Hello, and welcome to today's Berkshire Hills Bancorp Second Quarter 2022 Earnings Conference Call. My name is Elliot, and I will be coordinating your call today. I would now like to turn the call over to Kevin Conn, the floor is yours. Please go ahead..

Good morning, and thank you for joining Berkshire Bank's second quarter earnings call. My name is Kevin Conn, Investor Relations and Corporate Development Officer. Our news release is available in the Investor Relations section of our website berkshirebank.com and will be furnished to the SEC.

Supplemental investor information is provided in an information presentation at our website at ir.berkshirebank.com, and we will refer to this in our remarks. Our remarks will include forward-looking statements, and actual results could differ materially from those statements.

For details, please see our earnings release and most recent SEC reports on Forms 10-K and 10-Q. In addition, certain non-GAAP financial measures will be discussed in this conference call.

References to non-GAAP measures are only provided to assist you in understanding our results and performance trends and should not be relied on as financial measures of actual results or future projections. A comparison and reconciliation to GAAP measures is included in our news release.

On the call, we have Nitin Mhatre, President and Chief Executive Officer of Berkshire Hills Bancorp; Subhadeep Basu, our Chief Financial Officer; Sean Gray, our Chief Operating Officer; and Greg Lindenmuth, our Chief Risk Officer. At this time, I'll turn the call over to our CEO, Nitin Mhatre..

Thank you, Kevin. Good morning, everyone, and welcome once again to Berkshire's second quarter earnings call. I'll begin my remarks on Slide 3 that captures the highlights of the quarter. Overall, this was a strong quarter with significant improvement in EPS and ROTCE quarter-over-quarter and year-over-year.

Revenues were up 9% versus the first quarter driven by strong net interest income growth. Loan balances growth was robust and net interest margin grew significantly, and those tailwinds more than offset the headwinds in fees.

Expenses were flat quarter-over-quarter and slightly lower year-over-year as we continue to be disciplined on expense management while continuing to self-fund our BEST program. Earnings per share of $0.51 was up 19% quarter-over-quarter and up 17% year-over-year.

Return on tangible common equity improved to 8.48%, an improvement of 99 basis points quarter-over-quarter and 40 basis points year-over-year. On capital front, our balance sheet remains strong. We ended the quarter with a common equity Tier 1 ratio of 12.9% after returning about $61 million of capital to shareholders.

We have ample capital to both fund the loan growth and continue stock repurchases. Our credit metrics improved again in the second quarter, and thanks to the tremendous work by Berkshire team members across frontline to workout groups, our net charge-offs for the quarter were at historically low level of less than $0.5 million.

On a related note, in June, we announced that Moody's assigned us an investment-grade issuer rating of Baa3 with a positive outlook. The rating outlook is positive for both the holding company and the bank. On the BEST strategy front, we continue to make steady progress.

We continued our optimization initiatives, including the consolidation of five branches scheduled for third quarter. Getting better before getting bigger was an important part of our strategic focus in 2021.

And now even as we began to grow our balance sheet in 2022, we continue to look for opportunities to improve our balance sheet mix and align it better with our core strategy. And to that extent, we've decided to stop originating Firestone loans even to existing customers to have that portfolio runoff in due course.

Important to note that this is a strategic decision and not related to the performance of the portfolio, which is, in fact, quite strong as nonperforming loans were less than 1% of portfolio balances at the end of second quarter. Loan deferrals were at zero, and we recorded net recoveries of $118,000 in the quarter.

Similarly, the economic uncertainty -- given the economic uncertainty, we will stop new originations from Upstart. Important to note that our experience with Upstart has been terrific.

We are pleased with the quality and demographics of the customers acquired through that partnership and the corresponding opportunity to deepen banking relationships with those customers over time.

Credit performance of this portfolio is strong and life-to-date annualized charge-off freight on that portfolio is about 35 basis points compared to our model 4% to 5% annual charge-off rate.

That said, we believe that given the economic uncertainty, taking a pause in new originations from this partnership, is a prudent course of action, and it will enable our teams to focus on the core business of the bank that represents about 98% of loans that continue to grow and perform well.

