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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
For the quarterly period ended March 31, 2012
Commission file number 0-23695
Brookline Bancorp, Inc. (Exact name of registrant as specified in its charter)
(617) 730-3500 (Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES x NO o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO x
As of May 9, 2012, the number of shares of common stock, par value $0.01 per share, outstanding was 70,040,980.
BROOKLINE BANCORP, INC. AND SUBSIDIARIES FORM 10-Q
PART I — FINANCIAL INFORMATION
BROOKLINE BANCORP, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited)
See accompanying notes to the unaudited consolidated financial statements.
BROOKLINE BANCORP, INC. AND SUBSIDIARIES Consolidated Statements of Income (Unaudited)
See accompanying notes to the unaudited consolidated financial statements.
BROOKLINE BANCORP, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income (Unaudited)
See accompanying notes to the unaudited consolidated financial statements.
BROOKLINE BANCORP, INC. AND SUBSIDIARIES Consolidated Statements of Changes in Equity Three Months Ended March 31, 2012 and 2011 (Unaudited)
(Continued)
BROOKLINE BANCORP, INC. AND SUBSIDIARIES Consolidated Statements of Changes in Equity (Continued) Three Months Ended March 31, 2012 and 2011 (Unaudited)
See accompanying notes to the unaudited consolidated financial statements.
BROOKLINE BANCORP, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited)
(Continued)
BROOKLINE BANCORP, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited) (Continued)
See accompanying notes to the unaudited consolidated financial statements.
BROOKLINE BANCORP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) Three Months Ended March 31, 2012 and 2011
(1) Basis of Presentation
Overview
Brookline Bancorp, Inc. (the “Company”) is a bank holding company (within the meaning of the Bank Holding Company Act of 1956, as amended) and the parent of Brookline Bank, a federally-chartered savings bank; Bank Rhode Island (“BankRI”), a Rhode Island-chartered bank; and The First National Bank of Ipswich (“First Ipswich”), a national bank (collectively referred to as the “Banks”). The Company is also the parent of Brookline Securities Corp. (“BSC”). The Company’s primary business is to provide commercial, business and retail banking services to its corporate, municipal and individual customers through its banks and non-bank subsidiaries.
Brookline Bank, which includes its wholly-owned subsidiaries, BBS Investment Corp. and Longwood Securities Corp., and its 84.8% owned subsidiary, Eastern Funding LLC (“Eastern Funding”), operates 21 full-service banking offices in Brookline and the greater Boston metropolitan area. BankRI, which includes its wholly-owned subsidiaries, BRI Investment Corp., Macrolease Corporation (“Macrolease”), Acorn Insurance Agency, and BRI Realty Corp., operates 17 full-service branches in Providence County, Kent County and Washington County, Rhode Island. First Ipswich, which includes its wholly-owned subsidiaries, First Ipswich Securities II Corp., First Ipswich Insurance Agency, First Ipswich Realty and FNBI Realty, operates six full-service banking offices on the north shore of eastern Massachusetts and in the Boston metropolitan area.
The Company’s activities include acceptance of commercial and retail deposits, origination of mortgage loans on commercial and residential real estate located principally in Massachusetts and Rhode Island, origination of commercial loans and leases to small and mid-sized businesses, origination of indirect automobile loans, investment in debt and equity securities, and the offering of cash management and investment advisory services. The Company also provides specialty equipment financing through its subsidiaries Eastern Funding, which is based in New York City, and Macrolease, which is based in Plainview, New York.
The Company is subject to competition from other financial and non-financial institutions and is supervised, examined and regulated by the Board of Governors of the Federal Reserve System (“FRB”). Brookline Bank and First Ipswich are supervised, examined and regulated by the Office of the Comptroller of the Currency (“OCC”). BankRI is also subject to regulation under the laws of the State of Rhode Island and the jurisdiction of the Banking Division of the Rhode Island Department of Business Regulation and is supervised, examined and regulated by the Federal Deposit Insurance Corporation (“FDIC”), which also insures the Banks’ deposits.
