Beacon Q4 2025 Beacon Financial Corp Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Beacon Financial Corp Earnings Call
Speaker #1: 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session.
Operator: 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question again, press star one. Thank you. I'd now like to turn the call over to Dario Hernandez, Corporate Counsel. You may begin.
Operator: 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question again, press star one. Thank you. I'd now like to turn the call over to Dario Hernandez, Corporate Counsel. You may begin.
Speaker #1: If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one.
Speaker #1: Thank you. I'd now like to turn the call over to Dario Hernandez, Corporate Counsel. You may.
Speaker #1: begin. Thank you, Rob.
Dario Hernandez: Thank you, Rob, and good afternoon, everyone. Yesterday, we issued our earnings release and presentation, which is available on the investor relations page of our website, beaconfinancialcorporation.com, and as is filed with the SEC. This afternoon's call will be hosted by Paul Perrault -- Carl Carlson, and we'll be joined by Mark Meiklejohn as well. This call may contain forward-looking statements with respect to the financial condition, results of operations, and business of Beacon Financial Corporation. Please refer to page two of our earnings presentation for our forward-looking statement disclaimer. Also, please refer to our other filings with the SEC, which contain risk factors that could cause actual results to differ materially from these forward-looking statements.
Thank you, Rob, and good afternoon, everyone. Yesterday, we issued our earnings release and presentation, which is available on the investor relations page of our website, beaconfinancialcorporation.com, and as is filed with the SEC. This afternoon's call will be hosted by Paul Perrault -- Carl Carlson, and we'll be joined by Mark Meiklejohn as well. This call may contain forward-looking statements with respect to the financial condition, results of operations, and business of Beacon Financial Corporation. Please refer to page two of our earnings presentation for our forward-looking statement disclaimer. Also, please refer to our other filings with the SEC, which contain risk factors that could cause actual results to differ materially from these forward-looking statements.
Speaker #2: And good afternoon, everyone. Yesterday, we issued our earnings release and presentation, which is available on the Investor Relations page of our website, BeaconFinancialCorporation.com.
Speaker #2: It has been filed with the SEC. This afternoon's call will be hosted by Paul Perrault and Carl Carlson, and we'll be joined by Mark Mickle-John as well.
Speaker #2: This call may contain forward-looking statements with respect to the financial condition, results of operations, and business of Beacon Financial Corporation. Please refer to page 2 of our earnings presentation for our forward-looking statement disclaimer.
Speaker #2: Also, please refer to our other filings with the SEC, which contain risk factors that could cause actual results to differ materially from these forward-looking statements.
Speaker #2: Any references made during this presentation to non-GAAP measures are only made to assist you in understanding Beacon's financials. Results and performance trends should not be relied on as financial measures of actual results or future predictions.
Any references made during this presentation to non-GAAP measures are only made to assist you in understanding Beacon's financials, results, and performance trends, and should not be relied on as financial measures of actual results or future predictions. For a comparison and reconciliation to GAAP earnings, please see our earnings release. At this time, I'm pleased to introduce Beacon Financial's President and Chief Executive Officer, Paul Perrault.
Any references made during this presentation to non-GAAP measures are only made to assist you in understanding Beacon's financials, results, and performance trends, and should not be relied on as financial measures of actual results or future predictions. For a comparison and reconciliation to GAAP earnings, please see our earnings release. At this time, I'm pleased to introduce Beacon Financial's President and Chief Executive Officer, Paul Perrault.
Speaker #2: For comparison and reconciliation to GAAP earnings, please see our earnings release. At this time, I'm pleased to introduce Beacon Financial's President and Chief Executive Officer, Paul Perrault.
Speaker #3: Thanks, Dario. And good afternoon, everyone. Thank you for joining us for our fourth quarter earnings call, which represents the first full quarter of results for Beacon Financial Corporation.
Paul Perrault: Thanks, Dario, and good afternoon, everyone. Thank you for joining us for our fourth quarter earnings call, which represents the first full quarter of results for Beacon Financial Corporation. We finished the quarter and the year with $23.2 billion in assets, $19.5 billion in deposits, and $18 billion in loans. Our net interest margin improved to 3.82, with fourth quarter operating earnings of approximately $66 million or $0.79 per share before merger expenses and special charges. We also continued our record of returning capital to stockholders with a 32-cent per share quarterly dividend. Our balance sheet and asset quality remained solid. Operating performance improved with fourth quarter return on assets of 1.13% and return on tangible equity of 13.43%.
Paul Perrault: Thanks, Dario, and good afternoon, everyone. Thank you for joining us for our fourth quarter earnings call, which represents the first full quarter of results for Beacon Financial Corporation. We finished the quarter and the year with $23.2 billion in assets, $19.5 billion in deposits, and $18 billion in loans. Our net interest margin improved to 3.82, with fourth quarter operating earnings of approximately $66 million or $0.79 per share before merger expenses and special charges. We also continued our record of returning capital to stockholders with a 32-cent per share quarterly dividend. Our balance sheet and asset quality remained solid. Operating performance improved with fourth quarter return on assets of 1.13% and return on tangible equity of 13.43%.
Speaker #3: We finished the quarter and the year with 23.2 billion in assets, 19 and a half billion dollars in deposits, and 18 billion dollars in loans.
Speaker #3: Our net interest margin improved to 3.82, with fourth quarter operating earnings of approximately $66 million, or $0.79 per share, before merger expenses and special charges.
Speaker #3: We also continued our record of returning capital to stockholders with a $0.32 per share quarterly dividend. Our balance sheet and asset quality remain solid.
Speaker #3: Operating performance improved, with fourth quarter return on assets of 1.13 percent and return on tangible equity of 13.43 percent. These results exclude the full benefit of projected cost savings announced at the time of the merger.
These results exclude the full benefit of projected cost savings announced at the time of the merger. Overall, the strategic and financial goals outlined in our initial merger announcement are already materializing, and I fully expect to meet our remaining targets as intended. The entire integration remains on course, and we are scheduled to complete our core systems conversions in February 2026. Our highly experienced teams have spent many months preparing for this milestone by developing robust integration plans, testing technology, and training of colleagues. We continue to speak with our clients and introduce the new Beacon Bank brand so that they are fully prepared for a seamless transition. I'm pleased with the positive responses to date, which gives me added confidence that we will execute a successful conversion with strong client retention next month.
These results exclude the full benefit of projected cost savings announced at the time of the merger. Overall, the strategic and financial goals outlined in our initial merger announcement are already materializing, and I fully expect to meet our remaining targets as intended. The entire integration remains on course, and we are scheduled to complete our core systems conversions in February 2026. Our highly experienced teams have spent many months preparing for this milestone by developing robust integration plans, testing technology, and training of colleagues. We continue to speak with our clients and introduce the new Beacon Bank brand so that they are fully prepared for a seamless transition. I'm pleased with the positive responses to date, which gives me added confidence that we will execute a successful conversion with strong client retention next month.
Speaker #3: Overall, the strategic and financial goals outlined in our initial merger announcement are already materializing, and I fully expect to meet our remaining targets as intended.
Speaker #3: The entire integration remains on course, and we are scheduled to complete our core systems conversions in February 2026. Our highly experienced teams have spent many months preparing for this milestone by developing robust integration plans, testing technology, and training colleagues.
Speaker #3: We continue to speak with our clients and introduce the new Beacon Bank brand so that they are fully prepared for a seamless transition. I'm pleased with the positive responses to date, which gives me added confidence that we will execute a successful conversion with strong client retention next month.
Speaker #3: I'm proud of the hard work and dedication of our colleagues who continue to provide exceptional service to support our clients, and are working to drive meaningful performance improvements across the entire organization.
I'm proud of the hard work and dedication of our colleagues, who continue to provide exceptional service to support our clients and are working to drive meaningful performance improvements across the entire organization. Their leadership, resilience, and collaboration are integral to our ability to support those we serve, create greater value for our stockholders, and generate long-term success. I will now turn you over to Carl, who will review the company's fourth quarter results in detail.
I'm proud of the hard work and dedication of our colleagues, who continue to provide exceptional service to support our clients and are working to drive meaningful performance improvements across the entire organization. Their leadership, resilience, and collaboration are integral to our ability to support those we serve, create greater value for our stockholders, and generate long-term success. I will now turn you over to Carl, who will review the company's fourth quarter results in detail.
Speaker #3: Their leadership, resilience, and collaboration are integral to our ability to support those we serve, create greater value for our stockholders, and generate long-term success.
Speaker #3: I will now turn you over to Carl, who will review the company's fourth quarter results in detail.
Speaker #4: Thank you, Paul. Before I get into the fourth quarter, I'd like to briefly cover two items. First, the early adoption of FASB's ASU, and second, how the early adoption changes expectations for the merger since our original announcement back in December 2024.
Carl Carlson: Thank you, Paul. Before I get into the fourth quarter, I'd like to briefly cover two items. First, the early adoption of FASB's ASU, and second, how the early adoption changes expectations for the merger since our original announcement back in December 2024. As we mentioned in our press release, we chose to early adopt FASB's new ASU 2025-08, related to purchased loans. The FASB finalized this update in November, and it fixes what many in the industry refer to as the CECL double count. By adopting the new standard for 2025, purchase credit deteriorated loans for our merger of equals are treated the same as non-PCD loans. In financial terms, that means there's no day one hit to the income statement. Therefore, equity increases immediately. However, we no longer accrete the credit mark into income over the life of the loans.
Carl Carlson: Thank you, Paul. Before I get into the fourth quarter, I'd like to briefly cover two items. First, the early adoption of FASB's ASU, and second, how the early adoption changes expectations for the merger since our original announcement back in December 2024. As we mentioned in our press release, we chose to early adopt FASB's new ASU 2025-08, related to purchased loans. The FASB finalized this update in November, and it fixes what many in the industry refer to as the CECL double count. By adopting the new standard for 2025, purchase credit deteriorated loans for our merger of equals are treated the same as non-PCD loans. In financial terms, that means there's no day one hit to the income statement. Therefore, equity increases immediately. However, we no longer accrete the credit mark into income over the life of the loans.
Speaker #4: As we mentioned in our press release, we chose to early adopt FASB's new ASU 2025-08, related to purchased loans. The FASB finalized this update in November, and it fixes what many in the industry refer to as the CISO double count.
Speaker #4: By adopting the new standard for 2025, purchased credit deteriorated loans for our merger of equals are treated the same as non-PCD loans. In financial terms, that means there's no day one hit to the income statement.
Speaker #4: Therefore, equity increases immediately. However, we no longer accrete the credit mark into income over the life of the loan. For Beacon, the day one impact was an increase of roughly $49 million to equity, and about $0.55 to tangible book value per share.
