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BRKL Brookline Bancorp

Participants
Marissa Martin Associate General Counsel
Paul Perrault President & Chief Executive Officer
Carl Carlson Chief Financial Officer
Robert Rose Chief Credit Officer
Mark Fitzgibbon Piper Sandler
Laurie Hunsicker Compass Point
Collyn Gilbert KBW
Call transcript
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Operator

Good afternoon, everyone, and welcome to the Brookline Bancorp Incorporated Q1 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please also note, this event is being recorded.

At this time, I would now like to turn the conference call over to Marissa Martin of Brookline Bancorp. ahead. go please Ma'am,

Marissa Martin

been and executive and everyone. on presentation, of Carl hosted and Relations Jamie, afternoon’s Carlson. SEC. our will M. Paul call the we A. earnings page be has brooklinebancorp.com, website, release which Brookline our with good you, the Yesterday, This Bancorp’s afternoon, by issued Investor filed team, Thank is and available Perrault

being begin, done presentation from please locations. different we Before is note several this

your delay respect the refer So factors materially business from two understanding. actual technical condition, for Also forward-looking of or patience differ if refer disclaimer. that results appreciate earnings contain with and Commission Bancorp. to to statements. call forward-looking statement our we statements results a to also presentation may Please there's which contain and could Securities of Brookline Exchange filings and This cause risk to our problem, financial with page of forward-looking operation these please our other the

made trends Any of predictions. performance made understanding and results during are results be measures on future Brookline actual Bancorp's as you only or non-GAAP to relied financial assist measures should in references not and presentation to this

see and For GAAP a our reconciliation earnings earnings comparison please release. to

us of Brookline I'm pleased Bancorp's If on to page you the can introduce Perrault. Paul President join three earnings presentation and CEO

Paul Perrault

challenge at and time. physically, a day. "may empathize some outstanding of of in interesting with times commitment have live those appreciate there's consider and emotionally and many to But We will we during The middle times" a or who you those crisis. blessing arises curse often certainly each very Thanks, lived quote Marissa recognize in rise beginning all. interesting who are who an good and the some so a efforts every times know sacrifices, also us afternoon, end. some suffering this And financially which and of

was unemployment worldwide dollars on a trillions interest on monetary zero radar for January not the the coronavirus near the on XX, into economic and we in rates all surging were a earnings while pandemic considering fiscal sharply economy, of our screens, claims the need and basis, going assistance. again of last to near our call weekly At millions of shutdown complete

On first February confirmed in Massachusetts of was the of from a its Massachusetts had a student X, just coronavirus, who the University case report nation Wuhan. state case. second to Massachusetts returned

its Governor, March returning of to first On to Baker by XX. confirmed Gina which Governor, Island a Charlie that trip two were was March declared X, school Rhode a Raimondo X, Massachusetts On followed on February. March in Rhode related and state Island cases Italy emergency

All stay-at-home Massachusetts those a permitted As and doing with retail work. Island restrictions so of in essential are Rhode that today and non-essential environment report are both closed to in with only employees to to remain businesses allowed designated operating are place. open

shift which capabilities, were well and VPN have advance in we employees were their our to to to able place We the families. due is policy the and page on I safety will most few the important that four health areas preparation a you and and in presentation. touch thing strong to of our on early Zoom see can environment. initiatives work-from-home current and to fortunate to response our very this related on and pandemic The a of just in

company's are non-retail remotely have accommodate at a children employees remain for or flexible of ill. effectively. the approximately At possible caring may member who as those We working present, XX% who home as and to family be

at traffic at the it the While quite looking streets low, drive-up in is from wouldn't know you the branches.

lobby promote bankers and the access approach the by bank social distancing a with initiated customers. both appointment minimal for further to We

sanitizers while were and ensuring staggered and time. to also distributed schedules the enhanced of cleaning throughout employee exposure full into hand disinfectant went staffing continuity. place wipes types minimize We business organization All

All and provided required with have to are risks masks company been travel to employees office to those to who both customers. customer-facing and employees minimize health

furloughs no operations. and particularly call positions, been hiring have key have our in and actually We for had center

new have also businesses never busier to bankers and management cash near-term banking any concerns. with address Our been flow online in customers services and assisting existing and while retail working cash

of While the changed has institution, same. over much has the much couple last months the remained for

