Exhibit 99
Brookline Bancorp Announces 2003 First Quarter Operating Results and
Dividend Declaration
BROOKLINE, Mass.--(BUSINESS WIRE)--April 16, 2003--Brookline
Bancorp, Inc. (the "Company") (NASDAQ:BRKL) announced today that it
had a net loss of $148,000, or $0.00 per share (on a basic and diluted
basis), for the quarter ended March 31, 2003 compared to net income of
$5,478,000, or $0.10 per share ($0.09 on a diluted basis), for the
quarter ended March 31, 2002. The net loss in the 2003 quarter
resulted from a $5,515,000 charge to earnings that is explained in the
next paragraph.
On March 5, 2003, the Governor of the Commonwealth of
Massachusetts signed a law that denies dividend received deductions
for dividend distributions from REITs in determining Massachusetts
taxable income. The law not only disallows dividend received
deductions for the year 2003 and thereafter, but also disallows
dividend received deductions retroactively to tax years beginning in
1999. While the Company is evaluating whether to challenge the
constitutionality of the retroactive legislation and intends to
continue to appeal the Notices of Assessment it received from the
Massachusetts Department of Revenue, it was obliged under U.S.
generally accepted accounting principles to provide for the taxes and
interest resulting from the new law at the time of its enactment.
Accordingly, $5,515,000 was charged to first quarter earnings to
recognize the liabilities for taxes and interest resulting from the
retroactive application of the new law to the Company's REIT
subsidiary for the years 1999 through 2002. This amount is net of
federal and state income tax benefits. State excise taxes and interest
payments are deductible for federal income tax purposes and interest
payments are deductible for state tax purposes. The inability to
deduct dividends received from the Company's REIT and the accrual of
interest on taxes not yet paid resulted in an after-tax charge to 2003
first quarter earnings of $302,000. It is expected that net income
during the remainder of 2003 will likewise be reduced by approximately
$300,000 per quarter.
Excluding the $5,515,000 charge described in the preceding
paragraph, net income was $5,367,000 in the 2003 quarter compared to
$5,478,000 in the 2002 quarter. These amounts include securities gains
(on an after-tax basis) of $211,000 and $591,000, respectively.
Average earning assets increased $314 million, or 28.7%, from
$1.097 billion in the 2002 quarter to $1.411 billion in the 2003
quarter as a result of completion of the Company's stock offering and
reorganization from a mutual holding company structure in July 2002.
The net proceeds from the stock offering exceeded $332 million.
Despite the increase in earning assets, total interest income declined
from $17,351,000 in the 2002 quarter to $17,286,000 in the 2003
quarter as average yields continued to plummet. The average yield on
earning assets declined from 6.32% in the 2002 quarter to 4.91% in the
2003 quarter due in part to (a) the placement of much of the proceeds
from the stock offering in high quality investments with relatively
short maturities and (b) extensive refinancing of existing mortgage
loans at lower rates. Because of uncertainty about the future
direction of interest rates, the Company has concentrated its
investment purchases mostly in collateralized mortgage obligations
("CMOs") with projected maturities in the two to four year range. For
the past few months, mortgage loans that comprise the CMOs have been
prepaying at accelerated rates. The magnitude of the prepayments has
caused a reduction in income earned on CMOs since premiums paid at the
time of their acquisition must be amortized over shorter time periods
than originally estimated.
Interest expense on deposits and borrowed funds was $1,817,000, or
27.2%, lower in the 2003 quarter than in the 2002 quarter due to the
declining interest rate environment and a $54.8 million reduction in
average borrowings outstanding, $45 million of which resulted from
prepayment of high rate borrowings in the last four months of 2002.
The current interest rate environment is the lowest in over forty
years. Continuation of that environment or further declines in
interest rates will have a negative impact on the Company's net
interest income and net interest margin. Since a high percent of the
Company's assets (over 40%) are funded by stockholders' equity,
declining rates cause a greater reduction in asset yields than the
amount of reduction in rates paid on deposits and borrowed funds.
Conversely, rising interest rates would have a positive effect on the
Company's net interest income and net interest margin.
