Marissa Frerk – Associate General Counsel Paul Perrault – President and Chief Executive Officer Carl Carlson – Chief Financial Officer and Treasurer.

Matt Kelley – Piper Jaffray Collyn Gilbert – KBW Laurie Hunsicker – Compass Point.

Good afternoon and welcome to the Brookline Bancorp Inc Third Quarter 2015 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Marissa Frerk. Please go ahead..

Thank you, Andrew. This call may contain forward-looking statements with respect to the financial condition, results of operation and business of Brookline Bancorp Inc. Actual results may differ from these forward-looking statements.

Factors that may cause actual results to differ include those identified in our annual report on Form 10-K and our earnings press release.

Brookline Bancorp cautions you against unduly relying upon any forward-looking statements and disclaims any intent to update publicly any forward-looking statements, whether in response to new information, future events or otherwise. Please note this event is being recorded.

I would now like to turn the conference call over to Paul Perrault, President and CEO. Please go ahead sir..

Thank you, Marissa, and good afternoon all and welcome to Brookline Bancorp’s third quarter earnings call. I’m accompanied today by our Chief Financial and Treasurer, Carl Carlson, who will walk you through our quarterly financial results following my comments.

Yesterday, we reported $12.9 million of net income, or $0.18 per share, for the third quarter of 2015 as compared to $11.7 million, or $0.17 per share, in the second quarter. This represents an 8.6% quarter-over-quarter increase in net income.

I’m excited about this growth, considering the intense competition we face in the market and the revenue headwind we created with the sale of $255 million worth of indirect auto loans in March of this year.

Our colleagues here have worked hard to serve our customers and our communities to make Brookline Bancorp one of the region’s leading commercial banks, which drives our earnings and our returns to our shareholders. Commercial real estate and commercial loans continue to be the focus of our business.

At September 30, our total commercial loans made up over 80% of our loan portfolio, which represented growth of $90.4 million or 9.5% on an annualized basis from the end of last quarter.

In the third quarter, we successfully maintain the efficiencies that we have built in recent quarters by streamlining many processes, while maintaining our outstanding customer service. This we believe is evidenced in the promising efficiency ratio trends.

I will now turn you over to Carl, who will review the Company’s third quarter results in some more detail.

Carl?.

Thank you, Paul. Well, our quarterly average interest running assets only increased $35 million from the previous quarter. This reflects the investment of excess liquidity generated from the sale of indirect auto portfolio at the end of March and higher yielding loans.

As Paul mentioned, our loan portfolio continue to have strong growth with quarterly average balance is increasing $87.6 million or 7.5% on an annualized basis. While the yield on portfolio increased by one basis point.

Net interest income grew $1.3 million during the quarter, helped by additional net income from the Federal Home Loan Bank and special dividend from our restricted equity security. These two additional dividend streams contributed approximately $340,000 to net interest income and three basis points to the third quarter net interest margin.

[Audio Dip] losses for the quarter was $1.8 million, a decline of $158,000 from the second quarter. It was another solid quarter for non-interest income, which totaled $4.8 million, down $83,000 from the second quarter. The company’s non-interest expense increased $818,000 during the third quarter to $31.3 million.

This was driven by increases in compensation, occupancy, FDIC and marketing costs in the quarter. Our effective tax rate decreased to 33.9% and we currently project our effective tax rate to be 35.5% for the fourth quarter and full year.

As of September 30, there has been no stock repurchased under the $10 million [indiscernible] plan which expires at the end of this year. Finally, the board approved a quarterly common dividend of $0.09 per share. This will be paid on November 20 to stockholders of record on November 6.

The quarterly $0.09 per share dividend represents an annualized yield of 343 basis points based on yesterday’s closing price. Before turning back over to Paul, I’ll provide a few comments on our expectations for the fourth quarter of 2015. We expect continued growth in average earning assets driven by loan growth.

Coupons on new originations continue to come in lower than current portfolio and currently – and we currently project the overall margin to be down five to six basis points from Q3, which also reflects the three basis point impact of the restricted stock dividends.

Provisions for loan losses will be driven by our loan growth, net charge-offs and the continued assessment of our portfolio of risk factors and trends.

Non-interest income is currently projected to be in line with the third quarter, we’ve managed those expenses rising slightly as we opened our new Brookline branch in Chestnut Hill as well as the relocation of our Bank Rhode Island branch in this providence during the fourth quarter.

We expect the effective tax rate in the fourth quarter to be 35.5, an increase of 36.5 for 2016. With that I’ll turn it back over to Paul for concluding remarks. .

Thank you, Carl. Brookline Bancorp has had a great year-to-date and we are looking forward to wrapping up the year in a strong manner. And now, we will open it up for questions..

