Sign in

You're signed outSign in or to get full access.

BB

BROOKLINE BANCORP INC (BRKL)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 EPS was $0.25 on net income of $22.0M, up from $0.21 and $19.1M in Q1; operating EPS (non-GAAP) was $0.25 with merger costs minimal this quarter .
  • Net interest margin expanded 10 bps to 3.32%, net interest income rose to $88.7M, and efficiency ratio improved to 61.3%, aided by deposit mix and lower funding costs .
  • Asset quality was stable: NPL ratio held at 0.65%, NPAs ticked down slightly; net charge-offs fell to $5.1M, largely from sale of two CRE loans with $3.5M combined impact .
  • Management guided Q3 NIM up another 4–8 bps and maintained deposit growth (4–5%), low-single-digit loan growth, non-interest income ($5.5–$6.5M), and ~24.25% tax rate; dividend maintained at $0.135/share .
  • Merger with Berkshire Hills progressing; FASB’s expected ASU on day-two CECL could avoid $71M after-tax charge ($0.84/share) and accelerate earn-back; combined dividends expected to align to ~$1.28/share annually post-close, per management discussion .

What Went Well and What Went Wrong

What Went Well

  • NIM expansion and revenue growth: NIM rose to 3.32% (+10 bps q/q) and net interest income climbed to $88.7M; total revenues were ~$94.7M (+3% q/q, +10% y/y), driven by higher asset yields and lower funding costs .
  • Deposit strength and mix: Customer deposits increased $58.3M q/q while brokered deposits fell $8.5M; total deposits up $49.8M q/q and $224.2M y/y, supporting funding cost decline .
  • Cost control: Non-interest expense decreased $1.9M q/q to $58.1M, with reductions in compensation, occupancy, and merger expenses, improving efficiency ratio to 61.34% .
  • Quote: “Our net interest margin expanded again this quarter despite intentional contraction in our commercial real estate portfolio.” — CEO Paul Perrault .
  • Credit charge-offs improved: Net charge-offs fell to $5.1M from $7.6M, and annualized NCO ratio dropped to 0.21% from 0.31% .
  • Merger execution on track: Stockholders approved the MOE; systems conversion targeted for early February; management reported no significant issues identified to date .

What Went Wrong

  • Provision increased: Provision for credit losses rose to $7.0M (from $6.0M), reflecting stress in Boston office and additional specific reserves on two Eastern Funding credits (commercial laundry and grocery) .
  • Equipment finance nonperformers rose: Nonperformers in equipment financing increased, driven by a single fitness equipment credit (~$11M), raising watch on C&I and specialty exposures .
  • Continued CRE runoff and loan contraction: Total loans/leases declined $60.3M q/q (intentional contraction), limiting balance-sheet growth; CRE investment balances decreased materially .
  • Analyst concern: Office exposure (~$647M) with ~$154M in Boston CBD; several credits at 50–70% occupancy; lease-up is slow, requiring patience and reserves .

Financial Results

MetricQ2 2024Q1 2025Q2 2025
EPS (Diluted, $)$0.18 $0.21 $0.25
Net Interest Income ($M)$80.001 $85.830 $88.685
Non-Interest Income ($M)$6.396 $5.660 $5.970
Total Revenues ($M)$86.397 $91.49 $94.7
Net Interest Margin (%)3.00% 3.22% 3.32%
Efficiency Ratio (%)68.50% 65.60% 61.34%
ROA (Annualized, %)0.57% 0.66% 0.77%
Loan Portfolio ($M)Q2 2024Q1 2025Q2 2025
Commercial Real Estate$5,782.1 $5,581.0 $5,485.5
Commercial Loans & Leases$2,443.5 $2,512.9 $2,520.3
Consumer Loans$1,495.5 $1,548.8 $1,576.5
Total Loans & Leases$9,721.1 $9,642.7 $9,582.4
Deposits & Funding ($M)Q2 2024Q1 2025Q2 2025
Total Deposits$8,737.0 $8,911.5 $8,961.2
Brokered Deposits$923.5 $765.0 $756.4
FHLB Advances$1,265.1 $957.8 $934.7
Total Borrowed Funds$1,429.5 $1,155.8 $1,155.1
Asset Quality & CapitalQ2 2024Q1 2025Q2 2025
NPLs / Loans (%)0.62% 0.65% 0.65%
NPAs ($M)$62.683 $64.021 $63.596
Allowance / Loans (%)1.25% 1.29% 1.32%
Net Charge-Offs ($M)$8.387 $7.597 $5.127
Equity / Assets (%)10.30% 10.77% 10.84%
Tangible Book Value/Share ($)$10.53 $11.03 $11.20

