Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Berkshire Hills Bancorp (NYSE:BHLB)

Q4 2013 Earnings Conference Call

January 28, 2014 10:00 ET

Executives

Ally O'rourke - Vice President, Investor Relations

Mike Daly - Chairman, President, Chief Executive Officer

Josephine Iannelli - Executive Vice President, Chief Financial Officer

George Bacigalupo - Executive Vice President, Commercial Banking

Sean Gray - Executive Vice President, Retail Banking

Analysts

Mark Fitzgibbon - Sandler O'Neill

Matthew Kelley - Sterne, Agee

Collyn Gilbert - KBW

Operator

Good morning and welcome to the Berkshire Hills Bancorp's Fourth Quarter Earnings Release Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Ally O'Rourke, Investor Relations Officer. Please go ahead.

Ally O'Rourke

Good morning and welcome to America's most exciting bank. Thank you for joining us in this discussion of fourth quarter results. Our news release is available on the Investor Relations section of our website, berkshirebank.com and will be furnished to the SEC. Our discussion will include forward-looking statements and actual results could differ materially from those statements. For a discussion of related factors, please see our earnings release in our most recent SEC reports on Form 10-K and 10-Q.

With that, I will turn the call over to Mike Daly, President and CEO. Mike?

Mike Daly

Thank you, Ally. Good morning everyone welcome to our fourth quarter conference call. With me this morning is Josephine Iannelli, along with other members of our management team.

In addition to our earnings release last night and I hope you all saw the separate release about Josephine's promotion to Chief Financial Officer. I'm delighted to welcome her to our executive team and I'll have a little more to say about that in just a few minutes.

With respect to our earnings release, we did achieve our guidance and we turned in good results for net loan growth and expense reduction. Core earnings per share came in at $1.87 for the year and $0.40 for the quarter. And Josephine will speak to the GAAP results a little later.

Results in the quarter and the second half of the year were driven mainly by a continued strong loan growth, continued cost cutting and a focus on driving fee income and I'm going to touch on each of these.

And I will start with loan growth. Total loans were up 16% annualized for the quarter that follows 16% annualized growth in the third quarter, so results here continue to be good. In fact, we are seeing strong results out of not just our commercial teams at this point but also the consumer side.

Total consumer loans were up 10% annualized for the quarter and a big piece of this growth was driven by auto loans and this was the direct result of some of the investment we made in the first half of the year.

On the commercial front, it's been a particularly good year for our C&I business. We posted double-digit growth quarter-after-quarter, and we are up another 12% annualized in the fourth quarter. Commercial real estate loans turned around in the back half of the year as well and were up 7% annualized for the quarter there.

So I'm pleased where George Bacigalupo leadership has taken us and the fact that we are seeing strong performance in all our regions has been particularly satisfying because that set the heart of the strategy of the franchise to become a strong organic player in the five regions where we've made investments. We saw a good growth out of our Albany area, our new Burlington, Mass area in Eastern Massachusetts. Our leasing teams are starting to show some traction. We had a good year in Connecticut, and ABL again was a strong contributor.

We’ve also got a strong and solid pipeline ending the year, so I'd anticipate that net loan growth should remain strong. And of course, adherence to sound and consistent credit structuring and emphasis on relationship building will continue as important themes for us as always.

Now turning to expenses, we reduced our core operating expense by an additional 3% in the quarter that brought our total to 7% in the last 6 months. We completed the consolidation of two branches in December bringing the total for the year to 5. And we discussed this on the third quarter call.

We also got some benefit from the Six Sigma projects we are working on earlier in the year, and as I have said in the past, the direct cost saves from these process improvement projects, they are not always easy to predict, but you can see the results in slightly lower expenses across many of the categories in the bank, and as I have said before as growth occurs, you realize better scalability through these process improvements.

As we move further into the year, expenses will remain a focus for us. But, we are going to make some investments where we need to. I think it's widely agreed that the regulatory environment and compliance are becoming more demanding and we intend to keep the credit flowing to support our markets, and with CFPB becoming more active, we are going to be increasing our compliance resources to stay prepared and to get ahead where we can.

