Brookline Bancorp(US:BRKL)2024-07-25 20:58Financial Data and Key Metrics Changes - The company reported net income of $16.4 million, or $0.18 per share, for the quarter, with operating earnings of $17 million and operating EPS of $0.19 per share, excluding restructuring charges [10][11] - Total assets grew by $92 million, driven by loan growth of $66 million across all categories [11] - Net interest income decreased by $1.6 million to $80 million, with total average interest-earning assets remaining flat at $10.7 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-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 $5.6 million, a decrease of $1.8 million from the first quarter, with net charge-offs of $8.4 million primarily related to equipment financing [14] Market Data and Key Metrics Changes - Customer deposits increased by $66 million, while broker deposits rose to $48 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 $240 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 $240 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]