Exhibit 99.1
Brookline Bancorp Announces 2007 Third Quarter Earnings
and Dividend Declaration
BROOKLINE, Mass.--(BUSINESS WIRE)--Oct. 18, 2007--Brookline
Bancorp, Inc. (the "Company") (NASDAQ: BRKL) announced today its
earnings for the 2007 third quarter and approval by the Board of
Directors of a regular quarterly dividend of $0.085 per share payable
November 15, 2007 to stockholders of record on October 31, 2007.
The Company earned $4,249,000, or $0.07 per share on a basic and
diluted basis, for the quarter ended September 30, 2007 compared to
$5,109,000, or $0.08 per share on a basic and diluted basis, for the
quarter ended September 30, 2006. The decline in net income was
attributable primarily to lower dividend income from the Federal Home
Loan Bank of Boston ("FHLB"), a higher provision for loan losses and
higher expenses for professional services and loan collection costs.
As a result of a change in policy regarding the timing of dividend
declarations, the FHLB declared cash dividends on its common stock in
the 2006 third quarter that were equivalent to two quarters of income.
Of the $761,000 of dividend income received in the 2006 third quarter,
$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.
Net income for the nine months ended September 30, 2007 was
$14,043,000, or $0.24 per share ($0.23 per share on a diluted basis),
compared to $15,435,000, or $0.25 per share on a basic and diluted
basis. These earnings include the operating results of Eastern Funding
LLC ("Eastern") since April 2006, the date the Company acquired a
controlling interest in Eastern. The 2006 period included gains on the
sale of marketable equity securities of $558,000 ($358,000 on an
after-tax basis); no securities were sold in the 2007 period. The
decline in net income was also attributable primarily to the same
factors depressing third quarter results, exclusive of the FHLB
dividend matter.
Interest rate spread declined from 2.16% in the 2006 nine month
period to 2.13% in the 2007 nine month period and from 2.17% in the
2006 third quarter to 2.14% in the 2007 third quarter, but improved
from 2.11% in the 2007 first quarter and 2.13% in the 2007 second
quarter. Net interest margin increased from 3.13% in the 2006 nine
month period to 3.18% in the 2007 nine month period. The improvement
in net interest margin resulted primarily from an increase in higher
yielding loans. Net interest margin, however, declined from 3.20% in
the 2007 first quarter to 3.18% in the 2007 second quarter and 3.16%
in the 2007 third quarter. The decline was due to a reduction in
stockholders' equity resulting primarily from repurchases of the
Company's common stock. The inverted yield curve, which existed for
some time, started to modestly slope upward in the 2007 second
quarter. Meaningful improvement in interest rate spread and net
interest margin, however, will continue to be difficult until the
yield curve becomes more upward in slope.
Interest income was 11% higher in the first nine months of 2007
than in the first nine months of 2006. Net interest income, however,
increased only 3% as interest expense rose 21%. The Company's mix of
deposits continued to shift from lower rate transaction deposit
accounts to higher rate certificates of deposit. Certificates of
deposit comprised 64% of total retail deposits at September 30, 2007
compared to 61% at December 31, 2006.
The average rate earned on mortgage loans, the Company's largest
asset category, declined from 6.44% in the 2006 third quarter to 6.34%
in the 2007 third quarter. Over the past year, it was increasingly
difficult to incorporate rising funding costs into the pricing of
mortgage loan originations. Some financial institutions and other
entities active in mortgage lending sought to enhance yields by
originating higher risk mortgage loans. The Company refrained from
such originations and, at September 30, 2007, its loan portfolio did
not include any subprime mortgage loans. The decision to maintain high
underwriting standards and aggressive loan pricing by competitors
resulted in less loan originations and a decline of $56 million in the
average balance of mortgage loans outstanding in the first nine months
of 2006 compared to the first nine months of 2007. Mortgage loans, net
of unadvanced funds, amounted to $1.02 billion at September 30, 2007.
