Exhibit 99.1
Brookline Bancorp Announces 2005
Fourth Quarter and Annual Earnings and Dividend Declarations
BROOKLINE, Mass.--(BUSINESS WIRE)--Jan. 19, 2006--Brookline
Bancorp, Inc. (the "Company") (NASDAQ:BRKL) announced today its
earnings for the 2005 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 February 15, 2006 to
stockholders of record on January 31, 2006.
The Company earned $5,536,000, or $0.09 per share on a basic and
diluted basis, for the quarter ended December 31, 2005 compared to
$3,996,000, or $0.07 per share on a basic and diluted basis, for the
quarter ended December 31, 2004. The 39% increase in quarterly
earnings was attributable primarily to inclusion of the operating
results of Mystic Financial, Inc. and its subsidiaries ("Mystic").
Net income for the year ended December 31, 2005 was $22,030,000,
or $0.37 per share ($0.36 per share on a diluted basis), compared to
$17,767,000, or $0.31 per share on a basic and diluted basis, for the
year ended December 31, 2004. Included in net income were after-tax
securities gains of $547,000 ($0.01 per share) in 2005 and $1,134,000
($0.02 per share) in 2004. The 24% increase in net income was likewise
attributable primarily to inclusion of Mystic's operating results.
As previously reported, the Company acquired Mystic on January 7,
2005. Total assets acquired were $440 million, including loans of $343
million, and deposits assumed were $331 million. The balance of Mystic
loans acquired declined to $255 million at September 30, 2005 and $240
million at December 31, 2005 as a result of loan payoffs and the sale
in the 2005 first quarter of $30 million of long-term fixed rate
residential mortgage loans done to reduce interest rate risk. In view
of rising interest rates and signs of a weakening real estate market,
the Company chose to be cautious in originating new construction and
real estate loans and in renewing lines of credit to small business
commercial borrowers. The balance of Mystic related deposits increased
$17 million from the date of acquisition to $348 million at December
31, 2005. The attractive deposit base of Mystic was one of the
important reasons for making the acquisition.
As part of the acquisition, Mystic was merged into the Company and
in April 2005 its operating systems were merged into the Company's
operating systems. Merger/conversion related expenses amounted to
$894,000, substantially all of which were incurred in the first half
of 2005. Of the total amount paid for the acquisition, $11.8 million
was classified as a core deposit intangible that is being amortized on
an accelerated basis over nine years and $35.6 million was classified
as goodwill, none of which was amortized or written-down in 2005.
Amortization of the core deposit intangible charged to expense
amounted to $593,000 in the fourth quarter and $2,370,000 in the year
ended December 31, 2005.
Net interest income was $3,649,000, or 28% higher, in the 2005
fourth quarter than in the 2004 fourth quarter and $17,060,000, or 33%
higher, in the 2005 year than in the 2004 year. The increases were due
to growth in assets, notably from the Mystic acquisition and the
indirect automobile loan portfolio, and a higher interest rate
environment.
While interest rate spread improved from 2.34% in the 2004 year to
2.48% in the 2005 year, it declined steadily throughout 2005 from
2.59% in the first quarter to 2.52% in the second quarter, 2.42% in
the third quarter and 2.33% in the fourth quarter. These declines
resulted from a more rapid increase in the average rates paid on
deposits and borrowed funds than in the increase in the average rates
earned on assets. The rise in the average rates paid for funds
resulted from the rate setting actions of the Federal Reserve (13 rate
increases of 0.25% each in the federal funds rate for overnight
borrowings between banks since June 2004), increased competition for
deposits and a shift in the mix of deposits. Customarily, higher rates
are paid on certificates of deposit than on transaction deposit
accounts. Certificates of deposit comprised 55% of total deposits at
December 31, 2005 compared to 52% at September 30, 2005, 48% at June
30, 2005 and 41% at December 31, 2004.
The trend in net interest margin was similar to that in interest
rate spread, albeit less pronounced. It improved from 3.21% in the
2004 year to 3.24% in the 2005 year, but declined steadily throughout
2005 from 3.31% in the first quarter to 3.26% in the second quarter,
3.20% in the third quarter and 3.19% in the fourth quarter. The 2005
quarterly declines resulted primarily from the developments mentioned
in the preceding paragraph, the existence of a flat yield curve
environment (an environment where interest rates offered on assets
with longer maturities in the five to ten year range differ little
with rates offered on assets with shorter maturities in the one to two
year range) and a reduction in the percent of total interest-earning
assets comprised of mortgage loans from 54% in the first quarter to
52% in the second quarter and 51% in the third and fourth quarters.
