Brookline Bancorp Announces 2003 First Quarter Operating Results and Dividend Declaration.Business Editors BROOKLINE Brookline (br  k`līn), town (1990 pop. 54,718), Norfolk co., E Mass., a suburb adjacent to Boston; settled 1630s, set off from Boston and inc. 1705. , Mass.--(BUSINESS WIRE)--April 16, 2003
Brookline Bancorp, Inc. (the "Company") (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :BRKL) announced today that it had a net loss of $148,000, or $0.00 per share (on a basic and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. basis), for the quarter ended March 31, 2003 compared to net income of $5,478,000, or $0.10 per share ($0.09 on a diluted basis), for the quarter ended March 31, 2002. The net loss in the 2003 quarter resulted from a $5,515,000 charge to earnings that is explained in the next paragraph. On March 5, 2003, the Governor of the Commonwealth of Massachusetts Massachusetts (măsəch  `sĭts), most populous of the New England states of the NE United States. signed a law that denies dividend received deductions for dividend
distributions from REITs in determining Massachusetts taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. .
The law not only disallows dividend received deductions for the year
2003 and thereafter, but also disallows dividend received deductions
retroactively ret·ro·ac·tive adj. Influencing or applying to a period prior to enactment: a retroactive pay increase. [French rétroactif, from Latin to tax years beginning in 1999. While the Company is evaluating whether to challenge the constitutionality of the retroactive Having reference to things that happened in the past, prior to the occurrence of the act in question. A retroactive or retrospective law is one that takes away or impairs vested rights acquired under existing laws, creates new obligations, imposes new duties, or attaches a legislation and intends to continue to appeal the Notices of Assessment it received from the Massachusetts Department of Revenue, it was obliged o·blige v. o·bliged, o·blig·ing, o·blig·es v.tr. 1. To constrain by physical, legal, social, or moral means. 2. under U.S. generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting to provide for the taxes and interest resulting from the new law at the time of its enactment. Accordingly, $5,515,000 was charged to first quarter earnings to recognize the liabilities for taxes and interest resulting from the retroactive application of the new law to the Company's REIT REIT See: Real Estate Investment Trust REIT See real estate investment trust (REIT). subsidiary for the years 1999 through 2002. This amount is net of federal and state income tax benefits. State excise taxes excise taxes, governmental levies on specific goods produced and consumed inside a country. They differ from tariffs, which usually apply only to foreign-made goods, and from sales taxes, which typically apply to all commodities other than those specifically exempted. and interest payments are deductible That which may be taken away or subtracted. In taxation, an item that may be subtracted from gross income or adjusted gross income in determining taxable income (e.g., interest expenses, charitable contributions, certain taxes). for federal income tax purposes and interest payments are deductible for state tax purposes. The inability to deduct de·duct v. de·duct·ed, de·duct·ing, de·ducts v.tr. 1. To take away (a quantity) from another; subtract. 2. To derive by deduction; deduce. v.intr. dividends received from the Company's REIT and the accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. of interest on taxes not yet paid resulted in an after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. charge to 2003 first quarter earnings of $302,000. It is expected that net income during the remainder of 2003 will likewise be reduced by approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $300,000 per quarter. Excluding the $5,515,000 charge described in the preceding paragraph, net income was $5,367,000 in the 2003 quarter compared to $5,478,000 in the 2002 quarter. These amounts include securities gains (on an after-tax basis After-tax basis The comparison basis used to analyze the net after-tax returns on a corporate taxable bond and a municipal tax-free bond. ) of $211,000 and $591,000, respectively. Average earning assets Earning Assets Any income-earning asset owned by a company. Notes: These assets are generally interest-bearing accounts, bonds, and securities available for sale. See also: Asset, Asset Valuation, Earnings, Net Interest Margin increased $314 million, or 28.7%, from $1.097 billion in the 2002 quarter to $1.411 billion in the 2003 quarter as a result of completion of the Company's stock offering and reorganization The process of carrying out, through agreements and legal proceedings, a business plan for winding up the affairs of, or foreclosing a mortgage upon, the property of a corporation that has become insolvent. from a mutual holding company structure in July July: see month. 