Beacon Financial (NYSE:BBT) reported first-quarter financial results on Thursday. The transcript from the company’s first-quarter earnings call has been provided below.
This content is powered by Benzinga APIs. For comprehensive financial data and transcripts, visit https://www.benzinga.com/apis/.
The full earnings call is available at https://events.q4inc.com/attendee/947331842
Summary
Beacon Financial completed a significant core systems conversion in Q1, enhancing client retention despite financial performance falling short of expectations.
GAAP earnings were $0.55 per share, with operating earnings at $0.70 per share, reflecting a challenging environment with balance sheet contraction and margin pressure.
The company plans to focus on executing strategic priorities, stabilizing the balance sheet, and achieving growth as merger-related charges and system conversions are complete.
Operating return on assets was 1.01%, and operating return on tangible common equity was 11.24%, with disciplined expense management and core profitability despite revenue declines.
The board approved a quarterly dividend of 32.25 cents per share and authorized a $50 million stock repurchase program, pending regulatory approval.
Credit metrics showed slight deterioration, with non-performing loans rising to 83 basis points of total loans, but reserves remain robust at 1.36% of loans.
Loan growth is expected to be soft in Q2 but should strengthen later in the year, with the margin stabilizing around 3.80% and gradually improving.
Management is confident in closing the performance gap as uncertainties like interest rates and legislative factors are resolved.
Full Transcript
Tina (Conference Operator)
Thank you for standing by. My name is Tina and I will be your conference operator today. At this time I would like to welcome everyone to the Beacon Financial Report Corporation first quarter 2026 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. To ask a question, simply press star one on your telephone keypad. To withdraw your question, press star one again. It is now my pleasure to turn the call over to Dario Hernandez, Corporate Counsel. You may begin.
Dario Hernandez (Corporate Counsel)
Thank you Tina and good afternoon everyone. Yesterday we issued our earnings release and presentation which is available on the investor relations page of our website beaconfinancialcorporation.com and has been filed with the SEC. This afternoon’s call will be hosted by Paul Peralt and Carl Carlson. During the question and answer session they will also be joined by Mark Miklejohn, the Chief Credit Officer. This call may contain forward looking statements with respect to the financial condition results of operations and business of Beacon Financial Corporation. Please refer to page two of our earnings presentation for our forward looking statement disclosure. Also, please refer to our other filings with the Securities and Exchange Commission 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 or future predictions. For a comparison and reconciliation to GAAP earnings, please see our earnings release at this time. I’m pleased to introduce Beacon Financial’s President and Chief Executive Officer Paul Peralt.
Paul Peralt (President and Chief Executive Officer)
Thanks Dario and good afternoon everyone and thank you for joining us for our first quarter earnings call. I’m pleased to share that we achieved a major milestone in our integration process in the first quarter with the successful completion of a core systems conversion in mid February. I would like to recognize the hard work and dedication of our teams in executing on this very critical step and just as importantly, their efforts to achieve strong client retention throughout that process. That outcome reflects months of preparation, disciplined execution and a continued focus on serving clients during a period of significant change. From a financial perspective, I am very disappointed with our first quarter results. Loan growth and the margin fell far short of our expectations and reflects some near term pressures, uncertainty in the economic environment and the tail end of merger-related activity. GAAP earnings for the first quarter were $0.55 per share and operating earnings were $0.70 per share excluding merger related charges. While operating results were below both of our prior quarter and our expectations. The core returns remained good with operating ROA just over 1% and operating return on tangible common equity of 11 and a quarter percent. As we discussed coming out of the fourth quarter, the operating environment during the first quarter remained quite challenging. Balance sheet contraction, margin pressure from declining rates and lower fee income all weighed on our results. Importantly, several of these headwinds are not structural in nature. They were influenced by seasonal dynamics, timing and the uncertainty created in economic environment from persistent inflation, extremely thin pricing, global events and the prospect of rent control legislation in our major markets. Collectively, these headwinds impacted loan volumes. While the pipelines remain strong, clients are cautious yet optimistic as the economic environment remains quite fluid. Excuse me. On the positive side, we continue to make progress on the strategic priorities we laid out at the time of the merger. Expense discipline remains strong. Core funding costs improved sequentially. Capital levels are robust with CET1 at 11% and tangible common equity at just over 9%. And while credit metrics moved modestly higher during the quarter, they remain manageable and well reserved, reflecting proactive credit management in a still uncertain environment. Now that the systems conversion is behind us and merger charges are largely complete, our focus shifts squarely to execution, stabilizing the balance sheet, restoring growth momentum and fully capturing the revenue and efficiency benefits we outlined when we announced the merger. We believe the pieces are now in place to close the gap between current performance and our planned Runway as we move through the remainder of the year. Before I turn it over to Carl, I’ll note that our board approved a quarterly dividend of 32.25 cents per share, consistent with our commitment to returning capital to stockholders. In addition, the board authorized a $50 million stock repurchase program subject to regulatory approval, reflecting our confidence in the franchise, our capital strength and long term value creation opportunity that we see ahead. I will now turn it over to Carl to walk us through the financial results in some more detail. Carl?