A we make company's mission For actions and a times and and A up day to day culture basis, a organization ensure, the company's in we the attitudes for here they reach to out our or of culture value the of continue on customers, statement. know are in out in bad. its is is who sum them. those good

of proud of adaptability we and culture, leadership. empathy call very They and everything colleagues for what one teamwork we is four customers company's our also truly core am I And do. which of our display. been on in accountability, have

will results. the first review I quarter over will who Carl, you company's turn now to

Carl Carlson

Thank you, Paul.

defined this asset crisis, a of excellent record reserves XXXX and base. year in robust strong strong a and capital this and balance a entered in quality, fortress company Our sheet, by earnings, banking position commercial growth strength, consumer and

ways for by a originations are start loan promising headed we to supported solid good deposit many and fee growth In XXXX, income.

Brookline consolidation First and merger mid-February. the completed successfully in Ipswich into of Bank, also We Bank

provided $XX.X the We quarter, preparation weekend highest and year. On global $XX.X pandemic became net response of the for priority. prior for million a statements data quarter income which our recognized driven was prior our we've X a slide our for loss and after to summary losses quarter, provision of Soon by conversion, million. the of the credit

were distancing, the was implement standard, many shifted from of is our economic loan on to forward the based economic forecasts. using our over the businesses losses estimating known as estimating nearly in provision the decision to the social and activities activity, CECL, continue in significant as which probable commonly accounting deep Also and schools decline potential future models, all events cancelled. losses new life closed practice and communities increase and due rapid and to significant The

insurance very compensation decreased as a And associated from fees, higher and seasonality revenue benefits. operating pre-tax strong million, and expenses Our by QX. in driven interest performance with net FDIC increased, net declined and income professional pre-provision $X.X

illustrated net X, $X.X points. income interest basis as margin interest As XX compressed declined net page million, our on

of prepayment on of fees in yields basis $X.X the declined LIBOR and basis of of contributed increase Linked-quarter for $X.X the in as accounting in portfolio yield the points significantly pricing billion amortization adjustable declines the decline, fees, loan well in the over in an loans rate was in million decline XX prime quarter. and The as XX points, by in sharp purchase $XXX,XXX impacted as rates. deferred $XXX,XXX loan

of of XX basis consisted deposits. in And XX decline which liabilities cost decline declined points, basis XX of a the an cost in point Overall, cost borrowings. interest-bearing our the point interest-bearing of basis

X% could of solid and you slide or our $XX me X, million we or loan If balance deposits an $XX sheets. can annualized. quarter annualized you bit follow reference first basis growth comparative, grew In had to on summary the X% million

million is the notable in losses unfunded loan million the Also for $XX growth and in allowance the $XX related growth for loans. reserves

position clients. stock value the needs book quarter the tangible to our well We the meet $X.XX. loss repurchase by cash also our modest The added significantly and securities as as ourselves in per share of potential reduced financial to activities to our prudently

the our growth estate loan of net real have we savings. growth, driven real strong the estate XX% of reflects demand first non-interest-bearing and while Commercial continued deposits quarter and composition deposit estate, makes commercial net loan loan categories. was our both up includes X Slide commercial in In investor and to deposit by significant real growth portfolio. and which owner-occupied

DDA of deposit represents XX% our base.

impact near-term million points losses me illustrated coverage total representing you CECL, a $XX.X the If XX for of to total the At credit for follow allowance reserve slide we of the estimating losses. of year-end, our commitments. XX, unfunded in funded loan credit and was basis of implementation have reserves

