Exhibit 99.1
Brookline Bancorp Announces 2006 Third Quarter Earnings and
Dividend Declaration
BROOKLINE, Mass.--(BUSINESS WIRE)--Oct. 19, 2006--Brookline
Bancorp, Inc. (the "Company") (NASDAQ:BRKL) announced today its
earnings for the 2006 third quarter and approval by the Board of
Directors of a regular quarterly dividend of $0.085 per share payable
November 15, 2006 to stockholders of record on October 31, 2006.
The Company earned $5,109,000, or $0.08 per share on a basic and
diluted basis, for the quarter ended September 30, 2006 compared to
$5,521,000, or $0.09 per share on a basic and diluted basis, for the
quarter ended September 30, 2005. As a result of a change in policy
regarding the timing of dividend declarations, the Federal Home Loan
Bank of Boston ("FHLB") declared cash dividends on its common stock in
the 2006 third quarter that were equivalent to two quarters of income.
FHLB dividend income in the 2006 and 2005 quarters was $761,000 and
$239,000, respectively. Of the 2006 amount, $378,000 ($220,000 on an
after-tax basis) is the amount that would have been recognized in the
2006 second quarter if the FHLB had not changed its policy. After
exclusion of the extra quarterly dividend, the decline in net income
was due primarily to the rise in the provision for loan losses from
$32,000 in the 2005 quarter to $813,000 in the 2006 quarter. The
considerably lower provision in the 2005 quarter was due primarily to
a $650,000 credit resulting from payoff of loans acquired in the
January 2005 Mystic transaction, including certain higher risk loans.
Net income was also affected by the adverse consequences of an
inverted yield curve environment. The negative effect of these factors
on net income was softened by the additional earnings resulting from
the purchase of a controlling interest in Eastern Funding LLC
("Eastern") on April 13, 2006.
Net income for the nine months ended September 30, 2006 was
$15,435,000, or $0.25 per share on a basic and diluted basis, compared
to $16,494,000, or $0.27 per share on a basic and diluted basis, for
the nine months ended September 30, 2005. Included in the 2006 and
2005 nine month periods were after-tax securities gains of $358,000
and $547,000, respectively. Excluding securities gains, the $870,000,
or 5.5%, decline in net income was attributable primarily to a
$1,196,000 ($696,000 on an after-tax basis) reduction in mortgage loan
prepayment fees in the 2006 period compared to the 2005 period and the
adverse consequences of the inverted yield curve environment.
Interest rate spread has been declining steadily from 2.59% in the
2005 first quarter to 2.42% in the 2005 third quarter and to 2.17% in
the 2006 third quarter (2.11% after exclusion of the extra FHLB
dividend received in that quarter). The trend in net interest margin
has been similar to that in interest rate spread, although less
pronounced in the degree of decline. Net interest margin was 3.20% in
the 2005 third quarter compared to 3.15% in the 2006 third quarter
(3.11% after exclusion of the extra FHLB dividend). Net interest
margin has been aided in the 2006 second and third quarters by
inclusion of the higher yielding Eastern loan portfolio. Improvement
in interest rate spread and net interest margin will continue to be
difficult to achieve until the slope in the yield curve commences an
upward movement.
While interest income (excluding the extra FHLB dividend) was 27%
higher in the 2006 third quarter than in the 2005 third quarter,
interest expense rose 64% between the two quarterly periods. The
significant increase in expense resulted from a rising interest rate
environment triggered by rate setting actions of the Federal Reserve,
increased competition for deposits and a shift in the mix of deposits.
Customarily, higher rates are paid on certificates of deposit than on
transaction accounts. Retail certificates of deposit comprised 61% of
total retail deposits at September 30, 2006 compared to 55% at
December 31, 2005 and 52% at September 30, 2005. As to asset yields,
rates earned on mortgage loans generally are higher than the rates
earned on most of the Company's other interest-earning assets. Over
the past year, mortgage loan pricing has been subjected to increased
competitive pressure and, as a result, it has been increasingly
difficult to incorporate the rise in funding costs into the pricing of
new loan originations. Due in part to this development, the average
balance of mortgage loans outstanding was $13.8 million less in the
2006 third quarter compared to the 2006 second quarter and $11.9
million less in the 2006 nine month period compared to the 2005 nine
month period.
The provision for loan losses is comprised of amounts related to
indirect automobile lending, the Eastern portfolio and the remainder
of the Company's loan portfolio. The provisions related to indirect
automobile lending in the 2006 and 2005 quarters were $850,000 and
$692,000, respectively, and in the 2006 and 2005 nine month periods
$2,355,000 and $2,019,000, respectively. The higher amounts resulted
from increases in loans outstanding from $369 million at the end of
2004 to $459 million at the end of 2005 and $531 million at September
30, 2006. Net charge-offs in the 2006 and 2005 nine month periods were
$1,380,000 and $863,000, respectively, or annualized rates of 0.36%
and 0.28%, respectively, based on average indirect automobile loans
outstanding during those periods. Indirect automobile loans delinquent
more than 30 days were $4.8 million or 0.91% of the portfolio at
September 30, 2006 compared to $5.3 million, or 1.01% of the
portfolio, at June 30, 2006 and $5.5 million, or 1.21% of the
portfolio, at December 31, 2005.
