Exhibit 99.1
Oct. 16, 2003--Brookline Bancorp, Inc. (the "Company") (NASDAQ:BRKL)
announced today that it earned $4,502,000, or $0.08 per share (on a basic
and diluted basis), for the quarter ended September 30, 2003 compared
to $5,461,000, or $0.09 per share (on a basic and diluted basis) for the quarter
ended September 30, 2002. The decline in earnings resulted primarily from a
higher rate of income taxes (42.1% versus 36.5%) caused by the
elimination of the favorable tax treatment of the Company's real
estate investment ("REIT") subsidiary, a $361,000 dividend equivalent
rights payment triggered by the special dividend paid to stockholders
in August 2003 and a $194,000 reduction in after-tax gains from the
sale of securities. If the rate of income taxes had remained the same,
net income for the 2003 quarter would have been greater by $420,000.
Net income for the nine months ended September 30, 2003 was
$11,041,000, or $0.19 per share (on a basic and diluted basis),
compared to $16,071,000, or $0.28 per share (on a basic and diluted
basis), for the nine months ended September 30, 2002. The decline in
earnings was due primarily to the following factors: (a) a $2,788,000
after-tax charge resulting from settlement of a tax dispute, (b)
$1,262,000 more in income taxes due to an increase in the rate of
income taxes from 36.3% to 41.2%, (c) a $660,000 reduction in
after-tax gains from the sale of securities and (d) a decline in net
interest margin from 3.62% in the 2002 period to 3.34% in the 2003
period.
On March 5, 2003, a new law was enacted denying favorable tax
treatment for dividend distributions from REITs in determining
Massachusetts taxable income not only for the year 2003 and
thereafter, but also retroactively for tax years 1999 through 2002.
The Company disputed the retroactive tax assessments. In June 2003,
the Company reached an agreement with the Commissioner of Revenue of
the Commonwealth of Massachusetts to settle all disputes relating to
the tax treatment of the Company's REIT subsidiary. The Company paid
$4,341,000 as full settlement of the dispute, resulting in the
after-tax charge to earnings of $2,788,000 mentioned in the preceding
paragraph.
The Company entered the indirect automobile lending business in
the first quarter of 2003. Total indirect automobile loans outstanding
increased from $84 million at June 30, 2003 to $155 million at
September 30, 2003. The average credit score of all loans outstanding
at September 30, 2003 was over 730 and the total of loans with credit
scores below 660 was less than 10%. The total of loans delinquent over
30 days at September 30, 2003 was $211,000, or 0.14% of the portfolio.
Total assets were $1.46 billion at September 30, 2003 compared to
$1.41 billion at June 30, 2003 and $1.42 billion at December 31, 2002.
While the growth in assets since the beginning of the year has been
modest (2.5%), asset composition has changed more significantly. Loans
as a percent of total assets increased from 55% at December 31, 2002
to 68% at September 30, 2003. Of the $209 million net increase in
loans outstanding, $155 million related to the indirect automobile
portfolio. Loan originations were funded primarily from maturing
short-term investments, prepayment of loans underlying collateralized
mortgage obligations purchased as investments, deposit growth (2.8%)
and $45 million of borrowings from the Federal Home Loan Bank of
Boston, $30 million of which mature in two years and $15 million of
which mature in five years. The borrowings were initiated in
anticipation of a rising rate environment commencing in 2004. While
the cost of the borrowings is slightly penalizing net interest income
in 2003, it is believed that operating results thereafter will benefit
from this funding decision.
In the 2003 second and third quarters, the Company reduced pre-tax
earnings by $1,680,000 and $126,000, respectively, as a result of
accelerated amortization of premiums paid in purchasing collateralized
mortgage obligations and pass-through mortgage-backed securities
(collectively "mortgage securities"). Unprecedented prepayment of
loans underlying the mortgage securities shortened the estimated life
of the securities significantly, thus necessitating the accelerated
expensing of part of the premiums paid to purchase the securities.
Total premium amortization was $1,198,000 in the 2003 third quarter
compared to $3,093,000 in the 2003 second quarter. Due to prepayments,
the Company's investment in mortgage securities declined from $315
million at March 31, 2003 to $263 million at June 30, 2003 and $158
million at September 30, 2003. Continuation of high levels of
prepayments could require further accelerated expensing of unamortized
premiums in the future. The total of unamortized premiums at September
30, 2003 was $3,219,000, $608,000 of which is scheduled to be
amortized in the 2003 fourth quarter.
