Q1 2025 Brookline Bancorp Inc Earnings Call
Operator: Good afternoon and welcome to Brookline Bancorp Inc's first quarter 2025 earnings conference call. All participants will be in listen-only mode. After today's presentation, there'll be an opportunity to ask questions. Please note this event is being recorded.
Good afternoon, and welcome to Brookline Bancorp, Inc. Basketball to 2025 earnings Conference call.
All participants will be in Mr 90 night.
After today's presentation there'll be an opportunity to ask questions.
Please note this event is being recorded.
Dario Hernandez: I'd now like to turn the conference over to Brookline Bancorp's Attorney, Dario Hernandez. Please go ahead. Thank you, Lydia, and good afternoon, everybody. Yesterday, we issued our earnings release and presentation, which is available on the Investors Relations page on our website, brooklinebancorp.com, and has been filed with the SEC.
I'd now like to turn the conference over to Brookline Bancorp's Attorney. So he is not dead.
Please go ahead.
Speaker Change: Thank you Olivia and good afternoon everybody.
Speaker Change: Yesterday, we issued our earnings release and presentation, which is available on the Investor Relations page on our website Brookline Bancorp Dot com as it filed with the SEC.
Dario Hernandez: This afternoon's call will be hosted by Paul A. Perrault and Carl Carlson. This call may contain forward-looking statements with respect to the financial condition, results of operations, and business of Brookline Bancorp.
Speaker Change: Afternoon call will be hosted by Paul April and Carl Carlson.
Speaker Change: The call may contain forward looking statements with respect to the financial condition.
Speaker Change: Results of operations and business of Brookline Bancorp. Please refer to page two of our earnings presentation for our forward looking statement disclaimer.
Dario Hernandez: Please refer to page 2 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.
Speaker Change: So 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.
Dario Hernandez: 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 of actual results or future predictions.
Speaker Change: 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 of actual results or future predictions.
Paul Perrault: For a comparison and reconciliation to GAAP earnings, please see our earnings I am pleased to introduce Brookline Bancorp's Chairman and CEO, Paul Perrault. Thanks, Dario, and good afternoon, everyone. Thank you for joining us for today's earnings call. We had solid core operating results for the first quarter with operating earnings of $20 million or $0.22 per share. On a gap basis, which includes merger charges of $971,000, net income was $19.1 million, resulting in earnings per share of 21 cents. The contraction in our loan portfolio of $136.6 million is intentional, as we reduce commercial real estate exposures, while maintaining our focus on important customer relationships.
Speaker Change: For a comparison and reconciliation to GAAP earnings. Please see our earnings release I am pleased to introduce Brookline, Bancorp's, Chairman and CEO Paul Perrault.
Speaker Change: Thanks, Darryl and good afternoon, everyone. Thank you for joining us for todays earnings call.
Speaker Change: We had solid core operating results for the first quarter with operating earnings of $20 million or 22 per share.
Speaker Change: On a GAAP basis, which includes merger charges of $971000 net income was $19 1 million, resulting in earnings per share of 21 sets.
Speaker Change: The contraction in our loan portfolio of $136 $6 million is intentional as we reduced commercial real estate exposures, while maintaining our focus on important customer relationships we.
Paul Perrault: We also experienced some planned runoff in our specialty vehicle portfolio following our exit from that business last year, while we continue to increase our participation in the general C&I market. Customer deposits increased $113.8 million and our margin increased 10 basis points during the quarter. In January, we expected market rates to gradually return to normal. However, as you all know, the opposite has occurred as uncertainty has become the theme of the day and markets have become even more volatile. Even with that, we expect to see our net interest margin continue to improve throughout 2025.
Speaker Change: We also experienced some planned run off in our specialty vehicle portfolio following our exit from that business last year.
Speaker Change: We continue to increase our participation in the general C&I markets.
Speaker Change: Customer deposits increased $113 $8 million.
Speaker Change: Our margin increased 10 basis points during the quarter.
Speaker Change: In January we expected market rates to gradually return to normal. However, as you all know the opposite has occurred as uncertainty has become the theme of the day and markets have become even more volatile.
Speaker Change: Even with that we expect to see our net interest margin to continue to improve throughout 2025.
Paul Perrault: In December, we announced a planned merger with Berkshire Hills Bancorp, and I'm delighted to tell you it is moving along very nicely.
Speaker Change: In December we announced the planned merger with Berkshire Hills Bancorp and I'm delighted to tell you. It is moving along very nicely.
Carl Carlson: I will now turn you over to Carl, who will review the company's first quarter. Thank you, Paul. At the end of the quarter, total assets stood at $11.5 billion, reflecting a decrease of $385.5 million from the end of the year. This reduction was due to a deliberate decrease in both cash equivalents and components of our loan portfolio. Specifically, loans declined by $136.6 million, with commercial real estate and equipment finance dropping by $135 million and $32 million, respectively, while commercial loans saw growth. Owner-occupied commercial real estate fell by $10 million, and the investment commercial real estate portfolio decreased by $125 million, bringing the percentage of investment commercial real estate to total risk-based capital to 375% at year-end.
I will now turn you over to Carl who will review the company's first quarter well. Thank.
Carl Carlson: Thank you Paul at the end of the quarter total assets stood at 11 5 billion, reflecting a decrease of $385 5 million from the end of the year.
Speaker Change: This reduction was due to a deliberate decrease in both cash equivalents and components of our loan portfolio spin.
