. And then just one last question here in the office. I really, really appreciate all your details here.

Laura Katherine Havener Hunsicker: The 8%, and I'm looking at slide 12 here, the 8% that's maturing in 2024, is that 8% maturing for the rest of 2024? Was that the full year 2024? I guess, round numbers, that's about 40 million. Can you help us think about what that's looking like for the next two quarters and, you know, any color you can give us on vacancies in that bucket or Class A, B, C. Any other details you can provide on that.

Speaker Change: Okay, okay, great. And then just last question here on office.

Speaker Change: I really, really appreciate all your details here. The 8%, and I'm looking at slide 12 here, the 8% that's maturing in 2024, is that 8% maturing for the rest of 2024, or was that full year 2024? I guess round numbers, that's about 40 million. Can you help us think about...

Speaker Change: You know what that's looking like for the next two quarters and you know any color you can give us on

Speaker Change: Vacancies in that bucket or Class A, B, C. Any other details you can provide on that?

Gregory D. Lindenmuth: Yeah, Greg, do you want to take that?

Gregory Lindenmuth: Yeah, Greg, you want to take that?

Laura Katherine Havener Hunsicker: Sure. Hi Laurie. How are you?

Gregory Lindenmuth: Sure. Hi, Laurie. How are you?

Gregory D. Lindenmuth: I hate Greg. Thanks so much. No problem.

Gregory Lindenmuth: I hate Greg. Thanks so much. No problem at all.

Speaker Change: Yeah, Greg, you want to take that?

Gregory D. Lindenmuth: No problem at all. When we started the year off, 23% of the portfolio was maturing, so we're down to 8% for the remaining part of the year. So, so far, so good. We've had some real success stories in our maturities with payoffs, some sales, all getting out at par. If you look at Class A-D, it's almost evenly split between the remaining amount this year. It's $21 million in Class A and roughly $18-19 million in Class B. And then the buckets for the maturities are relatively balanced as well. It's about 60% of that remaining is in 3Q, and 40% in 4Q.

Greg: Sure. Hi, Laurie. How are you?

Gregory Lindenmuth: Well, we started the year off. 23% of the portfolio was maturing. So we're down to 8% for the remaining part of the year. So, so far, so good. We've had some real success stories in our maturities with payoffs, some sales, all getting out that at par. If you look at that class, AD, it's almost evenly split the remaining amount this year. It's 21,000,000 a day and roughly 18, 19,000,000 in class B. And then the buckets for the maturities are relatively balanced as well. It's about 60% of that remaining; is it in 3,000? 40% for Q.

Laura Katherine Havener Hunsicker: I hate Greg, thanks so much.

Greg: No problem at all. When we started the year off, 23% of the portfolio was maturing, so we're down to eight.

Greg: part of the year.

Speaker Change: So, so far, so good. We've had some real success stories in our maturities with payoffs, some sales, all getting out at par.

Speaker Change: If you look at that Class A-D, it's almost evenly split the remaining amount this year. It's $21 million in A and roughly $18-19 million in Class B.

Speaker Change: And then the buckets for the maturities are relatively balanced as well. It's about 60% of that remaining is in 3Q, 40% in 4Q.

Gregory D. Lindenmuth: Okay, and then any comment on vacancies on those properties? Any color there? Yeah, the vacant, it's very consistent with the average of the portfolio, so most are 90% occupied, our lowest being probably around 80% occupied one-to-one cash flow. It is one of our criticized assets that we're keeping an eye on that's coming up in the third quarter.

Gregory Lindenmuth: Okay.

Gregory Lindenmuth: And then any comment on vacancies on those properties, any color there? Yeah, the vacant, yeah, it's very consistent with the average of the portfolio. So most are 90% occupied, are lowest being probably around 80% occupied one to one cash low. It is one of our criticized assets that we're keeping an eye on. That's coming up in the third quarter. Okay, perfect. Very helpful. That's great.

Speaker Change: Okay. And then any, any comment on vacancies on those properties?

Speaker Change: Any color there? Yeah, the vacant. Yeah, it's very consistent with the average of the portfolio. So most are 90% occupied our lowest being probably around 80% occupied one-to-one cash flow it is one of our criticized Assets that we're keeping an eye on that's coming up in the third quarter

Laura Katherine Havener Hunsicker: Okay, perfect. Very helpful. That's great. That's all for me.