Financial Statements
The Company’s unaudited consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as set forth by the Financial Accounting Standards Board (“FASB”) in its Accounting Standards Codification and through the rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under the authority of federal securities laws. Certain amounts previously reported have been reclassified to conform to the current year’s presentation.
The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances are eliminated in consolidation.
In preparing these unaudited consolidated financial statements, management is required to make significant estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses. Actual results could differ from those estimates based upon changing conditions, including economic conditions, and future events. Material estimates that are particularly susceptible to significant change in the near-term include the determination of the allowance for loan and lease losses, the determination of fair market values of assets and liabilities, the review of goodwill and intangibles for impairment, income tax accounting and status of contingencies.
BROOKLINE BANCORP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) Three Months Ended March 31, 2012 and 2011
The judgments used by management in applying these critical accounting policies may be affected by a further and prolonged deterioration in the economic environment, which may result in changes to future financial results. For example, subsequent evaluations of the loan and lease portfolio, in light of the factors then prevailing, may result in significant changes in the allowance for loan and lease losses in future periods, and the inability to collect outstanding principal may result in increased loan and lease losses.
The unaudited interim results of consolidated operations are not necessarily indicative of the results for any future interim period or for the entire year. These unaudited consolidated financial statements do not include all disclosures associated with annual financial statements and, accordingly, should be read in conjunction with the annual consolidated financial statements and accompanying notes included in the Company’s 2011 Annual Report on Form 10-K and Bancorp Rhode Island’s audited financial statements as of and for the years ended December 31, 2011 and 2010 included in the Company’s Forms 8-K/A filed with the SEC.
(2) Recent Accounting Pronouncements
In May 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirement in U.S. GAAP and IFRSs. This Update results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP and International Financial Reporting Standards (“IFRSs.”). The amendments in this Update explain how to measure fair value. They do not require additional fair value measurements and are not intended to result in a change in the application of current fair value measurement requirements. The amendments in this Update are effective during interim and annual periods beginning after December 15, 2011. The adoption of ASU No. 2011-04, in January 2012, did not have a material impact on the Company’s financial statements.
In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income. The objective of this Update is to improve the comparability, consistency and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. Under the amendments in this Update, a company has the option to present the total of comprehensive income and details of each of its components (net income and other comprehensive income) either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This Update eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments in this Update do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The amendments in this Update are effective during interim and annual periods beginning after December 15, 2011. As ASU No. 2011-05 only deals with presentation requirements, the adoption of ASU No. 2011-05 in January 2012 did not have any impact on the Company’s financial statements. The FASB recently announced the addition of a FASB agenda project to consider deferring certain aspects of ASU No. 2011-05, “Presentation of Comprehensive Income” related to the presentation of reclassification adjustments from other comprehensive income to net income.
In September 2011, the FASB issued ASU No. 2011-08, Intangibles—Goodwill and Other (Topic 350). ASU No. 2011-08 applies to all entities that have goodwill reported in their financial statements. Under the amendments, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit. If the carrying amount of a reporting unit exceeds its fair value, then the entity is required to perform the second step of the goodwill impairment test to measure the amount of the
BROOKLINE BANCORP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) Three Months Ended March 31, 2012 and 2011
impairment loss, if any. An entity has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the first step of the two-step goodwill impairment test. An entity may resume performing the qualitative assessment in any subsequent period. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption of ASU No. 2011-08, in January 2012, did not have a material impact on the Company’s financial statements.
(3) Acquisition
Bancorp Rhode Island, Inc.
On January 1, 2012 (the “Bancorp Rhode Island Acquisition Date”), the Company acquired all the assets and liabilities of Bancorp Rhode Island, Inc., the bank holding company for BankRI. As part of the acquisition, Bancorp Rhode Island, Inc. was merged into the Company and no longer exists as a separate entity. BankRI, a commercial bank with 17 branches serving businesses and individuals in Rhode Island and nearby Massachusetts, continues to operate as a separate bank subsidiary of the Company.