Carl Carlson: For Beacon, the day one impact was an increase of roughly $49 million to equity and about $0.55 to tangible book value per share. Estimated pre-tax annual credit mark accretion of $10 to 13 million is foregone. Both the balance sheet and income statement for Q3 and year to date have been updated to reflect this. Since this is our first full quarter of combined results, and there have been a few changes since we announced the merger, I thought a brief reconciliation of expectations might be helpful. Back in December 2024, our announcement provided a reconciliation of 2026 earnings per share on page 29 of that presentation. Based on analyst expectations at the time, we projected a 2028 GAAP EPS of $3.85.
For Beacon, the day one impact was an increase of roughly $49 million to equity and about $0.55 to tangible book value per share. Estimated pre-tax annual credit mark accretion of $10 to 13 million is foregone. Both the balance sheet and income statement for Q3 and year to date have been updated to reflect this. Since this is our first full quarter of combined results, and there have been a few changes since we announced the merger, I thought a brief reconciliation of expectations might be helpful. Back in December 2024, our announcement provided a reconciliation of 2026 earnings per share on page 29 of that presentation. Based on analyst expectations at the time, we projected a 2028 GAAP EPS of $3.85.
Speaker #4: Estimated pre-tax annual credit mark accretion of $10 to $13 million is foregone. Both the balance sheet and income statement for Q3 and year-to-date have been updated to reflect this.
Speaker #4: Since this is our first full quarter of combined results, and there have been a few changes since we announced the merger, I thought a brief reconciliation of expectations might be helpful.
Speaker #4: Back in December 2024, our announcement provided a reconciliation of 2026 earnings per share on page 29 of that presentation. Based on analyst expectations at the time, we projected a 2028 GAAP EPS of $3.85.
Speaker #4: As I just mentioned, the FASB issued the ASU, impacting the accounting for acquired PCD loans. At the time of the merger announcement, the annual after-tax impact was estimated at $13.9 million.
Carl Carlson: As I just mentioned, the FASB issued the ASU, impacting the accounting for acquired PCD loans. At the time of the merger announcement, the annual after-tax impact was estimated at $13.9 million. This reduces the EPS projection 17 cents per share to $3.68, which I would consider operating. At announcement, we also estimated a November 2025 systems conversion, which was moved to February 2026, which delayed some of the timing on synergies and pushed some of the merger charges to the first quarter of 2026, which will lower GAAP EPS estimates.
As I just mentioned, the FASB issued the ASU, impacting the accounting for acquired PCD loans. At the time of the merger announcement, the annual after-tax impact was estimated at $13.9 million. This reduces the EPS projection 17 cents per share to $3.68, which I would consider operating. At announcement, we also estimated a November 2025 systems conversion, which was moved to February 2026, which delayed some of the timing on synergies and pushed some of the merger charges to the first quarter of 2026, which will lower GAAP EPS estimates.
Speaker #4: This reduces the EPS projection 17 cents per share to 3 dollars and 68 cents, which I would consider operating. At announcement, we also estimated a November 2025 systems conversion, which was moved to February 2026, which delayed some of the timing unsynergies and pushed some of the merger charges to the first quarter of 2026, which will lower GAAP EPS estimates.
Speaker #4: Based on the six analysts covering Beacon, which I track, the average EPS for 2026 was 3 dollars and 62 cents, with a high of 3.75 and a low of 3.49, with stock prices ranging from 28 dollars to 39 dollars.
Carl Carlson: Based on the six analysts covering Beacon, which I track, the average EPS for 2026 was $3.62, with a high of $3.75, and a low of $3.49, with stock prices ranging from $28 to $39. I believe all of these are operating EPS estimates, and exclude Q1 merger charges. Turning to Q4, total assets were up $353 million in the quarter, mainly due to higher cash and equivalents tied to strong period-end payroll fulfillment deposits. Loans declined $275 million, with Commercial Real Estate making up $235 million of that decrease. Investor commercial real estate declined to 333% of total Risk-Based Capital. Loan originations and draws were just over $1 billion, with a weighted average coupon of 631 basis points.
Based on the six analysts covering Beacon, which I track, the average EPS for 2026 was $3.62, with a high of $3.75, and a low of $3.49, with stock prices ranging from $28 to $39. I believe all of these are operating EPS estimates, and exclude Q1 merger charges. Turning to Q4, total assets were up $353 million in the quarter, mainly due to higher cash and equivalents tied to strong period-end payroll fulfillment deposits. Loans declined $275 million, with Commercial Real Estate making up $235 million of that decrease. Investor commercial real estate declined to 333% of total Risk-Based Capital. Loan originations and draws were just over $1 billion, with a weighted average coupon of 631 basis points.
Speaker #4: I believe all of these are operating EPS estimates, and exclude Q1 merger charges. Turning to Q4, total assets were up $353 million in the quarter, mainly due to higher cash and equivalents tied to strong period-end payroll fulfillment deposits.
Speaker #4: Loans declined $275 million, with commercial real estate making up $235 million of that decrease. Investor commercial real estate declined to 333 percent of total risk-based capital.
Speaker #4: Loan originations and draws were just over $1 billion, with a weighted average coupon of 631 basis points. Forty-nine percent of originations were floating rate.
Carl Carlson: 49% of originations were floating rate. On the funding side, customer deposits grew by $262 million, driven by $127 million of DDA growth. Broker deposits and borrowings both moved lower, down $496 million and $293 million, respectively. Our loan-to-deposit ratio ended the quarter at 92.4%. I'd like to take a minute and discuss the payroll fulfillment deposits. This business works with various payroll processing companies, which process payrolls for hundreds of companies and pay thousands of employees. Funds are transferred in for payrolls, taxes, and benefits, with ACH payments to employees shortly thereafter. The average balance of payroll deposits are in the range of $800 to 900 million. For liquidity purposes, we maintain balances over $500 million at the Fed.
49% of originations were floating rate. On the funding side, customer deposits grew by $262 million, driven by $127 million of DDA growth. Broker deposits and borrowings both moved lower, down $496 million and $293 million, respectively. Our loan-to-deposit ratio ended the quarter at 92.4%. I'd like to take a minute and discuss the payroll fulfillment deposits. This business works with various payroll processing companies, which process payrolls for hundreds of companies and pay thousands of employees. Funds are transferred in for payrolls, taxes, and benefits, with ACH payments to employees shortly thereafter. The average balance of payroll deposits are in the range of $800 to 900 million. For liquidity purposes, we maintain balances over $500 million at the Fed.
Speaker #4: On the funding side, customer deposits grew by $262 million, driven by $127 million of DDA growth. Brokered deposits and borrowings both moved lower, down $496 million and $293 million, respectively.
Speaker #4: Our loan-to-deposit ratio ended the quarter at 92.4 percent. I'd like to take a minute and discuss the payroll fulfillment deposits. This business works with various payroll processing companies, which process payrolls for hundreds of companies and pay thousands of employees.
Speaker #4: Funds are transferred in for payrolls, taxes, and benefits, with ACH payments to employees shortly thereafter. The average balance of payroll deposits is in the range of $800 million to $900 million.
Speaker #4: For liquidity purposes, we maintain balances over $500 million at the Fed. Depending on the day of the week the quarter ends on, payroll deposits can fluctuate significantly.
Carl Carlson: Depending on the day of the week the quarter ends on, payroll deposits can fluctuate significantly. A more informative calculation of the loan-to-deposit ratio uses average balances. Our average loans to average deposits was 96.8% at year-end. The allowance for loan losses closed at $253 million or 140 basis points of coverage. This includes ninety-six million of specific reserves on about $354 million of substandard loans for a coverage rate of 22%. The general reserve of $177 million represents a coverage level of about 100 basis points on the balance of the portfolio. Given the strong reserve position and the current environment and improving risk rating trends, we continue to see the quarterly provision running in the $5 to 9 million range.
Depending on the day of the week the quarter ends on, payroll deposits can fluctuate significantly. A more informative calculation of the loan-to-deposit ratio uses average balances. Our average loans to average deposits was 96.8% at year-end. The allowance for loan losses closed at $253 million or 140 basis points of coverage. This includes ninety-six million of specific reserves on about $354 million of substandard loans for a coverage rate of 22%. The general reserve of $177 million represents a coverage level of about 100 basis points on the balance of the portfolio. Given the strong reserve position and the current environment and improving risk rating trends, we continue to see the quarterly provision running in the $5 to 9 million range.
Speaker #4: A more informative calculation of the loan-to-deposit ratio uses average balances. Our average loans to average deposits was 96.8 percent at year-end. The allowance for loan losses closed at $253 million, or 140 basis points of coverage.
Speaker #4: This includes $76 million of specific reserves on about $354 million of substandard loans, for a coverage rate of 22 percent. The general reserve of $177 million represents a coverage level of about 100 basis points on the balance of the portfolio.
Speaker #4: Given the strong reserve position and the current environment, and improving risk rating trends, we continue to see the quarterly provision running in the $5 to $9 million range.
Speaker #4: We expect the coverage ratio to gradually trend lower, as charge-offs will likely exceed provision as we work through existing substandard credits. Net charge-offs were $9 million for the quarter, or 20 basis points annualized.
Carl Carlson: We expect the coverage ratio to gradually trend lower, as charge-offs will likely exceed provision as we work through existing substandard credits. Net charge-offs were $9 million for the quarter or 20 basis points annualized. All but $1.4 million of that had already been reserved. Turning to the income statement, this was our first full quarter of combined results. On a GAAP basis, including $14.4 million of merger-related charges, we earned $53.4 million or $0.64 per share. That translates to a 94 basis point ROA and 11.2% return on tangible equity. Our net interest margin came in at 382 basis points, which included a 26 basis point lift from purchase accounting. Net interest income was $199.7 million, which included $13.8 million purchase, purchase accounting accretion.
We expect the coverage ratio to gradually trend lower, as charge-offs will likely exceed provision as we work through existing substandard credits. Net charge-offs were $9 million for the quarter or 20 basis points annualized. All but $1.4 million of that had already been reserved. Turning to the income statement, this was our first full quarter of combined results. On a GAAP basis, including $14.4 million of merger-related charges, we earned $53.4 million or $0.64 per share. That translates to a 94 basis point ROA and 11.2% return on tangible equity. Our net interest margin came in at 382 basis points, which included a 26 basis point lift from purchase accounting. Net interest income was $199.7 million, which included $13.8 million purchase, purchase accounting accretion.
Speaker #4: All but $1.4 million of that had already been reserved. Turning to the income statement, this was our first full quarter of combined results. On a GAAP basis, including $14.4 million of merger-related charges, we earned $53.4 million, or $0.64 per share.
Speaker #4: That translates to a 94-basis-point ROA and an 11.2 percent return on tangible equity. Our net interest margin came in at 382 basis points, which included a 26-basis-point lift from purchase accounting.
