Brookline Bancorp (BRKL) 10-Q 2021 Q1 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One) 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from           N/A           to                                 .

Commission file number 0-23695

BROOKLINE BANCORP INC.

(Exact name of registrant as specified in its charter)

Delaware			04-3402944
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
131 Clarendon Street	Boston	MA	02116
(Address of principal executive offices)			(Zip Code)

(617) 425-4600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	BRKL	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  Yes  ☒  No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  ☒  No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12-b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐ (Do not check if a smaller reporting company)	Smaller Reporting Company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   ☐  No  ☒   

At April 30, 2021, the number of shares of common stock, par value $0.01 per share, outstanding was 78,192,589.

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

FORM 10-Q

Table of Contents

		Page
Part I	Financial Information
Item 1.	Unaudited Consolidated Financial Statements
	Unaudited Consolidated Balance Sheets at March 31, 2021 and December 31, 2020	1
	Unaudited Consolidated Statements of Income for the Three Months Ended March 31, 2021 and 2020	2
	Unaudited Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2021 and 2020	3
	Unaudited Consolidated Statements of Changes in Equity for the Three Months Ended March 31, 2021 and 2020	4
	Unaudited Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020	5
	Notes to Unaudited Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	77
Item 4.	Controls and Procedures	79
Part II	Other Information
Item 1.	Legal Proceedings	80
Item 1A.	Risk Factors	80
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	80
Item 3.	Defaults Upon Senior Securities	80
Item 4.	Mine Safety Disclosures	80
Item 5.	Other Information	80
Item 6.	Exhibits	81
	Signatures	82

PART I — FINANCIAL INFORMATION

Item 1. Unaudited Consolidated Financial Statements

BROOKLINE BANCORP, INC. AND SUBSIDIARIES Unaudited Consolidated Balance Sheets
	At March 31, 2021		At December 31, 2020
	(In Thousands Except Share Data)
ASSETS
Cash and due from banks	$	41,284	$	36,069
Short-term investments	89,643		398,848
Total cash and cash equivalents	130,927		434,917
Investment securities available-for-sale	729,901		745,822
Equity securities held-for-trading	518		526
Total investment securities	730,419		746,348
Loans and leases:
Commercial real estate loans	3,790,341		3,823,826
Commercial loans and leases	2,324,202		2,274,899
Consumer loans	1,153,009		1,170,828
Total loans and leases	7,267,552		7,269,553
Allowance for loan and lease losses	(109,837)		(114,379)
Net loans and leases	7,157,715		7,155,174
Restricted equity securities	40,400		49,786
Premises and equipment, net of accumulated depreciation of $83,290 and $82,233, respectively	72,524		71,568
Right-of-use asset operating leases	23,180		24,143
Deferred tax asset	42,857		40,129
Goodwill	160,427		160,427
Identified intangible assets, net of accumulated amortization of $38,984 and $38,752, respectively	2,920		3,152
Other real estate owned ("OREO") and repossessed assets, net	6,383		6,515
Other assets	192,058		250,265
Total assets	$	8,559,810	$	8,942,424
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand checking accounts	$	1,724,170	$	1,592,205
Interest-bearing deposits	5,142,616		5,318,491
Total deposits	6,866,786		6,910,696
Borrowed funds:
Advances from the Federal Home Loan Bank of Boston ("FHLBB")	378,646		648,849
Subordinated debentures and notes	83,783		83,746
Other borrowed funds	83,574		87,652
Total borrowed funds	546,003		820,247
Operating lease liabilities	23,180		24,143
Mortgagors' escrow accounts	6,483		5,901
Reserve for unfunded credits	13,705		13,071
Accrued expenses and other liabilities	158,254		226,588
Total liabilities	7,614,411		8,000,646
Commitments and contingencies (Note 12)	0		0
Stockholders' Equity:
Common stock, $0.01 par value; 200,000,000 shares authorized; 85,177,172 shares issued and 85,177,172 shares issued, respectively	852		852
Additional paid-in capital	737,882		737,178
Retained earnings, partially restricted	282,301		264,892
Accumulated other comprehensive income	2,082		16,490
Treasury stock, at cost; 6,534,602 shares and 6,525,783 shares, respectively	(77,463)		(77,343)
Unallocated common stock held by Employee Stock Ownership Plan ("ESOP"); 44,502 shares and 51,114 shares, respectively	(255)		(291)
Total stockholders' equity	945,399		941,778
Total liabilities and stockholders' equity	$	8,559,810	$	8,942,424

See accompanying notes to unaudited consolidated financial statements.

1

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Income

	Three Months Ended March 31,
	2021		2020
	(In Thousands Except Share Data)
Interest and dividend income:
Loans and leases	$	75,009	$	79,559
Debt securities	3,118		2,976
Marketable and restricted equity securities	301		778
Short-term investments	39		209
Total interest and dividend income	78,467		83,522
Interest expense:
Deposits	6,707		16,240
Borrowed funds	2,651		5,570
Total interest expense	9,358		21,810
Net interest income	69,109		61,712
(Credit) provision for credit losses	(2,147)		54,114
Net interest income after provision for credit losses	71,256		7,598
Non-interest income:
Deposit fees	2,281		2,458
Loan fees	599		550
Loan level derivative income, net	474		2,156
(Loss) gain on investment securities, net	(7)		1,330
Gain on sales of loans and leases held-for-sale	709		120
Other	738		2,714
Total non-interest income	4,794		9,328
Non-interest expense:
Compensation and employee benefits	25,821		25,219
Occupancy	4,004		3,953
Equipment and data processing	4,493		4,703
Professional services	1,226		1,651
FDIC insurance	1,044		378
Advertising and marketing	1,100		1,075
Amortization of identified intangible assets	232		336
Other	2,891		3,433
Total non-interest expense	40,811		40,748
Income (loss) before provision for income taxes	35,239		(23,822)
Provision (benefit) for income taxes	8,785		(6,546)
Net income (loss)	$	26,454	$	(17,276)
Earnings per common share:
Basic	$	0.34	$	(0.22)
Diluted	0.34		(0.22)
Weighted average common shares outstanding during the year:
Basic	78,143,752		79,481,462
Diluted	78,404,063		79,665,774
Dividends paid per common share	$	0.115	$	0.115

See accompanying notes to unaudited consolidated financial statements.

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Comprehensive Income (Loss)

	Three Months Ended March 31,
	2021		2020
	(In Thousands)
Net income (loss)	$	26,454	$	(17,276)
Investment securities available-for-sale:
Unrealized securities holding gains (losses)	(18,481)		18,810
Income tax (expense) benefit	4,073		(4,146)
Net unrealized securities holding gains (losses) before reclassification adjustments, net of taxes	(14,408)		14,664
Cash flow hedges:
Change in fair value of cash flow hedges	2		0
Reclassification adjustment for (income) expense recognized in earnings	(2)		0
Net change in fair value of cash flow hedges	0		0
Other comprehensive income (loss), net of taxes	(14,408)		14,664
Comprehensive income (loss)	$	12,046	$	(2,612)

See accompanying notes to unaudited consolidated financial statements.

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Changes in Stockholders' Equity

Three Months Ended March 31, 2021 and 2020

	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Unallocated Common Stock Held by ESOP		Total Stockholders' Equity
	(In Thousands)
Balance at December 31, 2020	$	852	$	737,178	$	264,892	$	16,490	$	(77,343)	$	(291)	$	941,778
Net income	—		—		26,454		—		—		—		26,454
Other comprehensive income (loss)	—		—		—		(14,408)		—		—		(14,408)
Common stock dividends of $0.115 per share	—		—		(8,992)		—		—		—		(8,992)
Restricted stock awards issued, net of awards surrendered	—		120		—		—		(120)		—		0
Compensation under recognition and retention plans	—		537		(53)		—		—		—		484
Common stock held by ESOP committed to be released (6,612 shares)	—		47		—		—		—		36		83
Balance at March 31, 2021	$	852	$	737,882	$	282,301	$	2,082	$	(77,463)	$	(255)	$	945,399

	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive  Income (Loss)		Treasury Stock		Unallocated Common Stock Held by ESOP		Total Stockholders' Equity
	(In Thousands)
Balance at December 31, 2019	$	852	$	736,601	$	265,376	$	2,283	$	(59,073)	$	(433)	$	945,606
Net loss	—		—		(17,276)		—		—		—		(17,276)
Other comprehensive income (loss)	—		—		—		14,664		—		—		14,664
Common stock dividends of $0.115 per share	—		—		(9,173)		—		—		—		(9,173)
Compensation under recognition and retention plans	—		758		(45)		—		(134)		—		579
Treasury stock, repurchase shares	—		—		—		—		(10,410)		—		(10,410)
Common stock held by ESOP committed to be released (7,107 shares)	—		63		—		—		—		38		101
Adoption of ASU 2016-13 (CECL)	—		—		(11,523)		—		—		—		(11,523)
Balance at March 31, 2020	$	852	$	737,422	$	227,359	$	16,947	$	(69,617)	$	(395)	$	912,568

See accompanying notes to unaudited consolidated financial statements.

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Cash Flows

	Three Months Ended March 31,
	2021		2020
	(In Thousands)
Cash flows from operating activities:
Net income (loss)	$	26,454	$	(17,276)
Adjustments to reconcile net income to net cash provided from operating activities:
(Credit) provision for credit losses	(2,147)		54,114
Deferred income tax expense (benefit)	1,345		(17,270)
Depreciation of premises and equipment	1,318		1,581
Amortization of investment securities premiums and discounts, net	770		384
Amortization of deferred loan and lease origination costs, net	1,584		2,154
Amortization of identified intangible assets	232		336
Amortization of debt issuance costs	25		26
Accretion of acquisition fair value adjustments, net	(51)		(372)
Loss (gain) on investment securities, net	7		(1,330)
Gain on sales of loans and leases held-for-sale	(709)		(120)
Write-down of OREO and other repossessed assets	129		354
Compensation under recognition and retention plans	536		624
ESOP shares committed to be released	83		101
Net change in:
Cash surrender value of bank-owned life insurance	(251)		(254)
Other assets	58,480		(103,913)
Accrued expenses and other liabilities	(68,387)		173,346
Net cash provided from operating activities	19,418		92,485
Cash flows from investing activities:
Proceeds from sales of investment securities available-for-sale	0		86,434
Proceeds from maturities, calls, and principal repayments of investment securities available-for-sale	46,184		25,530
Purchases of investment securities available-for-sale	(49,514)		(273,252)
Proceeds from maturities, calls, and principal repayments of investment securities held to maturity	0		6,302
Proceeds from redemption/sales of restricted equity securities	9,386		2,944
Purchase of restricted equity securities	0		(17,598)
Proceeds from sales of loans and leases held-for-investment, net	50		5,800
Net increase in loans and leases	(995)		(96,414)
Purchase of premises and equipment, net	(2,347)		(1,071)
Proceeds from sales of OREO and other repossessed assets	385		1,972
Net cash provided from (used for) investing activities	3,149		(259,353)
			(Continued)

See accompanying notes to unaudited consolidated financial statements.

5

	Three Months Ended March 31,
	2021		2020
	(In Thousands)
Cash flows from financing activities:
Increase in demand checking, NOW, savings and money market accounts	296,341		57,871
(Decrease) increase in certificates of deposit	(340,207)		2,333
Proceeds from FHLBB advances	63,300		1,736,600
Repayment of FHLBB advances	(333,503)		(1,357,638)
(Decrease) increase in other borrowed funds, net	(4,078)		10,054
Increase in mortgagors' escrow accounts, net	582		209
Repurchases of common stock	0		(10,410)
Payment of dividends on common stock	(8,992)		(9,173)
Net cash (used for) provided from financing activities	(326,557)		429,846
Net (decrease) increase in cash and cash equivalents	(303,990)		262,978
Cash and cash equivalents at beginning of period	434,917		77,790
Cash and cash equivalents at end of period	$	130,927	$	340,768
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest on deposits, borrowed funds and subordinated debt	$	11,007	$	23,227
Income taxes	2,212		2,070
Non-cash investing activities:
Transfer from loans to other real estate owned	$	382	$	1,733

See accompanying notes to unaudited consolidated financial statements.

6

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(1) Basis of Presentation

Overview

Brookline Bancorp, Inc. (the "Company") is a bank holding company (within the meaning of the Bank Holding Company Act of 1956, as amended) and the parent of Brookline Bank, a Massachusetts-chartered trust company and Bank Rhode Island ("BankRI"), a Rhode Island-chartered financial institution (collectively referred to as the "Banks"). The Banks are both members of the Federal Reserve System. The Company is also the parent of Brookline Securities Corp. ("BSC"). The Company's primary business is to provide commercial, business and retail banking services to its corporate, municipal and retail customers through the Banks and its non-bank subsidiaries.

Brookline Bank, which includes its wholly-owned subsidiaries Longwood Securities Corp. ("LSC"), Eastern Funding LLC ("Eastern Funding") and First Ipswich Insurance Agency, operates 30 full-service banking offices in the greater Boston metropolitan area with 2 additional lending offices. BankRI, which includes its wholly-owned subsidiaries, Acorn Insurance Agency, BRI Realty Corp., Macrolease Corporation ("Macrolease"), BRI Investment Corp. and its wholly-owned subsidiary, BRI MSC Corp., operates 20 full-service banking offices in the greater Providence, Rhode Island area.

The Banks' activities include acceptance of commercial, municipal and retail deposits, origination of mortgage loans on commercial and residential real estate located principally in New England, origination of commercial loans and leases to small- and mid-sized businesses, investment in debt and equity securities, and the offering of cash management and investment advisory services. The Company also provides specialty equipment financing through its subsidiaries Eastern Funding, which is based in New York City, New York, and Macrolease, which is based in Plainview, New York, respectively.

The Company and the Banks are supervised, examined and regulated by the Board of Governors of the Federal Reserve System (the "FRB"). As a Massachusetts-chartered trust company, Brookline Bank is also subject to regulation under the laws of the Commonwealth of Massachusetts and the jurisdiction of the Massachusetts Division of Banks (the "DOB"). As a Rhode Island-chartered financial institution, BankRI is subject to regulation under the laws of the State of Rhode Island and the jurisdiction of the Banking Division of the Rhode Island Department of Business Regulation.

The Federal Deposit Insurance Corporation ("FDIC") offers insurance coverage on all deposits up to $250,000 per depositor at each of the Banks. As FDIC-insured depository institutions, the Banks are also subject to supervision, examination and regulation by the FDIC. As previously disclosed, on July 31, 2019, Brookline Bank converted its charter from a Massachusetts savings bank to a Massachusetts-chartered trust company and ended its membership in the Depositors Insurance Fund (the “DIF”), a private industry-sponsored fund which insures Massachusetts-chartered savings bank deposit balances in excess of federal deposit insurance coverage. Brookline Bank’s growth in deposit size necessitated it's withdrawal from the DIF and the concurrent charter conversion of Brookline Bank. Brookline Bank’s deposit accounts are and will continue to be insured by the deposit insurance fund of the FDIC up to applicable limits. Term deposits in excess of the FDIC insurance coverage will continue to be insured by the DIF until they reach maturity.