Gregory Lindenmuth: That's all from me. Thank you. Thank you, Laurie. Thanks, Greg. Thank you.

Operator: Thank you, Laurie. Thanks, Greg.

Speaker Change: Okay, perfect very helpful. That's great. That's all for me. Thank you

Mark Thomas Fitzgibbon: Thank you. The next question comes from Mark Fitzgibbon at Piper Sandler. Please go ahead.

Mark Fitzgibbon: Next question comes from Mark Fitzgibbon at Piper Sandler.

Speaker Change: Thank you, Laurie. Thanks, Greg.

Mark Fitzgibbon: Please go ahead. Hey, guys. Good morning.

Speaker Change: Thank you. Next question comes from Mark Fitzgibbon at Piper Sandler. Please go ahead.

Mark Fitzgibbon: I good morning, three years ago when you set out your targets, those three your targets for best. Many of us thought they were; they were low because they were below where your peers were. And you guys ultimately came up short of those targets.

unknown: [inaudible]

Mark Thomas Fitzgibbon: Hey guys, good morning.

Mark Thomas Fitzgibbon: [inaudible]

Mark Thomas Fitzgibbon: Good morning. Three years ago when you set out your targets, those three-year targets for BEST, many of us thought they were low because they were below where your peers were, and you guys ultimately came up short of those targets.

Mark Thomas Fitzgibbon: Good morning. Three years ago, when you set out your targets, those three-year targets for BEST, many of us thought they were low because they were below where your peers were, and you guys ultimately came up short of those targets. And so I guess I'm wondering, does that change the strategic thinking of senior management and the board? And what are your new strategic goals? And what kind of timeline are you looking for?

Nitin Mhatre: And so I guess I'm wondering, does that change the strategic thinking of senior management in the board? And what are your new strategic goals, and what kind of timeline are you looking at? Yeah, Mark. Thanks for the question. As we set out the plan, the intent was we were literally operating at the bottom of our peer group with the broad sea and our way and all other financial matrix. Our intent was to get to the median of the peer group over a, you know, medium outlook and then get to, you know, build a journey towards getting to the top quarter.

Mark Thomas Fitzgibbon: And so I guess I'm wondering, does that change the strategic thinking of senior management and the board? And what are your new strategic goals and what kind of timeline are you looking at?

Nitin J. Mhatre: Yeah, Mark, thanks for the question. As we set out the plan, the intent was that we were literally operating at the bottom of our peer group, with the broad C and ROA and the other financial matrix. Our intent was to get to the median of the peer group over a midterm outlook and then build a journey towards getting to the top quartile. I think we're roughly about the 65th percentile, so we've climbed up about 35 percentile points in the relative ranking on broad C and ROA, and obviously, we didn't anticipate the whole inverted Buell curve and March Madness, as we call it, last year.

Mark Thomas Fitzgibbon: Yeah, Mark, thanks for the question. As we set out the plan, the intent was we were literally operating at the bottom of our peer group with the broad C and ROA and all other financial matrix.

Mark Thomas Fitzgibbon: Our intent was to get to the median of the peer group over a mid-term outlook and then get to build a journey towards getting to the top quartile. I think we're roughly about...

Nitin Mhatre: I think we're roughly about 65th, you know, percentile. So we've climbed up about 35% of points in the relative ranking on Broad Sea and R.O.A. And obviously we didn't anticipate the whole inverted bill curve and March Madness as we call it last year. So I think with that said, we are proud as to how far we've come from where we were. And at this point of time, I think the journey is going to be how do we continue to improve our momentum, as we talked about in my marks. The focus is on growing deposits, managing expenses, and credit.

Mark Thomas Fitzgibbon: 65th percentile. So we've climbed up about 35 percentile points in the relative ranking on ROTC and ROA and obviously we didn't anticipate the whole inverted wheel curve and march madness as we called it last year.

Mark Thomas Fitzgibbon: So, I think with that said, we're proud of how far we've come from where we were, and at this point in time, I think the journey is going to be how do we continue to improve our momentum. As we talked about in my remarks, the focus is on growing deposits, managing expenses, and credit. And I think you've seen it consistently over the last four years, that expense delta year over year in the last four years has significantly outpaced the So, I think we believe that it's going to continue to be the case.