Note: Attempt to retrieve Wall Street consensus estimates (EPS, Revenue) via S&P Global failed due to missing mapping for BRKL; estimates comparison unavailable at this time.

Guidance Changes

MetricPeriodPrevious Guidance (Q1 2025)Current Guidance (Q2 2025)Change
Net Interest MarginQ2/Q3 2025+4–8 bps in Q2 +4–8 bps in Q3 Maintained
Loan GrowthFull-year 2025Low single digits Low single digits Maintained
Deposit GrowthFull-year 20254–5% 4–5% Maintained
Non-Interest IncomeQuarterly$5.5–$6.5M $5.5–$6.5M Maintained
Effective Tax RateOngoing~24.25% excl. non-deductible merger charges ~24.25% excl. non-deductible merger charges Maintained
DividendQ2/Q3$0.135/share declared $0.135/share declared Maintained
CECL (Day-Two) ASUTiming/ImpactN/AExpected Q4 issuance; avoids $71M after tax ($0.84/share); early adoption planned New clarity

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 and Q1 2025)Current Period (Q2 2025)Trend
Merger progress/timingApproval process uncertain; aiming H2 2025; cost saves front-loaded; conversion Feb 2026 early guidance Stockholders approved; awaiting Fed; optimistic on Sep close; systems conversion mid-Feb; no major issues Improving visibility
NIM trajectoryGuided +4–8 bps in Q1; margin sensitive to rate path NIM up 10 bps; guided +4–8 bps in Q3; June spot margin 3.39% Positive momentum
CRE exposure & Boston officeTwo office NPLs; general office reserve 2.23%; one CBD loan with ~50% vacancy being resolved Boston office stress persists; credits 50–70% occupied; added reserves; sold 2 CRE loans (combined $3.5M NCO) Managed but cautious
Equipment finance specialty vehicle runoffRunoff ~$2.2M/week; specialty vehicle reserve 2.6%; Q4 grocery-related charge-off Equipment finance nonperformers up on one fitness equipment credit (~$11M); specialty vehicle down to $240M Specific credit pressure
Deposit repricing/betasResponsive to market; funding costs falling; deposit growth Customer deposits +$58.3M; brokered -$8.5M; CDs and FHLB repricing down (large maturities at 410–480 bps) Tailwind to funding costs
Loan origination pricingQ4 originations $492M at 7.34% coupon Q2 originations $445M at 6.94% coupon; portfolio coupon ~5.91–6.01% Strong pricing, competitive market
Expense disciplineManaging to ≤$247M FY ex-merger; Q1 expenses flat q/q outlook Q2 non-interest expense down $1.9M; Q3 run-rate seen flat to down Improving efficiency
Tariffs/macroMonitoring tariff impacts; cautious underwriting; uncertain rate path Macro/rates continue to drive liability repricing benefits; NIM guidance excludes rate cuts Similar caution