2002. The net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). from the stock offering exceeded $332 million. Despite the increase in earning assets, total interest income declined from $17,351,000 in the 2002 quarter to $17,286,000 in the 2003 quarter as average yields continued to plummet. The average yield on earning assets declined from 6.32% in the 2002 quarter to 4.91% in the 2003 quarter due in part to (a) the placement of much of the proceeds from the stock offering in high quality investments with relatively short maturities and (b) extensive refinancing Refinancing An extension and/or increase in amount of existing debt. of existing mortgage loans at lower rates. Because of uncertainty about the future direction of interest rates, the Company has concentrated its investment purchases mostly in collateralized mortgage obligations Collateralized mortgage obligation (CMO) A security backed by a pool of pass-through rates , structured so that there are several classes of bondholders with varying maturities, called tranches. ("CMOs") with projected maturities in the two to four year range. For the past few months, mortgage loans that comprise To embrace, cover, or include; to confine within; to consist of. In the law governing patents—grants of an exclusive right or privilege to make, use, or sell an invention or product for a term of years—the term comprise the CMOs have been prepaying at accelerated rates. The magnitude magnitude, in astronomy, measure of the brightness of a star or other celestial object. The stars cataloged by Ptolemy (2d cent. A.D.), all visible with the unaided eye, were ranked on a brightness scale such that the brightest stars were of 1st magnitude and the of the prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. has caused a reduction in income earned on CMOs since premiums paid at the time of their acquisition must be amortized over shorter time periods than originally estimated. Interest expense on deposits and borrowed funds was $1,817,000, or 27.2%, lower in the 2003 quarter than in the 2002 quarter due to the declining interest rate environment and a $54.8 million reduction in average borrowings outstanding, $45 million of which resulted from prepayment Prepayment 1. The payment of a debt obligation prior to its due date. 2. The excess payment over a scheduled debt repayment amount. Notes: 1. Examples include deferred expenses such as rent and early loan repayments. 2. of high rate borrowings in the last four months of 2002. The current interest rate environment is the lowest in over forty years. Continuation continuation - continuation passing style of that environment or further declines in interest rates will have a negative impact on the Company's net interest income and net interest margin. Since a high percent of the Company's assets (over 40%) are funded by stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. , declining rates cause a greater reduction in asset yields than the amount of reduction in rates paid on deposits and borrowed funds. Conversely con·verse 1 intr.v. con·versed, con·vers·ing, con·vers·es 1. To engage in a spoken exchange of thoughts, ideas, or feelings; talk. See Synonyms at speak. 2. , rising interest rates would have a positive effect on the Company's net interest income and net interest margin. A $375,000 provision for loan losses was charged to earnings in the 2003 quarter compared to a $100,000 credit to earnings in the 2002 quarter. The credit resulted primarily from shrinkage Shrinkage The amount by which inventory on hand is shorter than the amount of inventory recorded. Notes: The missing inventory could be due to theft, damage, or book keeping errors. in loans outstanding during the first quarter of 2002. The 2003 provision resulted primarily from $27.7 million of mortgage loan growth during the quarter and inauguration INAUGURATION. This word was applied by the Romans to the ceremony of dedicating some temple, or raising some man to the priesthood, after the augurs had been consulted. It was afterwards applied to the installation (q.v. of indirect auto lending which grew to $13.0 million of loans outstanding at March 31, 2003. Most of the mortgage loan growth was in the multi-family and commercial real estate segments and was partly attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to a program that offered discounted rates on selected new loans. Rates offered exceeded rates that otherwise would have been earned on the Company's excess liquidity. As mentioned in prior communications, the Company entered the