Brookline Bancorp Q2 2024 Earnings Report

Brookline Bancorp EPS Results

• Actual EPS: $0.19
• Consensus EPS: $0.18
• Beat/Miss: Beat by +$0.01
• One Year Ago EPS: $0.26

Brookline Bancorp Revenue Results

• Actual Revenue: $161.75 million
• Expected Revenue: $89.40 million
• Beat/Miss: Beat by +$72.35 million
• YoY Revenue Growth: N/A

Brookline Bancorp Announcement Details

• Quarter: Q2 2024
• Date: 7/24/2024
• Time: After Market Closes
• Conference Call Date: Thursday, July 25, 2024
• Conference Call Time: 1:30PM ET

Brookline Bancorp (NASDAQ:BRKL) is a bank holding company headquartered in Boston, Massachusetts, primarily through its wholly owned subsidiary, Brookline Bank. The company traces its banking operations back to the mid-19th century with the founding of its primary subsidiary, and it was organized as a bank holding company in 1988. Brookline Bancorp focuses on community banking, providing a full suite of financial services tailored to individuals and small- to mid-sized businesses.

The company’s lending portfolio includes residential and commercial real estate loans, home equity lines of credit, and consumer installment loans. On the deposit side, Brookline Bank offers checking and savings accounts, money market deposits, certificates of deposit and specialized business deposit products. In addition, the company provides treasury management services, commercial and industrial loans, and digital banking solutions through its online and mobile platforms.

Brookline Bancorp serves markets in Massachusetts, New Hampshire and the New York metropolitan area through a network of branches and ATMs. The bank also offers wealth management and trust services, retirement planning, and investment advisory solutions through its asset management division. With a focus on personalized service and local decision-making, Brookline Bancorp seeks to support community development and foster long-term relationships with its clients.

Brookline Bancorp Q2 2024 Earnings Call Transcript

Key Takeaways

• Brookline Bancorp delivered solid growth in Q2 with total assets rising by $92 million, loan balances up $66 million, and customer deposits increasing by $66 million across all three banks.
• The net interest margin eased by 6 basis points to 3.00% but showed signs of bottoming as June outperformed May; net interest income totaled $80 million, down $1.6 million sequentially.
• Exited the Specialty Vehicle Finance business—primarily tow trucks—recognizing an $0.8 million restructuring charge, closing the Melville office, reducing 21 staff, and planning a $115 million portfolio runoff over the next 12 months.
• Reported Q2 net income of $16.4 million ($0.18/share), or $17 million ($0.19/share) excluding restructuring; noninterest expenses fell $2.6 million quarter-over-quarter, while provision for credit losses was $5.6 million and net charge-offs reached $8.4 million.
• Reaffirmed full-year targets: loan growth of 2%–5%, deposit growth of 4%–5%, NIM of 3.10%–3.15%, quarterly noninterest income of $6–$7 million, operating expenses under $240 million, and a maintained dividend yielding approximately 5.1%.

Presentation

[Operator]

Good afternoon and welcome to Brookline Bancorp, Inc.'s second quarter 2024 earnings conference call. All participants will be in a listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Brookline Bancorp, Inc.'s attorney, Laura Vaughn. Please go ahead.

[Laura Vaughn, Attorney at Brookline Bancorp]

Thank you, Alyssa, and good afternoon, everyone. Yesterday, we issued our earnings release and presentation, which is available on the investor relations page of our website, brooklinebancorp.com, and has been filed with the SEC. This afternoon's call may contain forward-looking statements with respect to the financial condition and results of operations and business of Brookline Bancorp. Please refer to page two of our earnings presentation for our forward-looking statement disclaimer. Also, please refer to our other filings with the Securities and Exchange Commission, which contain risk factors that could cause actual results to differ materially from these forward-looking statements. Any references made during this presentation to non-GAAP measures are only made to assist you in understanding Brookline Bancorp's results and performance trends and should not be relied on as financial measures for actual results and financial performance. For comparison and reconciliation to GAAP earnings, please see our earnings release.