On ESG strategy, we continue to improve our ESG program performance. Additionally, we became the first bank under $150 billion in assets to issue a sustainability bond through our issuance of $100 million of subordinated debt in the second quarter.

Our customer experience and Net Promoter Score part of our West strategy, we continue to make good progress. Our mobile app rating on iOS improved further to 4.7 stars this quarter and our net promoter score measured directly through J.D. Power, showed further gains in the quarter.

Slide 4 highlights the continued strength of our loan originations and balances. As we reported in the previous quarter, Q1’22 was the inflection quarter with our total loan book started to grow again after a gap of 6 quarters.

We’re pleased to see that the momentum continues with loan balances growth of 7% quarter-over-quarter on both average and end of period basis. Loan growth was driven by new loan originations that were up significantly year-over-year.

Our strategy to invest in our bankers, customer experience and technology is helping us win business across the board. Finally, I’d like to thank all of our Berkshire Bank colleagues for their continued hardwork and passionate commitment to our vision of becoming a high performing leading socially responsible community bank.

Their commitment to our strategy and dedication to our customers is what is driving our improving performance and continued progress. With that, I’ll turn the call over to Subhadeep to discuss our financials in more detail.

Subhadeep?.

Thank you, Nitin. Slide 5 shows our quarterly income statement, please see the appendix for a reconciliation of GAAP and adjusted financials. My comments will be on an adjusted basis and non-GAAP. Revenues were up 9% quarter-over-quarter and up 1% year-over-year.

Net interest income grew 18% sequentially given strong loan growth, increased asset yields and stable funding costs. Fee revenues were down 19% quarter-over-quarter. I'll speak to fees in more detail in a moment. Our continued expense discipline resulted in flat expenses quarter-over-quarter and down 1% year-over-year.

While we had a $4 million provision benefit last quarter, we recorded a provision expense of zero this quarter. After-tax income rose 13% and 7% quarter-over-quarter and year-over-year, respectively. Our pretax pre-provision net revenue, PPNR, grew significantly and was up 38% quarter-over-quarter and up 4% year-over-year.

We also had positive operating leverage quarter-over-quarter and year-over-year. Slide 6 highlights changes in our earning assets. As Nitin mentioned, we had another quarter of robust loan growth, a 7% increase in average loans with loan growth across all business lines.

The commercial loan portfolio, which accounts for about 70% of our loan growth, grew 5% quarter-over-quarter, with particular strength in asset-based lending. Our loan yields rose sharply with higher interest rates, up 38 basis points versus the first quarter.

Our short-term investments in securities book was down 20% as we deployed cash into higher-yielding loans. The mix shift in our balance sheet from lower-yielding cash and investments to high-yielding loans is driving growth in our net interest income and NIM. Moving on to Slide 7, it shows our average liabilities.

Total deposits declined 3% and 2% quarter-over-quarter and year-over-year, respectively. However, excluding payroll deposits, which were unusually high in the first quarter and broker deposits, our deposits were down 1% quarter-over-quarter and year-over-year.

Noticeably, our cost of deposits were unchanged at 17 basis points quarter-over-quarter, and our cost of funds increased 1 basis point versus the first quarter to 24 basis points. While our deposit costs have remained stable, we do expect deposit costs to increase during the second half of the year.

During the second quarter, we issued $100 million of subordinated debt that was also the first sustainable bond issued by a bank under $150 billion in assets. I’d note that in third quarter of 2022, we plan to redeem $75 million of subordinated debt with a coupon of 6.875%. Moving on to the next slide, Slide 8.

shows more detail on our net interest income and margin. Net interest income grew 18% quarter-over-quarter, driven by loan balance growth, increased asset yields driven by the rate environment and stable funding costs. Our reported NIM is up 49 basis points year-over-year.

Our NIM adjusted for purchase loan accretion and PPP impact is up 65 basis points over the same period. While we were pleased with our lift in the NIM, we don't expect increases of similar magnitude going forward. Turning to the next slide, Slide 9. We show our fee revenues, which were weaker than expected this quarter.

Excluding securities gains and losses, our fee revenues were down 19% quarter-over-quarter and down 23% year-over-year. Excluding the impact of our insurance divestiture fees were down 14% year-over-year.

