Brookline Bancorp Announces 2003 Third Quarter Earnings, Stock Plan Grant 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)--Oct. 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 earned $4,502,000, or $0.08 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 September September: see month. 30, 2003 compared to $5,461,000, or $0.09 per share (on a basic and diluted basis) for the quarter ended September 30, 2002. The decline in earnings resulted primarily from a higher rate of income taxes (42.1% versus 36.5%) caused 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 ("REIT REIT See: Real Estate Investment Trust REIT See real estate investment trust (REIT). ") subsidiary, a $361,000 dividend equivalent rights payment triggered by the special dividend paid to stockholders in August 2003 and a $194,000 reduction in 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. gains from the sale of securities. If the rate of income taxes had remained the same, net income for the 2003 quarter would have been greater by $420,000. Net income for the nine months ended September 30, 2003 was $11,041,000, or $0.19 per share (on a basic and diluted basis), compared to $16,071,000, or $0.28 per share (on a basic and diluted basis), for the nine months ended September 30, 2002. The decline in earnings was due primarily to the following factors: (a) a $2,788,000 after-tax charge resulting from settlement of a tax dispute, (b) $1,262,000 more in income taxes due to an increase in the rate of income taxes from 36.3% to 41.2%, (c) a $660,000 reduction in after-tax gains from the sale of securities and (d) a decline in net interest margin from 3.62% in the 2002 period to 3.34% in the 2003 period. On March 5, 2003, a new law was enacted denying favorable tax treatment for dividend distributions from 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 for tax years 1999 through 2002. The Company disputed 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 tax assessments. In June June: see month. 2003, the Company reached an agreement with the Commissioner of Revenue of the Commonwealth of Massachusetts to settle all disputes relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the tax treatment of the Company's REIT subsidiary. The Company paid $4,341,000 as full settlement of the dispute, resulting in the after-tax charge to earnings of $2,788,000 mentioned in the preceding paragraph. 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 $84 million at June 30, 2003 to $155 million at September 30, 2003. The average credit score of all loans outstanding at September 30, 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 September 30, 2003 was $211,000, or 0.14% of the portfolio. Total assets were $1.46 billion at September 30, 2003 compared to $1.41 billion at June 30, 2003 and $1.42 billion at December December: see month. 31, 2002. While the growth in assets since the beginning of the year has been modest (2.5%), asset composition has changed more significantly. Loans as a percent of total assets increased from 55% at December 31, 2002 to 68% at September 30, 2003. Of the $209 million net increase in loans outstanding, $155 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, 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 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. purchased as investments, deposit growth (2.8%) and $45 million of borrowings from the Federal Home Loan Bank of Boston Boston, town, England Boston, town (1991 pop. 26,495), E central England, on the Witham River. Boston's fame as a port dates from the 13th cent., when it was a Hanseatic port trading wool and wine. Having recovered from a decline in the 18th and 19th cent. , $30 million of which mature in two years and $15 million of which mature in five years. The borrowings were initiated in anticipation The performance of an act or obligation before it is legally due. In patent law, the publication of the existence of an invention that has already been patented or has a patent pending, of a rising rate environment commencing in 2004. While the cost of the borrowings is slightly penalizing net interest income in 2003, it is believed that operating results thereafter will benefit from this funding decision. In the 2003 second and third quarters, the Company reduced pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta earnings by $1,680,000 and $126,000, respectively, as a result of accelerated amortization of premiums