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Operator: Good afternoon, and welcome to Brookline Bancorp Inc. First Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I’d now like to turn the conference over to Brookline Bancorp’s Attorney, Dario Hernandez. Please go ahead.

Dario Hernandez: 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. This afternoon’s call will be hosted by Paul A. Perl and Carl Carlson. This call may contain forward-looking statements with respect to the financial condition, results of operations, and business of Brookline Bancorp. Please refer to Page two of our earnings presentation for our forward-looking statement disclaimer. Also, please refer to our other filings with the Securities and Exchange Commission, which contain risk factors that could cause actual results to differ materially from these forward-looking statements.

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

Paul A. Perl: 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 GAAP basis, which includes merger charges of $971,000, net income was $19.1 million resulting in earnings per share of $0.21. The contraction in our loan portfolio of $130.6 million is intentional as we reduce commercial real estate exposures while maintaining our focus on important customer relationships. 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 markets.

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. In December, we announced the planned merger with Berkshire Hills Bancorp and I’m delighted to tell you it is moving along very nicely. I will now turn you over to Carl, who will review the company’s first quarter. Carl?

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. 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 quarter end. 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¢ to $11.03 from December 31. 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. 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.

Provision 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 for. The reserve coverage slightly increased to 129 points of total loans. 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. 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. Noninterest expense excluding merger charges was $59 million in 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 nontax deductible, contributing to a higher effective tax rate.

Excluding merger charges, operating EPS was $0.22 per share. Yesterday, the Board approved maintaining our quarterly dividend at $0.135 per share to be paid on May 23, to stockholders of record on May 9. Looking forward, the interest rate environment, the 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 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.

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 $5 million 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 nondeductible merger charges. 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 arise. On April 8, the S-4 and proxy went effective with the SEC and mailing commenced to stockholders of both entities.

The stockholder meetings for both Brookline and Berkshire are scheduled for May 21. We anticipate closing the transaction in February which will include the merger of all four bank charters. 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. 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. As you can appreciate, we are unable to comment further on the transaction beyond what has been publicly disclosed.

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

Paul A. Perl: Thanks, Carl. And Lydia, we will now open it up for questions.

Operator: 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 to speak. If you change your mind or your question’s already been answered, you can withdraw from the queue by pressing star followed by the number two. Our first question today comes from Mark Fitzgibbon with Piper Sandler.

Mark Fitzgibbon: Hey, guys. Good afternoon.

Carl Carlson: Hi, Mark. Hey, Mark. I was just curious, and this may be a question for you, Carl. Trying to get a sense for the impact of a 25 basis point Fed rate cut.

Mark Fitzgibbon: What do you think that means for the margin on a standalone basis pre, you know, pre Berkshire Hills?

Carl Carlson: 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 at the short end, that would certainly be beneficial to us. But, again, it’s highly dependable on what the market is like and what is going on with the market and why that cut is happening. But, generally, you know, just from a modeling perspective, a cut in short-term rates and longer-term or midterm rates staying where they are, that’s beneficial.

Mark Fitzgibbon: Okay. For your guidance, though, of 48 basis points up, that doesn’t assume any Fed rate cuts. Correct?

Carl Carlson: That does not reflect Fed rate cuts in the second quarter.

Mark Fitzgibbon: Okay. 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?

Carl Carlson: No. That was a large C&I credit. It was about a $13 million credit, 13 and change, that we had a specific reserve for that was around $5 million already on the books. There’s a little extra provisioning that was required to cover that full charge-off. We actually it was a sale of a note.

Mark Fitzgibbon: Okay. 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, the tariffs or not so much?

Paul A. Perl: 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 has become part of the underwriting process to see how that might have affected things. And so it is having a dampening effect on everything as we go forward. But there’s nothing tangible yet.

Mark Fitzgibbon: Okay. Thank you.

Operator: Okay, Mark. Our next question comes from Steve Moss with Raymond James. Please go ahead.

Steve Moss: Good afternoon.

Paul A. Perl: Hi, Steve.

Steve Moss: Just some hey, Paul. Just maybe on loan pricing here. Just kinda curious you know, what you guys are seeing for loan pricing 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 here?

Paul A. Perl: And my thoughts around what?

Steve Moss: Pull through of new C&I loans. Pull through, I think. Is it do you think it’s gonna extend out towards the latter part of the year, or you know, are you reasonably optimistic near term, like, put it that way?

Paul A. Perl: I’m reasonably optimistic, but we’re obviously gonna be very careful, like walking through glue or something. 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 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 gonna go carefully but I’m still optimistic with the numbers that Carl’s told you about for the balance of the year.

Carl Carlson: And 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 $111 million of originations in the quarter and the weighted average coupon on that book was 718 basis points. And the weighted average coupon of our overall book is about 591 basis points. So it gives you a sense of, you know, how that’s continuing. Every quarter that goes by, we’re still we’re getting a better benefit on unless the Fed cuts, and then we think it’s priced out, but that’s what I had to let.

Steve Moss: Right. Okay. That’s helpful there. Appreciate that color. And then just in terms of expenses here, you know, down quarter over quarter, compensation in particular, just kind of curious how you think about expenses for the second quarter? I apologize if I missed that.

Carl Carlson: No. I think they’ll probably be fairly stable with whatever happened in the first quarter. I did 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 be enhanced when that happens. So that’s and, you know, I mentioned the marketing expenses are down quarter over quarter. I think you were just being thoughtful about where we’re spending our money. Marketing dollars, and 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.

Paul A. Perl: Okay, Steve. See you.