Basis of Financial Statement Presentation

The unaudited consolidated financial statements of the Company presented herein have been prepared pursuant to the rules of the SEC for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by U.S. generally accepted accounting principles (“GAAP”). In the opinion of management, all adjustments (consisting of normal recurring adjustments) and disclosures considered necessary for the fair presentation of the accompanying consolidated financial statements have been included. Interim results are not necessarily reflective of the results of the entire year. The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2020. 

The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances are eliminated in consolidation.

In preparing these consolidated financial statements, management is required to make significant estimates and assumptions that affect the reported amounts of assets, liabilities, income, expenses and disclosure of contingent assets and liabilities. Actual results could differ from those estimates based upon changing conditions, including economic conditions and future events. Material estimates that are particularly susceptible to significant changes in the near-term include the

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

determination of the allowance for credit losses, the determination of fair market values of assets and liabilities, the review of goodwill and intangible assets for impairment and the review of deferred tax assets for valuation allowances.

The judgments used by management in applying these critical accounting policies may be affected by a further and prolonged deterioration in the economic environment, which may result in changes to future financial results. For example, subsequent evaluations of the loan and lease portfolio, in light of the factors then prevailing, may result in significant changes in the allowance for loan and lease losses in future periods, and the inability to collect outstanding principal may result in increased loan and lease losses.

Reclassification

Certain previously reported amounts have been reclassified to conform to the current year's presentation.

(2) Recent Accounting Pronouncements

Accounting Standards Adopted in 2021 and 2020

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 replaced the previous GAAP method of calculating credit losses. Previously, GAAP required the use of the incurred loss methodology, which used a higher threshold at which probable losses were calculated and recorded. ASU 2016-13 requires the use of an expected loss methodology, referred to as the current expected credit loss (“CECL”) methodology, which requires institutions to account for lifetime expected losses that previously would not have been part of the calculation. The CECL methodology incorporates future forecasting in addition to historical and current measures. The Company adopted all of the above mentioned ASU as of January 1, 2020. The standard had an impact on our consolidated balance sheet. On adoption, the Company recognized an increase in the allowance for loan and lease losses of $6.6 million, and an increase in the reserve for unfunded commitments of $8.9 million. The net, after-tax impact of the increase in the allowance for loan and lease losses and reserve for unfunded commitments was a decrease to retained earnings of $11.5 million shown in the Consolidated Statements of Changes in Stockholders’ Equity. Additional details can be found in Notes 3, 4 and 5.

8

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

(3) Investment Securities

Adoption of Topic 326

Effective January 1, 2020, the Company adopted the provisions of ASU 2016-13 using the modified retrospective method. There was a de minimis allowance for credit loss ("ACL") on available-for-sale debt securities recognized upon adoption and as of December 31, 2020.

The following tables set forth investment securities available-for-sale, held-to-maturity and equity securities held-for-trading at the dates indicated:

	At March 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(In Thousands)
Investment securities available-for-sale:
GSE debentures	$	273,315	$	4,130	$	5,919	$	271,526
GSE CMOs	39,980		957		12		40,925
GSE MBSs	271,231		5,981		1,146		276,066
Corporate debt obligations	22,269		978		0		23,247
U.S. Treasury bonds	119,817		1,586		3,762		117,641
Foreign government obligations	500		0		4		496
Total investment securities available-for-sale	$	727,112	$	13,632	$	10,843	$	729,901
Equity securities held-for-trading							$	518

	December 31, 2020
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(In Thousands)
Investment securities available-for-sale:
GSE debentures	$	273,820	$	5,455	$	630	$	278,645
GSE CMOs	44,937		1,103		12		46,028
GSE MBSs	312,658		10,956		5		323,609
Corporate debt obligations	22,299		1,168		0		23,467
U.S. Treasury bonds	70,339		3,318		80		73,577
Foreign government obligations	500		0		4		496
Total investment securities available-for-sale	$	724,553	$	22,000	$	731	$	745,822
Equity securities held-for-trading							$	526

As of March 31, 2021, the fair value of all investment securities available-for-sale was $729.9 million, with net unrealized gains of $2.8 million, compared to a fair value of $745.8 million and net unrealized gains of $21.3 million as of December 31, 2020. As of March 31, 2021, $261.6 million, or 35.8% of the portfolio, had gross unrealized losses of $10.8 million, compared to $86.9 million, or 11.7% of the portfolio, with gross unrealized losses of $0.7 million as of December 31, 2020.

Effective March 31, 2020, all investment securities classified as held-to-maturity were reclassified as available for sale to prudently reflect the ability and intent to not hold these assets to maturity due to the economic uncertainty created by the COVID-19 pandemic.

As of March 31, 2021 and December 31, 2020, the Company recorded a fair value of $0.5 million of equity securities held-for-trading.

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

Investment Securities as Collateral

As of March 31, 2021 and December 31, 2020, respectively, $413.5 million and $448.7 million of investment securities were pledged as collateral for repurchase agreements; municipal deposits; treasury, tax and loan deposits; swap agreements; FRB borrowings; and Federal Home Loan Bank of Boston ("FHLBB") borrowings. The Banks had 0 outstanding FRB borrowings as of March 31, 2021 and December 31, 2020.

Allowance for Credit Losses-Available-for-Sale Securities

For available-for-sale securities in an unrealized loss position, management first assesses whether (i) the Company intends to sell the security, or (ii) it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If either criterion is met, any previously recognized allowances are charged-off and the security's amortized cost is written down to fair value through income. If neither criterion is met, the security is evaluated to determine whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency and any adverse conditions specifically related to the security, among other factors.

If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, an allowance for credit loss is recorded, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an ACL is recognized in other comprehensive income. Adjustments to the allowance are reported as a component of credit loss expense. Available-for-sale securities are charged-off against the allowance or, in the absence of any allowance, written down through income when deemed uncollectible or when either of the aforementioned criteria regarding intent or requirement to sell is met. The Company has made the accounting policy election to exclude accrued interest receivable on available-for-sale securities from the estimate of credit losses. Accrued interest receivables associated with debt securities available-for-sale totaled $2.5 million and $2.6 million, respectively, as of March 31, 2021 and December 31, 2020.

A debt security is placed on nonaccrual status at the time any principal or interest payments become more than 90 days delinquent or if full collection of interest or principal becomes uncertain. Accrued interest for a debt security placed on nonaccrual is reversed against interest income. There were no debt securities on nonaccrual status and therefore there was no accrued interest related to debt securities reversed against interest income for the three months ended March 31, 2021 and 2020.

Assessment for Available for Sale Securities for Impairment

Investment securities as of March 31, 2021 and December 31, 2020 that have been in a continuous unrealized loss position for less than twelve months or twelve months or longer are as follows:

	At March 31, 2021
	Less than Twelve Months				Twelve Months or Longer				Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
	(In Thousands)
Investment securities available-for-sale:
GSE debentures	$	118,064	$	5,919	$	0	$	0	$	118,064	$	5,919
GSE CMOs	513		10		707		2		1,220		12
GSE MBSs	70,289		1,145		95		1		70,384		1,146
U.S. Treasury bonds	71,450		3,762		0		0		71,450		3,762
Foreign government obligations	0		0		496		4		496		4
Temporarily impaired investment securities available-for-sale	260,316		10,836		1,298		7		261,614		10,843
Total temporarily impaired investment securities	$	260,316	$	10,836	$	1,298	$	7	$	261,614	$	10,843

10

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

	At December 31, 2020
	Less than Twelve Months				Twelve Months or Longer				Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
	(In Thousands)
Investment securities available-for-sale:
GSE debentures	$	72,745	$	630	$	0	$	0	$	72,745	$	630
GSE CMOs	832		7		872		5		1,704		12
GSE MBSs	2,102		5		97		0		2,199		5
U.S. Treasury bonds	9,750		80		0		0		9,750		80
Foreign government obligations	0		0		496		4		496		4
Temporarily impaired investment securities available-for-sale	85,429		722		1,465		9		86,894		731
Total temporarily impaired investment securities	$	85,429	$	722	$	1,465	$	9	$	86,894	$	731

The Company performs regular analyses of the investment securities available-for-sale portfolio to determine whether a decline in fair value indicates that an investment security is impaired. In making these impairment determinations, management considers, among other factors, projected future cash flows; credit subordination and the creditworthiness; capital adequacy and near-term prospects of the issuers.

Management also considers the Company's capital adequacy, interest-rate risk, liquidity and business plans in assessing whether it is more likely than not that the Company will sell or be required to sell the investment securities before recovery. If the Company determines that a security investment is impaired and that it is more likely than not that the Company will not sell or be required to sell the investment security before recovery of its amortized cost, the credit portion of the impairment loss is recognized in the Company's consolidated statement of income and the noncredit portion is recognized in accumulated other comprehensive income. The credit portion of the impairment represents the difference between the amortized cost and the present value of the expected future cash flows of the investment security. If the Company determines that a security is impaired and it is more likely than not that it will sell or be required to sell the investment security before recovery of its amortized cost, the entire difference between the amortized cost and the fair value of the security will be recognized in the Company's consolidated statement of income.

Investment Securities Available-For-Sale Impairment Analysis

The following discussion summarizes, by investment security type, the basis for evaluating if the applicable investment securities within the Company’s available-for-sale portfolio were impaired as of March 31, 2021.The Company has determined it is more likely than not that the Company will not sell or be required to sell the investment securities before recovery of its amortized cost. The Company's ability and intent to hold these investment securities until recovery is supported by the Company's strong capital and liquidity positions as well as its historically low portfolio turnover. As such, management has determined that the investment securities are not impaired as of March 31, 2021. If market conditions for investment securities worsen or the creditworthiness of the underlying issuers deteriorates, it is possible that the Company may recognize additional impairment in future periods.

U.S. Government-Sponsored Enterprises

The Company invests in securities issued by U.S. Government-sponsored enterprises ("GSEs"), including GSE debentures, mortgage-backed securities ("MBSs"), and collateralized mortgage obligations ("CMOs"). GSE securities include obligations issued by the Federal National Mortgage Association ("FNMA"), the Federal Home Loan Mortgage Corporation ("FHLMC"), the Government National Mortgage Association ("GNMA"), the FHLBB and the Federal Farm Credit Bank. As of March 31, 2021, the Company held GNMA MBSs and CMOs, and Small Business Administration ("SBA") commercial loan asset-backed securities in its available-for-sale portfolio with an estimated fair value of $6.3 million, all of which were backed explicitly by the full faith and credit of the U.S. Government, compared to $7.3 million as of December 31, 2020.

As of March 31, 2021, the Company owned 54 GSE debentures with a total fair value of $271.5 million, and a net unrealized loss of $1.8 million. As of December 31, 2020, the Company held 54 GSE debentures with a total fair value of

11

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

$278.6 million, with a net unrealized gain of $4.8 million. As of March 31, 2021, 12 of the 54 securities in this portfolio were in an unrealized loss position. As of December 31, 2020, 7 of the 54 securities in this portfolio were in an unrealized loss position. All securities are performing and backed by the implicit (FHLB/FNMA/FHLMC) or explicit (GNMA/SBA) guarantee of the U.S Government. During the three months ended March 31, 2021, the Company did not purchase GSE debentures. This compares to the same period in 2020 when the Company purchased $75.2 million GSE debentures. During the three months ended March 31, 2020, the Company transferred 9 held-to-maturity GSE debentures with a total fair value of $25.5 million to the available-for-sale portfolio.

As of March 31, 2021, the Company owned 33 GSE CMOs with a total fair value of $40.9 million and a net unrealized gain of $0.9 million. As of December 31, 2020, the Company held 33 GSE CMOs with a total fair value of $46.0 million with a net unrealized gain of $1.1 million. As of March 31, 2021, 2 of the 33 securities in this portfolio were in an unrealized loss position. As of December 31, 2020, 2 of the 33 securities in this portfolio were in an unrealized loss position. All securities are performing and backed by the implicit (FHLB/FNMA/FHLMC) or explicit (GNMA) guarantee of the U.S Government. During the three months ended March 31, 2021 and 2020, the Company did 0t purchase any GSE CMOs.

As of March 31, 2021, the Company owned 139 GSE MBSs with a total fair value of $276.1 million and a net unrealized gain of $4.8 million. As of December 31, 2020, the Company held 140 GSE MBSs with a total fair value of $323.6 million with a net unrealized gain of $11.0 million. As of March 31, 2021, 23 of the 139 securities in this portfolio were in an unrealized loss position. As of December 31, 2020, 17 of the 140 securities in this portfolio were in an unrealized loss position. All securities are performing and backed by the implicit (FHLB/FNMA/FHLMC) or explicit (GNMA) guarantee of the U.S Government. During the three months ended March 31, 2021, the Company did not purchase any GSE MBSs. This compares to the same period in 2020 when the Company purchased $176.9 million GSE MBSs. During the three months ended March 31, 2020, the Company transferred 8 held-to-maturity GSE MBSs with a total fair value of $9.0 million to the available-for-sale portfolio.

Corporate Obligations

The Company may invest in high-quality corporate obligations to provide portfolio diversification and improve the overall yield on the portfolio. As of March 31, 2021, the Company held 6 corporate obligation securities with a total fair value of $23.2 million and a net unrealized gain of $1.0 million. As of December 31, 2020, the Company held 6 corporate obligation securities with a total fair value of $23.5 million and a net unrealized gain of $1.2 million. As of March 31, 2021 and December 31, 2020, NaN of the securities in this portfolio were in an unrealized loss position. Full collection of the obligations is expected because the financial condition of the issuers is sound, they have not defaulted on scheduled payments, the obligations are rated investment grade, and the Company has the ability and intent to hold the obligations for a period of time to recover the amortized cost. During the three months ended March 31, 2021 and 2020, the Company did 0t purchase any corporate obligations. During the three months ended March 31, 2020, the Company transferred 1 held-to-maturity corporate obligation security with a total fair value of $0.5 million to the available-for-sale portfolio.

U.S. Treasury Bonds

The Company invests in securities issued by the U.S. government. As of March 31, 2021, the Company owned 17 U.S. Treasury bonds with a total fair value of $117.6 million and an unrealized loss of $2.2 million. This compares to 12 U.S. Treasury bonds with a total fair value of $73.6 million and an unrealized gain of $3.2 million as of December 31, 2020. As of March 31, 2021, 8 of the 17 securities in this portfolio were in an unrealized loss position. As of December 31, 2020, 1 of the 12 securities in this portfolio was an unrealized loss position. During the three months ended March 31, 2021 the Company purchased $49.5 million U.S. Treasury bonds, compared to the same period in 2020 when the Company purchased $21.2 million U.S. Treasury bonds.

Municipal Obligations

As of March 31, 2021 and December 31, 2020, the Company did 0t own any municipal obligation securities. During the three months March 31, 2021 and 2020, the Company did 0t purchase any municipal obligations. During the three months ended March 31, 2020, the Company transferred 93 held-to-maturity municipal obligations securities with a total fair value of $47.7 million to our available-for-sale portfolio.