Loan fees and revenue were unusually low this quarter, driven by lower interest rate swap revenues and fair market value adjustments on the swap portfolio driven by the rising rate environment. The decline in other fees, a line item that can be lumpy reflect a large seasonal revenue sharing agreement in the first quarter.

Wealth management fees and deposit-related fees showed good momentum. On Slide 10, we show our expenses. Continued expense discipline resulted in flat expenses quarter-over-quarter and down 1% year-over-year. I would like to point out that we have kept our expenses essentially flat for the last 5 quarters as we continue to self-fund our best strategy.

We also continue to benefit from expenses from vendor management branch consolidations and other real estate optimization efforts, which have resulted in lower occupancy and equipment expenses. Slide 11 is a summary of our asset quality metrics. Our credit quality remained strong. Nonperforming loans are down 44% year-over-year and 9% sequentially.

Our net charge-offs dropped to historically low levels of 2 basis points. Continuing strong credit performance, offset by loan growth led to zero provision expenses for the quarter. Our allowance for credit losses to loans ended the quarter at 1.27% of loans. Moving to the next slide, Slide 12, show details of our capital and liquidity positions.

Our common equity Tier 1 capital ratio ended the first quarter at an estimated 12.9%. Our top priority is to deploy capital to support organic growth. We are also biased to opportunistic stock repurchase given our low stock valuation and repurchased about $55 million of stock in the second quarter. We also expect to grow our cash dividends over time.

I'd have to point out that like many banks in the second quarter, we also recorded a negative bond mark to other comprehensive income in our equity account of about $45 million on an after-tax basis. I'd reiterate that the OCI bond mark does not impact our regulatory capital ratios, and we expect those bonds to pull to par over time.

So in summary, a strong quarter with robust balance sheet net interest income and net interest margin growth, strong capital position, enabling us to continue returning capital to shareholders, ample deposits to fund future growth and strong credit performance and expense management.

Now I would like to close with comments on our outlook for the rest of 2022, which is depicted on Slide 13. We'll provide 2023 guidance in January. We are clearly aware of the ongoing economic uncertainty, including the impact of higher rates, supply chain disruptions and inflation.

We are not seeing a meaningful slowdown in economic activity in the markets we operate. The labor market is still quite strong, and demand is still recovering from the pandemic. We continue to closely monitor our asset quality.

We have a strong balance sheet, differentiated strategies for organic growth, continued expense discipline and multiple levers. We are focusing on things that we can control. Consistent with our BEST plan, we expect 5% to 7% average loan growth for full year 2022 versus full year 2021.

We now expect average deposits to be flat to down 2% for full year 2022 versus full year 2021. Also recall that our net interest income guidance in April was for mid-single-digit growth of reported net interest income in 2021 of $291 million. It was based on the modeled year-end Fed funds rate of 1.75%.

We are now modeling to a year-end Fed funds rate of 3.25%. We are also modeling deposit betas to be low near term, and to be between 30% to 40% later in the rate hike cycle and expect our deposit cost to increase for the second half of 2022.

We are raising our net interest income guide on a GAAP basis from mid-single digit to 9% to 11% and 17% to 19% on an adjusted basis. We expect fees to be down 10% to 15% in 2022 versus adjusted 2021 fees. I would like to remind you that 2021 was a record year for our SBA lending business and the slowdown is more than we expected.

Our Wealth Management business is impacted by headwinds from weaker equity and fixed income markets. However, both franchises remain fundamentally healthy and present long-term growth opportunities for us. Our asset quality remains strong. We expect credit provision expense to start to normalize in the second half of 2022.

We expect ACL to loans to be in the range of 110 to 120 basis points for 2022. We expect to continue to focus on expense discipline and expect to maintain a quarterly run rate of $68 million to $70 million. However, expenses could be lumpy and at the higher end of that range. We estimate our effective tax rate to be in the range of 19% to 21% for 2022.

With that, I'll turn it back to Nitin for further comments.

Nitin?.

Thanks, Subhadeep. On Slide 14, we have our BEST program North Star chart, which shows our progress on 5 key performance metrics. We've just finished the first year of our 3-year West journey.