We will now begin the question-and-answer session [Operator Instructions] The first question comes from Mark Fitzgibbon of Sandler ONeill and Partners. Please go ahead..

Good afternoon gentlemen. This is Nick filling in for Mark.

First, I just wanted to ask if – is the commercial lending competition in your market rational and are other banks compromising on in terms of covenants?.

It’s a little bit irrational, but not ramp in part. I’d say from time to time we do see some deals that make us scratch our heads, but I wouldn’t say – I’ve seen it much more worse than this in different cycles..

Got it, okay.

And then second, what sort of pricing are you seeing today in your equipment financing business?.

We are having a little trouble with the intermittent sounds out of this call. So if you could repeat that would be helpful..

Sure, my apologies.

What sort of pricing are you seeing today in your equipment financing business?.

Is that – I think the question was what kind of pricing are we seeing in the equipment financing business? Carl?.

Yes..

In Q3, the originations – the weighted average coupon originations was about 671..

Perfect. Thank you.

And then I know you guys mentioned your Chestnut Hill branch, but I wondered if you could talk about your plans to open de novo branches?.

We have sort of a mild branching plan that we have in place for a number of years. There are currently two branches that are in process that will be opened over the next year or so roughly. And we also typically have one or two other relocations going on, repositioning if you will at any point in time.

So it’s a slow growth, maintained credibly in the right places, doing the right things kind of strategy, not any huge de novo things..

Excellent, and then lastly, we saw that loan level derivative income remained at high levels again this quarter and I know you’ve talked in the past about this line item being volatile, but I wanted to get your outlook at this point in the quarter..

It’s difficult to project something like that. So far the pipelines look good. So, right now, my guidance is that we’ll probably be at the levels that we are today or our experience in the third quarter..

I could – I’ll add a little bit to that. And that is certainly a line item that can be very volatile..

Yes..

It’s just right now happened [indiscernible] run, where it was pretty consistent, but this is – these are a relatively small number of transactions and it depends on how our customers are trying to position usually commercial real estate properties in their portfolio, and depending on everybody’s opinions about where rates are going in any given day, you can probably understand how that could be volatile..

Yes, no question. Thanks very much gentlemen..

The next question comes from Matt Kelley of Piper Jaffray. Please go ahead..

Hi, Matt..

Mr. Kelley, your line is open. Please go ahead..

Yes, can you hear me now?.

Yes, please continue..

Hi, Matt..

Okay.

I’m just wondering what was the purchase accounting accretion recognized during the third quarter and what should we expect in the fourth quarter?.

Purchase accounting on the loan portfolio came in at $820,000 which was significantly higher than I expected. We did have some refinancing exit events and payoffs that drove that number [indiscernible] of about $500,000. Obviously, when these numbers are higher, I mean in the future it’s going to be lower.

So, right now, I would probably estimate about $400,000 for next quarter..

Okay, okay. Got it, got it. And so just taken back the envelope that looks like that was about five or six basis points as well..

Yes..

Okay, got it.

And then was there any outsized prepayment penalty income recognized during the quarter on loans?.

We did have prepayment income, but – from the second quarter and third quarter, it was about flat..

Nothing outsized..

Nothing outsized..

Okay.

And then on the $340,000 of special dividends on the FHLB stock, what did the FHLB pay during the quarter and how much excess FHLB stock do you folks have?.

It’s a good question. So they have doubled their dividend during the third quarter. From a – the payout was I think 176 basis points, an increase up to 328 basis points. So that payment in the second quarter – really it will be the second quarter dividend at the end of the day. We only accrued at the lower rate.

So we take that that up in the third quarter as well as the ongoing rate of 328. We also had another special dividend from another holding that we have that was more of an annual in nature, but also a special dividends that something we tend to count on and that was about $97,000..

Is that included in the 340?.

Included in the 340, that’s correct..

Okay, yes..

So we did have excess holdings of stocks, so some of that was purchased in the fourth quarter. So that will bring down about $10 million, $10 million of stock in the [indiscernible] stock was purchased in the quarter..

Okay.

And then looking at the multi-family portfolio, down two quarters in a row now has the pricing there become more intense as the year has progressed or competition, what’s driving that?.

Well, I would probably call it competition. Generally, it isn’t necessarily peer banks if you will or banks to banks like us, but rather the larger long-term markets have come back considerably, particularly in Boston and then Rhode Island as well everything from insurance companies to private equity to conduits and all the usual stuffs.

A lot of action in the government sector places like [indiscernible] and other government programs have been very active. And those are very favorable financings and although we lose the outstandings, we think it makes very healthy customer, who has properly diversified their holdings that way..

