Exhibit 99.1
Brookline Bancorp Announces 2003 Second Quarter Earnings and
Declaration of Per Share Regular Dividend of
$0.085 and Extra Dividend of $0.20
BROOKLINE, Mass.--(BUSINESS WIRE)--July 17, 2003--Brookline
Bancorp, Inc. (the "Company") (NASDAQ:BRKL) announced today its
earnings for the second quarter of 2003 and approval by its Board of
Directors of a regular quarterly dividend of $0.085 per share and an
extra dividend of $0.20 per share payable on August 15, 2003 to
stockholders of record on July 31, 2003.
The Company earned $6,687,000, or $0.12 per share (on a basic and
diluted basis), for the quarter ended June 30, 2003 compared to
$5,131,000, or $0.09 per share (on a basic and diluted basis), for the
quarter ended June 30, 2002. The 2003 quarter included an after-tax
credit of $2,727,000, or $0.05 per share, resulting from settlement of
the matter addressed in the following paragraph.
On March 5, 2003, a new law was enacted denying favorable tax
treatment for dividend distributions from real estate investment
trusts ("REITs") in determining Massachusetts taxable income not only
for the year 2003 and thereafter, but also retroactively to tax years
beginning in 1999. Because of the new law and as required by generally
accepted accounting principles, $8,580,000 ($5,515,000 on an after-tax
basis) was charged to the Company's earnings in the first quarter of
2003, despite initiatives by the Company to dispute and appeal taxes
assessed. As previously communicated, on June 23, 2003, the Company
signed an agreement with the Commissioner of Revenue of the
Commonwealth of Massachusetts settling all disputes relating to
assessments and the tax treatment of the Company's REIT subsidiary for
the years 1999 through 2002. In accordance with that agreement, the
Company paid $4,341,000 as full settlement of taxes and interest due.
The credit mentioned in the preceding paragraph is the difference
between the liability recorded in the first quarter of 2003 and the
amount of the settlement paid, net of related tax benefits.
Excluding the credit resulting from settlement of the REIT tax
matter, net income in the second quarter of 2003 was $1,171,000 less
than net income in the second quarter of 2002. The decline was
attributable primarily to a $1,680,000 ($977,000 on an after-tax
basis) write-down of unamortized premiums paid in purchasing
collateralized mortgage obligations and pass-through mortgage-backed
securities (collectively "mortgage securities"). Unprecedented
prepayment of loans underlying the mortgage securities shortened the
estimated life of the securities significantly, thus necessitating
accelerated expensing of part of the premiums paid to purchase the
securities. Continuation of unprecedented prepayment of loans
underlying the mortgage securities could require further write-downs
of unamortized premiums in the future. The total of unamortized
premiums on mortgage securities at June 30, 2003 was $4,403,000,
$2,143,000 of which is scheduled to amortize in the second half of
2003.
The Company entered the indirect automobile lending business in
the first quarter of 2003. Total indirect automobile loans outstanding
increased from $12,996,000 at March 31, 2003 to $84,385,000 at June
30, 2003. The Company is doing business with over 80 dealerships. The
average credit score of all loans originated is in excess of 725 and
the total of loans with credit scores below 660 is less than 10%. The
total of loans delinquent over 30 days at June 30, 2003 was $73,000,
or 0.09% of the portfolio. As previously communicated, the Company
expects the total of indirect automobile loan originations to be in
the range of $175 million to $200 million in 2003 and the indirect
automobile loan business to contribute modestly to the Company's net
earnings in the second half of 2003.
Average interest-earning assets increased $236 million, or
20%, in the 2003 second quarter compared to the 2002 second quarter
due to proceeds from the Company's stock offering in July 2002.
Despite such asset growth, net interest income was lower due to the
premium write-down mentioned above and lower asset yields. The current
interest rate environment is the lowest in over forty years.
Continuation of that environment or further declines in interest rates
will have a negative impact on the Company's net interest income and
net interest margin. Since a high percent of the Company's assets
(over 40%) are funded by stockholders' equity, 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.
