XNAS:BRKL Brookline Bancorp, Inc. Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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Table of Contents

 

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2012

 

Commission file number 0-23695

 

Brookline Bancorp, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware

 

04-3402944

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

160 Washington Street, Brookline, MA

 

02447-0469

(Address of principal executive offices)

 

(Zip Code)

 

(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.

 

Large accelerated filer x

 

Accelerated filer o

 

 

 

Non-accelerated filer o

 

Smaller Reporting Company o

 

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 August 9, 2012, the number of shares of common stock, par value $0.01 per share, outstanding was 70,081,031.

 

 

 



Table of Contents

 

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

FORM 10-Q

 

Index

 

 

 

 

 

Page

Part I

 

Financial Information

 

 

 

 

 

 

 

Item 1.

 

Consolidated Financial Statements (Unaudited)

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011 (Unaudited)

 

1

 

 

 

 

 

 

 

Consolidated Statements of Income
for the Three Months and Six Months Ended June 30, 2012 and 2011 (Unaudited)

 

2

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income
for the Three Months and Six Months Ended June 30, 2012 and 2011 (Unaudited)

 

3

 

 

 

 

 

 

 

Consolidated Statements of Changes in Equity
for the Six Months Ended June 30, 2012 and 2011 (Unaudited)

 

4

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 2012 and 2011 (Unaudited)

 

6

 

 

 

 

 

 

 

Notes to Consolidated Financial Statements (Unaudited)

 

8

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

43

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

 

66

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

69

 

 

 

 

 

Part II

 

Other Information

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

70

 

 

 

 

 

Item 1A.

 

Risk Factors

 

70

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

70

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

70

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

70

 

 

 

 

 

Item 5.

 

Other Information

 

70

 

 

 

 

 

Item 6.

 

Exhibits

 

71

 

 

 

 

 

 

 

Signatures

 

72

 



Table of Contents

 

PART I — FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited)

 

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited)

 

 

 

June 30, 2012

 

December 31, 2011

 

 

 

(In Thousands Except Share Data)

 

ASSETS

 

 

 

 

 

Cash and due from banks

 

$

118,411

 

$

56,513

 

Short-term investments

 

98,677

 

49,783

 

Total cash and cash equivalents

 

217,088

 

106,296

 

Investment securities available-for-sale (amortized cost of $381,618 and $214,555, respectively) (Note 4)

 

384,533

 

217,431

 

Restricted equity securities (Note 5)

 

61,291

 

39,283

 

Other securities

 

500

 

 

Total securities

 

446,324

 

256,714

 

Loans and leases (Note 6)

 

4,013,129

 

2,720,821

 

Allowance for loan and lease losses (Note 7)

 

(37,431

)

(31,703

)

Net loans and leases

 

3,975,698

 

2,689,118

 

Premises and equipment, net of accumulated depreciation and amortization of $21,426 and $19,726, respectively

 

56,248

 

38,495

 

Building held-for-sale (amortized cost of $6,192)

 

6,046

 

 

Deferred tax asset

 

25,656

 

12,681

 

Goodwill, net

 

137,890

 

45,799

 

Identified intangible assets, net of accumulated amortization of $15,160 and $12,651, respectively

 

24,578

 

5,214

 

Other real estate owned and repossessed assets, net

 

2,765

 

1,266

 

Monies in escrow — Bancorp Rhode Island, Inc. acquisition

 

 

112,983

 

Other assets

 

80,088

 

30,447

 

Total assets

 

$

4,972,381

 

$

3,299,013

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

Deposits:

 

 

 

 

 

Demand checking accounts

 

$

546,036

 

$

225,284

 

NOW accounts

 

185,234

 

110,220

 

Savings accounts

 

503,507

 

164,744

 

Money market savings accounts

 

1,236,967

 

946,411

 

Certificate of deposit accounts

 

1,049,462

 

805,672

 

Total deposits

 

3,521,206

 

2,252,331

 

Borrowed funds (Note 8):

 

