New relationships boosted deposits and prepayment fees improved the net interest margin for Brookline Bancorp in the third quarter, but company leadership spent much of their recent earnings call fielding questions over nonaccrual loans in the taxi medallion portfolio.
Approximately half of Brookline Bancorp’s $36 million taxi medallion portfolio was classified as impaired during the third quarter, CFO Carl M. Carlson said. The company has booked about $6 million in reserves against that portfolio, he said.
But Brookline Bancorp has not yet taken a single charge-off in that portfolio and every single one of its taxi medallion borrowers are continuing to pay, President and CEO Paul Perrault said.
“We continue to believe there’s a certain kind of stabilization that’s happening. So far nobody’s heading for the hills or throwing medallions on the table,” he said.
Carlson also shared other details about Brookline Bancorp’s taxi medallion lending business: approximately $22.2 million of those loans are against Boston medallions, while $13.8 million are on Cambridge medallions; Brookline has about 100 loans total in that portfolio; and the company values Boston medallions around $300,000 and Cambridge medallions around $250,000.
Asked by an investor whether the company would consider selling off that portfolio altogether, Perrault responded, “I’m not ready to go there at all because I don’t think I need to, and you’re making a big assumption about the situation deteriorating more. I don’t know that I see that.”
Perrault also stressed that those taxi medallion loans did not necessarily carry high loan-to-value ratios and that many of his borrowers had been paying on those loans for years before ride-sharing apps began troubling the taxi business.
On the whole, however, those taxi medallion loans make up just a small fraction of the $5.3 billion in total loans and leases Brookline Bancorp posted at Sept. 30. Loans and leases had increased $73.3 million from June 30 and $336.8 million from year-end 2015, and they grew 5.6 percent on an annualized basis in the third quarter. Most of that growth was in the company’s commercial real estate and commercial loan and lease portfolios, which increased $73 million during the quarter, or 6.8 percent annualized.
Brookline Bancorp also boosted its deposit base with some new operating accounts, some via lending relationships, Carlson said. Total deposits increased $79.8 million quarter-over-quarter to $4.6 billion at Sept. 30.
While competition for deposits has been stiff, particularly in the Greater Boston area, Carlson emphasized that Brookline Bancorp had built its deposit base via customer relationships and new operating accounts, rather than competitive pricing.
“We go after the whole relationship,” he said. “We’re not chasing hot money.”
Net interest income increased $2.1 million from the prior quarter to $52.4 million at Sept. 30, largely as a result of loan growth, a $700,000 increase in accretion related to acquired loans, and a $300,000 increase in prepayment fees on loans. The net interest margin increased 4 basis points to 3.48 percent for the three months ended Sept. 30.
Total assets at September 30, 2016 increased $83.8 million to $6.4 billion from $6.3 billion at June 30, and $338 million from $6.04 billion at Dec. 31, 2015.