Foreign Government Obligations

As of March 31, 2021 and December 31, 2020, the Company owned 1 foreign government obligation security with a fair value of $0.5 million, which approximated cost. As of March 31, 2021 and December 31, 2020 respectively, the security was

12

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

in an unrealized loss position. During the three months ended March 31, 2021 and 2020, the Company did 0t purchase any foreign government obligations.

Equity Securities Held-for-Trading

From time to time, the Company will invest in equity securities held-for-trading. As of March 31, 2021 and December 31, 2020, the Company owned equity securities held-for-trading with a fair value of $0.5 million.

Portfolio Maturities

The final stated maturities of the debt securities are as follows for the periods indicated:

	At March 31, 2021						At December 31, 2020
	Amortized Cost		Estimated Fair Value		Weighted Average Rate		Amortized Cost		Estimated Fair Value		Weighted Average Rate
	(Dollars in Thousands)
Investment securities available-for-sale:
Within 1 year	$	49,597	$	50,149	1.99	%	$	31,633	$	32,013	2.02	%
After 1 year through 5 years	132,676		138,463		2.23	%	146,274		153,262		2.22	%
After 5 years through 10 years	261,816		254,174		1.38	%	222,271		225,568		1.43	%
Over 10 years	283,023		287,115		2.01	%	324,375		334,979		1.86	%
	$	727,112	$	729,901	1.84	%	$	724,553	$	745,822	1.81	%

Actual maturities of debt securities will differ from those presented above since certain obligations amortize and may also provide the issuer the right to call or prepay the obligation prior to scheduled maturity without penalty. MBSs and CMOs are included above based on their final stated maturities; the actual maturities, however, may occur earlier due to anticipated prepayments and stated amortization of cash flows.

As of March 31, 2021, issuers of debt securities with an estimated fair value of $88.3 million had the right to call or prepay the obligations. Of the $88.3 million, approximately $12.7 million matures in 1 - 5 years, $66.2 million matures in 6 - 10 years, and $9.4 million matures after ten years. As of December 31, 2020, issuers of debt securities with an estimated fair value of approximately $90.8 million had the right to call or prepay the obligations. Of the $90.8 million, $12.9 million matures in 1-5 years, and $68.1 million matures in 6 - 10 years, and $9.8 million matures after ten years.

Security Sales

NaN sale of investment securities available-for-sale or equity securities held-for-trading occurred during the three months ended March 31, 2021. This compares to $86.4 million securities sold during the three months ended March 31, 2020.

Sales of investment and restricted equity securities are summarized as follows:

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
	(In Thousands)
Proceeds from sales of investment securities available-for-sale and equity securities held-for-trading	$	0	$	86,435
Gross gains from securities sales	0		2,446
Gross losses from securities sales	0		(93)
Gain on sales of securities, net	$	0	$	2,353

13

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

(4) Loans and Leases

The following table presents the amortized cost of loans and leases and weighted average coupon rates for the loan and lease portfolios at the dates indicated:

	At March 31, 2021				At December 31, 2020
	Balance		Weighted Average Coupon		Balance		Weighted Average Coupon
	(Dollars In Thousands)
Commercial real estate loans:
Commercial real estate	$	2,595,240	3.48	%	$	2,578,773	3.58	%
Multi-family mortgage	1,000,474		3.48	%	1,013,432		3.53	%
Construction	194,627		3.60	%	231,621		3.49	%
Total commercial real estate loans	3,790,341		3.49	%	3,823,826		3.56	%
Commercial loans and leases:
Commercial1	1,206,977		2.35	%	1,131,668		2.55	%
Equipment financing	1,069,621		7.17	%	1,092,461		7.26	%
Condominium association	47,604		4.54	%	50,770		4.55	%
Total commercial loans and leases	2,324,202		4.61	%	2,274,899		4.86	%
Consumer loans:
Residential mortgage	781,854		3.68	%	791,317		3.74	%
Home equity	334,706		3.25	%	346,652		3.26	%
Other consumer	36,449		2.92	%	32,859		3.04	%
Total consumer loans	1,153,009		3.53	%	1,170,828		3.58	%
Total loans and leases	$	7,267,552	3.84	%	$	7,269,553	3.97	%

______________________________________________________________________

(1) Including $604,790 of PPP loans as of March 31, 2021. These loans are fully guaranteed by the SBA and therefore, have not been reserved for in the allowance for credit losses as of March 31, 2021.

Accrued interest on loans and leases, which were excluded from the amortized cost of loans and leases totaled $21.0 million and $20.5 million at March 31, 2021 and December 31, 2020, respectively, and were included in other assets in the accompanying consolidated balance sheets.

The net unamortized deferred loan origination costs included in total loans and leases were $5.6 million and $4.1 million as of March 31, 2021 and December 31, 2020, respectively.

The Banks and their subsidiaries lend primarily in all New England states, with the exception of equipment financing, 12.7% of which is in the greater New York and New Jersey metropolitan area and 87.3% of which is in other areas in the United States of America as of March 31, 2021.

Loans and Leases Pledged as Collateral

As of March 31, 2021 and 2020, there were $3.3 billion and $3.5 billion respectively of loans and leases pledged as collateral for repurchase agreements; municipal deposits; treasury, tax and loan deposits; swap agreements; FRB borrowings; and FHLBB borrowings. The Banks did 0t have any outstanding FRB borrowings as of March 31, 2021 and December 31, 2020.

14

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

(5) Allowance for Loan and Lease Losses

The following tables present the changes in the allowance for loan and lease losses in loans and leases by portfolio segment for the periods indicated:

	Three Months Ended March 31, 2021
	Commercial Real Estate		Commercial		Consumer		Total
	(In Thousands)
Balance at December 31, 2020	$	80,132	$	29,498	$	4,749	$	114,379
Charge-offs	0		(2,140)		(3)		(2,143)
Recoveries	0		331		52		383
(Credit) provision for loan and lease losses excluding unfunded commitments	(203)		(1,864)		(715)		(2,782)
Balance at March 31, 2021	$	79,929	$	25,825	$	4,083	$	109,837

	Three Months Ended March 31, 2020
	Commercial Real Estate		Commercial		Consumer		Total
	(In Thousands)
Balance at December 31, 2019	$	30,285	$	24,826	$	5,971	$	61,082
Adoption of ASU 2016-13 (CECL)	11,694		(2,672)		(2,390)		6,632
Charge-offs	0		(2,527)		(12)		(2,539)
Recoveries	0		247		58		305
Provision for loan and lease losses	40,200		6,900		601		47,701
Balance at March 31, 2020	$	82,179	$	26,774	$	4,228	$	113,181

The allowance for credit losses for unfunded credit commitments, which is included in other liabilities, was $13.7 million and $13.1 million at March 31, 2021 and December 31, 2020, respectively.

Provision for Credit Losses

The provisions for credit losses are set forth below for the periods indicated:

	Three Months Ended March 31,
	2021		2020
	(In Thousands)
Provision for loan and lease losses:
Commercial real estate	$	(203)	$	40,200
Commercial	(1,864)		6,900
Consumer	(715)		601
Total (credit) provision for loan and lease losses	(2,782)		47,701
Unfunded commitments	635		6,413
Total (credit) provision for credit losses	$	(2,147)	$	54,114

Allowance for Loan and Lease Losses Methodology

Management has established a methodology to determine the adequacy of the allowance for credit losses that assesses the risks and losses expected on the loan and lease portfolio and unfunded commitments. Additions to the allowance for credit losses are made by charges to the provision for credit losses. Losses on loans and leases are charged off against the allowance when all or a portion of a loan or lease is considered uncollectible. Subsequent recoveries on loans previously charged off, if any, are credited to the allowance when realized.

15

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

To calculate the allowance for loans collectively evaluated, management uses models developed by a third party. The models include: Commercial real estate ("CRE"), Commercial and industrial ("C&I"), and Retail lifetime loss rate models calculate the expected losses over the life of the loan based on exposure at default loan attributes and reasonable, supportable economic forecasts. The exposure at default considers the current unpaid balance, prepayment assumptions and utilization of expected utilization assumptions. The expected loss estimates for two small commercial portfolios and a runoff auto portfolio are based on historical loss rates.

Key assumptions used in the models include portfolio segmentation, prepayments, and the expected utilization of unfunded commitments, among others. The portfolios are segmented by loan level attributes such as loan type, loan size, date of origination, and delinquency status to create homogenous loan pools. Pool level metrics are calculated and loss rates are subsequently applied to the pools as the loans have like characteristics. Prepayment assumptions are embedded within the models and are based on the same data used for model development and incorporate adjustments for reasonable and supportable forecasts. Model development data and developmental time periods vary by model, but all use at least ten years of historical data and capture at least one recessionary period. Expected utilization is based on current utilization and a loan equivalency ("LEQ") factor. LEQ varies by current utilization and provides a reasonable estimate of expected draws and borrower behavior. Assumptions and model inputs are reviewed in accordance with model monitoring practices and as information becomes available.

The ACL estimate incorporates reasonable and supportable forecasts of various macro-economic variables over the remaining life of loans and leases. The development of the reasonable and supportable forecast assume each macro-economic variable will revert to long-term expectations, with reversion characteristics unique to specific economic indicators and forecasts. Reversion towards long-term expectations generally begins two to three years from the forecast start date and largely completes within the first five years. Because the reasonable and supportable economic forecasts used in the models are mean reverting, the models are therefore considered to be implicitly mean reverting.

Management elected to use multiple economic forecasts in determining the reserve to account for economic uncertainty. The forecasts include various projections of Gross Domestic Product ("GDP"), interest rates, property price indices, and employment measures. Scenario weighting and model parameters are reviewed for each calculation and updated to reflect facts and circumstances as of the financial statement date. The March 31, 2021 forecasts reflect the immediate and longer-term effects of the COVID-19 pandemic as well as the associated policies and fiscal support provided by local and national authorities.

The CRE lifetime loss rate, C&I lifetime loss rate, and Retail lifetime loss rate models were developed using the historical loss experience of all banks in the model’s developmental dataset. Banks in the model’s developmental dataset may have different loss experiences due to geography and portfolio as well as variances in operational and underwriting procedures from the Company, and therefore, the Company calibrates expected losses using a scalar for each model. Each scalar was calculated by examining the loss rates of peer banks that have similar operations and asset bases to the Company and comparing these peer group loss rates to the model results. Peer group loss rates were used in the scalar calculation because management believes the peer group’s historical losses provide a better reflection of the Company’s current portfolio and operating procedures than the Company’s historical losses. Qualitative adjustments are also applied to the results of the three loss rate models.

For March 31, 2021, management applied qualitative adjustments to the CRE lifetime loss rate, C&I lifetime loss rate, and Retail lifetime loss rate models. These adjustments addressed model limitations, were based on historical loss patterns, and targeted specific risks within the certain portfolios. A general qualitative adjustment was applied to all models to account for general economic uncertainty by placing a greater probability on negative economic forecasts as compared to previous quarters. Additional qualitative adjustments were applied to the Commercial, Multifamily, and commercial real estate (includes owner occupied, non-owner occupied, and construction) portfolios based on the Company’s historical loss experience and the loss experience of the Company’s peer group. High risk segments of the Eastern Funding and Macrolease portfolios also received additional qualitative adjustments based on recent loss history and expected liquidation values. These qualitative adjustments resulted in additions to reserves for all portfolios, as compared to the model output.

Specific reserves are established for loans individually evaluated for impairment when amortized cost basis is greater than the discounted present value of expected future cash flows or, in the case of collateral-dependent loans, when there is an excess of a loan's amortized cost basis over the fair value of its underlying collateral. When loans and leases do not share risk characteristics with other financial assets they are evaluated individually. Individually evaluated loans are reviewed quarterly with adjustments made to the calculated reserve as necessary.

16

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

Beginning January 1, 2020, the Company implemented the CECL methodology to calculate the allowance for credit losses. Prior to January 1, 2020, the Company calculated the allowance for loan and lease losses using the incurred losses methodology.

The general allowance for loan and lease losses was $108.7 million as of March 31, 2021, compared to $112.1 million as of December 31, 2020. The reduction in the ACL is attributable to portfolio contraction, continued low level of net charge-offs, an improving macro-economic forecast, and qualitative adjustments that consider longer-term risks.

The specific allowance for loan and lease losses was $1.1 million as of March 31, 2021, compared to $2.3 million as of December 31, 2020. The specific allowance decreased by $1.2 million during the three months ended March 31, 2021 primarily due to the payoff of 2 commercial relationship which had a specific reserve of $0.3 million, 1 equipment financing relationship which had a specific reserve of $0.1 million, a partial charge off on 1 equipment financing relationship of $0.7 million and the and the decrease in specific reserves for the remaining individually evaluated loans due to improving collection prospects.

As of March 31, 2021, management believes that the methodology for calculating the allowance is sound and that the allowance provides a reasonable basis for determining and reporting on expected losses over the lifetime of the Company’s loan portfolios.

Credit Quality Assessment

At the time of loan origination, a rating is assigned based on the capacity to pay and general financial strength of the borrower, the value of assets pledged as collateral, and the evaluation of third party support such as a guarantor. The Company continually monitors the credit quality of the loan portfolio using all available information. The officer responsible for handling each loan is required to initiate changes to risk ratings when changes in facts and circumstances occur that warrant an upgrade or downgrade in a loan rating. Based on this information, loans demonstrating certain payment issues or other weaknesses may be categorized as delinquent, adversely risk-rated, nonperforming and/or put on nonaccrual status. Additionally, in the course of resolving such loans, the Company may choose to restructure the contractual terms of certain loans to match the borrower's ability to repay the loan based on their current financial condition. If a restructured loan meets certain criteria, it may be categorized as a troubled debt restructuring ("TDR") loan.

The Company reviews numerous credit quality indicators when assessing the risk in its loan portfolio. For all loans, the Company utilizes an eight-grade loan rating system, which assigns a risk rating to each borrower based on a number of quantitative and qualitative factors associated with a loan transaction. Factors considered include industry and market conditions; position within the industry; earnings trends; operating cash flow; asset/liability values; debt capacity; guarantor strength; management and controls; financial reporting; collateral; and other considerations. In addition, the Company's independent loan review group evaluates the credit quality and related risk ratings in all loan portfolios. The results of these reviews are reported to the Risk Committee of the Board of Directors on a periodic basis and annually to the Board of Directors. For the consumer loans, the Company heavily relies on payment status for calibrating credit risk.

The ratings categories used for assessing credit risk in the commercial real estate, multi-family mortgage, construction, commercial, equipment financing, condominium association and other consumer loan and lease classes are defined as follows:

1 -4 Rating—Pass

Loan rating grades "1" through "4" are classified as "Pass," which indicates borrowers are performing in accordance with the terms of the loan and are less likely to result in loss due to the capacity of the borrower to pay and the adequacy of the value of assets pledged as collateral.

5 Rating—Other Assets Especially Mentioned ("OAEM")

Borrowers exhibit potential credit weaknesses or downward trends deserving management's attention. If not checked or corrected, these trends will weaken the Company's asset and position. While potentially weak, currently these borrowers are marginally acceptable; no loss of principal or interest is envisioned.