 

 

 

 

Advances from the FHLBB

 

733,394

 

498,570

 

Other borrowed funds

 

60,707

 

8,349

 

Total borrowed funds

 

794,101

 

506,919

 

Mortgagors’ escrow accounts

 

6,942

 

6,513

 

Accrued expenses and other liabilities

 

47,328

 

26,248

 

Total liabilities

 

4,369,577

 

2,792,011

 

 

 

 

 

 

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

Brookline Bancorp, Inc. 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; 75,414,713 shares and 64,597,180 shares issued, respectively

 

754

 

644

 

Additional paid-in capital

 

618,184

 

525,171

 

Retained earnings, partially restricted

 

42,006

 

39,993

 

Accumulated other comprehensive income

 

1,969

 

1,963

 

Treasury stock, at cost; 5,373,733 shares

 

(62,107

)

(62,107

)

Unallocated common stock held by ESOP; 356,064 shares and 378,215 shares, respectively

 

(1,941

)

(2,062

)

Total Brookline Bancorp, Inc. stockholders’ equity

 

598,865

 

503,602

 

Noncontrolling interest in subsidiary

 

3,939

 

3,400

 

Total equity

 

602,804

 

507,002

 

Total liabilities and equity

 

$

4,972,381

 

$

3,299,013

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

1



Table of Contents

 

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Income (Unaudited)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

 

 

(In Thousands Except Share Data)

 

Interest and dividend income:

 

 

 

 

 

 

 

 

 

Loans and leases

 

$

50,135

 

$

33,786

 

$

99,778

 

$

65,411

 

Debt securities

 

1,541

 

1,754

 

4,770

 

3,511

 

Short-term investments

 

68

 

26

 

95

 

50

 

Marketable and restricted equity securities

 

95

 

55

 

187

 

92

 

Total interest and dividend income

 

51,839

 

35,621

 

104,830

 

69,064

 

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

Deposits

 

5,463

 

5,138

 

10,980

 

10,033

 

Borrowed funds and subordinated debt

 

3,617

 

2,685

 

7,458

 

5,293

 

Total interest expense

 

9,080

 

7,823

 

18,438

 

15,326

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

42,759

 

27,798

 

86,392

 

53,738

 

Provision for credit losses (Note 7)

 

6,678

 

839

 

9,925

 

1,898

 

Net interest income after provision for credit losses

 

36,081

 

26,959

 

76,467

 

51,840

 

 

 

 

 

 

 

 

 

 

 

Non-interest income:

 

 

 

 

 

 

 

 

 

Fees, charges and other income

 

4,168

 

1,518

 

7,901

 

2,563

 

Loss from investments in affordable housing projects

 

(244

)

 

(383

)

 

Gain on sales of securities, net (Note 4)

 

797

 

 

797

 

80

 

Total non-interest income

 

4,721

 

1,518

 

8,315

 

2,643

 

 

 

 

 

 

 

 

 

 

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

Compensation and employee benefits

 

14,238

 

7,795

 

28,926

 

14,606

 

Occupancy

 

2,503

 

1,499

 

5,179

 

2,873

 

Equipment and data processing

 

3,632

 

2,290

 

7,275

 

4,365

 

Professional services

 

2,554

 

1,458

 

9,008

 

2,247

 

FDIC insurance

 

671

 

324

 

1,301

 

757

 

Advertising and marketing

 

774

 

517

 

1,476

 

729

 

Amortization of identified intangible assets

 

1,271

 

455

 

2,554

 

750

 

Other

 

3,056

 

1,539

 

5,571

 

2,999

 

Total non-interest expense

 

28,699

 

15,877

 

61,290

 

29,326

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

12,103

 

12,600

 

23,492

 

25,157

 

Provision for income taxes

 

4,320

 

5,273

 

9,075

 

10,281

 

Net income

 

7,783

 

7,327

 

14,417

 

14,876

 

 

 

 

 

 

 

 

 

 

 

Less net income attributable to noncontrolling interest in subsidiary

 

254

 

326

 

539

 

609

 

Net income attributable to Brookline Bancorp, Inc.