Speaker #4: Net interest income was $199.7 million, which included $13.8 million in purchase accounting accretion. Of that amount, only a net $1.9 million came from loan prepayments on purchased loans.
Carl Carlson: Of that amount, only a net $1.9 million came from loan prepayments on purchased loans. Non-interest income was $25.9 million. Non-interest expense was $119.1 million, and the provision for credit losses was $8.1 million. Excluding the $14.1 million of merger charges, operating earnings were $89.6 million or $0.79 per share. That's an operating ROA of 113 basis points, a 13.4% return on tangible equity, and an efficiency ratio of 56.7%. Excluding non-cash intangible amortization, our core efficiency ratio was 52.8%. We'll continue to see merger-related charges in Q1 as we complete our core systems integrations and realize the remaining cost synergies. I want to recognize the Beacon teams for the work they've done preparing for the upcoming systems conversions.
Of that amount, only a net $1.9 million came from loan prepayments on purchased loans. Non-interest income was $25.9 million. Non-interest expense was $119.1 million, and the provision for credit losses was $8.1 million. Excluding the $14.1 million of merger charges, operating earnings were $89.6 million or $0.79 per share. That's an operating ROA of 113 basis points, a 13.4% return on tangible equity, and an efficiency ratio of 56.7%. Excluding non-cash intangible amortization, our core efficiency ratio was 52.8%. We'll continue to see merger-related charges in Q1 as we complete our core systems integrations and realize the remaining cost synergies. I want to recognize the Beacon teams for the work they've done preparing for the upcoming systems conversions.
Speaker #4: Non-interest income was $25.9 million. Non-interest expense was $119.1 million, and the provision for credit losses was $8.1 million. Excluding the $14.1 million of merger charges, operating earnings were $89.6 million, or $0.79 per share.
Speaker #4: That's an operating ROA of 113 basis points, a 13.4 percent return on tangible equity, and an efficiency ratio of 56.7 percent. Excluding non-cash intangible amortization, our core efficiency ratio was 52.8 percent.
Speaker #4: We'll continue to see merger-related charges in the first quarter as we complete our core systems integrations and realize the remaining cost synergies. I want to recognize the Beacon teams for the work they've done preparing for the upcoming systems conversions.
Speaker #4: They've partnered closely with our vendors, and we're all looking forward to getting to the other side of this process. The strategic and economic benefits of the merger are already showing up.
Carl Carlson: They've partnered closely with our vendors, and we're all looking forward to getting to the other side of this process. The strategic and economic benefits of the merger are already showing up: greater diversification, better balance, low overall risk, stronger efficiency, along with a focused regional leadership and customer service. Yesterday, the board approved a quarterly dividend of $0.3225 per share, payable 27 February, to stockholders of record on 13 February. That represents a dividend yield of about 4.5%. That concludes my comments. Back to you, Paul.
They've partnered closely with our vendors, and we're all looking forward to getting to the other side of this process. The strategic and economic benefits of the merger are already showing up: greater diversification, better balance, low overall risk, stronger efficiency, along with a focused regional leadership and customer service. Yesterday, the board approved a quarterly dividend of $0.3225 per share, payable 27 February, to stockholders of record on 13 February. That represents a dividend yield of about 4.5%. That concludes my comments. Back to you, Paul.
Speaker #4: Greater diversification, better balance, lower overall risk, and stronger efficiency, along with focused regional leadership and customer service. Yesterday, the Board approved a quarterly dividend of $0.3225 per share, payable February 27th to stockholders of record on February 13th.
Speaker #4: That represents a dividend yield of about 4.5 percent. That concludes my comments. Back to you,
Speaker #4: Paul. Thanks, Carl.
Paul Perrault: Thanks, Carl. We will now be joined by our Chief Credit Officer, Mark Meiklejohn, and we will open it up for questions.
Paul Perrault: Thanks, Carl. We will now be joined by our Chief Credit Officer, Mark Meiklejohn, and we will open it up for questions.
Speaker #2: We will now be joined by our Chief Credit Officer, Mark Micklejohn, and we will open it up for questions.
Speaker #3: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad.
Carl Carlson: Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press star one in your telephone keypad. If you would like to withdraw your question, simply press star one again. Your first question comes from the line of Carl Shepherd from RBC. Your line is open.
Operator: Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press star one in your telephone keypad. If you would like to withdraw your question, simply press star one again. Your first question comes from the line of Carl Shepherd from RBC. Your line is open.
Speaker #3: If you would like to withdraw your question, simply press star 1 again. Your first question comes from the line of Carl Shepherd from RBC.
Speaker #3: Your line is
Speaker #3: open. Hey, good afternoon, guys.
Carl Shepherd: Hey, good afternoon, guys.
Carl Shepherd: Hey, good afternoon, guys.
Speaker #2: Hi, Carl.
Paul Perrault: Hi, Carl.
Paul Perrault: Hi, Carl.
Speaker #4: You know, I guess my first question is on capital. I think you had a nice build with the accounting change and some of the CRE paydowns.
Carl Shepherd: You know, I guess my first question is on capital. I think you had a nice build with the accounting change and some of the CRE pay down. You kept the language in the deck around exploring opportunities to optimize capital. Just how do you want us to think about that and kind of any landmarks over the next couple of quarters after you get past the conversion?
Carl Shepherd: You know, I guess my first question is on capital. I think you had a nice build with the accounting change and some of the CRE pay down. You kept the language in the deck around exploring opportunities to optimize capital. Just how do you want us to think about that and kind of any landmarks over the next couple of quarters after you get past the conversion?
Speaker #4: And you kept the language in the deck around keeping exploring opportunities to optimize capital. Just how do you want us to think about that, and kind of any landmarks over the next couple of quarters after you get past the—
Speaker #4: conversion? Sure.
Carl Carlson: Sure. So I'm more specifically talking to the subdebt both at legacy Brookline. Legacy Brookline had $65 million of subdebt, and it's already about 40% of it does not count as regulatory capital at this point. And come September of this year, you know, another 20% declines. Legacy Berkshire has $100 million of subdebt that starts to go into that kind of same discount factor come next year in 2027. So we'll be looking at refinancing. I think I wanna get a good quarter of results, a clean quarter, once we get all our cost savings included before we go out and refinance that.
Carl Carlson: Sure. So I'm more specifically talking to the subdebt both at legacy Brookline. Legacy Brookline had $65 million of subdebt, and it's already about 40% of it does not count as regulatory capital at this point. And come September of this year, you know, another 20% declines. Legacy Berkshire has $100 million of subdebt that starts to go into that kind of same discount factor come next year in 2027. So we'll be looking at refinancing. I think I wanna get a good quarter of results, a clean quarter, once we get all our cost savings included before we go out and refinance that.
Speaker #2: So, I'm more specifically talking to the sub debt, both that legacy Brookline—legacy Brookline had $75 million of sub debt—and it's already about 40 percent of it that does not count as regulatory capital at this point.
Speaker #2: And come September of this year, you know, another 20 percent declines. Legacy Berkshire has $100 million of sub debt that starts to go into that kind of same discount factor come next year.
Speaker #2: In 2027, so we'll be looking at refinancing. I think I want to get a good quarter of results—a clean quarter once we get all our cost savings included.
Speaker #2: Before we go out and refinance that, I want to try to get the best rate on that. So I think that's kind of how I'm looking at that.
Carl Carlson: I want to try to get the best rate on that. So, I think that's, that's kind of how I'm looking at that. We all—we, we all know the tools around common equity, stock buybacks, and things of that nature, and that's always something that we, we keep top of mind if we think that's right, the right thing to do at any particular time. But we're all—we also... I've said this before, so any new shareholder, you know, we, we feel capital is very precious, and we want to be very, very thoughtful about that, as we move forward.
I want to try to get the best rate on that. So, I think that's, that's kind of how I'm looking at that. We all—we, we all know the tools around common equity, stock buybacks, and things of that nature, and that's always something that we, we keep top of mind if we think that's right, the right thing to do at any particular time. But we're all—we also... I've said this before, so any new shareholder, you know, we, we feel capital is very precious, and we want to be very, very thoughtful about that, as we move forward.
Speaker #2: We all know the tools around common equity, stock buybacks, and things of that nature. And that's always something that we keep top of mind if we think that's the right thing to do at any particular time.
Speaker #2: But we also—I've said this before—so for any new shareholders, we feel capital is very precious. And we want to be very, very thoughtful about that.
Speaker #2: As we move
Speaker #2: forward. Okay.
Carl Shepherd: Okay. And then I guess as a follow-up here, you kept the loan growth guidance, I think, and you had obviously a lot of CRE declines, which I think you'd welcome. But does kind of anything surprise you in terms of the, maybe the pace of CRE declines and how should we think about maybe core CNI and maybe when could we inflect, I guess, from a, you know, a net number?
Carl Shepherd: Okay. And then I guess as a follow-up here, you kept the loan growth guidance, I think, and you had obviously a lot of CRE declines, which I think you'd welcome. But does kind of anything surprise you in terms of the, maybe the pace of CRE declines and how should we think about maybe core CNI and maybe when could we inflect, I guess, from a, you know, a net number?
Speaker #4: And then I guess as a follow-up here, you kept the loan growth guidance, I think, and you had obviously a lot of CRE declines, which I think you'd welcome.
Speaker #4: But just kind of—did anything surprise you in terms of maybe the pace of CRE declines, and how should we think about maybe core CNI, and maybe when could we inflect, I guess, from a net number?
Speaker #2: Well, we are targeting to get down to the 300 percent level by the end of next year. In the meantime, we want to be able to take very good care of our very important, our very good customers who are the backbone, the legacy Brookline’s real estate families.
Paul Perrault: Well, we are targeting to get down to the 300% level by the end of next year. In the meantime, we want to be able to take very good care of our very important, our very good customers who are the backbone of Legacy Brookline's real estate families. And one of the tools that we're going to use to do that is Legacy Berkshire had brought in a significant amount of participations, led by other banks. As those mature, we will kindly bow out of the refinance, and in the meantime, the normal order of business.
Paul Perrault: Well, we are targeting to get down to the 300% level by the end of next year. In the meantime, we want to be able to take very good care of our very important, our very good customers who are the backbone of Legacy Brookline's real estate families. And one of the tools that we're going to use to do that is Legacy Berkshire had brought in a significant amount of participations, led by other banks. As those mature, we will kindly bow out of the refinance, and in the meantime, the normal order of business.
Speaker #2: And one of the tools that we're going to use to do that is, legacy Berkshire had brought in a significant amount of participations led by other banks as those mature.
Speaker #2: We will kindly bow out of the refinance. And in the meantime, the normal order of business—the real estate in Metro Boston—does seem to be stabilizing a little bit.
Paul Perrault: The real estate is in Metro Boston, does seem to be stabilizing a little bit, and so I think, I think we'll, we'll have a good pace of originations and paydowns, which will keep us on track and keep our customers happy.