Despite an increase in average interest-earning assets of $170
million, or 13.7%, in the 2003 nine month period compared to the 2002
nine month period, total interest income declined by $4,429,000, or
8.3%, between the two periods. While part of the decline was
attributable to the premium amortization referred to in the preceding
paragraph, the primary reason for the decline has been the
continuation of an interest rate environment that is the lowest
experienced in over forty years. Continuation of that environment or
further declines in interest rates will have a negative impact on the
Company's net interest income and net interest margin. Since a high
percent of the Company's assets (over 40%) are funded by stockholders'
equity, declining rates cause a greater reduction in interest income
from lower asset yields than the reduction in interest expense from
lower rates paid on deposits and borrowed funds. Conversely, rising
interest rates would have a positive effect on the Company's net
interest income and net interest margin. While net interest margin was
lower in the 2003 nine month period (3.34%) than in the 2002 nine
month period (3.62%), it improved to 3.42% in the 2003 three month
period due primarily to growth of the loan portfolio.
Provision for loan losses in the 2003 periods were higher than in
the 2002 periods due primarily to growth in the indirect automobile
loan and the non-residential mortgage loan portfolios. Non-performing
assets remained diminimus ($111,000) at September 30, 2003. Excluding
securities gains and a loss from prepayment of FHLB advances in 2002,
net interest income was higher in the 2003 periods due primarily to
increased fees from mortgage loan prepayments, changes in the pricing
of deposit services, favorable valuation adjustments related to the
Company's swap agreement and improved earnings from the Company's
equity investment in a specialty finance company.
Non-interest expenses were higher in the 2003 periods than in the
2002 periods because of the commencement of the indirect automobile
lending activities in 2003, the opening of a new branch in the third
quarter of 2003, added personnel, higher costs for benefits,
occupancy, professional fees associated with resolution of the REIT
matter, corporate governance and stockholder related matters, and
payment of dividend equivalent rights ($361,000) to holders of
unexercised options as a result of the $0.20 per share special
dividend paid to stockholders in August 2003.
On August 27, 2003, the stockholders of the Company approved the
2003 Recognition and Retention Plan (the "Recognition Plan"). Pursuant
to that plan, up to 1,250,000 shares of the Company's common stock may
be awarded to the Company's employees and directors. On October 16,
2003, the Compensation Committee of the Board of Directors awarded to
directors and certain employees of the Company 1,158,000 shares under
the Recognition Plan. The shares awarded vest over periods extending
from January, 2004 through October, 2012. The total expense of the
shares awarded, approximately $17.3 million, will be charged to
earnings over the periods in which the shares vest, approximately $3.9
million of which will be charged in the fourth quarter of 2003, $2.7
million in 2004 and the remainder in varying amounts over the years
2005 through 2012.
The Board of Directors of the Company approved a quarterly
dividend of $0.085 per share of common stock to stockholders of record
as of October 31, 2003 and payable November 17, 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)
September 30,December 31,September 30,
2003 2002 2002
--------------------------------------
(unaudited) (unaudited)
ASSETS
Cash and due from banks $ 12,547 $ 13,571 $ 13,055
Short-term investments 121,610 224,897 353,800
Securities available for sale 293,222 361,049 254,834
Securities held to maturity
(market value of $1,450, $4,944
and $4,953, respectively) 1,411 4,861 4,887
Restricted equity securities 9,423 9,423 9,423
Loans, excluding money market
loan participations 1,013,764 803,425 809,199
Money market loan participations 3,000 4,000 7,000
Allowance for loan losses (15,954) (15,052) (15,156)
----------- ----------- ------------
Net loans 1,000,810 792,373 801,043
----------- ----------- ------------
Other investment 4,166 3,979 3,844
Accrued interest receivable 5,046 5,224 5,189
Bank premises and equipment, net 2,763 1,813 1,803
Deferred tax asset 6,868 5,779 3,071
Other assets 593 388 369
----------- ----------- ------------
Total assets $1,458,459 $1,423,357 $1,451,318
=========== =========== ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits $ 667,771 $ 649,325 $ 632,531
Borrowed funds 170,531 124,900 164,606
Mortgagors' escrow accounts 4,935 4,256 4,638
Income taxes payable 895 4,970 4,859
Accrued expenses and other
liabilities 10,007 7,525 7,138
----------- ----------- ------------
Total liabilities 854,139 790,976 813,772
----------- ----------- ------------
Stockholders' equity:
Preferred stock, $0.01 par
value; 50,000,000 shares
authorized; none issued - - -
Common stock, $0.01 par value;
200,000,000 shares
authorized; 58,996,410
shares, 58,714,948 shares and
58,651,222 shares issued,
respectively 590 587 587
Additional paid-in capital 451,512 449,254 448,734
Retained earnings, partially
restricted 170,824 185,788 184,829
Accumulated other
comprehensive income (A) 3,424 4,155 8,949
Treasury stock, at cost -
1,335,299 shares, 170,299
shares and none, respectively (17,017) (1,944) -
Unearned compensation -
recognition and retention
plan (548) (741) (769)
Unallocated common stock held
by ESOP - 818,861 shares,
865,364 shares and 877,296
shares, respectively (4,465) (4,718) (4,784)
----------- ----------- ------------
Total stockholders' equity 604,320 632,381 637,546
----------- ----------- ------------
----------- ----------- ------------
Total liabilities and
stockholders' equity $1,458,459 $1,423,357 $1,451,318
=========== =========== ============
(A) Represents net unrealized gains on securities available for sale,
net of taxes.