And as you will see, our financial metrics, ROTCE, ROA and PPNR, continue to show steady improvement compared to the baseline and are headed in the right direction towards our stated 3-year goals. Our EHG score remained in the top quartile at the 22nd percentile nationally. We have enhanced our NPS score measurement process and have hired J.D.

Power to provide us with a Net Promoter Score directly through our customer surveys. We've seen steady improvement in the absolute Net Promoter Score this quarter with an increased sample size. We hope to have a relative ranking versus New England banks at the year-end of 2022.

Our strategy is driving us forward towards becoming a high-performing, leading, socially responsible community bank in New England and beyond. Consistent with that vision, Slide 15 highlights the progress we've made in empowering community come back and some of the external recognition that we received.

Over the last 8 weeks, I've had an opportunity, along with my leadership team to participate in what we call as our BEST Community Comeback tour. Through this tour, we visited all 9 markets across 5 states, covering 80 cities and meet over 80% of our employees and over 100 business customers and community partners.

It was incredibly energizing to see how engaged our bankers are in our transformation, and we've committed to continue to listen to their feedback on an ongoing basis to get better every day in providing exceptional service to our customers. Our BEST Community Comeback program is tracking well overall.

And as part of that program, our wealth management group launched our center for women, wellness and well to provide women with tools to support financial stability and overall wellness.

This initiative is in addition to the socially responsible investing program we launched earlier in the year in our Wealth Management division that has already generated over $40 million in assets under management program to date. Issuance of sustainability bond that we mentioned earlier, further enhances our community comeback program.

And while all of this is creating a lot of energy internally, we're also excited about the external recognition that's coming our way. Newsweek ranked us number 9 on their list of America's most trustworthy banks in 2022. We were also awarded Communitas Award for leadership in corporate social responsibility for BEST Community Comeback program.

We ranked among the top 1% of all U.S. banks for ESG in Bloomberg this year. And while absolute ranking can change frequently, we were pleased to reach number 1 spot towards the end of second quarter on Bloomberg.

So in summary, a strong quarter with steady progress on our BEST plan, strong loan growth and net interest income and margin expansion, disciplined expense control, improved financial returns, along with solid progress on our ESG performance. With that, I'll turn it over to the operator for questions.

Elliot?.

Our first question comes from Mark Fitzgibbon from Piper Sandler..

Congrats on a good quarter.

First question I had, I wondered how much of the payroll deposits left this quarter and how much you might -- you expect those to return on the balance sheet in the third quarter, roughly?.

So I think, Mark -- this is Subhadeep. If you look at our second quarter numbers, I think our payroll deposits were unusually high in the first quarter. I think it was around $1.7 billion. I think on a sort of normalized basis, I would put a range between $700 million to $1 billion..

Okay.

So somewhere between $700 million and $1 billion, you think will flow back on the balance sheet?.

If you look at sort of historically where we have been, that's kind of the, I would say, as an average balances..

Mark, just to make sure I understand you correctly though. You're saying will it flow back $700 million to $1 billion? I think what Subhadeep saying is $700 million to $1 billion has been an average on a quarterly basis for the last, let's say, 5 quarters before first quarter. We ended this quarter at 1.3.

We think it's going to normalize around that $1 billion mark..

Okay. Secondly, on wealth management fees, they were surprisingly good this quarter.

I wondered if you could share with us what assets under management are and maybe what flows look like this quarter and market depreciation of assets?.

So I think, Mark, we will look into our disclosures around sort of assets under management and potentially going to get back to you. However, I think this quarter, we had good inflows, and that was actually offset by weaker equity markets and fixed income markets. So I think that speaks to the resilience of the business so far.

However, on a go-forward basis, we expect weakness to persist in the equity and fixed income markets and do not expect Wealth Management to grow at the rate that you have seen this quarter..

Okay. And then I wanted -- just want to touch on the Upstart relationship. You all have been pretty positive on it in past calls.

Is there a conscious move away from third-party originated loans now? Or was it more Upstart specific?.

No, I think it's really just the fact that we anticipated to get those volumes through that partnership to about 3% of the total loans, and we feel just given the environment that we are in and all the provisions that we have to build along the way, 2% is the right number to and we've reached that volume.

