Berkshire Hills Bancorp (NYSE: NYSE:BHLB) reported strong financial results in its Third Quarter 2024 Earnings Conference Call on October 24, 2024. CEO Nitin Mhatre and CFO Brett Brbovic highlighted the bank's significant operating earnings growth, improved capital ratios, and robust asset quality. The bank also provided insights into its strategic initiatives and expectations for the upcoming quarter.
Key Takeaways
- Berkshire Hills Bancorp reported operating earnings of $24.8 million, or $0.58 per share.
- Operating ROTC improved to 9.91%, with net charge-offs at 16 basis points of loans.
- Capital ratios strengthened, with CET1 at 11.9% and TCE at 9.1%.
- The bank completed the sale of 10 New York branches and part of its Upstart (NASDAQ:UPST) loan portfolio.
- The digital deposit product rollout aims to enhance deposit generation and client experience.
- Net interest margin (NIM) is expected to be between 3.10% and 3.20% in Q4 2024.
- Stock repurchases were paused in Q3 to support balance sheet growth, with share count down by 18% since Q4 2020.
- CEO Nitin Mhatre discussed the improving banking environment and the company's focus on digital banking.
- No specific reserves are required for criticized assets; the company is taking measures against industry-wide fraud trends.
- The bank focuses on organic growth, with a 20% year-over-year increase in the loan pipeline.
Company Outlook
- Berkshire Hills Bancorp projects a Q4 2024 NIM between 3.10% and 3.20%.
- Revenue is expected to be flat to slightly down in Q4, with stable net charge-offs, excluding certain charge-offs from the Upstart loan sale.
- Deposit costs were 2.41% for September.
- Plans for capital allocation include prioritizing organic growth, dividends, and buybacks, with potential for acquisitions.
Bearish Highlights
- The bank paused stock repurchases in Q3 to support balance sheet growth.
- The Upstart loan sale resulted in a $1.9 million charge-off.
- The check fraud incident led to $1.5 million in losses, reflecting a broader industry trend.
Bullish Highlights
- Operating earnings saw a 5% increase linked quarter and a 16% year-over-year rise.
- The bank reported a 94 basis point increase in its TCE ratio to 9.1%.
- Year-to-date, the bank has repurchased $17.4 million of stock below tangible book value.
- The sale of 10 New York branches resulted in a $16 million pre-tax gain.
- The loan pipeline has increased by 20% year-over-year.
Misses
- 40% of the retained loan book was 1 to 30 days past due.
- Losses for the quarter were reported at $2 million for a $67 million book.
Q&A Highlights
- No specific reserves are needed for criticized assets.
- The company has robust controls to manage and prevent fraud losses.
- Organic growth is the primary focus, with a 1% increase in loans for the quarter.
- Annual guidance, including possible mid-term targets, will be provided in January.
Berkshire Hills Bancorp's third-quarter performance indicates a strong financial position, with a focus on strategic growth and digital banking initiatives. The bank's management remains committed to improving profitability and shareholder value while navigating the challenges of the current banking environment. Investors and stakeholders can look forward to the upcoming guidance in January to gain further insights into the company's strategic direction.
InvestingPro Insights
Berkshire Hills Bancorp's (NYSE: BHLB) recent earnings call paints a picture of a bank navigating challenges while maintaining its financial strength. This narrative is further supported by data from InvestingPro, which offers additional context to the company's performance and outlook.
According to InvestingPro data, Berkshire Hills Bancorp currently has a market capitalization of $1.15 billion. The company's P/E ratio stands at 25.43 (adjusted for the last twelve months as of Q3 2024), suggesting that investors are willing to pay a premium for the bank's earnings. This could be attributed to the bank's strong performance and strategic initiatives highlighted in the earnings call.
One of the key InvestingPro Tips notes that Berkshire Hills Bancorp "Has maintained dividend payments for 25 consecutive years." This impressive track record of consistent dividends aligns with the bank's commitment to shareholder value, as mentioned in the earnings call. The current dividend yield is 2.64%, providing a steady income stream for investors.
Another relevant InvestingPro Tip indicates that the bank has been "Profitable over the last twelve months." This is consistent with the reported operating earnings growth and improved capital ratios discussed in the earnings call. The bank's ability to maintain profitability in a challenging banking environment is a positive sign for investors.
It's worth noting that InvestingPro has 6 additional tips for Berkshire Hills Bancorp, which could provide further insights into the company's financial health and market position. These tips, along with real-time metrics and analysis, are available to InvestingPro subscribers.