 

$

7,529

 

$

7,001

 

$

13,878

 

$

14,267

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share (Note 11):

 

 

 

 

 

 

 

 

 

Basic

 

$

0.11

 

$

0.12

 

$

0.20

 

$

0.24

 

Diluted

 

0.11

 

0.12

 

0.20

 

0.24

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding during the period:

 

 

 

 

 

 

 

 

 

Basic

 

69,677,656

 

58,629,265

 

69,671,130

 

58,620,467

 

Diluted

 

69,715,890

 

58,630,908

 

69,706,694

 

58,624,699

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

2



Table of Contents

 

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Unaudited)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

 

 

(In Thousands)

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

7,783

 

$

7,327

 

$

14,417

 

$

14,876

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of taxes:

 

 

 

 

 

 

 

 

 

Unrealized securities holding gains excluding non-credit gain on impairment of securities

 

40

 

1,970

 

802

 

1,539

 

Non-credit gain on impairment of securities

 

32

 

3

 

34

 

5

 

Net unrealized securities holding gains before income taxes

 

72

 

1,973

 

836

 

1,544

 

Income tax expense

 

(42

)

(723

)

(311

)

(581

)

Net unrealized securities holding gains

 

30

 

1,250

 

525

 

963

 

 

 

 

 

 

 

 

 

 

 

Adjustment of accumulated obligation for postretirement benefits

 

(5

)

(5

)

(10

)

(10

)

Income tax benefit

 

2

 

2

 

6

 

4

 

Net adjustment of accumulated obligation for postretirement benefits

 

(3

)

(3

)

(4

)

(6

)

 

 

 

 

 

 

 

 

 

 

Net unrealized holding gains

 

27

 

1,247

 

521

 

957

 

 

 

 

 

 

 

 

 

 

 

Less reclassification adjustment for securities gains (losses) included in net income:

 

 

 

 

 

 

 

 

 

Gain on sales of securities

 

797

 

 

797

 

80

 

Income tax expense

 

(282

)

 

(282

)

(29

)

Net securities gains included in net income

 

515

 

 

515

 

51

 

 

 

 

 

 

 

 

 

 

 

Net other comprehensive (loss) income

 

(488

)

1,247

 

6

 

906

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

7,295

 

8,574

 

14,423

 

15,782

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to noncontrolling interest in subsidiary

 

(254

)

(326

)

(539

)

(609

)

 

 

 

 

 

 

 

 

 

 

Comprehensive income attributable to Brookline Bancorp, Inc.

 

$

7,041

 

$

8,248

 

$

13,884

 

$

15,173

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

3



Table of Contents

 

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity

Six Months Ended June 30, 2012 and 2011 (Unaudited)

 

 

 

Common
Stock

 

Additional
Paid-in
Capital

 

Retained
Earnings

 

Accumulated
Other
Comprehensive
Income

 

Treasury
Stock

 

Unallocated
Common Stock
Held by ESOP

 

Total Brookline
Bancorp, Inc.
Stockholders’
Equity

 

Non-
Controlling
Interest in
Subsidiary

 

Total Equity

 

 

 

(In Thousands Except Share Data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2010

 

$

644

 

$

524,515

 

$

32,357

 

$

2,348

 

$

(62,107

)

$

(2,314

)

$

495,443

 

$

2,505

 

$

497,948

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Brookline Bancorp, Inc.

