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BROOKLINE BANCORP INC (BRKL)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 2024 delivered sequential improvement: EPS $0.23 on net income of $20.1M; net interest income rose to $83.0M and net interest margin expanded 7 bps to 3.07% versus Q2 2024 .
  • Deposit mix improved materially: customer deposits +$103.2M with brokered deposits −$107.9M; demand checking +$43.5M, supporting lower funding costs and NIM expansion through 2025 per management .
  • Credit costs moderated: net charge-offs fell to $3.8M (0.16% annualized) and provision declined to $4.8M; NPAs/Assets rose to 0.62% driven by one Eastern Funding relationship reserved at ~55% .
  • Outlook/guidance catalysts: Q4 NIM guided to 312–320 bps, noninterest income $6–7M/quarter, deposit growth 4–5%, OpEx growth 3.0–3.5% in 2025, and dividend maintained at $0.135; management signaled potential future buyback discussion as the curve normalizes .

What Went Well and What Went Wrong

What Went Well

  • Margin and NII inflected higher: “Performance improved in the quarter … margin increased 7 basis points … expect … NIM continue to improve right through 2025” (CEO) ; net interest income rose $3.0M q/q to $83.0M and NIM to 3.07% .
  • Deposit quality/mix improved: customer deposits +$103.2M; demand deposits +$43.5M; brokered −$107.9M, positioning liabilities to reprice down after the Fed’s 50 bp cut in September .
  • Operating discipline: operating expenses declined to $57.9M (ex-Q2 $0.8M restructuring, OpEx down ~$0.5M q/q); pretax, pre-provision income up $4.2M q/q to $31.4M .

What Went Wrong

  • Nonperformers rose: NPAs/Assets increased to 0.62% and nonaccruals to $71.2M, driven by one equipment financing relationship (~$9.3M reserved at ~55%) .
  • Equipment finance and specialty vehicles remained a drag: $3.8M net charge-offs, ~$2.1M from the discontinued specialty vehicle portfolio; equipment financing NPLs reached $37.2M .
  • Office CRE remains an area to watch: one office nonaccrual of ~$10.8M with ~$2M specific reserves; criticized/classified ~$9.2M, albeit overall office portfolio remains largely pass-rated .

Financial Results

MetricQ3 2023Q2 2024Q3 2024
EPS (Diluted, $)$0.26 $0.18 $0.23
Total Revenue ($USD Millions)$89.6 $86.4 $89.3
Net Interest Income ($USD Millions)$84.070 $80.001 $83.008
Non-interest Income ($USD Millions)$5.508 $6.396 $6.348
Net Interest Margin (%)3.18% 3.00% 3.07%
Efficiency Ratio (%)64.39% 68.50% 64.85%
Provision for Credit Losses ($USD Millions)$2.947 $5.607 $4.832
Net Loan & Lease Charge-offs ($USD Millions)$10.974 $8.387 $3.808
ROA (Annualized, %)0.81% 0.57% 0.70%
ROE (Annualized, %)7.78% 5.49% 6.63%
Dividend per Share ($)$0.135 $0.135 $0.135

Segment/Balance Mix

MetricQ2 2024Q3 2024
Commercial Real Estate Loans ($USD Millions)$5,782.111 $5,779.290
Commercial Loans & Leases ($USD Millions)$2,443.530 $2,453.038
Consumer Loans ($USD Millions)$1,495.496 $1,522.908
Total Loans & Leases ($USD Millions)$9,721.137 $9,755.236
Total Deposits ($USD Millions)$8,737.036 $8,732.271
Total Assets ($USD Millions)$11,635.292 $11,676.721

Asset Quality KPIs

MetricQ3 2023Q2 2024Q3 2024
NPAs / Total Assets (%)0.46% 0.54% 0.62%
NPLs / Total Loans & Leases (%)0.55% 0.62% 0.73%
Nonaccrual Loans & Leases ($USD Millions)$51.241 $60.709 $71.242
Allowance / Loans & Leases (%)1.27% 1.25% 1.31%
Net Charge-offs / Avg Loans (Annualized, %)0.47% 0.35% 0.16%

Origination Yields (Q3 2024)

