Brookline Bancorp Announces 2003 Second Quarter 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)--July 17, 2003Brookline 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 second quarter of 2003 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 August 15, 2003 to stockholders of record on July July: see month. 31, 2003. The Company earned $6,687,000, or $0.12 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 June June: see month. 30, 2003 compared to $5,131,000, or $0.09 per share (on a basic and diluted basis), for the quarter ended June 30, 2002. The 2003 quarter included 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. credit of $2,727,000, or $0.05 per share, resulting from settlement of the matter addressed in the following paragraph. On March 5, 2003, a new law was enacted denying favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. tax treatment for dividend distributions from real estate investment trusts ("REITs") in determining Massachusetts Massachusetts (măsəch  `sĭts), most populous of the New England states of the NE United States. 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. not only
for the year 2003 and thereafter, but also 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. Because of the new law and as required by 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 , $8,580,000 ($5,515,000 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. ) was charged to the Company's earnings in the first quarter of 2003, despite initiatives by the Company to dispute and appeal taxes assessed. As previously communicated, on June 23, 2003, the Company signed an agreement with the Commissioner of Revenue of the Commonwealth of Massachusetts settling all disputes relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc assessments and the tax treatment of the Company's REIT REIT See: Real Estate Investment Trust REIT See real estate investment trust (REIT). subsidiary for the years 1999 through 2002. In accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with that agreement, the Company paid $4,341,000 as full settlement of taxes and interest due. The credit mentioned in the preceding paragraph is the difference between the liability recorded in the first quarter of 2003 and the amount of the settlement paid, net of related tax benefits. Excluding the credit resulting from settlement of the REIT tax matter, net income in the second quarter of 2003 was $1,171,000 less than net income in the second quarter of 2002. The decline was attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk primarily to a $1,680,000 ($977,000 on an after-tax basis) write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. of unamortized 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"). Unprecedented 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 loans underlying the mortgage securities 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 accelerated expensing of part of the premiums paid to purchase the securities. Continuation continuation - continuation passing style of unprecedented prepayment of loans underlying the mortgage securities could require further write-downs of unamortized premiums in the future. The total of unamortized premiums on mortgage securities at June 30, 2003 was $4,403,000, $2,143,000 of which is scheduled to amortize amortize To write off gradually and systematically a given amount of money within a specific number of time periods. For example, an accountant amortizes the cost of a long-term asset by deducting a portion of that cost against income in each period. in the second half of 2003. The Company entered the 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 business in the first quarter of 2003. Total indirect automobile loans outstanding increased from $12,996,000 at March 31, 2003 to $84,385,000 at June 30, 2003. The Company is doing business with over 80 dealerships. The average credit score of all loans originated is in excess of 725 and the total of loans with credit scores below 660 is 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 June 30, 2003 was $73,000, or 0.09% of the portfolio. As previously communicated, the Company expects the total of indirect automobile 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. to be in the range of $175 million to $200 million in 2003 and the indirect automobile loan business to contribute modestly to the Company's net earnings in the second half of 2003. Average interest-earning 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 $236 million, or 20%, in the 2003 second quarter compared to the 2002 second quarter due to proceeds from the Company's stock offering in July 2002. Despite such asset growth, net interest income was lower due to the premium write-down mentioned above and lower asset yields. The current interest rate environment is the lowest in over forty