The bank's focus on organic growth is reflected in its revenue figures, with InvestingPro reporting revenue of $344.86 million for the last twelve months as of Q3 2024. While this represents a 16.41% decline year-over-year, the quarterly revenue growth of 20.36% in Q3 2024 suggests a potential turnaround, aligning with management's positive outlook.
These InvestingPro insights complement the earnings call information, providing a more comprehensive view of Berkshire Hills Bancorp's financial position and market performance. For investors seeking a deeper understanding of the company's prospects, exploring the additional tips and metrics available on InvestingPro could prove valuable.
Full transcript - Berkshire Hills B (BHLB) Q3 2024:
Operator: Good morning, ladies and gentlemen, and welcome to the Berkshire Hills Bancorp Third Quarter 2024 Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on October 24, 2024. I would now like to turn the conference over to Kevin Conn, Investor Relations Officer. Please go ahead.
Kevin Conn: Good morning, and thank you for joining Berkshire Bank's third quarter earnings call. My name is Kevin Conn, Investor Relations and Corporate Development Officer. Here with me today are Nitin Mhatre, Chief Executive Officer; Sean Gray, Chief Operating Officer; Brett Brbovic, Chief Financial Officer; and Greg Lindenmuth, Chief Risk Officer. Our remarks will include forward-looking statements and refer to non-GAAP financial measures. Actual results could differ materially from those statements. Please see our legal disclosure on Page 2 of the earnings presentation referencing forward-looking statements and non-GAAP financial measures. A reconciliation of non-GAAP to GAAP measures is included in our news release. At this time, I'll turn the call over to Nitin. Nitin?
Nitin Mhatre: Thank you, Kevin. Good morning, everyone, and thank you all for joining us today. I'll begin my comments on Slide 3, where you can see the highlights for the third quarter. I'm pleased to report that we had a strong quarter with robust improvement in operating earnings quarter-over-quarter and year-over-year. Operating EPS of $0.58 was up 5% linked quarter and up 16% year-over-year. Operating net income of $24.8 million was up 7% linked quarter and up 15% year-over-year. Operating ROTC was 9.91%, up 26 basis points linked quarter and up 64 basis points year-over-year. Asset quality and balance sheet metrics remain strong. Excluding the Upstart loan sale charge-off, net charge-offs were 16 basis points of loans and our reserve to loans was flat to second quarter at 122 basis points. Of note, our total [pass-through] (ph) loans percentage at 53 basis points is at its lowest level in 15 years. And our reserve for losses at 122 basis points is about 5 times the total non-performing loans. We increased our capital ratios linked quarter with CET1 at 11.9% and TCE at 9.1%. Liquidity remains solid with our loan-to-deposit ratio at 96% and average noninterest-bearing deposits as a percentage of total deposits remains steady at 24%. We've updated the slides on overall three office and multifamily portfolios. The information on those slides highlight that our portfolio remains granular, geographically diverse, and resultantly less risky. The performance on those loan books remains strong. Average loan balances were up 1% linked quarter and up 3% year-over-year. Average deposits were up 1% linked quarter and down 3% year-over-year. Our loans pipeline was stable versus third quarter and was up 20% year-over-year. Deposit costs were up 7 basis points in the quarter, reflecting a reduction in the rate of increase in deposit costs and beta. We expect funding costs to decline as the Fed continues to cut interest rates. And like many banks, we've already moved deposit rates lower late in third quarter. We continue to make steady progress on strategic initiatives. The sale of 10 branches in New York that was announced in March was completed this quarter, bringing our total branches to 83. The pre-tax gain on this transaction was $16 million, slightly lower than the $19 million we expected in March, given that client-selected deposit retention exceeded our expectations. This transaction tightens our footprint and enhances the efficiency and profitability of our network. We are now at about the right size for our branch network. A week ago, we announced the sale of $46.5 million of our Upstart loan portfolio. The loans were priced at 96% of book value, resulting in $1.9 million charge-off related to the sale. The weighted average credit score for the remaining approximately $10 million Upstart loans is 682, and we believe that our reserves against that book are sufficient. We continue to make banking with Berkshire when, where and how you want it easier than ever. We continue the rollout of Berkshire One and expanded suite of digital deposit products for our customers. We will continue to invest in digitizing the customer experience while investing in our bankers to accelerate growth in deposits-led client relationships. I will thank all of my Berkshire Bank colleagues for their continued hard work and commitment to the bank. Their commitment to our strategy and dedication to our customers is what continues to bring us together and truly set us apart. I'll now turn it over to Brett to talk through our financials in more detail. Brett?