$XX.X in for the be losses of the coverage based the implemented of formulated There Xst based losses or portfolio, over incurred of for on performance. and are $X.X to was were January accounting forward-looking unfunded loans components, renewals new for was the on two or credits. basis requires probable million forecast. loan Accounting points economic historical on estimates standard losses reserve on allowance on which loan, reserve The a XX outstanding, million which life

use ImpairmentStudio develop well our as Moody's as forecasts Moody's to economic We estimates. chose to

also known XXXX as basis the total of chose as models the loss to banks reserve our since year-end, credit was to performance forecast we determined $XX.X total to Northeast or of credit loans. loan group calibrate loss or too prudently XX also be losses for ACL unfunded allowance historical peer and We infrequent used funded economic points the losses XXth December of considered million low. for of and data At the a the too and

most was wait of the of XX% ACL from version increase or we This points of forecast, to methodology. which severe. This was basis less The Moody's estimate. million coverage of updated was March as one our economic to from using prior increase XX on $XXX.X basis our day million the commitments XXst, instead $XX.X X, decided At million, XXX $XX.X an the accounting for increased calculated from total points. mid-March April an

additional by reserve On experienced and highest of at funded total in XXX XX our construction the portfolio. rising allowance $XX.X our portfolio coverage in and requiring on selected details XXX points from on commercial we key the of slide The provide an quarter. of real commitments March subset change estate our coverage, XX, component to basis million segments

X.X% had coming of the XXXX XX.X% X.X% the full the real loss significant X.X% April from We've at in end It deterioration to was compared between The also key quarter economic also provided Unemployment April forecast in variables down a year to for December economic significant December at commercial expected illustrates XXXX driving the the X.X% some year. estate estimation forecast. our which expected to showed the forecast in forecast. price be deterioration peaking the index models. second unemployment of in the the the forecast before as the to from

included On and breakdowns commercial loans real and for within we slide provided major reflect business. commercial real million estate commercial XX, loans equipment finance Note we segments. have owner-occupied of loan our have our $XX also estate industry

real of our commercial billion outstanding comprises Investment loans. $X.X Apartments represent our of estate segment. XX% largest

by provide XX%. You can CRE retail office at portfolio XX% comprise at of investment followed and -- XX% our

manufacturing Food XX% Our at by commercial billion of is Lodging and and XX%. commercial XX% represents followed $X.X portfolio within our or portfolio

Equipment – focus $X.X loans Consumer billion cards, our no of X one credit airlines, represents consumer family finance point a billion direct have or of fitness equity student and XX% on portfolio is and Note, lending, led of is truck auto home which to laundry, we comprised to at loans. tow exposure X $X.X loans equipment. by residential energy.

and vintages presentation for information quality. appendix presentation our details loan of also -- credit reputation and illustrate the including the asset values strong which We've about metrics some in portfolio for underlying included various the underwriting the to the of culture providing

We've as maintained Slide activity, to the respond same deferment well into commitment to crisis. insight payment to illustrate our portfolio XX loan prudently segment needs provide this customer during on our as

interest. on impact no We had modifications accounting relief or have these on provided credits on our to of ratings or loan for either assets And related XX-day at interest these these short-term principal accrual credit or time. principal payments and internal this

balances $X outstanding for a equipment with XX% XX. our The categories loan of were in loans of approximately total as units. payment portfolio modification largest finance of granted impacted April billion were the In

some deferred information by selected We are also payment segments we tracking. provided

real mentioned our investment are of component commercial apartments earlier I our estate largest portfolio. As

attention It is we an to. area close pay

requests or need for deferment. little seen have We

catch healthcare is cleanings for as accelerate Another at and and where example with are an procedures category, that as basically activity here closed this to doing provide offices few up We will expect emergency certainly offices only we also dentist deferments to on requests procedures. other need time.

also and restrictions accidents the unfortunately want As to donuts in back, breakdowns resume. these and laundries expect are bounce down. good their lifted health, focused businesses basically we're be be to I to on shut and the and to economy to stay-at-home highlight busier before we folks all coffee well-run are traffic, standing

the XX funding XX. of it’s access facilitating April Slide over payroll for balances originated The SBA also protection on And XXXX have active April has we loans to with of $XXX Friday before company-funded, program PPP XXth, show on as X. which clients loan the first been our closed million. very first round the on company of We Friday the

be eligible these over also and activity next reporting and loans the weeks quarter. we will of forgiveness next tracking will on be for Portions several the

teamwork organization. tremendous every the pure We are and level at proud attitude, very in do-whatever-it-takes of saw adaptability and department every across commitment we the

at When Monday we the as would program reopened you expect were on back it.