And we communicate pretty closely with our regulators, and we intend to maintain a strong relationship there and good standing with them and I think staffing appropriately is always going to be part of that. I can also say that there are some opportunities right now for us to bring in some additional talent and to strengthen our teams and our regions. As you know, we have had pipeline of people looking to bring their skills and relationships to us, and I think to miss out on those hires at this point and the potential revenue generation that they bring for a couple of cents just isn’t worth it.

And we are closely managing our total salary expense, but there are some important players on the sideline right now that we want, and I think are important to our growth strategy. So, we are going to have to continue to create efficiencies where we can, so we can absorb these costs and I would say, stay tuned on that front.

Now turning to fee income, we showed an increased quarter-over-quarter in almost every category, and total fee income was up at a 6% annualized rate in the fourth quarter. This reverses the downward trend in fee income we were seeing earlier in the year primarily driven by the drop-off in the mortgage market.

We saw a double-digit annualized growth from our wealth management and our deposit fee categories, and our swap fees also made a solid contribution. On the insurance front, I would like us to do a little better. We’ve launched several new programs designed to drive growth including Quick Life in the branches and some niche programs on the commercial side, so I'm excited to see where that takes us, but fee income continues to be a very important revenue source for us, and we are going to remain vigilant here as we go forward.

Now turning to deposits, as we discussed last quarter, much of the run-off this year was related to expensive time deposits that we let go ahead of the branch acquisition. And while total deposits were down for the fourth quarter, most importantly non-maturity deposits were up. And we did post a 2% annualized growth for total deposits in the second half of the year, again anticipating the branch acquisition.

We completed the acquisition of the 20 branches from Bank of America in Central New York last weekend. These locations nicely fill in our footprint along I-90, bridging our markets from Albany to Syracuse, and while numbers are still subject to some adjustment, we acquired approximately $450 million in deposits and $4 million in loans.

There was some deposit run-off between the announcement and the closing and not unlike other transactions recently, but as you know we only pay for the deposits we receive. So overall, it was a smooth transaction. Our new customers seem happy. And frankly, Bank of America was helpful in making that happen.

We closed two of the 20 branches as they were eyesight of branches we currently operate. And at the same time, we opened an additional previously planned de novo branch in Loudonville, New York, and that's just outside of Albany. This brings our total branch count up to 92, with over half of those now in Central and Eastern New York.

As you know, we originally planned to use about half of the new deposits to payoff borrowings while investing the rest. But I’ve got to tell you with market consensus, the loan rates could move higher in the near term, and I think we have to be cautious about when and where we put that money.

I really think we are better off being disciplined and cautious with rate volatility rather than being aggressive and risk moving too far into liability-sensitive territory at this stage of the game. I mean the easy thing to do would be to invest the new deposits quickly and make a few cents early, but that could hurt us going forward and I don't want us looking back wishing we had been more patient. Now Josephine will add some more thoughts on this transaction, but it seems to me as though this is a good time to bring her into the conversation.

As most of you know, Josephine has been with us as Chief Accounting Officer for the last year, and she has been filling the role of Interim Chief Financial Officer since July. Myself, the executive team, and the Board have been impressed with the leadership Joe has shown over the last six months, and she has been instrumental in our restructuring and our cost initiatives. Her knowledge of accounting is superb and her ability to cut through and understand the complicated aspects of purchase accounting and other financial dynamics has been impressive, and not just to management but to our audit committee, our regulators, and our outside auditors.

So she has been vetted and tested over the last six months both internally and externally, and I think everyone is impressed with her. Importantly, she also demonstrates the best of AMEB's culture and her willingness to stretch and grow and bring in thoroughbreds to support her.

And she also shows humility, and she is a strong team player and that's exactly what we are looking for. So for me personally, it's been nice to be able to promote two executives from within this year, starting with George Bacigalupo on commercial and now Josephine as CFO. We had a lot of outside interest in these executive positions and I'm proud of the fact that our internal talent showed the best promise to drive market share and earnings. And I think it's a testament to the bench strength that we built and we are building here at America's most exciting bank.