Total consideration paid in the acquisition was $205.8 million, which consisted of approximately 11.0 million shares of stock with a par value of $0.1 million and a fair value of $92.8 million and $113.0 million in cash. Stock consideration was paid at the rate of 4.686 shares of Brookline Bancorp common stock per share of Bancorp Rhode Island common stock. The assets acquired and the liabilities assumed in the acquisition were recorded by the Company at their estimated fair values as of the Bancorp Rhode Island Acquisition Date. The excess of consideration paid over the fair value of identifiable net assets was recorded as goodwill in the unaudited consolidated financial statements.
The following table presents the goodwill recorded in connection with the acquisition of Bancorp Rhode Island, Inc. Dollar amounts are presented in thousands.
BROOKLINE BANCORP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) Three Months Ended March 31, 2012 and 2011
Goodwill represents the future economic benefits arising from net assets acquired that are not individually identified and separately recognized. None of the goodwill is expected to be deductible for income tax purposes. The acquisition date estimated fair values of the assets acquired and liabilities assumed are summarized as follows:
The above summary includes adjustments that record the acquired assets and assumed liabilities at the respective fair value, based on management’s best estimates using the information available at this time. While there may be changes in respective acquisition date fair values of certain balance sheet amounts, and other items, management does not expect that such changes, if any, will be material.
Fair values of the major categories of assets acquired and liabilities assumed were determined as follows:
Loans and Leases
The acquired loans and leases were recorded at fair value at the Bancorp Rhode Island Acquisition Date without carryover of BankRI’s allowance for loan and lease losses of $18.1 million. The fair value of the loans and leases was determined using market participant assumptions in estimating the amount and timing of both principal and interest cash flows expected to be collected on the loans and leases and then applying a market-based discount rate to those cash flows. In this regard, the acquired loans and leases were segregated into pools based on loan or lease type and credit risk. Loan or lease type was determined based on collateral type and purpose, location, industry segment and loan structure. Credit risk characteristics included risk rating groups (pass rated loans and adversely classified loans), updated loan-to-value ratios, and lien position. For valuation purposes, these pools were further disaggregated by maturity and pricing characteristics (fixed rate, adjustable rate, balloon maturities).
The estimate of future credit losses on the acquired loan and lease portfolio was based on segregating the acquired loans and leases into the classes referred to in the preceding paragraph, the risk characteristics and credit quality indicators related to each loan/lease class, and evaluation of the collectability of larger individual non-performing and classified loans and leases. Increases in the estimate of expected future credit losses in subsequent periods will require the Company to record an allowance
BROOKLINE BANCORP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) Three Months Ended March 31, 2012 and 2011
for loan and lease losses with a corresponding charge to earnings (provision for loan and lease losses). Improvement in expected cash flows in future periods will result in a reduction of the nonaccretable discount with such amount subsequently recognized as interest income over the remaining lives of the related acquired loans and leases. Charge-offs of acquired loans and leases are first applied to the nonaccretable discount and then to any allowance for loan and lease losses established subsequent to the acquisition.
Information about the acquired loan and lease portfolio subject to ASC 310-30 as of January 1, 2012 is as follows:
The fair value of acquired loans and leases which fall under ASC 310-20 at January 1, 2012 is $677.4 million.
Premises and Equipment
The fair value of BankRI’s premises, including land, buildings and improvements, was determined based upon appraisal by licensed appraisers. These appraisals were based upon the best and highest use of the property with final values determined based upon an analysis of the cost, sales comparison, and income capitalization approaches for each property appraised. This fair value of Bank-owned real estate resulted in an estimated premium of $1.7 million, amortized over the weighted average remaining useful life of the properties, estimated to be 25 years.
The majority of leasehold interests were valued based upon the income approach, developed by licensed appraisers utilizing market rental rates developed through comparable lease signings, third-party information regarding the local market for comparable properties with similar utility, and a review of the contractual terms of the leases. The discount of leasehold interests is estimated at $1.0 million and is being accreted over the weighted average remaining life of the underlying leases.
Identified Intangible Assets
The fair value of the core deposit intangible (“CDI”) was determined based on a discounted cash flow analysis using a discount rate based on the estimated cost of capital for a market participant. To calculate cash flows, deposit account servicing costs (net of deposit fee income) and interest expense on deposits were compared to the cost of alternative funding sources available through the Federal Home Loan Bank. The life of the deposit base and projected deposit attrition rates were determined using BankRI’s historical deposit data. The CDI was valued at $19.4 million or 1.71% of deposits. The intangible asset is being amortized over a weighted average life of ten years using the sum-of-the-years digits method. Amortization for the three months ended March 31, 2012 was $0.9 million.
Other intangible assets associated with the BankRI acquisition included a trade name intangible valued at $1.6 million and a non-compete agreement valued at $0.9 million. These intangible assets are being amortized over eleven years and two years respectively using the sum-of-the-years digits method. Amortization for the three months ended March 31, 2012 was $0.2 million. Amortization expense of acquisition-related intangible assets is included in other non-interest expense in the unaudited consolidated statements of income.
Scheduled amortization expense attributable to the core deposit intangible, trade name, and non-compete agreement for the full year of 2012 and each of the next five years is as follows: $4.3 million in 2012; $3.6 million in 2013; $2.9 million in 2014; $2.6 million in 2015; $2.2 million in 2016; and $1.9 million in 2017. There were no impairment losses relating to goodwill or other acquisition-related intangible assets recorded during the three months ended March 31, 2012 or 2011.
Deposits
The fair value adjustment of deposits represents discounted value of the contractual repayments of fixed-maturity deposits using prevailing market interest rates for similar term certificates of deposit. The resulting fair value adjustment of certificates of deposit range in maturity from three months to over four years is a $2.0 million discount and is being accreted into income on a level-yield basis over the weighted average remaining life of approximately 14 months.
Federal Home Loan Bank Advances
The fair value of Federal Home Loan Bank of Boston (“FHLBB”) advances represents contractual repayments discounted using interest rates currently available on borrowings with similar characteristics and remaining maturities. The resulting fair value adjustment on FHLBB advances was $16.3 million and is being amortized on a level yield basis over the remaining life of the borrowings which have a weighted average remaining life of approximately 3.5 years.
Other Liabilities
The fair value adjustment to other liabilities includes $5.6 million of compensation accruals related to executive severance and cash payments made post-acquisition to settle vested stock options and restricted stock.
BROOKLINE BANCORP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) Three Months Ended March 31, 2012 and 2011
In addition, BankRI maintains Supplemental Executive Retirement Plans (the “SERPs”) for certain of its senior executives under which participants designated by the Board of Directors are entitled to an annual retirement benefit. Annual amounts related to the SERPs are recorded based on an actuarial calculation. Actuarial gains and losses are reflected immediately in the statement of operations.
The liability for the postretirement benefit obligation related to the BankRI SERPs included in accrued expenses and other liabilities was $10.4 million at March 31, 2012. The Company incurred a related net periodic benefit expense related to these plans of $0.1 million for the three months ended March 31, 2012.
Deferred Tax Assets and Liabilities
Deferred tax assets and liabilities were established for purchase accounting fair value adjustments as the future amortization/accretion of these adjustments represent temporary differences between book income and taxable income. In addition, the deferred tax asset related to the BankRI allowance for loan and lease losses and the deferred tax liability related to the BankRI tax-deductible goodwill were written off.
Financial Information — Acquisition
The Company’s consolidated results of operations for the three months ended March 31, 2012 include $15.2 million of net interest income and $1.7 million of net income from the results of BankRI from the acquisition date. Expenses relating to the transaction amounted to $5.4 million and were included in the March 31, 2012 income statement.