Got it. And then as you grow the balance sheet here at 8% to 10% type of rate, which is pretty solid, what do you anticipate for a funding strategy within the loan-to-deposit ratio, creep up a little a bit in the last two quarters.

What should we expect going forward? And what would you say as the incremental cost of funding on the deposit side?.

Qualitative, I will let Carl to the quantitative part of that question. And that is that we have been developing and improving the deposit base in the company since the day I got here. The loan-to-deposit ratio is in the lowest range that it has been in that whole time.

So we can track back constant improvement and we will continue to work that deposit base, but operating at these levels is not frightening at all. We have a plenty of liquidity and borrowing capability. And so, we intend to keep going.

In a prefect world, we would be gaining on the loan-to-deposit ratio and have as I mentioned in recent years whether or not that will happen in a smooth way or rather it will be bumpy over the next number of years, is a little bit hard to tell.

Cost Carl?.

From a cost perspective, as you can see we’ve been fairly flat in our cost to funds from an interest interest-bearing perspective. I’d encourage you to look at that DDA balances as part of that. And if you look at the NIM schedules, you can see some significant growth not only just linked quarter, but year-over-year in DDA balances.

So overall – we’re continuing to management that cost of funds down. So we have bought a lot of different levers to pull. Certainly, we want to bring new customers into the company and grow the deposits.

Our focus is on commercial deposits and taking care of our customers there, and growing our DDA and operating accounts, but we also could – we go to the corporate CD market or bank borrowings and take advantage of the very little environment and low rates that are available to us. We’re now going to pay up for the deposits..

Okay, got it. Thank you..

The next question comes from Collyn Gilbert of KBW. Please go ahead..

Thanks. Good afternoon, gentlemen. Carl, just turning back to your deposit comment, has that size of your deposit relationships changed meaningfully as you’ve been kind of building out this initiative.

And I guess how do you think about those deposits kind of on the DDA side of the business deposits, those balances, as rates rise or just sort of kind of risk of outflow in those deposits?.

Collyn, right?.

Yes..

It’s very, very choppy and I apologize for that, but I think I may have to adjust here, so let me take the stab at the answer and feel free to guide me for anything else that you might be trying to get.

We are building this company and have from the beginning sort of brick by brick basis, in that we are not trying to retract deposits in a [indiscernible] or promotional kind of way here that might be transitional in nature. We really do work very hard to minimize the turnover if you will.

And so once our relationship is established, we do expect that the person or the entities operating accounts will be here. We have developed a high-level, very sophisticated and capable cash management and then treasury operation and so we can approach bigger operators, middle market companies and take care all of their needs.

And they have been bringing them on through the years almost as quickly as we can. And even today we have a very attractive pipeline of cash management people who we’re bringing in. In many cases, we have a lending relationship that’s newly established as well.

And so the evidence of that is indeed this DDA increase proportionally and in an absolute level. And I think you can expect us to continue doing those kinds of things. And institutions, operating entities tend to have operating accounts and money market accounts. And that’s we have the big action has been.

The total funding supplemented by a little bit of broker deposits and then the Federal Home Loan Bank borrowings. But the strategy is consistent and we will continue to employ it, I expect successfully. Whether or not we bring the loan-to-deposit ratio down very much in any given period is a little bit hard to predict and doesn’t matter that much..

Okay, okay that’s helpful. And then can you just remind us what, kind of the rate in terms that you’re seeing on some of the CRE credits that you guys have been putting on..

CRE, many terms is probably, generally in the fours and then it could be like as low as four in some limited number of cases. And that’s a decent credit that’s not likely to be in the fives..

Okay, okay that’s helpful. And then just finally, Carl, I think you’ve – guys maybe, were sort of thinking that expenses would be actually higher this quarter than where they came in. I know you’ve guided higher into the fourth quarter because of the branch openings.

But was there anything in particular that was driving that or just kind of thinking about your – the expense thoughts longer term here..

I believe the question did I think the expenses were going to be a little higher this quarter..

Yes..

And I think that, I probably did project them to be a little bit higher this quarter. We have been running with some – quite a few vacancies, throughout the summer, it took some time to fill some positions. So I probably were – was a little bit more conservative in my projections there.

But we’re starting to hire up for these branches and get up the compliment as we open up the – at least the Chestnut Hill branch. And some of the other areas within the bank that we’re short-handed over the summer..

Okay, great. That’s helpful, that’s all I had. Thanks guys..

Okay, Collyn..

[Operator Instructions] The next question comes from Laurie Hunsicker of Compass Point. Please go ahead..

Yes, hi good afternoon..

Hi, Laurie..

Just wondered if you could chat briefly on the non-accrual drop within the equipment financing, the $12 million down to $8 million.

