| Another quarter, another round of questions over Brookline Bancorp’s taxi medallion loans and the commercial real estate scene in Boston.
“So far, a bit to our surprise, rents have been holding up, sales have been holding up, occupancies have been holding up,” President and CEO Paul Perrault said in response to an investor’s question about commercial real estate lending in Metro Boston.
Perrault said that was in part because the Greater Boston area’s underlying economy was strong, but he added, “We wake up and worry about it every day.”
Meanwhile, investors listening in on the company’s quarterly earnings call posed questions about its taxi medallion loans.
CFO Carl M. Carlson said that while about $2.5 million of those loans had gone into nonaccrual, the company had rewritten those loans and recorded no charge-offs in that portfolio, which totals around $35 million.
“While I’d love to say that it’s stabilizing, I can’t really say that just yet,” he said. “We’re still working with customers and there’s still pressure out there.”
Brookline Bancorp posted net income totaling $12.7 million in the second quarter this year, up 6.7 percent from $11.9 million in the year-ago quarter.
Total assets increased to $6.3 billion from $6.2 billion in the first quarter and $6 billion at year-end 2015. The holding company for Brookline Bank, Bank Rhode Island and First Ipswich Bank attributed that largely to increases in loans and leases.
Total loans and leases increased to $5.3 billion at June 30, up roughly 12.7 percent from $4.7 billion a year ago, drive in particular by the company’s commercial real estate and commercial loan and lease portfolios. Commercial real estate loans increased 13 percent to $2.8 billion, and commercial loans and leases increased 12.5 percent to $1.4 billion from the year-ago period. Total deposits increased 8.6 percent year-over-year to $4.5 billion. The company recorded a provision for loan and lease losses of $2.7 million for the quarter ended June 30, compared with $2.3 million in the prior quarter.
Net charge-offs increased $3.6 million to $4 million for the second quarter of 2016 from $400,000 in the first quarter due to a $3.4 million charge off of a commercial relationship which had a specific reserve of $3.3 million recorded in a prior period. Consequently, the company said, the ratio of net charge-offs to average loans on an annualized basis increased to 31 basis points in the second quarter from 3 basis points for the first quarter.
Responding to an investor’s question about that particular charge-off, Carlson said that that relationship had “turned out to be a fraud situation” and the company had established a specific reserve against it in the first quarter of 2015. More recently, that was taken over by a receiver, and this past quarter was when Brookline Bancorp took the charge off.
“We expect some piece of that to be recovered in the future,” he said. “I don’t know when or how much, but this was the time to get this recognized.”
The company’s allowance for loan and lease losses represented 1.09 percent of total loans and leases at June 30, compared with 1.14 percent at March 31 and year-end 2015. The allowance for loan and lease losses related to originated loans and leases as a percentage of originated loans and leases was 1.13 percent at June 30, compared with 1.20 percent at March 31, and Dec. 31, 2015.