Speaker Change: Specifically loans declined by $136 $6 million with commercial real estate and equipment finance dropping by $135 million and $32 million, respectively, while commercial loans saw growth.
Speaker Change: Owner occupied commercial real estate fell by $10 million and the investment commercial real estate portfolio decreased by $125 million, bringing.
Speaker Change: Bringing the percentage of investment commercial real estate to total risk based capital to 375% at year end.
Carl Carlson: at QuarterEdge. The decline in equipment finance was primarily driven by the continued runoff of the specialty vehicle portfolio, which decreased by $29 million during the quarter to $267 million. On the funding side, customer deposits increased by $113 million, while broker deposits and borrowings were reduced by $468 million. Stockholders' equity rose by $18 million due to the retained earnings and lower mark-to-market on the available-for-sale portfolio, with tangible book value per share rising 22 cents to $11.03 from December 31st. The net interest margin improved 10 basis points to 3.22%, driven by lower funding costs. However, this was partially offset by a decline of $50 million in average interest earning assets.
Speaker Change: At quarter end.
Speaker Change: The decline in equipment finance was primarily driven by the continued run off of the specialty vehicle portfolio, which decreased by $29 million during the quarter to $267 million.
Speaker Change: On the funding side customer deposits increased by $113 million, while broker deposits and borrowings were reduced by 400 $768 million.
Speaker Change: Stockholders equity rose by $18 million due to the retained earnings and lower mark to market on the available for sale portfolio.
Speaker Change: With tangible book value.
Speaker Change: Per share rising 22 to.
To $11 three from December 31.
Speaker Change: The net interest margin improved 10 basis points to three.
Speaker Change: Three 2% driven by lower funding costs.
Speaker Change: However, this was partially offset by a decline of $50 million in average interest earning assets.
Carl Carlson: Consequently, net interest income reached $85.8 million, an increase of $800,000 from the previous quarter. Lower derivative activity resulted in lower fee income for the quarter, bringing total revenues for the quarter to $91.5 million, consistent with Q4. Revision for credit losses was $6 million. $2 million higher than Q4. We had $7.6 million in net charge-offs, $5.2 million were previously reserved. The reserve coverage slightly increased to 129 basis points of total loan. The weightings of the Moody's economic scenarios remained at 40% baseline, 35% moderate recession, and 25% stronger near-term growth, which are consistent with the weightings at year-end.
Speaker Change: Consequently, net interest income reached $85 8 million, an increase of 800000 from the previous quarter.
Speaker Change: Lower derivative activity resulted in lower fee income for the quarter, bringing total revenues for the quarter to $91 5 million consistent with Q4.
Speaker Change: The provision for credit losses was $6 million.
Speaker Change: 2 million higher than Q4.
Speaker Change: We had six point, we had $7 6 million in net charge offs $5 2 million were previously reserved for.
Speaker Change: The reserve coverage slightly increased to 129 basis points of total loans.
Speaker Change: The weightings of the Moody's economic scenarios remained at 40% baseline, 35% moderate recession, and 25% stronger near term growth.
Speaker Change: Which are consistent with the weightings at year end.
Carl Carlson: We have evaluated the post-quarter-end increase in economic uncertainty and will continue to monitor how this uncertainty is captured by future scenarios and adjust as necessary. Non-interest expense, excluding merger charges, was $59 million for Q1, a decrease of $1.3 million from Q4, due to lower compensation and marketing costs. Merger expenses for the quarter were $971,000 and are largely non-tax deductible, contributing to a higher effective tax rate. Excluding merger charges, operating EPS was $0.22 per share.
Speaker Change: We have evaluated the post quarter end increase in economic uncertainty and will continue to monitor how this uncertainty is captured by future scenarios and adjust as necessary.
Speaker Change: Noninterest expense excluding merger charges was 59 million for Q1, a decrease of $1 3 million from Q4, due to lower compensation and marketing costs.
Speaker Change: Merger expenses for the quarter were 971000 and are largely non tax deductible contributing to a higher effective tax rate.
Speaker Change: Excluding merger charges operating EPS was <unk> 22 per share.
Carl Carlson: Yesterday, the board approved maintaining our quarterly dividend at 13.5 cents per share to be paid on May 23rd to stockholders of record on May 9th.
Speaker Change: Yesterday, the board approved maintaining our quarterly dividend at <unk> <unk> per share to be paid on may 23 to stockholders of record on May nine.
Carl Carlson: Looking forward, the interest rate environment. Potential impact of tariffs and how our customers respond remains uncertain and the need to continually adapt is greater than ever. While modest improvements to the net interest margin are increasingly uncertain, we are currently estimating an increase of four to eight basis points in Q2. This is dependent upon market conditions, deposit flows, and the direction, timing, and magnitude of future actions by the Federal Reserve. We continue to anticipate growth in the loan portfolio to be in the low single digits for the balance of 2025, as growth in commercial and consumer loans will be tempered by the runoff of specialty vehicle and lower commercial real estate activity.
Looking forward the interest rate environment.
Speaker Change: Potential impact of tariffs and how our customers respond remains uncertain and the need to continually adapt is greater than ever.
Speaker Change: While modest improvements to net interest margin are increasingly uncertain. We are currently estimating an increase of four to eight basis points in Q2.
Speaker Change: This is dependent upon market conditions deposit flows in the direction timing and magnitude of future actions by the federal reserve.