 

 

 

14,267

 

 

 

 

14,267

 

 

14,267

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to noncontrolling interest in subsidiary

 

 

 

 

 

 

 

 

609

 

609

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividend distribution to owners of noncontrolling interest in subsidiary

 

 

 

 

 

 

 

 

(577

)

(577

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of units of ownership to minority owners of subsidiary

 

 

 

 

 

 

 

 

102

 

102

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

906

 

 

 

906

 

 

906

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock dividends of $0.17 per share

 

 

 

(9,991

)

 

 

 

(9,991

)

 

(9,991

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expense of stock options granted

 

 

42

 

 

 

 

 

42

 

 

42

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax benefit from vesting of recognition and retention plan shares and dividend distributions on allocated ESOP shares

 

 

79

 

 

 

 

 

79

 

 

79

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation under recognition and retention plan

 

 

102

 

 

 

 

 

102

 

 

102

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock held by ESOP committed to be released (23,106 shares)

 

 

103

 

 

 

 

126

 

229

 

 

229

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2011

 

$

644

 

$

524,841

 

$

36,633

 

$

3,254

 

$

(62,107

)

$

(2,188

)

$

501,077

 

$

2,639

 

$

503,716

 

 

(Continued)

 

4



Table of Contents

 

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Equity (Continued)

Six Months Ended June 30, 2012 and 2011 (Unaudited)

 

 

 

Common
Stock

 

Additional
Paid-in
Capital

 

Retained
Earnings

 

Accumulated
Other
Comprehensive
Income

 

Treasury
Stock

 

Unallocated
Common Stock
Held by ESOP

 

Total Brookline
Bancorp, Inc.
Stockholders’
Equity

 

Non-
Controlling
Interest in
Subsidiary

 

Total Equity

 

 

 

(In Thousands Except Share Data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2011

 

$

644

 

$

525,171

 

$

39,993

 

$

1,963

 

$

(62,107

)

$

(2,062

)

$

503,602

 

$

3,400

 

$

507,002

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to Brookline Bancorp, Inc.

 

 

 

13,878

 

 

 

 

13,878

 

 

13,878

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to noncontrolling interest in subsidiary

 

 

 

 

 

 

 

 

539

 

539

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of shares of common stock (10,997,840 shares)

 

110

 

92,712

 

 

 

 

 

92,822

 

 

92,822

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

6

 

 

 

6

 

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock dividends of $0.085 per share

 

 

 

(11,865

)

 

 

 

(11,865

)

 

(11,865

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation under recognition and retention plan

 

 

301

 

 

 

 

 

301

 

 

301

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock held by ESOP committed to be released (11,073 shares)

 

 

 

 

 

 

121

 

121

 

 

121

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2012

 

$

754

 

$

618,184

 

$

42,006

 

$

1,969

 

$

(62,107

)

$

(1,941

)

$

598,865

 

$

3,939

 

$

602,804

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

5



Table of Contents

 

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2012

 

2011

 

 

 

(In Thousands)

 

Cash flows from operating activities:

 

 

 

 

 

Net income attributable to Brookline Bancorp, Inc.

 

$

13,878

 

$

14,267

 

Adjustments to reconcile net income to net cash provided from operating activities:

 

 

 

 

 

Net income attributable to noncontrolling interest in subsidiary

 

539

 

609

 

Income from bank-owned life insurance

 

(590

)

 

Provision for credit losses

 

9,925

 

1,898

 

Origination of loans and leases to be sold

 

(52,044

)

(19,412

)

Proceeds from loans and leases sold

 

56,718

 

19,184

 

Depreciation and amortization of premises and equipment

 

1,696

 

931

 

Amortization of securities premiums and discounts, net

 

2,702

 

1,162

 

Amortization of deferred loan and lease origination costs, net

 

5,171

 

4,754

 

Amortization of identified intangible assets

 

2,554

 

750

 

(Accretion) amortization of acquisition fair value adjustments, net

 

(5,547

)

146

 

Non-accretable discount recognized as interest income

 

(273

)

(100

)

Gain on sale of securities

 

(797

)

(80

)

Write-down of acquired assets

 

 

112

 

Compensation under recognition and retention plans

 

301

 

102

 

Release of ESOP shares

 

121

 

229

 

Deferred income taxes

 

(199

)

(455

)

(Increase) decrease in:

 

 

 

 

 

Other assets

 

(8,003

)

2,145

 

Decrease in:

 

 