With that, I'm going to turn it over to Josephine. She will walk us through the numbers and then she will give us some guidance for next quarter. Joe.

Josephine Iannelli

Thanks Mike and good morning to everyone on the line. I had been part of the Berkshire family for nearly a year now. And I'm pleased to join the executive team to do my part on delivering on the earnings and investment potential we all see in front of us in this company.

That said, I will turn to the first quarter and provide some color here in a minute on the key drivers to earnings and also some guidance on our outlook. I will also refer to our operations as they stood at the end of the year and then separately address the impact of the branch purchase.

We produced $0.40 in core EPS in the fourth quarter, which was in line with our prior guidance. Taking into account some adjustments that I will comment on, we produced positive operating leverage with growth in core revenue and a decrease in core expense. Mike mentioned our strong loan growth. We also invested further in medium term collateralized mortgage obligations in our securities portfolio. This contributed 5% growth in our average earning assets compared to the prior quarter.

Our total net interest income decreased compared to the prior quarter. However, our net interest income includes purchase loan accretion and we produced exceptionally high recoveries on purchased impaired loans in the third quarter. This helped to boost our total purchase loan accretion to an unusually high $8.5 million at that time including an out-of-period accounting adjustment.

In the fourth quarter, total accretion declined to $2.4 million, which was inline with our guidance, excluding the accretion, our net interest income actually picked up slightly in the fourth quarter after having declined in previous quarters.

The growth in average earning assets was mostly offset by compression of the underlying margin due to changes in the asset mix and lower yields on the replacement of run-off.

Looking ahead, we continued to target near double-digit annualized loan growth and low-single digit deposit growth. We believe that our run-off and replacement interest rates on the asset side are coming into closer balance and we expect that we can continue to gradually move down our funding cost as we have done so for the last four quarters. We therefore expect asset yields and funding cost to do more in parallel and that our margin compression is mostly behind us.

As we have discussed before, we expect that purchase loan accretion will gradually go to zero by the end of the year, while strong earning asset growth is expected to keep total net interest income moving north.

Moving to non-interest income, Mike comment on our 6% annualized fee income growth. We also had some year end adjustments primarily in bank owned life insurance that contributed to an increase in other non-interest income.

Looking at core revenues taken altogether, we expect to see mid-single digit annualized growth even while we are absorbing the expected decreases in our loan accretion. We also posted non-core revenue in the fourth quarter from additional gains on sales to bank equity securities due to favorable market conditions for certain securities.

Our loan loss provision and allowance remain very steady, our charge-offs ticked down slightly in the fourth quarter and measured 29 basis points for the year.

Looking forward, we expect the provision to increase modestly based on our strong loan growth. But we expect to continue to have favorable charge-off numbers and the ratio of the allowance to total loans may continue to modestly decline as overall portfolio quality continues to improve.

On the expense side, Mike talked about the 3% reduction in core expenses for the quarter. We do expect an up tick in expenses in the fourth quarter -- in the first quarter excuse me, due to the normal seasonal items as well as the recruiting and initiatives that Mike referenced.

Looking at taxes, results came in better than we expected. We benefited from the recapture of capital gains reserves as a result of our securities gains and the additional non-core items including restructuring which have contributed to a lower overall rate. The core tax rate for the quarter and the year was 31% and we presently don't anticipate major changes to this rate in 2014.

So taking a step back as we put it altogether, we see core EPS on baseline operations running flat to slightly up in the first quarter.

Let me now turn to the $450 million deposit purchase that Mike described earlier. We are being careful and how we utilized the proceeds and are using the acquired funds to repay borrowings and purchased investment securities at a blended rate. Decisions are being made on the exact mix at this time and our current expectation is that investments will increase by around $300 million with the rest of the funds being used to reduce borrowings.

