Beacon Financial Corp Q4 FY2025 earnings call

• Merger progress: Core systems conversions are scheduled for February 2026, with integration on course and teams preparing through robust plans, testing, and training.
• Financial results: First full quarter combined results showed GAAP earnings of $53.4 million ($0.64 per share) including $14.4 million merger charges; operating earnings excluding merger charges were $89.6 million ($0.79 per share). Net interest margin was 382 basis points, net interest income was $199.7 million.
• Deposit details: Payroll deposits fluctuate significantly, with an average balance range of $800 million to $900 million, and a core portion of ~$500 million considered for funding.
• Credit quality: Allowance for loan losses was solid at ~$253 million, with coverage ratio expected to gradually trend lower as charge-offs may exceed provision.

Beacon Financial Corporation finished the fourth quarter with $23.2 billion in assets, $19.5 billion in deposits, and $18 billion in loans. The net interest margin improved to 3.82% with fourth quarter operating earnings of approximately $66 million or $0.79 per share before merger expenses and special charges. Return on assets was 1.13% and return on tangible equity was 13.43%. Loans declined $275 million in the quarter, with commercial real estate making up $235 million of the decrease. Loan originations and draws were just over $1 billion with a weighted average coupon of 631 basis points, 49% of which were floating rate. Customer deposits grew by $262 million, driven by $127 million of DDA growth. The loan-to-deposit ratio ended the quarter at 92.4%, and the average was 96.8% at year-end. The allowance for loan losses was close to $253 million, with net charge-offs of $9 million for the quarter.

• NIM guidance: Management expects the net interest margin to be in the range of 3.85% to 3.95%.
• Cost savings: Anticipates realizing cost savings in the second quarter of 2026, with expense growth rate projected to be around 3%-3.5% after cost savings are realized.
• Loan growth: Targets mid- to lower single-digit loan growth for 2026, with interest in exploring larger loan opportunities for new and existing customers.

• Commercial real estate risks: Office properties face challenges, with potential continued stress in the commercial real estate market.
• Interest rate risks: Balance sheet is asset-sensitive, and rate movements could impact margins.
• Prepayment risks: Volatility in loan prepayments can affect net interest margin performance.

Q: On new origination yields, how trended quarter-over-quarter?

A: Carl mentions originated a little over $1 billion at 631 basis points on average, with C&I loans at 701 basis points, consumer loans at 549 basis points, and commercial real estate at 607 basis points.

Q: On capital management and credit risk transfer, any thoughts?

A: Carl states credit risk transfer is not currently on the capital management equation but didn't rule it out entirely.

Q: On remaining one-time charges in Q1, what's the range?

A: Mark Meiklejohn says it's in the $10 million to $13 million range.