paid in purchasing collateralized mortgage obligations 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 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 the accelerated expensing of part of the premiums paid to purchase the securities. Total premium amortization was $1,198,000 in the 2003 third quarter compared to $3,093,000 in the 2003 second quarter. Due to 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 $263 million at June 30, 2003 and $158 million at September 30, 2003. Continuation continuation - continuation passing style of high levels of prepayments could require further accelerated expensing of unamortized premiums in the future. The total of unamortized premiums at September 30, 2003 was $3,219,000, $608,000 of which is scheduled to be amortized in the 2003 fourth quarter. Despite an increase in average interest-earning assets of $170 million, or 13.7%, in the 2003 nine month period compared to the 2002 nine month period, total interest income declined by $4,429,000, or 8.3%, between the two periods. While part of the decline was attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the premium amortization referred to in the preceding paragraph, the primary reason for the decline has been the continuation of an interest rate environment that is the lowest experienced 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 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 have a positive effect on the Company's net interest income and net interest margin. While net interest margin was lower in the 2003 nine month period (3.34%) than in the 2002 nine month period (3.62%), it improved to 3.42% in the 2003 three month period due primarily to growth of the loan portfolio. Provision for loan losses in the 2003 periods were higher than in the 2002 periods due primarily to growth in the indirect automobile loan and the non-residential mortgage loan portfolios. Non-performing assets remained diminimus ($111,000) at September 30, 2003. Excluding securities gains and a loss from prepayment of FHLB FHLB Federal Home Loan Bank advances in 2002, net interest income was higher in the 2003 periods due primarily to increased fees from mortgage loan prepayments, changes in the pricing of deposit services, favorable valuation adjustments related to the Company's swap agreement and improved earnings from the Company's equity investment 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. Non-interest expenses were higher in the 2003 periods than in the 2002 periods because of the commencement of the indirect automobile lending activities in 2003, the opening of a new branch in the third quarter of 2003, added personnel, higher costs for benefits, occupancy Gaining or having physical possession of real property subject to, or in the absence of, legal right or title. In a fire insurance policy, for example, the term occupancy , professional fees associated with resolution of the REIT matter, 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, and payment of dividend equivalent rights ($361,000) to holders of unexercised options as a result of the $0.20 per share special dividend paid to stockholders in August 2003. On August 27, 2003, the stockholders of the Company approved the 2003 Recognition and Retention Plan (the "Recognition Plan"). Pursuant to that plan, up to 1,250,000 shares of the Company's common stock may be awarded to the Company's employees and directors. On October October: see month. 16, 2003, the Compensation Committee of the Board of Directors awarded to directors and certain employees of the Company 1,158,000 shares under the Recognition Plan. The shares awarded vest over periods extending from January January: see month. , 2004 through October, 2012. The total expense of the shares awarded, approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $17.3 million, will be charged to earnings over the periods in which the shares vest, approximately $3.9 million of which will be charged in the fourth quarter of 2003, $2.7 million in 2004 and the remainder in varying amounts over the years 2005 through 2012. 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 October 31, 2003 and payable November November: see month. 17, 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 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)
September 30,December 31,September 30,
2003 2002 2002
--------------------------------------
(unaudited) (unaudited)
ASSETS
Cash and due from banks $ 12,547 $ 13,571 $ 13,055
