Exhibit 99.1
Brookline Bancorp Announces 2004 Second Quarter Operating Results
and Declaration of Per Share Regular Dividend of $0.085
and Extra Dividend of $0.20
BROOKLINE, Mass.--(BUSINESS WIRE)--July 15, 2004--Brookline
Bancorp, Inc. (the "Company") (NASDAQ:BRKL) announced today its
earnings for the 2004 second quarter 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 16, 2004 to
stockholders of record on July 30, 2004.
The Company earned $4,622,000, or $0.08 per share on a basic and
diluted basis, in the 2004 second quarter compared to $6,687,000, or
$0.12 per share on a basic and diluted basis, in the 2003 second
quarter. The 2003 quarter included an after-tax credit of $2,727,000,
or $0.05 per share, resulting from settlement of all disputes relating
to the state tax treatment of the Company's real estate investment
trust ("REIT") subsidiary for the years 1999 through 2002.
Net income for the six months ended June 30, 2004 was $9,274,000,
or $0.16 per share on a basic and diluted basis, compared to
$6,539,000, or $0.11 per share on a basic and diluted basis, for the
six months ended June 30, 2003. The 2003 period included an after-tax
net charge to earnings of $2,788,000, or $0.05 per share, resulting
from settlement of the REIT tax matter. 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 in
the 2003 second quarter, net of related tax benefits.
Excluding the credit resulting from the REIT tax matter, net
income in the 2004 second quarter was $662,000, or 16.7%, higher than
in the 2003 second quarter. The increase was attributable to
improvement in net interest income ($1,265,000 after taxes), offset in
part by a higher provision for loan losses ($204 after taxes) and the
expense of restricted stock awards ($396,000 after taxes).
The 20.3% increase in net interest income from $10,712,000 in the
2003 second quarter to $12,887,000 in the 2004 second quarter resulted
from a $166 million, or 11.8%, growth in interest-earning assets and
an increase in the average rate earned on those assets from 4.38% to
4.55%. Asset growth came from the indirect automobile loan portfolio
which increased by $247 million in average balances outstanding
between the two quarterly periods. Total indirect automobile loans
outstanding were $313 million at June 30, 2004. Offsetting part of
this growth was a $92 million reduction in average balances invested
in debt securities and short-term investments. This shift in the mix
of earning assets was part of the reason for the improvement in the
average rate earned, as yields on loans generally exceed yields on
investments.
As we have reported in previous quarterly communications, the
interest rate environment of the past two years has been the lowest in
over forty years. As a result, asset yields have declined steadily.
Since a high percent of the Company's assets (38% in the 2004 second
quarter) were funded by stockholders' equity for which there is no
charge for interest expense, declining rates caused 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. On June 30, 2004, the Federal Reserve increased the
federal funds rate for overnight borrowings between banks for the
first time since May 16, 2000 from 1.00% to 1.25%. From May 2000
through June 2004, the federal funds rate had declined from 6.50% to
1.00%; it remained at 1.00% since June 25, 2003. While rising interest
rates would likely have a positive impact on the Company's net
interest income and net interest margin, future trends in interest
rates are dependent on many factors.
In a declining low interest rate environment, not only are new
loans originated and investments purchased at lower yields, but
existing higher yielding loans and investments secured by mortgage
loans are subject to prepayment before scheduled maturities.
Prepayment of higher yielding assets in a declining interest rate
environment can have a detrimental effect on net interest income. The
Company experienced such an effect during the past two years.
Unprecedented prepayment of loans underlying mortgage securities in
which the Company had invested shortened the estimated life of the
securities significantly, thus necessitating the accelerated expensing
of part of the premiums paid to purchase the securities. Accelerated
premium amortization caused by loan prepayments was $1,680,000 in the
2003 second quarter and $357,000 in the 2004 first quarter. In the
2004 second quarter, $232,000 was credited to income as subsiding
prepayments extended the estimated remaining life of the securities.
Mortgage loan payoffs generated prepayment fee income of
$1,141,000 in the first half of 2004 ($278,000 in the second quarter)
and $517,000 in the first half of 2003 ($339,000 in the second
quarter). Prepayments also occurred in 2004 in the indirect automobile
loan portfolio due in part to aggressive loan promotions by credit
unions, banks and credit card issuers. When prepayments arise, the
remainder of unamortized costs incurred in originating the loans must
be expensed as a charge to interest income. Such charges amounted to
$321,000 in the 2004 second quarter and $649,000 in the first half of
2004.