The provision for loan losses related to the Eastern portfolio was
$238,000 in the 2006 third quarter and $415,000 since the acquisition
of a controlling interest by the Company in April 2006. The Eastern
portfolio has increased from $106 million since the acquisition to
$125 million at September 30, 2006. Loans delinquent over 30 days
amounted to $2,077,000, or 1.66% of total loans at September 30, 2006.
Of that amount, $796,000 is on non-accrual; additionally $400,000 is
included in non-performing assets as equipment in possession. The rate
of losses on Eastern loans will normally exceed that experienced in
the other segments of the Company's loan portfolio because of the
higher risk characteristics associated with those loans. Likewise, the
yields earned on those loans are substantially higher than those
earned on the other loan segments.
Regarding the remainder of the loan portfolio, credits to the
provision for loan losses of $275,000 and $660,000 were taken to
income in the 2006 and 2005 third quarters, respectively, and $350,000
and $376,000 were taken to income in the 2006 and 2005 nine month
periods, respectively. Such credits resulted from reductions in loans
outstanding caused by payoffs.
The decline in non-interest income in the 2006 nine month period
compared to the 2005 nine month period was due primarily to the
decreases in mortgage loan prepayment fees and securities gains
mentioned earlier as well as the change in the reporting of the
Company's share of Eastern's earnings from the equity method before
the date of the acquisition to inclusion in the consolidated results
subsequent to the date of acquisition.
Non-interest expenses in the 2005 nine month period included
$894,000 of merger/conversion expenses related to the Mystic
acquisition. Excluding those expenses, the increases in non-interest
expenses in the 2006 quarterly and nine month periods compared to the
2005 quarterly and nine month periods were due primarily to the
inclusion of Eastern's expenses since the date of the acquisition, the
expenses related to a new branch that opened in April 2006, the hiring
of new loan officers, and higher processing and servicing costs
resulting from growth of the indirect automobile loan portfolio.
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. 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)
September 30, December 31, September 30,
2006 2005 2005
------------- ------------ -------------
ASSETS
- ------------------------------
Cash and due from banks $ 16,483 $ 15,507 $ 16,004
Short-term investments 97,454 102,888 133,707
Securities available for sale 367,373 374,906 349,813
Securities held to maturity
(market value of $754, $423
and $857, respectively) 745 410 841
Restricted equity securities 28,567 23,081 23,081
Loans 1,800,408 1,636,755 1,620,090
Allowance for loan losses (25,066) (22,248) (21,900)
------------ ------------ -------------
Net loans 1,775,342 1,614,507 1,598,190
------------ ------------ -------------
Other investment - 4,662 4,545
Accrued interest receivable 10,697 9,189 8,609
Bank premises and equipment,
net 9,681 10,010 11,198
Other real estate owned - - 1,150
Deferred income tax asset 11,581 11,347 9,486
Prepaid income taxes 1,690 - 1,813
Goodwill 42,489 35,615 35,615
Identified intangible assets,
net of accumulated
amortization of $4,035,
$2,370 and $1,777,
respectively 8,917 9,471 10,064
Other assets 4,453 3,111 2,972
------------- ------------ -------------
Total assets $ 2,375,472 $ 2,214,704 $ 2,207,088
============= ============ =============
LIABILITIES AND STOCKHOLDERS'
EQUITY
- ------------------------------
Retail deposits $ 1,187,700 $ 1,168,307 $ 1,153,854
Brokered deposits 78,096 - -
Borrowed funds 489,537 411,507 421,896
Subordinated debt 12,123 12,218 12,249
Mortgagors' escrow accounts 5,580 5,377 5,465
Income taxes payable - 630 -
Accrued expenses and other
liabilities 20,223 14,215 12,118
------------- ------------ -------------
Total liabilities 1,793,259 1,612,254 1,605,582
------------- ------------ -------------
Minority interest in
subsidiary 1,331 - -
------------- ------------ -------------
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 issued 630 630 630
Additional paid-in capital 507,056 512,338 512,163
Retained earnings, partially
restricted 95,938 121,042 120,620
Accumulated other
comprehensive loss (A) (1,091) (1,577) (1,158)
Treasury stock, at cost -
1,405,611 shares (18,144) (18,144) (18,144)
Unearned compensation -
recognition and retention
plans - (8,103) (8,779)
Unallocated common stock
