Thank you for standing by. At this time, I would like to welcome everyone to the Beacon Financial Corporation third quarter 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 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, press star one again.

Thank you. i would now like to turn the call over to dario hernandez corporate council you may begin thank you gene and good afternoon everyone yesterday we issued our earnings release presentation which is available on the investor relations page of our website beaconfinancialcorporation.com and as it follows the sdc this afternoon fall will be hosted by paul for all and carl carlson during the question and answer session they will be joined by mark Michael Jones, Chief Credit Officer. This call may contain forward-looking statements with respect to the financial condition, the results of operations, and business of Beacon Financial Corporation. Please refer to page two of our earnings presentation for our forward-looking statements disclaimer. Also, please refer to our other filings with the Securities and Exchange Permissions, which contain risk factors that could cause actual results to differ materially from these forward-looking statements. Any references made during this presentation to non-GAAP measures are only made to assist you in understanding Beacon Financial's results and performance trends and should not be relied on as financial measures of actual results for future predictions. For a comparison on reconciliation to GAAP earnings, please see our earnings release. At this time, I'll please introduce Sheikin Financial's President and Chief Executive Officer, Paul Perot.

Thanks, Dario, and good afternoon, everyone, and thank you for joining us for our first earnings call as beacon financial corp let me start by welcoming the brookline and berkshire stockholders employees and customers to the new beacon financial corporation holding company for beacon bank and trust this powerful combination between our two great legacy organizations will help position us as a leading northeast financial institution that provides enhanced service capabilities for our clients, performance for our shareholders, and resources for our communities. On September 1st, the merger and consolidation of the bank charters was completed. However, until we finalize our core system integration in the first quarter of next year, we will continue to conduct business as Brookline Bank, Berkshire Bank, Bankward Island, and PCSB Bank, operating as divisions of Beacon. We will formally introduce our Beacon Bank brand to the market over the next few months as we get closer to finalizing our system integrations. The Beacon Bank name represents guidance, strength, and the promise of stability. The core principles the legacy institutions have upheld for generations. With the combined strengths of Berkshire and Brookline, Beacon can help customers make financial decisions with clarity and confidence. The integration is moving ahead as expected. Our priority remains ensuring our customers and communities continue to experience the outstanding service and support our banks are known for, which is driven by the attitude and expertise of our employees and supported by our six regional presidents. I want to thank all of our Beacon Bank employees for their hard work on this integration, their continued superior service to our customers, and a commitment to ensuring a smooth transition. Beacon Financial finished the quarter with $23 billion in assets, $19 billion in deposits, and $18 billion in loans, with third-quarter operating earnings of approximately $38.5 million, or 44 cents per share, before merger expenses and special charges. We're already beginning to see the rationale for the merger play out with the addition of Brookshare's lower-cause deposit base combined with Brookline's higher growth markets, creating opportunities to deepen relationships with clients. I'm particularly pleased with our strong retention of client-facing talent through this and the excitement amongst the team, and I'm optimistic to see this excitement and energy translated to even more robust results. I will now turn you over to Carl, who will review the company's third quarter.