 

 

 

Accrued expenses and other liabilities

 

(4,365

)

(4,735

)

Net cash provided from operating activities

 

21,787

 

21,507

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Securities available-for-sale:

 

 

 

 

 

Proceeds from sales

 

157,225

 

124

 

Proceeds from maturities, calls and principal repayments

 

116,908

 

75,333

 

Purchases

 

(130,230

)

(29,540

)

Purchase of restricted equity securities

 

(7,990

)

(182

)

Purchase of other securities

 

(500

)

 

Net increase in loans and leases

 

(163,023

)

(137,991

)

Acquisitions, net of cash and cash equivalents acquired

 

(89,258

)

5,792

 

Monies in escrow — Bancorp Rhode Island, Inc. acquisition

 

112,983

 

 

Purchase of premises and equipment

 

(12,881

)

(14,960

)

Sale of premises and equipment

 

32

 

 

Redemption of restricted securities (FHLBB stock)

 

2,003

 

 

Net cash used for investing activities

 

(14,731

)

(101,424

)

 

(Continued)

 

6



Table of Contents

 

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited) (Continued)

 

 

 

Six Months Ended June 30,

 

 

 

2012

 

2011

 

 

 

(In Thousands)

 

Cash flows from financing activities:

 

 

 

 

 

Increase in demand deposits and NOW, savings and money market savings accounts

 

$

180,081

 

$

164,247

 

Decrease in certificates of deposit (excluding brokered deposits)

 

(43,862

)

(28,117

)

Proceeds from FHLBB advances

 

1,493,274

 

2,182,500

 

Repayment of FHLBB advances

 

(1,536,840

)

(2,151,918

)

Repayment of subordinated debt

 

 

(13,000

)

Increase (decrease) in other borrowings

 

22,519

 

(12,542

)

Increase in mortgagors’ escrow accounts

 

429

 

457

 

Income tax benefit from vesting of recognition and retention plan shares and dividend distributions on allocated ESOP plans

 

 

79

 

Expense of stock options granted

 

 

42

 

Payment of dividends on common stock

 

(11,865

)

(9,991

)

Payment of dividend to owners of noncontrolling interest in subsidiary

 

 

(577

)

Purchase of additional ownership interest in subsidiary

 

 

102

 

Net cash provided from financing activities

 

103,736

 

131,282

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

110,792

 

51,365

 

Cash and cash equivalents at beginning of period

 

106,296

 

65,908

 

Cash and cash equivalents at end of period

 

$

217,088

 

$

117,273

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Interest on deposits, borrowed funds and subordinated debt

 

$

21,111

 

$

16,836

 

Income taxes

 

9,275

 

10,880

 

 

 

 

 

 

 

Acquisition of First Ipswich Bancorp:

 

 

 

 

 

Assets acquired (excluding cash and cash equivalents)

 

$

 

$

245,752

 

Liabilities assumed

 

 

251,544

 

 

 

 

 

 

 

Acquisition of Bancorp Rhode Island, Inc.:

 

 

 

 

 

Assets acquired (excluding cash and cash equivalents)

 

$

1,571,817

 

$

 

Liabilities assumed

 

1,481,535

 

 

 

See accompanying notes to the unaudited consolidated financial statements.

 

7



Table of Contents

 

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

At and for the Six Months Ended June 30, 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 Massachusetts-chartered savings bank; Bank Rhode Island (“BankRI”), a Rhode Island-chartered bank; and First Ipswich Bank (“First Ipswich”), a Massachusetts-chartered trust company (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, Massachusetts 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”). As state-chartered banks, Brookline Bank and First Ipswich are also subject to regulation under the laws of the Commonwealth of Massachusetts and the jurisdiction of the Massachusetts Division of Banks and the FRB. BankRI is 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. BankRI is also supervised, examined and regulated by the Federal Deposit Insurance Corporation (“FDIC”), which also insures all of 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.

 

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.

