Growth in deposits and lending powered Brookline Bancorp, the holding company of Brookline Bank, to record earnings in the second quarter, as it prepares to greatly expand its commercial lending portfolio.
Net income in the second quarter was $14.9 million, a 14 percent increase from the second quarter of 2016. Earnings per diluted share were $.20, up 10 percent from this time last year.
Net interest income for the three months in the second quarter was $55.6 million, an increase of $5 million from the second quarter of last year.
Total assets reached $6.66 billion in the second quarter, up more than $360 million since this time last year. Total deposits increased $58 million since the prior quarter.
“During the quarter, we generated steady growth in loans and deposits with a stable net interest margin,” Paul Perrault, president and CEO of Brookline Bancorp, said in a statement. “We look forward to continued success in the second half of 2017.”
Non-interest income at the end of the second quarter sat at $4.5 million, down from roughly $5.4 million at the same time the year before, but also $11.4 million less than non-interest income in the first quarter.
The reason for the sharp drop in non-interest income is a result of Brookline Bancorp’s large one-time revenue gain in the first quarter.
The company sold shares of common stock it received from Community Bank Systems when it acquired Northeast Retirement Services, where Brookline had 9,721 shares of restricted equity.
Growth In Commercial
Net loans and leases reached $5.5 billion in value for the second quarter, up $77 million from the first quarter of 2017 and more than $270 million since this time last year.
Commercial real estate loans in the second quarter reached $2.94 billion at the end of this quarter, an increase of $10 million year-over-year. Other commercial loans reached $1.59 billion, up $19 million year-over-year, and consumer loans, which include residential mortgage loans, reached $1.01 billion, up $24 million year-over-year.
The increase in net loans comes as Brookline pushes to grow its commercial lending portfolio.
The bank earlier this month announced the hiring of Peter Costa as senior vice president to create and lead a team of middle-market construction and industrial bankers to manage a new lending office that will be opened somewhere south of Boston.
“We have a well-established C&I customer base within our bricks and mortar footprint,” Darryl Fess, president and CEO of Brookline Bank, said in a statement about the hiring. “It is Peter’s charge to take our brand of high-touch commercial banking to currently unserved territory.”
Brookline Bancorp CFO Carl Carlson said in an earnings’ call that the bank’s portfolio is currently 30 percent commercial, experiencing some real growth recently. He also confirmed that loan growth in near future quarters would likely increase to $100 million or more.
Also in the call, the question was raised of whether Brookline Bank would make any acquisitions with the $82 million in stock offerings the company raised this quarter.
“It’s possible; it’s just not probable,” Perrault said about making a move in the short-term. “I don’t think there is too much noise out there right now. We were thinking of a three-year horizon when raising capital.”
Taxi Medallions
Questions were also raised about Brookline’s taxi medallion loans, a small part of the bank’s overall portfolio, but still of concern in past quarters considering the plummeting value of the medallion.
The company increased its allowance for loan and lease losses by $12.4 million in the first quarter of 2017, mainly due to its taxi medallion loans.
The total loans and leases secured by taxi medallions that were placed on nonaccrual increased to $14.2 in the first quarter from $13.4 million at the end of 2016 due to the two restructured taxi medallion relationships placed on nonaccrual.
But at the end of the second quarter in 2017, Brookline Bank recorded a provision for credit losses of $0.9 million for the second quarter, compared to $13.4 million for the first quarter, primarily because of a $12.3 million decrease in specific and taxi medallion related reserves.
The taxi medallion loan portfolio, according to Carlson, is currently $30.4 million, half of which are performing and the other half which are not. The bank currently has $6.1 million in reserves against the non-performing loans and $1.8 million against the performing ones, he said.
Carlson also said there have been very few charge-offs and that most people with taxi medallion loans are currently paying something to the bank.