The provision for loan losses increased from $360,000 in the 2003
second quarter to $711,000 in the 2004 second quarter and from
$735,000 in the first half of 2003 to $1,041,000 in the first half of
2004 due primarily to growth of the indirect automobile loan
portfolio. Non-performing assets, comprised of loans past due 90 days
or more and repossessed assets, were insignificant ($322,000) at June
30, 2004. The allowance for loan losses was $16,962,000, or 1.44% of
total loans outstanding, at that date.
Securities gains were $381,000 and $181,000, respectively, in the
2004 and 2003 second quarters and $961,000 and $508,000, respectively,
in the first half of 2004 and 2003. The expense for restricted stock
awarded under the Company's 2003 recognition and retention plan
amounted to $681,000 in the 2004 second quarter and $1,371,000 in the
first half of 2004. Other non-interest expenses increased $284,000, or
6.2% in the 2004 second quarter compared to the 2003 second quarter
and $1,302,000, or 14.9%, in the first half of 2004 compared to the
first half of 2003 due primarily to operations related to the indirect
automobile loan business, the opening of a new branch in the fall of
2003 and $375,000 of dividend equivalent rights payments in the first
quarter of 2004.
In approving an extra dividend of $0.20 per share in addition to
the regular quarterly dividend of $0.085 per share, the Board of
Directors considered a number of factors. The recent announcement to
acquire Mystic Financial Inc., which is expected to be completed in
January 2005, was not viewed to be of such a magnitude as to affect
extra dividend payments. While it is the intent of the Board for the
foreseeable future to authorize payment of an extra dividend
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, expansion of the Company's business and general economic
conditions.
The above text 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 could 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)
June 30, December 31, June 30,
2004 2003 2003
-------------------------------------
ASSETS
------
Cash and due from banks $ 9,639 $ 15,131 $ 12,870
Short-term investments 118,748 127,572 90,841
Securities available for sale 276,489 287,952 342,964
Securities held to maturity
(market value of $1,251, $1,381
and $1,597, respectively) 1,222 1,343 1,548
Restricted equity securities 15,125 11,401 9,423
Loans, excluding money market
loan participations 1,177,005 1,072,740 951,489
Money market loan participations 6,000 2,000 -
Allowance for loan losses (16,962) (16,195) (15,811 )
------------------------------------
Net loans 1,166,043 1,058,545 935,678
------------------------------------
Other investment 4,318 4,251 3,969
Accrued interest receivable 5,712 5,248 5,377
Bank premises and equipment, net 2,663 2,737 2,533
Deferred tax asset 9,116 8,843 7,212
Prepaid income taxes 12 - 1,376
Other assets 1,131 1,011 417
-------------------------------------
Total assets $ 1,610,218 $ 1,524,034 $1,414,208
=====================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------
Deposits $ 725,486 $ 679,921 $ 662,754
Borrowed funds 273,738 220,519 123,738
Mortgagors' escrow accounts 4,579 4,565 4,361
Income taxes payable - 1,489 -
Accrued expenses and other
liabilities 10,173 10,856 8,512
-------------------------------------
Total liabilities 1,013,976 917,350 799,365
-------------------------------------
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; 60,409,532 shares,
60,160,530 shares and
58,953,804 shares
issued, respectively 604 602 589
Additional paid-in capital 471,100 469,493 451,151
Retained earnings, partially
restricted 157,174 169,417 182,584
Accumulated other
comprehensive income (A) 1,003 2,529 2,673
Treasury stock, at cost -
1,335,299 shares (17,017) (17,017) (17,017 )
Unearned compensation -
recognition and retention
plans (12,406) (13,960) (588 )
Unallocated common stock held
by ESOP -773,290 shares,
803,356 shares and 834,362
shares, respectively (4,216) (4,380) (4,549 )
-------------------------------------
Total stockholders' equity 596,242 606,684 614,843
-------------------------------------
Total liabilities and
stockholders' equity $ 1,610,218 $ 1,524,034 $1,414,208
============= ============ ==========
(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,