Typically, the yield on mortgage loans is higher than the yields
earned on the Company's other interest-earning assets. It should be
noted, however, that loan pricing has also been subjected to greater
competitive pressure over the past two years and, as a result, it has
been increasingly difficult to incorporate the rise in funding costs
into the pricing of new loan originations.
A high percent of the Company's assets (26% at December 31, 2005
and 35% at December 31, 2004) are funded by tangible equity
(stockholders' equity less goodwill and core deposit intangible) on
which no interest expense is incurred. Because of this and our belief
that the interest rate environment of the past several months will
continue at least in the first half of 2006, we expect net interest
income in 2006 to continue to rise, but at a considerably more modest
rate of annual increase. It is worth noting that net interest income
is reduced whenever the Company pays extra dividends. Each extra
dividend of $0.20 per share reduces stockholders' equity by
approximately $12.3 million and interest income by the amount that
otherwise would have been earned if the dividend had not been paid.
Continuation of the market trends mentioned above will likely cause
interest rate spread to decline in the first half of 2006 and possibly
thereafter and make it challenging to improve net interest margin from
its existing level. Trends in interest rates depend on many factors
and, accordingly, actual rates in the future could vary significantly
from the Company's predictions.
The provision for loan losses was $840,000 in the 2005 fourth
quarter compared to $927,000 in the 2004 fourth quarter and $2,483,000
in the 2005 year compared to $2,603,000 in the 2004 year. All of the
provision in the 2005 fourth quarter and $742,000 of the provision in
the 2004 fourth quarter related to the indirect automobile loan
portfolio as movements in the non-indirect automobile loan portfolio
did not require much change in the allowance for loan losses related
to such loans. Due primarily to the payoff of Mystic loans, including
several loans deemed to have higher than normal risk exposures,
$376,000 was credited to the 2005 provision for loan losses related to
non-indirect automobile loans; in 2004, $404,000 was charged to the
provision for loan losses primarily due to loan growth.
The indirect automobile loan portfolio has grown from $211 million
at the end of 2003 to $369 million at the end of 2004 and $459 million
at the end of 2005. Net charge-offs were $1,358,000 in 2005 and
$1,246,000 in 2004, or 0.28% and 0.40% of the average balance of
indirect automobile loans outstanding in those respective years. While
charge-off experience to date has been favorable, indirect automobile
loans delinquent 30 days or more increased from $3.2 million, or 0.85%
of the portfolio, at December 31, 2004 to $4.5 million, or 1.00% of
the portfolio, at September 30, 2005 and $5.5 million, or 1.21% of the
portfolio, at December 31, 2005. The increase is considered to be due
in part to the change in the bankruptcy law which occurred in October
2005. The substantial excess provisions over net charge-offs reflect
the rapid growth of the portfolio and our assumption that the rate of
charge-offs may increase in the future.
Most of the increase in non-interest income in the quarterly and
yearly periods presented is attributable to the Mystic acquisition. In
the 2005 fourth quarter, the sales of a building and a foreclosed
residential property owned by Mystic resulted in a gain of $322,000.
In the 2005 third quarter, $250,000 was charged to expense to reduce
the carrying value of the foreclosed property to its estimated fair
value.
Excluding merger/conversion expenses, amortization of the core
deposit intangible and the write-down referred to in the preceding
paragraph, higher non-interest expenses in the 2005 fourth quarter and
year compared to the 2004 fourth quarter and year were attributable
primarily to the Mystic acquisition, the opening of a new branch in
the fall of 2004, higher premiums for employee medical benefits and
higher professional fees due mostly to meeting the added compliance
requirements of the Sarbanes-Oxley Act.
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 the earnings of the Company, its capital
requirements, potential future business initiatives and other factors.
