Earnings call transcript: Brookline Bancorp Q4 2024 misses EPS forecast
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed outlook. Positive aspects include improved net income and operating earnings per share, along with deposit growth and stable dividends. However, concerns arise from charge-offs, particularly in the industrial laundry sector, and management's lack of clarity on regulatory timelines. The Q&A revealed uncertainties regarding deposit rates and margin expansion. While financial performance shows some strength, the lack of guidance and potential risks in loan segments balance the sentiment, leading to a neutral prediction for the stock price movement over the next two weeks.
Key Financial Performance
Net Income $20,700,000 (up from $17,500,000), an increase due to improved core operating performance.
Operating Earnings per Share $0.23 (up from $0.20), reflecting the increase in net income.
Loans Growth $24,000,000 (modest growth), driven by strong C&I growth of $84,000,000.
Customer Deposits Growth $116,000,000 (up from $117,000,000), indicating continued deposit growth.
Net Interest Margin 312 basis points (up 5 basis points), due to improved market rates.
Net Interest Income $85,000,000 (up $2,000,000 from Q3), resulting from growth in average interest-earning assets.
Non-Interest Income $6,500,000 (up from $6,300,000), due to stronger loan level derivative income.
Operating Expenses $60,300,000 (up from $57,900,000), primarily due to additional incentive and commission-related expenses.
Provision for Credit Losses $4,000,000 (down $700,000 from Q3), indicating improved credit quality.
Dividend per Share $0.135, maintaining the quarterly dividend.
Effective Tax Rate 24.25%, expected to remain stable.
Charge Offs $7,300,000, including a $5,100,000 charge off related to a grocery loan.
General Reserve 2.23%, indicating a healthy reserve level.
Specialty Vehicle Charge Offs $1,100,000, with the specialty vehicle book at $296,000,000.
Loan Yield 5.92%, reflecting a decline of 11 basis points during the quarter.
Origination Yield 734 basis points, indicating strong loan origination performance.
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Operating Highlights
Merger Announcement: Brookline Bancorp announced a planned merger with Berkshire Hills Bancorp to create a $24 billion financial institution, enhancing market presence in New England with minimal branch overlap.
Net Income: Net income for Q4 was $20.7 million, with GAAP net income at $17.5 million after merger charges of $3.4 million.
Loan Growth: Loans grew by $24 million, with total loans originated in Q4 amounting to $492 million.
Deposit Growth: Customer deposits increased by $116 million, with broker deposits rising by $53 million.
Net Interest Margin: Net interest margin improved by 5 basis points to 3.12% for the quarter.
Operating Expenses: Operating expenses rose to $60.3 million, primarily due to increased incentive and commission expenses.
Future Projections: The company anticipates low single-digit loan growth for 2025 and a 4-5% growth in deposits.
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Risk or Challenges
Regulatory Approval Timeline: The timeline for regulatory approvals regarding the merger with Berkshire Hills Bancorp is uncertain, with potential delays due to the requirement to use year-end numbers for filings.
Interest Rate Environment: The interest rate environment remains volatile, impacting net interest margins and client behavior. Future actions by the Federal Reserve could significantly affect margins.
Loan Growth Challenges: Loan growth is anticipated to be in the low single digits for 2025, with a planned reduction in commercial real estate loans and a cautious approach to new lending.
Charge-offs: A charge-off of $5,100,000 was recorded due to a customer in the industrial laundry sector, indicating potential risks in specific loan segments.
Commercial Real Estate Concentration: The company is actively managing its commercial real estate concentration, which may impact future lending strategies and overall portfolio health.
Deposit Migration: There is a risk of continued migration of lower-cost deposits, which could affect funding costs and net interest margins.
Economic Factors: Economic conditions and market responses are unpredictable, which may influence the company's financial performance and strategic decisions.
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Guidance & Outlook
Merger with Berkshire Hills Bancorp: Announced planned merger to create a $24 billion financial institution with complementary market footprints and significant economies of scale.
Cost Savings and Profitability: The merger is expected to generate cost savings and enhance profitability metrics for the combined company.
Management Team Collaboration: Experienced management team is collaborating on planning and execution of the merger.
Net Interest Margin: Expected to improve by 4 to 8 basis points in Q1 2025 and continue to improve throughout the year.
Loan Portfolio Growth: Anticipated growth in the loan portfolio to be in the low single digits for 2025.
Deposit Growth: Projected deposit growth of 4% to 5%.
Non-Interest Income: Projected to be in the range of $6 million to $7 million per quarter.
Operating Expenses: Managing expenses to $247 million or less for the full year, excluding merger-related costs.
Effective Tax Rate: Expected to be in the range of 24.25%.
Quarterly Dividend: Quarterly dividend maintained at $0.135 per share, yielding approximately 4.5% annually.
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Shareholder Return Plan
Quarterly Dividend: The Board approved maintaining the quarterly dividend at $0.135 per share, to be paid on February 28 to stockholders of record on February 14.