Speaker Change: We continue to anticipate growth in the loan portfolio to be in the low single digits for the balance of 2025% as growth in commercial and consumer loans will be tempered by the runoff of specialty vehicle and lower commercial real estate activity.
Carl Carlson: On the deposit side, we anticipate growth of 4% to 5%, with growth generally favoring interest-bearing. Non-interested income is projected to be in the range of $5.5 to $6.5 million per quarter, although components may vary significantly. We are managing expenses to $247 million or less for the full year, excluding merger-related costs. Our effective tax rate is expected to be in the range of 24.25%, excluding the impact of non-deductible merger charges.
Speaker Change: On the deposit side, we anticipate growth of 4% to 5% with growth generally favoring interest bearing accounts.
Noninterest income is projected to be in the range of five 5% to $6 5 million per quarter.
Speaker Change: Both components may vary significantly.
Speaker Change: We are managing expenses to $247 million or less for the full year, excluding merger related costs. Our effective tax rate is expected to be in the range of $24 two 5%, excluding the impact of non deductible merger charges.
Carl Carlson: Regarding the merger of equals with Berkshire Hills Bancorp, we have added slide 11 into our earnings presentation, providing an update. Regulatory applications have been filed and we will respond to comments or follow up questions from the regulators if and as they've arrived. On April 8th, the S-4 and proxy went effective with the SEC, and mailing commenced to stockholders of both entities.
Speaker Change: Regarding the merger of equals with Berkshire Hills Bancorp, we have added slide 11% to our earnings presentation, providing an update.
Speaker Change: Regulatory applications have been filed and we will respond to comments or follow up questions from the regulators and as they rise.
Speaker Change: On April eight the S four and proxy when effective with the SEC and mailing commenced the stockholders of both entities.
Carl Carlson: The stockholder meetings for both Brookline and Berkshire are scheduled for May 21st. We anticipate closing the transaction in the second half of 2025, which will include the merger of all four bank charters.
Speaker Change: The stockholder meetings for both Brookline in Berkshire are scheduled for May 21.
Speaker Change: We anticipate closing the transaction in the second half of 2025, which will include the merger full for bank charters.
Carl Carlson: While we are encouraged by the recent regulatory approval process experienced by other institutions, we will make no predictions or observations with respect to our own application. At the time of the transaction announcement, we had not decided on a core banking platform. I'm pleased to say the diligence was completed and the core banking platform and related technologies have been determined, with conversion planning well underway. System conversions are scheduled for February.
Speaker Change: While we are encouraged by the recent regulatory approval process experienced by other institutions, we will make no predictions or observations with respect to our own applications.
Speaker Change: Yeah.
Speaker Change: At the time of the transaction announcement, we have not decided on a core banking platform I am pleased to say that diligence was completed and the core banking platform and related technologies have been determined with conversion planning well underway system conversions are scheduled for February.
Carl Carlson: As you can appreciate, we are unable to comment further on the transaction beyond what has been publicly disclosed.
Speaker Change: As you can appreciate we are not able to comment further on the transaction beyond what has been publicly disclose this.
Carl Carlson: This concludes my formal comments, and we'll turn it back to Thanks, Carl.
Paul: This concludes my formal comments I will turn it back to Paul.
Speaker Change: Thanks, Carl and.
Operator: And Lydia, we will now open it up for questions. Thank you. Please press star followed by the number one if you'd like to ask a question and ensure your devices are muted locally when it's your turn. If you change your mind or your question has already been answered, you can withdraw from the queue by pressing star followed by the number.
Speaker Change: Lithium we will now open it up for questions.
Paul: Thank you.
Paul: Please press star followed by the number one if you'd like to ask a question and answer all your devices that needed likely when it's your attention.
Paul: Have you changed your mind or your question has already been paid.
Paul: All from the queue by pressing star followed by the number too.
Mark Fitzgibbon: Our first question today comes from Mark Fitzgibbon with Piper Sandler, please go ahead, your line is open. Hey guys, good afternoon. I was just curious, and this may be a question for you, Carl. You know, trying to get a sense for the impact of a 25 base point Fed rate cut. What what do you think that means for the margin on a standalone basis? Pre, you know, pre Berkshire. Well, I think it all depends on what happens with the rest of the yield curve naturally. So if you get that slightly steepening of the yield curve, just cut at the short end, that would certainly be beneficial to us.
Paul: Our first question today comes from Mark Fitzgibbon with Piper Sandler.
Speaker Change: Please go ahead your line is open.
Mark Fitzgibbon: Hey, guys good afternoon.
Speaker Change: Sure.
Speaker Change: I was just curious and this maybe a question for you Carl.
Speaker Change: Trying to get a sense for the impact of a 25 basis point fed rate cut.
Speaker Change: What do you think that means for the margin on a standalone basis.
Speaker Change: Berkshire Hills.
Speaker Change: Okay.
Speaker Change: Well I think it all depends on what happens with the rest of the yield curve naturally. So if you get that slightly steepening of the yield curve.
Speaker Change: Cut at the short end that would certainly be beneficial to us.
Speaker Change: <unk>.
Carl Carlson: But again, it's entirely dependable on what the market is like and what is going on with the market and why that cut is happening. But generally, just from a modeling perspective, a cut in short-term rates and longer-term or mid-term rates staying where they are, that's beneficial.
Speaker Change: But.
Speaker Change: Again, it's highly dependable and what what the market is like and what is going on with the market and why that cut is happening.
Speaker Change: But generally just from a modeling perspective.
Speaker Change: Ah cutting short term rates.
Speaker Change: And longer term or mid term rates staying where they are that's beneficial.
Carl Carlson: Okay, for your your guidance, though, a 48 base points out that doesn't assume any Fed rate cuts, correct? But that does not reflect Fed rate cuts in the second quarter.
Speaker Change: Okay for your guidance, though a 48 basis points out that doesn't assume any fed rate cuts correct.
Speaker Change: But that does not.
Speaker Change: Reflect fed rate cuts in the second quarter.
Speaker Change: Okay.
Carl Carlson: Secondly, I wondered if you could give us any color on that $7.1 million commercial charge-off you had. You know, what was the story with that loan? Was that the transportation one that you've talked about in the past? No, that was a large C&I credit that we it was about $13 million credit, 13 to change, that we had a specific reserve for that was around 5 million already on the books. So there was a little extra provisioning that required to cover that full charge off. It was a sale of a note.
Speaker Change: Secondly, I wondered if you could give us any color on that $7 $1 million commercial charge off you had what was the story with that loan was that the transportation one that you've talked about in the past.
Speaker Change: No that was a large C&I credit that we it was about $13 million credit 13 to change that we had a specific reserve for that was around $5 million.
Speaker Change: Already on the books, so theres, a little extra provisioning that required to cover that full charge off.
Speaker Change: We actually it was a sale of a note.
Mark Fitzgibbon: Okay.
Speaker Change: Okay.
Carl Carlson: And then lastly, I just wondered, maybe at a high level, if you could share with us your thoughts on sort of the tariff implications on things like your equipment finance book and maybe your manufacturing loan book, which I think was around $250 million. Are you seeing any impact? Are you hearing from customers that it's become a significant problem, you know, the tariffs, or not so much? Credit administration is all over that like a wet blanket, and they're hearing that people are not doing very much, but are very uneasy about it. And when we look at new credits that that has become part of the underwriting process to see how that that that how that might have affected things.
Speaker Change: And then lastly, I just wondered maybe at a high level, if you could share with us your thoughts on sort of the tariff implications on things like your equipment Finance book and maybe you are manufacturing.
Speaker Change: Loan book, which I think was around $250 million.
Speaker Change: Are you seeing any impact that you're hearing from customers that it's become a significant problem the tariffs or not so much.
Speaker Change: Credit administration is all over that like a wet blanket.
Speaker Change: They're hearing that people are.
Speaker Change: Not doing very much but a very uneasy about it.
And when we look at new credits that that has become part of the underwriting process to see how that.
Speaker Change: How that might have affected things and so it is having a dampening effect on.
Carl Carlson: And so it is having a dampening effect on. Everything, as we go forward, but there's nothing tangible yet.
Speaker Change: Everything.
Speaker Change: As we go forward, but there's nothing tangible yet.
Mark Fitzgibbon: Okay, thank you. Okay, Mark.
Speaker Change: Okay. Thank you.
Mark Fitzgibbon: Okay Mark.
Steve Moss: Our next question comes from Steve Moss with Raymond James. Please go ahead. Good afternoon.
Speaker Change: Our next question comes from Steve Moss with Raymond James Please.
Speaker Change: Please go ahead.
Speaker Change: Good afternoon.
Speaker Change: Thanks, Steve.
Paul Perrault: Go to sleep. Hey, Paul, just maybe on loan pricing here, just kind of curious, you know, what you guys are seeing for loan pricing that these days and, you know, as you are also, you know, adding more C&I customers, what's the sentiment with those borrowers and your thoughts around pull through? And my thoughts around what? on pull-through of New Sean Island. Do you think it's going to extend out towards the latter part of the year, or are you reasonably optimistic near term? Let me put it that way. I'm reasonably optimistic, but we're obviously going to be very careful like walking through glue or something.
Speaker Change: Tom.
Speaker Change: Hey, Paul just maybe on loan pricing here just kind of curious.
Speaker Change: What you guys are seeing for loan pricing that does that these.
These days.
Speaker Change: As you are also adding more C&I customers.
Speaker Change: What's the sentiment with those borrowers.
Speaker Change: Thoughts around poultry here.
Speaker Change: And my thoughts around what.
Speaker Change: Pull through of <unk>.
Speaker Change: C&I loans.
Speaker Change: Pull through I think.
Speaker Change: Is it do you think is going to extend out towards the latter part of the year are you reasonably optimistic near term I can put it that way.
Speaker Change: Alright.
Speaker Change: Reasonably optimistic, but we were up we're obviously going to be very careful like working through blue or something.
Paul Perrault: But the pipelines are okay. And the quality of the stuff that's in the pipeline, I've been very impressed with. And the pricing has generally been pretty good. It feels like the dominant very, very large banks in our markets are pretty tepid about things right now. So we're not being pushed around too much. The smaller banks have tended to be a lot more aggressive, but our full service, paying close attention nature, I think, has made us attractive for companies that feel a little bit abused in this time. So we're going to go carefully, but I'm still optimistic with the numbers that Carl's told you about for the balance of the year.
Speaker Change: But the pipelines are okay, and the quality of the stuff that's in the pipeline pipeline I've been very impressed with.
Speaker Change: And the pricing has generally been pretty good it feels like.