during customers since we be the helping first the in However successful significantly were less, will very round. volume our

As well-capitalized shown as and on $XXX we XX of own well internal to requirements March capitalized operating targets. regulatory capital over had slide buffer regulatory exceeding XX, our standards. the be very At policies well company or as continues million X.X% all

previously quarter, million. any During million that further company plan the buyback was suspending time on first announced the to Board $XX $XX completed shares from million. announced purchases of had it expanded $XX.X March the at repurchase and for the The stock XXX,XXX XX

a the quarterly quarter continued to dividend as May May provides of payout, on be approved which will which this XX history on Slide per a regular our XX. of record XX Board $X.XXX share paid stockholders of dividend

a approximates remains dividend the remainder for a be the year. share XXXX yield. would constant increase and Full X.X% of per dividends currently $X.XX Our year X.X% over

Paul. This turn formal comments back to I'll concludes my and it

Paul Perrault

Carl. Thanks,

and McCurdy, is session our Brookline expertise represent very is and commitment leadership, Chief they Robert question-and-answer gentlemen, organization. fortunate our Chief particularly, I to Counsel. Officer; Michael experience these General this I'm and Credit the during time for have the see happy and us the Joining of say across the to Rose, Officer Risk today and

will now we take questions. And

Operator

Ladies Mark And Sandler. first from comes Instructions] at go ahead with Please our today [Operator Fitzgibbon from and this Piper the question-and-answer. question. we’ll begin gentlemen, time question

Mark Fitzgibbon

Hey, guys. Good afternoon.

Paul Perrault

Hi, Mark

Mark Fitzgibbon

could -- if wondered slides. you gave I detail great the guys off first you on

potential you distressed you the you. as are the would It portfolio wondered segments content could feel the where where life I think the if concerned you you're of makes most with maybe be though loss thank areas us So where areas most greatest. easier. borrowers and/or our share or

Paul Perrault

Bob?

Robert Rose

there. Hi,

fallout of I a relatively bit You extremely and XX% tend JCCs segment, difficult to portion think seem hard things health precisely. about Planet that the the that components know, times. are other to in studios. of will would to things they to concerned as that pinpoint about when have ones low-priced you that have such middle-priced and won't in that But and YMCAs exercise return our and Fitness equipment of it's higher-priced It's a fallout. quickly and not be finance our the

say would bit. would a us I So the segment portfolio a fitness concern little of

home in can exposure, is all or modest recreation-oriented. we ferry. in at It And have hotel XX% is $XXX while New size vacation-oriented a you those about to that places a benefit in canceling people they summer of to about from million get but car be England we customers Our where to type get have home fly to and observed plans, to are some cancellations where hopeful -- want be people will airfare quickly. able vacations closer

that are portfolio The be business of aren't but this other hotels, that many of them. part in would all they There area.

be that So stand would those out. two

Mark Fitzgibbon

say thinking And moving guidance super Okay. of provision parts could -- be to second answer. provide such. is this and about the There's I would how difficult helpful. and know any Great. a And lot are you very in But quarter? the then you

Robert Rose

close customers are attention Well, are paying fortune I'm expert, care a how not to doing. and we not but I'm a health teller our

them highlighted XXX also the talking the that key program with We've XX. a are project all thinking. days to to on and customers page XX what time. trying with them days segments the were of talking in are out especially We're We forward as instituted

this helpful gain forecast So hit cannot that I late in find in because say. will this quarters. believe we provisioning very I I we we've a of really one took could achieved latest do think we've the that level altitude be that coming

Paul Perrault

these models match we we that for came through it something not is try And I in ours with but and the which they exposures portfolio up treating It's took harshly, add for is appears Moody's been came door everybody. shape. they as say it outcome. little and that harsh new is would we've it did to here which got very Mark actual a good have very, took to our in new is that as Moody's We us. our experience certainly CECL with

Mark Fitzgibbon

today you ride do on like based to, you of, And have what storm? feel sort out enough the Thank Paul then you. know capital Okay. you

Paul Perrault

Yes.