Management Commentary

  • “We are pleased to report solid earnings for the second quarter of the year led by growth in our C&I portfolio and deposits… our net interest margin expanded again this quarter despite intentional contraction in our commercial real estate portfolio.” — Paul Perrault, CEO .
  • “Net interest margin improved 10 basis points to 332 basis points… Net interest income increased $2.9 million… Non-interest expense, excluding merger charges, was $57.7 million, a decrease of $1.3 million… We anticipate modest improvements to the net interest margin… currently estimating an increase of 4 to 8 basis points in Q3.” — Carl Carlson, CFO .
  • “Our Boston office portfolio continues to be under stress… we downgraded several credits… added to the reserves… The office portfolio outside of Boston is continuing to perform very well.” — Paul Perrault, CEO .
  • “CDs… about $556 million rolling off at 410 bps… Brokered CDs about $194 million maturing… at 480 bps… FHLB advances about $371 million at 477 bps… still seeing the benefits of those repricing down.” — Carl Carlson, CFO .
  • “FASB… day-two CECL… estimated at $94.5M pre-tax, $71M after-tax ($0.84/share)… early adoption… improves earn-back vs 2.9 years initially.” — Carl Carlson, CFO .

Q&A Highlights

  • Merger timeline and scale: Management awaits Fed approval; optimistic on September close; systems conversion mid-Feb; combined lending capacity could approach ~$90–$100M per well-sponsored relationship, roughly double current levels .
  • Credit specifics: Added ~$1M reserves each on Eastern Funding grocery and commercial laundry credits; equipment finance nonperformers rose due to an ~$11M fitness equipment credit .
  • NIM sensitivity: Q3 NIM guide excludes rate cuts; an initial 25 bp cut likely “fairly flat” for the quarter given timing and both deposits and loans repricing .
  • Spot margin and office exposure: June spot NIM was 3.39%; Boston CBD office exposure ~$154M within a ~$647M office book, with some properties at 50–70% occupancy .
  • MassHousing takeout: One CRE loan (>90 days past due on maturity) is accruing and expected to be taken out by MassHousing; property 100% leased; timing tied to paperwork completion .
  • Expense run-rate: Q3 expenses expected flat to slightly down; continued discipline ahead of merger .
  • Dividend policy post-merger: Expect combined company dividend rate aligned to Brookline’s current (~$1.28/share annually vs Berkshire’s $0.72), subject to board decisions .

Estimates Context

  • S&P Global consensus EPS and revenue for Q2 2025 were unavailable due to missing Capital IQ mapping for BRKL; we attempted to retrieve but could not access values. We will update comparisons when mapping is available.
  • Without consensus, we cannot formally mark a beat/miss; however, operational metrics improved (NIM, NII, efficiency), and EPS rose y/y and q/q .

Key Takeaways for Investors

  • Positive NIM momentum and funding tailwinds: Large CDs, brokered deposits, and FHLB refinancing at lower rates should continue to aid margin; Q3 guide +4–8 bps supports near-term EPS resilience .
  • Credit watch remains targeted: Boston office stress is contained and well-reserved; equipment finance nonperformer spike is idiosyncratic; overall NPAs/NPLs stable and NCOs improved q/q .
  • Cost discipline improving profitability: Sequential decline in non-interest expense and stronger efficiency ratio signal operating leverage into H2 2025 .
  • Merger catalysts: Regulatory approval and FASB ASU timing are potential stock catalysts; day-two CECL relief (~$0.84/share) could lift capital and accelerate earn-back; combined dividend alignment may enhance income appeal .
  • Balance-sheet repositioning: Intentional CRE contraction and specialty vehicle runoff de-risk portfolio while C&I and consumer growth offsets; watch for low-single-digit loan growth to resume as CRE activity gradually picks up .
  • Trading implications (short-term): Monitor Fed rate path; a slower pace of cuts favors NIM tailwinds; estimate visibility limited until S&P mapping resolves.
  • Medium-term thesis: Efficiency gains, deposit mix improvement, and merger synergies underpin ROTCE progression; execution on CRE concentration targets (~300%) and stable credit trends key to rerating .

Additional Documents Reviewed

  • Earnings release scheduling and conference call details (July 7, 2025) .
  • Q1 2025 earnings materials and transcript (trend, guidance baseline) .
  • Q4 2024 earnings materials and transcript (trend, CRE/credit context) .