Thank you, Paul. As Paul mentioned, we closed our merger on September 1st with Berkshire as the legal acquirer and Brookline as the accounting acquirer. As such, historical results reflect Brookline performance and the assets and liabilities of Berkshire were marked to market and combined with Brookline's as of September 1st. On a combined basis, we finished the quarter with total assets of $22.8 billion, and on September 1st, the fair value of Berkshire assets was $12.1 billion, of which we sold approximately $426 million, $177 million in securities, and $249 million in loans. The proceeds were used to reduce wholesale funding. Excluding the purchase accounting mark, the combined loan portfolio declined $484 million during the quarter, largely driven by the sale of $249 million of purchased residential mortgage loans and the reclass of $83 million in similar loans to help for sale. The sale of those loans closed in October, except for a small pool which closes next week. On the funding side, combined customer deposits increased $89 million. Payroll deposits declined $186 million, while broker deposits and borrowings declined by $249 million and $74 million respectively. At the end of the quarter, the loan-to-deposit ratio was 96.5%. The allowance for loan losses finished at $254 million, reflecting a coverage ratio of 139 basis points. The allowance includes $77 million in specific reserves on approximately $380 million of loans, representing a coverage rate of 20%. The general reserve of $177 million represents a 99 basis point coverage on the balance of a portfolio. Given the strong coverage rate in the current environment, we expect that, well, While charge-offs may remain elevated as we continue to work through these substandard assets, we expect the run rate for the provision to be $5 to $9 million a quarter as the reserve coverage ratio trends lower. Net charge-offs for the quarter were $15.8 million, all but $1.4 million of the charge-offs were previously reserved for. Our quarterly results reflect two months of earnings for Brookline and one month of earnings on a combined basis. The quarter also included the merger charges and purchase accounting associated with the transaction. We will continue to have merger charges through the first quarter when our core systems integrations are completed and the remaining cost synergies realized. As we anticipated, we reported a gap loss for the third quarter of $56 million, or $0.64 per share. The third quarter included pre-tax charges of $130 million, $78 million related to the initial provision expense, and $52 million in merger expenses. Excluding these charges, operating earnings were $39 million, or $0.44 per share. The net interest margin was 372 basis points for the quarter, which included a 30 basis point benefit from purchase accounting. We provided the performance for the month of September, representing the first month of performance on a combined basis, and adjusted it for the one-time merger-related charges. This is provided on page 5 of the presentation. Net interest income for September was $72 million, which included $10.7 million in purchase accounting accretion for the month, and resulted in a net interest margin of 412 basis points for September. Of the $10.7 million, $3.8 million is related to the credit mark, with the remaining $6.9 million related to the interest rate mark. Of the $6.9 million, $1.8 million is due to loan prepayments. We expect FASB to release the final rule on accounting for acquired loans and the credit mark to be reversed in the fourth quarter, increasing equity and no longer reflected in income going forward. We currently estimate purchase accounting accretion to be in the range of $15 to $20 million per quarter, depending on loan prepayment activity. Non-interest income was $8.5 million for the month, reflecting a $25 to $26 million quarterly run rate. Non-interest expense of $40.6 million for the month captured some of the day one synergies created by the merger and reflects a quarterly run rate of $122 million. Amortization of intangibles at $2.7 million for the month reflects an $8.1 million quarterly run rate. Provision for credit losses for September was $6.6 million, but as is typical, true-up of reserves and provision requirements take place in the third month of the quarter. As I stated earlier, we anticipate quarterly provisions to be in the range of $5 to $9 million. the september operating performance of 129 basis points on assets and over 15 return on tangible equity illustrates the strong performance of the combined franchise and the potential opportunity going forward yesterday the board approved increasing our quarterly dividend to 32 and a quarter cents per share to be paid on november 24th to stockholders of record on november 10th this represents a 79 increase in the cash dividends previously received by berkshire shareholders and maintains the level of cash dividends previously received by Brookline stockholders. The quarterly dividend equates to an annual dividend of $1.29 per share, which was communicated when we announced the merger and currently represents a dividend yield of approximately 5.4%. As Paul mentioned, the team is optimistic and excited as we continue to deliver on the merger benefits. This continues my formal comments and I'll turn it back to Paul.

Thanks, Carl. We will now be joined by Mark Mickeljohn, our Chief Credit Officer, and we will open it up for questions.

At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. Your first question comes from the line of Mark Fitzgibbon with Piper Sandler. Please go ahead.

Hey, guys. Good afternoon and congratulations on the completion of the deal. Thanks, Mark. Sure. First question I had, I guess for Carl, Carl, what should we expect for the remaining deal-related charges to be in 4Q and 1Q? Do you have a sense for a rough range on that?

I think it's going to be between $22 and $24 million in that range.