The real estate is in Metro Boston, does seem to be stabilizing a little bit, and so I think, I think we'll, we'll have a good pace of originations and paydowns, which will keep us on track and keep our customers happy.
Speaker #2: And so I think we'll have a good pace of originations and paydowns, which will keep us on track and keep our customers happy.
Carl Shepherd: Okay. Thank you both.
Carl Shepherd: Okay. Thank you both.
Speaker #4: you Okay. Thank both.
Speaker #3: Your next question comes from the line of Mark Fitzgibbon from Piper Sandler. Your line is open.
Operator: Your next question comes from the line of Mark Fitzgibbon from Piper Sandler. Your line is open.
Operator: Your next question comes from the line of Mark Fitzgibbon from Piper Sandler. Your line is open.
Speaker #2: Hey, guys. Hey, guys. Nice quarter.
Mark Fitzgibbon: Hey, guys. Hey, guys.
Mark Fitzgibbon: Hey, guys. Hey, guys.
Speaker #4: Good afternoon. Thank
Paul Perrault: Hey, Mark.
Paul Perrault: Hey, Mark.
Mark Fitzgibbon: Good afternoon. Nice quarter.
Mark Fitzgibbon: Good afternoon. Nice quarter.
Speaker #4: You. First question I had for—
Paul Perrault: Thank you.
Paul Perrault: Thank you.
Mark Fitzgibbon: First question I had for you, Carl, is you have a little over $2 billion of cash today in short-term investments on the balance sheet. I guess I'm curious what your target for that is and maybe how long it takes you to get cash balances back to the appropriate level.
Mark Fitzgibbon: First question I had for you, Carl, is you have a little over $2 billion of cash today in short-term investments on the balance sheet. I guess I'm curious what your target for that is and maybe how long it takes you to get cash balances back to the appropriate level.
Speaker #2: You, Carl, is— you have a little over $2 billion of cash today, in short-term investments on the balance sheet. I guess I'm curious what your target for that is, and maybe how long it takes you to get cash balances back to the appropriate level.
Speaker #2: Oh, that happens very, very quickly, Mark. So I'll go over this a little bit. Again, folks that really followed Berkshire kind of know the business of the payroll deposits.
Carl Carlson: Oh, that happens very, very quickly, Mark. So, I'll go over this a little bit again. Folks that really followed Berkshire kind of know the business of the payroll deposits. But it's a nice business that they have, and we love the fee income associated with it, the efficiency around what they were able to build, and it's a great part of the new Beacon Financial Corporation. But the payroll deposits are highly volatile. They come in, and then they go out. It's very, very predictable. They know exactly what's coming in, they know exactly what's going out, but it's deposits. It's in and out.
Carl Carlson: Oh, that happens very, very quickly, Mark. So, I'll go over this a little bit again. Folks that really followed Berkshire kind of know the business of the payroll deposits. But it's a nice business that they have, and we love the fee income associated with it, the efficiency around what they were able to build, and it's a great part of the new Beacon Financial Corporation. But the payroll deposits are highly volatile. They come in, and then they go out. It's very, very predictable. They know exactly what's coming in, they know exactly what's going out, but it's deposits. It's in and out.
Speaker #2: But it's a nice business that they have, and we love the fee income associated with it. The efficiency around what they were able to build.
Speaker #2: And it's a great part of the new Beacon Financial Corporation. But the payroll deposits are highly volatile. They come in, and then they go out.
Speaker #2: It's very, very predictable. They know exactly what's coming in, they know exactly what's going out. But it's deposits—it's in and out. And so, on average, those balances range around $800 to $900 million on an average basis.
Carl Carlson: And so on average, those balances range around $800 to 900 million on an average basis, and that's kind of why I was trying to lead, you know, start pointing people towards, you know, a very common thing to look at is the loan-to-deposit ratio. For us, I think a better measure is an average loan to average deposit ratio, because that kind of tells more of a story. We finished the year at just under $1.9 billion in deposits, payroll deposits, which was up $800 and change, $800 million or so from the prior quarter. When I talk about the predictability, yesterday, our payroll deposits were around $600 million. Today, they're around $2 billion. So they fluctuate quite a bit.
And so on average, those balances range around $800 to 900 million on an average basis, and that's kind of why I was trying to lead, you know, start pointing people towards, you know, a very common thing to look at is the loan-to-deposit ratio. For us, I think a better measure is an average loan to average deposit ratio, because that kind of tells more of a story. We finished the year at just under $1.9 billion in deposits, payroll deposits, which was up $800 and change, $800 million or so from the prior quarter. When I talk about the predictability, yesterday, our payroll deposits were around $600 million. Today, they're around $2 billion. So they fluctuate quite a bit.
Speaker #2: And that's kind of why I was trying to start pointing people towards a very common thing to look at, which is the loan-to-deposit ratio.
Speaker #2: And for us, I think a better measure is an average loan-to-average deposit ratio, because that kind of tells more of a story.
Speaker #2: We finished the year at just under $1.9 billion in deposits, payroll deposits. That was up $800 million and change—$800 million or so—from the prior quarter.
Speaker #2: When I talk about the predictability, yesterday our payroll deposits were around $600 million. Today they're around $2 billion. So, they fluctuate quite a bit.
Speaker #2: Money comes in, and then it goes out. So what we do, we consider a portion of that core. About $500 million of that's core.
Carl Carlson: Money comes in and then it goes out. So what we do, we consider a portion of that core, about $500 million, and that's core. That can fund loans, that can fund securities, that can fund the balance sheet. The balance of it, we like to keep in at the Fed. So we make a little bit of a spread on it there, but it's not something that we're putting to use, and it's just going in and out. I hope that answers your question.
Money comes in and then it goes out. So what we do, we consider a portion of that core, about $500 million, and that's core. That can fund loans, that can fund securities, that can fund the balance sheet. The balance of it, we like to keep in at the Fed. So we make a little bit of a spread on it there, but it's not something that we're putting to use, and it's just going in and out. I hope that answers your question.
Speaker #2: That can fund loans. That can fund securities. That can fund the balance sheet. The balance of it, we like to keep in at the Fed.
Speaker #2: So we make a little bit of a spread on it there, but it's not something that we're putting to use, and it's just going in and out.
Speaker #2: I hope that
Speaker #2: answers your question. It
Speaker #2: Yeah, it does. Just one other question for you.
Mark Fitzgibbon: It does. Thank you. Yeah-
Mark Fitzgibbon: It does. Thank you. Yeah-
Speaker #4: Thank you.
Carl Carlson: Yeah.
Carl Carlson: Yeah.
Mark Fitzgibbon: Just one other question for me. I guess you guys have talked in the past about the opportunity to do some larger loans with new and existing customers, given the sort of the increased size in the balance sheet. I guess I'm curious, is that baked into your, you know, your projections of sort of mid to lower single digit loan growth for 2026?
Mark Fitzgibbon: Just one other question for me. I guess you guys have talked in the past about the opportunity to do some larger loans with new and existing customers, given the sort of the increased size in the balance sheet. I guess I'm curious, is that baked into your, you know, your projections of sort of mid to lower single digit loan growth for 2026?
Speaker #2: Question for me. I guess you guys have talked in the past about the opportunity to do some larger loans with new and existing customers, given the increased size in the balance sheet.
Speaker #2: I guess I’m curious—is that baked into your projections of sort of mid- to lower-single-digit loan growth for 2026?
Speaker #4: I think a little bit. You know, we will still look to try to syndicate some of the largest loans, as we have in the past.
Paul Perrault: I think a little bit. You know, we will still-
Paul Perrault: I think a little bit. You know, we will still-
Mark Meiklejohn: ... look to try to syndicate some of the largest loans, as we have in the past. So we will sort of walk through glue on the size thing. We don't wanna move too fast, but we are interested in looking at somewhat larger loans.
Mark Meiklejohn: Look to try to syndicate some of the largest loans, as we have in the past. So we will sort of walk through glue on the size thing. We don't wanna move too fast, but we are interested in looking at somewhat larger loans.
Speaker #4: So, we will sort of walk through GLUE on the size thing. We don't want to move too fast, but we are interested in looking at somewhat larger.
Speaker #4: loans. Thank
Carl Carlson: Thank you.
Carl Carlson: Thank you.
Speaker #3: Your next question comes from a line of Lori Huntsaker from Seaport. Your line is open.
Operator: Your next question comes from a line of Laurie Hunsicker from Seaport. Your line is open.
Operator: Your next question comes from a line of Laurie Hunsicker from Seaport. Your line is open.
Speaker #5: Yeah.
Laurie Hunsicker: Yeah, hi. Thanks. Good afternoon.
Laurie Hunsicker: Yeah, hi. Thanks. Good afternoon.
Speaker #5: Hi. Thanks. Good afternoon. Hi,
Mark Meiklejohn: Hi, Laurie.
Mark Meiklejohn: Hi, Laurie.
Speaker #5: Yeah, Lori, just wanted to go back to the buyback. Wanted to understand that a little bit more. Certainly, a lot of your peers are actively buying back stock, and you're sitting with a plethora of capital, right?
Laurie Hunsicker: Yeah, just wanted to go back to the buyback. Wanted to understand that a little bit more. Certainly, a lot of your peers are actively buying back stock, and you're sitting with a plethora of capital, right? Your CET1 is 11%. So how do you think about that? I mean, obviously, I realize price is a consideration and other uses, but where do you want that CET1 ratio, or how is it that you look at it? What is it that would get you excited and say, "Okay, now we have to be back in the market"? How should we think about that?
Laurie Hunsicker: Yeah, just wanted to go back to the buyback. Wanted to understand that a little bit more. Certainly, a lot of your peers are actively buying back stock, and you're sitting with a plethora of capital, right? Your CET1 is 11%. So how do you think about that? I mean, obviously, I realize price is a consideration and other uses, but where do you want that CET1 ratio, or how is it that you look at it? What is it that would get you excited and say, "Okay, now we have to be back in the market"? How should we think about that?
Speaker #5: Your CET1 is 11 percent. So how do you think about that? I mean, obviously, I realize prices are a consideration and other uses, but where do you want that CET1 ratio, or how is it that you look at it?
Speaker #5: What is it that would get you excited and say, okay, now we have to be back in the market? How should we think about...
Speaker #5: That? I think you only go...
Carl Carlson: I think you only go back in the market and buy back your stock when, number one, the stock is just not doing well, and it doesn't represent the value of the organization, and you're not able to grow and use the capital for growth. Now, the first thing that we easily hit that number, 'cause that's just going to what the analysts expect us to be trading at, we're very undervalued in that sense. Not that I'm saying we're undervalued, I'm just saying the analyst is saying that. I've bought some stock personally, but that's different. It's something that... But as far as making sure that we think about this for the long term.
