Berkshire Hills Bancorp's Q1 2024 earnings call presented a picture of steady, if unspectacular, progress. Credit costs are down, the branch network is tightening, and expenses are being managed with an almost monastic zeal. But beneath this calm exterior, a subtle shift in strategy is unfolding, one that other analysts seem to have overlooked: Berkshire Bank is playing the long game, building a foundation for sustained growth through a whisper-quiet focus on deposits and deep relationship building.

This strategy isn't about grabbing headlines with aggressive loan growth or flashy acquisitions. Instead, it's about building a fortress of stable, low-cost funding that will ultimately fuel responsible and profitable expansion. While larger banks have pulled back on lending, creating a potential vacuum for smaller institutions to fill, Berkshire has chosen to tread cautiously. This disciplined approach, combined with strategic hiring focused on deposit generation, speaks volumes about their long-term vision.

The emphasis on deposits is particularly striking. David Rosato, Berkshire's CFO, stated unequivocally that their focus for new hires "is more on the deposit side than the loan side." He went on to highlight the slowing rate of increase in deposit costs, noting that "while deposit costs are going up, the pressure is abating." This suggests a deliberate effort to build a stable deposit base, even if it means sacrificing some short-term loan growth.

The numbers tell a compelling story. Average deposits increased by $42 million in Q1, a modest but meaningful increase in a challenging rate environment. Even more telling is the 3% year-over-year growth in average deposits, demonstrating a steady upward trend. This focus on deposit generation is likely to pay dividends as the Fed eventually pivots to lower rates, putting Berkshire in a strong position to capitalize on renewed loan demand with a low-cost funding base.

The hiring spree, while targeted, is also significant. Nitin Mhatre, Berkshire's CEO, noted that "pipelines for both deposits and loans are up year-over-year on both sides of the balance sheet, partly driven by those hires." These new hires, specializing in professional segments, non-profits, and relationships with CPAs and law firms, are bringing in a "higher value" clientele that Berkshire previously had limited access to. This suggests a deliberate effort to build deeper, more profitable relationships, rather than simply chasing volume.

Deposit Growth Trend

The following chart illustrates Berkshire Bank's deposit growth over recent quarters, highlighting their "whisper strategy" focus.

Berkshire's commitment to this whisper strategy extends beyond balance sheet management. Their recent sale of 10 branches in New York, while seemingly counterintuitive in a growth-focused environment, actually reinforces their commitment to efficiency and profitability. This move allows them to focus resources on their core geography, where they continue to hold a strong market share, while selectively investing in new markets with high growth potential.

The quiet confidence in this strategy is palpable. Mhatre, reflecting on Berkshire's journey since he took the helm in 2021, stated that "we will similarly overcome the current challenges, including deposit growth and expense management." This isn't bravado, but a measured statement rooted in a clear understanding of their strengths and a long-term vision.

"If Berkshire can maintain its 3% year-over-year deposit growth rate, average deposits could reach approximately $10.9 billion by year-end 2024. Assuming a conservative average loan-to-deposit ratio of 80%, this could translate into potential loan growth of over $700 million, significantly exceeding their 5%-7% guidance. This, however, is predicated on maintaining deposit growth momentum. The question is, can Berkshire continue to attract deposits in a competitive environment where rates are expected to remain elevated for the foreseeable future? Their whisper strategy, focusing on building deep relationships and providing exceptional client service, offers a compelling alternative to simply chasing rates."

"Did you know that Berkshire Bank's commitment to community extends beyond traditional banking? They are a major sponsor of the "Lift Up Your Skirt and Run" 5k, an annual event that raises money for women's health initiatives. This event, known for its playful name and serious purpose, perfectly encapsulates Berkshire's approach: grounded in community, driven by purpose, and not afraid to have a little fun along the way."

Berkshire Bank's whisper strategy may not be generating headlines, but it's laying the groundwork for a future of sustained, profitable growth. Their disciplined approach, combined with a focus on deposit generation and deep relationship building, positions them to weather the current storm and emerge stronger, ready to capitalize on the opportunities that lie ahead. While others may be shouting about short-term gains, Berkshire Bank is quietly whispering its way to success.