Okay, great. And then I wondered if you could share any color on that $12.4 million office loan that you referenced in Boston. Any color on that? And also was curious from which institution did this loan come from?

Mark, this is Mark Mickeljohn. That loan is a downtown Boston office property. It's a retail first floor office above. At this point, the retail is full, and otherwise the building is largely vacant. We've got about a 25% to 30% reserve on that loan. Currently, it's being marketed for a potential sale, so we feel like we're in a pretty good place on it.

Okay, great. And then lastly, it looks like your capital ratios were stronger than we expected coming out of the deal, and it sounds like with the accounting adjustment potentially in the fourth quarter, capital ratios get even a little bit better. I guess I'm curious what your thoughts are on stock buybacks going forward.

We love the idea, particularly with the price where it is. But I think our first priority, well, our first priority was to get the dividend increased as we promised when we announced the transaction. And now it's really to get the concentration on the commercial real estate to where we all want it to be. And so right now we're targeting 300% by the end of 2027. Now, we may have an opportunity to still be able to do, you know, increases in dividends and stock buybacks while also, you know, maintaining our goal of getting to 300%. So we'll continue to explore that as we move forward. Thank you.

Your next question comes from the line of Steve Moss with Raymond James. Please go ahead.

Good afternoon. Hi, Steve. Hey, Paul. Maybe just starting off following up on credit here with regard to potential for elevated charge-offs. Just kind of curious if you could size that up a little bit. It sounds like it's going to be coming from the equipment finance portfolio, if I heard that correctly.

Yeah, I think just a comment, you know, to be a little repetitive to Carl, you know, we've got specific reserves of about almost $80 million on a population of about $380 million in what we consider troubled assets. Of that, I would say that, you know, a fair amount of that will come out of the—those problems as they resolve themselves will come out of the Eastern Funding Portfolio.

There's really not much of that in office at this point. right okay guy i know that that's helpful i just size that up a little bit and then you know the other thing here in terms of the commentary you know sounds upbeat with regard to cni lending just kind of curious uh get a sense for the type of deals you guys are seeing and and where loan pricing is these days well to give you a sense we put in in the deck you know what the originations were and of course that's on a combined basis uh for the quarter but you know we had we had coupons being added and just just a little south of seven percent uh and and i and that does include some eastern funding uh rigidations in there as well uh but okay yeah and then maybe just on the loan portfolio yields here uh in terms of the just curious you know it's a probably a bigger step up than i was expecting i realized the purchase kind of increased like math there but just kind of how you're thinking about where the loan portfolio yields shake out and how you guys are thinking about deposit betas um as we go through these these rate cuts on on a combined basis well of course the the uh the deposit betas uh right now we're modeling about a 57

percent beta uh for all all of our uh interest-bearing deposits uh and uh it seems like the uh the lines have been doing a little bit better job than that than our modeling uh now sometimes that happens initially and then it slows down but uh in the model that's what we're using is 57 percent okay and one more housekeeping item here just curious um how you guys are thinking about um the core deposit intangible amortization expense um going forward yeah i think uh we we provided some guidance on that i think it's about 8.1 million dollars a quarter uh that that'll come down over time i think we're doing a uh a 12 year some of the years digits method on that okay got you appreciate that i'll step back in the queue thank you okay steve your next question comes from the line of David Bishop with Hugty Group.

Please go ahead.

Hey, good afternoon, gentlemen. Hey, David. I'm curious, within the legacy Berkshire Hills, they had some resilience and strength recently in the 44 business capital back, you know, small business line. Any impact this quarter in terms of their ability to get stuff to the finish line in terms of loan sales? I'm curious if there's a significant backlog or pipeline within that segment?

That's an excellent question. I don't know if it really impacted September. I think September was fine. And as you know, you're only seeing Berkshire's results for the month of September in this. And I think that's important to realize. But the fourth quarter, I would imagine there would be a little bit of a shortfall as far as timing and maybe even the level of gain on sale on the guaranteed portions of those SBA loans. So I do expect that, but I couldn't give you really guidance on how much that might or may or may not be.