While the Board of Directors has authorized semi-annual extra dividend
payments of $0.20 per share since the second half of 2003, the payment
and magnitude of any future dividends will depend on available
opportunities to deploy capital effectively, including the repurchase
of Company common stock, future interest rates, expansion of the
Company's business, regulatory considerations 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)
December 31, September 30, December 31,
2005 2005 2004
------------ ------------- ------------
ASSETS
- ------------------------------
Cash and due from banks $ 15,507 $ 16,004 $ 8,937
Short-term investments 102,888 133,707 127,928
Securities available for sale 374,906 349,813 260,852
Securities held to maturity
(market value of $423, $857
and $914, respectively) 410 841 889
Restricted equity securities 23,081 23,081 17,444
Loans 1,636,755 1,620,090 1,269,637
Allowance for loan losses (22,248) (21,900) (17,540)
----------- ------------ -----------
Net loans 1,614,507 1,598,190 1,252,097
----------- ------------ -----------
Other investment 4,662 4,545 4,456
Accrued interest receivable 9,189 8,609 5,801
Bank premises and equipment,
net 10,010 11,198 3,900
Other real estate owned - 1,150 -
Deferred tax asset 11,347 9,486 9,980
Prepaid income taxes - 1,813 270
Core deposit intangible 9,471 10,064 -
Goodwill 35,615 35,615 -
Other assets 3,111 2,972 1,945
----------- ------------ -----------
Total assets $2,214,704 $ 2,207,088 $1,694,499
=========== ============ ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
- ------------------------------
Deposits $1,168,307 $ 1,153,854 $ 773,958
Borrowed funds 411,507 421,896 320,171
Subordinated debt 12,218 12,249 -
Mortgagors' escrow accounts 5,377 5,465 4,464
Income taxes payable 630 - -
Accrued expenses and other
liabilities 14,215 12,118 10,893
----------- ------------ -----------
Total liabilities 1,612,254 1,605,582 1,109,486
----------- ------------ -----------
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; 62,989,384
shares, 62,989,384 shares
and 60,477,939 shares
issued, respectively 630 630 605
Additional paid-in capital 512,338 512,163 471,799
Retained earnings, partially
restricted 121,042 120,620 144,081
Accumulated other
comprehensive income (loss) (A) (1,577) (1,158) 560
Treasury stock, at cost -
1,405,611 shares, 1,405,611
shares and 1,335,299 shares
issued, respectively (18,144) (18,144) (17,017)
Unearned compensation -
recognition and retention
plans (8,103) (8,779) (10,963)
Unallocated common stock
held by ESOP - 685,161
shares, 701,623 shares and
743,221 shares,
respectively (3,736) (3,826) (4,052)
----------- ------------ -----------
Total stockholders'
equity 602,450 601,506 585,013
----------- ------------ -----------
----------- ------------ -----------
Total liabilities and
stockholders' equity $2,214,704 $ 2,207,088 $1,694,499
=========== ============ ===========
(A) Represents net unrealized gains (losses) 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,
----------------------- -----------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
Interest income:
Loans $23,462 $16,880 $ 90,371 $63,527
Debt securities 3,333 1,459 11,121 6,333
Marketable equity
securities 40 69 268 281
Restricted equity
securities 281 149 980 429
Short-term
investments 1,243 536 4,356 1,540
----------- ----------- ----------- -----------
Total interest
income 28,359 19,093 107,096 72,110
----------- ----------- ----------- -----------
Interest expense:
Deposits 7,101 3,204 23,172 11,708
Borrowed funds 4,145 2,626 15,193 9,416
Subordinated debt 201 - 685 -
----------- ------- ----------- -----------
Total interest
expense 11,447 5,830 39,050 21,124
----------- ------- ----------- -----------
Net interest income 16,912 13,263 68,046 50,986
Provision for loan
losses 840 927 2,483 2,603
----------- ------- ----------- -----------
Net interest income
after provision
for loan losses 16,072 12,336 65,563 48,383
----------- ------- ----------- -----------
Non-interest income:
Fees and charges 725 411 3,576 2,577
Gains on securities,
net - - 853 1,767
Gains on sales of
building and other
real estate owned 322 - 322 -
Swap agreement
market valuation
credit - 53 49 231
Other income 126 142 497 635
----------- ----------- ----------- -----------
Total non-interest
income 1,173 606 5,297 5,210
----------- ----------- ----------- -----------
Non-interest expense:
Compensation and
employee benefits 3,373 2,455 13,264 10,004
Recognition and
retention plans 676 722 2,716 2,890
Occupancy 707 414 2,818 1,604
Equipment and data
processing 1,371 1,196 5,918 4,390
Advertising and
marketing 287 148 1,094 638
Dividend equivalent
rights - - 702 734
Merger/conversion - - 894 -