The following summarizes the unaudited pro forma results of operations as if the Company had acquired Bancorp Rhode Island, Inc. on January 1, 2011.
Amounts in the pro forma table above includes acquisition related expenses of $4.0 million, net of tax, and additional amortization of $0.7 million for the period ended March 31, 2011.
The supplemental pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the financial results of the combined companies had the acquisition been completed at the beginning of the period presented, nor is it indicative of future results for any other interim or full year period.
BROOKLINE BANCORP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) Three Months Ended March 31, 2012 and 2011
(4) Investment Securities
Investment securities available-for-sale are summarized below:
Debt securities of U.S. Government-sponsored enterprises (“GSEs”) include obligations issued by the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, the Government National Mortgage Association (“GNMA”), the Federal Home Loan Banks and the Federal Farm Credit Bank. At March 31, 2012, none of those obligations are backed by the full faith and credit of the U.S. Government, except for GNMA mortgage-backed securities (“MBS”) or collateralized mortgage obligations (“CMOs”) and Small Business Administration (“SBA”) securities with an estimated fair value of $8.0 million.
Investment Securities as Collateral
At March 31, 2012 and December 31, 2011, respectively, $360.6 million and $156.0 million of securities available-for-sale were pledged as collateral for repurchase agreements; municipal deposits; treasury; tax and loan deposits; swap agreements; current and future FHLBB borrowings; and future Federal Reserve “discount window” borrowings.
BROOKLINE BANCORP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) Three Months Ended March 31, 2012 and 2011
Other-Than-Temporary Impairment (“OTTI”)
Investment securities at March 31, 2012 and December 31, 2011 that have been in a continuous unrealized loss position for less than twelve months or twelve months or longer are as follows:
BROOKLINE BANCORP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) Three Months Ended March 31, 2012 and 2011
The Company performs regular analysis on the available-for-sale securities portfolio to determine whether a decline in fair value indicates that an investment is other-than-temporarily impaired (“OTTI”). In making these OTTI
BROOKLINE BANCORP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) Three Months Ended March 31, 2012 and 2011
determinations, management considers, among other factors, the length of time and extent to which the fair value has been less than amortized cost, projected future cash flows, credit subordination and the creditworthiness, capital adequacy and near-term prospects of the issuers.
Management also considers the Company’s capital adequacy, interest-rate risk, liquidity and business plans in assessing whether it is more likely than not that the Company will sell or be required to sell the securities before recovery. If the Company determines that a decline in fair value is OTTI and that it is more likely than not that the Company will not sell or be required to sell the security before recovery of its amortized cost, the credit portion of the impairment loss is recognized in earnings and the noncredit portion is recognized in accumulated other comprehensive income. The credit portion of the OTTI impairment represents the difference between the amortized cost and the present value of the expected future cash flows of the security. If the Company determines that a decline in fair value is OTTI and it is more likely than not that it will sell or be required to sell the security before recovery of its amortized cost, the entire difference between the amortized cost and the fair value of the security will be recognized in earnings.
At March 31, 2012, the Company did not intend to sell any of its debt securities and it is not likely that it will be required to sell the debt securities before the anticipated recovery of their remaining amortized cost. The unrealized losses on all debt securities within the securities portfolio without other-than-temporary impairment loss were considered by management to be temporary in nature. Full collection of those debt securities is expected because the financial condition of the issuers is considered to be sound, there has been no default in scheduled payments and the debt securities are rated investment grade except trust preferred securities and private-label CMOs with an estimated fair value of $7.5 million and net unrealized losses of $0.3 million.
