Exhibit 99.1
Brookline Bancorp Announces 2003 Fourth Quarter and Annual Earnings
and Declaration of Per Share Regular Dividend of $0.085 and Extra
Dividend of $0.20
BROOKLINE, Mass.--(BUSINESS WIRE)--Jan. 15, 2004--Brookline
Bancorp, Inc. (the "Company") (NASDAQ:BRKL) announced today its
earnings for the 2003 fourth quarter and year 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 February 16, 2004
to stockholders of record on January 31, 2004.
The Company earned $3,439,000, or $0.06 per share (on a basic and
diluted basis), for the quarter ended December 31, 2003 compared to
$5,864,000, or $0.10 per share (on a basic and diluted basis) for the
quarter ended December 31, 2002. The 2003 and 2002 quarters included
securities gains of $1,593,000 ($1,022,000 after taxes) and $7,161,000
($4,591,000 after taxes), respectively. The 2002 quarter also included
a loss of $7,494,000 ($4,360,000 after taxes) resulting from
prepayment of $97 million of borrowings from the Federal Home Loan
Bank with high rates of interest. New borrowings of $62 million were
obtained in the 2002 quarter at lower rates of interest and longer
maturities. These financing transactions resulted in a significant
reduction of interest expense in 2003 from what would otherwise have
been incurred if the transactions had not been initiated.
The decline in quarterly earnings was attributable primarily to
(a) expense related to the 2003 Recognition and Retention Plan (the
"2003 Recognition Plan"), (b) a higher rate of income taxes (42.3%
versus 35.3%) caused primarily by the elimination of the favorable tax
treatment of the Company's real estate investment subsidiary ("REIT")
and (c) higher operating expenses and provision for loan losses. The
increased operating expenses were due primarily to expanded indirect
automobile lending activities. The increase in the provision for loan
losses was caused primarily by growth of the loan portfolio.
Non-performing assets were insignificant throughout 2003 and amounted
to $133,000, or 0.01% of total assets at December 31, 2003.
The Company entered the indirect automobile lending business in
the first quarter of 2003. Total indirect automobile loans outstanding
increased from $155 million at September 30, 2003 to $211 million at
December 31, 2003. The average credit score of all loans outstanding
at December 31, 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 December 31, 2003 was $988,000, or 0.47% of the indirect
automobile portfolio.
As previously reported, on October 16, 2003, 1,158,000 shares were
awarded to directors and certain employees of the Company under the
2003 Recognition Plan approved by the stockholders of the Company on
August 27, 2003. The total expense of the shares awarded ($17,334,000)
is being charged to expense over the periods in which the shares vest.
The charge to pre-expense was $3,870,000 ($2,460,000 after taxes) in
the fourth quarter and is projected to be, on a pre-tax basis,
$2,760,000 in 2004 and $2,618,000 for each of the years 2005 through
2008.
Net income for the year ended December 31, 2003 was $14,480,000,
or $0.25 per share (on a basic and diluted basis), compared to
$21,935,000, or $0.38 per share (on a basic and diluted basis) for the
year ended December 31, 2002. The 2003 and 2002 years included
securities gains of $2,102,000 ($1,348,000 after taxes) and $8,698,000
($5,577,000 after taxes), respectively. The 2003 year also included
the expense for the 2003 Recognition Plan and an after-tax charge of
$2,788,000 resulting from settlement of a tax dispute relating to the
state tax treatment of the Company's REIT subsidiary for the tax years
1999 through 2002. The 2002 year also included a loss of $7,776,000
($4,524,000 after taxes) from the prepayment of borrowings from the
Federal Home Loan Bank in the third and fourth quarter.
In addition to the matters mentioned in the preceding paragraph,
the decline in earnings for 2003 compared to 2002 was attributable
primarily to (a) a higher rate of income taxes (41.4% versus 36.1%),
(b) accelerated amortization of premiums paid in purchasing
collateralized mortgage obligations and pass-through mortgage-backed
securities (collectively "mortgage securities"), (c) higher operating
expenses and provision for loan losses for the same reasons cited
above in the third preceding paragraph (d) added expenses to operate a
new branch opened in the third quarter of 2003, (e) payment of
dividend equivalent rights ($361,000) to holders of unexercised
options as a result of the $0.20 per share extra dividend paid to
stockholders in August 2003 and (f) a decline in net interest margin
from 3.58% in 2002 to 3.34% in 2003.
In the second half of 2002 and the first four months of 2003, the
Company invested a substantial part of the proceeds from its July 2002
stock offering in mortgage securities with relatively short
maturities. Because of the declining interest rate environment, the
investments were purchased at a premium which was to be amortized over
the estimated life of the securities. Unprecedented prepayment of
loans underlying the mortgage securities subsequent to their purchase
shortened the estimated life of the securities significantly, thus
necessitating the accelerated expensing of part of the premiums paid
to purchase the securities. Due to the prepayments, the Company's
investment in mortgage securities declined from $315 million at March
31, 2003 to $137 million at December 31, 2003. Total accelerated
premium amortization was $2,370,000 in 2003 and the total of
unamortized premiums at December 31, 2003 was $2,515,000. Continuation
of higher than anticipated prepayments could require further
accelerated expensing of unamortized premiums in the future.