Provision for loan losses in the 2003 quarter compared to the 2002
quarter was higher due primarily to loan growth. Non-performing assets
remained diminimus ($29,000 at June 30, 2003). Non-interest income was
higher due primarily to increased fees from mortgage loan prepayments,
changes in the pricing of deposit services and valuation adjustments
related to the Company's swap agreement. Non-interest expenses were
higher because of commencement of the indirect automobile lending
activities in 2003, the contemplated opening of a new branch in the
third quarter, added personnel, higher employee benefits costs, higher
occupancy costs, professional fees associated with the REIT matter,
and added costs for corporate governance and stockholder related
matters. The effective income tax rate is higher in 2003 than in 2002
primarily because of the loss of the favorable tax treatment
previously applied to the activities of the Company's REIT subsidiary.
Net income for the six months ended June 30, 2003 was $6,539,000,
or $0.11 per share (on a basic and diluted basis) compared to
$10,610,000, or $0.18 per share (on a basic and diluted basis) for the
six months ended June 30, 2002. Excluding the $2,788,000 ($0.05 per
share) after-tax net charge to earnings resulting from settlement of
the REIT tax matter previously discussed, net income was $1,283,000
less in the 2003 six month period than in the 2002 six month period.
The decline was attributable primarily to the write-down of
unamortized premiums and lower asset yields previously discussed.
Changes in the provision for loan losses, non-interest income,
non-interest expenses and the effective income tax rate between the
2003 and 2002 six month periods were due primarily to the same reasons
cited above regarding second quarter changes.
In approving an extra dividend of $0.20 per share in addition to a
regular quarterly dividend of $0.085 per share, the Board of Directors
considered the capital requirements of the Company and the recent
reduction in tax rates on dividends. While it is the intent of the
Board for the foreseeable future to authorize payment of an extra
dividend of $0.20 per share semi-annually, the payment and magnitude
of any future extra dividend will be considered in light of changing
opportunities to deploy capital effectively including the repurchase
of stock, future income tax rates and general economic conditions.
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, tax and regulatory
considerations, and competition.
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands except share data)
June 30, December 31, June 30,
2003 2002 2002
(unaudited) (unaudited)
Assets
Cash and due from banks $12,870 $13,571 $16,802
Short-term investments 90,841 224,897 404,518
Securities available for sale 342,964 361,049 223,327
Securities held to maturity
(market value of $1,597,
$4,944 and $6,964, respectively) 1,548 4,861 6,921
Restricted equity securities 9,423 9,423 9,423
Loans, excluding money market
loan participations 951,489 803,425 819,043
Money market loan participations - 4,000 36,000
Allowance for loan losses (15,811) (15,052) (15,214)
Net loans 935,678 792,373 839,829
Other investment 3,969 3,979 3,923
Accrued interest receivable 5,377 5,224 5,982
Bank premises and equipment, net 2,533 1,813 1,812
Prepaid income taxes 1,376 - -
Deferred tax asset 7,212 5,779 2,292
Other assets 417 388 613
Total assets $1,414,208 $1,423,357 $1,515,442
Liabilities and Stockholders' Equity
Deposits $662,754 $649,325 $671,788
Borrowed funds 123,738 124,900 178,801
Stock offering subscription
proceeds - - 351,946
Mortgagors' escrow accounts 4,361 4,256 4,217
Income taxes payable - 4,970 5,218
Accrued expenses and other
liabilities 8,512 7,525 7,025
Total liabilities 799,365 790,976 1,218,995
Stockholders' equity:
Preferred stock, $.01 par value;
50,000,000 shares, 50,000,000
shares and 5,000,000 shares
authorized, respectively;
none issued - - -
Common stock, $0.01 par value;
200,000,000 shares, 200,000,000
shares and 45,000,000 shares
authorized, respectively;
58,953,804 shares, 58,714,948
shares and 29,722,521 shares
issued, respectively 589 587 297
Additional paid-in capital 451,151 449,254 141,412
Retained earnings, partially
restricted 182,584 185,788 184,275
Accumulated other comprehensive
income (A) 2,673 4,155 9,968
Treasury stock, at cost -
1,335,299 shares, 170,299
shares and 2,921,378 shares,
respectively (17,017) (1,944) (33,813)
Unearned compensation -
recognition and retention plan (588) (741) (822)
Unallocated common stock held by
ESOP - 834,362 shares, 865,364
shares and 408,430 shares,
respectively (4,549) (4,718) (4,870)
Total stockholders' equity 614,843 632,381 296,447
Total liabilities and
stockholders' equity $1,414,208 $1,423,357 $1,515,442
(A) Represents net unrealized gains on securities available for sale,
net of taxes.