Carl Carlson: I think you only go back in the market and buy back your stock when, number one, the stock is just not doing well, and it doesn't represent the value of the organization, and you're not able to grow and use the capital for growth. Now, the first thing that we easily hit that number, 'cause that's just going to what the analysts expect us to be trading at, we're very undervalued in that sense. Not that I'm saying we're undervalued, I'm just saying the analyst is saying that. I've bought some stock personally, but that's different. It's something that... But as far as making sure that we think about this for the long term.
Speaker #2: Back in the market and buy back your stock when, number one, the stock is just not doing well and it doesn't represent the value of the organization.
Speaker #2: And you’re not able to grow and use the capital for growth. Now, the first thing is that we easily hit that number, because that’s just going to what the analysts expect us to be trading at.
Speaker #2: We're very undervalued in that sense. Not that I'm saying we're undervalued—I'm just saying the analysts are saying that. I've bought back some stock personally, but that's different.
Speaker #2: It's something that, but as far as making sure that we think about this for the long term, it's not a short-term thing. It's a long-term thing.
Carl Carlson: It's not a short-term thing; it's a long-term thing. Right now we're focused on getting to that 300% of capital for our CRE portfolio concentration numbers. Growth in capital gets us there, and so we expect to see that capital growth. But also growth in loans. So if we don't, for some reason, get the growth in loans that we expect, we understand that that's an opportunity to pull on. We also understand that when we do raise some subdebt, there may be opportunities to use some of those proceeds for common stock buyback, if it makes sense. These are all big ifs, but that's hopefully that's helpful.
It's not a short-term thing; it's a long-term thing. Right now we're focused on getting to that 300% of capital for our CRE portfolio concentration numbers. Growth in capital gets us there, and so we expect to see that capital growth. But also growth in loans. So if we don't, for some reason, get the growth in loans that we expect, we understand that that's an opportunity to pull on. We also understand that when we do raise some subdebt, there may be opportunities to use some of those proceeds for common stock buyback, if it makes sense. These are all big ifs, but that's hopefully that's helpful. We do provide our capital ratios in the deck, and where we feel comfortable with them.
Speaker #2: And right now we're focused on getting to that 300 percent of capital for our ICRE portfolio concentration numbers. And growth in capital gets us there.
Speaker #2: And so we expect to see that capital growth, but also growth in loans. So if we don't, for some reason, get the growth in loans that we expect, we understand that that's an opportunity to pull on.
Speaker #2: We also understand that when we do raise some sub debt, there may be opportunities to use some of those proceeds for common stock buyback if it makes sense.
Speaker #2: These are all big ifs. But hopefully that's helpful. We do provide our capital ratios in the deck, and we feel comfortable with them.
Carl Carlson: We do provide our capital ratios in the deck, and where we feel comfortable with them.
Speaker #5: And sorry, I see them provided in the deck. You mean you have targets? Did I miss—
Laurie Hunsicker: Sorry, I see them provided in the deck. You mean you have targets? Did I miss that?
Laurie Hunsicker: Sorry, I see them provided in the deck. You mean you have targets? Did I miss that?
Speaker #5: that? Yeah.
Carl Carlson: Well, we are-
Carl Carlson: Well, we are.
Laurie Hunsicker: Sorry, Carl.
Laurie Hunsicker: Sorry, Carl.
Carl Carlson: Yeah, we have, we have operating targets that we're very comfortable with. Our stress tests show that we could operate at that level.
Carl Carlson: Yeah, we have, we have operating targets that we're very comfortable with. Our stress tests show that we could operate at that level.
Speaker #2: We have operating targets that we're very comfortable with. Our stress tests show that we could operate at that—go right down to that level because of that level.
Laurie Hunsicker: Right.
Laurie Hunsicker: Right.
Speaker #2: That doesn't mean that we're—you also have to consider the market and what peers are doing and things of that nature, as well as other uses of capital.
Carl Carlson: That doesn't mean that we're gonna go right down to that level, because you also have to consider the market, what peers are doing, and things of that nature, as well as other uses of capital. You always need capital for growth.
Carl Carlson: That doesn't mean that we're gonna go right down to that level, because you also have to consider the market, what peers are doing, and things of that nature, as well as other uses of capital. You always need capital for growth.
Speaker #2: You always need capital for
Speaker #2: growth.
Speaker #5: But I mean, just one more thing. I—
Laurie Hunsicker: But, I mean, just so one more thing. I mean, what also is seeing your dividend yield here? I mean, I agree with you. I think obviously your stock is cheap, but your dividend yield here is so high, and so that's also an expensive cost that if you retire those shares, it's not there. Is that, is that part of the thinking? I mean, I guess I'm-
Laurie Hunsicker: But, I mean, just so one more thing. I mean, what also is seeing your dividend yield here? I mean, I agree with you. I think obviously your stock is cheap, but your dividend yield here is so high, and so that's also an expensive cost that if you retire those shares, it's not there. Is that, is that part of the thinking? I mean, I guess I'm-
Speaker #5: I mean, it would also seem your dividend yield here—I mean, I agree with you. I think, obviously, your stock is cheap, but your dividend yield here is so high.
Speaker #5: And so that’s also an expensive cost, that if you retire those shares, it’s not there. Is that part of the thinking? I mean, I guess.
Speaker #2: It goes into the yes, it does go into the calculus. Whenever you're thinking about doing buybacks.
Carl Carlson: It goes into the... Yes, it does go into the calculus whenever you're thinking about doing buybacks.
Carl Carlson: It goes into the., Yes, it does go into the calculus whenever you're thinking about doing buybacks.
Speaker #5: Okay, okay. And then just jumping over to credit—you obviously had a small jump here in your CRE non-performers. Looks like that was all office.
Laurie Hunsicker: Okay. And then just jumping over to credit. Obviously, you had a small jump here in your CRE nonperformers. Looks like that was all office. Just wondered on that, if there was any color on that $10 million increase. And then also on office, the $137 million of criticized. How much of that is set to mature this year in 2026? Thanks.
Laurie Hunsicker: Okay. And then just jumping over to credit. Obviously, you had a small jump here in your CRE nonperformers. Looks like that was all office. Just wondered on that, if there was any color on that $10 million increase. And then also on office, the $137 million of criticized. How much of that is set to mature this year in 2026? Thanks.
Speaker #5: Just wondered on that, if there was any color on that $10 million increase. And then also, on office—the $137 million of criticized—how much of that is set to mature this year and in 2026?
Speaker #5: Thanks.
Mark Meiklejohn: So, Laurie, to answer your question, the jump on the nonaccruals was a single office property. CBD, it was about a $9 million loan, vacancy issues there, and we have a very strong reserve on that. It's 56% reserved.
Mark Meiklejohn: So, Laurie, to answer your question, the jump on the nonaccruals was a single office property. CBD, it was about a $9 million loan, vacancy issues there, and we have a very strong reserve on that. It's 56% reserved.
Speaker #2: So
Speaker #2: Lori, to your answer to your question, the jump on the non-accruals was a single office property, CBDA. It was about a $9 million loan.
Speaker #2: Vacancy issues there. And we have a very strong reserve on that. It's 56 percent reserved.
Speaker #5: Oh, okay.
Laurie Hunsicker: Oh, okay.
Laurie Hunsicker: Oh, okay.
Speaker #2: And I apologize. I missed the second part of
Mark Meiklejohn: I apologize. I missed the second part of your question.
Mark Meiklejohn: I apologize. I missed the second part of your question.
Speaker #2: your question. Yeah.
Laurie Hunsicker: Yeah. The $137 million you have of criticized office, and by the way, I really, really appreciate all the disclosures here. How much of that is set to mature this year?
Laurie Hunsicker: Yeah. The $137 million you have of criticized office, and by the way, I really, really appreciate all the disclosures here. How much of that is set to mature this year?
Speaker #5: The $137 million you have of criticized office—and by the way, I really, really appreciate all the disclosures here—how much of that is set to mature this...
Speaker #5: year? Oh,
Mark Meiklejohn: Oh, very little, actually. In the five quarters, including the current quarter, we only had two criticized loans scheduled to mature. One is the loan that I just described to you, and then the second loan is a special mention loan, so it's not a substandard loan, and that is not until Q3 of 2026. And, frankly, I don't expect any issues with that loan.
Mark Meiklejohn: Oh, very little, actually. In the five quarters, including the current quarter, we only had two criticized loans scheduled to mature. One is the loan that I just described to you, and then the second loan is a special mention loan, so it's not a substandard loan, and that is not until Q3 of 2026. And, frankly, I don't expect any issues with that loan.
Speaker #2: Very little, actually. We had two in the five quarters, including the current quarter—we only had two criticized loans scheduled to mature. One is the loan that I just described to you.
Speaker #2: And then, the second loan is a special mention loan, so it's not a substandard loan. And that is not until the third quarter of '26.
Speaker #2: And frankly, I don't expect any issues with that loan.
Speaker #5: Okay. Okay. Great. And then the reserves to loans—you mentioned this—obviously nice and high at 1.4%. And you'd expect that to obviously come down.
Laurie Hunsicker: Okay. Okay, great. And then the reserves to loans, you mentioned, is obviously nice, nice and high at 1.4%, and you'd expect that to obviously come down. Where do you see that ending up as we look throughout 2026? Where could we see it in Q4?
Laurie Hunsicker: Okay. Okay, great. And then the reserves to loans, you mentioned, is obviously nice, nice and high at 1.4%, and you'd expect that to obviously come down. Where do you see that ending up as we look throughout 2026? Where could we see it in Q4?
Speaker #5: Where do you see that ending up as we look throughout 2026? Where could we see it in the fourth—
Speaker #5: quarter? Yeah.
Mark Meiklejohn: Yeah, I would probably hesitate to give you a number, because, you know, that's being driven by some of the specific reserves, as Carl mentioned, that we have on our substandard loan portfolio. Some of those loans are long-term workout loans. We have strategies with all of those that we're working through, but it's hard for me to say exactly when we... You know, we've said that we expect elevated charge-offs-
Mark Meiklejohn: Yeah, I would probably hesitate to give you a number, because, you know, that's being driven by some of the specific reserves, as Carl mentioned, that we have on our substandard loan portfolio. Some of those loans are long-term workout loans. We have strategies with all of those that we're working through, but it's hard for me to say exactly when we... You know, we've said that we expect elevated charge-offs- based upon the level of provision we have. It's hard for me to predict on when those may actually occur. But I think over the next 4 to 6 quarters, we'll see it ride down into the 125 range.
Speaker #2: I would probably hesitate to give you a number, because that's being driven by some of the specific reserves, as Carl mentioned, that we have on our substandard loan portfolio.
Speaker #2: Some of those loans are long-term workout loans. We have strategies with all of those that we're working through. But it's hard for me to say exactly when. We've said that we expect elevated charge-offs.