Investments will be similar instruments to what we have currently in the portfolio. Roughly 40% of the acquired deposits are in DDAs and the overall cost of the total deposits has been running in the mid teens in terms of basis points. We expect that the transaction will be asset sensitive to our interest income at risk and we have some capacity for longer durations on the investments side, so we will be balancing EPS, return on assets and the potential benefit of higher rates down the road.

We expect that the branch purchase will be accretive to our net interest margin and that our overall net interest margin including existing operations will be steady or expand in the first quarter both in total as well as the margin measured in that of a loan accretion. We do expect to benefit from the related termination of some higher rate swaps on borrowings that are repaid.

Also in addition to nicely filling in our Central New York footprint, these new funds improve our liquidity and we expect that our initial pro forma loans to deposits will be around 97% with these acquired deposits. We expect to pick-up around $1 million in fee income per quarter and around $3.5 million in non-interest expense per quarter initially. And we anticipate that we can improve on these numbers as we go along and build synergies in our Central New York region. We will likely have some initial dilution to our total return on assets and anticipate initially running in the 60s in terms of basis points on a total core basis and then moving north from there.

Looking at the bottom-line of the branch purchase we expect modest core EPS accretion in 2014, though we are not expecting any significant EPS benefit in the first quarter while we are completing the transaction. With the moving parts we have going on right now, we are still working out the timing and magnitude of expected core EPS growth after the first quarter and we expect to be able to clarify our outlook as we move forward through the year.

Moving to non-core items for a moment, we had $0.02 non-core contribution in the fourth quarter bringing us to $0.42 GAAP EPS. This included a security gains I mentioned earlier and was net of restructuring M&A and conversion charges shown in our release.

For the year, non-core items totaled $0.22 in net charges and GAAP EPS totaled $1.65. We expect further net non-core charges in the first quarter as we complete the acquisition along with the small amount of restructuring and conversion charges. We anticipate that tangible book value per share dilution will define slightly to little under $16 by the end of the quarter as we record these cost and goodwill arising primarily from the deposit premium of around $10.5 million.

We currently don't anticipate any significant differences between GAAP and core results beyond the first quarter. We expect to see accretive benefit of the deposit purchase will provide a payback within 5 years from the modest transaction solution. After the first quarter, we expect tangible book value per share to resume growing at a mid-single digit annualized rate or possibly higher. Our goal is to produce reliable, tangible shareholder return. And as CFO, I'm ready and enthusiastic about the contribution I intent to make in order to realize those results.

With that I'll turn the call back over to Mike.

Mike Daly

Thank you, Josephine. It was a nice job. So as Joe said, we expect next quarter to do at least what we did this past quarter and we're working to do a little better. And when we sort out our plans with out expanded operations we'll provide more guidance about expected growth beyond that. And I think you have to be some cautious of potential market volatility right now. I mean you've got a lot of variables in the economy both domestic and global and of course then there is the political side. You get the State of the Union tonight, a new head of the fed another debt ceiling deadline.

I would say this, I do take comfort, however, in the fact that a fair amount of our growth is based on market share gains and we're uniquely positioned in New England to take advantage of market vulnerabilities based on our geography. We're not necessarily depending on a 3% GDP growth and we've already done much of the hard work to put this franchise in place and we can concentrate on the revenue opportunities in front of us.

Now we're not taking our eye off our goals of positive operating leverage 1%, ROA double-digit ROE and a strong return on tangible book value. As we discussed in the third quarter, we're still going to be in a transitional state for the next quarter or two as we bring on the new branches, pursue further net loan growth and we continue to architect this infrastructure. Loan accretion continues to wind down but excluding these effects, we did post positive operating leverage in the most recent quarter and we plan to keep that our prospect.

With the Central New York branch deal recently closed, we are spending a lot of time and effort making sure those customers and new employees have a smooth transition. As I said last quarter, our focus right now is on developing the synergies in our business; increasing our market share in the regions where we've made investments and pursuing our long-term profitability run rates while moving the core EPS needle north consistently from here.