Speaker Change: The dominant very large banks in our markets are pretty tepid about things right now so we're not being pushed around too much.
Speaker Change: Smaller banks have tended to be a lot more aggressive.
Speaker Change: But our full service paying close attention nature, I think has made us attractive for companies that feel a little bit abused.
Speaker Change: At this time, so we're going to go carefully, but I'm still optimistic with the numbers that.
Speaker Change: <unk> told you about for the balance of the year.
Paul Perrault: Just to give you a little bit more, get a little bit more specific on pricing, I think it might be helpful. So we booked about $411 million of originations in the quarter. And the weighted average coupon on that book was 718 basis points. And the weight average coupon of our overall book is about 591 basis points, so it gives you a sense of, you know, how that's, you know, continuing. Every quarter that goes by, we're still, we're getting a benefit on that. Unless the Fed cuts and then we think it's priced out, but that's what I had in mind.
Speaker Change: Just to give you a little bit more get a little bit more specific on pricing I think it might be helpful. So we booked about $411 million of originations in the quarter and the weighted average coupon on that book was 718 basis points.
Speaker Change: And the weighted average coupon of our overall book is about 591 basis points. So it gives you a sense of.
Speaker Change: How thats continuing every quarter that goes by we're still we're getting a little better about a benefit on that yet.
Speaker Change: I'll ask the fed cuts and then they can look like.
Speaker Change: Style, but thats.
Speaker Change: So what happened.
Speaker Change: Thanks.
Steve Moss: Right. Okay, that's that's helpful there. Appreciate that color.
Speaker Change: Right.
Okay.
Speaker Change: Helpful. There I appreciate that color and then just in terms of expenses here.
Steve Moss: And then just in terms of expenses here, you know, down quarter over quarter compensation in particular, just kind of curious, you know, how you think about expenses for the second quarter? I apologize if I missed that. No, I think they'll probably be fairly stable with whatever happened in the first quarter. I give guidance for the full year that we have an annual budget that we try to manage towards. And we're doing much better than that at this point. As you probably understand, we've got the merger of equals with Berkshire Hills. So we are being very careful about any hires and things of that nature, or even replacing folks, as we know that the opportunity to be able to fill those positions on a combined basis will will be enhanced when that happens.
Speaker Change: Down quarter over quarter compensation in particular, just kind of.
Speaker Change: Curious, how you're thinking about expenses for the second quarter I apologize if I missed that.
Speaker Change: No I think.
Speaker Change: It will be.
Speaker Change: Fairly stable with whatever happened in the first quarter.
Speaker Change: I give guidance for the full year that we have an annual budget that we try to manage towards and we.
Speaker Change: We're doing much better than that at this point.
Speaker Change: As you probably understand we've got the merger of equals with Berkshire Hills. So we are being very careful about any.
Any hires and things of that nature, or even replacing folks as we know that the opportunity to be able to.
Speaker Change: Fill those positions on a combined basis will.
Speaker Change: Be enhanced when that happens so.
Paul Perrault: So That's, you know, I took mentioned the marketing expenses are down, you know, quarter over quarter, I think we were just being thoughtful about where we're spending our money, marketing dollars and keeping some powder dry for for for the merger.
Speaker Change: Okay.
Speaker Change: Tom mentioned, the marketing expenses are down.
Speaker Change: <unk> over quarter, I think we're just being thoughtful about.
Speaker Change: Where we're spending our money marketing dollars in keeping some powder dry for the merger.
Steve Moss: Okay, great. Those were my primary two questions. I really appreciate the call here. I'll step back in the queue. Okay, Steve. See you.
Speaker Change: Okay great.
Speaker Change: Having a few questions I really appreciate the color here I'll step back in the queue.
Speaker Change: We've seen.
Laura Hunsicker: Our next question comes from Laurie Hunsicker with Seaport Research Partners, please go ahead. Yeah. Hi, Paul and Carl. Good afternoon. Just circling back to credit here, so the 7.6 million in C&I's charge-off, $7.1 million, was one loan. Was that a... I guess, what type of loan was that? Was that an equipment finance loan? Was that a grocery store? What was that? It's in the food manufacturing business, if you will, and it was not entirely the 7-6, but it was primarily So that that loan, it had been a family business that was subject to a leveraged buyout by private equity firms and things haven't gone according to oil.
Laurie Hunsicker: Our next question comes from Laurie Hunsicker with Seaport Research partners.
Speaker Change: Please go ahead.
Laurie Hunsicker: Yeah, Hi, Paul good.
Speaker Change: Good afternoon, Hi, Laurie.
Speaker Change: Yes going back to your credit here.
Speaker Change: The $7 6 million and.
C&I charge off $7 1 million was one loan was that a.
I guess what type of loan was that was that that equipment finance on was that a grocery store with what was that.
Speaker Change: It's in the food manufacturing business, if you will and it was not entirely to 76, but it was primarily yes.
Speaker Change: So that that loan it.
Speaker Change: It had been a family business was subject to a leveraged buyout by private equity firms and <unk>.
Speaker Change: Things haven't gone according to oil.
Speaker Change: [laughter].
Laura Hunsicker: Okay, okay.
Speaker Change: Okay, Okay, and then youre, especially vehicle back down to $267 million, how much where charge offs there in the quarter.
Laura Hunsicker: And then your specialty vehicle book down to $267 million. That's great. How much were charge-offs there in the quarter? Not much at all. It was de minimis. Okay. All right.