Carl Carlson
Thank you Paul. I’ll begin with the high level summary of the quarter and then walk through the income statement, balance sheet and credit trends in more detail. First quarter operating results declined sequentially driven primarily by balance sheet contraction, modest net interest margin pressure tied to the rate environment and lower non interest income. GAAP earnings totaled $46.2 million or $0.55 per share. Operating earnings were 58.4 million or $0.70 per share, which excludes $13 million of one time pre tax merger related charges. Operating return metrics remained healthy. Operating ROA was 1.01% and operating return on tangible common equity was 11.24%, reflecting continued expense discipline and solid core profitability even with lower revenues. Turning to the income statement in more detail, managed income was $190.8 million, down 8.9 million or 4% from the fourth quarter. This decline was driven by lower average earning assets and a modest reduction in asset yields. As rates moved lower in late 2024, the net interest margin declined by 4 basis points to 3.78%. Importantly, funding costs improved sequentially. Interest bearing deposit costs declined 17 basis points and we expect continued improvement as pricing actions taken continue to flow through as balance sheet growth resumes. We believe this positions the margin more favorably. Looking ahead, non interest income totaled 23.9 million, down 2 million or 8% from the prior quarter. The decline was primarily driven by lower deposit fees and reduced gains on loan sales as SBA activity moderated from a very strong fourth quarter. These declines were partially offset by higher mark to market income on derivatives, tax credit, investment income and relatively stable wealth management fees. On the expense side, operating costs remained well controlled. Total managed expense was essentially flat compared to the fourth quarter came in nearly 1 million below budget. This performance reflects disciplined cost management and continued execution against merger synergies, offset modestly by seasonal increases in occupancy costs and a true up in FDIC insurance. Excluding merger charges, the operating efficiency ratio for the quarter was 59.5%, underscoring the underlying expense discipline in the business. Now turning to the balance sheet, total assets declined $992 million to $22.2 billion, driven primarily by lower cash balances associated with point in time payroll fulfillment deposits. Loans declined approximately 1%, reflecting continued runoff in the commercial real estate and consumer portfolios, partially offset by growth in core commercial lending. Loan originations and draws were 734 million, with a weighted average coupon of 628 basis points. 67% of originations were floating rate deposits declined 6%, driven largely by payroll deposits and brokered balances. Excluding payroll and brokered deposits. Core customer deposits declined approximately 2%, reflecting typical seasonal outflows related to tax payments and commercial activity. Turning to credit Credit metrics deteriorated modestly during the quarter. Non Performing loans increased to 83 basis points of total loans, driven primarily by migration of Boston office exposure and several rent controlled multifamily properties in New York City. Net charge offs total 13.6 million or 30 basis points annualized, reflecting resolutions of a small number of larger credits. The allowance for loan losses closed the quarter at 244 million, representing 1.36% of loans. Given portfolio composition and current risk trends, we believe reserve coverage remains appropriate. Provision expense declined modestly from the prior quarter and we continue to expect provisioning to be less than that. Charge offs as we work through existing criticized credits. Capital generation remains a clear strength. CET1 ended the quarter at 11%, tangible common equity at 9.1% and tangible book value increased $0.16 to $23.48 per share. Importantly, with the core systems conversions completed in early February, we have now recognized the final significant merger charges. Total merger costs were in line with expectations and management is confident the announced cost synergies of the merger have been realized. Looking ahead, we anticipate improving earnings momentum now that the merger costs and system conversions are completed and announced expense synergies have been realized. We expect loan growth to remain soft in the second quarter, then strengthen throughout the remainder of the year. We expect the margin to stabilize around 380 basis points and gradually improve. While near term, macro and rate uncertainties remain. We believe the franchise is well positioned to improve performance and close the gap to our targeted run rate over the coming quarters. That concludes my prepared remarks. Back to you, Paul. Thank you, Carl.
Paul Peralt (President and Chief Executive Officer)
We will now be joined by Mark Meljohn and Michael McCurdy and we’ll open it up for questions.
Tina (Conference Operator)
As a reminder to ask a question, simply press Star one on your telephone keypad. And our first question comes from the line of Justin Crawley with Piper Sandler. Please go ahead.
Justin Crawley (Equity Analyst)
Hey, good afternoon everyone.
Paul Peralt (President and Chief Executive Officer)
Hi Justin.
Justin Crawley (Equity Analyst)
Just wanted to start out on the margin in the outlook there. Can you just, Carl, maybe provide a little more detail on the reset on accretion expectations? Just what changed from the original assumptions that went into that and what got you from 15 down to that $12 million number just on a go forward basis?
Carl Carlson
Sure. Thanks for the question. So when we first estimated the purchase accounting, we tried to take out the impact of prepayments and things of that nature and we’re estimating at around 15 million. A lot of the schedules suggested that we’ve got these, these all set up in our systems to track as loans pay down and it’s coming in a little bit lower and we’re not seeing any kind of prepayment activity at this point that that’s meaningful to the amounts. And so we’re it’s coming in for this quarter came in at 12.1. I believe it was over 13 million last quarter. And so I’m feeling more confident that the $12 million range is something now that the System conversions have been taking place. We’re all on the. We had two general ledger conversions, and all the systems conversions onto a new system. I feel more confident that this will be the number going forward.
Justin Crawley (Equity Analyst)
Okay, understood. And just I guess some of the moving pieces there, you know if I look at the average balance sheet and just loan yields what they did for the quarter that 596 was down over 30 basis points and you pointed it out but you know without a huge huge swing in accretion income, you know and …
This post was originally published here