Mark Fitzgibbon

outlook modeling. margin to the then rate. the Carl about as just your Thank you. for effective the lastly and things And Okay. thoughts curious I'd two on be tax

Carl Carlson

Sure.

that lot just so this the – the any on internal variability we've time. models here. with margin much running. and out external got with margin been so we've Regarding a of uncertainty I'm not There's much guidance at going

can grown lot see, loans as well. As with of with that also quite the we've you balance a sheet bit putting a securities. We're on offsetting a cash deposits in and quite and bit

on you is of give not I'm trying kind you work to your margin of a that, up and comfortable variability, – own to we'll there's estimate an to can really So what be. numbers try lot in going but the

Paul Perrault

rate. Tax

Mark Fitzgibbon

Okay.

Carl Carlson

tax CARES We going to benefit rate, item did have the a is about associated quarter XX%. $XXX,XXX rate that with around be of discrete Act. was Tax right this a

recognize So quarter. impact we this an which were to had that able on taxes

Mark Fitzgibbon

Thank you.

Operator

Our go next Please your question Point. Compass comes from Laurie Hunsicker ahead from with question.

Laurie Hunsicker

afternoon. Good Hi. Yeah.

echo deck really wanted comments. Just It's helpful. is transparency. appreciate to your Mark's amazing. I really This

Just here. one question quick

forth just Just looking want and kind got XX to slide and between back I've XX right. this sure, of make slide I

exposure that Donuts primarily $XXX million Dunkin' is C&I? of So

Robert Rose

Yes. is. it Yes,

Laurie Hunsicker

Okay.

So that's – okay.

And XX. guess what's so that on million correct? page that's found that in embedded $XXX Is I

Robert Rose

strips I small. outside real like Dunkin' sometimes is will estate Food rather the exposure Dunkin' extent Correct. better the But they Dunkin'. of operators part there's there. operate of would and some included in Laurie that lodging say to for by Correct. dominated that that themselves to And the buy be but is little ones restaurant

Laurie Hunsicker

Thank you.

Carl Carlson

exposure. the for or like slide XX represents slide restaurant more exposure. It XX% XX% catch that of you did on deck, It's the something XX%. really on thank our food comments Laurie you but

Laurie Hunsicker

it. Got

you. Thank Perfect. Okay.

Operator

KBW. ahead question. next Gilbert comes Our go Please with from your from question Instructions] [Operator Collyn

Collyn Gilbert

afternoon, Good Thanks. everyone.

Paul Perrault

Collyn. Hi,

Collyn Gilbert

reserves. Just starting the on

what you which took big within assumption one just as I assuming took using the and little build, wanting specifically was book. the that it conservative was like know really the – of it just on by – part the guess obviously maybe to Moody's I great, reserve the kind but found the dig is there? was just very book, reserve surprised a forecast. I within more. a a build understand stance And into and that guys the I just as sounds bit I was build reserve simple don't I You interesting thought But that CRE CRE

bit there. little more just thoughts If give you a color the to could

Paul Perrault

Actually, I than to But, you answer you there? I'll a really let it. as may as described. It's have do Bob been simple more surprised Bob color you. little give want

Robert Rose

As you know, it and did little a noticed, punitive that – surprised on surprise us you if well. us. And as construction on it's commercial

are come that, and you have of difficult loss. and There's form be take will offer odd that that assuming to they something that portfolio. nothing particularly no think I finish some one up to when it used in you'll or

build-to-suit fact, that's people used $XX In million be it's to there's going is completed. it about by of when

makes don't lot part, that So I a sense. of think

be our They in fairly might workforce As down close might to range. when rent the estate the to be workforce-related, activity, appear through real of that XXX% to behaving that range part other that XX% part you that well part be student the them. b, a parts of portfolio to might as are low the be collection in go collections as the and

but is assets think there's So, retail use we our things, don't segment beginning the particularly and or request The are to mixed use pleased slightly segment way we're other usually not estate anything see there, holding with about some good Collyn. retail real mixed the things up.

Collyn Gilbert

Okay.

helpful. That's Okay.

Paul Perrault

in around a we of It is legacy do estate here. business and expertise have our real lot

Collyn Gilbert

Yeah.