years. Continuation 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. Provision for loan losses in the 2003 quarter compared to the 2002 quarter was higher due primarily to loan growth. Non-performing assets remained diminimus ($29,000 at June 30, 2003). Non-interest income was higher due primarily to increased fees from mortgage loan prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. , changes in the pricing of deposit services and valuation adjustments related to the Company's swap agreement. Non-interest expenses were higher because of commencement of the indirect automobile lending activities in 2003, the contemplated opening of a new branch in the third quarter, added personnel, higher employee benefits costs, 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 , professional fees associated with the REIT matter, and added costs for corporate governance Corporate Governance The relationship between all the stakeholders in a company. This includes the shareholders, directors, and management of a company, as defined by the corporate charter, bylaws, formal policy, and rule of law. and stockholder related matters. The effective income tax rate is higher in 2003 than in 2002 primarily because of the loss of the favorable tax treatment previously applied to the activities of the Company's REIT subsidiary. Net income for the six months ended June 30, 2003 was $6,539,000, or $0.11 per share (on a basic and diluted basis) compared to $10,610,000, or $0.18 per share (on a basic and diluted basis) for the six months ended June 30, 2002. Excluding the $2,788,000 ($0.05 per share) after-tax net charge to earnings resulting from settlement of the REIT tax matter previously discussed, net income was $1,283,000 less in the 2003 six month period than in the 2002 six month period. The decline was attributable primarily to the write-down of unamortized premiums and lower asset yields previously discussed. Changes in the provision for loan losses, non-interest income, non-interest expenses and the effective income tax rate between the 2003 and 2002 six month periods were due primarily to the same reasons cited above regarding second quarter changes. 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 and the recent reduction in tax rates on dividends. 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 future extra dividend 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, tax and 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)
June 30, December 31, June 30,
2003 2002 2002
(unaudited) (unaudited)
Assets
Cash and due from banks $12,870 $13,571 $16,802
Short-term investments 90,841 224,897 404,518
Securities available for sale 342,964 361,049 223,327
Securities held to maturity
(market value of $1,597,
$4,944 and $6,964, respectively) 1,548 4,861 6,921
Restricted equity securities 9,423 9,423 9,423
Loans, excluding money market
loan participations 951,489 803,425 819,043
Money market loan participations - 4,000 36,000
Allowance for loan losses (15,811) (15,052) (15,214)
Net loans 935,678 792,373 839,829
Other investment 3,969 3,979 3,923
Accrued interest receivable 5,377 5,224 5,982
Bank premises and equipment, net 2,533 1,813 1,812
Prepaid income taxes 1,376 - -
Deferred tax asset 7,212 5,779 2,292
Other assets 417 388 613
Total assets $1,414,208 $1,423,357 $1,515,442
Liabilities and Stockholders' Equity
Deposits $662,754 $649,325 $671,788
Borrowed funds 123,738 124,900 178,801
Stock offering subscription
proceeds - - 351,946
Mortgagors' escrow accounts 4,361 4,256 4,217
Income taxes payable - 4,970 5,218
Accrued expenses and other
liabilities 8,512 7,525 7,025
Total liabilities 799,365 790,976 1,218,995
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;
58,953,804 shares, 58,714,948
shares and 29,722,521 shares
issued, respectively 589 587 297
Additional paid-in capital 451,151 449,254 141,412
Retained earnings, partially
restricted 182,584 185,788 184,275
Accumulated other comprehensive
income (A) 2,673 4,155 9,968
Treasury stock, at cost -
1,335,299 shares, 170,299
shares and 2,921,378 shares,
respectively (17,017) (1,944) (33,813)
Unearned compensation -
recognition and retention plan (588) (741) (822)
Unallocated common stock held by
ESOP - 834,362 shares, 865,364
shares and 408,430 shares,
respectively (4,549) (4,718) (4,870)
Total stockholders' equity 614,843 632,381 296,447
Total liabilities and
stockholders' equity $1,414,208 $1,423,357 $1,515,442
(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 Six months ended
June 30, June 30,
2003 2002 2003 2002
(unaudited)
Interest income:
Loans, excluding
money market loan
participations $13,914 $14,392 $27,169 $28,831
Money market loan
participations 4 47 17 84
Debt securities 910 2,560 4,163 4,870
Marketable equity
securities 96 138 208 269
Restricted equity
securities 71 87 147 170
Short-term
investments 350 462 928 813