Speaker Change: Not much at all it was de Minimis.
Speaker Change: Okay.
Speaker Change: Okay. Okay.
Laura Hunsicker: And then just wondered, can you, can you give us an update, the The office, the $11 million office loan that I think is supposed to... I think it's supposed to close in 2Q. Is that still the case? Yeah, it's under P&S and it's imminent to close sometime soon. I don't know exactly the timing, but it's fully expected to close. Yeah, and we're not anticipating any additional loss associated with that. OK, perfect.
Speaker Change: Alright, and then just wonder can you can you give us an update there.
Speaker Change: The office.
Speaker Change: The $11 million.
Speaker Change: Thank you.
Speaker Change: Kill.
Speaker Change: I think it's supposed to close in Q O Q.
Speaker Change: Is that still the case.
Speaker Change: How do you think it's under P&L and it's eminent to close.
Speaker Change: Time soon I don't know exactly the timing, but that's fully.
Speaker Change: Specced at the close.
Speaker Change: Yes, we are in.
Speaker Change: We're not anticipating any additional loss associated with that.
Speaker Change: Okay perfect that was my question.
Laura Hunsicker: That was my question. OK, great.
Speaker Change: Great and then.
Laura Hunsicker: And then I see here, I love that you give this update. You're ninety five percent pass rated on that, which is maturing. Where does your whole book stand in terms of pass rated? I think I last had that at around 90 percent. I don't know if you have that number refreshed or if that's still approximately the number. It's approximately 95%. Oh, for the whole book, okay. Yep. Okay, great.
Speaker Change: I see here I love that you give us update your 95% pass rated on that which is maturing what where does your DUC stand in terms of past rated I think I last had that at around 90% I don't know if you have that number refresh or sell approximately the number.
Speaker Change: Right.
It's approximately 95%.
Speaker Change: Oh for the whole back okay.
Speaker Change: No.
Speaker Change: Okay great.
Speaker Change:
Laura Hunsicker: up here. Do you have a spot margin for Mark? 323. Okay, and then I guess.
Speaker Change: Let me pause here.
Speaker Change: Do you have do you have a.
Speaker Change: That margin remark.
Speaker Change: 323.
Speaker Change: Yeah.
Okay, and then I guess.
Laura Hunsicker: Just sort of fast-forwarding, and I appreciate that you don't want to comment any further on the timing, but just fast-forwarding, the Brookline-Berkshire Hills merger is closed. Can you just talk a little bit about sort of a few things on a go-forward basis? So number one, obviously, there was that non-binding letter of intent from Company A to potentially acquire you 50% higher.
It's sort of fast forwarding I appreciate that you don't want to comment any further on the timing.
Speaker Change: Fast forwarding, the Brooklyn, Berkshire Hills merger is closed.
Speaker Change: Can you talk a little bit about sort of do things on a go forward basis. So number one obviously there was that non binding letter of intent from company a to potentially acquire use 50% higher I guess, how do you think about.
Laura Hunsicker: So I guess, how do you think about You know, what direction are you going to do as a combined company to get that value from where we are here to sort of 50% higher? That's my first question. And then my second question is, previously, you were pretty active in buybacks, you're obviously very well capitalized. Credit looks good. Obviously, many, many uncertainties at the moment, but we are seeing companies amp up the buyback, just taking advantage of stock price. Can you tell us a little bit about how you would think about fair buyback once this is closed?
Speaker Change: You know what's your <unk> are you going to do as a combined company to get that value from where we are here to sort of 50% higher.
Speaker Change: First question and then my second question is previously you were pretty active in buybacks are obviously very well capitalized I am proud that looks good obviously, many many uncertainties at the moment that we are seeing companies amp up the buyback taking advantage of stock price can you tell us a little bit about how you would think about share buyback one.
Speaker Change: That's correct.
Laura Hunsicker: Thanks.
Speaker Change: Thanks.
Paul Perrault: Sure. So again, we can't talk too much about adding any additional information. But I would certainly refer you back to the when we announced the transaction and the benefits associated with that transaction, particularly the operational efficiencies, the results and performance of the organization, excluding purchase accounts. because Purchase Accounting, as we all know, is moving in many different ways every day. But the benefits of getting the Purchase Accounting done as well will add significantly to to the performance. As you know, a lot of a lot of banks in particular have done restructuring of their investment portfolios to enhance the yields going forward in their margins going forward.
Speaker Change: Sure so.
Speaker Change: Again, we can't talk too much about.
Speaker Change: Adding any additional information, but I would certainly refer you back to the when we announced the transaction and the benefits associated with that transaction, particularly b.
Speaker Change: The opportunity.
Speaker Change: <unk> efficiencies.
Speaker Change: Results and performance of the organization excluding purchase accounting.
Speaker Change: Because purchase accounting as we all know is moving in many different ways every day.
Speaker Change: But the benefits of getting the purchase accounting done as well will add significantly to two the performance as you know a lot of a lot of.
Speaker Change: In particular have done restructuring of their investment portfolios too.
Speaker Change: Enhance the yields going forward and their margins going forward.
Paul Perrault: And here you're taking basically one organization so 11 billion dollars of a balance sheet and doing the Purchase Accounting on that and getting the benefits of that going forward. So I think you refer to that to see, hey, what is the returns on this this going forward? And of course, we're in the process of doing the conversion and the cost savings. And we we feel really, really good about the process so far.
