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Brookline Bancorp(BRKL) - 2024 Q2 - Earnings Call Transcript
BRKLBrookline Bancorp(BRKL)2024-07-25 20:58
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Financial Data and Key Metrics Changes - The company reported net income of 16.4million,or16.4 million, or 0.18 per share, for the quarter, with operating earnings of 17millionandoperatingEPSof17 million and operating EPS of 0.19 per share, excluding restructuring charges [10][11] - Total assets grew by 92million,drivenbyloangrowthof92 million, driven by loan growth of 66 million across all categories [11] - Net interest income decreased by 1.6millionto1.6 million to 80 million, with total average interest-earning assets remaining flat at 10.7billion[7][11]−Thenetinterestmargindeclinedby6basispointsto300basispoints,whiletotalfundingcostsincreasedby7basispointsto365basispoints[7][11]BusinessLineDataandKeyMetricsChanges−Thecompanyexitedthespecialtyvehiclefinancebusiness,whichhadaportfolioof10.7 billion [7][11] - The net interest margin declined by 6 basis points to 300 basis points, while total funding costs increased by 7 basis points to 365 basis points [7][11] Business Line Data and Key Metrics Changes - The company exited the specialty vehicle finance business, which had a portfolio of 350 million, and recognized a restructuring charge of 823,000[4][10][6]−Non−interestincomewas823,000 [4][10][6] - Non-interest income was 6.4 million, remaining flat compared to the previous quarter, with lower fees on derivative income offset by higher participation fees [13] - Provision for credit losses was 5.6million,adecreaseof5.6 million, a decrease of 1.8 million from the first quarter, with net charge-offs of 8.4millionprimarilyrelatedtoequipmentfinancing[14]MarketDataandKeyMetricsChanges−Customerdepositsincreasedby8.4 million primarily related to equipment financing [14] Market Data and Key Metrics Changes - Customer deposits increased by 66 million, while broker deposits rose to 48million,withgrowthfocusedonhigher−ratesavingstimedeposits[7]−Non−accrualloansincreasedby48 million, with growth focused on higher-rate savings time deposits [7] - Non-accrual loans increased by 20 million year-over-year, with a notable increase in commercial and industrial (C&I) loans [15] - The company anticipates loan growth of 2% to 5% across all segments, with deposit growth projected at 4% to 5% [16][17] Company Strategy and Development Direction - The company aims to reduce reliance on wholesale funding and expects to see more lending activity as rates potentially reverse [56] - The exit from the specialty vehicle finance business is part of a strategy to focus on more profitable loan types, as the specialty vehicle segment became unprofitable due to high origination and collection costs [4][28] - The company plans to manage operating expenses to remain at 240millionorlessforthefullyear,benefitingfromtheexitofthespecialtyvehiclebusiness[18][25]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementnotedthatwhileloandemandisnotrobust,itisbetterthanpreviouslyanticipated,andtheyexpecttoseeimprovementsinloangrowthandmargins[16][17]−Themanagementexpressedoptimismaboutassetqualitystabilizingandindicatedthattheyhavedealtwithrecentcreditchallenges[37]−ThecompanyiscloselymonitoringtheimpactofFederalReserveratechangesontheirmarginsandexpectstobenefitfromresponsiveliabilitymanagement[57]OtherImportantInformation−Thecompanymaintaineditsquarterlydividendat240 million or less for the full year, benefiting from the exit of the specialty vehicle business [18][25] Management's Comments on Operating Environment and Future Outlook - Management noted that while loan demand is not robust, it is better than previously anticipated, and they expect to see improvements in loan growth and margins [16][17] - The management expressed optimism about asset quality stabilizing and indicated that they have dealt with recent credit challenges [37] - The company is closely monitoring the impact of Federal Reserve rate changes on their margins and expects to benefit from responsive liability management [57] Other Important Information - The company maintained its quarterly dividend at 0.135 per share, with an annualized yield of approximately 5.1% [19][20] - The effective tax rate is expected to be around 24.5% for the remainder of the year [18] Q&A Session Summary Question: Guidance on expenses - The company expects to keep expenses at 240millionorlessforthefullyear[25]Question:Benefitfromexitingthespecialtyfinancebusiness−Theexitisexpectedtoreduceexpensesbyabout240 million or less for the full year [25] Question: Benefit from exiting the specialty finance business - The exit is expected to reduce expenses by about 800,000 per quarter [26] Question: Dynamics behind exiting the specialty vehicle business - The decision was driven by high origination costs and challenges in profitability due to increased competition and collection difficulties [27][28] Question: Details on large loans causing nonperformers - One loan was a restructured C&I credit, and the other was related to an industrial laundry business [30][33] Question: Asset quality comparison among different banks - Management indicated that Putnam is currently the cleanest in terms of asset quality, with Rhode Island and Boston banks being comparable [36] Question: Thoughts on M&A activity - There is increased chatter about M&A, but the environment remains challenging due to capital raising difficulties [71]