Mark Thomas Fitzgibbon: So I think with that said, we're proud as to how far we've come from where we were.

Mark Thomas Fitzgibbon: And at this point of time, I think the journey is going to be how do we continue to improve our momentum as we talked about in my remarks.

Nitin Mhatre: And I think you've seen it consistently over the last four years that expense of delta year over year in the last four years has significantly outpaced the delta for the peers, which means our expenses were growing at a lower pace than the market and the peers. leading with deposits and managing credit tightly. So I think we will have a lot of those tailwinds as we get into the next three years.

Speaker Change: The focus is on growing deposits, managing expenses and credit. And I think you've seen it consistently over the last four years that expense delta year over year in the last four years has significantly outpaced

Mark Thomas Fitzgibbon: We believe our initiatives that we implemented for loans have turned out well, and now the deposit initiatives are kicking in, and credit is continued to be monitored tight. Leading with deposits and managing credit tightly. So I think we will have a lot of those tailwinds as we get into the next three years. And as Brett mentioned in his remarks, when we give the annual guidance in January, we would also think about, do we give a midterm outlook somewhere in the middle of next year when there is better clarity on the macro environment?

Speaker Change: We believe our initiatives that we implemented for loans have turned out well and now the deposit initiatives are kicking in.

Speaker Change: And credit is continued to be monitored tight and our head of commercial, which is where almost 65-66% of our book is, is incredibly focused on quality of relationships, quality of sponsors and

Speaker Change: leading with deposits and managing credit tightly. So I think we will have a lot of those tailwinds as we get into the next three years.

Nitin Mhatre: And I think Brett mentioned in his remarks that when we give the annual guidance in January, we would also think about do we give midterm outlook somewhere in the middle of next year when there is better clarity on the macro environment. Okay, so you're not recalibrating quite yet. You're going to have to wait until you're in for that. Yes. Okay.

Speaker Change: And I think Brett mentioned in his remarks when we give the annual guidance in January , we would also think about do we give midterm outlook somewhere in the middle of next year when there is better clarity on the macro environment.

Speaker Change: Okay, so you're not recalibrating quite yet. We're going to have to wait until year-end for that.

Nitin J. Mhatre: Okay, so you're not recalibrating quite yet. We're going to have to wait till year end for that. Yes. Okay, I'm changing gears a little bit. It looked like you grew commercial real estate by about 113 million this quarter. Can you share with us what kind of breakdown of the types of CRE you're booking and maybe what the average rates were?

Mark Fitzgibbon: Changing gears a little bit. It looked like you grew from real estate about 113 million in this quarter. Can you share with us what kind of a breakdown of the types of CRE you're booking and maybe what the average rates were? The average rate for the focus about it is closer to 8% mark. I think it was about 7.85 something for the overall commercial book. So closer to 8. And again, most of these existing clients, existing and well-known sponsors, and some part of it is also the drawings on the construction loans that are in the portfolio.

Speaker Change: Yes.

Speaker Change: Okay, I'm changing gears a little bit. It looked like you grew commercial real estate about $113 million this quarter. Can you share with us what kind of the breakdown of the types of CRE you were booking and maybe what the average rates were?

Nitin J. Mhatre: The average rate for the book is about 8% Mark, I think it was about 7.85 something for the overall commercial book, so closer to eight. And again, most of these existing clients are existing and well-known sponsors, and some part of it is also the draws on the construction loans that are in the portfolio.

Speaker Change: The average rate for the book is about, it is closer to 8% Mark, I think it was about 7.85 something for the overall commercial book, so closer to 8.

Speaker Change: And again, most of these existing clients, existing and well-known sponsors, and some part of it is also the draws on the construction loans that are in the portfolio.

Mark Fitzgibbon: Okay.

Mark Thomas Fitzgibbon: Okay. And then I was curious, has the Biden proposal to cap rent increases nationwide on multifamily up to 5% a year kind of changed how you think about multifamily long term?