Brett Brbovic: Thank you, Nitin. Slide 4 shows an overview of the third quarter. As Nitin mentioned, operating earnings were $24.8 million or $0.58 per share, up $0.03 linked quarter. Net interest income of $88.1 million was down less than 1% linked quarter. Operating interest income was $21.5 million, up 7% linked quarter. Total operating revenue was up 1% linked quarter, and operating expenses were $72.3 million, up 1% linked quarter and down 2% year-over-year. Net charge-offs were $5.6 million or 24 basis points of average loans and included $1.9 million of charge-offs related to the Upstart loan sale. Provision expense was $5.5 million and the reserve coverage ratio was flat linked quarter at 122 basis points. Slide 5 shows our average loan balances. Average loans were up $76 million linked quarter or 1%. This was primarily driven by growth in the commercial lending. We've updated a page in the appendix, which shows data on the Upstart and Firestone runoff portfolios. Including the recent Upstart loan sales, the combined runoff portfolios are down by $66 million to $58 million or 60 basis points of total loans and are performing as expected. Slide 6 shows the average deposit balances. Average deposits increased $64 million or 1% linked quarter. Year-over-year deposits were down 3%, but excluding the New York branch sale deposits from prior year balances, our deposits were up 1% year-over-year. Noninterest-bearing deposits as a percentage of total deposits remained at 24%, consistent with the prior two quarters. Deposit costs were 242 basis points, up 7 basis points linked quarter and our cumulative total deposit beta is 44%. While it's early in the cycle, we expect deposit betas in a down interest rate environment to be higher than the beta on the way up as we remain focused on managing deposit costs. Turning to Slide 7, we show net interest income. Net interest income was down 1% linked quarter and down 3% year-over-year. Net interest margin was down 4 basis points linked quarter to 3.16% versus 3.20% in the second quarter and 3.15% in the first quarter. Our historical range for NIM excluding the pandemic years has been between 3.10% and 3.40%. We expect the fourth quarter NIM to be between 3.10% and 3.20%. While we have headwinds of floating rate loans repricing lower short term, we also have several tailwinds. We have $1.6 billion of CDs or 67% of that book maturing in the next six months. And we have about $400 million of FHLB funding that matures over the same time period. Further, we have $600 million of low-yield received fixed swaps maturing over 2025 and 2026, and we have low-yield fixed rate securities and loans that will mature and reprice at higher yields. Slide 8 shows operating noninterest income up $1.4 million or 7% linked quarter and up $4 million or 23% year-over-year. The growth in fees was primarily related to higher swap volumes. This was the third quarter in a row where we've seen solid growth in overall fees. Slide 9 shows expenses. Operating expenses were up 1% linked quarter to $72.3 million and down 2% year-over-year. Occupancy and professional services expense declined linked quarter and were offset by slightly higher compensation and higher other expense. Other expenses include check fraud expenses, a line that impacts the entire industry and which can be volatile. This quarter that line item was $1.5 million higher than the average of the prior eight quarters due to one isolated incident. Slide 10 is a summary of asset quality metrics. Non-performing loans were up 12% linked quarter and down 10% year-over-year. The increase in CRE non-performing loans linked quarter was driven by one isolated multi-use property in upstate New York. Net charge-offs of $5.6 million were up $4 million linked quarter and $193,000 year-over-year. Net charge-offs included $1.9 million related to the Upstart loan sales. Charge-offs excluding that sale were $3.8 million or 16 basis points of loans. We've included a chart in the appendix with Berkshire's net charge-off rates versus the industry since 2000, which reflects relatively better asset quality than the industry over time. Slide 11 shows that our CRE book is well-diversified in terms of geography and collateral type. The credit quality of the CRE portfolio remains solid with non-accrual loans at 22 basis points of period-end loans. Slide 12 shows details on our office portfolio. As noted last quarter, the weighted average loan to value ratios are about 60% and a large majority of the portfolio is in suburban and Class A space. We have very limited exposure to Boston's Financial District and 80% of our office properties financed are under 150,000 square feet, suggesting our portfolio has much lower default probabilities. Slide 13 shows details of our multifamily portfolio. The multifamily portfolio was $664 million or 7.2% of loans. The book is well-diversified across our footprint with a weighted average loan to value of 65%. While current credit quality metrics are strong, we recognize that economic uncertainties exist and we are monitoring both new originations and existing portfolios carefully. As Nitin mentioned, we have strong capital levels. Tangible book value per share was $24.53, an increase of 6% linked quarter and 16% year-over-year. Our CET ratio was up 30 basis points to 11.9% and our TCE ratio rose 94 basis points to 9.1% due to higher retained earnings and a lower bond mark on our AFS securities. Our top capital management priority is to support organic loan growth. Year-to-date, we've repurchased $17.4 million of stock at an average cost of $21.94. All of our repo this year has been completed below tangible book value per share. We paused our stock repurchase in the third quarter to support expected balance sheet growth. We expect to continue to be opportunistic with stock repurchases, and I'd note that since fourth quarter of 2020, we've reduced our share count by 18%. With that, I'll turn it back over to Nitin for further comments. Nitin?