indirect auto lending business in the first quarter. The activity to date with respect to the volume and credit quality of loans originated has been encouraging. As a result, we expect the total of loan originations The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. for 2003 to be increased from the $30 million to $50 million range previously communicated to a range of $70 million to $100 million. While the added volume allows fixed overhead to be spread over a larger base of business, short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. earnings are penalized pe·nal·ize tr.v. pe·nal·ized, pe·nal·iz·ing, pe·nal·iz·es 1. To subject to a penalty, especially for infringement of a law or official regulation. See Synonyms at punish. 2. since provisions for loan losses are established at the time of origination Origination The process through which a mortgage lender creates a mortgage secured by some amount of the mortgagor's real property. Notes: Also known as loan origination, everyone must go through the origination process when securing a mortgage for a piece of real and before realization (specification) realization - A UML semantic relationship between a classifier that specifies a contract and another classifier that guarantees to carry it out. [Handout by Mr. David Gillibrand]. of interest income. Accordingly, we continue to project that the indirect auto lending business will reduce 2003 earnings by around $0.01 per share and operate profitably in the second half of 2004. Excluding securities gains, non-interest income increased from $582,000 in the 2002 quarter to $632,000 in the 2003 quarter. Increased fees from changes in pricing of deposit services and from mortgage loan prepayments offset a decline in earnings from the Company's equity interest in a specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. finance company and from market valuation of the Company's outstanding swap agreement. Non-interest expense increased $414,000, or 11.1%, in the 2003 quarter compared to the 2002 quarter. The increase was attributable to expense related to indirect auto lending activities ($102,000); higher personnel costs ($195,000, or 9.4%) due to expanded staff, higher premiums for medical and dental dental /den·tal/ (den´t'l) pertaining to a tooth or teeth. den·tal adj. 1. Of, relating to, or for the teeth. 2. Of, relating to, or intended for dentistry. benefits and added ESOP ESOP See: Employee Stock Ownership Plan ESOP See Employee Stock Ownership Plan (ESOP). expense caused by the increase in the market value of the Company's stock; higher occupancy costs Occupancy costs are the whole life costs of buildings and their associated land from occupancy until disposal. These costs may be incurred on a regular or irregular basis. Occupancy costs are those costs related to occupying a space including; rent, real estate taxes, personal ; higher contributions expense as a result of no longer having a mutual holding company structure; and a Delaware Delaware, state, United States Delaware (dĕl`əwâr, –wər), one of the Middle Atlantic states of the United States, the country's second smallest state (after Rhode Island). franchise tax. Partly offsetting these increases was a reduction in data processing data processing or information processing, operations (e.g., handling, merging, sorting, and computing) performed upon data in accordance with strictly defined procedures, such as recording and summarizing the financial transactions of a expenses due primarily to consolidation of customer accounts. The effective income tax rate on earnings, excluding the effect of the retroactive REIT assessment, increased from 36.0% in the 2002 quarter to 39.5% in the 2003 quarter. The higher rate, which resulted from the change in the tax treatment of REITs previously described herein, is expected to continue throughout 2003. On March 7, 2003, the Company received regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. non-objection to its request to purchase up to 5% of its outstanding common stock, or 2,937,532 shares. Between that date and March 31, 2003, the Company purchased 1,135,000 at a total cost of $14,691,000, or $12.94 per share. The Board of Directors of the Company approved a quarterly dividend of $0.085 per share of common stock to stockholders of record as of April 30, 2003 and payable May 15, 2003. This press release contains statements about future events that constitute forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Projections about future events are subject to risks and uncertainties that could cause actual results to differ materially. Factors that might cause such differences include, but are not limited to, general economic conditions, changes in interest rates, regulatory considerations and competition.