Nitin Mhatre: And then I was curious. Is the Biden proposal to cap rent increases nationwide on multi-family up to 5% a year kind of changed how you think about multi-family long-term? Not fundamentally. I think we've been prudent about it all along and especially in the last few years that I've been here. We've been consistently focused on more of the quality of the sponsor, the borrower risk rate, as well as the facilities. So I think really the focus remains to be staying prudent. And in fact, even now, as you know, the market demand has somewhat subsided. But the lenders have backed away as well.

Speaker Change: Okay. And then I was curious, has the Biden proposal to cap rent increases nationwide on multifamily up to 5% a year kind of changed how you think about multifamily long-term?

Nitin J. Mhatre: Not fundamentally. I think we've been prudent about it all along, and especially in the last few years that I've been here, we've been consistently focused on more of the quality of the sponsor, the borrower risk rate, as well as the facilities. So I think really the focus remains to be staying prudent. And in fact, even now, as you know, market demand has somewhat subsided, but lenders have backed away as well. So we do potentially have more swings at the plate, but we've been very prudent and judicious and leading with the relationships and quality of deposits and sponsors.

Speaker Change: Not fundamentally. I think we've been prudent about it all along, and especially in the last few years that I've been here, we've been consistently focused on more of the quality of the sponsor, the borrower risk rate, as well as the facilities. So I think,

Speaker Change: Really, the focus remains to be staying prudent, and in fact, even now, as you know, the market demand has somewhat subsided.

Nitin Mhatre: So we do have potentially more swings at the plate, but we've been very prudent and judicious and leading with relationship and quality of deposits and sponsors.

Speaker Change: but the lenders have backed away as well. So we do have potentially more swings at the plate, but we're being very prudent and judicious and leading with relationship and quality of deposits and sponsors.

Mark Thomas Fitzgibbon: And then lastly, the NIM guidance that you gave, does that assume any rate cuts this year? It assumes

Mark Fitzgibbon: Great.

Mark Fitzgibbon: And then lastly, the NIM guidance that you gave, does that assume any rate cuts this year? It assumes one this year in the fourth quarter. Thank you. Thanks, Mark. Thank you.

Speaker Change: Great. And then lastly, the NIM guidance that you gave, does that assume any rate cuts this year?

Nitin J. Mhatre: It assumes one will be released this year in the fourth quarter. Thank you.

Speaker Change: It assumes one this year in the fourth quarter.

Speaker Change: Thank you.

Operator: Thank you. The next question comes from Christopher O'Connell from KPW. Please go ahead.

Christopher O'Connell: Next question comes from Christopher O'Connell from KBW. Please go ahead. Thank you. Good morning. Um, good morning.

Speaker Change: Thanks, Mark.

Speaker Change: Thank you. Next question comes from Christopher O'Connell from KBW. Please go ahead.

Christopher O'Connell: Good morning. For that last question, can you just remind us how much of the loan portfolio is short-term or repriced with the short end of the curve?

Christopher O'Connell: All right, last question. Can you just remind us how much of the loan portfolio is short-term reprises with the short end of the curve? The rough rate curve, Chris, is about 42% I believe what the portfolio is, uh, fixed and 58 is floating. And roughly of the floating about two-thirds that has floors as well, if that was your question. Okay, yeah, that's helpful. And, uh, so, you know, in the event that we do, you know, get more cuts than what's in your guide, um, you know, how much do you think each, you know, additional rate cut, you know, what that impact has in NIM, um, you know, initially?

Christopher O'Connell: Hey, good morning.

Christopher O'Connell: Can you just remind us how much of the loan portfolio is short-term or reprices with the short end of the curve? Yes. Okay. Thank you.

Brett Berbovic: The rough breakout, Chris, is about 42%, I believe, of the portfolio is fixed, and 58 is floating. And roughly of the floating, about two-thirds of that has floors as well, if that is your question.

Speaker Change: The rough breakout, Chris, is about 42%, I believe, of the portfolio is fixed and 58% is floating.

Speaker Change: And roughly of the floating, about two-thirds of that has floors as well, if that is your question.

Christopher O'Connell: Okay, yeah, that's helpful. And so, you know, in the event that we do, you know, get more cuts than what's in your guide, you know, how much do you think each, you know, additional rate cut will impact him, you know, initially?

Speaker Change: Okay, yeah, that's helpful.