Nitin Mhatre: Thank you, Brett. Quick comments on macroeconomic environment. The operating environment for banking industry is improving. As I noted last quarter, the yield curve has been in its longest period of conversion in recorded history, but it's starting to normalize as the Fed lowers short-term interest rates starting last month. The potential net interest income increase for the industry during periods of yield curve steepening is substantial. As Brett mentioned, we're already starting to reduce our funding costs and expect a more normal operating environment in the quarters to come. A lower interest rate environment will not just lower the funding cost, but it'll also help improve credit, raise property values, and increase loan demand. I'm proud of what our team has accomplished and how far we've come. Notably, we're starting to gain traction on our new deposit generation initiatives. We still have work to do. Our focus near term is to accelerate our deposit growth engine, continue to tightly manage expenses and credit, and further improve client acquisition and retention through enhanced client experience and our digital banking offerings. In closing, it was a strong quarter and we'll continue to focus on managing the headwinds and tailwinds towards further improving long-term profitability and shareholder value. With that, I'll turn it over to the operator for questions. Operator?
Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Christopher O'Connell with KBW. Your line is now open.
Christopher O'Connell: Hey, good morning.
Nitin Mhatre: Good morning, Chris.
Christopher O'Connell: Hey, Nitin. I was just hoping to check-in, was the guidance not included in the slide deck? Is the guidance still valid, I guess, from -- for the 2024 updated guidance provided last quarter?
Brett Brbovic: Yeah. So, I think, we're still expecting to see -- we said in our call, we're expecting the NIM for the fourth quarter to be between 3.10% and 3.20%. We're expecting revenue to be flat to slightly down in Q4, with expenses modestly down. And then, from a net charge-off standpoint, I think we're expecting it to be stable, when you exclude the Upstart loan sale charge-offs from this quarter.
Christopher O'Connell: Okay, great. That's helpful. And then, just curious on the commentary around the cutting cycle and the deposit beta is expected to be higher on the way down than on the way up, which I think somewhat different than many of your peers. Any -- just color about why you guys feel that way or kind of how you expect to achieve that?
Nitin Mhatre: Yeah. I think, Chris, qualitatively speaking, we do have a number of tailwinds that we've identified where we could have the opportunity to manage that deposit beta and the margins better in the downcycle. We have significant amount of CDs coming up for maturity. Almost two-thirds of our portfolio comes up for maturities in the next two quarters. We've got some swaps rolling off, and so on and so forth. So, we believe we have those tailwinds. And then, on the front line, the teams are working hard to manage the deposit pricing sharply, keeping a good balance of volume versus spreads. So, I think there will be more opportunities as in this cycle. And we're beginning to see market react to that as well. Some of it depends on how the competition reacts, and we're beginning to see -- they're always outliers, but we're beginning to see more and more of our peers bringing down the deposit rates starting late September.
Christopher O'Connell: Great. And you mentioned you've already moved a bit on those rates. Do you guys have a spot, either interest-bearing or total deposit cost post the sale and after the rate moves?
Nitin Mhatre: The spot for September was 3.10%, Chris. And I think our...
Brett Brbovic: Spot NIM.
Nitin Mhatre: Spot NIM was about 3.10% for September. And I think we believe for the fourth quarter, we should be between 3.10% and 3.20%.
Christopher O'Connell: Got it. Do you have the anything spot on the overall deposit cost?
Nitin Mhatre: Deposit cost. Just give us one second, Chris.
Christopher O'Connell: No problem.
Nitin Mhatre: That's 242 basis points.
Brett Brbovic: That's for the whole quarter.
Nitin Mhatre: For whole quarter...
Brett Brbovic: For spot, for just September alone, it was 2.41%.
Nitin Mhatre: 2.41%.