Offsetting a decline in mortgage loan income was interest income
derived from indirect automobile ("auto") loans, Eastern loans and
commercial loans. The average balance of auto loans outstanding
increased $77 million in the 2007 nine month period compared to the
2006 nine month period and $22 million in the 2007 third quarter
compared to the 2007 second quarter. Auto loans amounted to $606
million at September 30, 2007. Of greater importance was the increase
in the yield on auto loans in those respective periods from 5.01% to
6.09% and from 6.14% to 6.31%. The average balance of Eastern loans
outstanding increased from $129 million in the 2007 second quarter to
$140 million in the 2007 third quarter. The yields on those loans were
10.70% and 10.57%, respectively. The average balance of commercial
loans grew $6.8 million in the 2007 third quarter to $76 million and
the average yield on those loans was 7.14%.
The provision for loan losses, which is comprised of amounts
relating to the auto loan portfolio, the Eastern loan portfolio and
the remainder of the Company's loan portfolio, was $1,503,000 in the
2007 third quarter compared to $813,000 in the 2006 third quarter and
$3,860,000 in the 2007 nine month period compared to $2,420,000 in the
2006 nine month period.
The amounts provided for auto loan losses in the 2007 and 2006
third quarters were $1,389,000 and $850,000, respectively, and
$3,012,000 and $2,355,000, respectively, in the 2007 and 2006 nine
month periods. The increases resulted from higher loan balances and a
rise in charge-offs. Net charge-offs were $1,232,000 in the 2007 third
quarter (resulting in an annualized rate of net charge-offs of 0.80%
based on the average balance of loans outstanding) and $2,527,000 in
the 2007 nine month period (0.57% annualized rate of net charge-offs).
Net charge-offs in the 2006 nine month period were $1,381,000 (0.36%
annualized rate of net charge-offs). Loans delinquent 30 days or more
were $7,437,000, or 1.23% of loans outstanding at September 30, 2007,
compared to $7,092,000 (1.31%) at December 31, 2006. The rise in net
charge-offs is due primarily to economic pressures affecting the
ability of consumers to service their debt and larger per unit losses
upon auto repossession due to weaker demand and slowing retail auto
business activity.
The provisions for loan losses related to the Eastern portfolio in
the 2007 and 2006 third quarters were $114,000 and $238,000,
respectively, $823,000 in the 2007 nine month period and $415,000 in
the six month period ended September 30, 2006. Net charge-offs
declined from $391,000 in the 2007 first quarter to $288,000 in the
2007 second quarter and $63,000 in the 2007 third quarter, which was
aided by recoveries of $179,000 in that quarter. The resulting
annualized rate of net charge-offs for the 2007 nine month period was
0.75% of average loans outstanding. Loans delinquent 30 days or more
increased from $1,436,000 (1.13% of total loans) at December 31, 2006
to $2,002,000 (1.45%) at June 30, 2007 and $3,414,000 (2.44%) at
September 30, 2007. Loans on non-accrual at those respective dates
were $657,000 (0.52% of total loans), $2,254,000 (1.63%) and
$2,169,000 (1.55%). The total allowance for loan losses related to
Eastern's loans was $2,377,000, or 1.80% of loans outstanding at
September 30, 2007 (excluding seasoned loans purchased at the end of
the 2007 second quarter). Despite a much lower rate of charge-off
experience, the allowance is maintained at 1.80% in recognition of the
higher risk exposure associated with Eastern's loans. The higher risk
exposure is the reason why the rates charged on the loans are
significantly above those on other segments of the Company's loan
portfolio.
Regarding the remainder of the Company's loan portfolio, which is
comprised primarily of mortgage loans and commercial loans, the
provisions for loan losses in the 2007 third quarter and nine month
period were none and $25,000, respectively. In the 2006 third quarter
and nine month period, credits to the provision for loan losses of
$275,000 and $350,000, respectively, were taken to income as a result
of reductions in loans outstanding caused by payoffs. No mortgage
loans or commercial loans were charged off in 2007 or 2006. Loans
delinquent 30 days or more at September 30, 2007 were insignificant at
$956,000.