Total interest income 15,345 17,686 32,632 35,037
Interest expense:
Deposits 3,224 4,091 6,666 8,166
Borrowed funds 1,409 2,666 2,830 5,271
Total interest expense 4,633 6,757 9,496 13,437
Net interest income 10,712 10,929 23,136 21,600
Provision (credit)
for loan losses 360 - 735 (100)
Net interest income
after provision
(credit) for
loan losses 10,352 10,929 22,401 21,700
Non-interest income:
Fees and charges 714 448 1,260 816
Gains on
securities, net 181 312 508 1,235
Swap agreement
market valuation
credit (charge) 18 (117) 37 (64)
Other income 181 158 248 318
Total non-interest
income 1,094 801 2,053 2,305
Non-interest expense:
Compensation and
employee benefits 2,422 2,131 4,815 4,214
Occupancy 443 275 781 562
Equipment and data
processing 776 680 1,403 1,383
Advertising and marketing 188 175 375 337
Other 751 386 1,339 870
Total non-interest
expense 4,580 3,647 8,713 7,366
Income before income
taxes 6,866 8,083 15,741 16,639
Income tax expense:
Provision for
income taxes 2,906 2,952 6,414 6,029
Retroactive (credit)
assessment related
to REIT (2,727) - 2,788 -
Total income
tax expense 179 2,952 9,202 6,029
Net income $6,687 $5,131 $6,539 $10,610
Weighted average
common shares outstanding
during the period:
Basic 56,599,521 57,530,747 57,031,545 57,493,593
Diluted 57,575,487 58,538,741 57,995,708 58,316,740
Earnings per common
share:
Basic $0.12 $0.09 $0.11 $0.18
Diluted $0.12 $0.09 $0.11 $0.18
Three months ended June 30,
2003 2002
Average Average
Average yield/ Average yield/
balance Interest cost balance Interest cost
(1) (1)
(Dollars in thousands)
Assets:
Interest-earning
assets:
Short-term
investments $120,409 $350 1.17% $106,811 $462 1.73%
Debt securities
(2)(4) 365,122 914 1.00 198,264 2,561 5.17
Equity
securities (2) 21,241 202 3.81 29,229 273 3.74
Mortgage
loans (3) 815,533 12,873 6.31 794,721 13,934 7.01
Commercial
participation
loans 1,132 4 1.42 9,998 47 1.89
Other commercial
loans (3) 23,961 352 5.88 28,208 387 5.49
Consumer loans (3) 2,999 57 7.60 3,197 71 8.88
Auto finance
loans (3) 56,441 632 4.49 - - -
Total interest-
earning
assets 1,406,838 15,384 4.38 1,170,428 17,735 6.06
Allowance for
loan losses (15,594) (15,280)
Non-interest
earning assets 28,596 34,045
Total assets $1,419,840 $1,189,193
Liabilities and Retained Earnings:
Interest-bearing liabilities:
Deposits:
NOW accounts $60,962 26 0.17% $75,993 93 0.49%
Savings
accounts (5) 20,777 38 0.73 15,014 39 1.04
Money market
savings
accounts 294,448 1,214 1.65 263,930 1,158 1.76
Certificate of
deposit
accounts 257,248 1,946 3.03 278,503 2,679 3.86
Total deposits 633,435 3,224 2.04 633,440 3,969 2.51
Borrowed funds 123,804 1,409 4.50 179,131 2,666 5.89
Total deposits
and borrowed
funds 757,239 4,633 2.45 812,571 6,635 3.28
Stock offering
proceeds - - - 47,810 122 1.02
Total interest-
bearing
liabilities 757,239 4,633 2.45 860,381 6,757 3.15
Non-interest-bearing
demand checking
accounts 28,494 18,292
Other liabilities 20,730 17,878
Total
liabilities 806,463 896,551
Retained earnings 613,377 292,642
Total
liabilities and
stockholders'
equity $1,419,840 $1,189,193
Net interest income
(tax equivalent
basis)/interest
rate spread (6) 10,751 1.93% 10,978 2.91%
Less adjustment of
tax exempt income 39 49
Net interest income $10,712 $10,929
Net interest margin (7) 3.06% 3.74%
(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 $1,680 of
premium write-down on the CMO portfolio. Excluding the
write-down, the average yield for the 2003 period would have been
2.84% for debt securities and 4.85% for total interest-earning
assets.
(5) Savings accounts include mortgagors' escrow accounts.
(6) 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 ended Six months ended
June 30, June 30,
2003 2002 2003 2002
Performance Ratios
(annualized):
Return on average assets 1.88% 1.73% 0.92% 1.85%
Return on average
stockholders' equity 4.36% 7.01% 2.10% 7.31%
Return on average
stockholders' equity,
excluding effect of
unrealized gains on
securities available for
sale, net of taxes 4.38% 7.20% 2.12% 7.50%
Interest rate spread 1.93% 2.91% 2.10% 2.94%
Net interest margin 3.06% 3.74% 3.29% 3.83%
Efficiency ratio (A) 39.40% 31.94% 35.31% 32.50%
Dividend paid per share
during period $0.085 $0.073(B) $0.17 $0.146(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.
June 30, December 31, June 30,
2003 2002 2002
(dollars in thousands
except per share data)
Capital Ratio:
Stockholders' equity to total assets 43.48% 44.43% 19.56%
Asset Quality:
Non-performing loans $29 $5 $136
Non-performing assets 29 5 136
Allowance for loan losses 15,811 15,052 15,214
Allowance for loan losses as a
percent of total loans, excluding
money market loan participations 1.66% 1.87% 1.86%
Non-performing assets as a percent of
total assets - - -
Per Share Data:
Book value per share $10.67 $10.80 $11.06(B)
Market value per share $14.00 $11.90 $11.57(B)
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