A $375,000 provision for loan losses was charged to earnings in
the 2003 quarter compared to a $100,000 credit to earnings in the 2002
quarter. The credit resulted primarily from shrinkage in loans
outstanding during the first quarter of 2002. The 2003 provision
resulted primarily from $27.7 million of mortgage loan growth during
the quarter and inauguration of indirect auto lending which grew to
$13.0 million of loans outstanding at March 31, 2003. Most of the
mortgage loan growth was in the multi-family and commercial real
estate segments and was partly attributable to a program that offered
discounted rates on selected new loans. Rates offered exceeded rates
that otherwise would have been earned on the Company's excess
liquidity.
As mentioned in prior communications, the Company entered the
indirect auto lending business in the first quarter. The activity to
date with respect to the volume and credit quality of loans originated
has been encouraging. As a result, we expect the total of loan
originations for 2003 to be increased from the $30 million to $50
million range previously communicated to a range of $70 million to
$100 million. While the added volume allows fixed overhead to be
spread over a larger base of business, short-term earnings are
penalized since provisions for loan losses are established at the time
of origination and before realization of interest income. Accordingly,
we continue to project that the indirect auto lending business will
reduce 2003 earnings by around $0.01 per share and operate profitably
in the second half of 2004.
Excluding securities gains, non-interest income increased from
$582,000 in the 2002 quarter to $632,000 in the 2003 quarter.
Increased fees from changes in pricing of deposit services and from
mortgage loan prepayments offset a decline in earnings from the
Company's equity interest in a specialty finance company and from
market valuation of the Company's outstanding swap agreement.
Non-interest expense increased $414,000, or 11.1%, in the 2003
quarter compared to the 2002 quarter. The increase was attributable to
expense related to indirect auto lending activities ($102,000); higher
personnel costs ($195,000, or 9.4%) due to expanded staff, higher
premiums for medical and dental benefits and added ESOP expense caused
by the increase in the market value of the Company's stock; higher
occupancy costs; higher contributions expense as a result of no longer
having a mutual holding company structure; and a Delaware franchise
tax. Partly offsetting these increases was a reduction in data
processing expenses due primarily to consolidation of customer
accounts.
The effective income tax rate on earnings, excluding the effect of
the retroactive REIT assessment, increased from 36.0% in the 2002
quarter to 39.5% in the 2003 quarter. The higher rate, which resulted
from the change in the tax treatment of REITs previously described
herein, is expected to continue throughout 2003.
On March 7, 2003, the Company received regulatory non-objection to
its request to purchase up to 5% of its outstanding common stock, or
2,937,532 shares. Between that date and March 31, 2003, the Company
purchased 1,135,000 at a total cost of $14,691,000, or $12.94 per
share.
The Board of Directors of the Company approved a quarterly
dividend of $0.085 per share of common stock to stockholders of record
as of April 30, 2003 and payable May 15, 2003.
This press release contains statements about future events that
constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Projections about
future events are subject to risks and uncertainties that could cause
actual results to differ materially. Factors that might cause such
differences include, but are not limited to, general economic
conditions, changes in interest rates, regulatory considerations and
competition.