Speaker Change: And so, you know, in the event that we do, you know, get more cuts than what's in your guide, you know, how much do you think each, you know, additional rate cut, you know, what that impact has on them, you know, initially?

Brett Brbovic: We remain relatively neutral right now, so it won't have much of an impact. Yeah, and do you think that eventually, you know, you would begin to benefit, you know, from the cuts over time, as you get, you know, further along into 2025, and, you know, any sense of, if that is the case, you know, how long that might take to kind of materialist. Yeah, I think eventually we will obviously start to see some of the benefit there, especially as, you know, the deposit costs, you know, slow. You know, I would say probably, you know, the next 12 months or so.

Brett Berbovic: We remain relatively neutral right now, so it won't have much of an impact.

Speaker Change: We remain relatively neutral right now, so it won't have much of an impact.

Christopher O'Connell: Yeah, and do you think that eventually, you know, you would begin to benefit from the cuts over time as we get, you know, further along into 2025? And, you know, any sense of, if that is the case, how long that might take to kind of materialize?

Speaker Change: Yeah.

Speaker Change: And do you think that eventually, you know, you would begin to benefit, you know, from the from the cuts over time as you get

Speaker Change: David Conn, David Conn, Nitin Mhatre

Brett Berbovic: Yeah, I think eventually, we will obviously start to see some of the benefit there, especially as you know, the deposit costs are slow. Yeah, I would say probably the next 12 months or so.

Speaker Change: Yeah I think eventually we will obviously start to see some of the benefit there especially as you know the deposit costs

Speaker Change: I would say probably the next 12 months or so.

Brett Brbovic: Chris, we've got 1.4 billion of CDs that are maturing over the next 12 months, and they're rolling over its sort of flat rates to where they were issued. So there's much less pressure on the CD book from a cost perspective, and as they start to roll, they eventually start to roll lower rates. Chris, I don't know if you think you, I think it, hey, Chris, just to add to that, I think the, the, as Brett said, the balance sheet is neutral, so we are relatively agnostic to the rate environment at the moment, but in this cycle so far, our deposit betas have been at 42.

Brett Berbovic: Chris, we've got 1.4 billion CDs that are maturing over the next 12 months, and they're rolling over at sort of flat rates to where they were issued. So there's much less pressure on the CD book from a cost perspective, and as they start to roll, they'll eventually start to roll to lower rates.

Speaker Change: Chris, we've got 1.4 billion of CDs that are maturing over the next 12 months and they're rolling over at sort of flat rates to where they were issued so there's much less pressure on the CD book from a cost perspective and as they start to roll they'll eventually start to roll to lower rates.

Christopher O'Connell: And Chris, I don't know if you think you, I think you, hey Chris, just to add to that, I think the, as Brett said, the balance sheet is neutral, so we're relatively agnostic to the rate environment at the moment, but in this cycle so far, our deposit betas have been at 42 cumulative, and that's kind of where the peer averages are, but on loans, our betas have been about Okay, great. And what is the current CD or kind of high?

Speaker Change: And Chris, I don't know if you think you...

Chris: Thank you.

Speaker Change: Hey Chris, just to add to that, I think the, as Brett said, the balance sheet is neutral, so we're relatively agnostic to the rate environment at the moment, but in this cycle so far,

Brett Brbovic: And that's kind of where the peer averages are, but on loans, our betas have been about 47, whereas the peer average is about 35. So we believe it allows us to have better spreads if we continue down this path.

Chris: Our deposit betas have been at 42 cumulative, and that's kind of where the peer averages are. But on loans, our beta has been about 47, whereas the peer average is about 35. So we believe it allows us to have better spreads if we continue down this path.

Brett Brbovic: Okay, great. And what is the current CD, you're kind of highest, you know, offering rate on deposits? Currently, the highest is about four and a half right now from a promotional perspective.

Christopher O'Connell: No, that does not include DOT operating costs. The guide is for operating expenses.

Brett Berbovic: Okay, great. And what is the current CD or kind of highest, you know, offering rate on deposit? Currently, the highest is about four and a half right now from a promotional perspective. And then on the expense guidance, is that inclusive of the 3.3. More or less of the non-operating that's occurred so far this year?