And as I said in my remarks, the performance of the portfolio is pristine. It's operating at 35 basis points of annualized loss rate compared to the 4% to 5% expected. So, no, it's not the quality of production or partnership, it's really limiting our exposure in the environment that we are in..

Mark, this is Subhadeep. I just want to get back to you on your question around assets under management. We have $1.6 billion in assets under management for wealth..

Okay. Great. And then last question, I wondered if you could share with us what the loan pipeline looks like? And maybe any color on the mix would be great..

I would say, Mark, in the third quarter and pretty much in the second half, we expect the volumes to slow down as compared to the first half, but the pipeline looks strong. It's not as high as it was at the end of the first quarter, but it's significantly strong.

And I think if we continue at the same clip, we should get to the growth numbers that should be outlined in his outlook..

Our next question comes from Billy Young from RBC..

Great quarter. I guess I just want to follow up on the Upstart loans.

Just so I'm clear, is the partnership with Upstart terminated in its entirety going forward? Or are you just only originating up to 2% of loans?.

Pretty much breaching that -- Billy, no, we're pretty much reaching that 2% cap in this -- once we clear up the pipeline. So we're going to pause the originations for the foreseeable period..

Okay. Okay.

And then on the Firestone loans, how quickly do you expect those to kind of run off the balance sheet?.

We will think about 10 to 12 quarters for it to fully run off. We're not going to originate new loans. I think at earlier stage, we are originating to accommodate existing customers. We're going to stop doing that. So I think it will go through a traditional CPR, which will take it to about 10 to 12 quarters..

And I guess just to touch on the loan-to-deposit ratio, there's a bigger step-up this quarter, close to 77%. I believe your 3-year target for BEST is around 90%.

I guess if growth continues to remain good, and we reached that 90% sooner rather than later, how does that impact management thinking on funding longer term?.

Billy, this is Subhadeep. I think in terms of our best strategy and in terms of our balance sheet and liquid and funding, at this point, we don't anticipate any changes I think it's good that our loan-to-deposit ratio has increased.

However, that also, if you take into account some of the payroll deposits moving out, and that has impacted the loan-to-deposit ratio. But we remain comfortable about our capacity to fund the growth in our balance sheet as targeted in BEST..

Okay. And final question for me. Just -- I guess just more of a philosophical question, but in the last tightening cycle, your margin reached -- approached a mid-3% level.

Can you maybe speak a little bit about how much your balance sheet has changed since that cycle? And what that might mean for the margin this time this cycle?.

So I think as outlined in our best strategy, we have a goal of 70-30 commercial consumer/residential mix. In terms of our net interest margin, I would say that was impacted by 3 factors, obviously, in our asset sensitivity. Secondly, cash got deployed into loans and our deposit pricing remained surprisingly sticky, which we are happy about.

I think on a go-forward basis, we don't expect a 1/4 of this magnitude for NIM increase. We do expect modest NIM increase throughout the rest of the year..

We now turn to Chris O'Connell from KBW. .

Nice quarter.

So just wanted to start with the loan growth guidance and just confirm the $7.3 billion average for last year, that includes PPP, I believe, is being growth of 5% to 7% off of that $7.3 billion as an average for 2022?.

Yes, Chris, this is Subhadeep. Yes, it's based of the $7.3 billion number..

Okay. Great.

And then I was just hoping to get a little bit of color as to what you guys are seeing in the updated pipeline in terms of rates for the different loan categories that you're putting on?.

Chris, this is Subhadeep, again. Yes, I can give you a little bit of color in terms of the new originations that are coming in. I would say commercial in the mid-4% yield range. Mortgages around, I would say, 4%..

Okay. Got it. And then the residential portfolio growth this quarter is still particularly strong despite the macro environment becoming a little bit more negative for that market.

How are you guys seeing the split of that growth going forward versus the commercial portfolio into the back half of the year?.

Chris, this is Subhadeep, again. So in terms of our overall guidance, we have factored in the resi portfolio growth. And I think we are monitoring it closely. We are fully aware that in the rising rate environment, that could potentially slow down like what other banks are seeing.