Steve Moss: ... based upon the level of provision we have. It's hard for me to predict on when those may actually occur. But I think over the next 4 to 6 quarters, we'll see it ride down into the 125 range.
Speaker #2: Based upon the level of provision we have, it's hard for me to predict when those may actually occur. But I think over the next four to six quarters, we'll see it ride down into the 125 range.
Speaker #2: Based upon the level of provision we have, it's hard for me to predict when those may actually occur. But I think over the next four to six quarters, we'll see it ride down into the—
Speaker #5: Okay. Okay. That's what I'm getting at. Great. Okay. And then, last question: one-time charges—by my math, there's about $10 million or so remaining for the fourth quarter.
Laurie Hunsicker: Okay. Okay, that's what I'm getting at. Great. Okay. And then last question, one-time charges, by my math, there's about $10 million or so remaining for the first quarter. Is that still a good number, or is there a better number to be using?
Laurie Hunsicker: Okay. Okay, that's what I'm getting at. Great. Okay. And then last question, one-time charges, by my math, there's about $10 million or so remaining for the first quarter. Is that still a good number, or is there a better number to be using?
Speaker #5: Is that still a good number, or is there a better number to be using?
Speaker #2: You want merger charges. I think it's, yeah, it's in the $10 to $13 million, I think, range.
Paul Perrault: Q1 merger charges.
Paul Perrault: Q1 merger charges.
Carl Carlson: Q1, I think it's-
Carl Carlson: Q1, I think it's-
Laurie Hunsicker: Sorry.
Laurie Hunsicker: Sorry.
Carl Carlson: It's, yeah, it's in the $10 to 13 million, I think, range.
Carl Carlson: It's, yeah, it's in the $10 to 13 million, I think, range.
Speaker #5: Okay. Okay. Okay. Great. Thanks so much for taking my—
Laurie Hunsicker: Okay. Okay. Great. Thanks so much for taking my questions.
Laurie Hunsicker: Okay. Okay. Great. Thanks so much for taking my questions.
Speaker #5: questions. Okay,
Speaker #5: questions. Okay,
Carl Carlson: Okay, Laurie.
Carl Carlson: Okay, Laurie.
Speaker #1: Your next, Lori. The question comes from Elina of David Conrad from KBW. Your line is open.
Operator: Your next question comes from the line of David Konrad from KBW. Your line is open.
Operator: Your next question comes from the line of David Konrad from KBW. Your line is open.
Speaker #1: open. Good afternoon.
David Konrad: Good afternoon. Carl, thanks for your comments earlier in the call regarding the accounting change. But wanted to take it another way with your guidance. You were 15 to 20 accretable yield prior with the 3.90 to 4 NIM. I was interpreting the 15 to be with the new accounting change, and so now your accretable yield is estimated to be 15, and the guide now is 3.85 to 3.95 for the NIM. So I kind of get why the high end would be reduced, but, you know, maybe am I interpreting the accounting change, and why do we drop to the 3.85 NIM on the low end? If that makes sense.
David Konrad: Good afternoon. Carl, thanks for your comments earlier in the call regarding the accounting change. But wanted to take it another way with your guidance. You were 15 to 20 accretable yield prior with the 3.90 to 4 NIM. I was interpreting the 15 to be with the new accounting change, and so now your accretable yield is estimated to be 15, and the guide now is 3.85 to 3.95 for the NIM. So I kind of get why the high end would be reduced, but, you know, maybe am I interpreting the accounting change, and why do we drop to the 3.85 NIM on the low end? If that makes sense.
Speaker #6: Carl, thanks for your comments earlier in the call regarding the accounting change. Excuse me. But I wanted to take it another way. With your guidance—excuse me—you were 15 to 20 accretable yield prior, with the 3.90% to 4% NIM.
Speaker #6: I was interpreting the 15 to be with the new accounting change. And so now your accretable yield is estimated to be 15, and the guide now is 3.85 to 3.95 for the NIM.
Speaker #6: So, I kind of get why the high end would be reduced, but maybe I’m misinterpreting the accounting change—and why do we drop to the 3.85% NIM on the low end, if that makes sense.
Speaker #2: Sure. Well, as you know, we came in like—this is the guidance I gave, almost exactly, for last quarter. But I gave, as you said, the 390 to 4.
Carl Carlson: Sure. Well, as you know, we came in, like this is the guidance I gave almost exactly for last quarter, and, but I gave, like, as you said, the $3.90 to 4. And I was always thinking, when I think about prepayments on the loans that were marked with the merger of equals. I was just thinking about the upside. And so we were estimating about $3 million of benefit from loans being prepaid, and that's kind of what our baseline guesstimate, and I'll say guesstimate because it is mostly a guess on prepayments.
Carl Carlson: Sure. Well, as you know, we came in, like this is the guidance I gave almost exactly for last quarter, and, but I gave, like, as you said, the $3.90 to 4. And I was always thinking, when I think about prepayments on the loans that were marked with the merger of equals. I was just thinking about the upside. And so we were estimating about $3 million of benefit from loans being prepaid, and that's kind of what our baseline guesstimate, and I'll say guesstimate because it is mostly a guess on prepayments.
Speaker #2: And I was always thinking, when I think about prepayments on the loans that were marked with the merger of equals, I'm always thinking—I was just thinking about the upside.
Speaker #2: And so, we were estimating about $3.3 million of benefit from loans being prepaid. And that's kind of what our baseline guesstimate—and I'll say guesstimate because it is mostly a guess—on prepayments.
Speaker #2: Our prepayments would have actually been a little higher than that, but it was knocked down because we had one large loan that prepaid that actually had a premium on it.
Carl Carlson: Our prepayments would have been actually a little higher than that, but it was knocked down because we had one large loan that prepaid that actually had a premium on it. And so I wasn't really thinking about the loans with premiums on them. And that actually had a big impact on what we actually realized this quarter on interest, so it knocked us down to 13 and change. And so I figure, you know what? I better adjust my-
Our prepayments would have been actually a little higher than that, but it was knocked down because we had one large loan that prepaid that actually had a premium on it. And so I wasn't really thinking about the loans with premiums on them. And that actually had a big impact on what we actually realized this quarter on interest, so it knocked us down to 13 and change. And so I figure, you know what? I better adjust my-
Speaker #2: And so it wasn't really thinking about the loans with premiums on them. And that actually had a big impact on what we actually realized this quarter, so it knocked us down to 13 and change.
Speaker #2: And so I figured, you know what, I better adjust my take, take that into consideration a little bit. So you are right.
David Konrad: Reconsider.
David Konrad: Reconsider.
Carl Carlson: Take that into-- a little bit of that into consideration. So you are right, the $15 million did exclude the impact, the FASB impact, because we knew it was coming or we were very hopeful that it was coming. But prepayments are a little bit more volatile. I wanted to give myself a little bit more room there.
Carl Carlson: Take that into a little bit of that into consideration. So you are right, the $15 million did exclude the impact, the FASB impact, because we knew it was coming or we were very hopeful that it was coming. But prepayments are a little bit more volatile. I wanted to give myself a little bit more room there.
Speaker #2: The $15 million did exclude the impact—the FASB impact—because we knew it was coming, or we were very hopeful that it was coming.
Speaker #2: And, but prepayments are a little bit more volatile. I wanted to give myself a little bit more room.
Speaker #2: there. Got it.
David Konrad: Got it. Okay. And then on the expenses, one quick question. Amortization expense came in at $8.88, I think, which is a little bit higher than what I thought. Is that a good number to think about going forward?
David Konrad: Got it. Okay. And then on the expenses, one quick question. Amortization expense came in at $8.88, I think, which is a little bit higher than what I thought. Is that a good number to think about going forward?
Speaker #6: Okay, and then on the expenses—one quick question. Amortization expense came in at $88, I think, which was a little bit higher than what I thought.
Speaker #6: Is that a good number to think about going?
Speaker #6: forward? Yes.
Carl Carlson: Yes, that's, that's a good number. I mean, it does, it does step down over time, because we, we do do it on a sum-of-the-years-digits basis. I think it's the CDI component is over 12 years, so it does step down over time.
Carl Carlson: Yes, that's, that's a good number. I mean, it does, it does step down over time, because we, we do do it on a sum-of-the-years-digits basis. I think it's the CDI component is over 12 years, so it does step down over time. And we've got a wealth amortization component of that as well.
Speaker #2: That's a good number. I mean, it does step down over time, because we do do it on a sum of the years' digits basis.
Speaker #2: I think the CDI component is over 12 years, so it does step down over time. And we've got a wealth amortization component of that as well.
Speaker #2: I think the CDI component is over 12 years, so it does step down over time. And we've got a wealth amortization component of that as well.
David Konrad: Mm-hmm.
Carl Carlson: And we've got a wealth amortization component of that as well.
Speaker #6: And then, last one—as you achieve all the cost saves and the 2Q26 area, what should we expect for the back half of your expense growth rate?
David Konrad: And then last one, as you achieve all the cost saves in the Q2 2026 area, what will—what should we expect for, like, the back half of the year expense growth rate, you know, once all the cost saves are done?
David Konrad: And then last one, as you achieve all the cost saves in the Q2 2026 area, what will—what should we expect for, like, the back half of the year expense growth rate, you know, once all the cost saves are done?
Speaker #6: Once all the cost saves are
Speaker #2: Well, I think we would stay in that 3% to 3.5% growth after we get realized our cost savings. I mean, we do have a lot of work going into our branding efforts right now.
Carl Carlson: Well, I think we would stay in that 3 to 3.5% growth after we get realize our cost savings. I mean, we do have a lot of work going into our branding efforts right now. So that'll be in the run rate, basically. You know, it'll start in the run rate, I'd say, in Q1, but you really, you'll see the impact in Q2. So we'll have a net impact in Q2, of all the cost savings, as well as some of the investments in the organization.
Carl Carlson: Well, I think we would stay in that 3 to 3.5% growth after we get realize our cost savings. I mean, we do have a lot of work going into our branding efforts right now. So that'll be in the run rate, basically. You know, it'll start in the run rate, I'd say, in Q1, but you really, you'll see the impact in Q2. So we'll have a net impact in Q2, of all the cost savings, as well as some of the investments in the organization.
Speaker #2: So that'll be in the run rate, basically. It'll start in the run rate, I'd say, in Q1. But you'll see the impact in Q2.
Speaker #2: So we'll have a net impact in Q2 of all the cost savings as well as some of the investments in the organization. There's a lot of
Speaker #6: A lot of signs.
David Konrad: A lot of signs.
David Konrad: A lot of signs.
Carl Carlson: There's a lot of signs. You know, we're doing some upgrades to some of our systems, but there's also a lot of savings around those, around systems, vendors, and things of that nature as well.