17

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

6 Rating—Substandard

Borrowers exhibit well defined weaknesses that jeopardize the orderly liquidation of debt. Substandard loans may be inadequately protected by the current net worth and paying capacity of the obligors or by the collateral pledged, if any. Normal repayment from the borrower is in jeopardy. Although no loss of principal is envisioned, there is a distinct possibility that a partial loss of interest and/or principal will occur if the deficiencies are not corrected. Collateral coverage may be inadequate to cover the principal obligation.

7 Rating—Doubtful

Borrowers exhibit well-defined weaknesses that jeopardize the orderly liquidation of debt with the added provision that the weaknesses make collection of the debt in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Serious problems exist to the point where partial loss of principal is likely.

8 Rating—Definite Loss

Borrowers deemed incapable of repayment. Loans to such borrowers are considered uncollectible and of such little value that continuation as active assets of the Company is not warranted.

Assets rated as "OAEM," "substandard" or "doubtful" based on criteria established under banking regulations are collectively referred to as "criticized" assets.

Credit Quality Information

The following table presents the amortized cost basis of loans in each class by credit quality indicator and year of origination as of March 31, 2021.

	March 31, 2021
	2021		2020		2019		2018		2017		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total
			(In Thousands)
Commercial Real Estate
Pass	$	80,520	$	357,115	$	366,961	$	283,214	$	252,971	$	1,115,585	$	55,390	$	12,645	$	2,524,401
OAEM	693		736		27,369		0		0		35,014		0		0		63,812
Substandard	0		210		0		0		1,617		5,139		0		61		7,027
Total	81,213		358,061		394,330		283,214		254,588		1,155,738		55,390		12,706		2,595,240
Multi-Family Mortgage
Pass	14,673		124,227		145,143		165,079		99,440		416,861		5,218		27,457		998,098
OAEM	0		0		0		0		0		2,376		0		0		2,376
Total	14,673		124,227		145,143		165,079		99,440		419,237		5,218		27,457		1,000,474
Construction
Pass	2,272		46,896		46,555		85,292		665		632		4,697		0		187,009
Substandard	0		0		4,853		0		0		2,765		0		0		7,618
Total	2,272		46,896		51,408		85,292		665		3,397		4,697		0		194,627
Commercial

18

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

	March 31, 2021
	2021		2020		2019		2018		2017		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total
			(In Thousands)
Pass	237,440		451,623		55,419		37,516		35,407		129,638		226,438		1,716		1,175,197
OAEM	0		1,589		4,436		0		16,242		12		1,840		0		24,119
Substandard	0		0		0		118		345		2,902		3,716		578		7,659
Doubtful	0		0		0		0		0		0		0		2		2
Total	237,440		453,212		59,855		37,634		51,994		132,552		231,994		2,296		1,206,977
Equipment Financing
Pass	65,631		318,891		286,098		186,109		105,056		86,647		1,868		556		1,050,856
OAEM	0		196		1,058		293		96		709		0		0		2,352
Substandard	0		1,000		2,787		5,224		3,678		2,529		0		0		15,218
Doubtful	0		1		450		65		27		652		0		0		1,195
Total	65,631		320,088		290,393		191,691		108,857		90,537		1,868		556		1,069,621
Condominium Association
Pass	187		7,409		9,206		5,194		7,385		16,769		1,172		176		47,498
Substandard	0		0		0		0		0		106		0		0		106
Total	187		7,409		9,206		5,194		7,385		16,875		1,172		176		47,604
Other Consumer
Pass	35		852		523		1,827		31		869		32,295		15		36,447
Substandard	0		0		0		0		0		1		0		1		2
Total	35		852		523		1,827		31		870		32,295		16		36,449
Total
Pass	400,758		1,307,013		909,905		764,231		500,955		1,767,001		327,078		42,565		6,019,506
OAEM	693		2,521		32,863		293		16,338		38,111		1,840		0		92,659
Substandard	0		1,210		7,640		5,342		5,640		13,442		3,716		640		37,630
Doubtful	0		1		450		65		28		652		0		2		1,198
Total	$	401,451	$	1,310,745	$	950,858	$	769,931	$	522,961	$	1,819,206	$	332,634	$	43,207	$	6,150,993

As of March 31, 2021, there were 0 loans categorized as definite loss.

For residential mortgage and home equity loans, the borrowers' credit scores contribute as a reserve metric in the retail loss rate model.

19

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

	At March 31, 2021
	2021		2020		2019		2018		2017		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total
			(In Thousands)
Residential
Credit Scores
Over 700	$	22,650	$	119,549	$	89,528	$	57,286	$	49,514	$	162,830	$	4,002	$	0	$	505,359
661 - 700	3,036		24,134		18,328		10,110		13,852		30,005		0		0		99,465
600 and below	682		6,914		4,700		5,053		4,234		16,956		0		0		38,539
Data not available*	2,177		17,969		17,003		15,591		13,248		71,181		0		1,322		138,491
Total	$	28,545	$	168,566	$	129,559	$	88,040	$	80,848	$	280,972	$	4,002	$	1,322	$	781,854
Home Equity
Credit Scores
Over 700	$	553	$	1,534	$	2,421	$	2,249	$	2,507	$	12,331	$	239,483	$	2,303	$	263,381
661 - 700	51		118		440		476		260		2,354		44,625		616		48,940
600 and below	0		58		106		260		13		550		10,267		1,058		12,312
Data not available*	0		68		0		0		0		1,318		7,719		968		10,073
Total	$	604	$	1,778	$	2,967	$	2,985	$	2,780	$	16,553	$	302,094	$	4,945	$	334,706

_______________________________________________________________________________

* Represents loans and leases for which data are not available.

The following tables present the recorded investment in loans in each class as of December 31, 2020, by credit quality indicator.

	December 31, 2020
	2020		2019		2018		2017		2016		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total
	(In Thousands)
Commercial Real Estate
Pass	$	352,832	$	412,071	$	282,629	$	255,786	$	243,477	$	944,676	$	55,392	$	12,585	$	2,559,448
OAEM	0		477		0		0		3,312		8,991		0		0		12,780
Substandard	0		0		0		1,261		2		5,220		0		62		6,545
Doubtful	0		0		0		0		0		0		0		0		0
Total	352,832		412,548		282,629		257,047		246,791		958,887		55,392		12,647		2,578,773
Multi-Family Mortgage
Pass	125,434		136,620		162,180		103,997		127,873		304,224		15,845		34,871		1,011,044
OAEM	0		0		0		0		0		2,388		0		0		2,388
Total	125,434		136,620		162,180		103,997		127,873		306,612		15,845		34,871		1,013,432
Construction

20

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

	December 31, 2020
	2020		2019		2018		2017		2016		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total
	(In Thousands)
Pass	46,249		56,074		112,856		1,799		2,788		404		3,834		0		224,004
Substandard	0		4,853		0		0		2,764		0		0		0		7,617
Total	46,249		60,927		112,856		1,799		5,552		404		3,834		0		231,621
Commercial
Pass	574,542		66,278		41,325		62,112		22,085		113,715		226,495		1,687		1,108,239
OAEM	310		4,850		0		0		35		17		5,382		0		10,594
Substandard	80		0		129		389		29		7,612		3,930		664		12,833
Doubtful	0		0		0		0		0		0		0		2		2
Total	574,932		71,128		41,454		62,501		22,149		121,344		235,807		2,353		1,131,668
Equipment Financing
Pass	332,375		306,231		209,219		121,845		56,241		45,451		636		576		1,072,574
OAEM	196		1,066		290		93		609		85		0		0		2,339
Substandard	402		4,385		5,280		3,545		1,891		631		0		0		16,134
Doubtful	1		64		24		27		1,292		6		0		0		1,414
Total	332,974		311,746		214,813		125,510		60,033		46,173		636		576		1,092,461
Condominium Association
Pass	6,455		9,918		5,399		7,928		5,213		12,682		2,684		379		50,658
Substandard	0		0		0		0		112		0		0		0		112
Total	6,455		9,918		5,399		7,928		5,325		12,682		2,684		379		50,770
Other Consumer
Pass	694		549		1,938		32		570		301		28,755		18		32,857
Substandard	0		0		0		0		0		0		0		2		2
Total	694		549		1,938		32		570		301		28,755		20		32,859
Total
Pass	1,438,581		987,741		815,546		553,499		458,247		1,421,453		333,641		50,116		6,058,824
OAEM	506		6,393		290		93		3,956		11,481		5,382		0		28,101
Substandard	482		9,238		5,409		5,195		4,798		13,463		3,930		728		43,243
Doubtful	1		64		24		27		1,292		6		0		2		1,416
Total	$	1,439,570	$	1,003,436	$	821,269	$	558,814	$	468,293	$	1,446,403	$	342,953	$	50,846	$	6,131,584
As of December 31, 2020, there were 0 loans categorized as definite loss.

21

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

	At December 31, 2020
	2020		2019		2018		2017		2016		Prior		Revolving		Converted		Total
	(In Thousands)
Residential
Credit Scores
Over 700	$	119,566	$	94,300	$	62,452	$	53,662	$	47,327	$	124,999	$	4,442	$	0	$	506,748
661 - 700	21,820		19,426		10,943		15,616		8,132		23,282		0		0		99,219
600 and below	6,901		5,659		4,763		4,318		4,553		13,997		0		0		40,191
Data not available*	19,209		17,082		16,199		14,153		5,729		71,456		0		1,331		145,159
Total	$	167,496	$	136,467	$	94,357	$	87,749	$	65,741	$	233,734	$	4,442	$	1,331	$	791,317
Home Equity
Credit Scores
Over 700	$	1,546	$	2,832	$	2,440	$	2,770	$	910	$	12,804	$	247,538	$	2,397	$	273,237
661 - 700	122		459		499		566		305		2,793		45,356		1,334		51,434
600 and below	59		108		266		13		39		541		10,139		878		12,043
Data not available*	61		0		0		0		0		1,387		7,330		1,160		9,938
Total	$	1,788	$	3,399	$	3,205	$	3,349	$	1,254	$	17,525	$	310,363	$	5,769	$	346,652

Age Analysis of Past Due Loans and Leases

The following table presents an age analysis of the amortized cost basis in loans and leases as of March 31, 2021.

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

	At March 31, 2021
	Past Due										Past Due Greater Than 90 Days and Accruing
	31-60 Days		61-90 Days		Greater Than 90 Days		Total		Current					Total Loans and Leases			Non-accrual		Non-accrual with No Related Allowance
	(In Thousands)
Commercial real estate loans:
Commercial real estate	$	5,489	$	3,946	$	3,366	$	12,801	$	2,582,439		$	2,595,240		$	0	$	3,611	$	2,902
Multi-family mortgage	1,141		0		0		1,141		999,333			1,000,474			0		0		0
Construction	3,764		0		3,853		7,617		187,010			194,627			0		3,853		3,853
Total commercial real estate loans	10,394		3,946		7,219		21,559		3,768,782			3,790,341			0		7,464		6,755
Commercial loans and leases:
Commercial	229		0		1,213		1,442		1,205,535			1,206,977			62		3,161		1,882
Equipment financing	4,010		2,115		9,501		15,626		1,053,995			1,069,621			1,113		15,772		4,260
Condominium association	0		0		0		0		47,604			47,604			0		106		106
Total commercial loans and leases	4,239		2,115		10,714		17,068		2,307,134			2,324,202			1,175		19,039		6,248
Consumer loans:
Residential mortgage	1,979		459		3,254		5,692		776,162			781,854			0		3,722		3,260
Home equity	1,056		1		531		1,588		333,118			334,706			4		792		557
Other consumer	12		1		1		14		36,435			36,449			0		2		0
Total consumer loans	3,047		461		3,786		7,294		1,145,715			1,153,009			4		4,516		3,817
Total loans and leases	$	17,680	$	6,522	$	21,719	$	45,921	$	7,221,631		$	7,267,552		$	1,179	$	31,019	$	16,820

There is 0 interest income recognized on non-accrual loans for the three months ended March 31, 2021.

23

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

The following tables present an age analysis of the recorded investment in originated and acquired loans and leases as of December 31, 2020.

	At December 31, 2020
	Past Due										Loans and Leases Past Due Greater Than 90 Days and Accruing				Non-accrual with No Related Allowance
	31-60 Days		61-90 Days		Greater Than 90 Days		Total		Current					Total Loans and Leases					Non-accrual
	(In Thousands)
Commercial real estate loans:
Commercial real estate	$	18,294	$	12,402	$	7,272	$	37,968	$	2,540,805		$	2,578,773		$	4,722	$	3,300	$	2,580
Multi-family mortgage	813		0		0		813		1,012,619			1,013,432			0		0		0
Construction	0		0		7,617		7,617		224,004			231,621			3,764		3,853		3,853
Total commercial real estate loans	19,107		12,402		14,889		46,398		3,777,428			3,823,826			8,486		7,153		6,433
Commercial loans and leases:
Commercial	451		304		9,171		9,926		1,121,742			1,131,668			3,486		7,702		6,263
Equipment financing	5,970		2,263		9,391		17,624		1,074,837			1,092,461			0		16,757		4,062
Condominium association	282		297		0		579		50,191			50,770			0		112		112
Total commercial loans and leases	6,703		2,864		18,562		28,129		2,246,770			2,274,899			3,486		24,571		10,437
Consumer loans:
Residential mortgage	2,161		648		3,841		6,650		784,667			791,317			0		5,587		5,117
Home equity	580		215		588		1,383		345,269			346,652			3		1,136		824
Other consumer	13		0		1		14		32,845			32,859			0		1		0
Total consumer loans	2,754		863		4,430		8,047		1,162,781			1,170,828			3		6,724		5,941
Total loans and leases	$	28,564	$	16,129	$	37,881	$	82,574	$	7,186,979		$	7,269,553		$	11,975	$	38,448	$	22,811

Impaired Loans and Leases

A loan is considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due (both interest and principal) according to the contractual terms of the loan agreement. The loans and leases risk-rated "substandard" or worse are considered impaired. The Company has also defined the population of impaired loans to include nonaccrual loans and TDR loans. Impaired loans and leases which do not share similar risk characteristics with other loans are individually evaluated for credit losses. Specific reserves are established for loans and leases with deterioration in the present value of expected future cash flows or, in the case of collateral-dependent loans and leases, any increase in the loan or lease amortized cost basis over the fair value of the underlying collateral discounted for estimated selling costs. In contrast, the loans and leases which share similar risk characteristics and are not included in the individually evaluated population are collectively evaluated for credit losses.

24

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

The following tables present information regarding individually evaluated and collectively evaluated allowance for loan and lease losses for credit losses on loans and leases at the dates indicated. Periods prior to January 1, 2020 are presented in accordance with accounting rules effective at that time.