[Laura Vaughn, Attorney at Brookline Bancorp]

I'm pleased to introduce Brookline Bancorp's Chairman and CEO, Paul Perrault.

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

Thanks, Laura, and good afternoon, everyone. Thank you for joining us for today's earnings call. We had a solid quarter of loan and deposit growth across all three of our banks. While our net interest margin declined slightly, it appears to be hitting the bottom as the month of June was higher than May. This quarter, we decided to exit our specialty vehicle finance business, which is primarily tow trucks. The spreads for this business line have been coming under pressure for some time now as more competition has entered the market. Unfortunately, costs also continued to rise, particularly collection costs, which drove this decision. We closed our office in Melville, Long Island, and had a reduction of staff of 21. The portfolio of $350 million in specialty vehicle loans will run off over time and will be a slight headwind to the overall growth in the equipment finance portfolio.

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

We estimate runoff over the next 12 months to be $115 million. I will now turn you over to Carl, who will review the company's second quarter results in detail. Carl?

[Carl Carlson, CFO at Brookline Bancorp]

Thank you, Paul. Yesterday, we reported net income for the quarter of $16.4 million, or $0.18 per share. As Paul just mentioned, we exited the specialty vehicle finance business and recognized the restructuring charge of $823,000, which includes severance and other lease losses. Excluding the restructuring charge, operating earnings were $17 million, and operating EPS was $0.19 per share. During the quarter, total assets grew $92 million, given by loan growth of $66 million spread across all loan categories. In the second quarter, we originated $491 million in loans at a weighted average coupon of 802 basis points. The weighted average coupon on the core loan portfolio rose 9 basis points during the quarter to 605 basis points at June 30.

[Carl Carlson, CFO at Brookline Bancorp]

On a linked quarter basis, the yield on the loan portfolio declined one basis point to 602 basis points, driven by the reversal of interest income due on two large commercial loans going non-accrual in the quarter. The reversal of accrued interest and quarterly interest foregone on those loans equaled five basis points in the net interest margin for Q2. On the deposit side, customer deposits grew $66 million, while broker deposits increased to $48 million. Deposit growth continued to be focused in higher-rate savings and time deposits. Total funding costs increased seven basis points in the quarter to 365 basis points. Overall, the margin declined six basis points to 300 basis points in the quarter. Total average interest earning assets were basically flat at $10.7 billion on a linked quarter basis, resulting in net interest income of $80 million, a decline of $1.6 million from Q2.

[Carl Carlson, CFO at Brookline Bancorp]

Non-interest income was $6.4 million, which was basically flat with the prior quarter, as lower fees on derivative income were offset by higher participation fees and other non-interest income. Operating expenses were $58.4 million for the quarter, excluding the restructuring charge. This is down $2.6 million from Q1, primarily driven by lower compensation and benefits and weather-related facilities cost. The provision for credit losses was $5.6 million for the quarter, a decrease of $1.8 million from the first quarter. Net charge-offs were $8.4 million, driven by a $3.8 million charge-off of an office building and $4.6 million in C&I charge-offs, nearly all of which were related to equipment financing. The charge-offs were largely previously reserved for. Non-performing loans increased $20 million in the quarter, an increase of $27 million in C&I, driven by two large credits.

[Carl Carlson, CFO at Brookline Bancorp]

The increase was offset by a decline of $6.7 million in non-performing commercial real estate loans. NPAs to total assets increased to 54 basis points. Our reserve coverage ratio increased slightly to 125 basis points. As I mentioned last quarter, client behavior and industry responses continue to adapt to a fairly volatile environment. Recently, we've seen greater market expectation in the Federal Reserve will cut rates and longer-term rates have declined significantly since the end of the quarter, approaching March levels. While loan demand is not robust, it is a bit better than we previously anticipated, and we expect loan growth of 2%-5% across all segments. Our cash and securities portfolio remains stable, representing 9%-12% of total assets. On the deposit side, we anticipate growth of 4%-5%.