Carl Carlson: There's a lot of signs. You know, we're doing some upgrades to some of our systems, but there's also a lot of savings around those, around systems, vendors, and things of that nature as well.
Speaker #2: We're doing some upgrades to some of our systems, but there's also a lot of savings around systems and vendors and things of that nature as well.
Speaker #6: Okay. Perfect. Thank you.
David Konrad: Okay, perfect. Thank you.
David Konrad: Okay, perfect. Thank you.
Speaker #1: Your next question comes from Elina of Steve Moss from Raymond James. Your line is open.
Operator: Your next question comes from the line of Steve Moss from Raymond James. Your line is open.
Operator: Your next question comes from the line of Steve Moss from Raymond James. Your line is open.
Speaker #6: Good afternoon. Hi, Steve. Maybe just—hey, Paul. So maybe just starting on kind of how to think about the loan runoff portfolios, just on the equipment finance and the Berkshire Hills commercial real estate participations.
Steve Moss: Good afternoon. Hi, Steve. Hey, hey, Paul. So maybe just starting on kind of how to think about the loan runoff portfolios, just on the equipment finance and the Berkshire Hills commercial real estate participations. Kind of curious if you could size up, you know, how much you're looking to carve out over the next or let go over the next kind of 12 to 18 months.
Steve Moss: Good afternoon.
Paul Perrault: Hi, Steve.
Steve Moss: Hey, hey, Paul. So maybe just starting on kind of how to think about the loan runoff portfolios, just on the equipment finance and the Berkshire Hills commercial real estate participations. Kind of curious if you could size up, you know, how much you're looking to carve out over the next or let go over the next kind of 12 to 18 months.
Speaker #6: Kind of curious if you could size up how much you're looking to carve out over the next, or let go over the next, kind of 12 to 18 months.
Speaker #6: Mark, take up the three portfolios that are running off, that we're not in those businesses anymore.
Paul Perrault: Mark?
Paul Perrault: Mark?
Steve Moss: Yeah.
Steve Moss: Yeah.
Paul Perrault: They get the three, the three portfolios that are running off, that we're not in those businesses anymore.
Paul Perrault: They get the three, the three portfolios that are running off, that we're not in those businesses anymore.
Speaker #2: Yeah. So for Eastern Funding, the TOE portfolio is down to about 190 million dollars. Macro lease is about 150 million. And the aircraft portfolio I'm sorry, the Firestone is just under 20 million dollars.
Laurie Hunsicker: Yeah, so, you know, for Eastern Funding, the tow portfolio is down to about $190 million. Macrolease, about $150 million, and the aircraft portfolio - I'm sorry, the
Laurie Hunsicker: Yeah, so, you know, for Eastern Funding, the tow portfolio is down to about $190 million. Macrolease, about $150 million, and the aircraft portfolio - I'm sorry, the
Mark Meiklejohn: ... Firestone is just under $20 million. In terms of runoff on those, we've got tow at about $27 million a quarter, on Macrolease at $19 million a quarter, and Firestone at $2 to 3 million per quarter. So those are running off quite quickly. In terms of the participation side, you know, I don't think we can put a number on that because, you know, there's a lot of factors involved with that, you know, the maturity of the loans, the desirability of those loans in the marketplace when they do mature, and then our ability to sort of work our way out of those. So it's a stated strategic goal for us, but I would be, it would be inappropriate for me to put a number on that.
Mark Meiklejohn: Firestone is just under $20 million. In terms of runoff on those, we've got tow at about $27 million a quarter, on Macrolease at $19 million a quarter, and Firestone at $2 to 3 million per quarter. So those are running off quite quickly. In terms of the participation side, you know, I don't think we can put a number on that because, you know, there's a lot of factors involved with that, you know, the maturity of the loans, the desirability of those loans in the marketplace when they do mature, and then our ability to sort of work our way out of those. So it's a stated strategic goal for us, but I would be, it would be inappropriate for me to put a number on that.
Speaker #2: In terms of runoff on those, we've got TOE at about $27.25 million, Macro Lease at $19.25 million, and Firestone at $2 to $3 million per quarter.
Speaker #2: So, those are running off quite quickly. In terms of the participation side, I don't think we can put a number on that because there's a lot of factors involved with that.
Speaker #2: The maturity of the loans, the desirability of those loans in the marketplace when they do mature, and then our ability to sort of work our way out of those.
Speaker #2: So, it's a stated strategic goal for us. But I would be—it would be inappropriate for me to put a number on that.
Speaker #6: Okay, got it. Appreciate that. And then in terms of just the office loan—I apologize if I missed it—just the timing of resolution around that. Kind of curious as to how you're thinking about the $9 million.
Steve Moss: Okay. Got it. Appreciate that. And then in terms of just the office floor, and I apologize if I missed it, just kind of curious as to, you know, how you're thinking about the timing of resolution around that $9 million NPL?
Steve Moss: Okay. Got it. Appreciate that. And then in terms of just the office floor, and I apologize if I missed it, just kind of curious as to, you know, how you're thinking about the timing of resolution around that $9 million NPL?
Speaker #6: NPL. Currently on
Mark Meiklejohn: Well, currently on that, that's the new nonaccrual that we discussed. We're working. The sponsor is very amenable to working with the bank on a potential sale of that property. So we think there's some interest, and we're hopeful.
Mark Meiklejohn: Well, currently on that, that's the new nonaccrual that we discussed. We're working. The sponsor is very amenable to working with the bank on a potential sale of that property. So we think there's some interest, and we're hopeful.
Speaker #2: That—that's the new non-accrual that we discussed. We're working—the sponsor is very amenable to working with the bank on a potential sale of that property.
Speaker #2: So, we think there's some interest, and we're—
Speaker #2: hopeful. Okay.
Steve Moss: Okay. And then a third one here, just in terms of, I know it's a disclosure on the, rent-controlled multifamily properties in New York. Just wondering if you'd size up, how large that portfolio is.
Steve Moss: Okay. And then a third one here, just in terms of, I know it's a disclosure on the, rent-controlled multifamily properties in New York. Just wondering if you'd size up, how large that portfolio is.
Speaker #6: And then a third one here, just in terms of—I know it's a disclosure on the rent-controlled multifamily properties in New York. Just wondering if you'd size up how large that portfolio is.
Speaker #2: Yeah, I think we had talked about this last quarter. If I recall correctly, I believe we have seven loans in that portfolio. The total is about $18 or $19 million.
Mark Meiklejohn: Yeah, I think we had talked about this last quarter. If I recall correctly, we had, I believe we have 7 loans in that portfolio. The total is about $18 or 19 million. So it's, you know, it's a really very small population of loans, and it comes out of our formerly the PCSB Bank.
Mark Meiklejohn: Yeah, I think we had talked about this last quarter. If I recall correctly, we had, I believe we have 7 loans in that portfolio. The total is about $18 or 19 million. So it's, you know, it's a really very small population of loans, and it comes out of our formerly the PCSB Bank.
Speaker #2: So it's a really very small population of loans. And it comes out of our—formerly the PCSB.
Speaker #2: bank. Okay.
Steve Moss: Okay. Appreciate that. And then, I guess, a question for Carl here. Just kind of curious, you know, as you have the balance sheets combined here, you know, you've laid out your expectations for growth. Kind of curious, you know, how you're thinking about positioning the balance sheet for rates, you know, how a 25 basis point rate cut could impact you guys these days, and, you know, if there's anything you're looking to in terms of adjusting balance sheet positioning.
Steve Moss: Okay. Appreciate that. And then, I guess, a question for Carl here. Just kind of curious, you know, as you have the balance sheets combined here, you know, you've laid out your expectations for growth. Kind of curious, you know, how you're thinking about positioning the balance sheet for rates, you know, how a 25 basis point rate cut could impact you guys these days, and, you know, if there's anything you're looking to in terms of adjusting balance sheet positioning.
Speaker #6: Appreciate that. And then I guess a question for Carl here. Just kind of curious, as you have the balance sheets combined here. You've laid out your expectations for growth.
Speaker #6: Kind of curious how you’re thinking about positioning the balance sheet for rates. How would a 25 basis point rate cut impact you guys these days?
Speaker #6: And if there's anything you're looking to do in terms of adjusting balance sheet positioning.
Speaker #2: Yeah, I'd say we like the position of the balance sheet right now. It is a little bit on the asset-sensitive side in the very near term.
Carl Carlson: Yeah, I'd say we like the position of the balance sheet right now. It is a little bit on the asset-sensitive side in the very near term. So when rates move quickly, the rates on our loans and our assets move a little faster than our deposit side. But deposits tend to catch up fairly quickly. It may not be in the quarter, but pretty quickly. We like where we're positioned. You can see, you know, the duration of loans is short, the duration of the securities portfolio is short, and the size of the securities portfolio is, you know, minimal to support the organization and very vanilla in what they're invested in.
Carl Carlson: Yeah, I'd say we like the position of the balance sheet right now. It is a little bit on the asset-sensitive side in the very near term. So when rates move quickly, the rates on our loans and our assets move a little faster than our deposit side. But deposits tend to catch up fairly quickly. It may not be in the quarter, but pretty quickly. We like where we're positioned. You can see, you know, the duration of loans is short, the duration of the securities portfolio is short, and the size of the securities portfolio is, you know, minimal to support the organization and very vanilla in what they're invested in but the deposit portfolio just continues to get better and better.
Speaker #2: So, when rates move quickly, the rates on our loans and our assets move a little faster than our deposit side. But deposits tend to catch up fairly quickly.
Speaker #2: They may not be in the quarter, but pretty quickly. So we like where we're positioned. You can see the duration of loans is short.
Speaker #2: The duration of the securities portfolio is short, and the size of the securities portfolio is minimal to support the organization, and very vanilla in what they're invested in.
Speaker #2: But the deposit portfolio just continues.
Carl Carlson: But the deposit portfolio just continues to get better and better.
Paul Perrault: From a strategic point of view, Steve, we work to try to be neutral. We don't like to take a guess on where interest rates are gonna go and then take action on the balance sheet that you may or may not realize that. So, we'll make our money the old-fashioned way.
Paul Perrault: From a strategic point of view, Steve, we work to try to be neutral. We don't like to take a guess on where interest rates are gonna go and then take action on the balance sheet that you may or may not realize that. So, we'll make our money the old-fashioned way.
Speaker #6: From a strategic point of view, Steve, we worked to try to be neutral. We don't like to take a guess on where interest rates are going to go.
Speaker #6: And then take action on the balance sheet. They may or may not realize that. So we'll make our money the old-fashioned way.
Steve Moss: Hmm. Okay. I, I appreciate all the color there. Thank you very much, guys.
Steve Moss: Hmm. Okay. I, I appreciate all the color there. Thank you very much, guys.
Speaker #2: Okay. I appreciate all the color there. Thank you very much, guys.