Excluding securities gains, the increases in non-interest income
in the 2007 third quarter and nine month periods compared to the same
periods for 2006 were due primarily to higher deposit service and loan
fees, including fees from prepayment of loans.
Non-interest expenses were $763,000, or 7.9%, higher in the 2007
third quarter than in the 2006 third quarter due primarily to higher
expenses related to auto loan growth, higher marketing expenses for
promotion of deposit programs, higher legal fees and higher costs for
loan collections and auto repossessions. The $3,116,000, or 11.4%,
increase in non-interest expenses for the 2007 nine month period
compared to the 2006 nine month period was due primarily to the
inclusion of Eastern for only six months in 2006, higher professional
fees for legal and audit services, and higher costs for loan
collections and auto repossessions.
During the 2007 third quarter, the Company repurchased 457,300
shares of its common stock at a total cost of $4,831,000, or $10.56
per share including transaction costs. In the 2007 nine month period,
the Company repurchased 2, 517,300 shares of its common stock at a
total cost of $29,671,000, or $11.79 per share including transaction
costs. The foregone interest income resulting from the stock
repurchases was approximately $357,000 in the 2007 third quarter and
$527,000 in the 2007 nine month period. As of September 30, 2007, the
Company remained authorized by the Board of Directors to repurchase an
additional 3,755,232 shares.
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 December September
30, 31, 30,
2007 2006 2006
----------- ----------- -----------
ASSETS
Cash and due from banks $ 15,665 $ 18,237 $ 16,483
Short-term investments 130,254 134,417 97,454
Securities available for sale 265,424 335,246 367,373
Securities held to maturity
(market value of $203, $242 and
$754, respectively) 195 233 745
Restricted equity securities 26,563 28,567 28,567
Loans 1,892,087 1,792,062 1,800,408
Allowance for loan losses (23,461) (23,024) (25,066)
---------- ---------- ----------
Net loans 1,868,626 1,769,038 1,775,342
---------- ---------- ----------
Accrued interest receivable 9,897 10,310 10,697
Bank premises and equipment, net 9,267 9,335 9,681
Deferred tax asset 10,936 11,036 11,581
Prepaid income taxes 1,089 1,801 1,690
Goodwill 42,545 42,545 42,489
Identified intangible assets, net
of accumulated amortization of
$6,115, $4,604 and $4,035,
respectively 6,837 8,348 8,917
Other assets 4,608 3,927 4,453
---------- ---------- ----------
Total assets $2,391,906 $2,373,040 $2,375,472
========== ========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
- ----------------------------------
Retail deposits $1,244,642 $1,210,206 $1,187,700
Brokered deposits 67,991 78,060 78,096
Borrowed funds 512,019 463,806 489,537
Subordinated debt 7,024 12,092 12,123
Mortgagors' escrow accounts 5,429 5,114 5,580
Accrued expenses and other
liabilities 21,997 19,494 20,223
---------- ---------- ----------
Total liabilities 1,859,102 1,788,772 1,793,259
---------- ---------- ----------
Minority interest in subsidiary 1,321 1,375 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;
63,256,281 shares, 62,989,384
shares and 62,989,384 shares
issued, respectively 633 630 630
Additional paid-in capital 511,758 508,248 507,056
Retained earnings, partially
restricted 70,109 96,229 95,938
Accumulated other comprehensive
income (loss) 7 (640) (1,091)
Treasury stock, at cost -
3,922,911 shares, 1,405,611
shares and 1,405,611 shares,
respectively (47,815) (18,144) (18,144)
Unallocated common stock held by
ESOP - 588,500 shares, 629,081
shares and 643,104 shares,
respectively (3,209) (3,430) (3,507)