Short-term investments 121,610 224,897 353,800
Securities available for sale 293,222 361,049 254,834
Securities held to maturity
(market value of $1,450, $4,944
and $4,953, respectively) 1,411 4,861 4,887
Restricted equity securities 9,423 9,423 9,423
Loans, excluding money market
loan participations 1,013,764 803,425 809,199
Money market loan participations 3,000 4,000 7,000
Allowance for loan losses (15,954) (15,052) (15,156)
----------- ----------- ------------
Net loans 1,000,810 792,373 801,043
----------- ----------- ------------
Other investment 4,166 3,979 3,844
Accrued interest receivable 5,046 5,224 5,189
Bank premises and equipment, net 2,763 1,813 1,803
Deferred tax asset 6,868 5,779 3,071
Other assets 593 388 369
----------- ----------- ------------
Total assets $1,458,459 $1,423,357 $1,451,318
=========== =========== ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits $ 667,771 $ 649,325 $ 632,531
Borrowed funds 170,531 124,900 164,606
Mortgagors' escrow accounts 4,935 4,256 4,638
Income taxes payable 895 4,970 4,859
Accrued expenses and other
liabilities 10,007 7,525 7,138
----------- ----------- ------------
Total liabilities 854,139 790,976 813,772
----------- ----------- ------------
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; 58,996,410
shares, 58,714,948 shares and
58,651,222 shares issued,
respectively 590 587 587
Additional paid-in capital 451,512 449,254 448,734
Retained earnings, partially
restricted 170,824 185,788 184,829
Accumulated other
comprehensive income (A) 3,424 4,155 8,949
Treasury stock, at cost -
1,335,299 shares, 170,299
shares and none, respectively (17,017) (1,944) -
Unearned compensation -
recognition and retention
plan (548) (741) (769)
Unallocated common stock held
by ESOP - 818,861 shares,
865,364 shares and 877,296
shares, respectively (4,465) (4,718) (4,784)
----------- ----------- ------------
Total stockholders' equity 604,320 632,381 637,546
----------- ----------- ------------
----------- ----------- ------------
Total liabilities and
stockholders' equity $1,458,459 $1,423,357 $1,451,318
=========== =========== ============
(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 Nine months ended
September 30, September 30,
---------------------- -----------------------
2003 2002 2003 2002
---------------------- -----------------------
(unaudited)
Interest income:
Loans, excluding
money market loan
participations $ 14,403 $14,215 $ 41,572 $43,046
Money market loan
participations 7 43 25 128
Debt securities 1,750 2,455 5,912 7,324
Marketable equity
securities 90 109 298 378
Restricted equity
securities 71 87 219 257
Short-term
investments 288 1,723 1,215 2,537
---------------------- -----------------------
Total interest
income 16,609 18,632 49,241 53,670
---------------------- -----------------------
Interest expense:
Deposits 2,860 3,946 9,525 12,113
Borrowed funds 1,608 2,675 4,439 7,946
----------- ------- -----------------------
Total interest
expense 4,468 6,621 13,964 20,059
----------- ------- -----------------------
Net interest income 12,141 12,011 35,277 33,611
Provision (credit) for
loan losses 240 (50) 975 (150)
----------- ------- -----------------------
Net interest income
after provision
(credit) for loan
losses 11,901 12,061 34,302 33,761
----------- ------- -----------------------
Non-interest income:
Fees and charges 572 378 1,832 1,195
Gains on securities,
net - 302 508 1,537
Loss from pre-payment
of FHLB advances - (282) - (282)
Swap agreement market
valuation credit
(charge) 60 (146) 97 (210)
Other income 173 121 421 439
---------------------- -----------------------
Total non-interest
income 805 373 2,858 2,679
---------------------- -----------------------
Non-interest expense:
Compensation and
employee benefits 2,439 2,147 7,254 6,361
Occupancy 360 304 1,141 866
Equipment and data
processing 879 654 2,282 2,038
Advertising and
marketing 188 187 563 523
Dividend equivalent
rights 361 - 361 -
Other 701 538 2,040 1,409
---------------------- -----------------------
Total non-interest
expense 4,928 3,830 13,641 11,197
---------------------- -----------------------
Income before income
taxes 7,778 8,604 23,519 25,243
---------------------- -----------------------
Income tax expense:
Provision for income
taxes 3,276 3,143 8,137 9,172
Retroactive
assessment related
to REIT - - 4,341 -
---------------------- -----------------------
Total income tax
expense 3,276 3,143 12,478 9,172
---------------------- -----------------------