Despite an increase in average interest-earning assets of $141
million, or 10.9%, in 2003 compared to 2002, total interest income
declined by $5,287,000, or 7.4%, between the two years. While part of
the decline was attributable to the premium amortization referred to
in the preceding paragraph, it was also due to the continuation of an
interest rate environment that is the lowest experienced in over forty
years. Continuation of that environment or further reductions in
interest rates would likely have a negative impact on the Company's
net interest income and net interest margin. Since a high percent of
the Company's assets (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 likely have a positive impact on the Company's net
interest income and net interest margin.
Total assets were $1.524 billion at December 31, 2003 compared to
$1.458 billion at September 30, 2003 and $1.423 billion at December
31, 2002. While the rate of growth for the year was 7.1%, asset
composition changed more significantly. Net loans as a percent of
total assets increased from 56% at December 31, 2002 to 69% at
December 31, 2003. Of the $267 million increase in net loans
outstanding, $217 million related to the indirect automobile
portfolio. Loan originations were funded primarily from maturing
short-term investments, proceeds from the paydown of mortgage
securities, deposit growth and borrowings from the Federal Home Loan
Bank.
Stockholders' equity declined from $632.4 million, or 44.4% of
assets at December 31, 2002, to $606.7 million, or 39.8% of assets at
December 31, 2003, due primarily to payment of dividends to
stockholders in excess of net earnings ($16.4 million) and the
purchase of 1,165,000 shares of the Company's common stock at an
aggregate cost of $15.1 million.
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, potential future
business initiatives and the reduction in tax rates on dividends that
went into effect in 2003. 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 extra future
dividends 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 and tax rates, regulatory
considerations and competition.
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands except share data)
December September December
31, 2003 30, 2003 31, 2002
ASSETS
Cash and due from banks $ 15,131 $ 12,547 $ 13,571
Short-term investments 127,572 121,610 224,897
Securities available for sale 287,952 293,222 361,049
Securities held to maturity
(market value of $1,381, $1,450
and $4,944, respectively) 1,343 1,411 4,861
Restricted equity securities 11,401 9,423 9,423
Loans, excluding money market loan
participations 1,072,740 1,013,764 803,425
Money market loan participations 2,000 3,000 4,000
Allowance for loan losses (16,195) (15,954) (15,052)
Net loans 1,058,545 1,000,810 792,373
Other investment 4,251 4,166 3,979
Accrued interest receivable 5,248 5,046 5,224
Bank premises and equipment, net 2,737 2,763 1,813
Deferred tax asset 8,843 6,868 5,779
Other assets 1,011 593 388
Total assets $1,524,034 $1,458,459 $1,423,357
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 679,921 $ 667,771 $ 649,325
Borrowed funds 220,519 170,531 124,900
Mortgagors' escrow accounts 4,565 4,935 4,256
Income taxes payable 1,489 895 4,970
Accrued expenses and other
liabilities 10,856 10,007 7,525
Total liabilities 917,350 854,139 790,976
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;
60,160,530 shares, 58,996,410
shares and 58,714,948 shares
issued, respectively 602 590 587
Additional paid-in capital 469,493 451,512 449,254
Retained earnings, partially
restricted 169,417 170,824 185,788
Accumulated other comprehensive
income (A) 2,529 3,424 4,155
Treasury stock, at cost -
1,335,299 shares,
1,335,299 shares and
170,299 shares, respectively (17,017) (17,017) (1,944)
Unearned compensation -
recognition and retention plan (13,960) (548) (741)
Unallocated common stock held by
ESOP - 803,356 shares, 818,861
shares and 865,364 shares,
respectively (4,380) (4,465) (4,718)
Total stockholders' equity 606,684 604,320 632,381
Total liabilities and
stockholders' equity $1,524,034 $1,458,459 $1,423,357
(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 Year ended
December 31, December 31,
2003 2002 2003 2002
Interest income:
Loans, excluding
money market loan
participations $12,684 $ 13,752 $52,176 $ 56,798
Money market loan
participations 9 26 34 154
Indirect automobile
loans 2,069 - 4,149 -
Debt securities 1,735 2,692 7,648 10,016
Marketable equity
securities 73 109 370 487
Restricted equity
securities 70 82 289 339
Short-term
investments 329 1,167 1,544 3,703
Total interest
income 16,969 17,828 66,210 71,497
Interest expense:
Deposits 2,770 3,677 12,295 15,790
Borrowed funds 1,874 1,783 6,313 9,729