[Carl Carlson, CFO at Brookline Bancorp]

Due to prevailing interest rates, the migration of demand deposit accounts and low-cost deposits may persist, but at a significantly slower pace. Our Q3 margins is projected to fall within a range of 300-310 basis points and continue to improve. However, this is dependent on deposit flows and timing of actions by the Federal Reserve. Non-interest income is projected to be in the range of $6 million-$7 million per quarter, although components may vary significantly. We continue to manage operating expenses at $240 million or less for the full year. Exiting the specialty vehicle business will reduce operating expenses by approximately $800,000 per quarter. Currently, our effective tax rate is expected to be in a rate of 24.5% for the balance of the year.

[Carl Carlson, CFO at Brookline Bancorp]

Yesterday, the board approved maintaining our quarterly dividend at $0.135 per share to be paid on August 30 and stockholders of record on August 16. On an annualized basis, our dividend payout approximates a yield of 5.1%. This concludes my formal comments, and we'll turn it back to Paul.

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

Thanks, Carl, and we will now open it up for questions.

[Operator]

We will now begin the question and answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove your question from the queue, you may press star two. If you are using a speakerphone, please remember to pick up your handset before asking your question. Once again, please press star one to queue for questions. First question is from the line of Mark Fitzgibbon with Piper Sandler. Your line is now open.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

Hey, guys. Good afternoon.

[Carl Carlson, CFO at Brookline Bancorp]

Hi, Mark.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

Carl, could you just repeat your guidance on expenses? I missed that. I apologize.

[Carl Carlson, CFO at Brookline Bancorp]

Sure. We're still expected to be in the $240 million or less for the full year.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

You said the benefit from an expense standpoint of getting out of the specialty finance business was how much?

[Carl Carlson, CFO at Brookline Bancorp]

About $800,000 per quarter.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

$800,000 a quarter. Okay, great. And then secondly, I know it's been challenging recently from a credit perspective on the specialty vehicle business, but I guess I'm curious, longer term, what were some of the other major dynamics of why you're exiting this business?

[Carl Carlson, CFO at Brookline Bancorp]

Expensive origination costs, small ticket relative to other kinds of loans that we can do. The collection effort is very big and difficult, and you're just dealing with a lot of little pieces that make it unprofitable, and you can't get a rate in that gig anymore.

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

It was good while it lasted. It's something we got into about 10 years ago, and we were sticking with mostly larger operators for a while, but as time went on, we seem to have ended up with more one or two truck kind of people, and it's just really hard to make money at that.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

Makes sense.

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

The other piece, it's mostly tow trucks, but the other piece that was affected too is somewhere along the line, they got into delivery vehicles, mostly for contractors with UPS or FedEx. And when Amazon decided to have its own delivery business, a lot of those guys kind of lost that business, and it was kind of stuck without anything. So it's just not going well, so it's time to stop.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

Okay. Great. And then I wondered if you could provide any color on those two large loans that caused the uptick in non-performers this quarter?

[Carl Carlson, CFO at Brookline Bancorp]

Sure. Once a Bank Rhode Island client, a long-term client that just was restructured, and so there was deferred payments for 2 quarters. So we just automatically put that on non-accrual, and that'll go back on accrual status after they pay for 2 quarters in a row. So we do expect that to happen by the end of this year, early next year.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

And that's a C&I credit, Carl?

[Carl Carlson, CFO at Brookline Bancorp]

That's a C&I credit.

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

Specialty food companies.

[Carl Carlson, CFO at Brookline Bancorp]

Yeah. The other is a large industrial laundry, basically two laundromats, the laundry companies.

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

Industrial laundry.