---------------------- -----------------------
Net income $ 4,502 $ 5,461 $ 11,041 $16,071
====================== =======================
Earnings per common
share:
Basic $ 0.08 $ 0.09 $ 0.19 $ 0.28
Diluted 0.08 0.09 0.19 0.28
Weighted average common
shares outstanding
during the period:
Basic 56,644,208 57,583,175 56,901,014 57,523,780
Diluted 57,658,817 58,614,100 57,881,992 58,416,186
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Average Yields / Costs
Three months ended September 30,
---------------------------------------------------
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 $ 115,109 $ 288 0.99 % $ 398,330 $1,723 1.72%
Debt securities
(2) (4) 302,612 1,759 2.33 209,806 2,455 4.68
Equity securities
(2) 21,535 194 3.59 32,873 235 2.86
Mortgage loans
(3) 828,683 12,564 6.06 788,275 13,806 7.01
Money market loan
participations 2,653 7 1.12 9,242 44 1.89
Other commercial
loans (3) 26,052 372 5.71 20,819 340 6.53
Indirect
automobile loans
(3) 127,067 1,419 4.43 - - -
Other consumer
loans (3) 2,561 48 7.50 3,273 69 8.43
-------------------- --------------------
Total interest-
earning assets 1,426,272 16,651 4.67 % 1,462,618 18,672 5.11%
-------------- ------------
Allowance for loan
losses (15,868) (15,214)
Non-interest
earning assets 29,044 26,602
----------- ------------
Total assets $1,439,448 $ 1,474,006
=========== ============
Liabilities and
Stockholders'
Equity
-------------------
Interest-bearing
liabilities:
Deposits:
NOW accounts $ 59,804 22 0.15 %$ 72,980 55 0.30%
Savings accounts
(5) 23,591 29 0.49 14,414 33 0.91
Money market
savings
accounts 306,958 1,077 1.39 244,975 1,116 1.81
Certificate of
deposit
accounts 243,624 1,732 2.82 285,783 2,654 3.68
-------------------- --------------------
Total deposits 633,977 2,860 1.79 618,152 3,858 2.48
Borrowed funds 152,000 1,608 4.14 178,057 2,675 5.88
-------------------- --------------------
Total deposits
and borrowed
funds 785,977 4,468 2.26 796,209 6,533 3.26
Stock offering
proceeds - - - 34,269 88 1.02
-------------------- --------------------
Total interest
bearing
liabilities 785,977 4,468 2.26 % 830,478 6,621 3.16%
-------------- ------------
Non-interest-
bearing demand
checking
accounts 32,130 18,267
Other liabilities 12,315 19,800
----------- ------------
Total
liabilities 830,422 868,545
Stockholders'
equity 609,026 605,461
----------- ------------
Total
liabilities
and
stockholders'
equity $1,439,448 $ 1,474,006
=========== ============
Net interest income
(tax equivalent
basis)/interest
rate spread (6) 12,183 2.41 % 12,051 1.95%
===== =====
Less adjustment of
tax exempt income 42 40
--------- --------
Net interest income $12,141 $12,011
========= ========
Net interest margin
(7) 3.42 % 3.30%
===== =====
(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 $126 of
accelerated premium amortization on the CMO portfolio.
Excluding the accelerated amortization, the average yield for the
2003 period would have been 2.49% for debt securities and 4.70%
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 ended Nine months ended
September 30, September 30,
----------------------------------------
2003 2002 2003 2002
----------------------------------------
Performance Ratios (annualized):
Return on average assets 1.25 % 1.48 % 1.03 % 1.70 %
Return on average
stockholders=equity 2.96 % 3.61 % 2.38 % 5.40 %
Return on average
stockholders=equity, excluding
effect of unrealized gains on
securities available for sale,
net of taxes 2.97 % 3.67 % 2.40 % 5.52 %
Interest rate spread 2.41 % 1.95 % 2.21 % 2.52 %
Net interest margin 3.42 % 3.30 % 3.34 % 3.62 %
Efficiency ratio (A) 38.07 % 30.98 % 36.25 % 31.96 %
Dividend paid per share during
period $0.285 $0.085 $0.455 $0.231 (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.
At At At
September 30, December 31, September 30,
2003 2002 2002
-------------------------------------------
(dollars in thousands except per share data)
Capital Ratio:
Stockholders= equity to
total assets 41.44 % 44.43 % 43.93 %
Asset Quality:
Non-performing loans $ 39 $ 5 $ 1
Non-performing assets 111 5 1
Allowance for loan losses 15,954 15,052 15,156
Allowance for loan losses as
a percent of total loans,
excluding money market loan
participations 1.57 % 1.87 % 1.87 %
Non-performing assets as
a percent of total
assets 0.01 % - -
Per Share Data:
Book value per share $ 10.48 $ 10.80 $ 10.87
Market value per share $ 14.77 $ 11.90 $ 11.75
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