Business Overview
Brookline Bancorp, Inc. (BRKL) is a bank holding company based in Boston, Massachusetts that operates through its subsidiaries, Brookline Bank, Bank Rhode Island, PCSB Bank, and Clarendon Private. With a history dating back to the 1800s, Brookline Bancorp has established itself as a prominent financial institution, providing a comprehensive suite of commercial, business, and retail banking services to customers across the New England region.
Brookline Bancorp's roots trace back to the 1800s when it began as a commercial bank serving the Boston metropolitan area. The company has grown significantly over the decades through a series of strategic acquisitions, expanding its footprint throughout central New England. A key milestone in the company's expansion was the acquisition of Bank Rhode Island in 2005, which substantially increased Brookline's presence in the Rhode Island market.
Throughout its history, Brookline Bancorp has faced and overcome various challenges common to the banking industry. During the 2008 financial crisis, the company successfully navigated the economic downturn and managed an increase in non-performing assets, emerging as a stronger institution. In recent years, Brookline Bancorp has adapted to the low interest rate environment and increasing competition from non-traditional financial service providers by investing in technology to improve customer experience and operational efficiency. The company has also focused on growing its commercial and specialty lending businesses to diversify its revenue streams.
Despite these challenges, Brookline Bancorp has consistently maintained a strong capital position and a commitment to serving its local communities. The company's multi-bank structure and risk management practices have been integral to its success over the decades, allowing it to establish itself as a leading commercial bank in the Northeast.
Today, Brookline Bancorp operates a network of 63 full-service banking offices across Greater Boston, Massachusetts, Providence, Rhode Island, and New York, serving a diverse customer base that includes small- to mid-sized businesses, municipalities, and individual retail clients. The company's primary business lines include commercial real estate lending, commercial and industrial lending, equipment financing, and consumer banking products such as residential mortgages and home equity loans.
Financial Snapshot
As of December 31, 2024, Brookline Bancorp reported total assets of $11.91 billion, an increase of 4.60% from the prior year. The company's loan portfolio stood at $9.78 billion, with a healthy mix of commercial real estate (58.40%), commercial and industrial loans (25.60%), and consumer loans (16.00%). Brookline Bancorp's deposit base grew 4.10% year-over-year to $8.90 billion, with core deposits (non-interest-bearing, NOW, savings, and money market accounts) comprising 69.10% of total deposits.
In the fiscal year ended December 31, 2024, Brookline Bancorp reported revenue of $355.56 million and net income of $68.72 million, or $0.77 per diluted share, compared to $75.00 million, or $0.85 per diluted share, in the prior year. The decrease in net income was primarily attributable to a $10.10 million decline in net interest income, a $6.30 million decrease in non-interest income, and a $4.10 million increase in the provision for income taxes, partially offset by a $15.90 million decrease in the provision for credit losses. The company's return on average assets and return on average stockholders' equity were 0.60% and 5.67%, respectively, for the year ended December 31, 2024.
For the fourth quarter of 2024, Brookline Bancorp reported revenue of $91.68 million and net income of $17.54 million. On a GAAP basis, which included $3.40 million in merger charges, net income was $17.50 million with earnings per share of $0.20. The company's operating earnings per share for Q4 2024 were $0.23.
Liquidity
Brookline Bancorp maintained a strong capital position, with a common equity Tier 1 capital ratio of 10.46%, a Tier 1 leverage ratio of 9.06%, and a total risk-based capital ratio of 12.42% as of December 31, 2024. These ratios exceeded the well-capitalized thresholds set by banking regulators, providing the company with ample flexibility to support future growth initiatives.
The company's debt-to-equity ratio stood at 1.28, and it held $543.67 million in cash and equivalents. Brookline Bancorp has access to $1.30 billion in borrowing capacity from the Federal Home Loan Bank (FHLB) of Boston and FHLB of New York for advances and repurchase agreements. Total borrowed funds increased 10.40% to $1.52 billion as of December 31, 2024.
Proposed Merger with Berkshire
In December 2024, Brookline Bancorp announced plans to merge with Berkshire Hills Bancorp, Inc. (BHLB) in an all-stock transaction valued at approximately $1.14 billion. The combined entity will have approximately $24 billion in assets and 148 branch offices, solidifying its position as a preeminent banking franchise in the Northeast. The merger is expected to close in the second half of 2025, subject to customary regulatory and shareholder approvals.