Speaker Change: Okay, great. And what is the current CD or kind of highest, you know, offering rate on deposits?

Speaker Change: Currently the the highest is about four and a half right now from a promotional perspective.

Brett Brbovic: Okay, great. And then on the expense guidance, is that inclusive of the 3.3, more or less of the non-operating that's been occurred so far this year or no? No, that does not include down operating. The, the guide is for operating expenses. Okay, thank you.

Speaker Change: And then, on the expense guidance, is that inclusive of...

Speaker Change: The 3.3

Speaker Change: More or less of the non-operating that's been occurred so far this year, no.

Speaker Change: No, that does not include non-operating. The guide is for operating.

Speaker Change: expenses.

Brett Brbovic: All right, great. And then, you know, on the, on the rest of, you know, the portfolio, you know, outside of office, you know, it seems like the right off portfolios have been holding up pretty well. I mean, is there, is there anything else in the areas that concern any pockets that see already that you guys are feeling, you know, a little bit more cautious on here? No, Chris, I think, as we said, you know, the, this quarter was really at seven basis points; that's really low. I think we'll have to go back many, many quarters to go find such a good quarter, but we recognize that this has episodic elements.

Speaker Change: Okay, thank you.

Brett Berbovic: All right, great. And then, you know, on the rest of the portfolio, outside of office, it seems like the write-off portfolios have been holding up pretty well. I mean, is there anything else, any areas of concern, any pockets of CRE that you guys are feeling, you know, a little bit more cautious on here?

Speaker Change: All right, great. And then, you know, on the, on the rest of, you know, the portfolio, you know, outside of

Speaker Change: office. You know, it seems like the write-off portfolios have been holding up pretty well. I mean, is there anything else, any areas of concern, any pockets of CRE that you guys are feeling, you know, a little bit more cautious on here?

Christopher O'Connell: No, Chris, I think, as we said, this quarter was really at seven basis points. That's really low.

Speaker Change: No, Chris, I think as we said, you know, the this quarter was really at seven basis points. That's really low. I think we'll have to go back many, many quarters to go go find such a good quarter. But we recognize that this is.

Nitin J. Mhatre: I think we'll have to go back many, many quarters to find such a good quarter. But we recognize that this has episodic elements. So we remain cautiously optimistic. The trend's been good for six quarters. Charges have gone down.

Speaker Change: This has episodic elements, so we remain cautiously optimistic. The trend's been good for the six quarters, charges have gone down, but we recognize.

Nitin J. Mhatre: But we recognize that it's not going to be seven basis points right away in the outer quarters. And to that extent, our teams, both on the frontline and the risk management teams, continue to manage portfolios, and monitor them very closely. And yeah, everything that the street, you know, worries about Cree office multifamily, there is heightened attention paid to those portfolios.

Speaker Change: That is not going to be seven basis points, right, in the outer quarters. And to that extent, our teams, both on the front line and the risk management teams,

Nitin Mhatre: And yeah, everything that the street, you know, worries about free office multifamily, there is a heightened attention paid to those portfolios. Yeah, anything like anything in particular that as you guys look in terms of like long growth going forward that you guys are trying to stick away from, or that you do feel a little bit better about putting money to work at. No, I think we continue to look at commercial portfolios about 66% of the book. The way we're continuing down the path, we hope that becomes 70% or higher over time, and to that extent, get as much of commercial originations in the portfolio as possible. And within that, trying to get as much of CNI and business banking type of loans to improve the asset mix within that as well.

Speaker Change: continue to manage portfolios, monitor them very closely. And yeah, everything that the street, you know, worries about Cree office multifamily, there is heightened attention paid to those portfolios.

Christopher O'Connell: Yeah, any particular thing that as you guys look in terms of like loan growth going forward that you guys are trying to stick away from or that you do feel a little bit better about putting money to work?

Speaker Change: Anything in particular, as you guys look in terms of loan growth going forward that you guys are trying to stick away from, or that you do feel a little bit better about putting money to work at?

Nitin J. Mhatre: No, I think we continue to look at our, you know, commercial portfolio is about 66% of the book; we, the way we are continuing down the path, we hope that becomes, you know, 70% or higher over time, and to that extent, get as much commercial origination in the portfolio as possible. And within that, trying to get as much of the CNI and business banking type of loans to improve the asset mix within that as well. So that remains to be our priority.