 

8



Table of Contents

 

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

At and for the Six Months Ended June 30, 2012 and 2011

 

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, Fair Value Measurement (Topic 820): 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, Comprehensive Income (Topic 220): 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): Testing Goodwill for Impairment. 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 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,

 

9



Table of Contents

 

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

At and for the Six Months Ended June 30, 2012 and 2011

 

2011. The adoption of ASU No. 2011-08, in January 2012, did not have a material impact on the Company’s financial statements.

 

In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 requires an entity to disclose information about offsetting and related arrangements to enable users of financial statements to understand the effect of those arrangements on its financial position, and to allow investors to better compare financial statements prepared under U.S. GAAP with financial statements prepared under IFRS. The new standards are effective for annual periods beginning January 1, 2013, and interim periods within those annual periods. Retrospective application is required. The Company is currently assessing the impact on the Company’s financial statements and will implement the provisions of ASU 2011-11 as of January 1, 2013.

 

(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.

 

 

 

As Recorded at

 

 

 

Acquisition

 

June 30, 2012

 

 

 

(In Thousands)

 

Brookline Bancorp, Inc. common stock issued to Bancorp Rhode Island stockholders

 

$

92,822

 

$

92,822

 

Cash consideration to Bancorp Rhode Island stockholders

 

112,983

 

112,983

 

Total consideration paid

 

205,805

 

205,805

 

 

 

 

 

 

 

Fair value of identifiable net assets acquired

 

112,660

 

113,684

 

 

 

 

 

 

 

Goodwill

 

$

93,145

 

$

92,121

 

 

10



Table of Contents

 

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

At and for the Six Months Ended June 30, 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:

 

 

 

As Recorded at

 

 

 

Acquisition

 

June 30, 2012

 

 

 

(In Thousands)

 

Assets Acquired:

 

 

 

 

 

Cash and cash equivalents

 

$

23,402

 

$

23,402

 

Investment securities available-for-sale

 

312,620

 

312,620

 

Federal Home Loan Bank stock

 

16,274

 

16,274

 

Loan and lease receivables

 

1,135,816

 

1,135,816

 

Premises and equipment

 

12,780

 

12,780

 

Deferred tax asset

 

26,120

 

26,635

 

Identified intangible assets

 

21,918

 

21,918

 

Bank owned life insurance

 

32,496

 

32,496

 

Other assets

 

13,278

 

13,278

 

Total assets acquired

 

1,594,704

 

1,595,219

 

 

 

 

 

 

 

Liabilities Assumed:

 

 

 

 

 

Deposits

 

1,133,358

 

1,133,358

 

Overnight and short-term borrowings

 

46,216

 

46,216

 

Federal Home Loan Bank advances

 

251,378

 

251,378

 

Subordinated deferrable interest debentures

 

12,703

 

12,703

 

Deferred tax liability

 

12,225

 

12,225

 

Other liabilities

 

26,164

 

25,655

 

Total liabilities assumed

 

1,482,044

 

1,481,535

 

 

 

 

 

 

 

Identifiable net assets acquired

 

$

112,660

 

$

113,684

 

 

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 as of the acquisition. During the three months ended June 30, 2012, the Company obtained new information about facts and circumstances that existed at the acquisition date but were unknown to the Company at that date. The Company received unexpected recoveries of approximately $0.5 million related to certain provisional amounts recorded in connection with legal contingencies during the three months ended June 30, 2012 period and recorded these amounts as a subsequent reduction of the liability and a corresponding reduction to goodwill. Additionally, the Company increased its net deferred tax asset recorded in connection with the elimination of the deferred tax asset associated with a prior taxable acquisition by Bancorp Rhode Island and reduced goodwill by $0.5 million during the measurement period.  While there may be other 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

 

11



Table of Contents

 

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

At and for the Six Months Ended June 30, 2012 and 2011

 

loans), updated loan-to-value ratios, and lien position. For valuation purposes, these pools were further disaggregated by maturity and pricing characteristics (e.g., 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 nonperforming 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 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.