Got it. Understood. Good. And then appreciate the deck noting some of the divestitures. Any more repositioning or loan sales or security sales anticipated after this? Thanks.

Yeah, I put a note in there to keep my options open, but I think I'm pretty much done with that. There may be a few more securities that we would like to sell, but it's nothing material.

In terms of the branches, there's four or five overlaps which will be dealt with post-conversion. But I think that Berkshire had sort of cleaned up the footprint quite handily in the past couple of years, maybe two or three years.

Right. And then, Carl, just curious if you have it available, the CRE concentration ratio at at quarter ends?

355 percent for ICRE, the total risk-based capital, and I just like to highlight that our construction portfolio is only 33 percent. It's quite low, and it's nice to remind people of that.

Great, appreciate it, Keller.

Your next question comes from the line of Carl Shepard with RBC Capital Markets. Please go ahead.

Hey, good afternoon, and congrats on getting all this done. Thanks, I guess I wanted to start with Carl. Thanks for all the help with slide 5 and I'm just thinking high level here. This feels like a pretty good starting point once we kind of right size the provision and back out a little bit of the accelerated and credit related accretion this quarter. Is that is that fair? And then what's the message on the size of the balance sheet?

You're right on with that. That's right. That's why I spent so much time and almost all of my time on that. I think that gives you a good sense of the direction. in the different categories and how that's laying out. And September gives us a little snapshot of that. As far as the size of the balance sheet, we basically reduced the balance sheet $500 million when you include the loans held for sale. I don't expect that to go down going forward. We'll see exactly what kind of loan growth we're seeing on a combined basis as we move forward. But over time. I think we're targeting that probably mid-single-digit growth in interest-earning assets. I want to be careful. A lot of ratios that people calculate, and even when you look at the yield tables and things like that, you'll look at our yield table and our press release, and you'll see interest-earning assets or loans might be $12 billion or something like that. But it's a much higher number when you look at just where we ended September, right? Because that included Brookline for two months and the combined organization for one month. So you've got to be careful about averages and average balances and calculations like that. But we expect to be able to get on a growth trajectory on interesting assets going forward in the low single digits to mid single digits.

Okay. Yeah, I was trying to do the algebra on NII for September, but I guess then one for everyone, but maybe Paul in particular. Can we get a few more thoughts on how the first two months have gone as a combined organization, and then what's the focus execution-wise between now and the systems integration for you?

Well, I think it's gone exceptionally well. I mean, everybody has an important role to play and my management committee works very well together and have been knocking off the kinds of things that are necessary to do in these kinds of mergers. everything from employee benefits to consolidating contracts for services. All the technology stuff is well underway. That was done very early on. The selections were made. And so we're about execution at this point. And we've got the banking centers all set up under Chief Banking Officer Mike McCurdy. We have six regions, given the footprint that we have. And so we have decentralized localized all of the support for those regions. And as I travel around the land, I feel very good about the people that I'm meeting and the enthusiasm that they're bringing to this new adventure for everybody. So this is a lot different for everybody, but the optimism is there and the talent is there. And so I'm feeling very good about where we are here a couple of months away from the conversion.

Okay, great. Thanks for all the help.

Your next question comes from the line of david conrad with kbw please go ahead hey good afternoon um since you spent so much time on uh slide five let's spend a little bit more time on it i guess if we could but um i just looking at the at this you know september expenses of you know 40.6 and then the amortization of 2.7 And if I kind of cauterize that, if you will, I get to about $130 million of expenses, kind of a run rate. I guess two questions. One, how much of the 68.9 cost saves has already been implemented in that number, if any?

