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BROOKLINE BANCORP INC (BRKL)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 GAAP EPS was $0.20 on net income of $17.5M; operating EPS (ex-$3.4M merger charges) was $0.23, roughly flat vs Q3 operating EPS and down vs Q4 2023 EPS of $0.26 .
  • Net interest margin improved 5 bps sequentially to 3.12% on lower funding costs, partially offset by lower loan yields; net interest income rose to $85.0M (+$2.0M QoQ) .
  • Asset quality stabilized (NPLs/Loans 0.71% vs 0.73% in Q3), but net charge-offs rose to $7.3M, driven by a single $5.1M charge-off in equipment finance that had been previously reserved; allowance stood at 1.28% of loans .
  • 2025 outlook: management guides to Q1 NIM of ~3.16–3.20% with continued improvement in 2025; loan growth low-single-digit, deposits +4–5%, FY noninterest expense ≤$247M ex-merger, tax rate ~24.25%, dividend maintained at $0.135 .
  • Merger with Berkshire Hills (BHLB) progressing; exchange ratio 0.42 BHLB shares per BRKL share; combined ownership expected at ~51% BHLB / 45% BRKL / ~4% new investors; targeted close by H2 2025 subject to approvals .

What Went Well and What Went Wrong

What Went Well

  • Net interest margin expansion: NIM increased 5 bps to 3.12% on lower funding costs; net interest income rose $2.0M QoQ to $85.0M .
  • Deposit momentum and liquidity: total deposits rose $169.4M QoQ to $8.90B, with $115.9M growth in customer deposits; cash and equivalents increased $135.8M QoQ to $543.7M .
  • Management tone on 2025 NIM trajectory: “As market rates gradually return to normal we would expect to see our net interest margin continue to improve through this year” (CEO) and Q1 NIM guided to 3.16–3.20% (CFO) .

What Went Wrong

  • Higher charge-offs and one‑offs: total net charge-offs rose to $7.3M (vs $3.8M in Q3), including a large, previously reserved $5.1M equipment finance charge-off (Eastern Funding, grocery) .
  • Expense pressure: noninterest expense rose $5.8M QoQ to $63.7M, driven by $3.4M merger and acquisition expense and higher compensation/benefits (+$2.1M) .
  • EPS down YoY: GAAP EPS $0.20 vs $0.26 in Q4 2023; operating metrics remain below 2023 levels (ROA 0.61% vs 0.81% in Q4 2023), reflecting industry margin pressure and elevated credit costs .

Financial Results

Core P&L (figures USD Millions unless noted)

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Net Interest Income$83.6 $80.0 $83.0 $85.0
Noninterest Income$8.0 $6.4 $6.3 $6.6
Total “Revenue” (NII + Noninterest)$91.6 (=83.6+8.0) $86.4 (=80.0+6.4) $89.4 (=83.0+6.3) $91.6 (=85.0+6.6)
Provision for Credit Losses (Loans)$3.9 $5.6 $4.8 $4.1
Noninterest Expense$59.2 $59.2 $57.9 $63.7
Net Income$22.9 $16.4 $20.1 $17.5
Diluted EPS ($)$0.26 $0.18 $0.23 $0.20
Operating Earnings After Tax$22.9 $17.0 $20.1 $20.7
Operating EPS ($)$0.26 $0.19 $0.23 $0.23
Net Interest Margin (%)3.15% 3.00% 3.07% 3.12%
Efficiency Ratio (%)64.69% 68.50% 64.85% 69.58%
ROAA (annualized, %)0.81% 0.57% 0.70% 0.61%

KPIs and Credit Metrics

KPIQ4 2023Q2 2024Q3 2024Q4 2024
Loans & Leases ($B)$9.642 $9.721 $9.755 $9.779
Deposits ($B)$8.548 $8.737 $8.732 $8.902
NPLs/Loans (%)0.45% 0.62% 0.73% 0.71%
NPAs/Assets (%)0.40% 0.54% 0.62% 0.59%
Allowance for Loan & Lease Losses (% of Loans)1.22% 1.25% 1.31% 1.28%
Net Charge-offs ($M)$7.1 $8.4 $3.8 $7.3
NCOs / Avg Loans (annualized)0.30% 0.35% 0.16% 0.30%
Tangible Book Value/Share ($)$10.50 $10.53 $10.89 $10.81
Equity/Assets (%)10.53% 10.30% 10.54% 10.26%
TCE/TA (%)8.39% 8.23% 8.50% 8.27%

Notes:

  • Q4 2024 included $3.4M merger-related expense and higher compensation, lifting noninterest expense QoQ .
  • Q4 net charge-offs included a $5.1M equipment finance charge-off previously reserved; specialty vehicle charge-offs ~$1.1M .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Interest MarginQ1 2025n/a3.16%–3.20% (spot December 3.10%) New
Net Interest Margin2025n/a“Continue to improve throughout 2025” New
Loan GrowthFY 2025n/aLow single digits; CRE to be reduced thoughtfully New
Deposit GrowthFY 2025n/a+4% to +5% New
Cash + Securities2025n/a9%–12% of total assets New
Noninterest Income2025 (per quarter)n/a$6M–$7M New
Noninterest Expense (ex-merger)FY 2025n/a≤$247M New
Effective Tax RateFY 2025n/a~24.25% (merger charges may be nondeductible) New
DividendQ1 2025$0.135$0.135 declared; payable 2/28/25 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Net Interest Margin trajectoryNIM fell to 3.00% on higher funding costs and interest reversals; pressure “decreased in intensity” vs Q1 NIM up to 3.07% on higher loan yields NIM 3.12% on lower funding costs; guided higher in Q1 and through 2025 Improving
Deposit costs / betasInterest‑bearing deposit cost 3.34%; continued remix to time/MM Interest‑bearing deposit cost 3.39%; customer deposits +$103M QoQ Cost of interest‑bearing deposits 3.16%; CFO expects continued downward cuts as market rates fall Moderating costs
Credit qualityNPLs/Loans up to 0.62%; NCOs $8.4M (CRE + EF) NPLs/Loans up to 0.73%, driven by EF; NCOs $3.8M NPLs/Loans 0.71%; NCOs $7.3M including $5.1M EF charge-off reserved Stabilizing NPLs; episodic NCOs
CRE concentration / office—Added reserves on equipment finance; disclosed rising nonaccruals (EF) Classified $10.8M CBD office (50% vacancy) likely to resolve in Q1/Q2; plan to reduce CRE concentration toward 300% combined De‑risking focus
Specialty vehicle runoff (Eastern Funding)Announced exit of specialty vehicle business; restructuring charge EF charge-offs $2.6M drove Q3 NCOs Runoff ~$2.2M/week; EF specialty vehicle NCOs ~$1.1M in Q4 Ongoing runoff
Berkshire Hills merger——Exchange ratio 0.42; H2’25 close expected; working through approvals Advancing

Management Commentary

  • CEO: “As market rates gradually return to normal we would expect to see our net interest margin continue to improve through this year.”
  • CFO on Q1 and FY outlook: “Our first quarter margin is projected to fall within a range of 316 to 320 basis points and will continue to improve throughout the year… We are managing expenses to $247 million or less for the full year, excluding merger-related costs… [and] our effective tax rate is expected to be in the range of 24.25%.”
  • CFO on growth mix: “We anticipate growth in the loan portfolio to be in the low single digits for 2025 as growth in commercial and consumer loans will be tempered by the runoff of specialty vehicle and continued lower commercial real estate activity.”
  • Merger: “This partnership generates significant economies of scale, resulting in cost savings and the ability to leverage future investments driving the profitability metrics of a combined company.”

Q&A Highlights

  • Regulatory timeline for the Berkshire merger: Company is filing with year-end numbers; hopeful approvals could be faster than initial Q3 expectation but no firm read yet .
  • Q4 charge-off detail: ~$5.1M charge-off in equipment finance was a significant grocery loan at Eastern Funding and was previously reserved; specialty vehicle NCOs ~$1.1M .
  • Deposit pricing/betas: Management expects to continue lowering rates responsively as markets move; yield curve still flat where banks “make money,” limiting spread benefits .
  • CRE de-risking: Intention to reduce CRE concentration (targeting ~300% at combined company), managing office exposure; $10.8M CBD office (50% vacancy) expected to resolve around Q1/Q2 with existing reserves .
  • December spot NIM was ~3.10% (slightly below quarterly average), reflecting timing effects on deposit repricing and other items .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue was unavailable via our S&P Global tool for BRKL at the time of analysis; therefore, estimate comparisons are not provided. We will update when the S&P Global mapping becomes available.

Key Takeaways for Investors

  • Core earnings are holding in the low‑$20M range ex-merger costs, with sequential NIM expansion and deposit growth providing a foundation for further improvement in 2025 as rates normalize .
  • Expect near-term margin tailwinds: guided Q1 NIM 3.16–3.20% and continued improvement through 2025; deposit costs are trending lower as betas roll down .
  • Credit remains manageable but lumpy: Q4 NCOs rose on a single pre-reserved EF exposure; allowance remains solid at 1.28% and NPL ratios ticked down slightly QoQ .
  • Expense discipline is a 2025 lever: noninterest expense guided ≤$247M ex-merger despite Q4’s merger-related costs; noninterest income expected $6–7M/quarter .
  • Strategic merger with Berkshire Hills could catalyze medium-term EPS power via scale and cost saves; investors should monitor regulatory timeline and CRE concentration reduction plans .
  • Dividend maintained at $0.135/share, supported by stable profitability and liquidity .
  • Near-term trading: stock likely sensitive to confirmation of NIM progression, credit outcomes on the CBD office exposure, and merger approval milestones; medium-term thesis tied to spread normalization and merger synergies .