CategoryOriginations ($USD Millions)Weighted Avg Coupon
Total Loans Originated$4597.35%
Commercial Real Estate$1707.22%
Commercial (incl. Equipment Finance)$1957.71%
Consumer (residential/home equity/consumer)—~6.84%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest Margin (NIM)Q4 2024Not provided3.12%–3.20%New range
NIM TrajectoryFY 2025Not providedModel suggests NIM in the “3.40s” by Q4 2025New directional target
Noninterest IncomeQ4 2024 onwardNot provided$6–$7M per quarterNew range
Operating Expense GrowthFY 2025Not provided+3.0%–3.5% off ~$240M run-rateNew range
Effective Tax RateFY 2025Not provided~24.25%New rate
Deposit GrowthFY 2025Not provided+4%–5%New target
DividendQ3 2024$0.135$0.135Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 2024)Trend
Interest rates & marginQ2: margin pressure persisted; NIM 3.00%; Q1: NIM 3.06% NIM up 7 bps to 3.07%; Q4 guided 3.12–3.20%; path to 3.40s by Q4’25 Improving
Deposit mix & betasQ2: customer +$65.8M; brokered −$47.4M Customer +$103.2M; brokered −$107.9M; immediate pricing cuts post Fed move; CDs/brokered/borrowings repricing lower Favorable mix/lower cost
Equipment finance / specialty vehiclesQ2: $8.4M NCOs largely CRE & equipment; exit specialty vehicles with $0.8M restructuring charge NCOs $3.8M (0.16%); ~$2.1M specialty vehicle; equipment finance NPLs $37.2M Moderating credit costs
Office CRELimited detail in Q2; NPAs rising One office nonaccrual ~$10.8M; criticized/classified ~$9.2M; ~$2M specific reserve Stable/contained
Capital returnQ2 dividend $0.135 Dividend maintained; buybacks to be discussed as curve normalizes and NIM improves Potential optionality
M&ANot highlighted in Q2Environment “quiet,” could improve with rates; thin market; monitoring Watchful stance

Management Commentary

  • CEO: “Performance improved in the quarter with net income of $20.1 million and earnings per share of $0.23 … margin increased 7 basis points. As market rates gradually return to normal, we expect to see our net interest margin continue to improve right through 2025.”
  • CFO: “Customer deposits grew $103 million, while brokered deposits declined $107 million … net interest margin improved 7 basis points to 307 basis points … our Q4 margin is projected to fall within a range of 312 to 320 basis points and continue to improve … NIM for September was 313 basis points.”
  • CFO: “Noninterest income is projected to be in the range of $6 million to $7 million per quarter … operating costs to grow in the 3% to 3.5% range for 2025 … effective tax rate expected ~24.25% … Board approved maintaining our quarterly dividend at $0.135 per share … dividend yield ~5.1% annualized.”

Q&A Highlights

  • Eastern Funding nonaccrual: one large loan financing two grocery stores; ~$5M specific reserve established; timing of resolution uncertain .
  • Specialty vehicle runoff: ~$2.1M of Q3 NCOs from discontinued specialty vehicles; ~$800k quarterly OpEx savings from the exit, fully visible in Q4 .
  • Office CRE detail: total office nonaccrual ~$10.8M; criticized/classified ~$9.2M; ~$2M specific reserves; overall maturities concentrated in H2’25 .
  • Liability repricing: ~$413M CDs maturing in Q4 at ~4.48% and repricing into low-4s; ~$140M brokered CDs at ~5.40% repricing to mid/low-4s; ~$170M borrowings repricing to mid-4s; deposit tiers adjusted promptly after Fed cut .
  • Margin path: with higher deposit betas and liability repricing, internal model points to NIM in “the 3.40s” by Q4 2025 .

Estimates Context

  • Wall Street consensus via S&P Global was unavailable for BRKL due to a mapping issue, so we cannot provide a formal comparison versus consensus for Q3 2024 EPS or revenue at this time [SpgiEstimatesError].

Key Takeaways for Investors

  • The NIM inflection appears durable, aided by deposit mix improvement and proactive repricing, with Q4 guided to 3.12–3.20% and a trajectory toward the 3.40s by Q4 2025, supporting EPS leverage in a declining rate environment .
  • Credit normalization underway: NCOs fell to 0.16% annualized and provision dipped; equipment finance and specialty vehicles remain the primary watch items but are shrinking and better reserved .
  • Deposit franchise resilience: customer deposits grew while brokered balances declined; demand checking rose, helping fund at lower costs post Fed cut and mitigating asset yield compression .
  • Capital and liquidity are solid: TCE/Tangible Assets ~8.5% and Total Risk-Based Capital ~12.5% per investor deck; 72% of non-brokered deposits are insured/collateralized, reducing funding risk .
  • Operating discipline should support positive operating leverage: OpEx down q/q; ~$0.8M quarterly savings from specialty vehicle exit; 2025 OpEx growth restrained to 3.0–3.5% .
  • Shareholder returns: dividend maintained ($0.135 per quarter, ~5.1% annualized yield), and management opened the door to potential buybacks as NIM and the curve improve, offering upside optionality .
  • Monitoring points: resolution of the Eastern Funding nonaccrual, office CRE metrics (currently contained), and deposit betas versus peers; sustained NIM expansion is the primary stock narrative driver near term .