held by ESOP - 643,104
shares, 685,161 shares and
701,623 shares,
respectively (3,507) (3,736) (3,826)
------------- ------------ -------------
Total stockholders'
equity 580,882 602,450 601,506
------------- ------------ -------------
Total liabilities and
stockholders' equity $ 2,375,472 $ 2,214,704 $ 2,207,088
============= ============ =============
(A) Represents net unrealized 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 Nine months ended
September 30, September 30,
----------------------- -----------------------
2006 2005 2006 2005
----------- ----------- ----------- -----------
Interest income:
Loans $ 29,154 $ 22,830 $ 81,356 $ 66,908
Debt securities 3,774 2,876 11,033 7,787
Marketable equity
securities 30 78 93 228
Restricted equity
securities 763 241 1,074 699
Short-term
investments 1,436 1,259 3,874 3,115
----------- ----------- ----------- -----------
Total interest
income 35,157 27,284 97,430 78,737
----------- ----------- ----------- -----------
Interest expense:
Retail deposits 9,523 6,159 25,354 16,071
Brokered deposits 968 - 1,605 -
Borrowed funds 6,256 3,994 17,313 11,048
Subordinated debt 236 182 667 485
----------- --------- ----------- -----------
Total interest
expense 16,983 10,335 44,939 27,604
----------- --------- ----------- -----------
Net interest income 18,174 16,949 52,491 51,133
Provision for loan
losses 813 32 2,420 1,643
----------- --------- ----------- -----------
Net interest income
after provision
for loan losses 17,361 16,917 50,071 49,490
----------- --------- ----------- -----------
Non-interest income:
Fees and charges 829 798 2,362 2,851
Gains on securities,
net - - 558 853
Equity interest in
earnings from other
investment - 110 1 328
Other income 8 20 27 92
----------- ----------- ----------- -----------
Total non-interest
income 837 928 2,948 4,124
----------- ----------- ----------- -----------
Non-interest expense:
Compensation and
employee benefits 5,027 4,000 14,462 11,929
Occupancy 837 721 2,396 2,111
Equipment and data
processing 1,538 1,361 4,478 4,547
Advertising and
marketing 294 352 749 807
Merger/conversion - 1 - 894
Amortization of
identified
intangibles 526 593 1,579 1,778
Other 1,410 1,602 3,670 3,858
----------- ----------- ----------- -----------
Total non-interest
expense 9,632 8,630 27,334 25,924
----------- ----------- ----------- -----------
Income before income
taxes and minority
interest 8,566 9,215 25,685 27,690
Provision for income
taxes 3,383 3,694 10,109 11,196
----------- ----------- ----------- -----------
Net income before
minority interest 5,183 5,521 15,576 16,494
Minority interest in
earnings of
subsidiary 74 - 141 -
----------- ----------- ----------- -----------
Net income $ 5,109 $ 5,521 $ 15,435 $ 16,494
=========== =========== =========== ===========
Earnings per common
share:
Basic $ 0.08 $ 0.09 $ 0.25 $ 0.27
Diluted 0.08 0.09 0.25 0.27
Weighted average common
shares outstanding
during the period:
Basic 60,387,098 60,108,206 60,353,648 60,026,232
Diluted 61,060,561 60,948,961 61,064,942 60,830,950
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Average Yields / Costs
Three months ended September 30,
--------------------------------------
2006
------------------------------------
Average
Average Interest yield/
balance (1) cost
------------- ----------- ----------
(Dollars in thousands)
Assets
- --------------------------------
Interest-earning assets:
Short-term investments $ 108,992 $ 1,436 5.23%
Debt securities (2) 349,759 3,865 4.42
Equity securities (2) (4) 31,215 805 10.23
Mortgage loans (3) 1,075,151 17,305 6.44
Commercial loans - Eastern
Funding (3) 122,349 3,338 10.82
Other commercial loans (3) 67,866 1,190 7.01
Indirect automobile loans (3) 541,343 7,263 5.32
Other consumer loans (3) 3,058 58 7.59
------------ ----------
Total interest-earning assets 2,299,733 35,260 6.11%
---------- ----------
Allowance for loan losses (25,000)
Non-interest earning assets 104,092
------------
Total assets $ 2,378,825
============
Liabilities and Stockholders'
Equity
- --------------------------------
Interest-bearing liabilities:
Deposits:
NOW accounts $ 86,869 54 0.25%
Savings accounts 111,492 478 1.70
Money market savings accounts 221,066 1,458 2.62
Retail certificates of
deposit 694,076 7,533 4.31
------------ ----------
Total retail deposits 1,113,503 9,523 3.39
Brokered certificates of
deposit 71,574 968 5.37
------------ ----------
Total deposits 1,185,077 10,491 3.51
Borrowed funds 512,691 6,256 4.77
Subordinated debt 12,144 236 7.60
------------ ----------
Total interest bearing