Christopher O'Connell: Great. Thank you. And then just last one for me and I'll step out. It seems like the swap fees picked up quite a bit this quarter. Are you guys seeing just in general the change in the rate environment increase demand for that type of product?
Nitin Mhatre: I think the demand -- because you -- we see that in the pipeline, that the pipeline seems to suggest that it'll be relatively flat in the fourth quarter. Difficult to predict it beyond that, beyond what's in the pipeline, but, yeah, I think the momentum seems to be holding going into the fourth quarter.
Christopher O'Connell: Great. Appreciate the time. Thank you.
Nitin Mhatre: Thank you, Chris.
Operator: Your next question comes from Laurie Hunsicker with Seaport Research. Your line is now open.
Laurie Hunsicker: Yeah. Hi. Thanks. Good morning, gentlemen.
Nitin Mhatre: Good morning, Laurie.
Laurie Hunsicker: Just wondered if we could go back to expenses. The comments you gave Chris, expenses are going to [Technical Difficulty] quarter. That makes sense. But maybe you can just help us think about what's reinvested, what's dropping to the bottom-line, right? So, if we look at your expenses, they were $72 million this quarter. $1.6 million of fraud comes out, and then the 10 branch closures. Previously, you all had said that the $6.5 million expense savings, so $1.6 million in the quarter, which would then take us down to $69 million. Maybe just help us think about what's being reinvested or just in terms of dollars, how we should be thinking about the expense line in the fourth quarter? Thanks.
Brett Brbovic: Yeah. Hi, Laurie. This is Brett. I would say, from an expense standpoint, some of the expenses that we had related to those branches were already captured in the current quarter. So, there will be some falling to the bottom line. You do remove the $1.34 million of the fraud losses that we saw. I think we're looking to be in the range of right around approximately $71 million of Q4 operating expenses give or take.
Laurie Hunsicker: Okay. Great. And then just going over here to office, and I appreciate all the details you guys provide. Can you just update on a couple of things with respect to your criticized book, that $24 million specifically? It looks like $14 million in Class A and $10 million in Class B. Just what are the occupancies on those? And when do they mature? Are there any specific reserves? Any concerns you're seeing there? And then, same on that Class B non-performer, that's $3.5 million, what's the occupancy and when does that mature?
Nitin Mhatre: Sure. Greg, you want to take that?
Greg Lindenmuth: Sure thing. Hi, Laurie. How are you?
Laurie Hunsicker: Hey there.
Greg Lindenmuth: For the Class A, it's a single credit. Basically, it's 80% occupancy. It does mature in December 2024, and we're working closely with the client to refinance that credit and it'll likely be an improved structure. As far as the Class B, it's a couple handful of credits that range in occupancy from 25% to 50% occupancy. And one of those credits happens to be one of the NPLs as well. And those mature in '26 to 2028.
Laurie Hunsicker: '28. Got it. Okay. Got it. And then, what's the reserve on your whole office book?
Greg Lindenmuth: And just to answer your prior question, there are no specific reserves on those criticized assets. None of them warrant specific reserves, and I would have approximated that about 1.5% based off the lower risk profile of our office book.
Laurie Hunsicker: Got it. Okay. Great. That's helpful. And then, just last question, Upstart, obviously, you've got a great price here at $0.96 on $1. Can you just talk a little bit about how that came together? And then, just remind us when specifically in the quarter that closed, and what was the FICO on those? And then, I just want to confirm, too, as I'm looking at this. So, your Upstart sale had $1.9 million charge-offs, then you had another $2 million in charge-offs related to your book, and you said the FICO on that was 682. So, I just want to understand that a little bit too. Thanks.
Greg Lindenmuth: Sure. You got the...
Nitin Mhatre: Yeah, Laurie, I'll...
Greg Lindenmuth: Go ahead. Sorry.
Nitin Mhatre: No. Go ahead, Greg.
Greg Lindenmuth: Yeah, so the sale criteria, the purchaser's investment policies were basically nothing past due and anything over 660. Now, there's an intricacy I think with the past due piece, even if it was one day late, that was not included in the sale. So, actually 40% of the book that we're retaining was one to 30 days past due and that has a similar risk profile, including loans that are in their grace period, similar risk profiles our existing book above. And that's why you see a weighted average credit score in the book of 682. Of the loans that we sold, the weighted average FICO was slightly above our overall average in around 711. And that sale closed right in the middle of October on 10/16.
Laurie Hunsicker: 10/16.
Greg Lindenmuth: As far as the losses, the $2 million in losses, that was just our quarterly run rate for our -- basically our $67 million book at the end of 2Q, that was our losses for the whole quarter.