Was this part of that loan relationship that was identified and downgraded in the first quarter, was just a clean up of that? Or in the corresponding charge off, I guess that that was elevated in this quarter of $1.3 million, I mean, clearly your credit is pristine.

Just trying to get a little bit of a better sense here of the movement in the C&I non-performers and….

I am sorry. You’re breaking up pretty bad.

I believe the question was you’re asking about the non-accrual loans – C&I non-accruals?.

The C&I – right, the drop in C&I, the drop in the equipment financing. Was that the credit that was downgraded in the first quarter? Was that a clean up on that? And the drop did that correspond to the charge off that we saw in the quarter..

Okay, so a couple of things. It’s not the one loan that we took fairly significant specific reserve on in the first quarter..

Okay..

And so we’ve had nothing to do with that one, but it did have to do with some equipment financing loans, one in particular was related to Hurricane Sandy grocery store that at the end of the day did not workout. We have a specific reserve setup for that.

It was just a different one than the one you are referring to and we charge that off and clean – and that was cleaned up in the....

Okay.

And any update on that that other loan that was downgraded in the first quarter? Is there any movement coming on that?.

Yes, it’s been moving through its bankruptcies cycle and we have probably not reflected in that quarter, but we have seen some proceeds, reductions and its proceeding in and are very common for middle market trouble companies that go through this kind of thing. We feel comfortable that we have any risks covered at this point..

It’s fully reserved for….

So the resolution will happen over the next number of months, but we don’t expect it to have any material affect on our earnings statements or balance sheet to that matter..

Great and then just one last question, do you all have reserves to loans target for next year for a range?.

I don’t think so. I mean – I don’t think we are allowed to think about it in those terms anymore with loss emergence period….

That’s correct. It depends on where the loan growth is – all of the things that go into a formula of that nature..

Okay. And actually just one last question that – the two categories within C&I, your equipment finance, which has been growing in your condo association.

How do you think about those in terms of where you would like to see those two portfolios? Do they stay in the same percentage band? Are you looking to make those higher?.

Yes, I’m having a little trouble. Condo associations, I will talk about in a second.

What was the other category?.

And the equipment finance….

Well….

Yes and that’s it, thanks. Yes, thank you..

Okay, Laurie, condo association loans [indiscernible] it’s a pretty small portfolio, but we have been putting some efforts into it recently. And you can see that’s sort of inching up over the past couple of years. These are super safe loans that tend to come with nice relationships that are deposit oriented.

And it’s a local business for us unlike some of the people who participate in that business. We only build it around here with people. We delve in our footprint kind of thing. So I would like to see that really a lot. I don’t expect that it will, it will continue to inch up I believe. Equipment finance has been going very, very well.

And I think we still have plenty of capacity there as the different categories have been developing.

A lot of the growth in the past year or two, I would say, is really coming from the specialty vehicle i.e., the tow truck part, which now in a more mature status as those customers have more completely come over to us from previous lenders and our fitness equipment continues to plug along in the nice level and the laundromat business also continues to be pretty strong, but the spiking in the past couple of years really came out of the tow trucks.

So Logic would suggest to me that we will continue to do very well, see some nice growth, but probably not at the levels of last year and this year..

Great, thank you..

And we have a followup from Matt Kelley of Piper Jaffray. Please go ahead. Mr. Kelley, your line is open. Please go ahead with your question..

Yes, hi.

I’d like to get – I hope – why don’t you give a little bit a commentary on the taxi medallion lending business and what you’re seeing there and how you think that transpires over the course of the next year for that business?.

Sure, we’ve got about $34 million of taxi medallion loan, so it’s not a very large portfolio. It’s about a hundred relationships. We have seen two loans, go to non-accrual to date. And that something that we feel that we’re adequately reserved on and we’re really monitoring the situation closely..

Okay.

Any sense on just where LTVs or values of medallions are in Boston on that collateral?.

We have a fair amount of information on the industry as you might imagine. And it’s – we can quantify it in one sense. On the other hand, there has been very, very limited number of transactions and the transactions that have happened that tended to be structured.

And in a general way, the operating situation seems to be stabilizing, buy and large our portfolio was all carefully one-by-one originated and those of you who follow us know how conservative we are and the lending originations in that portfolio would bought [ph] in that manner. So we are comfortable that that we can continue to manage this thing.

It is not the wheels haven’t fallen off around here. Things are growing along okay. And as Carl mentioned, there really is a couple. And from our perspective, those two probably had roots in trouble that weren’t related to the market if you will..

Got it, okay. Thank you..

This concludes our question-and-answer session. I would like to turn the conference back over to Carl Carlson for any closing remarks..

Thank you, Andrew, and thank you all for joining us and we look forward to talking to you next quarter..

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect..