Brookline Bancorp Announces 2003 Fourth Quarter and Annual Earnings and Declaration of Per Share Regular Dividend of $0.085 and Extra Dividend of $0.20.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)--Jan. 15, 2004Brookline 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 its earnings for the 2003 fourth quarter and year and approval by its Board of Directors of a regular quarterly dividend of $0.085 per share and an extra dividend of $0.20 per share payable on February February: see month. 16, 2004 to stockholders of record on January January: see month. 31, 2004. The Company earned $3,439,000, or $0.06 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 December December: see month. 31, 2003 compared to $5,864,000, or $0.10 per share (on a basic and diluted basis) for the quarter ended December 31, 2002. The 2003 and 2002 quarters included securities gains of $1,593,000 ($1,022,000 after taxes) and $7,161,000 ($4,591,000 after taxes), respectively. The 2002 quarter also included a loss of $7,494,000 ($4,360,000 after taxes) resulting 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 $97 million of borrowings from the Federal Home Loan Bank with high rates of interest. New borrowings of $62 million were obtained in the 2002 quarter at lower rates of interest and longer maturities. These financing transactions resulted in a significant reduction of interest expense in 2003 from what would otherwise have been incurred if the transactions had not been initiated. The decline in quarterly earnings was attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk primarily to (a) expense related to the 2003 Recognition and Retention Plan (the "2003 Recognition Plan"), (b) a higher rate of income taxes (42.3% versus 35.3%) caused primarily by the elimination of the favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. tax treatment of the Company's real estate investment subsidiary ("REIT REIT See: Real Estate Investment Trust REIT See real estate investment trust (REIT). ") and (c) higher operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. and provision for loan losses. The increased operating expenses were due primarily to expanded indirect automobile automobile, self-propelled vehicle used for travel on land. The term is commonly applied to a four-wheeled vehicle designed to carry two to six passengers and a limited amount of cargo, as contrasted with a truck, which is designed primarily for the transportation of lending activities. The increase in the provision for loan losses was caused primarily by growth of the loan portfolio. Non-performing assets were insignificant throughout 2003 and amounted to $133,000, or 0.01% of total assets at December 31, 2003. The Company entered the indirect automobile lending business in the first quarter of 2003. Total indirect automobile loans outstanding increased from $155 million at September September: see month. 30, 2003 to $211 million at December 31, 2003. The average credit score of all loans outstanding at December 31, 2003 was over 730 and the total of loans with credit scores below 660 was less than 10%. The total of loans delinquent delinquent 1) adj. not paid in full amount or on time. 2) n. short for an underage violator of the law as in juvenile delinquent. DELINQUENT, civil law. He who has been guilty of some crime, offence or failure of duty. over 30 days at December 31, 2003 was $988,000, or 0.47% of the indirect automobile portfolio. As previously reported, on October October: see month. 16, 2003, 1,158,000 shares were awarded to directors and certain employees of the Company under the 2003 Recognition Plan approved by the stockholders of the Company on August 27, 2003. The total expense of the shares awarded ($17,334,000) is being charged to expense over the periods in which the shares vest. The charge to pre-expense was $3,870,000 ($2,460,000 after taxes) in the fourth quarter and is projected to be, on a pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta basis, $2,760,000 in 2004 and $2,618,000 for each of the years 2005 through 2008. Net income for the year ended December 31, 2003 was $14,480,000, or $0.25 per share (on a basic and diluted basis), compared to $21,935,000, or $0.38 per share (on a basic and diluted basis) for the year ended December 31, 2002. The 2003 and 2002 years included securities gains of $2,102,000 ($1,348,000 after taxes) and $8,698,000 ($5,577,000 after taxes), respectively. The 2003 year also included the expense for the 2003 Recognition Plan and 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 of $2,788,000 resulting from settlement of a tax dispute relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the state tax treatment of the Company's REIT subsidiary for the tax years 1999 through 2002. The 2002 year also included a loss of $7,776,000 ($4,524,000 after taxes) from the prepayment of borrowings from the Federal Home Loan Bank in the third and fourth quarter. In addition to the matters mentioned in the preceding paragraph, the decline in earnings for 2003 compared to 2002 was attributable primarily to (a) a higher rate of income taxes (41.4% versus 36.1%), (b) accelerated amortization of premiums paid in purchasing 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. and pass-through pass-through n. 1. An opening between two rooms, especially a shelved space between a kitchen and dining room that is used for passing food. 2. A route through which something is permitted to pass. 3. mortgage-backed securities Mortgage-backed securities (MSBs) Securities backed by a pool of mortgage loans. (collectively "mortgage securities"), (c) higher operating expenses and provision for loan losses for the same reasons cited above in the third preceding paragraph (d) added expenses to operate a new branch opened in the third quarter of 2003, (e) payment of dividend equivalent rights ($361,000) to holders of unexercised options as a result of the $0.20 per share extra dividend paid to stockholders in August 2003 and (f) a decline in net interest margin from 3.58% in 2002 to 3.34% in 2003. In the second half of 2002 and the first four months of 2003, the Company invested a substantial part of the proceeds from its July July: see month. 2002 stock offering in mortgage securities with relatively short maturities. Because of the declining interest rate environment, the investments were purchased at a premium which was to be amortized over the estimated life of the securities. Unprecedented prepayment of loans underlying the mortgage securities subsequent to their purchase shortened short·en v. short·ened, short·en·ing, short·ens v.tr. 1. To make short or shorter. 2. the estimated life of the securities significantly, thus necessitating the accelerated expensing of part of the premiums paid to purchase the securities. Due to the prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. , the Company's investment in mortgage securities declined from $315 million at March 31, 2003 to $137 million at December 31, 2003. Total accelerated premium amortization was $2,370,000 in 2003 and the total of unamortized premiums at December 31, 2003 was $2,515,000. Continuation continuation - continuation passing style of higher than anticipated prepayments could require further accelerated expensing of unamortized premiums in the future. Despite an increase in average interest-earning assets of $141 million, or 10.9%, in 2003 compared to 2002, total interest income declined by $5,287,000, or 7.4%, between the two years. While part of the decline was attributable to the premium amortization referred to in the preceding paragraph, it was also due to the continuation of an interest rate environment that is the lowest experienced in over forty years. Continuation of that environment or further reductions in interest rates would likely have a negative impact on the Company's net interest income and net interest margin. Since a high percent of the Company's assets (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 interest income from lower asset yields than the reduction in interest expense from lower 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 likely have a positive impact on the Company's net interest income and net interest margin. Total assets were $1.524 billion at December 31, 2003 compared to $1.458 billion at September 30, 2003 and $1.423 billion at December 31, 2002. While the rate of growth for the year was 7.1%, asset composition changed more significantly. Net loans as a percent of total assets increased from 56% at December 31, 2002 to 69% at December 31, 2003. Of the $267 million increase in net loans outstanding, $217 million related to the indirect automobile portfolio. 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. were funded primarily from maturing 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. investments, proceeds from the paydown Paydown A payment made towards an outstanding loan balance. Notes: Every time you make a mortgage payment you are "paying down" your loan. See also: Loan, Mortgage, Principal paydown In a corporate or U.S. of mortgage securities, deposit growth and borrowings from the Federal Home Loan Bank. Stockholders' equity declined from $632.4 million, or 44.4% of assets at December 31, 2002, to $606.7 million, or 39.8% of assets at December 31, 2003, due primarily to payment of dividends to stockholders in excess of net earnings ($16.4 million) and the purchase of 1,165,000 shares of the Company's common stock at an aggregate cost of $15.1 million. In approving an extra dividend of $0.20 per share in addition to a regular quarterly dividend of $0.085 per share, the Board of Directors considered the capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. of the Company, potential future business initiatives and the reduction in tax rates on dividends that went into effect in 2003. While it is the intent of the Board for the foreseeable fore·see tr.v. fore·saw , fore·seen , fore·see·ing, fore·sees To see or know beforehand: foresaw the rapid increase in unemployment. future to authorize To empower another with the legal right to perform an action. The Constitution authorizes Congress to regulate interstate commerce. authorize v. to officially empower someone to act. (See: authority) payment of an extra dividend of $0.20 per share semi-annually, the payment and 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 any extra future dividends will be considered in light of changing opportunities to deploy capital effectively (including the repurchase of stock Repurchase of stock Technique to pay cash to firm's shareholders that provides more preferential tax treatment for shareholders than dividends. Treasury stock is the name given to previously issued stock that has been repurchased by the firm. ), future income tax rates and general economic conditions. 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 and tax rates, 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. considerations and competition.
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands except share data)
December September December
31, 2003 30, 2003 31, 2002
ASSETS
Cash and due from banks $ 15,131 $ 12,547 $ 13,571
Short-term investments 127,572 121,610 224,897
Securities available for sale 287,952 293,222 361,049
Securities held to maturity
(market value of $1,381, $1,450
and $4,944, respectively) 1,343 1,411 4,861
Restricted equity securities 11,401 9,423 9,423
Loans, excluding money market loan
participations 1,072,740 1,013,764 803,425
Money market loan participations 2,000 3,000 4,000
Allowance for loan losses (16,195) (15,954) (15,052)
Net loans 1,058,545 1,000,810 792,373
Other investment 4,251 4,166 3,979
Accrued interest receivable 5,248 5,046 5,224
Bank premises and equipment, net 2,737 2,763 1,813
Deferred tax asset 8,843 6,868 5,779
Other assets 1,011 593 388
Total assets $1,524,034 $1,458,459 $1,423,357
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 679,921 $ 667,771 $ 649,325
Borrowed funds 220,519 170,531 124,900
Mortgagors' escrow accounts 4,565 4,935 4,256
Income taxes payable 1,489 895 4,970
Accrued expenses and other
liabilities 10,856 10,007 7,525
Total liabilities 917,350 854,139 790,976
Stockholders' equity:
Preferred stock, $0.01 par
value; 50,000,000 shares
authorized; none issued - - -
Common stock, $0.01 par value;
200,000,000 shares authorized;
60,160,530 shares, 58,996,410
shares and 58,714,948 shares
issued, respectively 602 590 587
Additional paid-in capital 469,493 451,512 449,254
Retained earnings, partially
restricted 169,417 170,824 185,788
Accumulated other comprehensive
income (A) 2,529 3,424 4,155
Treasury stock, at cost -
1,335,299 shares,
1,335,299 shares and
170,299 shares, respectively (17,017) (17,017) (1,944)
Unearned compensation -
recognition and retention plan (13,960) (548) (741)
Unallocated common stock held by
ESOP - 803,356 shares, 818,861
shares and 865,364 shares,
respectively (4,380) (4,465) (4,718)
Total stockholders' equity 606,684 604,320 632,381
Total liabilities and
stockholders' equity $1,524,034 $1,458,459 $1,423,357
(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 Year ended
December 31, December 31,
2003 2002 2003 2002
Interest income:
Loans, excluding
money market loan
participations $12,684 $ 13,752 $52,176 $ 56,798
Money market loan
participations 9 26 34 154
Indirect automobile
loans 2,069 - 4,149 -
Debt securities 1,735 2,692 7,648 10,016
Marketable equity
securities 73 109 370 487
Restricted equity
securities 70 82 289 339
Short-term
investments 329 1,167 1,544 3,703
Total interest
income 16,969 17,828 66,210 71,497
Interest expense:
Deposits 2,770 3,677 12,295 15,790
Borrowed funds 1,874 1,783 6,313 9,729
Total interest
expense 4,644 5,460 18,608 25,519
Net interest income 12,325 12,368 47,602 45,978
Provision (credit)
for loan losses 313 (100) 1,288 (250)
Net interest
income after
provision
(credit) for loan
losses 12,012 12,468 46,314 46,228
Non-interest income:
Fees and charges 720 886 2,552 2,081
Gains on
securities, net 1,593 7,161 2,102 8,698
Loss from
prepayment of FHLB
advances - (7,494) - (7,776)
Swap agreement
market valuation
credit (charge) 67 9 163 (202)
Other income 114 140 536 579
Total non-interest
income 2,494 702 5,353 3,380
Non-interest expense:
Compensation and
employee benefits 2,488 2,117 9,636 8,357
Recognition and
retention plans 3,885 40 3,992 161
Occupancy 376 319 1,517 1,186
Equipment and data
processing 937 662 3,219 2,700
Advertising and
marketing 198 219 761 742
Dividend equivalent
rights - - 361 -
Other 662 752 2,701 2,158
Total non-interest
expense 8,546 4,109 22,187 15,304
Income before income
taxes 5,960 9,061 29,480 34,304
Income tax expense:
Provision for
income taxes 2,521 3,197 12,212 12,369
Retroactive
assessment related
to REIT - - 2,788 -
Total income tax
expense 2,521 3,197 15,000 12,369
Net income $ 3,439 $ 5,864 $14,480 $ 21,935
Earnings per common
share:
Basic $ 0.06 $ 0.10 $ 0.25 $ 0.38