Speaker Change: And here you are taking basically one organization.
Speaker Change: <unk> <unk>.
Speaker Change: $11 billion of our balance sheet and purchased doing the purchase accounting on that and getting the benefits of that going forward. So.
Speaker Change: You can refer to that to see what is the returns on this going forward.
Speaker Change: And of course, we're in the process of doing the conversion and the cost savings.
Speaker Change: We feel really really good about the process so far.
Speaker Change: <unk>.
Paul Perrault: Regarding stock buybacks, I'd say it's just too early to talk about that at this point. And we'll see what the capital ratios and how that will, you know, how the balance sheet is restructured as we come together. And the board will review what the capital opportunities are there and optimize the capital structure. And If my backs are appropriate, that will get discussed. Okay, thanks.
Regarding stock buybacks I would say, it's just too early to talk about that at this point.
Speaker Change: We'll see what the capital ratios and how that will have.
Speaker Change: The balance sheet is restructured as we come together and.
Speaker Change: And the board will review, what the capital opportunities are there and optimize the capital structure and.
Speaker Change: If if buybacks are appropriate belt that will get discussed.
Speaker Change: Okay. Thanks, and one more one more question with respect to capital management is it still the intent to take the Berkshire Hills.
Laura Hunsicker: And one more one more question with respect to capital management. Is it still the intent to take the Berkshire Hills? you know, pro forma combined company dividend up to a rate that's on par with where Brookline is currently. Is that still the plan? That's correct. Okay, great. Thanks, I'll leave it there.
Speaker Change: On a pro forma combined company dividend at a rate that's on par with where Brooklyn is currently is that still the plan.
Speaker Change: That's correct.
Speaker Change: Okay, great. Thanks, I'll leave it there.
Operator: Okay, Laurie. Thank you.
Speaker Change: Okay Laurie.
Speaker Change: Yeah.
Speaker Change: Thank you and our next question comes from Chris O'connell with <unk>. Your line is open.
Chris O'connell: And our next question comes from Chris O'Connell with KBW. Your line is open. Oh, hey Carl!
Speaker Change: Carl.
Carl Carlson: I just want to start off on the CRE runoff, you know, which, you know, I know you guys was planned, you know, wondering how much more is kind of earmarked, you know, to be run off over, you know, the next few quarters and if that, you know, will continue after the merger call. Well, excellent question. So we did plan for the, for the ICRE. runoff. We identified certain areas that we would not try to pursue certain customers or certain transactions. I wouldn't want to call them customers, but certain transactions. It was accelerated a bit in the first quarter, a little bit more than we had originally planned.
Speaker Change: Just wanted to start off on the CRE runoff.
Speaker Change: Which I know you guys was planned.
Speaker Change: Wondering how.
Speaker Change: How much more is kind of earmarked to be run off.
Speaker Change: Over the next few quarters and if that.
Speaker Change: We will continue after the merger close.
Speaker Change: Excellent question. So we did plan for the for the <unk>.
Speaker Change: Run off.
Speaker Change: <unk> certain areas that we would not try to pursue.
Speaker Change: Certain customers or certain transactions I wouldn't want to call them customers sort of transactions.
Speaker Change: It was accelerated a bit in the first quarter, a little bit more than we had originally planned.
Carl Carlson: So outside of that, I don't see a lot of reduction in that space to the magnitude going forward, but that was a planned approach to 2025. On a go forward, after the combination of the two companies, we'll be looking at that and where we stand and what we want to be focused on. I would say we're not focused on participating in commercial real estate transactions into the bank. We'd like to do the lead. Occasionally, we'll do that with friends and family, but that's not something that we would want to be doing on a go forward basis, and we'd be looking at the combined portfolio and looking at those types of transactions and not really pursuing those going forward.
Speaker Change: So.
Speaker Change: Outside of that I don't see a lot of.
Speaker Change: Reduction in that space to the magnitude going forward.
Speaker Change: But thats that was a planned planned approach to 2025.
Speaker Change: On a go forward.
Speaker Change: It will.
Speaker Change: After the combination of the two companies will be looking at that and where we stand.
Speaker Change: And what we want to be focused on wood.
Speaker Change: I would say, we're not focused on participating.
Speaker Change: Commercial real estate transactions into the bank.
Speaker Change: We'd like to do the lead.
Speaker Change: Occasionally we will do that with friends and family but.
Speaker Change: But that's not something that we would want to be doing.
Speaker Change: On a go forward basis, and we'd be looking at the combined portfolio and looking at those types of transactions and not really pursuing those going forward. So the timing around that and seeing that we rather preserve our capital or funding for for taking care of our customers in our footprint.
Carl Carlson: So the timing around that and seeing that we rather preserve our capital or funding for taking care of our customers in our book print.
Speaker Change: Footprint.
Chris O'connell: Understood. Thank you.
Speaker Change: Understood.
Chris O'connell: And, you know, appreciate the standalone, you know, expense guide in the comments, you know, for flat-ish into Q2. You know, just rough calculations, you know, you guys are, did a really good job, you know, here in the first quarter, you know, keeping expenses low. You know, if it's relatively flat into Q2, you know, that leaves about, you know, $11 million of growth in the back half of the year to kind of get towards that guidance number. Is there any, you know, particular dynamics, I guess, that are, you know, driving up the costs, you know, that much in the back half of the year?
Speaker Change: Thank you.