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands except share data)
March 31, December 31, March 31,
2003 2002 2002
(unaudited) (unaudited)
Assets
Cash and due from banks $ 11,651 $ 13,571 $ 13,431
Short-term investments 148,897 224,897 63,229
Securities available for sale 393,017 361,049 205,116
Securities held to maturity
(market value of $3,776,
$4,944 and $8,636 respectively) 3,717 4,861 8,547
Restricted equity securities 9,423 9,423 9,423
Loans, excluding money market loan
participations 842,811 803,425 819,860
Money market loan participations 8,700 4,000 10,000
Allowance for loan losses (15,424) (15,052) (15,212)
Net loans 836,087 792,373 814,648
Other investment 3,917 3,979 3,772
Accrued interest receivable 5,150 5,224 5,169
Bank premises and equipment, net 2,175 1,813 1,803
Deferred tax asset 9,516 5,779 4,141
Other assets 496 388 515
Total assets $1,424,046 $1,423,357 $1,129,794
Liabilities and Stockholders' Equity
Deposits $ 663,018 $ 649,325 $ 640,409
Borrowed funds 123,945 124,900 178,970
Mortgagors' escrow accounts 4,790 4,256 4,689
Income taxes payable 10,248 4,970 9,464
Accrued expenses and other
liabilities 8,534 7,525 6,627
Total liabilities 810,535 790,976 840,159
Stockholders' equity:
Preferred stock, $.01 par value;
50,000,000 shares,
50,000,000 shares and
5,000,000 shares,
authorized respectively;
none issued - - -
Common stock, $0.01 par value;
200,000,000 shares,
200,000,000 shares and
45,000,000 shares authorized
respectively; 58,924,935
shares, 58,714,948 shares
and 29,718,421 shares issued,
respectively 589 587 297
Additional paid-in capital 450,893 449,254 141,276
Retained earnings, partially
restricted 180,720 185,788 180,896
Accumulated other comprehensive
income (A) 3,279 4,155 6,798
Treasury stock, at cost -
1,135,000 shares, 170,299 shares
and 2,921,378 shares,
respectively (16,635) (1,944) (33,813)
Unearned compensation -
recognition and retention plan (701) (741) (862)
Unallocated common stock held by
ESOP - 849,863 shares
865,364 shares and 415,711
shares, respectively (4,634) (4,718) (4,957)
Total stockholders' equity 613,511 632,381 289,635
Total liabilities and
stockholders' equity $1,424,046 $1,423,357 $1,129,794
(A) Represents net unrealized gains on securities available for sale,
net of taxes.
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands except share data)
Three months ended
March 31,
2003 2002
(unaudited)
Interest income:
Loans, excluding money market loan
participations $ 13,255 $ 14,439
Money market loan participations 13 37
Debt securities 3,253 2,309
Marketable equity securities 111 132
Restricted equity securities 77 83
Short-term investments 577 351
Total interest income 17,286 17,351
Interest expense:
Deposits 3,442 4,076
Borrowed funds 1,421 2,604
Total interest expense 4,863 6,680
Net interest income 12,423 10,671
Provision (credit) for loan losses 375 (100)
Net interest income after provision
(credit) for loan losses 12,048 10,771
Non-interest income:
Fees and charges 546 368
Gains on sales of securities, net 328 922
Swap agreement market valuation credit 18 53
Other income 68 161
Total non-interest income 960 1,504
Non-interest expense:
Compensation and employee benefits 2,392 2,082
Occupancy 337 287
Equipment and data processing 627 703
Advertising and marketing 187 162
Other 591 486
Total non-interest expense 4,134 3,720
Income before income taxes 8,874 8,555
Income tax expense:
Provision for income taxes 3,507 3,077
Retroactive assessment related to REIT 5,515 -
Total income tax expense 9,022 3,077
Net income $ (148) $ 5,478
Weighted average common shares
outstanding during the period:
Basic 57,468,369 57,456,025
Diluted 58,420,730 58,410,637
Earnings per common share:
Basic $ 0.00 $ 0.10
Diluted 0.00 0.09
Three months ended March 31,
2003
Average
Average yield/
balance Interest(1) cost
(Dollars in thousands)
Assets:
Interest-earning assets:
Short-term investments $ 191,207 $ 577 1.22%
Debt securities (2) (4) 371,163 3,253 3.51
Equity securities (2) 22,872 230 4.02
Mortgage loans (3) 793,170 12,819 6.47
Commercial participation loans 3,921 13 1.34
Other commercial loans (3) 22,833 344 6.03
Consumer loans (3) 3,305 63 7.62
Auto finance loans (3) 2,911 29 4.04
Total interest-earning assets 1,411,382 17,328 4.91
Allowance for loan losses (15,187)
Non-interest earning assets 27,416
Total assets $1,423,611