	At March 31, 2021
	Commercial Real Estate		Commercial		Consumer		Total
	(In Thousands)
Allowance for Loan and Lease Losses:
Individually evaluated	$	132	$	907	$	94	$	1,133
Collectively evaluated	79,797		24,918		3,989		108,704
Total	$	79,929	$	25,825	$	4,083	$	109,837
Loans and Leases:
Individually evaluated	$	14,927	$	20,198	$	6,414	$	41,539
Collectively evaluated	3,775,414		2,304,004		1,146,595		7,226,013
Total	$	3,790,341	$	2,324,202	$	1,153,009	$	7,267,552

	At December 31, 2020
	Commercial Real Estate		Commercial		Consumer		Total
	(In Thousands)
Allowance for Loan and Lease Losses:
Individually evaluated	$	183	$	2,020	$	108	$	2,311
Collectively evaluated	79,949		27,478		4,641		112,068
Total loans and leases	$	80,132	$	29,498	$	4,749	$	114,379
Loans and Leases:
Individually evaluated	$	14,159	$	24,727	$	8,760	$	47,646
Collectively evaluated	3,809,667		2,250,172		1,162,068		7,221,907
Total loans and leases	$	3,823,826	$	2,274,899	$	1,170,828	$	7,269,553

25

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

Troubled Debt Restructuring Loans and Leases

The following table sets forth information regarding TDR loans and leases at the dates indicated:

	At March 31, 2021		At December 31, 2020
	(In Thousands)
Troubled debt restructurings:
On accrual	$	16,770	$	11,483
On nonaccrual	6,293		7,476
Total troubled debt restructurings	$	23,063	$	18,959

Total TDR loans and leases increased by $4.1 million to $23.1 million at March 31, 2021 from $19.0 million at December 31, 2020, primarily driven by 2 new TDR relationships, consisting of 1 $3.7 million construction relationship and 1 $1.3 million equipment financing relationship, partially offset by the payoff of one TDR relationship during the three months ended March 31, 2021.

The amortized cost basis in TDR loans and the associated specific credit losses for the loan and lease portfolios, that were modified during the periods indicated, are as follows.

	At and for the Three Months Ended March 31, 2021
		Amortized Cost				Specific Allowance for Credit Losses				Defaulted (1)
	Number of Loans/ Leases	At Modification		At End of Period				Nonaccrual Loans and Leases		Number of Loans/ Leases		Amortized Cost
	(Dollars in Thousands)
Commercial real estate	1	$	497	$	497	0		0		0		0
Construction	4	2,764		2,764		0		0		0		0
Equipment financing	12	1,718		1,731		0		234		0		0
Total loans and leases	17	$	4,979	$	4,992	$	0	$	234	$	0	$	0

______________________________________________________________________

(1) Includes loans and leases that have been modified within the past twelve months and subsequently had payment defaults during the period indicated.

	At and for the Three Months Ended March 31, 2020
		Recorded Investment				Specific Allowance for Loan and Lease Losses				Defaulted (1)
	Number of Loans/ Leases	At Modification		At End of Period				Nonaccrual Loans and Leases		Number of Loans/ Leases	Recorded Investment
	(Dollars in Thousands)
Commercial real estate	0	0		0		0		0		1	228
Commercial	1	297		295		0		295		0	0
Equipment financing	2	200		200		0		0		0	0
Total loans and leases	3	$	497	$	495	$	0	$	295	1	$	228

______________________________________________________________________

(1) Includes loans and leases that have been modified within the past twelve months and subsequently had payment defaults during the period indicated.

The following table sets forth the Company's end-of-period amortized cost basis for TDRs that were modified during the periods indicated, by type of modification.

26

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

	Three Months Ended March 31,
	2021		2020
	(In Thousands)
Extended maturity	$	4,300	$	295
Combination maturity, principal, interest rate	693		200
Total	$	4,993	$	495

The TDR loans and leases that were modified for the three months ended March 31, 2021 and 2020 were $5.0 million and $0.5 million, respectively. The increases in TDR loans and leases that were modified for the three months ended March 31, 2021 were primarily due to the modification of 2 construction relationships totaling $2.7 million and 5 equipment finance relationships totaling $1.7 million during the three months ended March 31, 2020.

The net charge-offs for performing and nonperforming TDR loans and leases for the three months ended March 31, 2021 and 2020 were $0.6 million and $0.1 million, respectively.

The commitments to lend funds to debtors owing receivables whose terms had been modified in TDRs as of March 31, 2021 was $2.1 million. As of March 31, 2020, there were $2.3 million commitments to lend funds to debtors owing receivables whose terms had been modified in TDRs.

The Coronavirus Aid, Relief and Economic Security ("CARES") Act and regulatory guidance issued by the Federal banking agencies provides that certain short-term loan modifications to borrowers experiencing financial distress as a result of the economic impacts created by the COVID-19 pandemic are not required to be treated as TDRs under GAAP. As such, the Company suspended TDR accounting for COVID-19 pandemic related loan modifications meeting the loan modification criteria set forth under the CARES Act or as specified in the regulatory guidance. Further, loans granted payment deferrals related to the COVID-19 pandemic are not required to be reported as past due or placed on non-accrual status (provided the loans were not past due or on non-accrual status prior to the deferral). As of March 31, 2021, the Company granted 4,603 short-term deferments on loan and lease balances of $1.1 billion of which 4,262 loans and leases representing balances $955.6 million returned to payment and 341 loans and leases representing balances of $125.7 million remain in deferment. The outstanding deferred loans and leases represent 1.7% of the Company's total loan and lease balances.

(6) Goodwill and Other Intangible Assets

The following table sets forth the carrying value of goodwill and other intangible assets at the dates indicated:

	At March 31, 2021		At December 31, 2020
	(In Thousands)
Goodwill	$	160,427	$	160,427
Other intangible assets:
Core deposits	1,831		2,063
Trade name	1,089		1,089
Total other intangible assets	2,920		3,152
Total goodwill and other intangible assets	$	163,347	$	163,579

At December 31, 2013, the Company concluded that the BankRI name would continue to be utilized in its marketing strategies; therefore, the trade name with carrying value of $1.1 million, has an indefinite life and ceased to amortize.

The weighted-average amortization period for the core deposit intangible is 5.5 years.

27

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

The estimated aggregate future amortization expense (in thousands) for other intangible assets for each of the next five years and thereafter is as follows:

Remainder of 2021	$	644
Year ending:
2022	494
2023	263
2024	151
2025	103
2026	74
Thereafter	102
Total	$	1,831

(7) Accumulated Other Comprehensive Income (Loss)

For the three months ended March 31, 2021 and 2020, the Company’s accumulated other comprehensive income (loss) includes the following three components: (i) unrealized holding gains (losses) on investment securities available-for-sale; (ii) change in the fair value of cash flow hedges and (iii) adjustment of accumulated obligation for postretirement benefits.

Changes in accumulated other comprehensive income (loss) by component, net of tax, were as follows for the periods indicated:

	Three Months Ended March 31, 2021
	Investment Securities  Available-for-Sale		Net Change in Fair Value of Cash Flow Hedges		Postretirement Benefits		Accumulated Other Comprehensive Income (Loss)
	(In Thousands)
Balance at December 31, 2020	$	16,582	$	7	$	(99)	$	16,490
Other comprehensive income (loss)	(14,408)		2		0		(14,406)
Reclassification adjustment for (income) expense recognized in earnings	0		(2)		0		(2)
Balance at March 31, 2021	$	2,174	$	7	$	(99)	$	2,082

	Three Months Ended March 31, 2020
	Investment Securities  Available-for-Sale		Net Change in Fair Value of Cash Flow Hedges		Postretirement Benefits		Accumulated Other Comprehensive Income (Loss)
	(In Thousands)
Balance at December 31, 2019	$	2,199	$	0	$	84	$	2,283
Other comprehensive income (loss)	14,664		0		0		14,664
Balance at March 31, 2020	$	16,863	$	0	$	84	$	16,947

(8) Derivatives and Hedging Activities

The Company executes loan level derivative products such as interest rate swap agreements with commercial banking customers to aid them in managing their interest rate risk. The interest rate swap contracts allow the commercial banking customers to convert floating rate loan payments to fixed rate loan payments. The Company concurrently enters into offsetting swaps with a third party financial institution, effectively minimizing its net risk exposure resulting from such transactions. The third party financial institution exchanges the customer's fixed rate loan payments for floating rate loan payments. As the interest rate swap agreements associated with this program do not meet hedge accounting requirements, changes in the fair value are recognized directly in earnings. Based on the Company's intended use for the loan level derivatives at inception, the

28

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

Company designates the derivative as either an economic hedge of an asset or liability, or a hedging instrument subject to the hedge accounting provisions of FASB ASC Topic 815, "Derivatives and Hedging".

The Company believes using interest rate derivatives adds stability to interest income and expense and allows the Company to manage its exposure to interest rate movements. The Company enters into interest rate swaps as part of its interest rate risk management strategy. These interest rate swaps are designated as cash flow hedges and involve the receipt of variable rate amounts from a counterparty in exchange for the Company making fixed payments. The Company enters into interest rate swaps as hedging instruments against the interest rate risk associated with the Company's FHLB borrowings. For derivative instruments that are designated and qualify as cash flow hedging instruments, the effective portion of the gains or losses is reported as a component of other comprehensive income ("OCI"), and is reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

As of March 31, 2021, the Company paid its counterparties a fixed weighted average interest rate of 0.08% over a maximum period of 2 years for derivative instruments that are designated as and qualify as cash flow hedging instruments.

The Company utilizes risk participation agreements with other banks participating in commercial loan arrangements. Participating banks guarantee the performance on borrower-related interest rate swap contracts. Risk participation agreements are derivative financial instruments and are recorded at fair value. These derivatives are not designated as hedges and therefore, changes in fair value are recorded directly through earnings at each reporting period. Under a risk participation-out agreement, a derivative asset, the Company participates out a portion of the credit risk associated with the interest rate swap position executed with the commercial borrower, for a fee paid to the participating bank.

The Company offers foreign exchange contracts to commercial borrowers to accommodate their business needs. These foreign exchange contracts do not qualify as hedges for accounting purposes. To mitigate the market and liquidity risk associated with these foreign exchange contracts, the Company enters into similar offsetting positions.

Asset derivatives and liability derivatives are included in other assets and accrued expenses and other liabilities on the unaudited consolidated balance sheets.

The following tables present the Company's customer related derivative positions for the periods indicated below for those derivatives not designated as hedging.

	Notional Amount Maturing
	Number of Positions	Less than 1 year		Less than 2 years		Less than 3 years		Less than 4 years		Thereafter		Total		Fair Value
	March 31, 2021
	(Dollars In Thousands)
Loan level derivatives
Receive fixed, pay variable	134	$	0	$	10,876	$	13,949	$118,504		$	1,089,153	$	1,232,482	$	71,310
Pay fixed, receive variable	134	0		10,876		13,949		118,504		1,089,153		1,232,482		71,310
Risk participation-out agreements	37	0		0		6,975		22,718		233,737		263,430		1,019
Risk participation-in agreements	8	0		0		18,929		0		41,360		60,289		205
Foreign exchange contracts
Buys foreign currency, sells U.S. currency	16	$	1,416	$	0	$	0	$	0	$	0	$	1,416	$	99
Sells foreign currency, buys U.S. currency	21	1,422		0		0		0		0		1,422		93

29

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

	Notional Amount Maturing
	Number of Positions	Less than 1 year		Less than 2 years		Less than 3 years		Less than 4 years		Thereafter		Total		Fair Value
	December 31, 2020
	(Dollars In Thousands)
Loan level derivatives
Receive fixed, pay variable	136	$	0	$	8,541	$	16,447	$	99,014	$	1,090,144	$	1,214,146	$	129,284
Pay fixed, receive variable	136	0		8,541		16,447		99,014		1,090,144		1,214,146		129,284
Risk participation-out agreements	37	0		0		7,009		22,733		222,913		252,655		1,843
Risk participation-in agreements	8	0		0		19,000		0		41,619		60,619		361
Foreign exchange contracts
Buys foreign currency, sells U.S. currency	18	$	1,266	$	0	$	0	$	0	$	0	$	1,266	$	156
Sells foreign currency, buys U.S. currency	20	1,273		0		0		0		0		1,273		148

30

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

Certain derivative agreements contain provisions that require the Company to post collateral if the derivative exposure exceeds a threshold amount. The Company posted collateral to dealer counterparties of $149.4 million and $166.5 million in the normal course of business as of March 31, 2021 and December 31, 2020, respectively.

The tables below present the offsetting of derivatives and amounts subject to master netting agreements not offset in the unaudited consolidated balance sheet at the dates indicated.

	At March 31, 2021
	Gross Amounts Recognized		Gross Amounts Offset in the Statement of Financial Position		Net Amounts  Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position				Net Amount
							Financial Instruments Pledged		Cash Collateral Pledged
	(In Thousands)
Asset derivatives
Derivatives designated as hedging instruments:
Interest rate derivatives	$	10	$	0	$	10	$	0	$	0	$	10
Derivatives not designated as hedging instruments:
Loan level derivatives	$	84,128	$	0	$	84,128	$	0	$	0	$	84,128
Risk participation-out agreements	1,019		0		1,019		0		0		1,019
Foreign exchange contracts	99		0		99		0		0		99
Total	$	85,256	$	0	$	85,256	$	0	$	0	$	85,256
Liability derivatives
Derivatives designated as hedging instruments:
Interest rate derivatives	$	2	$	0	$	2	$	0	$	0	$	2
Derivatives not designated as hedging instruments:
Loan level derivatives	$	84,128	$	0	$	84,128	$	138,110	$	11,280	$	(65,262)
Risk participation-in agreements	205		0		205		0		0		205
Foreign exchange contracts	93		0		93		0		0		93
Total	$	84,428	$	0	$	84,428	$	138,110	$	11,280	$	(64,962)

31

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

	At December 31, 2020
	Gross Amounts Recognized		Gross Amounts Offset in the Statement of Financial Position		Net Amounts  Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position				Net Amount
							Financial Instruments Pledged		Cash Collateral Pledged
	(In Thousands)
Asset derivatives
Interest rate derivatives	$	8	$	0	$	8	$	0	$	0	$	8
Loan level derivatives	131,328		0		131,328		0		0		131,328
Risk participation-out agreements	1,843		0		1,843		0		0		1,843
Foreign exchange contracts	156		0		156		0		0		156
Total	$	133,335	$	0	$	133,335	$	0	$	0	$	133,335
Liability derivatives
Loan level derivatives	$	131,328	$	0	$	131,328	$	155,220	$	11,280	$	(35,172)
Risk participation-in agreements	361		0		361		0		0		361
Foreign exchange contracts	148		0		148		0		0		148
Total	$	131,837	$	0	$	131,837	$	155,220	$	11,280	$	(34,663)

The Company has agreements with certain of its derivative counterparties that contain credit-risk-related contingent provisions. These provisions provide the counterparty with the right to terminate its derivative positions and require the Company to settle its obligations under the agreements if the Company defaults on certain of its indebtedness or if the Company fails to maintain its status as a well-capitalized institution.