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands except share data)
Three months ended Six months ended
June 30, June 30,
2003 2002 2003 2002
(unaudited)
Interest income:
Loans, excluding
money market loan
participations $13,914 $14,392 $27,169 $28,831
Money market loan
participations 4 47 17 84
Debt securities 910 2,560 4,163 4,870
Marketable equity
securities 96 138 208 269
Restricted equity
securities 71 87 147 170
Short-term
investments 350 462 928 813
Total interest income 15,345 17,686 32,632 35,037
Interest expense:
Deposits 3,224 4,091 6,666 8,166
Borrowed funds 1,409 2,666 2,830 5,271
Total interest expense 4,633 6,757 9,496 13,437
Net interest income 10,712 10,929 23,136 21,600
Provision (credit)
for loan losses 360 - 735 (100)
Net interest income
after provision
(credit) for
loan losses 10,352 10,929 22,401 21,700
Non-interest income:
Fees and charges 714 448 1,260 816
Gains on
securities, net 181 312 508 1,235
Swap agreement
market valuation
credit (charge) 18 (117) 37 (64)
Other income 181 158 248 318
Total non-interest
income 1,094 801 2,053 2,305
Non-interest expense:
Compensation and
employee benefits 2,422 2,131 4,815 4,214
Occupancy 443 275 781 562
Equipment and data
processing 776 680 1,403 1,383
Advertising and marketing 188 175 375 337
Other 751 386 1,339 870
Total non-interest
expense 4,580 3,647 8,713 7,366
Income before income
taxes 6,866 8,083 15,741 16,639
Income tax expense:
Provision for
income taxes 2,906 2,952 6,414 6,029
Retroactive (credit)
assessment related
to REIT (2,727) - 2,788 -
Total income
tax expense 179 2,952 9,202 6,029
Net income $6,687 $5,131 $6,539 $10,610
Weighted average
common shares outstanding
during the period:
Basic 56,599,521 57,530,747 57,031,545 57,493,593
Diluted 57,575,487 58,538,741 57,995,708 58,316,740
Earnings per common
share:
Basic $0.12 $0.09 $0.11 $0.18
Diluted $0.12 $0.09 $0.11 $0.18
Three months ended June 30,
2003 2002
Average Average
Average yield/ Average yield/
balance Interest cost balance Interest cost
(1) (1)
(Dollars in thousands)
Assets:
Interest-earning
assets:
Short-term
investments $120,409 $350 1.17% $106,811 $462 1.73%
Debt securities
(2)(4) 365,122 914 1.00 198,264 2,561 5.17
Equity
securities (2) 21,241 202 3.81 29,229 273 3.74
Mortgage
loans (3) 815,533 12,873 6.31 794,721 13,934 7.01
Commercial
participation
loans 1,132 4 1.42 9,998 47 1.89
Other commercial
loans (3) 23,961 352 5.88 28,208 387 5.49
Consumer loans (3) 2,999 57 7.60 3,197 71 8.88
Auto finance
loans (3) 56,441 632 4.49 - - -
Total interest-
earning
assets 1,406,838 15,384 4.38 1,170,428 17,735 6.06
Allowance for
loan losses (15,594) (15,280)
Non-interest
earning assets 28,596 34,045
Total assets $1,419,840 $1,189,193
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Deposits:
NOW accounts $60,962 26 0.17% $75,993 93 0.49%
Savings
accounts (5) 20,777 38 0.73 15,014 39 1.04
Money market
savings
accounts 294,448 1,214 1.65 263,930 1,158 1.76
Certificate of
deposit
accounts 257,248 1,946 3.03 278,503 2,679 3.86
Total deposits 633,435 3,224 2.04 633,440 3,969 2.51
Borrowed funds 123,804 1,409 4.50 179,131 2,666 5.89
