Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Brookline Bancorp Inc (BRKL, Financial) reported net income of $16.4 million for the quarter, or $0.18 per share.
- Total assets grew by $92 million, driven by loan growth of $66 million across all loan categories.
- Operating expenses were reduced by $2.6 million from Q1, primarily due to lower compensation benefits and weather-related occupancy growth.
- The company maintained its quarterly dividend at $0.135 per share, yielding an annualized payout of approximately 5.1%.
- Brookline Bancorp Inc (BRKL) expects loan growth of 2% to 5% across all segments and deposit growth of 4% to 5%.
Negative Points
- Net interest margin declined by 6 basis points to 300 basis points.
- The company exited its specialty vehicle finance business, incurring a restructuring charge of $823,000 and reducing staff by 21.
- Non-accrual loans increased by $20 million, driven by two large commercial loans going non-accrual.
- Total funding costs increased by 7 basis points in the quarter to 365 basis points.
- Net charge-offs were $8.4 million, driven by a $3.8 million charge on an office building and $4.6 million in C&I charge-offs.
Q & A Highlights
Q: Carl, could you just repeat your guidance on expenses? I missed that. I apologize.
A: Sure. We still expect to be in the $240 million or less for the full year.
Q: And you said the benefit from an expense standpoint of just getting out of the specialty finance business was how much?
A: About $800,000 per quarter.
Q: I know it's been challenging recently from a credit perspective on the specialty vehicle business. But I guess I'm curious longer term, what were some of the other major dynamics of why you're exiting this business?
A: Expense in origination costs, small ticket relative to other kinds of loans that we can do. The collection effort is very big and difficult and you're just dealing with a lot of little pieces that make it unprofitable and you can't get rate in that gig anymore. It was good while it lasted. It's something we got into about 10 years ago and we were sticking with mostly larger operators for a while. But as time went on, we see that it ended up with more Q1 or Q2 kind of people and it's just very hard to make money at that.
Q: Could you provide any color on those two large loans that caused the uptick in non-performers this quarter?
A: Sure. One's a banker have client long-term client that just was restructured. And so there's a deferred. Deferred payments for two quarters. So we just automatically put that on non-accrual and that will go back on accrual status after they paid for two quarters in a row. So we do expect that to happen by the end of this year, early next year. The other is a large industrial laundry, basically (inaudible). The laundry companies -- industrial laundry. That's staying in the process. They worked out too long.
Q: How would you say asset quality in general is stacking up amongst your three different banks?
A: I would probably say that [Putnam] is the cleanest at this point, then the (inaudible) and Boston are probably neck and neck. We've had a few quarters of a little bit bumpy for us in the asset quality area. I'm optimistic that we've kind of gotten through the worst of it. We've dealt with it and I'm very hopeful that we'll go back to our normal kind of numbers.
Q: There seems to be a little bit more M&A chatter going on. Obviously, you're one of the few banks who did an acquisition as rates started to go up, can you just share with us your take on how you are thinking about M&A? How you see sort of the pulse on M&A? Any chatter, any directional thoughts?
A: Well, I think you said it right. I mean, a little bit more talk, but very little. It's still a very difficult environment with the marks on everything. The difficulties of raising capital and having it all work. I think we're closer to getting to more normal M&A activity, but we're not quite there yet. And I'm not aware that there's all that much around us anyway.
Q: Just hoping to start off on some of the margin dynamics going forward. It seems like the deposit mix shifts turned around and slowed this quarter. Are you guys still seeing pressure there at all? Do you expect a little bit slower pace in the back half of the year?
A: Yes. So, we're not seeing the movement between products that we've seen in the past, that people are moving a lot of money out of one product or a lower interest bearing product into a higher interest rate product. Any growth in deposits is basically coming behind your interest, as you attract new customers. We are starting to see more activity on the DDA side, particularly on the commercial side and the cash management side, which always a bit good to see. And you don't have the outflows that you were seeing earlier, so you start to see some growth there.
Q: Have you guys been able to test the waters at all, with any reductions in any of the products on the deposit side at all year-to-date?
A: Yes, we have. So we have moved rates on the top tier offerings that we might have in money markets and so it's savings I know savings accounts. The number of quarter is somewhere 10 basis points. Yes. That's a fairly decent problem.
Q: If the pace of growth does kind of continue to be relatively tepid, is there a point where capital ratios get high enough where you'd be interested in buying back shares?
A: So, we continually look at. So we have to build that with capital. I think that's something that's important.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