The Company’s portfolio of trust preferred securities includes the Company’s investment in three trust preferred pools (“PreTSLs”). The Company monitors these pools closely for impairment due to a history of losses experienced. The following tables summarize the pertinent information as of March 31, 2012, that was considered in determining whether OTTI existed on these PreTSLs:
(1) As a percentage of original collateral. (2) As a percentage of performing collateral. (3) Excess subordination represents the additional defaults/losses in excess of both current and projected defaults/losses that the security can absorb before the security is exposed to a loss in principal, after taking into account the best estimate of future deferrals/defaults/losses. (4) The Company reviewed credit ratings provided by S&P and Moody’s in 2010 in its evaluation of issuers.
BROOKLINE BANCORP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) Three Months Ended March 31, 2012 and 2011
(1) The amortized cost reflects previously recorded credit-related OTTI charges recognized in earnings for the applicable securities.
In performing the analysis for OTTI impairment on the PreTSLs, expected future cash flow scenarios for each pool were considered under varying levels of severity for assumptions including future delinquencies, recoveries and prepayments. The Company also considered its relative seniority within the pools and any excess subordination. The Company’s OTTI assessment for the quarter ended March 31, 2012 was as follows:
Pooled Trust Preferred Security A (“PreTSL A”)
PreTSL A has experienced $30 million in deferrals, or 74% of the security’s underlying collateral, to date. The Company recorded a total of $0.1 million in OTTI on this security in 2009 and 2010 as a result of the Company’s analysis of expected and contractual cash flows. During the first quarter of 2012, there was no change in the deferral or default schedules and no further rating actions were noted. Furthermore, management was not aware of adverse changes in performance indicators for the underlying banks that issued collateral into the pool. Based on the security’s future expected cash flows and after factoring in projected defaults of 14% over its remaining life, the security’s current amortized cost (53% of current par) and the Company’s intent and ability to hold the security until recovery, the Company believes that no further OTTI charges are warranted at this time.
Pooled Trust Preferred Security B (“PreTSL B”)
PreTSL B has experienced $97 million in deferrals/defaults, or 27% of the security’s underlying collateral, to date. During the first quarter of 2012, there was no change in the deferral or default schedules and no further rating actions. Based on the security’s future expected cash flows and after factoring in projected defaults of 16% over its remaining life, the security’s current amortized cost (99% of current par), $98 million in excess subordination (37% of outstanding performing collateral) and the Company’s intent and ability to hold the security until recovery, the Company believes that no OTTI charges are warranted at this time.
Pooled Trust Preferred Security C (“PreTSL C”)
PreTSL C was acquired on January 1, 2012 as part of the Company’s merger with Bancorp Rhode Island, Inc. PreTSL C has experienced $79 million in deferrals/defaults, or 40% of the security’s underlying collateral, to date. During the first quarter of 2012, there was no change in the deferral or default schedules and no further rating actions. Based on the security’s future expected cash flows and after factoring in projected defaults of 21% over its remaining life, the security’s current amortized cost (19% of current par) and the Company’s intent and ability to hold the security until recovery, the Company believes that no OTTI charges are warranted at this time.
The amount related to credit losses on debt securities held at March 31, 2012 for which a portion of an OTTI was recognized in other comprehensive income was $0.1 million.
BROOKLINE BANCORP, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) Three Months Ended March 31, 2012 and 2011
Portfolio Maturities
The maturities of the investments in debt securities at March 31, 2012 are as follows:
Actual maturities of GSE debt securities may differ from those presented above since certain obligations provide the issuer the right to call or prepay the obligation prior to scheduled maturity without penalty. At March 31, 2012, issuers of debt securities with an estimated fair value of approximately $52.6 million had the right to call or prepay the obligations, the scheduled maturities of which were $42.9 million after one through five years, $0.7 million after five years though ten years and $9.1 million after ten years. MBS and CMOs are included above based on their contractual maturities; the remaining lives, however, are expected to be shorter due to anticipated payments.
Security Sales
Sales of investment securities are summarized in the table below. There were no writedowns.
(5) Restricted Equity Securities
Restricted equity securities are as follows:
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