Speaker #6: Okay,
Paul Perrault: Okay, Steve.
Paul Perrault: Okay, Steve.
Speaker #6: Steve, your next question comes from—
Operator: Your next question comes from the line of David Bishop from Hovde Group. Your line is open.
Operator: Your next question comes from the line of David Bishop from Hovde Group. Your line is open.
Speaker #1: Elina of David Bishop from HodeGroup, your line is open.
Speaker #7: Yeah. Good
David Bishop: Yeah, good afternoon, gentlemen.
David Bishop: Yeah, good afternoon, gentlemen.
Speaker #7: afternoon, gentlemen. Hi,
Speaker #6: David.
Paul Perrault: Hi, David.
Paul Perrault: Hi, David.
David Bishop: I'm curious from an economic backdrop perspective, I think, Paul, maybe you mentioned this in the preamble. Maybe just an update in terms of what you're seeing in terms of the health of the Boston Commercial Real Estate market. I know life science is causing object up there in terms of available space. Maybe, maybe what you're seeing from a macro-level perspective on the Commercial Real Estate side.
David Bishop: I'm curious from an economic backdrop perspective, I think, Paul, maybe you mentioned this in the preamble. Maybe just an update in terms of what you're seeing in terms of the health of the Boston Commercial Real Estate market. I know life science is causing object up there in terms of available space. Maybe, maybe what you're seeing from a macro-level perspective on the Commercial Real Estate side.
Speaker #7: From an economic backdrop perspective, I think Paul—maybe you mentioned this in the preamble—maybe just an update in terms of what you're seeing in terms of the health of the Boston commercial real estate market.
Speaker #7: I know life sciences is causing agita up there in terms of available space. Maybe what you're seeing from a macro-level perspective on the commercial real estate...
Speaker #7: I know life sciences is causing agita up there in terms of available space. Maybe what you're seeing from a macro-level perspective on the commercial real estate side.
Speaker #2: Yeah, certainly, this is Mark. Certainly, there continues to be stress in the portfolio—in the market, I should say—both in terms of office and lab.
Mark Meiklejohn: Yeah, certainly, this is Mark. You know, certainly, you know, there continues to be stress in the portfolio, both, in the market, I should say, both in terms of office and lab. I think there are, you know, quality lease opportunities out there. There are quality tenants out there, and, you know, they've got a lot of leverage right now. So, you know, we are seeing values, values drop. We've seen that in the resolution of, of some of our problem assets. But I think we're, you know, we're generally seeing that stress in the marketplace as it relates to, you know, price per square foot type values.
Mark Meiklejohn: Yeah, certainly, this is Mark. You know, certainly, you know, there continues to be stress in the portfolio, both, in the market, I should say, both in terms of office and lab. I think there are, you know, quality lease opportunities out there. There are quality tenants out there, and, you know, they've got a lot of leverage right now. So, you know, we are seeing values, values drop. We've seen that in the resolution of, of some of our problem assets. But I think we're, you know, we're generally seeing that stress in the marketplace as it relates to, you know, price per square foot type values.
Speaker #2: I think there are quality lease opportunities out there. There are quality tenants out there, and they've got a lot of leverage right now. So, we are seeing values drop.
Speaker #2: We've seen that in the resolution of some of our problem assets. But I think we're generally seeing that stress in the marketplace as it relates to price-per-square-foot type values.
Speaker #2: And I expect that stress to continue. But I think the new news, or the green shoots, if you will, in the market is that there are people, some particularly on the life science side, out there we're seeing some of the tenants starting to be successful with rounds of finance—rounds of funding, I should say.
Mark Meiklejohn: And, you know, I expect that stress to continue, but I think the new news or the green shoots, if you will, in the market, is that there are, you know, there are people out there. We're seeing some, particularly on the life science side, some of the tenants starting to be successful with rounds of finance or rounds of funding, I should say. So that's creating some opportunities in the marketplace for, you know, to sort of buoy the lease market a little bit, if you will.
And, you know, I expect that stress to continue, but I think the new news or the green shoots, if you will, in the market, is that there are, you know, there are people out there. We're seeing some, particularly on the life science side, some of the tenants starting to be successful with rounds of finance or rounds of funding, I should say. So that's creating some opportunities in the marketplace for, you know, to sort of buoy the lease market a little bit, if you will.
Speaker #2: So that's creating some opportunities in the marketplace to sort of buoy the lease market a little bit, if you—
Speaker #2: will. I would just
Paul Perrault: I would just add, David, that the core business district in Boston has gone through some pain, probably has to go through some more pain, but it does seem to be coming back. Green shoots, I think Mark mentioned, and some life science stuff which got overbuilt in the past few years, where we don't have all that much in that. I think that continues to suffer. But in our entire footprint, the rest of the stuff is really pretty good. It's all going pretty well. When I talk about Rhode Island, and even Western Mass and Albany, places like that, they're all holding up pretty well.
Paul Perrault: I would just add, David, that the core business district in Boston has gone through some pain, probably has to go through some more pain, but it does seem to be coming back. Green shoots, I think Mark mentioned, and some life science stuff which got overbuilt in the past few years, where we don't have all that much in that. I think that continues to suffer. But in our entire footprint, the rest of the stuff is really pretty good. It's all going pretty well. When I talk about Rhode Island, and even Western Mass and Albany, places like that, they're all holding up pretty well.
Speaker #6: Add, David, that the core business district in Boston has gone through some pain, probably has to go through some more pain. But it does seem to be coming back.
Speaker #6: Green shoots, I think Mark mentioned, and some life science stuff—which got overbuilt in the past few years—where we don't have all that much in that.
Speaker #6: I think that continues to suffer. But in our entire footprint, the rest of the stuff is really pretty good. It's all going pretty well when I talk about Rhode Island, and even Western Mass, and Albany, places like that.
Speaker #6: They're all holding up pretty
Speaker #6: They're all holding up pretty well. Got it.
David Bishop: Got it. And then maybe, maybe back to the loan side of the equation on the yields. Just curious what you're seeing in terms of new origination yields, how those trended quarter-over-quarter?
David Bishop: Got it. And then maybe, maybe back to the loan side of the equation on the yields. Just curious what you're seeing in terms of new origination yields, how those trended quarter-over-quarter?
Speaker #7: Then maybe back to the loan side equation on the yield. Just curious what you're seeing in terms of new origination yields out of this, trended quarter over quarter.
Speaker #7: quarter. So like I
Carl Carlson: ... So like I said, we originated-
Carl Carlson: So like I said, we originated-
Speaker #2: said, we originated.
Operator: Billion.
Mark Fitzgibbon: Billion.
Carl Carlson: A little over $1 billion at 630, 631 basis points on average. Now, remember, we had 3 rate moves in the quarter as well. So we saw the impact on that, on not only just the originations, 49% of our originations are basically floating rate, but also on the balance sheet, of those loans that reprice. So if there's any particular category you're interested in, you know, C&I loans were coming in, on an asset-weighted average basis, about 701 basis points. Consumer loans around 549 basis points, and commercial real estate, 607 basis points.
Carl Carlson: A little over $1 billion at 630, 631 basis points on average. Now, remember, we had 3 rate moves in the quarter as well. So we saw the impact on that, on not only just the originations, 49% of our originations are basically floating rate, but also on the balance sheet, of those loans that reprice. So if there's any particular category you're interested in, you know, C&I loans were coming in, on an asset-weighted average basis, about 701 basis points. Consumer loans around 549 basis points, and commercial real estate, 607 basis points.
Speaker #2: A little over a billion—billion dollars at 631 basis points on average. Now, remember, we had three rate moves in the quarter as well.
Speaker #2: So we saw the impact of that on not only just the originations—49% of our originations are basically floating rate—but also on the balance sheet of those loans that repriced.
Speaker #2: So, if there's any particular category you're interested in, C&I loans were coming in on a weighted average basis of about 701 basis points. Consumer loans were around 549 basis points.
Speaker #2: And commercial 607 basis real estate points. Yeah.
David Konrad: Eastern Funding?
David Konrad: Eastern Funding? I appreciate that color.
Speaker #7: Let me see that color. Eastern Funding?
David Bishop: I appreciate that color.
Speaker #2: The
Carl Carlson: Yeah, the Eastern Funding, you know, as far as equipment financing-
Carl Carlson: Yeah, the Eastern Funding, you know, as far as equipment financing that would, you know, that's, that's as a subset of commercial loans, 853 basis points in that book.
Speaker #2: Eastern Funding, as far as equipment financing—that's as a subset of commercial loans—853 basis points in that.
David Bishop: Yeah.
Carl Carlson: -that would, you know, that's, that's as a subset of commercial loans, 853 basis points in that book.
Speaker #2: book. Got it.
David Bishop: Got it. Then maybe one final question, turn it back to capital. All right, Carl, you probably saw maybe one of your peers last week, I think, announced they did a credit risk transfer. Any thought, is that something that could ever, you know, enter the capital management equation? Thanks.
David Bishop: Got it. Then maybe one final question, turn it back to capital. All right, Carl, you probably saw maybe one of your peers last week, I think, announced they did a credit risk transfer. Any thought, is that something that could ever, you know, enter the capital management equation? Thanks.
Speaker #7: And maybe one final question, turning back to capital. All right. Carl, you probably saw maybe one of your peers last week, I think, announced they did a credit risk transfer.
Speaker #7: Any thoughts? Is that something that could ever enter the capital management equation?
Speaker #7: Thanks.
Speaker #2: I never want to
Carl Carlson: I never want to say never, but it's not something that we're really interested in. God forbid, I said I was interested, I'd get 400 calls.
Carl Carlson: I never want to say never, but it's not something that we're really interested in. God forbid, I said I was interested, I'd get 400 calls.
Speaker #2: say never, but it's not something that we're really interested in. And God forbid I said I was interested, I get 400
Speaker #2: calls. And that ends our question.
Operator: That ends our question and answer session. I will now turn the call back over to Paul Perrault for closing remarks.
Operator: That ends our question and answer session. I will now turn the call back over to Paul Perrault for closing remarks.
Speaker #1: and answer session. I will now turn the call back over to Paul Perrault for closing remarks.
Speaker #7: Thanks, Rob. And thank you all for joining us today. We will look forward to talking with you next quarter. Have a good day.
Speaker #7: Thanks, Rob. And thank you all for joining us today. We look forward to talking with you next.
Carl Carlson: Thanks, Rob, and thank you all for joining us today, and we will look forward to talking with you next quarter. Have a good day.
Paul Perrault: Thanks, Rob, and thank you all for joining us today, and we will look forward to talking with you next quarter. Have a good day.
Operator: This concludes today's conference call. Thank you for your participation, and you may now disconnect.
Operator: This concludes today's conference call. Thank you for your participation, and you may now disconnect.