[Carl Carlson, CFO at Brookline Bancorp]

Industrial laundry that's being in the process being worked out as well.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

Okay. Great. And then lastly, and I know the size of the portfolios are different, but how would you say asset quality in general is stacking up among your three different banks?

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

I would probably say that Putnam is the cleanest at this point, and Rhode Island and Boston are probably neck and neck.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

Okay. Great. Thank you.

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

We've had a few quarters that are a little bit bumpy for us in the asset quality area. I'm optimistic that we've kind of gotten through the worst of it, and we've dealt with it, and I'm very hopeful that we'll go back to our normal kind of numbers.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

Paul, just having been through the cycles, as we both have over a long time, I've talked to probably six other banks today that all seem to have one-off isolated credit incidents. I guess I'm wondering, can there be that many one-off isolated credit situations, or are we seeing a trend here? Just curious as to your thoughts from a big picture, not specific to Brookline.

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

Well, I think that there's a lot of stuff that was tried post-pandemic, and some of it didn't work. Companies struggled through, didn't make ends meet, and things are not as solid as they were before. But I don't see any big overriding trends that show like a whole industry being in trouble or something, unless I guess you have any electric cars. We don't see inventory problems. We don't see collection problems. Real estate, knock on wood here, at least in the metro of Boston, and certainly Rhode Island and Westchester continues to hold up pretty well. And we've only had the two downtown properties that were an issue, and those were relatively unique.

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

They both have the same background in the sense that they were C properties that were acquired by very capable owners who intended to upgrade them to almost A level in at least a month, and they got caught in the middle with the pandemic. The buildings got fixed, but not leased entirely. In both cases, they're looking to hold on and put in more money and kind of wait it out. I think real estate is okay. In the C&I business, it's a little bit trickier to be successful than it might have been five years ago or something.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

Thank you.

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

Yep.

[Operator]

Thank you. The next question is from the line of Laurie Hunsicker with Seaport Research. Your line is now open.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

Great. Hi, thanks. Good afternoon, Paul and Carl. Just going back to your specialty vehicle portfolio of $352 million, can you share with us what the coupon is on that and then what the non-performers are on that?

[Carl Carlson, CFO at Brookline Bancorp]

Sure. The coupon on the specialty vehicles, I'll go to the yield. The yield's around 750 on the entire.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

Perfect. Yeah. And then the non-performers, I mean, I guess your equipment finance non-performers are $27 million. How much of that is related to this book?

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

I'll get back to you. I don't have that in front of me right now.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

Okay. Okay. Okay. And then also the charge-offs for this quarter, the $4.3 million equipment financing charge-off, C&I equipment financing charge-off, was that a specialty vehicle or was that something separate?

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

Mostly.

[Carl Carlson, CFO at Brookline Bancorp]

Mostly specialty vehicle. We had some car washes that come out of the car.

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

But the lion's share was special.

[Carl Carlson, CFO at Brookline Bancorp]

The lion's share.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

Got it. Okay. So I missed it. You said how many people were terminated on the specialty vehicle side?

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

21.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

Okay. Did that happen late in the quarter, middle of the quarter, beginning of the quarter? How should we think about that?

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

It's happening right now. Yeah.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

Okay. Okay. And then we're also going to see the Durbin impact coming through in September. And I had in my notes that roughly, at least on the expense side, so obviously we know the non-interest income that deducts $1 million or something annually. But on the expense side, I had that impact running about $1.6 million annually, so $400,000 next quarter. Am I thinking about that right, or has that already been reflected?

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

It's done.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

How should we think about that?

[Carl Carlson, CFO at Brookline Bancorp]

I'm not sure what you're referring to when you talk about the Durbin. You might be misunderstanding it. Durbin's really just the amount that you get on the debit card side.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

Right.

[Carl Carlson, CFO at Brookline Bancorp]

It's just me that's.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

Right. It's just.

[Carl Carlson, CFO at Brookline Bancorp]

$200.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

Side, but I thought for some reason that you guys were doing something on the expense side around a compliance build, or maybe I got that wrong.

[Carl Carlson, CFO at Brookline Bancorp]

No, I think when we first were estimating. When we were first estimating what the impact would be about going over $10 billion, I think we estimated some higher expenses associated with adding a few people on staff. But that had nothing to do with Durbin. That just had to do with going over to compliance, adding some people on credit, things of that nature, compliance. But that's largely done.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

That's already done. Okay. Okay.

[Carl Carlson, CFO at Brookline Bancorp]

That's already done.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

Okay. Okay. Perfect. Perfect. Okay. And then on office, the $3.8 million that you had that were net charge-off, how big was that office credit that you took the charge-off on? Just trying to think about what the write-off was.

[Carl Carlson, CFO at Brookline Bancorp]

It was around $14 million. $14 million.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

$14 million originally. Okay.

[Carl Carlson, CFO at Brookline Bancorp]

That's correct. Let me go a little bit more detail on that. We currently are carrying it at $10.8 million. We're still working through this. We do have a specific reserve, $2.5 million.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

$2.5 specific reserve. Okay. And then where is that located? Is that a downtown property?

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

Not down Boston.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

Okay. And that's Class A, Class B?

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

Class B.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

Class B. Okay. And then just last question on that one. Is that or what is the vacancy, if you have it, on that one?

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

I don't have a great it could be half. Could be half. It'd have to be about half because the lowest number you can get between the third and a half. First of all, it's the quarters.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

Gotcha. Okay. Gotcha. Okay. Good, good. Okay. And then office non-accruals, I appreciate all the detail you've got in your deck here, but it looks like these are just the ones that are maturing. Do you have what your overall office non-performers are?

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

We just have the one. We only have the one that's expected.

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

Just that one.

[Carl Carlson, CFO at Brookline Bancorp]

It's just that one. It's $10.8.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

Just the one that's coming due. Okay. Okay.

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

That's correct.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

Got it. Okay. Okay. Very helpful. Okay. And then I guess, Paul, just last question. There seems to be a little bit more M&A chatter going on. Obviously, you're one of the few banks who did an acquisition as rates started to go up. Can you just share with us your take on how you are thinking about M&A, how you see sort of the pulse on M&A, any chatter, any directional thoughts? That'd be really helpful. Thanks.

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

Well, I think you said it right. I mean, a little bit more talk, but very little. It's still a very difficult environment with the marks on everything and the difficulties of raising capital and having it all work. But I think we're closer to getting to more normal M&A activity, but we're not quite there yet. And I'm not aware that there is all that much around us anyway.

[Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research]

Okay. Great. Thank you so much for taking my questions.

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

Okay. Lori, that's all right.

[Operator]

Thank you. The next question is from the line of Chris O'Connell with KBW. Your line is now open.

[Chris O'Connell, Director at KBW]

Hey. Good afternoon. Paul and Carl.

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

Hey, Chris.

[Carl Carlson, CFO at Brookline Bancorp]

Chris.

[Chris O'Connell, Director at KBW]

So hoping to start off on some of the margin dynamics going forward. It seems like the deposit mix shifts turned around and slowed this quarter. Are you guys still seeing pressure there at all? Do you expect a little bit slower pace in the back half of the year? I guess SOFR out there.

[Carl Carlson, CFO at Brookline Bancorp]

Yeah. So we're not seeing the movement between products that we've seen in the past, that people are moving a lot of money out of one product or a lower interest-bearing product into a higher interest-bearing product. Any growth in deposits is basically coming from higher interest as you attract new customers. We are starting to see more activity on the DDA side, particularly on the commercial side and the cash management side, which is always good to see. And you don't have the outflows that you were seeing earlier. You start to see some growth there. I would say on the CD side, we're basically priced where the market is, right? So the book is maturing. So we've got about $330 million CDs that will roll off in Q3, and it's basically going on at similar rates. And wherever possible, we're trying to shorten those durations a little bit.

[Carl Carlson, CFO at Brookline Bancorp]

We're actually offering a little bit of a higher rate for lower. We're limiting the curve out there so that people are attracted to lower terms. So, not buying in those CDs that stay on the downside.

[Chris O'Connell, Director at KBW]

Have you guys been able to test the waters at all with any reductions in any of the products on the deposit side at all year to date?

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

Yes.

[Carl Carlson, CFO at Brookline Bancorp]

Yes, we have. So we have moved rates on the top-tier offerings that we might have in money markets and certain savings, annual savings accounts.

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

Number of quarter CDs.

[Carl Carlson, CFO at Brookline Bancorp]

Number of quarters, somewhere 10 basis points.

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

Yeah.

[Carl Carlson, CFO at Brookline Bancorp]

That's a fairly recent development.

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

Yeah.

[Chris O'Connell, Director at KBW]

Got it. And just with the outlook for the rate environment now shifting a bit to hopefully be a little bit more favorable as we get further along into 2024 into 2025, maybe just talk about your strategic priorities in terms of, I mean, does that make you a little bit more optimistic on loan growth into next year? Or there's still a good amount of broker deposits that are at a fairly high cost right now that could mix shift or come off the balance sheet. Is there any kind of strategic priority in terms of growing the assets out of the balance sheet or maybe taking it a little bit slower into next year and reducing some of those high-cost broker deposits or even some of the highest-cost borrowings?

[Carl Carlson, CFO at Brookline Bancorp]

Well, we're always looking to try to reduce those on the wholesale funding side of things. And I think when rates do start to reverse the portion, you'll see more activity on the money side. I think some people are sitting on the sidelines that they don't have to borrow, but they're getting their rates cut down a little bit. So all of those things are true. So we'll be out there.

[Chris O'Connell, Director at KBW]

Got it. And just thinking about the margin as we get past the next quarter or so, I mean, how much do you think the dynamic changes depending on the pace of Fed fund cuts, whether they're coming in kind of quickly as we enter 2025 or a little bit more measured than what's been priced in recently?

[Carl Carlson, CFO at Brookline Bancorp]

Well, as rates come down, our liability side is pretty responsive to that. I expect that to be fairly responsive as it goes down. It wouldn't be as immediate as, let's say, the prime rate going down or the SOFR rate going down. Probably not. There'll probably be a little bit of a lag there. But we have quite a bit, like I said, of broker CDs and the Home Loan Bank advance that we reprice fairly quickly. And so we monitor that very closely. Of course, try to match that out with our own book. So we do also have a lot of adjustable rate, floating rate loans that we reprice down as well. But overall, I think it's going to be a benefit to us.

[Chris O'Connell, Director at KBW]

Understood. If the pace of growth does kind of continue to be relatively tepid, is there a point where capital ratios get high enough where you'd be interested in buying back shares?

[Carl Carlson, CFO at Brookline Bancorp]

We continually look at it. If we have a build of capital, I think that's something that's important to talk about.

[Chris O'Connell, Director at KBW]

Got it. All right. That's all I had. Thanks for taking my questions.

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

Thanks, Chris.

[Operator]

Thank you. This concludes our question-and-answer session. I'd like to turn the conference back over to Mr. Perrault for any closing remarks.

[Paul Perrault, Chairman and CEO at Brookline Bancorp]

Thanks, Alyssa. Thank you all for joining us here this afternoon. We look forward to talking with you again next quarter. Have a good day.

Participants

Executives

• Laura Vaughn, Attorney
• Paul Perrault, Chairman and CEO

Analysts

• Carl Carlson, CFO at Brookline Bancorp
• Chris O'Connell, Director at KBW
• Laurie Hunsicker, Senior Financials Banks Analyst at Seaport Research