-----------------------------------------------
2004 2003 2004 2003
-----------------------------------------------
Interest income:
Loans $ 15,506 $ 13,918 $ 30,565 $27,186
Debt securities 1,942 910 3,448 4,163
Marketable equity
securities 69 96 148 208
Restricted equity
securities 71 71 140 147
Short-term
investments 305 350 603 928
-----------------------------------------------
Total interest
income 17,893 15,345 34,904 32,632
-----------------------------------------------
Interest expense:
Deposits 2,832 3,224 5,529 6,666
Borrowed funds 2,174 1,409 4,313 2,830
-----------------------------------------------
Total interest
expense 5,006 4,633 9,842 9,496
-----------------------------------------------
Net interest income 12,887 10,712 25,062 23,136
Provision for loan
losses 711 360 1,041 735
-----------------------------------------------
Net interest income
after provision for
loan losses 12,176 10,352 24,021 22,401
-----------------------------------------------
Non-interest income:
Fees and charges 549 714 1,670 1,260
Gains on securities, net 381 181 961 508
Swap agreement market
valuation credit 88 18 128 37
Other income 211 181 351 248
-----------------------------------------------
Total non-interest
income 1,229 1,094 3,110 2,053
-----------------------------------------------
Non-interest expense:
Compensation and
employee benefits 2,537 2,396 5,072 4,749
Recognition and
retention plans 718 26 1,446 66
Occupancy 374 443 791 781
Equipment and data
processing 1,091 776 2,084 1,403
Advertising and
marketing 189 188 376 375
Dividend equivalent
rights - - 375 -
Other 636 751 1,242 1,339
-----------------------------------------------
Total non-interest
expense 5,545 4,580 11,386 8,713
-----------------------------------------------
Income before income
taxes 7,860 6,866 15,745 15,741
-----------------------------------------------
Income tax expense:
Provision for income
taxes 3,238 2,906 6,471 6,414
Retroactive (credit)
assessment related
to REIT - (2,727) - 2,788
-----------------------------------------------
Total income tax
expense 3,238 179 6,471 9,202
-----------------------------------------------
Net income $ 4,622 $ 6,687 $ 9,274 $ 6,539
===============================================
Earnings per common
share:
Basic $ 0.08 $ 0.12 $ 0.16 $ 0.11
Diluted 0.08 0.12 0.16 0.11
Weighted average common
shares outstanding
during the period:
Basic 57,247,354 56,599,521 57,156,108 57,031,545
Diluted. 58,057,812 57,575,487 58,051,083 57,995,708
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Average Yields / Costs
(In thousands)
Three months ended June 30,
----------------------------------
2004
----------------------------------
Average
Average yield/
balance Interest(1) cost
----------------------------------
(Dollars in thousands)
Assets
- ------
Interest-earning assets:
Short-term investments $ 118,387 $ 305 1.03%
Debt securities (2) (4) 273,969 1,951 2.85
Equity securities (2) 25,202 167 2.63
Mortgage loans (3) 817,699 12,032 5.89
Money market loan participations 640 2 1.15
Other commercial loans (3) 30,916 434 5.62
Indirect automobile loans (3) (5) 303,983 2,993 3.95
Other consumer loans (3) 2,341 44 7.52
----------------------
Total interest-earning assets (6) 1,573,137 17,928 4.55%
-------------------
Allowance for loan losses (16,501)
Non-interest earning assets 29,442
---------------
Total assets $ 1,586,078
===============
Liabilities and Stockholders' Equity
- ------------------------------------
Interest-bearing liabilities:
Deposits:
NOW accounts $ 62,666 22 0.14%
Savings accounts 74,713 319 1.71
Money market savings accounts 282,121 842 1.20
Certificate of deposit accounts (7) 261,911 1,649 2.53
--------------------
Total deposits 681,411 2,832 1.67
Borrowed funds 259,327 2,174 3.32
--------------------
Total interest bearing liabilities 940,738 5,006 2.13%
------------------
Non-interest-bearing demand
checking accounts 35,286
Other liabilities 13,744
-----------
Total liabilities 989,768
Stockholders' equity 596,310
-----------
Total liabilities and
stockholders' equity $1,586,078
===========
Net interest income (tax equivalent
basis)/interest rate spread 12,922 2.42%
=========
Less adjustment of tax exempt income 35
---------
Net interest income $12,887
=========
Net interest margin 3.29%
=========