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands except share data)
Three months ended Nine months ended
September 30, September 30,
---------------------- -----------------------
2003 2002 2003 2002
---------------------- -----------------------
(unaudited)
Interest income:
Loans, excluding
money market loan
participations $ 14,403 $14,215 $ 41,572 $43,046
Money market loan
participations 7 43 25 128
Debt securities 1,750 2,455 5,912 7,324
Marketable equity
securities 90 109 298 378
Restricted equity
securities 71 87 219 257
Short-term
investments 288 1,723 1,215 2,537
---------------------- -----------------------
Total interest
income 16,609 18,632 49,241 53,670
---------------------- -----------------------
Interest expense:
Deposits 2,860 3,946 9,525 12,113
Borrowed funds 1,608 2,675 4,439 7,946
----------- ------- -----------------------
Total interest
expense 4,468 6,621 13,964 20,059
----------- ------- -----------------------
Net interest income 12,141 12,011 35,277 33,611
Provision (credit) for
loan losses 240 (50) 975 (150)
----------- ------- -----------------------
Net interest income
after provision
(credit) for loan
losses 11,901 12,061 34,302 33,761
----------- ------- -----------------------
Non-interest income:
Fees and charges 572 378 1,832 1,195
Gains on securities,
net - 302 508 1,537
Loss from pre-payment
of FHLB advances - (282) - (282)
Swap agreement market
valuation credit
(charge) 60 (146) 97 (210)
Other income 173 121 421 439
---------------------- -----------------------
Total non-interest
income 805 373 2,858 2,679
---------------------- -----------------------
Non-interest expense:
Compensation and
employee benefits 2,439 2,147 7,254 6,361
Occupancy 360 304 1,141 866
Equipment and data
processing 879 654 2,282 2,038
Advertising and
marketing 188 187 563 523
Dividend equivalent
rights 361 - 361 -
Other 701 538 2,040 1,409
---------------------- -----------------------
Total non-interest
expense 4,928 3,830 13,641 11,197
---------------------- -----------------------
Income before income
taxes 7,778 8,604 23,519 25,243
---------------------- -----------------------
Income tax expense:
Provision for income
taxes 3,276 3,143 8,137 9,172
Retroactive
assessment related
to REIT - - 4,341 -
---------------------- -----------------------
Total income tax
expense 3,276 3,143 12,478 9,172
---------------------- -----------------------
---------------------- -----------------------
Net income $ 4,502 $ 5,461 $ 11,041 $16,071
====================== =======================
Earnings per common
share:
Basic $ 0.08 $ 0.09 $ 0.19 $ 0.28
Diluted 0.08 0.09 0.19 0.28
Weighted average common
shares outstanding
during the period:
Basic 56,644,208 57,583,175 56,901,014 57,523,780
Diluted 57,658,817 58,614,100 57,881,992 58,416,186
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Average Yields / Costs
Three months ended September 30,
---------------------------------------------------
2003 2002
---------------------------------------------------
Average Average
Average Interest yield/ Average Interest yield/
balance (1) cost balance (1) cost
---------------------------------------------------
(Dollars in thousands)
Assets
- -------------------
Interest-earning
assets:
Short-term
investments $ 115,109 $ 288 0.99 % $ 398,330 $1,723 1.72%
Debt securities
(2) (4) 302,612 1,759 2.33 209,806 2,455 4.68
Equity securities
(2) 21,535 194 3.59 32,873 235 2.86
Mortgage loans
(3) 828,683 12,564 6.06 788,275 13,806 7.01
Money market loan
participations 2,653 7 1.12 9,242 44 1.89
Other commercial
loans (3) 26,052 372 5.71 20,819 340 6.53
Indirect
automobile loans
(3) 127,067 1,419 4.43 - - -
Other consumer
loans (3) 2,561 48 7.50 3,273 69 8.43
-------------------- --------------------
Total interest-
earning assets 1,426,272 16,651 4.67 % 1,462,618 18,672 5.11%
-------------- ------------
Allowance for loan
losses (15,868) (15,214)
Non-interest
earning assets 29,044 26,602
----------- ------------
Total assets $1,439,448 $ 1,474,006
=========== ============