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands except share data)
March 31, December 31, March 31,
2003 2002 2002
(unaudited) (unaudited)
Assets
Cash and due from banks $ 11,651 $ 13,571 $ 13,431
Short-term investments 148,897 224,897 63,229
Securities available for sale 393,017 361,049 205,116
Securities held to maturity
(market value of $3,776,
$4,944 and $8,636 respectively) 3,717 4,861 8,547
Restricted equity securities 9,423 9,423 9,423
Loans, excluding money market loan
participations 842,811 803,425 819,860
Money market loan participations 8,700 4,000 10,000
Allowance for loan losses (15,424) (15,052) (15,212)
Net loans 836,087 792,373 814,648
Other investment 3,917 3,979 3,772
Accrued interest receivable 5,150 5,224 5,169
Bank premises and equipment, net 2,175 1,813 1,803
Deferred tax asset 9,516 5,779 4,141
Other assets 496 388 515
Total assets $1,424,046 $1,423,357 $1,129,794
Liabilities and Stockholders' Equity
Deposits $ 663,018 $ 649,325 $ 640,409
Borrowed funds 123,945 124,900 178,970
Mortgagors' escrow accounts 4,790 4,256 4,689
Income taxes payable 10,248 4,970 9,464
Accrued expenses and other
liabilities 8,534 7,525 6,627
Total liabilities 810,535 790,976 840,159
Stockholders' equity:
Preferred stock, $.01 par value;
50,000,000 shares,
50,000,000 shares and
5,000,000 shares,
authorized respectively;
none issued - - -
Common stock, $0.01 par value;
200,000,000 shares,
200,000,000 shares and
45,000,000 shares authorized
respectively; 58,924,935
shares, 58,714,948 shares
and 29,718,421 shares issued,
respectively 589 587 297
Additional paid-in capital 450,893 449,254 141,276
Retained earnings, partially
restricted 180,720 185,788 180,896
Accumulated other comprehensive
income (A) 3,279 4,155 6,798
Treasury stock, at cost -
1,135,000 shares, 170,299 shares
and 2,921,378 shares,
respectively (16,635) (1,944) (33,813)
Unearned compensation -
recognition and retention plan (701) (741) (862)
Unallocated common stock held by
ESOP - 849,863 shares
865,364 shares and 415,711
shares, respectively (4,634) (4,718) (4,957)
Total stockholders' equity 613,511 632,381 289,635
Total liabilities and
stockholders' equity $1,424,046 $1,423,357 $1,129,794
(A) Represents net unrealized gains on securities available for sale,
net of taxes.
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands except share data)
Three months ended
March 31,
2003 2002
(unaudited)
Interest income:
Loans, excluding money market loan
participations $ 13,255 $ 14,439
Money market loan participations 13 37
Debt securities 3,253 2,309
Marketable equity securities 111 132
Restricted equity securities 77 83
Short-term investments 577 351
Total interest income 17,286 17,351
Interest expense:
Deposits 3,442 4,076
Borrowed funds 1,421 2,604
Total interest expense 4,863 6,680
Net interest income 12,423 10,671
Provision (credit) for loan losses 375 (100)
Net interest income after provision
(credit) for loan losses 12,048 10,771
Non-interest income:
Fees and charges 546 368
Gains on sales of securities, net 328 922
Swap agreement market valuation credit 18 53
Other income 68 161
Total non-interest income 960 1,504
Non-interest expense:
Compensation and employee benefits 2,392 2,082
Occupancy 337 287
Equipment and data processing 627 703
Advertising and marketing 187 162
Other 591 486
Total non-interest expense 4,134 3,720
Income before income taxes 8,874 8,555
Income tax expense:
Provision for income taxes 3,507 3,077
Retroactive assessment related to REIT 5,515 -
Total income tax expense 9,022 3,077
Net income $ (148) $ 5,478
Weighted average common shares
outstanding during the period:
Basic 57,468,369 57,456,025
Diluted 58,420,730 58,410,637
Earnings per common share:
Basic $ 0.00 $ 0.10
Diluted 0.00 0.09
Three months ended March 31,
2003
Average
Average yield/
balance Interest(1) cost
(Dollars in thousands)
Assets:
Interest-earning assets:
Short-term investments $ 191,207 $ 577 1.22%
Debt securities (2) (4) 371,163 3,253 3.51
Equity securities (2) 22,872 230 4.02
Mortgage loans (3) 793,170 12,819 6.47
Commercial participation loans 3,921 13 1.34
Other commercial loans (3) 22,833 344 6.03
Consumer loans (3) 3,305 63 7.62
Auto finance loans (3) 2,911 29 4.04
Total interest-earning assets 1,411,382 17,328 4.91
Allowance for loan losses (15,187)
Non-interest earning assets 27,416
Total assets $1,423,611
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Deposits:
NOW accounts $ 65,237 35 0.22%
Savings accounts (5) 16,992 35 0.84
Money market savings accounts 278,233 1,244 1.81
Certificate of deposit accounts 265,539 2,128 3.25
Total deposits 626,001 3,442 2.23
Borrowed funds (6) 124,088 1,396 4.50
Total interest-bearing
liabilities 750,089 4,838 2.62
Non-interest-bearing demand
checking accounts 27,017
Other liabilities 16,319
Total liabilities 793,425
Retained earnings 630,186
Total liabilities and
retained earnings $1,423,611
Net interest income (tax equivalent
basis)/interest rate spread (7) 12,490 2.29%
Less adjustment of tax exempt income 42
Net interest income $12,448
Net interest margin (8) 3.54%
Three months ended March 31,
2002
Average
Average yield/
balance Interest(1) cost
(Dollars in thousands)
Assets:
Interest-earning assets:
Short-term investments $ 82,317 $ 351 1.73%
Debt securities (2) (4) 158,103 2,244 5.68
Equity securities (2) 26,991 263 3.92
Mortgage loans (3) 787,127 13,958 7.09
Commercial participation loans 7,856 37 1.91
Other commercial loans (3) 31,576 409 5.18
Consumer loans (3) 3,149 72 9.15
Auto finance loans (3) - - -
Total interest-earning assets 1,097,119 17,334 6.32
Allowance for loan losses (15,301)
Non-interest earning assets 28,432
Total assets $1,110,250
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Deposits:
NOW accounts $ 72,668 88 0.49%
Savings accounts (5) 13,911 43 1.25
Money market savings accounts 262,156 1,290 2.00
Certificate of deposit accounts 260,841 2,655 4.13
Total deposits 609,576 4,076 2.71
Borrowed funds (6) 178,885 2,604 5.91
Total interest-bearing
liabilities 788,461 6,680 3.44
Non-interest-bearing demand checking
accounts 17,998
Other liabilities 15,930
Total liabilities 822,389
Retained earnings 287,861
Total liabilities and
retained earnings $1,110,250
Net interest income (tax equivalent
basis)/interest rate spread (7) 10,654 2.88%
Less adjustment of tax exempt income 48
Net interest income $ 10,606
Net interest margin (8) 3.88%
(1) Tax exempt income on equity securities is included on a tax
equivalent basis.
(2) Average balances include unrealized gains on securities available
for sale. Equity securities include marketable equity securities
(preferred and common stocks) and restricted equity securities.
(3) Loans on non-accrual status are included in average balances.
(4) Excluded from interest income in the 2002 period is $65 of an
interest payment on a defaulted bond that relates to prior
periods.
(5) Savings accounts include mortgagors' escrow accounts.
(6) The 2003 period excludes a $25 interest charge on a prepaid FHLB
advance that relates to prior periods.
(7) Interest rate spread represents the difference between the yield
on interest-earning assets and the cost of interest-bearing
liabilities.
(8) Net interest margin represents net interest income (tax equivalent
basis) divided by average interest-earning assets.
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Selected Financial Ratios and Other Data
Three months ended
March 31,
2003 2002
Performance Ratios (annualized):
Return on average assets (0.04)% 1.99%
Return on average stockholders' equity (0.09)% 7.67%
Return on average stockholders' equity,
excluding effect of unrealized gains on
securities available for sale, net of taxes (0.09)% 7.86%
Interest rate spread 2.29% 2.88%
Net interest margin 3.54% 3.88%
Efficiency ratio (A) 31.67% 33.06%
Dividend paid per share during period $ 0.085 $0.073 (B)
(A) Represents the ratio of non-interest expenses divided by the sum
of net interest income and non-interest income (exclusive of
securities gains).
(B) Adjusted to reflect exchange of shares resulting from
reorganization on July 9, 2002.
March 31, December 31, March 31,
2003 2002 2002
(dollars in thousands except per share data)
Capital Ratio:
Stockholders' equity to
total assets 43.08% 44.43% 25.64%
Asset Quality:
Non-performing loans $ 137 $ 5 $ 5
Non-performing assets 137 5 5
Allowance for loan losses 15,424 15,052 15,212
Allowance for loan losses as a
percent of total loans,
excluding money market
loan participations 1.83% 1.87% 1.86%
Non-performing assets as a
percent of total assets - - -
Per Share Data:
Book value per share $ 10.65 $ 10.80 $4.94 (B)
Market value per share 12.52 11.90 7.80 (B)
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