---------- ---------- ----------
Total stockholders' equity 531,483 582,893 580,882
---------- ---------- ----------
Total liabilities and
stockholders' equity $2,391,906 $2,373,040 $2,375,472
========== ========== ==========
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands except share data)
Three months ended Nine months ended
September 30, September 30,
--------------------- ---------------------
2007 2006 2007 2006
---------- ---------- ---------- ----------
Interest income:
Loans $31,258 $29,154 $ 91,181 $81,356
Debt securities 3,342 3,774 10,682 11,033
Marketable equity
securities 15 30 50 93
Restricted equity
securities 469 763 1,353 1,074
Short-term investments 1,759 1,436 5,242 3,874
---------- ---------- ---------- ----------
Total interest income 36,843 35,157 108,508 97,430
---------- ---------- ---------- ----------
Interest expense:
Retail deposits 11,476 9,523 33,332 25,354
Brokered deposits 1,019 968 3,092 1,605
Borrowed funds 6,211 6,256 17,371 17,313
Subordinated debt 140 236 531 667
---------- ------ ---------- ----------
Total interest expense 18,846 16,983 54,326 44,939
---------- ------ ---------- ----------
Net interest income 17,997 18,174 54,182 52,491
Provision for loan losses 1,503 813 3,860 2,420
---------- ------ ---------- ----------
Net interest income
after provision for
loan losses 16,494 17,361 50,322 50,071
---------- ------ ---------- ----------
Non-interest income:
Fees and charges 926 829 3,217 2,362
Gains on securities, net - - - 558
Other income 1 8 40 28
---------- ---------- ---------- ----------
Total non-interest
income 927 837 3,257 2,948
---------- ---------- ---------- ----------
Non-interest expense:
Compensation and
employee benefits 5,227 5,027 15,712 14,462
Occupancy 854 837 2,545 2,396
Equipment and data
processing 1,700 1,538 4,872 4,478
Professional services 462 365 1,477 1,007
Advertising and
marketing 406 294 813 749
Amortization of
identified intangibles 503 569 1,510 1,665
Other 1,243 1,002 3,521 2,577
---------- ---------- ---------- ----------
Total non-interest
expense 10,395 9,632 30,450 27,334
---------- ---------- ---------- ----------
Income before income taxes
and minority interest 7,026 8,566 23,129 25,685
Provision for income taxes 2,711 3,383 8,932 10,109
---------- ---------- ---------- ----------
Net income before
minority interest 4,315 5,183 14,197 15,576
Minority interest in
earnings of subsidiary 66 74 154 141
---------- ---------- ---------- ----------
Net income $ 4,249 $ 5,109 $ 14,043 $15,435
========== ========== ========== ==========
Earnings per common share:
Basic $ 0.07 $ 0.08 $ 0.24 $ 0.25
Diluted 0.07 0.08 0.23 0.25
Weighted average common
shares outstanding during
the period:
Basic 58,541,627 60,387,098 59,597,169 60,353,648
Diluted 59,020,681 61,060,561 60,171,865 61,064,942
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Average Yields / Costs
Three months ended September 30,
-----------------------------------------------------
2007 2006
-----------------------------------------------------
Average Average
Average Interest yield/ Average Interest yield/
balance (1) cost balance (1) cost
---------- -------- ------------------------- -------
(Dollars in thousands)
Assets
- ----------------
Interest-earning
assets:
Short-term
investments $ 134,882 1,759 5.17% $ 108,992 $ 1,436 5.23%
Debt
securities
(2) 269,968 3,428 5.08 349,759 3,865 4.42
Equity
securities
(2) (4) 27,704 490 7.02 31,215 805 10.23
Mortgage loans
(3) 1,029,843 16,316 6.34 1,075,151 17,305 6.44
Commercial
loans -
Eastern
Funding (3) 140,105 3,703 10.57 122,349 3,338 10.82
Other
commercial
loans (3) 76,076 1,358 7.14 67,866 1,190 7.01
Indirect
automobile