Operator: Our next question comes from Laurie Hunsicker with Seaport Research Partners. Please go ahead.

Laurie Hunsicker: Yeah. Hi, Paul and Carl. Good afternoon.

Paul A. Perl: Hey. Hello.

Laurie Hunsicker: Just circling back to credit here. So the $7.6 million in C&I 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?

Paul A. Perl: It’s in the food manufacturing business, if you will. And it was not entirely the $7.06, but it was primarily so that loan. It had been a family business that was subject to a leverage buyout by private equity firms things haven’t gone according to plan.

Laurie Hunsicker: Okay. And then your specialty vehicle book down to $267 million. That’s great. How much were charge-offs there in the quarter?

Carl Carlson: Not much at all. It was de minimis.

Laurie Hunsicker: Okay. Okay. Alright. And then just wonder, can you give us an update of the office the $11 million office loan that I think is supposed to I think it’s supposed to close in February. Is that still the case? Is that well reserved? How do you think that’s

Paul A. Perl: Yes. It’s under PNS, and it’s imminent to close. Sometime soon. I don’t know exactly the timing, but it’s fully expected to close.

Carl Carlson: Yeah. We’re not anticipating any additional loss associated with that.

Laurie Hunsicker: Okay. Perfect. That was my question. Okay. Great. And then I see here I love that you give this update. You’re 95% 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%. I don’t know if you have that number refreshed or if that’s still approximately the number.

Carl Carlson: It’s approximately 95%.

Laurie Hunsicker: Oh, for the whole book. Okay.

Carl Carlson: Yep.

Laurie Hunsicker: Okay. Great. And then let me just go up here. Do you have a spot margin for March?

Carl Carlson: $3.23.

Laurie Hunsicker: Thank you. Okay. And then I guess 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 two things on a go-forward basis? So number one, obviously, there was that nonbinding letter of intent from company A potentially acquire you 50% higher. So I guess, how do you think about you know, what directionally are you gonna do as a combined company to get that value from where we are here to sort of 50% higher?

Laurie Hunsicker: 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 share buybacks once this is closed? Thanks.

Carl Carlson: Sure. So again, we can’t talk too much about adding any additional information, but I would certainly refer you back to 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 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 the performance. As you know, a lot of banks, in particular, have done restructuring of their investment portfolios to enhance the yields going forward and their margins going forward. And here, you’re taking, basically one organization. So $11 billion of the balance sheet and doing the purchase accounting on that and getting the benefits of that going forward.

So, I think you can refer to that to see, hey. What are the returns on this going forward? And, of course, you know, we’re in the process of doing the conversion and the cost savings, and we feel really, really good about the process so far. 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 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 buybacks are appropriate, they’ll get discussed.

Laurie Hunsicker: Okay. Thanks. And one more with respect to capital management. Is it still the intent to take the Berkshire Hills pro forma combined company dividend up to a rate that’s on par with where Brookline is currently? Is that still the plan?

Paul A. Perl: That’s correct.

Laurie Hunsicker: Okay. Great. Thanks. I’ll leave it there.

Operator: Okay, Laurie. Thank you. And our next question comes from Chris O’Connell with KBW. Your line is open.

Chris O’Connell: Hey, Paul. Hey, Carl. Just wanted 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 will continue after the merger close.

Carl Carlson: Well, excellent question. So we did plan for the CRE runoff. We’d 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. 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, it will after the merger 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. So the timing around that and seeing that, we rather preserve our capital or funding for taking care of our customers in our footprint.

Chris O’Connell: Understood. Thank you. And, you know, appreciate the standalone expense guide. In the comments for flattish into Q2. You know, just rough calculations. You know, you guys did a really good job here in the first quarter of keeping expenses low. You know, if it’s relatively flat into Q2, you know, that leaves about $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 driving up the cost you know, that much in the back half of the year?

Carl Carlson: No. Not at all. Just was our original budget. That was the budget. They’re just doing much better. Yeah. 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.

Chris O’Connell: Okay. Great. And then what’s the conversion now booked for February 2026, 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 them out a little further?

Paul A. Perl: Only a little bit. It’s a little bit later than we had hoped it would be, and it had 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 gonna 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 expenses are gonna 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.

Paul A. Perl: So yeah. So Paul’s saying, but timing, we’re kind of front-loading some of those savings. And so economically, at the end of the day, I would imagine we probably get probably could be better off.

Chris O’Connell: Understood. 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 the Cambridge market and your overall lab exposure and just 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 market developments in those areas?

Paul A. Perl: It’s a pretty small share of our book. You know, we haven’t done very much in the Cambridge area that I can recall. Carl, do you have any sense of the numbers?

Carl Carlson: It’s a fraction of it. Approximately $50 million in lab.

Paul A. Perl: All in Cambridge?

Carl Carlson: No.

Paul A. Perl: No. All over. So it’s $50 million overall in lab space. So pretty small exposure. Like, we just haven’t been exposed to that sort of stuff. We tend to bank real estate professionals who really haven’t played all that much in the lab space.

Chris O’Connell: Okay. Great. That’s all I had. Thank you.

Paul A. Perl: Okay. Thanks, Chris. Got it.

Operator: This concludes our question and answer session. So I’d like to turn the conference back over to Mr. Perl for any closing remarks.

Paul A. Perl: Thank you, Lydia, and thank you all for joining us this afternoon, and we will look forward to talking with you again next quarter. Good day.

Operator: This concludes today’s call. Thank you very much for joining. You may now disconnect your line.