	Fair Value
	Three Months Ended   March 31, 2021		Three Months Ended   March 31, 2020
	(Dollars in Thousands)
Derivatives designated as hedges	$	8	$	0
Gain in OCI on derivatives (effective portion), net of tax	$	7	$	0
Gain (loss) reclassified from OCI into interest income or interest expense (effective portion)	$	2	$	0

The guidance in ASU 2017-12 requires that amounts in accumulated other comprehensive income that are included in the assessment of effectiveness should be reclassified into earnings in the same period in which the hedged forecasted transactions impact earnings. A portion of the balance reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made or received on the Company’s interest rate swaps. The Company monitors the risk of counterparty default on an ongoing basis.

32

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

(9) Stock Based Compensation

As of March 31, 2021, the Company had 2 active equity plans: the 2011 Restricted Stock Award Plan ("2011 RSA") with 500,000 authorized shares and the 2014 Equity Incentive Plan ("2014 Plan") with 1,750,000 authorized shares. The 2011 RSA and the 2014 Plan are collectively referred to as the "Plans". The purpose of the Plans is to promote the long-term financial success of the Company and its subsidiaries by providing a means to attract, retain and reward individuals who contribute to such success and to further align their interests with those of the Company's stockholders.

Of the awarded shares, generally 50% vest ratably over three years with one-third of such shares vesting at each of the first, second and third anniversary dates of the awards. These are referred to as "time-based shares". The remaining 50% of each award has a cliff vesting schedule and will vest three years after the award date based on the level of the Company's achievement of identified performance targets in comparison to the level of achievement of such identified performance targets by a defined peer group comprised of 14 financial institutions. These are referred to as "performance-based shares". If a participant leaves the Company prior to the third anniversary date of an award, any unvested shares are usually forfeited. Dividends declared with respect to shares awarded will be held by the Company and paid to the participant only when the shares vest.

Under the Plans, shares of the Company's common stock are reserved for issuance as restricted stock awards to officers, employees, and non-employee directors of the Company. Shares issued upon vesting may be either authorized but unissued shares or reacquired shares held by the Company as treasury shares. Any shares not issued because vesting requirements are not met will be retired back to treasury and be made available again for issuance under the Plans.

During the three months ended March 31, 2021 and March 31, 2020, 0 shares were issued upon satisfaction of required conditions of the Plans.

Total expense for the Plans was $0.5 million and $0.6 million for the three months ended March 31, 2021 and 2020, respectively.

(10) Earnings per Share ("EPS")

The following table is a reconciliation of basic EPS and diluted EPS:

	Three Months Ended
	March 31, 2021				March 31, 2020
	Basic		Fully Diluted		Basic		Fully Diluted
	(Dollars in Thousands, Except Per Share Amounts)
Numerator:
Net income	$	26,454	$	26,454	$	(17,276)	$	(17,276)
Denominator:
Weighted average shares outstanding	78,143,752		78,143,752		79,481,462		79,481,462
Effect of dilutive securities	—		260,311		—		184,312
Adjusted weighted average shares outstanding	78,143,752		78,404,063		79,481,462		79,665,774
EPS	$	0.34	$	0.34	$	(0.22)	$	(0.22)

(11) Fair Value of Financial Instruments

A description of the valuation methodologies used for assets and liabilities measured at fair value on a recurring and non-recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. There were no changes in the valuation techniques used during the three months ended March 31, 2021 and December 31, 2020.

33

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The following tables set forth the carrying value of assets and liabilities measured at fair value on a recurring basis at the dates indicated:

	Carrying Value as of March 31, 2021
	Level 1		Level 2		Level 3		Total
	(In Thousands)
Assets:
Investment securities available-for-sale:
GSE debentures	$	0	$	271,526	$	0	$	271,526
GSE CMOs	0		40,925		0		40,925
GSE MBSs	0		276,066		0		276,066
Corporate debt obligations	0		23,247		0		23,247
U.S. Treasury bonds	0		117,641		0		117,641
Foreign government obligations	0		496		0		496
Total investment securities available-for-sale	$	0	$	729,901	$	0	$	729,901
Equity securities held-for-trading	$	0	$	518	$	0	$	518
Interest rate derivatives	0		10		0		10
Loan level derivatives	0		84,128		0		84,128
Risk participation-out agreements	0		1,019		0		1,019
Foreign exchange contracts	0		99		0		99
Liabilities:
Interest rate derivatives	$	0	$	2	$	0	$	2
Loan level derivatives	0		84,128		0		84,128
Risk participation-in agreements	0		205		0		205
Foreign exchange contracts	0		93		0		93

34

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

	Carrying Value as of December 31, 2020
	Level 1		Level 2		Level 3		Total
	(In Thousands)
Assets:
Investment securities available-for-sale:
GSE debentures	$	0	$	278,645	$	0	$	278,645
GSE CMOs	0		46,028		0		46,028
GSE MBSs	0		323,609		0		323,609
Corporate debt obligations	0		23,467		0		23,467
U.S. Treasury bonds	0		73,577		0		73,577
Foreign government obligations	0		496		0		496
Total investment securities available-for-sale	$	0	$	745,822	$	0	$	745,822
Equity securities held-for-trading	$	0	$	526	$	0	$	526
Interest rate derivatives	0		8		0		8
Loan level derivatives	0		131,328		0		131,328
Risk participation-out agreements	0		1,843		0		1,843
Foreign exchange contracts	0		156		0		156
Liabilities:
Loan level derivatives	0		131,328		0		131,328
Risk participation-in agreements	0		361		0		361
Foreign exchange contracts	0		148		0		148

Investment Securities Available-for-Sale

The fair value of investment securities is based principally on market prices and dealer quotes received from third-party and nationally-recognized pricing services for identical investment securities such as U.S. Treasury and agency securities. These prices are validated by comparing the primary pricing source with an alternative pricing source when available. When quoted market prices for identical securities are unavailable, the Company uses market prices provided by independent pricing services based on recent trading activity and other observable information, including but not limited to market interest-rate curves, referenced credit spreads and estimated prepayment speeds, where applicable. These investments include GSE debentures, GSE mortgage-related securities, SBA commercial loan asset backed securities, corporate debt securities, and trust preferred securities, all of which are included in Level 2. As of March 31, 2021 and December 31, 2020, none of the investment securities were valued using pricing models included in Level 3.

Additionally, management reviews changes in fair value from period to period and performs testing to ensure that prices received from the third parties are consistent with management's expectation of the market. Changes in the prices obtained from the pricing service are analyzed from month to month, taking into consideration changes in market conditions including changes in mortgage spreads, changes in U.S. Treasury security yields and changes in generic pricing of 15-year and 30-year securities. Additional analysis may include a review of prices provided by other independent parties, a yield analysis, a review of average life changes using Bloomberg analytics and a review of historical pricing for a particular security.

Equity Securities Held-for-Trading

The fair value of equity securities held-for-trading is based principally on market prices and dealer quotes received from third-party and nationally-recognized pricing services. The Company's equity securities are priced this way and are included in Level 1 and Level 2. These prices are validated by comparing the primary pricing source with an alternative pricing source when available.

Derivatives and Hedging Instruments

The fair value of interest rate derivatives designated as hedging instruments, loan level derivatives, risk participation agreements (RPA in/out), and foreign exchange contracts represent a Level 2 valuation and are based on settlement values

35

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

adjusted for credit risks associated with the counterparties and the Company and observable market interest rate curves and foreign exchange rates where applicable. Credit risk adjustments consider factors such as the likelihood of default by the Company and its counterparties, its net exposures and remaining contractual life. To date, the Company has not realized any losses due to a counterparty's inability to pay any net uncollateralized position. Refer also to Note 8, "Derivatives and Hedging Activities."

There were no transfers between levels for assets and liabilities recorded at fair value on a recurring basis during the three months ended March 31, 2021 and December 31, 2020, respectively.

Assets and Liabilities Recorded at Fair Value on a Non-Recurring Basis

Assets and liabilities measured at fair value on a non-recurring basis are summarized below at the dated indicated:

	Carrying Value as of March 31, 2021
	Level 1		Level 2		Level 3		Total
	(In Thousands)
Assets measured at fair value on a non-recurring basis:
Collateral-dependent impaired loans and leases	$	0	$	0	$	844	$	844
OREO	0		0		5,328		5,328
Repossessed assets	0		1,055		0		1,055
Total assets measured at fair value on a non-recurring basis	$	0	$	1,055	$	6,172	$	7,227

	Carrying Value as of December 31, 2020
	Level 1		Level 2		Level 3		Total
	(In Thousands)
Assets measured at fair value on a non-recurring basis:
Collateral-dependent impaired loans and leases	$	0	$	0	$	3,445	$	3,445
OREO	0		0		5,415		5,415
Repossessed assets	0		1,100		0		1,100
Total assets measured at fair value on a non-recurring basis	$	0	$	1,100	$	8,860	$	9,960

Collateral-Dependent Impaired Loans and Leases

For nonperforming loans and leases where the credit quality of the borrower has deteriorated significantly, fair values of the underlying collateral were estimated using purchase and sales agreements (Level 2), or comparable sales or recent appraisals (Level 3), adjusted for selling costs and other expenses.

Other Real Estate Owned

The Company records OREO at the lower of cost or fair value. In estimating fair value, the Company utilizes purchase and sales agreements (Level 2) or comparable sales, recent appraisals or cash flows discounted at an interest rate commensurate with the risk associated with these cash flows (Level 3), adjusted for selling costs and other expenses.

Repossessed Assets

Repossessed assets are carried at estimated fair value less costs to sell based on auction pricing (Level 2).

36

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

The table below presents quantitative information about significant unobservable inputs (Level 3) for assets measured at fair value on a non-recurring basis at the dates indicated.

	Fair Value				Valuation Technique
	At March 31, 2021		At December 31, 2020
	(Dollars in Thousands)
Collateral-dependent impaired loans and leases	$	844	$	3,445	Appraisal of collateral (1)
Other real estate owned	5,328		5,415		Appraisal of collateral (1)

________________________________________________________________________

(1) Fair value is generally determined through independent appraisals of the underlying collateral. The Company may also use another available source of collateral assessment to determine a reasonable estimate of the fair value of the collateral. Appraisals may be adjusted by management for qualitative factors such as economic factors and estimated liquidation expenses. The range of the unobservable inputs used may vary but is generally 0% - 10% on the discount for costs to sell and 0% - 15% on appraisal adjustments.

Summary of Estimated Fair Values of Financial Instruments

The following table presents the carrying amount, estimated fair value, and placement in the fair value hierarchy of the Company's financial instruments at the dates indicated. This table excludes financial instruments for which the carrying amount approximates fair value. Financial assets for which the fair value approximates carrying value include cash and cash equivalents, restricted equity securities, and accrued interest receivable. Financial liabilities for which the fair value approximates carrying value include non-maturity deposits, short-term borrowings, and accrued interest payable.

					Fair Value Measurements at March 31, 2021
	Carrying Value		Estimated Fair Value		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
	(In Thousands)
Financial assets:
Loans and leases, net	$	7,157,715	$	7,122,319	$	0	$	0	$	7,122,319
Restricted equity securities	40,400		40,400		0		0		40,400
Financial liabilities:
Certificates of deposits	1,743,656		1,751,374		0		1,751,374		0
Borrowed funds	546,003		539,957		0		539,957		0

			Fair Value Measurements at December 31, 2020
	Carrying Value	Estimated Fair Value	Level 1 Inputs	Level 2 Inputs	Level 3 Inputs
	(In Thousands)
Financial assets:
Loans and leases, net	7,155,174	7,116,854	0	0	7,116,854
Restricted equity securities	49,786	49,786	0	0	49,786
Financial liabilities:
Certificates of deposit	2,083,907	2,092,867	0	2,092,867	0
Borrowed funds	820,247	818,681	0	818,681	—

37

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

Loans and Leases

The fair values of performing loans and leases was estimated by segregating the portfolio into its primary loan and lease categories—commercial real estate mortgage, multi-family mortgage, construction, commercial, equipment financing, condominium association, residential mortgage, home equity and other consumer. These categories were further disaggregated based upon significant financial characteristics such as type of interest rate (fixed / variable) and payment status (current / past-due). Using the exit price valuation method, the Company discounts the contractual cash flows for each loan category using interest rates currently being offered for loans with similar terms to borrowers of similar quality and incorporates estimates of future loan prepayments.

Restricted Equity Securities

The fair values of certain restricted equity securities are estimated using observable inputs adjusted for other unobservable information, including but not limited to probability assumptions and similar discounts where applicable. These restricted equity securities are considered to be Level 3.

Deposits

The fair values of deposit liabilities with no stated maturity (demand, NOW, savings and money market savings accounts) are equal to the carrying amounts payable on demand. The fair value of certificates of deposit represents contractual cash flows discounted using interest rates currently offered on deposits with similar characteristics and remaining maturities. The fair value estimates for deposits do not include the benefit that results from the low-cost funding provided by the Company's core deposit relationships (deposit-based intangibles).

Borrowed Funds

The fair value of federal funds purchased is equal to the amount borrowed. The fair value of FHLBB advances and repurchase agreements represents contractual repayments discounted using interest rates currently available for borrowings with similar characteristics and remaining maturities. The fair values reported for retail repurchase agreements are based on the discounted value of contractual cash flows. The discount rates used are representative of approximate rates currently offered on borrowings with similar characteristics and maturities. The fair values reported for subordinated deferrable interest debentures are based on the discounted value of contractual cash flows. The discount rates used are representative of approximate rates currently offered on instruments with similar terms and maturities.

(12) Commitments and Contingencies

Off-Balance Sheet Financial Instruments

The Company is party to off-balance sheet financial instruments in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments include loan commitments, standby and commercial letters of credit, and loan level derivatives. According to GAAP, these financial instruments are not recorded in the financial statements until they are funded or related fees are incurred or received.

The contract amounts reflect the extent of the involvement the Company has in particular classes of these instruments. Such commitments involve, to varying degrees, elements of credit risk and interest-rate risk in excess of the amount recognized in the consolidated balance sheets. The Company's exposure to credit loss in the event of non-performance by the counterparty is represented by the fair value of the instruments. The Company uses the same policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

38

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

Financial instruments with off-balance-sheet risk at the dates indicated follow:

	At March 31, 2021		At December 31, 2020
	(In Thousands)
Financial instruments whose contract amounts represent credit risk:
Commitments to originate loans and leases:
Commercial real estate	$	107,597	$	174,240
Commercial	105,426		80,291
Residential mortgage	82,366		30,418
Unadvanced portion of loans and leases	826,545		759,053
Unused lines of credit:
Home equity	591,377		584,881
Other consumer	41,583		38,954
Other commercial	431		408
Unused letters of credit:
Financial standby letters of credit	15,953		14,746
Performance standby letters of credit	6,607		5,903
Commercial and similar letters of credit	5,369		5,105
Loan level derivatives (Notional principal amounts):
Receive fixed, pay variable	1,232,482		1,214,146
Pay fixed, receive variable	1,232,482		1,214,146
Risk participation-out agreements	263,430		252,655
Risk participation-in agreements	60,289		60,619
Foreign exchange contracts (Notional amounts):
Buys foreign currency, sells U.S. currency	1,416		1,266
Sells foreign currency, buys U.S. currency	1,422		1,273

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee by the customer. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if any, is based on management's credit evaluation of the borrower.

