Brookline Bancorp Inc. today reported it took a second-quarter earnings hit in connection with two short-term commercial loans made immediately after acquisition by the company’s subsidiary, Bank Rhode Island.
Second-quarter 2012 results included a $6.7 million provision for credit losses that reduced net income by about 6 cents a share. Brookline Bancorp said in a statement that $4.2 million of the provision was booked in connection with the Rhode Island loans. The loans were based, in part, on the issuance of tax credits which, "due to the unexpected and abrupt bankruptcy filing of an entity in Rhode Island related to the borrowers, were not issued," the company said in a statement.
A bank spokesman was not available to comment on whether the bankruptcy filing was connected to the failure of 38 Studios, the video game company led by former Boston Red Sox pitcher Curt Schilling that filed for bankruptcy in June.
But The Boston Globe reported in June that Schilling posted 3,200 gold coins as collateral for a Bank Rhode Island loan the day after his troubled video game company released its first game in February, according to financing statements filed in Massachusetts.
Brookline Bancorp said in its earnings release that it has "moved aggressively to resolve the problem credits and is evaluating all potential sources of recovery; however, further recovery attempts will be complicated and subject to additional discussions with the relevant parties, including the state of Rhode Island."
Brookline Bancorp reported net income of $7.5 million, or 11 cents per share for the quarter ended June 30. Net income for the first half of 2012 was $13.9 million, or 20 cents a share, compared with $14.3 million, or 24 cents a share, for the first half of 2011.
Paul Perrault, president and CEO of Brookline Bancorp, said in a statement: "The company’s core strategy, the expertise of our banking officers and the strength of our customer service remain unchanged. As a result, we continue to report strong growth in loans and deposits despite the challenging economic environment in which we operate. We view the magnitude of this quarter’s unexpected development as an unusual event which we are working assertively to resolve. Business fundamentals remain strong. We continue to compete effectively against the many banks in our core markets, the first phase of our core systems conversion was a success, overall credit quality remains very strong, and the company remains well-capitalized even after the provision recorded this quarter."
Brookline Bancorp, headquartered in Brookline, is a bank holding company with about $5 billion assets and 44 branches throughout Massachusetts and Rhode Island. It is the holding company for Brookline Bank, Bank Rhode Island and First Ipswich Bank, formerly The First National Bank of Ipswich.
Total assets at June 30 grew to $5 billion, an increase of 7.8 percent from the prior quarter and 59.6 percent from June 30, 2011.
The loan and lease portfolio grew to $4 billion as of June 30, up 7.9 percent from the prior quarter and 9.9 percent from Dec. 31, 2011, after adjustment for the $1.2 billion in loans and leases acquired from Bancorp Rhode Island. The company’s commercial loan and lease portfolios totaled $2.7 billion, or 66.6 percent of total loans, at June 30. The commercial portfolios increased 11.7 percent during the second quarter and 13.9 percent for the first six months of 2012, after adjustment for the $0.8 million in commercial loans and leases acquired from Bancorp Rhode Island.
Deposits of $3.5 billion at June 30 were up 7.2 percent from the first quarter and 63.1 percent from June 30, 2011. Growth from June 30, 2011 includes the addition of $1.2 billion in deposits from the Bancorp Rhode Island acquisition. Core deposits increased 12.3 percent in the second quarter and now comprise 70.2 percent of total deposits at June 30. As a percentage of deposits, core deposits are up from 64.2 percent at Dec. 31, 2011 and 61.9 percent at June 30, 2011, largely as a result of the deposits acquired in the Bancorp Rhode Island acquisition.
Non-performing loans and leases totaled $21.1 million, or 0.52 percent of total loans and leases, at June 30, up from $12.0 million, or 0.30 percent of total loans and leases, at March 31, 2012. Non-performing assets at June 30, 2012 totaled $23.8 million or 0.48 percent of total assets, up from $14.6 million, or 0.30 percent of total assets, at March 31. The increases in non-performing loans included the two commercial loans in Rhode Island.
The provision for credit losses was $6.7 million for the second quarter 2, which included $4.2 million related to the Rhode Island problem credit, compared with $3.2 million in the first quarter, and $1.2 million in the second quarter 2011.
The company’s board of directors approved a dividend of 0.085 cents per share. The dividend will be paid on Aug. 24 to shareholders of record on Aug. 10.
On June 29, two of the company’s subsidiaries, Brookline Bank and First Ipswich Bank (formerly The First National Bank of Ipswich), converted to state-chartered financial institutions and became members of the Federal Reserve System.