I mentioned earlier there was some talent out there we were looking to hire and some teams we thought that would be good additions. And we're also going to continue to vet out potential teams or acquisitions in the fee business space. Again, with the intent of fully taking advantage of the footprint and overall franchise that we build are delivering to our shareholders.

For the year, we paid out 4% more in dividends while maintaining the yield near 3%. We also bought back about 0.5 million shares of our stock and we produced 5% growth and book value per share and 9% growth in tangible including dividends. Now this is good but we know we can do better.

I know where we need to be and I'm confident we're going to get there and we'll find and pull as many core levers as we can along the way. I do think it's important, however, to be disciplined and thoughtful about the value of the franchise that we're creating which will result in strong market positions across the pretty impressive footprint. Our 2014 will be about executing on our strategy and taking advantage of the opportunities that exists in our markets. And I'm confident we've got the right vision, the right culture and people and the right footprint to get that done.

Now with that I'll open it up to questions.

Question-and-Answer Session

Operator

At this time we will begin the question-and-answer session. (Operator Instructions) And our first question is from Mark Fitzgibbon of Sandler O'Neill.

Mark Fitzgibbon - Sandler O'Neill

Good morning.

Mike Daly

Hi, Mark. How are you?

Mark Fitzgibbon - Sandler O'Neill

Terrific. My first question is for Josephine, Josephine could you just clarify for us the reported margin in the first quarter, do you expect to see some additional compression?

Mike Daly

No.

Josephine Iannelli

No, I think we're hoping that it will stabilize here in Q1 and hopefully move north from there.

Mike Daly

It stabilizes in Q4 and moves north in Q1.

Josephine Iannelli

Yes.

Mark Fitzgibbon - Sandler O'Neill

Got you. And then as it relates to the purchase accounting adjustments, I know that you said they’d burn off by the end of the year. Do you have a sense on sort of how much will burn off in each quarter over the next couple of quarters?

Mike Daly

It's lumpy. A lot of it Mark has to do with the -- when we get recoveries on loans, so we could have a little bit more in the first quarter or a little bit less in the first quarter, a little bit more in the second quarter, really all depends on the aggressiveness by which people either get moved out or loans move, because that's the biggest portion of that loan accretion. Is that right Joe?

Josephine Iannelli

Yes.

Mark Fitzgibbon - Sandler O'Neill

And then you had said the pipeline was strong. I wondered if you could share with us the size of the pipeline and what the complexion of that looks like?

Mike Daly

Mr. Bacigalupo, can you help us with that?

George Bacigalupo

I sure can Mike. Pipeline is holding steady at about $160 million, and this is all high quality items that we expect to close in our first quarter. So this is pretty much inline with where we were last quarter. Despite growing pretty well in the fourth quarter and closing a number of deals, it’s good to see entering beginning of the year which sometimes is slow period that our pipeline has not withdrawn, and actually we're seeing a pickup of activity, so we're quite positive about where the pipeline is today and our probability of closing a majority of them in the first quarter.

Mark Fitzgibbon - Sandler O'Neill

And the mix of that?

George Bacigalupo

The mix is continuing to be similar to last quarter where we have growth in both real estate and commercial, including ABL. The good news here is that we are seeing stronger pipelines out of all of our different areas that are contributing, Hartford has a strong pipeline Central Mass is a very strong pipeline. And so areas that may have been slower in the previous quarters are picking up. Albany, which had a very strong fourth quarter is having a little bit of a slower quarter this quarter. We understood that there were some planned payouts. Overall, we're seeing a situation where all the regions are contributing to positive growth.

Mark Fitzgibbon - Sandler O'Neill

And then lastly, Mike I wondered if you could just share with us what you're seeing out there in the M&A market and is Berkshire in a good position to do additional acquisitions now?

Mike Daly

I think that the M&A market is probably not materially different than it's been over the last few quarters. Although, I think people are talking a little bit more about it today may be than they did last year, I think there is going to be some opportunities over the course of the year. And we'll take every opportunity that comes our way -- the way we have in the past and that is if it makes sense from not only a strategic standpoint but from a financial standpoint, it helps to move our profitability metrics forward in north from where they are and increases our EPS, it’s a good investment.