Speaker Change: No, I think we continue to look at our...

Speaker Change: You know, commercial portfolio is about 66% of the book. The way we're continuing down the path, we hope that becomes, you know, 70% or higher over time, and to that extent, get as much of commercial originations in the portfolio as possible.

Speaker Change: And within that, trying to get as much of CNI and business banking type of loans to improve the asset mix within that as well. So that remains to be our priority.

Nitin Mhatre: So that remains to be our priority.

Nitin Mhatre: Great, we'll appreciate time. Thanks for the call. Thanks for it. Have a good one.

Christopher O'Connell: Great. Well, I appreciate the time. Thanks for the call.

Operator: Thanks, Chris. Have a good day.

Speaker Change: Great. Well, I appreciate the time. Thanks for the call.

Operator: Thank you.

Laura Katherine Havener Hunsicker: Thank you. The next question is a follow-up from Laurie Hunsicker from Seaport Research Partners. Please go ahead. Yeah, thanks. Good morning, Brett. Just a quick follow-up.

Laura Hunsicker: Next question is a follow up from Lori Hunsicker from Super Research Partners. Please go ahead. Yeah, I think the morning, Brett. Just a quick follow-up here, the gain on sale of the New York branches, the 19 million dollars, how much of that is actually going to drop to the bottom line and what's the after-tax on that looking like. So it should, I mean, it's obviously will reinvest, but you know, the majority of it should drop to the bottom line. I think from a from an after tax impact, you know, it should be in about 15, 16 million.

Speaker Change: Thanks, Chris. Have a good one.

Speaker Change: Thank you. Next question is a follow-up from Laurie Hunsicker from Seaport Research Partners. Please go ahead.

Laura Katherine Havener Hunsicker: Just a quick follow up here. The gain on sale of the New York branch is $19 million. How much of that is actually going to drop to the bottom line? And what's the after tax on that looking like?

Laura Katherine Havener Hunsicker: Yeah, thanks. Good morning, Brett.

Laura Katherine Havener Hunsicker: Yeah, hi, thanks. Good morning. Brett, just a quick follow-up here. The gain on sale of the New York branches, the $19 million, how much of that is actually going to drop to the bottom line and what's the after tax on that looking like?

Laura Katherine Havener Hunsicker: Thanks.

Laura Katherine Havener Hunsicker: So...

Brett Berbovic: It's obviously we'll, we'll, we'll reinvest, but you know, the majority of it should drop to the bottom line, I think, from an after tax impact. You know, it should be about $15-$16 million.

Speaker Change: It should, I mean, obviously we'll reinvest, but the majority of it should drop to the bottom line. I think from an after-tax impact,

Speaker Change: You know, it should be, you know, about $15, $16 million.

Laura Katherine Havener Hunsicker: Okay, okay, great. Thanks so much.

Laura Hunsicker: Okay, okay, great. Thanks much. I'm sorry. Thank you.

Speaker Change: Okay, okay, great. Thanks so much.

Nitin J. Mhatre: Thank you. We have no further questions. I will turn the call back over to Nitin Mhatre for closing remarks.

Operator: We have no further questions.

Warren: No problem, Warren.

Kevin Conn: I looked on the call back over to in the heart rate for closing remarks. Thank you all for joining us today on our call and for your continued interest in Berkshire. Have a great day and be well.

Speaker Change: Thank you. We have no further questions. I will turn the call back over to Nitin Mhatre for closing remarks.

Nitin J. Mhatre: Thank you all for joining us today on our call and for your continued interest in Berkshire. Have a great day and be well. Joanna, you can close the call now.

Nitin J. Mhatre: Thank you all for joining us today on our call and for your continued interest in Berkshire. Have a great day and be well. Joanna, you can close the call now.

Operator: Joanna, I can close the call now.

Operator: Ladies and gentlemen, this concludes your conference for today. We thank you for participating, and we ask that you please disconnect your lines.

Operator: Ladies and gentlemen, this concludes your conference for today. We thank you for participating, and we ask that you please disconnect your lines.

Joanna: Ladies and gentlemen this concludes your conference for today. We thank you for participating and we ask that you please disconnect your lines.