So we have factored some of that in, but if there is a change in terms of our guidance and the growth we are seeing in the book, we'll come back to you guys in the next quarter..

Chris, if I could just add on that. I think you probably are looking at the mix as well. I think in terms of resi, we will see some growth. We're also in a different state of evolution in terms of how we're growing the organic growth muscle. As we talked about in the BEST program. We invested in the frontline bankers and the partnerships.

So I think the book will continue to grow at a slower pace in the second half. But most importantly, the overall mix today, commercial book is about 70%. And I think it's going to remain to be in that mid-to-high 60s through the year and beyond..

Okay. Got it. That's helpful.

And then just given the moves in the balance sheet this quarter and what you guys are seeing for the positive outlook, where is the eventual level that you want to get cash to as a percentage of assets -- earning assets than the deployment this quarter? And how are you thinking about utilizing cash and securities to fund loan growth going forward versus the deposit flows?.

Chris, this is Subhadeep. I think standing where we are and looking at our balance sheet at this point, approximately cash to be like 5% of total assets. However, as the balance sheet grows, we continue to assess that number and sort of review that on an ongoing basis.

In terms of funding our loan growth, I think looking at what we're expecting from a deposit trajectory perspective and the funding sources we have, we expect to be able to sort of fund our balance sheet and the growth that we expect in the foreseeable future through what we have today..

Okay. And then last one for me, just a couple of questions on the fee side. One, are you thinking about the contract tax line going forward? I know it's run a little bit lower in the past couple of quarters than it was during the back half of last year.

And then also, how much of the loan fees this quarter was a drop in the swaps versus drop in FDA? And how are you thinking about how those rebound or -- how much they rebound by going forward as well?.

Sure. So the first part of your question was, Chris, could you just repeat it, there was a bit of a sound --.

The counter tax line..

Yes. Right. Got it. So the -- we have a very active tax credit strategy. And I think you have seen our tax rate creep up marginally higher, and now you're seeing sort of lower impairments. We do expect to normalize around 19%, 20%. So that number will potentially grow as we deploy our tax credit strategy.

In terms of your question around loan fees and revenues about -- that variance, about $3 million of it is related to swap valuations and swap fee decline. I would split it halfway between the two of those. Yes..

Okay.

And how are you thinking about like the outlook on the environment for maybe the swap fees or SBA fees for the back half of the year?.

Sure. So first, let's talk about the SBA fees. The SBA fees actually grew marginally this quarter. But if you look on a year-over-year basis, right, it was quite a bit of a decline, right? And so the SBA business, and we are not unique in that position. I think the industry is experiencing a slowdown there.

I think in the gain on sales and the premiums actually have declined and the SBA guarantees -- the guarantees that we have on those loans have fallen from 90% to 75%. So that's impacting the industry as well. So we are expecting slowdowns in sort of the SBA business..

Our next question comes from Laurie Hunsicker from Compass Point..

Super excited. I think that's great. Can you just give us a refresh on the balances that Upstart? I had a 1Q '22 balance of $73 million.

Where was it as of 2Q?.

It's about $152 million..

$152 million. Okay.

And then did you continue to add to upstart in early July? Or did you see as of June 30?.

No. We're seeing as of now. So it will get effective from here on. So whatever pipelines get cleared, and that's when --.

Perfect. Okay.

And then can you just refresh us on what the loan yields are running at the moment in the Upstart book?.

It's in the same range, Laurie, it's about 12, 12.5%..

Okay. Great. Okay.

And then -- and sorry, charge-offs in the quarter, what were Upstart charge-offs in the quarter in dollars?.

I think cumulatively, I think it's about 35 basis points. I don't know specifically for the quarter on quarter. Yes, it was $30,000. So it's first quarter fractionally $30,000 first quarter, $100,000 second quarter. So still well below 0.5%..

Got it. Okay.

And then Firestone, what are the balances there? I had that is of $167 million as of 1Q? What was it as of 2Q?.

$165 million..

165. Okay. Great. And then can you just give us a refresh on just some of the other categories that we watch. If we think about restaurants and hotels and leverage lending, do you just have those 3 categories? If not, I can follow up with you offline..