Okay.

versus number what between Okay. any have adopted differential peers the Moody's had your reserves guys March? April chance of been Good. adopting you Most the you March. adopted have the And then the baseline would

of you So as one everybody. curious, that I'm ahead can you be. you just if said, quantify would what step maybe difference

Robert Rose

It was virtually was virtually it the same. –

moved the As Carl's to it were the at all January middle number Collyn. surprised slide. the in much hadn't – that's X-X We that bar

Collyn Gilbert

Okay.

to it's I just interesting. And out then, guess Okay. I the comments. round mean

being -- a segment are a down is step on ultra really a it where fair today, these seeing where you guys stock if the take bit ultra your back not as side disclosures yet that Even erring are your necessarily you with -- you're lot -- that's exposure, I of just of kind seems but trouble. of industry as you conservative. have So

Paul Perrault

a place aside identifiable I you great performance, think when a quarter to new different. bit CECL we will. a about the of the That's which Collyn. margin And robust go second provisioning pretty that's past and squeeze what's except think is a first right repeat quarter, put policies the the for kind if for manageable a as little you forward, of is in our provisioning and pandemic fourth everything

Collyn Gilbert

have and a of -- student it have now. I to just concern that on looking you guess institutions. one you exposure you housing the mentioned what get of I that? being into mean that through kind But is Okay. of how to is, to of to question I'm on education that a other I just of as Obviously all have the paid a move exposures seeing One I'm – before you're -- still Bob. is you hot going might on have you bed. NIM area last question But rents lot part just know academia we higher academic Do I guys segment? to perhaps sense this the sorry, look you are looking fall. the

Robert Rose

dragnet. Yes. you Yes. a but you Look, a to this couple here, of give that going I'm is numbers to tell I'm going

ZIP Somerville. at colleges and in We the looked have for and Tufts Boston in around the Providence, codes Cambridge in over

use mixed it pick million $XXX to which of of is and a component about up have exposure dragnet pure exposure. that so-called worth those retail a And million $XXX in about CRE it. would would So of of ZIPs apartments dragnet

call do what that of to mixed will tell with are that education. who students in go who that pure million dragnet in is and lots nothing Cambridge you I to $XXX you live might XXX Square over people there that So, with But have Harvard a and and roughly.

things exposure, we as think nexus correct but is it the that that as closely not the of is sort X:X So watch that unfolds. of year will pure of to

Collyn Gilbert

lastly, great. you're of give understand control any Okay, the do seems which are then Carl on kind desiring over I sitting at And have a I room see guidance, segment there'd bit little to to like that two guys trending? seems NIM CDs funding but the side just side. one more not how you move you with do guess like It be still you that on of XX. I still lot mean just deposit like a really

Carl Carlson

Well, of we and true, we'll that's we'll have and maturing -- repricing see that a benefit Certainly but be going forward. down. are that lot things

Collyn Gilbert

you tell Okay. CDs? your one-year where were CDs either you're on where March of at your the where Can -- new today us putting CD rates or end

Carl Carlson

think bit the as for more at or liquid more disappear. One-year in even of here lower we're and with Folks this look that are CDs, range points -- maybe XX and in CDs got -- we point. there getting basis less I deposits. may appetite with seeing we're specials about be and little even a not more We we at the

accounts deciles. it Just deposit and give sense deposit little you individual on our accounts to we at look break that up a into

and or And very saving And the lot it of in basically we're in the you're seeing significantly stimulus February. that's of as put coming holding CDs getting category And move just and I savings. money conservative since think, basically as we're being really, every market liquidity. seeing government more money more people and that's well a people out grow

Collyn Gilbert

Okay.

Thanks great. it there. leave That’s I’ll everybody. Okay.

Operator

any this to gentlemen, and the ladies conference showing additional And turn remarks. Instructions] for over like time at questions. back closing Perrault call no Paul to [Operator I'd

Paul Perrault

talking quarter. Thanks, Jamie, we and and thank all look for to next you us you forward joining with today

Operator

you does today's that thank presentation. do Ladies and gentlemen, joining. We conclude for

disconnect now your lines. may You