The transaction will expand Brookline Bancorp's geographic footprint, providing access to new markets and enhancing its ability to serve a broader customer base. Additionally, the combined company is expected to achieve significant cost savings and operational efficiencies, which should translate into improved profitability and enhanced shareholder value.
Product Segments
Commercial Real Estate Loans The commercial real estate loan portfolio is the largest component of Brookline's overall loan portfolio, representing 58.40% of total loans and leases as of December 31, 2024. This portfolio includes commercial real estate loans, multi-family mortgage loans, and construction loans. The company employs seasoned commercial lenders and utilizes conservative underwriting practices. As of December 31, 2024, the largest commercial real estate relationship in the company's portfolio was $61.30 million.
Commercial Loans and Leases The commercial loan and lease portfolio represents 25.60% of total loans outstanding and includes commercial loans, equipment financing loans and leases, and condominium association loans. Approximately 41.70% of the commercial loans outstanding as of December 31, 2024, were made to borrowers located in New England, with the remaining 58.30% made to borrowers in other areas of the United States, primarily through the company's equipment financing divisions.
Consumer Loans The consumer loan portfolio, representing 16.00% of total loans outstanding, consists of residential mortgage loans, home equity loans and lines of credit, and other consumer loans. The company focuses its mortgage and home equity lending on existing and new customers within its branch networks in the Greater Boston, Providence, and Lower Hudson Valley markets.
Deposits and Funding Brookline Bancorp's total deposits increased 4.10% to $8.90 billion as of December 31, 2024, with core deposits comprising 69.10% of total deposits. The company's loan-to-deposit ratio was 109.90% as of December 31, 2024, down from 112.80% as of December 31, 2023.
Financial Performance and Outlook
Brookline Bancorp's loan portfolio increased 1.40% to $9.78 billion as of December 31, 2024. The company's credit quality metrics have remained relatively stable, with nonperforming assets at 0.59% of total assets as of December 31, 2024, up from 0.40% as of December 31, 2023. The allowance for loan and lease losses increased to 1.28% of total loans and leases as of December 31, 2024, compared to 1.22% as of December 31, 2023.
For the fourth quarter of 2024, loans grew by $24 million, and customer deposits increased by $116 million. The company's net interest margin increased by 5 basis points to 3.12% for the quarter.
Looking ahead to 2025, Brookline Bancorp provided the following guidance:
- Net interest margin is projected to increase 4 to 8 basis points in Q1 2025 and continue to improve throughout the year. - Loan growth is expected to be in the low single digits for 2025. - Cash and securities combined are expected to represent 9% to 12% of total assets. - Deposit growth is anticipated to be 4% to 5%. - The first quarter 2025 margin is projected to fall within a range of 3.16% to 3.20%. - Noninterest income is projected to be in the range of $6 million to $7 million per quarter. - Expenses are expected to be $247 million or less for the full year 2025, excluding merger-related costs. - The effective tax rate is expected to be in the range of 24.25%.
Risks and Challenges
Like any financial institution, Brookline Bancorp faces a variety of risks, including interest rate risk, credit risk, and operational risk. The company's commercial real estate and commercial and industrial loan portfolios, which account for a significant portion of its overall loan book, may be vulnerable to economic downturns or changes in market conditions. Additionally, the proposed merger with Berkshire Hills Bancorp introduces integration and execution risks that the company will need to navigate effectively.
Furthermore, the banking industry as a whole continues to grapple with the ongoing impact of the COVID-19 pandemic, which has resulted in heightened credit risk, lower consumer and business spending, and increased regulatory scrutiny. Brookline Bancorp's ability to navigate these challenges and maintain its strong financial performance will be critical to its long-term success.
Conclusion
Brookline Bancorp has a rich history and a strong presence in the New England banking market. The company's diversified business model, conservative risk management practices, and well-capitalized balance sheet have enabled it to weather economic cycles and deliver consistent financial performance. The proposed merger with Berkshire Hills Bancorp represents a strategic opportunity for Brookline Bancorp to expand its reach, enhance its competitive position, and unlock additional growth potential. As the company navigates the integration process and continues to execute its strategic initiatives, investors may find Brookline Bancorp's story compelling.