Diluted 0.06 0.10 0.25 0.38
Weighted average
common shares
outstanding during
the period:
Basic 56,713,171 57,537,731 56,869,065 57,527,296
Diluted 57,724,597 58,536,785 57,871,763 58,446,364
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Average Yields / Costs
Three months ended December 31,
2003 2002
------------------------ --------------------------
Average Average
Average Interest yield/ Average Interest yield/
balance (1) cost balance (1) cost
(Dollars in thousands)
Assets
Interest-earning
assets:
Short-term
investments $ 129,721 $ 329 1.01% $ 306,931 $ 1,167 1.51%
Debt securities
(2) (4) 276,752 1,744 2.52 277,388 2,692 3.88
Equity
securities (2) 22,367 170 3.03 26,209 231 3.53
Mortgage loans
(3) 818,696 12,224 5.97 778,975 13,344 6.85
Money market
loan partici-
pations 3,227 9 1.11 6,382 26 1.62
Other
commercial
loans (3) 29,077 415 5.71 21,455 340 6.34
Indirect
automobile
loans (3) 191,391 2,069 4.29 - - -
Other consumer
loans (3) 2,429 45 7.41 3,329 68 8.17
Total
interest-
earning
assets 1,473,660 17,005 4.60 1,420,669 17,868 5.03%
Allowance for
loan losses (16,020) (15,156)
Non-interest
earning assets 31,307 27,440
Total assets $1,488,947 $1,432,953
Liabilities and
Stockholders' Equity
Interest-bearing
liabilities:
Deposits:
NOW accounts $ 60,756 20 0.13% $ 73,404 47 0.25%
Savings
accounts (5) 25,694 27 0.42 14,494 29 0.79
Money market
savings
accounts 306,790 1,031 1.33 258,418 1,201 1.84
Certificate of
deposit
accounts 248,109 1,692 2.70 274,329 2,400 3.47
Total
deposits 641,349 2,770 1.71 620,645 3,677 2.35
Borrowed funds 195,789 1,874 3.75 143,181 1,783 4.94
Total interest
bearing
liabilities 837,138 4,644 2.20 763,826 5,460 2.84
Non-interest-
bearing demand
checking accounts 32,530 18,040
Other liabilities 14,294 16,435
Total
liabilities 883,962 798,301
Stockholders'
equity 604,985 634,652
Total liabilities
and stockholders'
equity $1,488,947 $1,432,953
Net interest
income (tax
equivalent
basis)/interest
rate spread (6) 12,361 2.40% 12,408 2.19%
Less adjustment
of tax exempt
income 36 40
Net interest
income $12,325 $ 12,368
Net interest
margin (7) 3.36% 3.49%
(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) Included in interest income in the 2003 period is $93 of
accelerated premium amortization on the collateralized mortgage
obligations portfolio. Excluding the accelerated amortization, the
average yield for the 2003 period would have been 2.66% for debt
securities and 4.62% for total interest-earning assets.
(5) Savings accounts include mortgagors' escrow accounts.
(6) Net interest rate spread represents the difference between the
yield on interest-earning assets and the cost of interest-bearing
liabilities.
(7) 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 Year
ended ended
December 31, December 31,
2003 2002 2003 2002
Performance Ratios (annualized):
Return on average assets 0.98% 1.64% 1.03% 1.68%
Return on average stockholders'
equity 2.27% 3.70% 2.24% 4.81%
Return on average stockholders'
equity, excluding effect of
unrealized gains on securities
available for sale, net of taxes 2.28% 3.73% 2.25% 4.89%
Interest rate spread 2.40% 2.19% 2.25% 2.41%
Net interest margin 3.36% 3.49% 3.34% 3.58%
Dividend paid per share during
period $0.085 $0.085 $0.54 $0.316(A)
(A) Adjusted to reflect exchange of shares resulting from
reorganization on July 9, 2002.
At At At
Dec. 31, Sept. 30, Dec. 31,
2003 2003 2002
(dollars in thousands except per share data)
Capital Ratio:
Stockholders' equity to total assets 39.81% 41.44% 44.43%
Asset Quality:
Non-performing loans $ 50 $ 39 $ 5
Non-performing assets 133 111 5
Allowance for loan losses 16,195 15,954 15,052
Allowance for loan losses as a percent
of total loans 1.51% 1.57% 1.86%
Non-performing assets as a percent of
total assets 0.01% 0.01% -
Per Share Data:
Book value per share $ 10.31 $ 10.48 $ 10.80
Market value per share $ 15.34 $ 14.77 $ 11.90
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