Standby and commercial letters of credit are conditional commitments issued by the Company to guarantee performance of a customer to a third party. These standby and commercial letters of credit are primarily issued to support the financing needs of the Company's commercial customers. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers.

From time to time, the Company enters into loan level derivatives, risk participation agreements or foreign exchange contracts with commercial customers and third-party financial institutions. These derivatives allow the Company to offer long-term fixed-rate commercial loans while mitigating the interest-rate or foreign exchange risk of holding those loans. In a loan level derivative transaction, the Company lends to a commercial customer on a floating-rate basis and then enters into a loan level derivative with that customer. Concurrently, the Company enters into offsetting swaps with a third-party financial institution, effectively minimizing its net interest-rate risk exposure resulting from such transactions. The fair value of these derivatives are presented in Footnote 8.

39

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

Lease Commitments

The Company leases certain office space under various noncancellable operating leases as well as certain other assets. These leases have original terms ranging from 3 years to over 25 years. Certain leases contain renewal options and escalation clauses which can increase rental expenses based principally on the consumer price index and fair market rental value provisions. All of the Company's current outstanding leases are classified as operating leases.

The Company considered the following criteria when determining whether a contract contains a lease, the existence of an identifiable asset and the right to obtain substantially all of the economic benefits from use of the asset through the period. The Company used the FHLB classic advance rates available as of March 31, 2021 as the discount rate to determine the net present value of the remaining lease payments.

	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020
	(In Thousands)
The components of lease expense were as follow:
Operating lease cost	$	1,563	$	1,611
Supplemental cash flow information related to leases was as follows:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	1,579	$	1,658

	At March 31, 2021			At December 31, 2020
	(In Thousands)
Supplemental balance sheet information related to leases was as follows:
Operating Leases
Operating lease right-of-use assets	$	23,180		$	24,143
Operating lease liabilities	23,180			24,143
Weighted Average Remaining Lease Term
Operating leases	6.80			6.95
Weighted Average Discount Rate
Operating leases	3.2		%	3.2		%

40

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

A summary of future minimum rental payments under such leases at the dates indicated follows:

	Minimum Rental Payments
	March 31, 2021
	(In Thousands)
Remainder of 2021	$	4,596
Year ending:
2022	5,569
2023	4,643
2024	3,366
2025	2,343
2026	1,559
Thereafter	3,571
Total	$	25,647
Less imputed interest	(2,467)
Present value of lease liability	$	23,180

Certain leases contain escalation clauses for real estate taxes and other expenditures, which are not included above. The total real estate taxes were $0.5 million and other expenditures were $0.1 million for both the three months ended March 31, 2021, and 2020. Total rental expense was $1.5 million and $1.6 million for the three months ended March 31, 2021 and 2020, respectively.

Legal Proceedings

In the normal course of business, there are various outstanding legal proceedings. In the opinion of management, after consulting with legal counsel, the consolidated financial position and results of operations of the Company are not expected to be affected materially by the outcome of such proceedings.

(13) Revenue from Contracts with Customers

Overview

Revenue from contracts with customers in the scope of Accounting Standards Codification (“ASC”) ("Topic 606") is measured based on the consideration specified in the contract with a customer and excludes amounts collected on behalf of third parties. The Company recognizes revenue from contracts with customers when it satisfies its performance obligations.

The Company’s performance obligations are generally satisfied as services are rendered and can either be satisfied at a point in time or over time. Unsatisfied performance obligations at the report date are not material to our consolidated financial statements.

In certain cases, other parties are involved with providing services to our customers. If the Company is a principal in the transaction (providing services itself or through a third party on its behalf), revenues are reported based on the gross consideration received from the customer and any related expenses are reported in gross noninterest expense. If the Company is an agent in the transaction (referring to another party to provide services), the Company reports its net fee or commission retained as revenue.

A substantial portion of the Company’s revenue is specifically excluded from the scope of Topic 606. This exclusion is associated with financial instruments, including interest income on loans and investment securities, in addition to loan derivative income and gains on loan and investment sales. For the revenue that is in-scope of Topic 606, the following is a description of principal activities from which the Company generates its revenue from contracts with customers, separated by the timing of revenue recognition.

41

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

Revenue Recognized at a Point in Time

The Company recognizes revenue that is transactional in nature and such revenue is earned at a point in time. Revenue that is recognized at a point in time includes card interchange fees (fee income related to debit card transactions), ATM fees, wire transfer fees, overdraft charge fees, and stop-payment and returned check fees. Additionally, revenue is collected from loan fees, such as letters of credit, line renewal fees and application fees. Such revenue is derived from transactional information and is recognized as revenue immediately as the transactions occur or upon providing the service to complete the customer’s transaction.

Revenue Recognized Over Time

The Company recognizes revenue over a period of time, generally monthly, as services are performed and performance obligations are satisfied. Such revenue includes commissions on investments, insurance sales and service charges on deposit accounts. Fee revenue from service charges on deposit accounts represents the service charges assessed to customers who hold deposit accounts at the Banks.

42

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Certain statements contained in this Quarterly Report on Form 10-Q that are not historical facts may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties. These statements, which are based on certain assumptions and describe Brookline Bancorp, Inc.’s (the “Company’s”) future plans, strategies and expectations, can generally be identified by the use of the words “may,” “will,” “should,” “could,” “would,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target” and similar expressions. These statements include, among others, statements regarding the Company’s intent, belief or expectations with respect to economic conditions, trends affecting the Company’s financial condition or results of operations, and the Company’s exposure to market, liquidity, interest-rate and credit risk.

Forward-looking statements are based on the current assumptions underlying the statements and other information with respect to the beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions of management and the financial condition, results of operations, future performance and business are only expectations of future results. Although the Company believes that the expectations reflected in the Company’s forward-looking statements are reasonable, the Company’s actual results could differ materially from those projected in the forward-looking statements as a result of, among other factors, the negative impacts and disruptions of the COVID-19 pandemic and measures taken to contain its spread on our employees, customers, business operations, credit quality, financial position, liquidity and results of operations; turbulence in the capital and debt markets; changes in interest rates; competitive pressures from other financial institutions; the effects of weakness in general economic conditions on a national basis or in the local markets in which the Company operates; changes in consumer behavior due to changing political, business and economic conditions, including increased unemployment, or legislative or regulatory initiatives; changes in the value of securities and other assets in the Company’s investment portfolio; increases in loan and lease default and charge-off rates; the adequacy of allowances for loan and lease losses; decreases in deposit levels that necessitate increases in borrowing to fund loans and investments; operational risks including, but not limited to, cybersecurity incidents, fraud, natural disasters and future pandemics; changes in regulation; reputational risks relating to the Company’s participation in the Paycheck Protection Program, and other pandemic-related legislative and regulatory initiatives and programs; the possibility that future credit losses may be higher than currently expected; due to changes in economic assumptions and adverse economic developments; the risk that goodwill and intangibles recorded in the Company’s financial statements will become impaired; and changes in assumptions used in making such forward-looking statements; and the other risks and uncertainties detailed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and other filings submitted to the Securities and Exchange Commission. Forward-looking statements speak only as of the date on which they are made. The Company does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.

Introduction

Brookline Bancorp, Inc., a Delaware corporation, operates as a multi-bank holding company for Brookline Bank and its subsidiaries; Bank Rhode Island and its subsidiaries ("BankRI"); and Brookline Securities Corp.

As a commercially-focused financial institution with 50 full-service banking offices throughout greater Boston, the north shore of Massachusetts and Rhode Island, the Company, through Brookline Bank and BankRI, offers a wide range of commercial, business and retail banking services, including a full complement of cash management products, foreign exchange services, on-line and mobile banking services, consumer and residential loans and investment advisory services, designed to meet the financial needs of small- to mid-sized businesses and individuals throughout central New England. Specialty lending activities include equipment financing, 12.7% of which is in the greater New York and New Jersey metropolitan area and 87.3% of which is in other areas in the United States of America as of March 31, 2021.

The Company focuses its business efforts on profitably growing its commercial lending businesses, both organically and through acquisitions. The Company’s customer focus, multi-bank structure, and risk management are integral to its organic growth strategy and serve to differentiate the Company from its competitors. As full-service financial institutions, the Banks and their subsidiaries focus their efforts on developing and deepening long-term banking relationships with qualified customers through a full complement of products, excellent customer service, and strong risk management.

The Company manages the Banks under a uniform strategic objective, with one set of uniform policies consistently applied by one executive management team. Within this environment, the Company believes that the ability to make customer decisions locally enhances management's motivation, service levels and, as a consequence, the Company's financial results. As such, while most back-office functions are consolidated at the holding company level, branding and decision-making, including credit decisions and pricing, remain largely local in order to better meet the needs of bank customers and further motivate the

43

Banks’ commercial, business and retail bankers. These credit decisions, at the local level, are executed through corporate policies overseen by the Company's credit department.

The competition for loans and leases and deposits remains intense. The Company expects the operating environment to remain challenging. The volume of loan and lease originations and loan and lease losses will depend, to a large extent, on how the economy performs. Loan and lease growth and deposit growth are also greatly influenced by the rate-setting actions of the FRB. A sustained, low interest rate environment with a flat interest rate curve may negatively impact the Company's yields and net interest margin. While the Company is slightly asset sensitive and should benefit from rising rates, changes in interest rates could also precipitate a change in the mix and volume of the Company's deposits and loans. The future operating results of the Company will depend on its ability to maintain or increase the current net interest margin, while minimizing exposure to credit risk, along with increasing sources of non-interest income, while controlling the growth of non-interest expenses.

The Company and the Banks are supervised, examined and regulated by the FRB. As a Massachusetts-chartered trust company, Brookline Bank is also subject to regulation under the laws of the Commonwealth of Massachusetts and the jurisdiction of the Massachusetts Division of Banks. As a Rhode Island-chartered financial institution, BankRI is also subject to regulation under the laws of the State of Rhode Island and the jurisdiction of the Banking Division of the Rhode Island Department of Business Regulation. The FDIC continues to insure each of the Banks’ deposits up to $250,000 per depositor. As previously disclosed, on July 31, 2019, Brookline Bank converted its charter from a Massachusetts savings bank to a Massachusetts-chartered trust company and ended its membership in the Depositors Insurance Fund (the “DIF”), a private industry-sponsored fund which insures Massachusetts-chartered savings bank deposit balances in excess of federal deposit insurance coverage. Brookline Bank’s growth in deposit size necessitated Brookline Bank’s withdrawal from the DIF and the concurrent charter conversion of Brookline Bank. Brookline Bank’s deposit accounts will continue to be insured by the deposit insurance fund of the FDIC up to applicable limits. Term deposits in excess of the FDIC insurance coverage will continue to be insured by the DIF until they reach maturity.

On March 27, 2020, Congress passed, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted to address the economic effects of the COVID-19 pandemic.

•Paycheck Protection Program The CARES Act appropriated $349 billion for “paycheck protection loans” through the U.S. Small Business Administration's ("SBA's") Paycheck Protection Program ("PPP"). The amount appropriated was subsequently increased to $659 billion. Loans under the PPP that meet SBA requirements may be forgiven in certain circumstances, and are 100% guaranteed by SBA. Additionally, on December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the “Economic Aid Act”) was signed into law and provides for a second round of PPP loans (the "PPP-2"). The Banks are participating in the PPP-2 as of March 31, 2021. PPP loans are fully guaranteed by the U.S. government, have an initial term of up to five years and earn interest at a rate of 1%. We currently expect a significant portion of these loans will ultimately be forgiven by the SBA in accordance with the terms of the program. Through March 31, 2021, the Banks funded 1,342 PPP-2 loans representing $249.5 million. In the first round of PPP funding, the Banks funded 2,922 PPP loans totaling $581.7 million. In conjunction with the PPP, the FRB has created a lending facility for qualified financial institutions. The FRB's Paycheck Protection Program Liquidity Facility ("PPPLF") will extend credit to depository institutions with a term of up to five years at an interest rate of 0.35%. Only loans issued under the PPP can be pledged as collateral to access the facility. The Company is participating in the PPPLF program. As of the filing date, the Banks have obtained SBA approval for 1,613 PPP-2 loans totaling $260 million. All PPP-2 loans have been funded.

•Troubled Debt Restructuring Relief. From March 1, 2020 through the earlier of January 1, 2022 or 60 days after the termination date of the national emergency, a financial institution may elect to suspend the requirements under accounting principles generally accepted in the U.S. for loan modifications related to the COVID-19 pandemic that would otherwise be categorized as a troubled debt restructured, including impairment accounting. This troubled debt restructuring relief applies for the term of the loan modification that occurs during the applicable period for a loan that was not more than 30 days past due as of December 31, 2019. Financial institutions are required to maintain records of the volume of loans involved in modifications to which troubled debt restructuring relief is applicable. As of March 31, 2021, the Company granted 4,603 short-term deferments on loan and lease balances of $1.1 billion. Of these modifications, 4,262 loans and leases with total balances of $955.6 million have returned to the payment status and 341 loans and leases with total balances of $125.7 million remain on the deferral status, which represents 1.7% of the Company's total loan and lease balances. These short-term deferments are not classified as troubled debt restructured loans and will not be reported as past due provided that they are performing in accordance with the modified terms.

The Company’s common stock is traded on the Nasdaq Global Select MarketSM under the symbol “BRKL.”

44

Selected Financial Data

    The following is based in part on, and should be read in conjunction with, the consolidated financial statements and accompanying notes, and other information appearing elsewhere in this Quarterly Report on Form 10-Q.