Total deposits
and borrowed
funds 757,239 4,633 2.45 812,571 6,635 3.28
Stock offering
proceeds - - - 47,810 122 1.02
Total interest-
bearing
liabilities 757,239 4,633 2.45 860,381 6,757 3.15
Non-interest-bearing
demand checking
accounts 28,494 18,292
Other liabilities 20,730 17,878
Total
liabilities 806,463 896,551
Stockholders'
Equity 613,377 292,642
Total
liabilities and
stockholders'
equity $1,419,840 $1,189,193
Net interest income
(tax equivalent
basis)/interest
rate spread (6) 10,751 1.93% 10,978 2.91%
Less adjustment of
tax exempt income 39 49
Net interest income $10,712 $10,929
Net interest margin (7) 3.06% 3.74%
(1) Tax exempt income on equity securities is included on a tax
equivalent basis.
(2) Average balances include unrealized gains on securities available
for sale. Equity securities include marketable equity securities
(preferred and common stocks) and restricted equity securities.
(3) Loans on non-accrual status are included in average balances.
(4) Included in interest income in the 2003 period is $1,680 of
premium write-down on the CMO portfolio. Excluding the
write-down, the average yield for the 2003 period would have been
2.84% for debt securities and 4.85% for total interest-earning
assets.
(5) Savings accounts include mortgagors' escrow accounts.
(6) Interest rate spread represents the difference between the yield
on interest-earning assets and the cost of interest-bearing
liabilities.
(7) Net interest margin represents net interest income (tax
equivalent basis) divided by average interest-earning assets.
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Selected Financial Ratios and Other Data
Three months ended Six months ended
June 30, June 30,
2003 2002 2003 2002
Performance Ratios
(annualized):
Return on average assets 1.88% 1.73% 0.92% 1.85%
Return on average
stockholders' equity 4.36% 7.01% 2.10% 7.31%
Return on average
stockholders' equity,
excluding effect of
unrealized gains on
securities available for
sale, net of taxes 4.38% 7.20% 2.12% 7.50%
Interest rate spread 1.93% 2.91% 2.10% 2.94%
Net interest margin 3.06% 3.74% 3.29% 3.83%
Efficiency ratio (A) 39.40% 31.94% 35.31% 32.50%
Dividend paid per share
during period $0.085 $0.073(B) $0.17 $0.146(B)
(A) Represents the ratio of non-interest expenses divided by the sum
of net interest income and non-interest income (exclusive of
securities gains).
(B) Adjusted to reflect exchange of shares resulting from
reorganization on July 9, 2002.
June 30, December 31, June 30,
2003 2002 2002
(dollars in thousands
except per share data)
Capital Ratio:
Stockholders' equity to total assets 43.48% 44.43% 19.56%
Asset Quality:
Non-performing loans $29 $5 $136
Non-performing assets 29 5 136
Allowance for loan losses 15,811 15,052 15,214
Allowance for loan losses as a
percent of total loans, excluding
money market loan participations 1.66% 1.87% 1.86%
Non-performing assets as a percent of
total assets - - -
Per Share Data:
Book value per share $10.67 $10.80 $11.06(B)
Market value per share $14.00 $11.90 $11.57(B)
CONTACT: Brookline Bancorp, Inc.
Paul Bechet, 617-278-6405