liabilities 1,709,912 16,983 3.94%
---------- ----------
Non-interest-bearing demand
checking accounts 59,864
Other liabilities 24,088
------------
Total liabilities 1,793,864
Stockholders' equity 584,961
------------
Total liabilities and
stockholders' equity $ 2,378,825
============
Net interest income (tax
equivalent basis)/interest rate
spread (5) 18,277 2.17%
==========
Less adjustment of tax exempt
income 103
----------
Net interest income $ 18,174
==========
Net interest margin (6) 3.15%
==========
Three months ended September 30,
-------------------------------------
2005
-------------------------------------
Average
Average Interest yield/
balance (1) cost
------------- ---------- -----------
(Dollars in thousands)
Assets
- --------------------------------
Interest-earning assets:
Short-term investments $ 148,957 $ 1,259 3.35%
Debt securities (2) 341,734 2,943 3.45
Equity securities (2) (4) 31,572 348 4.38
Mortgage loans (3) 1,089,451 16,762 6.15
Commercial loans - Eastern
Funding (3) - - -
Other commercial loans (3) 73,321 1,124 6.11
Indirect automobile loans (3) 444,258 4,892 4.37
Other consumer loans (3) 3,117 52 7.19
----------- ----------
Total interest-earning assets 2,132,410 27,380 5.12%
---------- -----------
Allowance for loan losses (22,253)
Non-interest earning assets 99,631
-----------
Total assets $ 2,209,788
===========
Liabilities and Stockholders'
Equity
- --------------------------------
Interest-bearing liabilities:
Deposits:
NOW accounts $ 96,616 45 0.18%
Savings accounts 143,306 507 1.40
Money market savings accounts 260,271 1,161 1.77
Retail certificates of
deposit 583,760 4,446 3.02
----------- ----------
Total retail deposits 1,083,953 6,159 2.25
Brokered certificates of
deposit - - -
----------- ----------
Total deposits 1,083,953 6,159 2.25
Borrowed funds 424,401 3,994 3.68
Subordinated debt 12,269 182 5.77
----------- ----------
Total interest bearing
liabilities 1,520,623 10,335 2.70%
---------- -----------
Non-interest-bearing demand
checking accounts 67,711
Other liabilities 14,694
-----------
Total liabilities 1,603,028
Stockholders' equity 606,760
-----------
Total liabilities and
stockholders' equity $ 2,209,788
===========
Net interest income (tax
equivalent basis)/interest rate
spread (5) 17,045 2.42%
===========
Less adjustment of tax exempt
income 96
----------
Net interest income $ 16,949
==========
Net interest margin (6) 3.20%
===========
(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) The Federal Home Loan Bank ("FHLB") changed the timing of its
declaration of dividends on its common stock. As a result, no dividend
was declared by the FHLB in the second quarter of 2006 and,
accordingly, no dividend income was recognized by the Company in that
period. In the third quarter of 2006, the FHLB declared dividends that
were equivalent to two quarterly periods. The amount of dividend
income recognized by the Company in the third quarter of 2006 and 2005
was $761 and $239, respectively. The yield on average interest-earning
assets in the three months ended September 30, 2006 was 0.06% higher
than it otherwise would have been if the equivalent of an extra
quarterly dividend had not been received during that three month
period.
(5) Interest rate spread represents the difference between the
yield on interest-earning assets and the cost of interest-bearing
liabilities.
(6) 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,
------------------ -----------------
2006 2005 2006 2005
--------- -------- -------- --------
Performance Ratios (annualized):
Return on average assets 0.86% 1.00% 0.89% 1.01%
Return on average stockholders'
equity 3.49% 3.64% 3.48% 3.59%
Interest rate spread 2.17% 2.42% 2.16% 2.51%
Net interest margin 3.15% 3.20% 3.13% 3.25%
Dividends paid per share during
period $ 0.285 $ 0.285 $ 0.655 $ 0.655
At At At
September December September
30, 31, 30,
2006 2005 2005
----------- --------------------
(Dollars in thousands except per
share data)
Capital Ratio:
Stockholders' equity to total
assets 24.45% 27.20% 27.25%
Asset Quality:
Non-performing loans $ 1,063 $ 480 $ 300
Non-performing assets 2,299 973 1,869
Allowance for loan losses 25,066 22,248 21,900
Allowance for loan losses as a
percent of total loans 1.39% 1.36% 1.35%
Non-performing assets as a percent
of total assets 0.10% 0.04% 0.08%
Per Share Data:
Book value per share $ 9.43 $ 9.78 $ 9.77
Tangible book value per share $ 8.60 $ 9.05 $ 9.03
Market value per share $ 13.75 $ 14.17 $ 15.82
CONTACT: Brookline Bancorp, Inc.
Paul R. Bechet, 617-278-6405