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Deposits:
NOW accounts $ 65,237 35 0.22%
Savings accounts (5) 16,992 35 0.84
Money market savings accounts 278,233 1,244 1.81
Certificate of deposit accounts 265,539 2,128 3.25
Total deposits 626,001 3,442 2.23
Borrowed funds (6) 124,088 1,396 4.50
Total interest-bearing
liabilities 750,089 4,838 2.62
Non-interest-bearing demand
checking accounts 27,017
Other liabilities 16,319
Total liabilities 793,425
Retained earnings 630,186
Total liabilities and
retained earnings $1,423,611
Net interest income (tax equivalent
basis)/interest rate spread (7) 12,490 2.29%
Less adjustment of tax exempt income 42
Net interest income $12,448
Net interest margin (8) 3.54%
Three months ended March 31,
2002
Average
Average yield/
balance Interest(1) cost
(Dollars in thousands)
Assets:
Interest-earning assets:
Short-term investments $ 82,317 $ 351 1.73%
Debt securities (2) (4) 158,103 2,244 5.68
Equity securities (2) 26,991 263 3.92
Mortgage loans (3) 787,127 13,958 7.09
Commercial participation loans 7,856 37 1.91
Other commercial loans (3) 31,576 409 5.18
Consumer loans (3) 3,149 72 9.15
Auto finance loans (3) - - -
Total interest-earning assets 1,097,119 17,334 6.32
Allowance for loan losses (15,301)
Non-interest earning assets 28,432
Total assets $1,110,250
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Deposits:
NOW accounts $ 72,668 88 0.49%
Savings accounts (5) 13,911 43 1.25
Money market savings accounts 262,156 1,290 2.00
Certificate of deposit accounts 260,841 2,655 4.13
Total deposits 609,576 4,076 2.71
Borrowed funds (6) 178,885 2,604 5.91
Total interest-bearing
liabilities 788,461 6,680 3.44
Non-interest-bearing demand checking
accounts 17,998
Other liabilities 15,930
Total liabilities 822,389
Retained earnings 287,861
Total liabilities and
retained earnings $1,110,250
Net interest income (tax equivalent
basis)/interest rate spread (7) 10,654 2.88%
Less adjustment of tax exempt income 48
Net interest income $ 10,606
Net interest margin (8) 3.88%
(1) Tax exempt income on equity securities is included on a tax
equivalent basis.
(2) Average balances include unrealized gains on securities available
for sale. Equity securities include marketable equity securities
(preferred and common stocks) and restricted equity securities.
(3) Loans on non-accrual status are included in average balances.
(4) Excluded from interest income in the 2002 period is $65 of an
interest payment on a defaulted bond that relates to prior
periods.
(5) Savings accounts include mortgagors' escrow accounts.
(6) The 2003 period excludes a $25 interest charge on a prepaid FHLB
advance that relates to prior periods.
(7) Interest rate spread represents the difference between the yield
on interest-earning assets and the cost of interest-bearing
liabilities.
(8) Net interest margin represents net interest income (tax equivalent
basis) divided by average interest-earning assets.
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Selected Financial Ratios and Other Data
Three months ended
March 31,
2003 2002
Performance Ratios (annualized):
Return on average assets (0.04)% 1.99%
Return on average stockholders' equity (0.09)% 7.67%
Return on average stockholders' equity,
excluding effect of unrealized gains on
securities available for sale, net of taxes (0.09)% 7.86%
Interest rate spread 2.29% 2.88%
Net interest margin 3.54% 3.88%
Efficiency ratio (A) 31.67% 33.06%
Dividend paid per share during period $ 0.085 $0.073 (B)
(A) Represents the ratio of non-interest expenses divided by the sum
of net interest income and non-interest income (exclusive of
securities gains).
(B) Adjusted to reflect exchange of shares resulting from
reorganization on July 9, 2002.
March 31, December 31, March 31,
2003 2002 2002
(dollars in thousands except per share data)
Capital Ratio:
Stockholders' equity to
total assets 43.08% 44.43% 25.64%
Asset Quality:
Non-performing loans $ 137 $ 5 $ 5
Non-performing assets 137 5 5
Allowance for loan losses 15,424 15,052 15,212
Allowance for loan losses as a
percent of total loans,
excluding money market
loan participations 1.83% 1.87% 1.86%
Non-performing assets as a
percent of total assets - - -
Per Share Data:
Book value per share $ 10.65 $ 10.80 $4.94 (B)
Market value per share 12.52 11.90 7.80 (B)
CONTACT: Brookline Bancorp, Inc.
Paul R. Bechet, 617/278-6405