Entering text into the input field will update the search result below

Brookline Bancorp: Decline In Credit Costs To Help Turn The Bottom Line Positive

Jun. 07, 2020 1:20 PM ETBrookline Bancorp, Inc. (BRKL) Stock
Sheen Bay Research profile picture
Sheen Bay Research


  • Provision expense will likely decline as BRKL appears to have incorporated a severe economic scenario in its loan loss reserves. However, the provision expense will likely remain above normal.
  • The net interest margin will likely decrease going forward due to the interest rate cuts. The maturing certificates of deposits and shift in deposit mix will mitigate the rate impact.
  • The stock will most probably continue to trade at a discount to its fair value until some of the uncertainties clear up.

Brookline Bancorp, Inc. (NASDAQ:BRKL) posted a loss of $0.22 per share in the first quarter versus a profit of $0.28 per share in the last quarter of 2019. The company's bottom line will likely return to being in the black in the second quarter as provision expense will likely decline. However, the provision expense will likely remain above normal due to incremental worsening of economic variables and exposure to some COVID-19 sensitive industries. Additionally, the net interest margin will likely decline in the year ahead due to the March rate cuts, which will keep earnings below the 2019 level. For the full year, I'm expecting earnings to decline by 71% year-over-year to $0.32 per share. The uncertainties surrounding the COVID-19 pandemic have increased the chances of actual earnings differing materially from estimates. The December 2020 target price suggests a high upside from the current market price. However, like other bank holding companies, BRKL will likely trade at a discount to its fair value in the near-term due to the uncertainties. As a result, I'm adopting a neutral rating on the stock.

Some Sectors to Keep Provision Expense Above Normal in the Second Quarter

BRKL's provision expense surged to $54.1 million in the first quarter from $3.6 million in the last quarter of 2019. The management used Moody's economic forecasts to determine the provisioning for loan losses in the first quarter. As mentioned in the first quarter's investor presentation, the management assumed an average unemployment rate of 6.3% for 2020. The following table from the presentation shows some of the key assumptions.

Brookline Bancorp CECL Assumptions

Based on the double-digit unemployment rate for April and May and the high level of jobless claims, I'm expecting the average unemployment rate to be in the high single digits for 2020. As the unemployment rate incorporated in the

This article was written by

Sheen Bay Research profile picture
Around 10 years of experience covering Banks and Macroeconomics. Passionate about discovering lucrative investments and generating alpha.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: This article is not financial advice. Investors are expected to consider their investment objectives and constraints before investing in the stock(s) mentioned in the article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You


Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

About BRKL Stock

SymbolLast Price% Chg
Market Cap
Yield (TTM)
Rev Growth (YoY)
Short Interest
Prev. Close
Compare to Peers

More on BRKL

Related Stocks

SymbolLast Price% Chg
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.