Amortization of core
deposit intangible 593 - 2,370 -
Other 1,025 808 4,181 2,729
----------- ----------- ----------- -----------
Total non-interest
expense 8,032 5,743 33,957 22,989
----------- ----------- ----------- -----------
Income before income
taxes 9,213 7,199 36,903 30,604
Provision for income
taxes 3,677 3,203 14,873 12,837
----------- ----------- ----------- -----------
Net income $ 5,536 $ 3,996 $ 22,030 $17,767
=========== =========== =========== ===========
Earnings per common
share:
Basic $ 0.09 $ 0.07 $ 0.37 $ 0.31
Diluted 0.09 0.07 0.36 0.31
Weighted average common
shares outstanding
during the period:
Basic 60,139,074 57,424,472 60,054,059 57,278,329
Diluted 60,853,521 58,274,797 60,836,211 58,128,232
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Average Yields / Costs
Three months ended December 31,
-------------------------------------------------------
2005 2004
---------------------------- --------------------------
Average Average
Average Interest yield/ Average Interest yield/
balance (1) cost balance (1) cost
----------- -------- ------- ------- -------- ---------
(Dollars in thousands)
Assets
- --------------
Interest-earning
assets:
Short-term
investments $ 126,037 $ 1,243 3.91% $ 111,083 $ 536 1.91%
Debt
securities (2) 357,630 3,412 3.82 255,180 1,466 2.30
Equity
securities (2) 26,685 336 5.00 26,460 244 3.66
Mortgage
loans (3) 1,086,170 16,959 6.25 836,814 12,468 5.96
Money market
loan
participations - - - 3,130 15 1.90
Other
commercial
loans (3) 70,233 1,143 6.51 51,229 615 4.80
Indirect
automobile
loans (3) 463,734 5,307 4.54 367,951 3,738 4.03
Other
consumer
loans (3) 2,981 54 7.25 2,491 44 7.07
---------- -------- ---------- --------
Total
interest-
earning
assets 2,133,470 28,454 5.31% 1,654,338 19,126 4.60%
-------- ----- -------- -----
Allowance for
loan losses (21,987) (17,133)
Non-interest
earning
assets 98,934 32,610
----------- -----------
Total
assets $2,210,417 $1,669,815
=========== ===========
Liabilities
and Stockholders'
Equity
- --------------
Interest-bearing
liabilities:
Deposits:
NOW accounts $ 92,640 60 0.26% $ 63,473 23 0.14%
Savings
accounts 129,418 436 1.34 82,964 385 1.84
Money
market
savings
accounts 243,669 1,179 1.92 266,336 748 1.11
Certificate
of deposit
accounts 635,772 5,426 3.39 304,262 2,048 2.67
----------- -------- ----------- --------
Total
deposits 1,101,499 7,101 2.56 717,035 3,204 1.77
Borrowed
funds 412,412 4,145 3.93 315,189 2,626 3.26
Subordinated
debt 12,238 201 6.43 - - -
----------- -------- ----------- --------
Total
interest
bearing
liabil-
ities 1,526,149 11,447 2.98% 1,032,224 5,830 2.24%
-------- ----- -------- -----
Non-interest-
bearing demand
checking
accounts 65,286 38,435
Other
liabilities 17,206 13,989
----------- -----------
Total
liabilities 1,608,641 1,084,648
Stockholders'
equity 601,776 585,167
----------- -----------
Total
liabilities
and stock-
holders'
equity $2,210,417 $1,669,815
=========== ===========
Net interest
income (tax
equivalent
basis)/
interest rate
spread (4) 17,007 2.33% 13,296 2.36%
===== =====
Less adjustment of
tax exempt
income 95 33
-------- --------
Net interest
income $16,912 $13,263
======== ========
Net interest
margin (5) 3.19% 3.21%
===== =====
(1) Tax exempt income on debt and equity securities is included on a
tax equivalent basis.
(2) Average balances include unrealized gains (losses) 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) Interest rate spread represents the difference between the yield
on interest-earning assets and the cost of interest-bearing
liabilities.
(5) 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,
----------------- ---------------
2005 2004 2005 2004
-------- -------- ------- -------
Performance Ratios (annualized):
Return on average assets 1.00% 0.96% 1.01% 1.10%
Return on average stockholders'
equity 3.68% 2.73% 3.61% 2.99%
Interest rate spread 2.33% 2.36% 2.48% 2.34%
Net interest margin 3.19% 3.21% 3.24% 3.21%
Dividends paid per share during
period $0.085 $0.085 $0.74 $0.74
At At At
December September December
31, 30, 31,
2005 2005 2004
-------- --------- --------
(Dollars in thousands
except per share data)
Capital Ratio:
Stockholders' equity to total assets 27.20% 27.25% 34.52%
Asset Quality:
Non-performing loans $ 480 $ 300 $ 111
Non-performing assets 973 1,869 439
Allowance for loan losses 22,248 21,900 17,540
Allowance for loan losses as a percent
of total loans 1.36% 1.35% 1.38%
Non-performing assets as a percent of
total assets 0.04% 0.08% 0.03%
Per Share Data:
Book value per share $ 9.78 $ 9.77 $ 9.89
Tangible book value per share $ 9.05 $ 9.03 $ 9.89
Market value per share $ 14.17 $ 15.82 $ 16.32
CONTACT: Brookline Bancorp, Inc.
Paul R. Bechet, 617-730-3500
Chief Financial Officer