I'd say quite a bit of the 68 has already been realized. Just to step through that a little bit. Just since we announced the transaction, even before we announced the transaction, both companies were being very thoughtful about expenses going into that. And so when we were looking at and just people weren't getting hired, people who were leaving, positions weren't getting filled. There was a lot of, you know, a lot of double work going on, things of that, people, things getting done by additional folks. And so there's been a lot of control around expenses right up until the merger on September 1st. And both companies have done an excellent job of controlling those expenses and not spending a lot of money. Then you had September 1st come, and there are a lot of senior people and even department leaders that were let go on the first day. So they exercise their change of control, their contracts, and they're gone. So while the number of people, and there's quite a few people right day one, those are pretty high salary numbers and bonuses and things of that nature benefits. And so those came right out of the run rate September 1st. So that's a nice pickup. Now, there's still some savings and synergies to be had on all the contracts and things of that nature. Vendors that we use, professional services that we use. And so those things are still going on. And as we get through to conversion, we'll be able to realize on those. And then there's another staffing reduction at that time.

Just to put some numbers around it for you, David, we're down almost a couple of hundred people in the combined company since a little bit before the combination actually came to fruition. And scheduled to let go post-conversion at some point is almost another hundred. And so we're being very methodical about it. And as Carl pointed out, there's a fair number of those people who have already left who are highly paid.

Right. right and then so when we look at the fourth quarter um the 130 is probably a good run rate maybe i don't know if there's going to be more expenses core expenses seasonally in the fourth quarter um so i'm just kind of wondering what the core number of the fourth quarter range would be and then the last question would be on slide 11 that 119.8 kind of 2q expense number we should probably add in the eight eight million of the amortization on top of that to get the all-in expense that's correct that's correct yeah what i want to add i mean there's a million moving

parks on this thing as you can imagine and uh whether it's it's aligning the benefits across the organization it's aligning salaries across the organization there's things of that nature But there are positions that needed to be filled that have been postponed. And, of course, we've postponed them even further because we would have hired anybody in December because we're doing payroll conversion at that time. So there's a lot of things going on, but there's positions that we're going to have to fill. And so that 119.8 is something that the management team is committed to delivering on, and we're working very hard to make sure that happens. And we're close. And I think I don't see a reason why we're not going to hit that and perhaps do better.

And then for the fourth quarter, should we, is 130 kind of a decent for that? Or should we up that a little bit before it goes down?

No, I think I would use that number for now. I couldn't really give you that. I don't see a real reason why it would vary too much off of September.

I didn't really do a deep dive on that, but I think that should be pretty accurate. uh including including the intangible amortization right great okay thank you very helpful your next question comes from the line of laurie hunsicker with seaport research please go ahead yeah hi thanks good afternoon um yeah laurie laurie i just i just wanted to clarify this the the 119.8 million on page 11 there that does or does not include the amortization expense It does not.

It's operating costs.

I just wanted to double check. Okay. And then same thing when we look at the margin, the 390 to 4% that you're guiding, that does include accretion income to the rate of an estimated $15 to $20 million per quarter?

Yes, it does.

Okay.

Okay. Okay.

And then just your comments here at the bottom of page 11, can you expand a little bit on that, Paul and Carl, that management will continue to explore opportunities to optimize the balance sheet and capital structure over the next few quarters? Just help us think about that.

Expand on that a little bit. I think I said earlier, I wanted to keep my options open here. And I think for – and I want to get – this is something we will discuss with the board more fully and size it correctly. But as you know, we both – both organizations had sub-debt outstanding, and it's something that we will probably look to refinance sometime during 2026. I don't want every single banker in the world calling me, but that's something that we will be looking to explore that. And I think we'd like to get a nice clean quarter behind us before we move forward with that.

Okay. And then just to clarify, no spot secondary anywhere in the future.

Is that correct? We have nothing approved yet. All right.

And then on diluted income statement share count, I just want to make sure I have this right. It dropped a million six or so in September. It's going down another 3.6 million just the accounting, right? So it takes diluted income statement share count will be about 84 million. Is that correct? Or is my math off on that?