Speaker Change: I appreciate the Standalone expense guide and the comments for flat ish into Q2.
Speaker Change: Just rough calculations.
Speaker Change: You guys are doing a really good job here in the first quarter of keeping expenses low.
Speaker Change: And it's relatively flat into Q2.
Speaker Change: That leaves about $11 million.
Speaker Change: Of growth in the back half of the year.
Speaker Change: To kind of get towards that guidance number is there any particular.
Speaker Change: Particular dynamics I guess that are driving up the cost.
Speaker Change: That much in the back half of the year.
Carl Carlson: No, not at all. It just was our original budget. It was the budget. We're just doing much better. Both companies are doing much better on the expense side, as we're very careful on how we're spending money as we're going into this. Okay, great.
No not at all it's just was our original budget that was the budget.
Speaker Change: Better.
Speaker Change: Both both.
Speaker Change: Both companies are doing much better on the on.
Speaker Change: On the expense side as we were very careful in how we're spending money is where we're going into this.
Speaker Change: Okay great.
Carl Carlson: And And then with the conversion now, you know, booked, you know, for February 2026, you know, is that consistent with the original timing? I know it was a little bit up in the air at the time of the announcement. And does it change any of, you know, the cost save timings or shift them out a little further? Only a little bit. It's a little bit later than we had hoped it would be, and this has a lot to do with scheduling with providers and synchronizing all of the stuff that has to happen. And so some of the cost savings are going to be slightly delayed, but to the extent that both companies are managing their costs very well in the meantime, I'm not viewing it as having any material effect at that point, even though technically some of the some of the expenses are going to be longer than in the original plan.
Speaker Change: And.
Speaker Change: And then whats the conversion now booked for February 2026.
Speaker Change: Is that consistent with the original timing I know it was a little bit up in the air at the time of the announcement and does it change any of the cost save timings are shifting out a little further.
Speaker Change: Only a little bit it's a little bit later than we had hoped it would be and it just has a lot to do with scheduling with providers and synchronizing all of the stuff that has to happen and so some of the cost savings.
Speaker Change: We are going to be slightly delayed but to the extent that both companies are managing their costs very well in the meantime, I'm not viewing it as having any material effect.
Speaker Change: That point, even though technically.
Speaker Change: Some of the some of the expenses are going to be longer than in the original plan.
Carl Carlson: But at a lower level, it's gonna be harder to cut expenses that you're not even incurring. So yeah, so Paul staying at the timing, we're kind of front loading some of those those savings. And so economically, at the end of the day, I would imagine probably probably gonna be better off. Okay, understood.
Speaker Change: But at a lower level, it's going to be harder to cut expenses that youre not even occurring so.
So Paul staying at the timing, we were kind of Frontloading some of those savings and so economically at the end of the day.
Speaker Change: I would imagine would probably could probably could be better off.
Speaker Change: So.
Speaker Change: Understood.
Chris O'connell: And then, you know, on the, you know, I appreciate the kind of overall office commentary, you know, was hoping to get, you know, if you had your exposures to, you know, the Cambridge market and your overall lab exposure, and just, you know, any color around kind of, you know, what you guys are seeing or what you guys are hearing in terms of, you know, any, any, you know, market developments in those areas. It's a pretty small share of our book, you know, we haven't we haven't done very much in the Cambridge area that I can recall.
Speaker Change: And then on.
Speaker Change: On the.
Speaker Change: Appreciate the kind of overall of his commentary.
Speaker Change: Was hoping to get.
Speaker Change: If you had your exposures to the Cambridge market and your overall exposure and just any color around kind of what you guys are seeing or what you guys are hearing in terms of.
Speaker Change: Any any.
Speaker Change: Market developments in those areas.
It's a pretty small share of our book.
Speaker Change: We haven't we haven't done very much in the Cambridge.
Speaker Change: The area that I can recall call do you do you have a sense of the numbers.
Carl Carlson: Carl, do you have any sense of the numbers? It's approximately $50 million in labs. All in Cambridge? No, no, all over. So it's 50 million overall in lab in lab space. So it's pretty small exposure. We just haven't been exposed to that sort of stuff. We, we tend to bank real estate professionals who really haven't played all that much in the lab space.
Speaker Change: It's approximately approximately $50 million in lab.
Speaker Change: Portland, Cambridge, no no all over so it's 50 million overall in lab and lab space. So it's pretty small exposure, we just haven't been exposed to that sort of stuff.
Speaker Change: We tend to bank.
Speaker Change: Real estate professionals, who really haven't played all that much in the lab space.
Chris O'connell: Okay, great. That's all I have. Thank you.
Speaker Change: Okay great.
Speaker Change: All I had thank you.
Operator: Okay, next question.
Speaker Change: Okay Chris.
Paul Perrault: This concludes our question and answer session, so I'd like to turn the conference back over to Mr Perrault for any closing remarks. Thank you, Lydia. And thank you all for joining us this afternoon. And we will look forward to talking with you again next quarter.
Speaker Change: This concludes our question and answer questions I would like to turn the conference back over to Mr. Boyle for any closing remarks.
Speaker Change: Thank you Lydia and thank you all for joining US this afternoon, and we will look forward to talking with you again next quarter.
Speaker Change: Good day.
Operator: This concludes today's call. Thank you very much for joining. You may now disconnect your line.
Speaker Change: This concludes today's call. Thank you very much for joining you may now disconnect your lines.
Speaker Change: [music].