We're going to be looking at them as we have in the past, and we've done a lot of work over the past several months, I think to get our infrastructure really in a good sound place. There is a lot of scalability with the company, we're not done yet, but we're on our way to having an infrastructure that I think puts us in an enviable place when it comes to being able to integrate and partner with people who have like-minded options.

Mark Fitzgibbon - Sandler O'Neill

Thank you.

Mike Daly

Thank you, Mark.

Operator

And our next question is from Matthew Kelley of Sterne, Agee.

Matthew Kelley - Sterne, Agee

Yes. Hi. Just a quick one. Did you said there was a [BOLI] (ph) gain that we need to kind of be aware of in the fourth quarter, any items there in the BOLI income?

Josephine Iannelli

Yes. Hi, Matt. It's about $700,000 that was taken in, and Q4 relates to one of our past acquisitions, a BOLI portfolio that we retired.

Matthew Kelley - Sterne, Agee

Okay. Got you. And then may be could you just talk a little more about what's going on in the insurance business, just year-over-year revenues down 17% and what's profitability like there and what's the outlook for the insurance business?

Mike Daly

Well, I always feel like the outlook is good. So, I'll give you to Sean Gray who is probably a little more balanced in that respect, and he is running insurance. But I do think we’ve put a lot of things in place over the past two or three quarters that should help move that, Sean?

Sean Gray

Sure. Speaking first of this fourth quarter saw a little bit of a change in our business mix which created some seasonality in the fourth quarter. Our outlook going forward though was very positive. I think it’s going to be a balance between earnings and revenue gains as well as few in-cost reductions, so we anticipate positive operating leverage moving into 2014 for the insurance business as a whole. So we're optimistic.

Mike Daly

What about the mix Sean, the Quick Life seems to be doing well?

Sean Gray

Yes. With the larger branch footprint, we're able to leverage certain products, one of those is a mass market life insurance product called Quick Life for the branches. We've just recently rolled that out, so on the product development side; we're seeing more scale in our overall products which should positively improve revenues going forward.

Mike Daly

Matt one of the things we've talked about in the past several quarters is that in the first half of this year, we actually made some significant investments in all of our regions. When we look at, say the Berkshire County area and areas in that corridor, we've been able to squeeze that orange significantly more than we have in some of the other areas and some times the reason for that is we need to put some boots on the ground in some of these other regions.

And so in the first half of last year and in some cases in the second half of this past year we geared up to be able to garner a lot more wallet share in the other four regions outside of our primary headquarters here. So I think that's where everybody's concentration has been and there is a certain amount of optimism that we can drive additional fee and common additional loans now across the board in a way like we have here in the Berkshire County area.

Matthew Kelley - Sterne, Agee

Okay. Got you. And then I want to be clear on, it depends, say your base is running about $35 million in the fourth quarter of core expenses for Berkshire, you add-on $3 million for the Bank of America transaction that gets us to an annualized run rate of 152. What type of change do you expect to see off that 152 growth rate for the full year 2014?

Mike Daly

I would say none.

Matthew Kelley - Sterne, Agee

Flat?

Mike Daly

Yes.

Matthew Kelley - Sterne, Agee

Okay.

Josephine Iannelli

Yes. I think at this time we're going to hold off on giving any further guidance and we're still kind of vetting through that as we look to the full 2014 year.

Mike Daly

Yes. That's I think that's appropriate.

Matthew Kelley - Sterne, Agee

Okay. Thank you very much.

Mike Daly

Thank you.

Operator

And next we have a question from Collyn Gilbert of KBW.

Collyn Gilbert - KBW

Thanks good morning guys.

Mike Daly

Hi, Collyn. How are you?

Collyn Gilbert - KBW

I'm good. Thanks. What's your on your double-digit loan growth targets what are you expecting for sort of the composition of that growth through out the year? I know you kind of gave some color in the first quarter but just throughout the balance of the year?