Total interest
expense 4,644 5,460 18,608 25,519
Net interest income 12,325 12,368 47,602 45,978
Provision (credit)
for loan losses 313 (100) 1,288 (250)
Net interest
income after
provision
(credit) for loan
losses 12,012 12,468 46,314 46,228
Non-interest income:
Fees and charges 720 886 2,552 2,081
Gains on
securities, net 1,593 7,161 2,102 8,698
Loss from
prepayment of FHLB
advances - (7,494) - (7,776)
Swap agreement
market valuation
credit (charge) 67 9 163 (202)
Other income 114 140 536 579
Total non-interest
income 2,494 702 5,353 3,380
Non-interest expense:
Compensation and
employee benefits 2,488 2,117 9,636 8,357
Recognition and
retention plans 3,885 40 3,992 161
Occupancy 376 319 1,517 1,186
Equipment and data
processing 937 662 3,219 2,700
Advertising and
marketing 198 219 761 742
Dividend equivalent
rights - - 361 -
Other 662 752 2,701 2,158
Total non-interest
expense 8,546 4,109 22,187 15,304
Income before income
taxes 5,960 9,061 29,480 34,304
Income tax expense:
Provision for
income taxes 2,521 3,197 12,212 12,369
Retroactive
assessment related
to REIT - - 2,788 -
Total income tax
expense 2,521 3,197 15,000 12,369
Net income $ 3,439 $ 5,864 $14,480 $ 21,935
Earnings per common
share:
Basic $ 0.06 $ 0.10 $ 0.25 $ 0.38
Diluted 0.06 0.10 0.25 0.38
Weighted average
common shares
outstanding during
the period:
Basic 56,713,171 57,537,731 56,869,065 57,527,296
Diluted 57,724,597 58,536,785 57,871,763 58,446,364
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Average Yields / Costs
Three months ended December 31,
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 $ 129,721 $ 329 1.01% $ 306,931 $ 1,167 1.51%
Debt securities
(2) (4) 276,752 1,744 2.52 277,388 2,692 3.88
Equity
securities (2) 22,367 170 3.03 26,209 231 3.53
Mortgage loans
(3) 818,696 12,224 5.97 778,975 13,344 6.85
Money market
loan partici-
pations 3,227 9 1.11 6,382 26 1.62
Other
commercial
loans (3) 29,077 415 5.71 21,455 340 6.34
Indirect
automobile
loans (3) 191,391 2,069 4.29 - - -
Other consumer
loans (3) 2,429 45 7.41 3,329 68 8.17
Total
interest-
earning
assets 1,473,660 17,005 4.60 1,420,669 17,868 5.03%
Allowance for
loan losses (16,020) (15,156)
Non-interest
earning assets 31,307 27,440
Total assets $1,488,947 $1,432,953
Liabilities and
Stockholders' Equity
Interest-bearing
liabilities:
Deposits:
NOW accounts $ 60,756 20 0.13% $ 73,404 47 0.25%
Savings
accounts (5) 25,694 27 0.42 14,494 29 0.79
Money market
savings
accounts 306,790 1,031 1.33 258,418 1,201 1.84
Certificate of
deposit
accounts 248,109 1,692 2.70 274,329 2,400 3.47
Total
deposits 641,349 2,770 1.71 620,645 3,677 2.35
Borrowed funds 195,789 1,874 3.75 143,181 1,783 4.94
Total interest
bearing
liabilities 837,138 4,644 2.20 763,826 5,460 2.84
Non-interest-
bearing demand
checking accounts 32,530 18,040
Other liabilities 14,294 16,435
Total
liabilities 883,962 798,301
Stockholders'
equity 604,985 634,652
Total liabilities
and stockholders'
equity $1,488,947 $1,432,953
Net interest
income (tax
equivalent
basis)/interest
rate spread (6) 12,361 2.40% 12,408 2.19%
Less adjustment
of tax exempt
income 36 40
Net interest
income $12,325 $ 12,368
Net interest
margin (7) 3.36% 3.49%
(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 $93 of
accelerated premium amortization on the collateralized mortgage
obligations portfolio. Excluding the accelerated amortization, the
average yield for the 2003 period would have been 2.66% for debt
securities and 4.62% 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 Year
ended ended
December 31, December 31,
2003 2002 2003 2002
Performance Ratios (annualized):
Return on average assets 0.98% 1.64% 1.03% 1.68%
Return on average stockholders'
equity 2.27% 3.70% 2.24% 4.81%
Return on average stockholders'
equity, excluding effect of
unrealized gains on securities
available for sale, net of taxes 2.28% 3.73% 2.25% 4.89%
Interest rate spread 2.40% 2.19% 2.25% 2.41%
Net interest margin 3.36% 3.49% 3.34% 3.58%
Dividend paid per share during
period $0.085 $0.085 $0.54 $0.316(A)
(A) Adjusted to reflect exchange of shares resulting from
reorganization on July 9, 2002.
At At At
Dec. 31, Sept. 30, Dec. 31,
2003 2003 2002
(dollars in thousands except per share data)
Capital Ratio:
Stockholders' equity to total assets 39.81% 41.44% 44.43%
Asset Quality:
Non-performing loans $ 50 $ 39 $ 5
Non-performing assets 133 111 5
Allowance for loan losses 16,195 15,954 15,052
Allowance for loan losses as a percent
of total loans 1.51% 1.57% 1.86%
Non-performing assets as a percent of
total assets 0.01% 0.01% -
Per Share Data:
Book value per share $ 10.31 $ 10.48 $ 10.80
Market value per share $ 15.34 $ 14.77 $ 11.90
CONTACT: Brookline Bancorp, Inc.
Paul Bechet, 617-278-6405