Annualized Dividend Yield: The annualized dividend payout approximates a yield of 4.5%.
Share Repurchase Program: None
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Key Q&A
Q:Have you been able to triangulate with the regulators on the timeline for getting approvals on the merger with Berkshire Hills?
A:We certainly had contact with them, but I can't tell you that we have a read yet on how that is going to happen. Part of the sort of front end delay here, I think, has to do with the fact that we are advised that the regulators are going to expect we use year end numbers for the filings.
Q:Can you share any color on the equipment finance loan that resulted in the $5,100,000 charge off in the quarter? Was that in the specialty vehicle sector?
A:No, it wasn't a laundry. We had a customer with some large industrial laundry mats. We've been talking about this for a little while now. It was specifically reserved for, so that was the charge off in the quarter.
Q:Why haven't you taken deposit rates down faster, given that many of your peers have? Is that simply a function of trying to hold the loan to deposit ratio?
A:I can't think of anything at work. I mean, it's hard for me to evaluate just based on your review of that. But I think our deposit price setters have been reasonably aggressive, but we are careful that we want to hold the funding.
Q:How do you expect the margin to expand in the upcoming quarter?
A:I'm not giving guidance on the course of the year at this time. It's been just too volatile out there depending on what the Fed is going to do and the timing of changes.
Q:What is the total reserve on your office book?
A:The general reserve is 2.23%.
Q:What is the vacancy rate on the classified office property?
A:50%.
Q:What is the reserve that you have on the specialty vehicle book?
A:On the specialty vehicle, it's 2.6%.
Q:What is the impact of the adjustments in the weightings on the overall reserve level?
A:I think that just happens over time. The Moody's scenarios have been changing.
Q:Review of Unclear Management Responses
A:Management appeared to avoid giving a direct answer regarding the timeline for regulatory approvals on the merger with Berkshire Hills, stating they do not have a read yet on how that is going to happen. Additionally, there was a lack of clarity on the specifics of the reserve for the classified loan, with management stating they do not have the specifics available.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Bancorp CFO
Bancorp Sure
Bancorp afternoon
Bancorp loan
Bancorp reserve
Bancorp run
Bancorp type
Berkshire Hills
CEO Brookline
CFO Brookline
CRE concentration
Fed timing
accretion
approval
baseline scenario
charge specialty
couple
course
day
deposit beta
end
expansion
improvement
laundry
loan CFO
loan yield
merger
pace
point loan
price
regard
reserve office
reversal
run rate
specialty vehicle
tax
weighting
yield curve
BRKL Transcript
Brookline Bancorp, Inc. (BRKL) Q2 2025 Earnings Call Transcript
Unknown7-24
The earnings call summary presents mixed signals. Positive aspects include improved net interest margin, increased net interest income, and a decrease in noninterest expenses. However, concerns arise from increased provisions for credit losses and a rise in C&I nonperformers. The Q&A section reveals uncertainties about merger approval and deteriorated loans. While the dividend increase is positive, the lack of specific guidance on loan resolutions and merger timing tempers optimism. Overall, these factors balance out, suggesting a neutral sentiment for the stock price in the short term.
Earnings call transcript: Brookline Bancorp Q1 2025 shows strategic progress despite earnings miss
Unknown4-24
The earnings call reveals mixed signals: while the merger with Berkshire Hills Bancorp promises cost savings and improved profitability, concerns like tariff implications, significant charge-offs, and uncertain interest rate impacts present risks. The Q&A highlights management's cautious outlook on tariffs and loan pricing, with unclear responses on key issues. Stable dividends and slight improvements in net interest margin are positive, but the lack of strong growth metrics and potential future expenses from the merger balance the sentiment. Overall, the stock is likely to remain neutral over the next two weeks.
Brookline Bancorp, Inc. (BRKL) Q1 2025 Earnings Call Transcript
Unknown4-24
The earnings call presents a mixed picture: while there are positives like improved net interest margin and maintained dividends, concerns arise from increased credit losses, merger expenses, and uncertainties in interest rates and tariffs. The Q&A reveals cautious optimism but lacks clarity on some critical issues. The merger with Berkshire Hills Bancorp offers potential benefits, yet the absence of a share buyback program and vague management responses temper enthusiasm. Considering these factors, along with the stable dividend, the stock price is likely to remain neutral in the short term.
Earnings call transcript: Brookline Bancorp Q4 2024 misses EPS forecast
Unknown2-1
The earnings call presents a mixed outlook. Positive aspects include improved net income and operating earnings per share, along with deposit growth and stable dividends. However, concerns arise from charge-offs, particularly in the industrial laundry sector, and management's lack of clarity on regulatory timelines. The Q&A revealed uncertainties regarding deposit rates and margin expansion. While financial performance shows some strength, the lack of guidance and potential risks in loan segments balance the sentiment, leading to a neutral prediction for the stock price movement over the next two weeks.
BRKL Report
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