No, I think that's where folks got a little bit tricked up when it was Berkshire as the legal acquirer and Brookline as the accounting acquirer, and they were using the Berkshire share count and then the combined. It was really two months of Brookline's share count and then the combined. So, the combined share count's around $84 million, 84 million shares on a diluted basis.

That's perfect. Okay, good. And then, by the way, I appreciate so much all of your detail. You kept everything that you had in there that we loved as Brookline, and you added more stuff. So, just great. But just going to slide 14, can you help us think a little bit about, this is a smaller line item, but Firestone that came over with Berkshire Hills. What are you doing with that? Is that discontinued?

Yes, just got to run off. It's by $23 million.

Okay, good. Perfect. Just wanted to make sure you weren't growing it. And then, obviously, new here, it looks like, so you're discontinuing the fitness and the MAC release. That's down to $150,000, so that's great. And then, so your charge-offs this quarter, the $15.1 million in charge-offs, do you have a breakdown as to, you know, how much of that was vehicle and how much of that was the MAC release?

Yeah. Actually, there was two large Eastern funding deals in that. neither of them were vehicle or macro lease. They were both Eastern funding, but I would say they were non-core type businesses. One was a commercial laundry, and the other was a grocery operator. So yeah, those were both long-term workouts, and those reserves had been put up over the last year or so, so we thought now was the appropriate time, given where those deals are, to take those charge-offs.

Okay, great. Yeah, and we talked historically about the grocery. And then the specialty vehicle, what is that non-performing? And same question with the macro lease. So of your CNI equipment finance non-performers of $42 million, how much? is in those two buckets?

Specialty vehicle is about $4 million. Okay. That 42 is just made up of a handful of names, largely.

Okay. And the MAC release, do you have non-performers for that one?

I think that number's 11. 13. 13, sorry. 13. Okay.

Okay. That's great. And And then the office detail, and I appreciate the detail that you added around that, but can you just talk a little bit more? So you have zero non-performers, and you're now at $22 million. And I think Mark asked the question earlier, was this a Brookline or was this a Berkshire Hills credit? And not that it matters, just kind of curious. And then also, can you comment, you had a massive jump to the criticized office.

It looks like that's now $134 million. just any color on that would be great yeah the um the the deal that we mentioned earlier uh the downtown office um that moved the non-accrual number was uh was a legacy brookline account okay and so then you had it looks like then you had another what 10 million or so so now I'm performing from your book.

Is that right?

Yeah, that sounds about right.

Okay, okay. And then the criticized there, the $134 million, is any of that coming due in the next couple quarters or any color on that?

In terms of office, we have two loans that are coming due over the next couple of quarters that are in the criticized bucket. Those loans are on short-term maturities at this point. We're well-reserved on both of those loans, and we expect some resolution to them over the coming quarters.

Okay. And what is the amount on those?

About $30 million in total. $30 million. Okay. In total. Great. Okay.

And then do you happen to have the occupancies there on those?

I don't off the top of my head, no. Sorry. Okay. Okay.

I think you hit all my questions. Thank you so much for all the details. I appreciate it. Thanks, Lawrence.

Your next question comes from the line of David Conrad with KDW. Please go ahead.

Thanks for letting me jump back on. Just had a follow-up on slide 11 with the um first account increasing expected to be 15 to 20 per quarter just wanted to kind of clarify to make sure like if you did adopt the new fasby rule would we think of that range of being more like 11 to 16 or is that range contemplating the change of the uh the accounting it does contemplate the change in accounting but again this is an estimate And it's the best look, because just so you know, that's done at the loan level, the individual loan level.

And so it can be very volatile based on prepayments and things of that nature.

Okay, thank you.

Your next question comes from the line of Mark Fitzgibbon with Piper Sandler. Please go ahead. Mr. Fitzgibbon, your line is open. There are no further questions at this time. I will now turn the call back over to Paul Peralt for closing remarks.

Thank you, Gene, and thank you all for joining us, and we look forward to talking with you again next quarter. Good day.