Mike Daly

I don't think its going to change dramatically. It could change depending on where rates go. If we end up in a situation where we're selling more of our residential rather than keeping some of the variable rate that can have an impact and that the commercial could take a bigger position. I think also Sean, certainly the auto loans and some of the consumer loans could pick up a little bit. But I think as a range Collyn that's not a bad range from where we were in the fourth quarter with may be some small percentage changes but nothing material.

Collyn Gilbert - KBW

Okay. Is there a cap that you would want to put on your resi-mortgage portfolio as a percent of the total loans?

Mike Daly

Well, again, it's volatile. So we could put a cap on it today and if we found that we started to see more fixed rate mortgage production coming in that could change that percentage pretty dramatically. Anybody today that we are doing three, five, six year variable rate mortgages and that's good business and we don't want to continue to do that and there is probably not a cap but there is probably an informal cap that will occur just through internal business practice.

Collyn Gilbert - KBW

Okay. So what you're retaining is the -- are the adjustables at this point?

Mike Daly

Yes.

Collyn Gilbert - KBW

Okay, okay. And then just on the NIM, I just want to make sure I understood its kind of following up to Mark's question. So did you say total NIM has stabilized in the fourth quarter and now should increase from here or that was core NIM?

Mike Daly

Well, core NIM, I mean the total NIM will still be subject to the fluctuation --

Collyn Gilbert - KBW

Right. The accretion.

Mike Daly

Yes.

Collyn Gilbert - KBW

Okay, okay. So and then if we just look at the core NIM what's going to really drive that increase, is it, because I don't, I wouldn't, I guess it sound like -- its sounds like going to be a mixed shift. So was it just fund -- drop in the funding costs or you are finally seeing stabilization in loan yields?

Mike Daly

Well, we've got all three. But Joe you could comment on those specifically.

Josephine Iannelli

Yes. I think along with the BofA deposits there is a lower cost of funds there and we're seeing there will be more of a parallel shift there with our loan rate. So we expect it to neutralize as we go.

Mike Daly

If we look at our -- the loan rates that are coming on today there is probably stabilization there. We certainly I know we've got some higher priced CDs that's Sean is taking a look at. I mean I know he'd love to continue to be able to offer specials but we have a little room on the deposit side still and I think we'll probably use a little of that. And I think the BofA transaction has an impact as well.

Collyn Gilbert - KBW

Okay. That's helpful. And then Josephine what's the dollar amount, and if you said it, I apologize that you guys have left on the accreditable income that you said you recognized by year-end?

Josephine Iannelli

It's in the range of about $1 million to $2 million, if you look into 2014 and as Mike said it's been a relatively lumpy. So it's hard to predict exactly the timing of that.

Collyn Gilbert - KBW

Okay. $1 million to $2 million for the full year or a quarter?

Josephine Iannelli

For the full year.

Collyn Gilbert - KBW

Full year. Okay. Okay. And then just going back to I guess earlier in your – sorry, you guys were guiding to kind of what you saw the core NIM would be in the 320 range and now it sort of settled out this quarter at 307, what was – what change relative to your expectations earlier in the year, was it rates, was it mix, just curious to sort of bridge that gap?

Mike Daly

I think it's probably both of those things.

Collyn Gilbert - KBW

Okay.

Mike Daly

You all, I mean would you agree?

Josephine Iannelli

Yes. I mean we had a couple of one time unusual events for the most part we are seeing further compression and I think its assumption of the environment that we are in.

Collyn Gilbert - KBW

Yes. Okay. Okay. That was all I had. Thanks guys.

Mike Daly

Thanks Collyn.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Mike Daly for any closing remarks.

Mike Daly

Okay. Thank you everyone for joining us. We obviously look forward to speaking with you again in April and at that point we will discuss the first quarter results and anything else that we think would be germane to the company moving forward. Thank you.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Berkshire Hills' CEO Discusses Q4 2013 Results - Earnings Call Transcript
This Transcript
All Transcripts