Laurie, is Subhadeep.

Greg can you answer some of those questions from Laurie?.

Absolutely. Absolutely. Hospitality is 360, 360 in hospitality, restaurants is 90 and leverage lending is really de minimis, just a fraction of 1% at 66..

Okay. Great. And then -- just in terms of the criticized in those categories, if you have it..

Laurie, this is Kevin. I think we've been really responsive in terms of credit data for everybody, especially we did all the detail in the Covid sensitive industries. So we're happy to share exposure data. But on further credit data, I would refer you to the Q that will come out in that 45 days or so..

Yes. Okay. Okay. that works. And just on loan balances, just to touch on, I think, some of the questions that Chris was asking. I mean the resi book you added $250 million this quarter, a 64% annualized, obviously not continuing at the same rate.

Can you just help us think about and then pre-remarkably strong same with C&I, is that purchased? Or is that your team originating? Is that a combination? Is that all in footprint? Can you just help us think a little bit about those 3 categories in terms of how those loans actually came about because we -- I can't remember a time that we've seen this sort of strong growth from you guys..

No, it's predominantly what we call as the retail production, which is what our mortgage loan officers produced and supported through our correspondent partners. So that's the predominant trust of it and purchase volume will pretty much go down to 0 as we get into third quarter..

Got it. Got it. Okay. Buybacks, very, very active, love seeing that.

How do you think about that going forward?.

Laurie, this is Subhadeep. So as you may recall, our Board authorized $140 million in buybacks. As of now, we have around $55 million remaining in that program, and we intend to execute on that through the remainder of the year, obviously, we remain opportunistic and depending on share prices..

Got it. Okay. All right. And then Subhadeep, obviously, you had mentioned the $75 million sub debt that you plan to redeem in the third quarter. What about the $23 million of trust preferred, I think that was LIBOR plus 185 basis points.

Is that also going to be redeemed? Or are you hanging on to that?.

At this point, we don't tend to hang on to it..

Okay. Okay. And then the branch closures, you're closing that takes you down to 100.

How are you thinking about branch rationalization here in coming quarters and as we look forward to 2023?.

Yes, Laurie. We looked at the branch as part of the whole BEST program. And if you recall, we talked about -- we felt there was potential opportunity for 5% to 8% that we could consolidate, that roughly translated to about 5 to 9 consolidations. We've announced 5.

We continue to look for opportunities, but our team is also looking at opportunities to enhance productivity and kind of find different locations where we could actually get better production. So I think we're coming closer to the finish line on the objective, and we announced 5 and there might be a couple more that might come along.

But then after that, we're going to focus on getting more production and productivity from the centers..

Okay. Great. And then just kind of last question on that.

The onetime charges associated with that, what are those? And what's the geography on the branches are closing?.

So are you talking about the charges to the P&L, Laurie?.

Yes..

Yes. So those are mostly really to securities-related mark-to-mark. We have one holding and then we have some other holdings related to CRA..

No, sorry, the branch closure cost of 5 branches you're closing, are you not taking any onetime charges associated with that?.

At some point, we will, but we don't intend to -- we'll have more details coming in the future quarters..

Okay. Okay. And then obviously, any cost savings there. I'm just looking at your expense guide, which is helpful, but any cost savings from those branch closures? I assume you're plowing those back into the business, we're not going to really see a drop to the bottom line.

Am I thinking about that the right way?.

That's the intent, Laurie, in team with our -- with self-funding our best program..

Okay. Great. And then just sort of one housekeeping.

Your AOCI, do you have an actual as of June 30, in other words, the drag in terms of your tangible comment as of March 30 was $78.2 million, do you have an as of June 30 number there?.

Yes. I think so the mark for the second quarter was $45 million on after-tax basis..

You mean 45 plus the 78.

Is that right?.

Yes. Yes. So -- yes, correct. So at the end of June, I think you're looking at $121 million in cumulative mark..

This concludes our Q&A session. I will now hand over to Mr. Mhatre for final remarks..

Thank you all for joining the call today, and thank you for your interest. Have a good day and be well..

Today's call has now concluded. We'd like to thank you for your participation. You may now disconnect your lines..