Brookline Bancorp (BRKL) Q2 Earnings call transcript Jul 25, 2024

In the recent earnings call of Brookline Bancorp Inc., executives shared insights into the company's performance for the second quarter of 2024. The call, hosted by Paul Perrault and Carl Carlson, highlighted several key themes and trends that are important for investors and analysts to consider.

Loan and Deposit Growth

Brookline Bancorp reported a solid quarter of loan and deposit growth across all three of its banks. While the net interest margin declined slightly, management expressed optimism that it is nearing the bottom. The company decided to exit its specialty vehicle finance business, which primarily deals with tow trucks, due to the pressure on spreads and rising costs, particularly collection costs. This decision will lead to a slight headwind in the overall growth of the equipment finance portfolio.

Asset Quality and Non-Performing Loans

Asset quality has been a concern for the company in recent quarters, with non-performing loans increasing. The company reported a significant increase in non-performing loans in the second quarter, largely due to two large commercial loans that went non-accrual. These loans are expected to return to accrual status by the end of this year or early next year. The company also had to write off $8.4 million in equipment financing charge-offs, mostly related to the specialty vehicle portfolio.

Expenses and Operating Efficiency

Brookline Bancorp reported operating expenses of $58.4 million for the quarter, down from $61 million in Q1. This decrease was primarily due to lower compensation benefits and weather-related occupancy growth. The company also reported a restructuring charge of $823,000 related to the exit of the specialty vehicle finance business. Excluding this charge, operating earnings were $17 million, or $0.19 per share.

Outlook and Strategic Priorities

Management expressed cautious optimism about loan growth, projecting a modest increase of 2% to 5% across all segments. They anticipate deposit growth of 4% to 5% and maintain a stable cash and securities portfolio. The company is also focused on managing operating expenses of $240 million or less for the full year.

Credit Quality and Market Conditions

Credit quality remains a concern for the company, with non-performing loans increasing to 54 basis points. Management noted that they have seen a few challenging credit situations, but they do not see any widespread trends of industry-wide trouble.

M&A and Market Conditions

Paul Perrault shared his thoughts on the current M&A market, noting that there is still a difficult environment for M&A activity due to market conditions and difficulties in raising capital. He expressed optimism that the market is getting closer to returning to more normal M&A activity but cautioned that there is still a way to go.

Conclusion

In summary, Brookline Bancorp's Q2 2024 earnings call provided valuable insights into the company's performance and strategic priorities. While the company reported solid loan and deposit growth, there are concerns about asset quality and non-performing loans. Management's decision to exit the specialty vehicle finance business and focus on core loan categories is a strategic move to improve profitability. The company's outlook for loan and deposit growth, along with its focus on managing expenses, positions it well for the future. However, the credit quality concerns and challenges in the M&A market are factors that investors and analysts will be watching closely in the coming quarters.