Liabilities and
Stockholders'
Equity
- -------------------
Interest-bearing
liabilities:
Deposits:
NOW accounts $ 59,804 22 0.15 %$ 72,980 55 0.30%
Savings accounts
(5) 23,591 29 0.49 14,414 33 0.91
Money market
savings
accounts 306,958 1,077 1.39 244,975 1,116 1.81
Certificate of
deposit
accounts 243,624 1,732 2.82 285,783 2,654 3.68
-------------------- --------------------
Total deposits 633,977 2,860 1.79 618,152 3,858 2.48
Borrowed funds 152,000 1,608 4.14 178,057 2,675 5.88
-------------------- --------------------
Total deposits
and borrowed
funds 785,977 4,468 2.26 796,209 6,533 3.26
Stock offering
proceeds - - - 34,269 88 1.02
-------------------- --------------------
Total interest
bearing
liabilities 785,977 4,468 2.26 % 830,478 6,621 3.16%
-------------- ------------
Non-interest-
bearing demand
checking
accounts 32,130 18,267
Other liabilities 12,315 19,800
----------- ------------
Total
liabilities 830,422 868,545
Stockholders'
equity 609,026 605,461
----------- ------------
Total
liabilities
and
stockholders'
equity $1,439,448 $ 1,474,006
=========== ============
Net interest income
(tax equivalent
basis)/interest
rate spread (6) 12,183 2.41 % 12,051 1.95%
===== =====
Less adjustment of
tax exempt income 42 40
--------- --------
Net interest income $12,141 $12,011
========= ========
Net interest margin
(7) 3.42 % 3.30%
===== =====
(1) Tax exempt income on equity securities is included on a tax
equivalent basis.
(2) Average balances include unrealized gains on securities
available for sale. Equity securities include marketable equity
securities (preferred and common stocks) and restricted equity
securities.
(3) Loans on non-accrual status are included in average balances.
(4) Included in interest income in the 2003 period is $126 of
accelerated premium amortization on the CMO portfolio.
Excluding the accelerated amortization, the average yield for the
2003 period would have been 2.49% for debt securities and 4.70%
for total interest-earning assets.
(5) Savings accounts include mortgagors' escrow accounts.
(6) Net interest rate spread represents the difference between the
yield on interest-earning assets and the cost of interest-bearing
liabilities.
(7) Net interest margin represents net interest income (tax equivalent
basis) divided by average interest-earning assets.
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Selected Financial Ratios and Other Data
Three months ended Nine months ended
September 30, September 30,
----------------------------------------
2003 2002 2003 2002
----------------------------------------
Performance Ratios (annualized):
Return on average assets 1.25 % 1.48 % 1.03 % 1.70 %
Return on average
stockholders=equity 2.96 % 3.61 % 2.38 % 5.40 %
Return on average
stockholders=equity, excluding
effect of unrealized gains on
securities available for sale,
net of taxes 2.97 % 3.67 % 2.40 % 5.52 %
Interest rate spread 2.41 % 1.95 % 2.21 % 2.52 %
Net interest margin 3.42 % 3.30 % 3.34 % 3.62 %
Efficiency ratio (A) 38.07 % 30.98 % 36.25 % 31.96 %
Dividend paid per share during
period $0.285 $0.085 $0.455 $0.231 (B)
(A) Represents the ratio of non-interest expenses divided by the sum
of net interest income and non-interest income (exclusive of
securities gains).
(B) Adjusted to reflect exchange of shares resulting from
reorganization on July 9, 2002.
At At At
September 30, December 31, September 30,
2003 2002 2002
-------------------------------------------
(dollars in thousands except per share data)
Capital Ratio:
Stockholders' equity to
total assets 41.44 % 44.43 % 43.93 %
Asset Quality:
Non-performing loans $ 39 $ 5 $ 1
Non-performing assets 111 5 1
Allowance for loan losses 15,954 15,052 15,156
Allowance for loan losses as
a percent of total loans,
excluding money market loan
participations 1.57 % 1.87 % 1.87 %
Non-performing assets as
a percent of total
assets 0.01 % - -
Per Share Data:
Book value per share $ 10.48 $ 10.80 $ 10.87
Market value per share $ 14.77 $ 11.90 $ 11.75
CONTACT: Brookline Bancorp, Inc.
Paul Bechet, 617-278-6405