Laurie Hunsicker: Got it. Okay. Thanks for taking my question.
Nitin Mhatre: Thank you, Laurie.
Operator: Your next question comes from Mark Fitzgibbon with Piper Sandler. Your line is now open.
Mark Fitzgibbon: Hey, guys. Good morning.
Nitin Mhatre: Good morning, Mark.
Mark Fitzgibbon: First question, just to follow-up on a question my esteemed colleague, Laurie, just asked about, I'm curious, is it likely we'll see more Upstart or Firestone loan sales in coming quarters? Is the plan to sort of fire sale those out?
Nitin Mhatre: No, I think, Mark, we believe we kind of run those portfolios off. Upstart is really down to that $10 million and it's sufficiently provided for at this point of time. And Firestone is, in terms of performance, while it is liquidating and runoff mode, its performance is actually exceeding our expectations. And in fact, this quarter had a net recovery. So, I think we're done, it's a very tiny piece of our portfolio, roughly about 50 basis points, 60 basis points of the entire loan portfolio. So, it's still in the runoff mode and we don't see any difference in direction anymore.
Mark Fitzgibbon: Okay. And then secondly, wondered if I could dig in a little bit to the check fraud situation you mentioned. I know you all kind of downplayed it as a unique thing for the industry, but it's still $1.5 million. And I guess I wonder why couldn't that be $15 million or $150 million. I guess I'm curious if you could give us -- share any color on what happened and how you're going to prevent similar kinds of things from occurring.
Nitin Mhatre: It was really a commercial check kind of fraud. It's check washing. And I think, across every forum that you attend, there is an increase in that activity. And this is one of those situations where you have all the controls, but the fraudsters somehow are able to slip one through. It will be protected to the extent that there'll be some [indiscernible] coming off it because of the insurance, but by and large, our trend on the fraud losses is consistent with what we're seeing in the industry or marginally better. This is really one of those odd check washing things that just kind of escape through our controls.
Mark Fitzgibbon: Okay. So, is there like a diligence process you're going through to kind of figure out what happened and how to change that process so that this thing doesn't occur again?
Nitin Mhatre: Yes. And the good news part is we have been noticing the increase in fraud in the industry over the last 12 months or so. And there have been significant number of changes that have been made, including updating some of the processes and platforms. And I think everything that we have now should certainly help prevent repeat of such incidences.
Mark Fitzgibbon: Okay. And then next, I was curious, Nitin, if you could share with us kind of your priorities for capital today. You've got a little bit of excess capital. As you think about buybacks, dividends, growth, M&A, your thoughts on prioritizing?
Nitin Mhatre: Yeah. I think the sequence remains similar, Mark. We want to -- the first dollar want to be allocated to the organic growth, right? And we're beginning to see momentum. As I mentioned in my remarks, our loans growth was kind of roughly 1% in the quarter, but our loans pipeline was up about 20% year-over-year. So, we have a pipeline there. We're just being judicious, being careful, selective, and in fact, leading with clients that have deposit relationships as well across the board. So, yeah, first dollar, it goes to organic growth and then followed by dividends, buybacks, and if there are opportunities outside of that, we'll explore those as well, but that's the sequence.
Mark Fitzgibbon: Do you feel like Berkshire Hills is ready to consider an acquisition at this point? Have you kind of got your house in a place where you feel like if an opportunity came along, you'd be positioned to capitalize on that?
Nitin Mhatre: We have. I think, it does feel like through everything that we've done through our transformation, we are in the best possible situation to earn the right to be able to grow our currency and look for opportunities outside, but right now, pretty much the team is focused on how do we improve -- continue to improve our performance, improve our currency. And if something comes along, we take a look at that.
Mark Fitzgibbon: Okay. And then, last question I had is, when can we expect sort of an update on your BEST (NYSE:BEST) goals?
Nitin Mhatre: I think we're going to give annual guidance in January. And at that point of time, we could even look at some mid-term guidance as part of that guidance.
Mark Fitzgibbon: Great. Thank you.
Nitin Mhatre: Thank you, Mark.
Operator: There are no further questions at this time. I will now turn the call over to Nitin Mhatre. Please go ahead.
Nitin Mhatre: Thank you, Joel, and thank you all for joining us today on our call and for your continued interest in Berkshire. Have a great day, and be well. Joel, you can close the call now.
Operator: Thank you. Ladies and gentlemen, this concludes the conference call today. We thank you for participating and ask that you please disconnect your lines.
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