loans (3) 616,968 9,815 6.31 541,343 7,263 5.32
Other consumer
loans (3) 3,450 66 7.65 3,058 58 7.59
--------- -------- --------- -------
Total
interest-
earning
assets 2,298,996 36,935 6.41% 2,299,733 35,260 6.11%
-------- ----- ------- -----
Allowance for
loan losses (23,310) (25,000)
Non-interest
earning assets 99,626 104,092
---------- ----------
Total assets $2,375,312 $2,378,825
========== ==========
Liabilities and
Stockholders'
Equity
- ----------------
Interest-bearing
liabilities:
Deposits:
NOW accounts $ 81,869 63 0.31% $ 86,869 54 0.25%
Savings
accounts 90,684 360 1.57 111,492 478 1.70
Money market
savings
accounts 224,967 1,628 2.87 221,066 1,458 2.62
Retail
certificates
of deposit 767,063 9,425 4.87 694,076 7,533 4.31
---------- -------- ---------- -------
Total retail
deposits 1,164,583 11,476 3.91 1,113,503 9,523 3.39
Brokered
certificates
of deposit 74,996 1,019 5.39 71,574 968 5.37
---------- -------- ---------- -------
Total deposits 1,239,579 12,495 4.00 1,185,077 10,491 3.51
Borrowed funds 502,870 6,211 4.83 512,691 6,256 4.77
Subordinated
debt 7,034 140 7.79 12,144 236 7.60
---------- -------- ---------- -------
Total interest
bearing
liabilities 1,749,483 18,846 4.27% 1,709,912 16,983 3.94%
-------- ----- ------- -----
Non-interest-
bearing demand
checking
accounts 63,405 59,864
Other
liabilities 25,470 24,088
---------- ----------
Total
liabilities 1,838,358 1,793,864
Stockholders'
equity 536,954 584,961
---------- ----------
Total
liabilities
and
stockholders'
equity
$2,375,312 $2,378,825
========== ==========
Net interest
income (tax
equivalent
basis)/interest
rate spread (5) 18,089 2.14% 18,277 2.17%
===== =====
Less adjustment
of tax exempt
income 92 103
-------- -------
Net interest
income $ 17,997 $18,174
======== =======
Net interest
margin (6) 3.16% 3.11%
===== =====
(1) Tax exempt income on equity securities and municipal bonds 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 was $761. 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 Nine months
ended ended
September 30, September 30,
--------------- ---------------
2007 2006 2007 2006
------- ------- ------- -------
Performance Ratios (annualized):
Return on average assets 0.72% 0.86% 0.79% 0.89%
Return on average stockholders' equity 3.17% 3.49% 3.36% 3.48%
Interest rate spread 2.14% 2.17% 2.13% 2.16%
Net interest margin 3.16% 3.15% 3.18% 3.13%
Dividends paid per share during period $0.285 $0.285 $0.655 $0.655
At At At
September December September
30, 31, 30,
2007 2006 2006
----------- ---------- ---------
(dollars in thousands except per
share data)
Capital Ratio:
Stockholders' equity to total assets 22.22% 24.56% 24.45%
Tangible stockholders' equity to
total assets 20.58% 22.91% 22.78%
Asset Quality:
Non-accrual loans $ 3,373 (A) $ 900 $ 1,063
Non-performing assets 4,820 (A) 1,959 2,299
Allowance for loan losses 23,461 (B) 23,024 (B) 25,066
Allowance for loan losses as a
percent of total loans 1.24% (B) 1.28% (B) 1.39%
Non-performing assets as a percent of
total assets 0.20% 0.08% 0.10%
(A) Non-accrual loans and non-performing assets at June 30, 2007
amounted to $2,986 and $4,224, respectively.
(B) Net of transfers to allowance for unfunded loan commitments of
$1,445 at September 30, 2007 and $1,286 at December 31, 2006, which
are included in other liabilities at those dates. If the transfers
had not been made, the allowance for loan losses as a percent of
total loans would have been 1.32% at September 30, 2007 and 1.36% at
December 31, 2006.
Per Share Data:
Book value per share $ 8.93 $ 9.47 $ 9.43
Tangible book value per share 8.10 8.64 8.60
Market value per share 11.59 13.17 13.75
CONTACT: Brookline Bancorp, Inc.
Paul Bechet, 617-278-6405
Chief Financial Officer