	At and for the Three Months Ended
	March 31,			December 31,			September 30,			June 30,			March 31,
	2021			2020			2020			2020			2020
	(Dollars in Thousands, Except Per Share Data)
PER COMMON SHARE DATA
Earnings per share - Basic	$	0.34		$	0.34		$	0.24		$	0.25		$	(0.22)
Earnings per share - Diluted	0.34			0.34			0.24			0.25			(0.22)
Book value per share (end of period)	12.10			12.05			11.84			11.75			11.57
Tangible book value per share (end of period) (1)	10.01			9.96			9.77			9.67			9.49
Dividends paid per common share	0.115			0.115			0.115			0.115			0.115
Stock price (end of period)	15.00			12.04			8.65			10.08			11.28
PERFORMANCE RATIOS (2)
Net interest margin (taxable equivalent basis)	3.39		%	3.23		%	3.08		%	3.09		%	3.31		%
Return on average assets	1.21		%	1.20		%	0.83		%	0.88		%	(0.87)		%
Return on average tangible assets (1)	1.24		%	1.22		%	0.84		%	0.90		%	(0.89)		%
Return on average stockholders' equity	11.18		%	11.38		%	7.99		%	8.45		%	(7.30)		%
Return on average tangible stockholders' equity (1)	13.51		%	13.79		%	9.70		%	10.28		%	(8.84)		%
Dividend payout ratio (1)	33.99		%	33.96		%	48.67		%	46.37		%	(53.10)		%
Efficiency ratio (3)	55.22		%	55.27		%	57.83		%	55.46		%	57.36		%
ASSET QUALITY RATIOS
Net loan and lease charge-offs as a percentage of average loans and leases (annualized)	0.10		%	0.24		%	0.27		%	0.08		%	0.13		%
Nonperforming loans and leases as a percentage of total loans and leases	0.43		%	0.53		%	0.51		%	0.56		%	0.57		%
Nonperforming assets as a percentage of total assets	0.44		%	0.50		%	0.44		%	0.47		%	0.49		%
Total allowance for loan and lease losses as a percentage of total loans and leases	1.51		%	1.57		%	1.62		%	1.61		%	1.66		%
CAPITAL RATIOS
Stockholders' equity to total assets	11.04		%	10.53		%	10.39		%	10.21		%	10.78		%
Tangible equity ratio (1)	9.31		%	8.86		%	8.73		%	8.56		%	9.02		%
FINANCIAL CONDITION DATA
Total assets	$	8,559,810		$	8,942,424		$	9,000,192		$	9,069,667		$	8,461,591
Total loans and leases	7,267,552			7,269,553			7,396,358			7,407,697			6,822,527
Allowance for loan and lease losses	109,837			114,379			119,971			119,553			113,181
Investment securities available-for-sale	729,901			745,822			783,867			854,505			761,539
Investment securities held-to-maturity	—			—			—			—			—
Equity securities held-for-trading	518			526			525			1,992			2,558
Goodwill and identified intangible assets	163,347			163,579			163,891			164,203			164,514
Total deposits	6,866,786			6,910,696			6,792,523			6,440,233			5,889,938
Total borrowed funds	546,003			820,247			1,005,045			1,406,669			1,291,804
Stockholders' equity	945,399			941,778			935,558			926,413			912,568
													(Continued)

45

	At and for the Three Months Ended
	March 31,		December 31,		September 30,		June 30,		March 31,
	2021		2020		2020		2020		2020
	(Dollars in Thousands, Except Per Share Data)
EARNINGS DATA
Net interest income	$	69,109	$	68,225	$	65,938	$	64,288	$	61,712
Provision for credit losses	(2,147)		(2,103)		4,528		5,347		54,114
Non-interest income	4,794		4,219		4,862		6,235		9,328
Non-interest expense	40,811		40,038		40,947		39,109		40,748
Net income (loss)	26,454		26,663		18,679		19,571		(17,276)

_______________________________________________________________________________

(1) Refer to "Non-GAAP Financial Measures and Reconciliations to GAAP".

(2) All performance ratios are annualized and are based on average balance sheet amounts, where applicable.

(3) Efficiency ratio is calculated by dividing non-interest expense by the sum of non-interest income and net interest income.

Executive Overview

Balance Sheet

Total assets of $8.6 billion as of March 31, 2021 decreased $382.6 million, or 17.1% on an annualized basis, from December 31, 2020. The decrease was primarily driven by decreases in cash and cash equivalents and other assets.

Cash and cash equivalents as of March 31, 2021 decreased $304.0 million, or 279.6% on an annualized basis, to $130.9 million from December 31, 2020.

Total loans and leases as of March 31, 2021 decreased $2.0 million, or 0.1% on an annualized basis, to $7.3 billion from December 31, 2020. The Company's commercial loan portfolios, which are comprised of commercial real estate loans and commercial loans and leases, totaled $6.1 billion, or 84.1% of total loans and leases as of March 31, 2021, an increase of $15.8 million, or 1.0% on an annualized basis, from $6.1 billion, or 83.9% of total loans and leases, as of December 31, 2020.

Total deposits of $6.9 billion as of March 31, 2021 decreased $43.9 million, or 2.5% on an annualized basis, from December 31, 2020. Core deposits, which include demand checking, NOW, money market and savings accounts, totaled $5.1 billion, or 74.6% of total deposits as of March 31, 2021, an increase of $296.3 million, or 24.6% on an annualized basis from $4.8 billion, or 69.8% of total deposits, as of December 31, 2020. Certificate of deposit balances totaled $1.3 billion, or 18.5% of total deposits as of March 31, 2021, a decrease of $116.9 million, or 33.6% on an annualized basis from $1.4 billion, or 20.1% of total deposits, as of December 31, 2020. Brokered deposits totaled $470.6 million, or 6.9% of total deposits as of March 31, 2021, a decrease of $223.4 million, or 128.8% on an annualized basis from $693.9 million, or 10.0% of total deposits, as of December 31, 2020.

Total borrowed funds as of March 31, 2021 decreased $274.2 million, or 133.7% on an annualized basis, to $0.5 billion from December 31, 2020.

Asset Quality

Nonperforming assets as of March 31, 2021 totaled $37.4 million, or 0.44% of total assets, compared to $45.0 million, or 0.50% of total assets, as of December 31, 2020. Net charge-offs for the three months ended March 31, 2021 were $1.8 million, or 0.10% of average loans and leases on an annualized basis, compared to $2.2 million, or 0.13% of average loans and leases on an annualized basis, for the three months ended March 31, 2020.

The ratio of the allowance for loan and lease losses to total loans and leases was 1.51% as of March 31, 2021, compared to 1.57% as of December 31, 2020. On January 1, 2020, the Company implemented the CECL methodology to calculate the allowance for credit losses. Refer also to Note 5, "Allowance for Loan and Lease Losses."

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Capital Strength

The Company is a "well-capitalized" bank holding company as defined in the FRB's Regulation Y. The Company's common equity Tier 1 capital ratio was 11.65% as of March 31, 2021, compared to 11.04% as of December 31, 2020. The Company's Tier 1 leverage ratio was 9.26% as of March 31, 2021, compared to 8.92% as of December 31, 2020. As of March 31, 2021, the Company's Tier 1 risk-based capital ratio was 11.79%, compared to 11.18% as of December 31, 2020. The Company's Total risk-based capital ratio was 14.15% as of March 31, 2021, compared to 13.51% as of December 31, 2020.

The Company's ratio of stockholders' equity to total assets was 11.04% and 10.53% as of March 31, 2021 and December 31, 2020, respectively. The Company's tangible equity ratio was 9.31% and 8.86% as of March 31, 2021 and December 31, 2020, respectively.

Net Income (Loss)

For the three months ended March 31, 2021, the Company reported net income of $26.5 million, or $0.34 per basic and diluted share, an increase of $43.7 million, or 253.1%, from net loss of $(17.3) million, or $(0.22) per basic and diluted share for the three months ended March 31, 2020. This increase in net income is primarily the result of a decrease in the provision for credit losses of $56.3 million and an increase in net interest income of $7.4 million, partially offset by an increase in the provision for income taxes of $15.3 million and a decrease in non-interest income of $4.5 million. Refer to “Results of Operations" below for further discussion.

The annualized return on average assets was 1.21% for the three months ended March 31, 2021, compared to (0.87)% for the three months ended March 31, 2020. The annualized return on average stockholders' equity was 11.18% for the three months ended March 31, 2021, compared to (7.30)% for the three months ended March 31, 2020.

The net interest margin was 3.39% for the three months ended March 31, 2021, up from 3.31% for the three months ended March 31, 2020. The increase in the net interest margin is a result of a decrease of 79 basis points in the Company's overall cost of funds to 0.50% for the three months ended March 31, 2021 from 1.29% for the three months ended March 31, 2020, partially offset by a decrease in the yield on interest-earning assets of 66 basis points to 3.80% for the three months ended March 31, 2021 from 4.46% for the three months ended March 31, 2020.

The Company’s net interest margin and net interest income is sensitive to the structure and level of interest rates as well as competitive pricing in all loan and deposit categories.

Critical Accounting Policies

The SEC defines “critical accounting policies” as those involving significant judgments and difficult or complex assumptions by management, often as a result of the need to make estimates about matters that are inherently uncertain or variable, which have, or could have, a material impact on the carrying value of certain assets or net income. The preparation of financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. As discussed in the Company’s 2020 Annual Report on Form 10-K, management has identified the determination of the allowance for credit losses and the review of goodwill for impairment as the Company’s most critical accounting policies.

Recent Accounting Developments

In March 2020, the FASB issued ASU 2020-04, " Reference Rate Reform (Topic 848)-Facilitation of the Effects of Reference Rate Reform on Financial Reporting" ("ASU 2020-04") to provide optional expedients and exceptions for applying GAAP to certain contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships existing as of December 31, 2022, for which an entity has elected certain optional expedients provided that those elections are retained through the end of the hedging relationship. The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022 and do not apply to contract modifications made after December 31, 2022. The Company has not yet adopted the amendments in this update and is currently in the process of reviewing its contracts and existing processes in order to assess the risks and potential impact to the Company.

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Non-GAAP Financial Measures and Reconciliation to GAAP

In addition to evaluating the Company’s results of operations in accordance with GAAP, management periodically supplements this evaluation with an analysis of certain non-GAAP financial measures, such as operating earnings metrics, the return on average tangible assets, return on average tangible equity, the tangible equity ratio, tangible book value per share, and dividend payout ratio. Management believes that these non-GAAP financial measures provide information useful to investors in understanding the Company’s underlying operating performance and trends, and facilitates comparisons with the performance assessment of financial performance, including non-interest expense control, while the tangible equity ratio and tangible book value per share are used to analyze the relative strength of the Company’s capital position.

The following table reconciles the Company’s operating earnings, operating return on average assets and operating return on average stockholders’ equity for the periods indicated:

	At and for the Three Months Ended   March 31,
	2021		2020
	(Dollars in Thousands)
Net income (loss), as reported	$	26,454	$	(17,276)
Less:
Security (losses) gains (after-tax)	(5)		964
Operating earnings (loss)	$	26,459	$	(18,240)
Basic earnings (loss) per share, as reported	$	0.34	$	(0.22)
Less:
Security (losses) gains (after-tax)	—		0.01
Basic operating earnings (loss) per share	$	0.34	$	(0.23)

The following tables reconcile the Company’s return on average tangible assets and return on average tangible stockholders’ equity for the periods indicated:

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	Three Months Ended
	March 31, 2021			December 31, 2020			September 30, 2020			June 30, 2020			March 31, 2020
	(Dollars in Thousands)
Operating earnings (loss)	$	26,459		$	26,663		$	18,639		$	19,131		$	(18,240)
Average total assets	$	8,714,158		$	8,874,467		$	9,018,672		$	8,869,540		$	7,965,826
Less: Average goodwill and average identified intangible assets, net	163,457			163,758			164,072			164,385			164,701
Average tangible assets	$	8,550,701		$	8,710,709		$	8,854,600		$	8,705,155		$	7,801,125
Return on average assets (annualized)	1.21		%	1.20		%	0.83		%	0.88		%	(0.87)		%
Less:
Security gains	—		%	—		%	—		%	0.02		%	0.05		%
Operating return on average assets (annualized)	1.21		%	1.20		%	0.83		%	0.86		%	(0.92)		%
Return on average tangible assets (annualized)	1.24		%	1.22		%	0.84		%	0.90		%	(0.89)		%
Less:
Security gains	—		%	—		%	—		%	0.02		%	0.05		%
Operating return on average tangible assets (annualized)	1.24		%	1.22		%	0.84		%	0.88		%	(0.94)		%
Average total stockholders' equity	$	946,482		$	937,294		$	934,632		$	926,239		$	946,138
Less: Average goodwill and average identified intangible assets, net	163,457			163,758			164,072			164,385			164,701
Average tangible stockholders' equity	$	783,025		$	773,536		$	770,560		$	761,854		$	781,437
Return on average stockholders' equity (annualized)	11.18		%	11.38		%	7.99		%	8.45		%	(7.30)		%
Less:
Security gains (losses)	—		%	—		%	0.01		%	0.19		%	0.41		%
Operating return on average stockholders' equity (annualized)	11.18		%	11.38		%	7.98		%	8.26		%	(7.71)		%
Return on average tangible stockholders' equity (annualized)	13.51		%	13.79		%	9.70		%	10.28		%	(8.84)		%
Less:
Security gains (losses)	—		%	—		%	0.02		%	0.24		%	0.49		%
Operating return on average tangible stockholders' equity (annualized)	13.51		%	13.79		%	9.68		%	10.04		%	(9.33)		%

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	Three Months Ended
	March 31, 2021			December 31, 2020			September 30, 2020			June 30, 2020			March 31, 2020
	(Dollars in Thousands)
Net income (loss), as reported	$	26,454		$	26,663		$	18,679		$	19,571		$	(17,276)
Average total assets	$	8,714,158		$	8,874,467		$	9,018,672		$	8,869,540		$	7,965,826
Less: Average goodwill and average identified intangible assets, net	163,457			163,758			164,072			164,385			164,701
Average tangible assets	$	8,550,701		$	8,710,709		$	8,854,600		$	8,705,155		$	7,801,125
Return on average tangible assets (annualized)	1.24		%	1.22		%	0.84		%	0.90		%	(0.89)		%
Average total stockholders' equity	$	946,482		$	937,294		$	934,632		$	926,239		$	946,138
Less: Average goodwill and average identified intangible assets, net	163,457			163,758			164,072			164,385			164,701
Average tangible stockholders' equity	$	783,025		$	773,536		$	770,560		$	761,854		$	781,437
Return on average tangible stockholders' equity (annualized)	13.51		%	13.79		%	9.70		%	10.28		%	(8.84)		%

The following table reconciles the Company's tangible equity ratio for the periods indicated:

	Three Months Ended
	March 31, 2021			December 31, 2020			September 30, 2020			June 30, 2020			March 31, 2020
	(Dollars in Thousands)
Total stockholders' equity	$	945,399		$	941,778		$	935,558		$	926,413		$	912,568
Less: Goodwill and identified intangible assets, net	163,347			163,579			163,891			164,203			164,514
Tangible stockholders' equity	$	782,052		$	778,199		$	771,667		$	762,210		$	748,054
Total assets	$	8,559,810		$	8,942,424		$	9,000,192		$	9,069,667		$	8,461,591
Less: Goodwill and identified intangible assets, net	163,347			163,579			163,891			164,203			164,514
Tangible assets	$	8,396,463		$	8,778,845		$	8,836,301		$	8,905,464		$	8,297,077
Tangible equity ratio	9.31		%	8.86		%	8.73		%	8.56		%	9.02		%

50

The following table reconciles the Company's tangible book value per share for the periods indicated:

	Three Months Ended
	March 31, 2021		December 31, 2020		September 30, 2020		June 30, 2020		March 31, 2020
	(Dollars in Thousands)
Tangible stockholders' equity	$	782,052	$	778,199	$	771,667	$	762,210	$	748,054
Common shares issued	85,177,172		85,177,172		85,177,172		85,177,172		85,177,172
Less:
Treasury shares	6,534,602		6,525,783		5,629,854		5,859,708		5,862,811
Unallocated ESOP	44,502		51,114		58,227		65,334		72,441
Unvested restricted stock	449,981		458,800		487,318		398,188		395,085
Common shares outstanding	78,148,087		78,141,475		79,001,773		78,853,942		78,846,835
Tangible book value per share	$	10.01	$	9.96	$	9.77