Three months ended June 30,
----------------------------------
2003
----------------------------------
Average
Average yield/
balance Interest(1) cost
----------------------------------
(Dollars in thousands)
Assets
- ------
Interest-earning assets:
Short-term investments $ 120,409 $ 350 1.17%
Debt securities (2) (4) 365,122 914 1.00
Equity securities (2) 21,241 202 3.81
Mortgage loans (3) 815,533 12,873 6.31
Money market loan participations 1,132 4 1.42
Other commercial loans (3) 23,961 352 5.88
Indirect automobile loans (3) (5) 56,441 632 4.49
Other consumer loans (3) 2,999 57 7.60
----------------------
Total interest-earning assets (6) 1,406,838 15,384 4.38%
-------------------
Allowance for loan losses (15,594)
Non-interest earning assets 28,596
---------------
Total assets $ 1,419,840
===============
Liabilities and Stockholders' Equity
- ------------------------------------
Interest-bearing liabilities:
Deposits:
NOW accounts $ 60,962 26 0.17%
Savings accounts 20,777 38 0.73
Money market savings accounts 294,448 1,214 1.65
Certificate of deposit accounts (7) 257,248 1,946 3.03
--------------------
Total deposits 633,435 3,224 2.04
Borrowed funds 123,804 1,409 4.50
--------------------
Total interest bearing liabilities 757,239 4,633 2.45%
------------------
Non-interest-bearing demand
checking accounts 28,494
Other liabilities 20,730
-----------
Total liabilities 806,463
Stockholders' equity 613,377
-----------
Total liabilities and
stockholders' equity $1,419,840
===========
Net interest income (tax equivalent
basis)/interest rate spread 10,751 1.93%
=========
Less adjustment of tax exempt income 39
---------
Net interest income $10,712
=========
Net interest margin 3.06%
=========
(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 on debt securities in the 2004 period
is $232 of income resulting from adjustment of the amortization of
premiums on mortgage securities. Excluding this credit, the yield
on debt securities in the 2004 period would have been 2.51%.
Included in interest income in the 2003 period is $1,680 of
accelerated amortization of premiums on mortgage securities.
Excluding this charge, the yield on debt securities in the 2003
period would have been 2.84%.
(5) Included in interest income on indirect automobile loans in the
2004 period is $321 of accelerated amortization of deferred loan
origination costs due to prepaid loan payoffs. Excluding this
charge, the yield on the indirect automobile loan portfolio would
have been 4.37% in the 2004 period.
(6) Excluding the adjustments on debt securities and indirect
automobile loans noted above, the yield on interest-earning assets
would have been 4.57% in the 2004 period and 4.85% in the 2003
period.
(7) Included in interest expense in the 2004 period is $33 reduction
of expense due to a rate adjustment. Excluding this adjustment,
the cost of certificates of deposit in the 2004 period would have
been 2.58% and the cost of interest-bearing liabilities would have
been 2.15%.
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Selected Financial Ratios and Other Data
Three months ended Six months ended
June 30, June 30,
--------------------------------------
2004 2003 2004 2003
--------------------------------------
Performance Ratios (annualized):
Return on average assets 1.17% 1.88% 1.18% 0.92%
Return on average stockholders'
equity 3.10% 4.36% 3.08% 2.10%
Return on average stockholders'
equity,
excluding effect of unrealized
gains on
securities available for sale,
net of taxes 3.11% 4.38% 3.10% 2.12%
Interest rate spread 2.42% 1.93% 2.35% 2.10%
Net interest margin 3.29% 3.06% 3.24% 3.29%
Dividends paid per share during
period $ 0.085 $ 0.085 $ 0.37 $ 0.17
At At At
June 30, December 31, June 30,
2004 2003 2003
--------- --------- ---------
(Dollars in thousands
except per share data)
Capital Ratio:
Stockholders' equity to total assets 37.03% 39.81% 43.48%
Asset Quality:
Non-performing loans $ 168 $ 50 $ 29
Non-performing assets 322 133 29
Allowance for loan losses 16,962 16,195 15,811
Allowance for loan losses as a percent
of total loans 1.44% 1.51% 1.66%
Non-performing assets as a percent of
total assets 0.02% 0.01% -
Per Share Data:
Book value per share $ 10.09 $ 10.31 $ 10.67
Market value per share $ 14.67 $ 15.34 $ 14.00
CONTACT: Brookline Bancorp, Inc.
Paul R. Bechet, 617-278-6405