 

The fair value of acquired loans and leases which fall under ASC 310-20 at January 1, 2012 is $677.4 million. Information about the acquired loan and lease portfolio subject to ASC 310-30 as of January 1, 2012 is as follows:

 

 

 

ASC 310-30 Loans

 

 

 

(In Thousands)

 

 

 

 

 

Contractually required principal and interest at acquisition

 

$

554,553

 

 

 

 

 

Contractual cash flows not expected to be collected (nonaccretable discount)

 

(14,659

)

Expected cash flows at acquisition

 

539,894

 

Interest component of expected cash flows (accretable yield)

 

(81,503

)

Fair value of acquired loans and leases

 

$

458,391

 

 

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. Depreciation of the premium on premises and equipment for the three months and six months ended June 30, 2012, was $22,000 and $44,000, respectively.

 

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. Accretion for the three months and six months ended June 30, 2012, was $21,000 and $42,000, respectively.

 

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 and six months ended June 30, 2012, was $0.8 million and $1.7 million, respectively.

 

12



Table of Contents

 

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

At and for the Six Months Ended June 30, 2012 and 2011

 

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 and six months ended June 30, 2012 was $0.2 million and $0.4 million, respectively.

 

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 known impairment losses relating to goodwill or other acquisition-related intangible assets recorded during the six months ended June 30, 2012 or 2011.

 

Deposits

 

The fair value adjustment of deposits represents a premium over the 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 ranging 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. Accretion for the three months and six months ended June 30, 2012 was $0.3 million and $0.6 million, respectively.

 

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 accreted on a level yield basis over the remaining life of the borrowings which have remaining lives of one to four years. Accretion for the three months and six months ended June 30, 2012 was $0.9 million and $1.9 million, respectively.

 

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.

 

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 June 30, 2012. The Company incurred a related net periodic benefit expense related to these plans of $0.1 million and $0.2 million for the three months and six months ended June 30, 2012, respectively.

 

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 and six months ended June 30, 2012, respectively, include $14.2 million and $29.4 million of net interest income and $1.9 million and $3.6 million of net income from the results of BankRI from the acquisition date. Expenses relating to the transaction amounted to $5.4 million.

 

13



Table of Contents

 

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

At and for the Six Months Ended June 30, 2012 and 2011

 

The following summarizes the unaudited pro forma results of operations as if the Company had acquired Bancorp Rhode Island, Inc. on January 1, 2011.

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30, 2011

 

June 30, 2011

 

 

 

(In Thousands Except Per Share Data)

 

 

 

 

 

 

 

Net interest income

 

$

41,903

 

$

82,995

 

Net income

 

8,810

 

15,918

 

Basic earnings per share

 

0.13

 

0.23

 

 

Amounts in the pro forma table above include acquisition-related expenses of $4.0 million and $4.0 million, net of tax, respectively, for the three and six months ended June 30, 2011, and additional amortization of $1.1 million and $1.8 million, respectively, for the three and six months ended June 30, 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.

 

(4)     Investment Securities

 

Investment securities available-for-sale are summarized below:

 

 

 

June 30, 2012

 

December 31, 2011

 

 

 

Amortized
Cost

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Estimated
Fair Value

 

Amortized
Cost

 

Gross
Unrealized
Gains

 

Gross
Unrealized
Losses

 

Estimated
Fair Value

 

 

 

(In Thousands)

 

Securities available-for-sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GSEs

 

$

106,965

 

$

509

 

$

4

 

$

107,470

 

$

92,402

 

$

673

 

$

6

 

$

93,069

 

Municipal obligations

 

1,255

 

52

 

2

 

1,305

 

1,250

 

55

 

2

 

1,303

 

Auction-rate municipal obligations

 

2,400

 

 

132

 

2,268

 

2,700

 

 

210

 

2,490

 

Corporate debt obligations

 

29,620

 

278

 

196

 

29,702

 

41,490

 

400

 

536

 

41,354

 

Trust preferred securities

 

4,004

 

79

 

477

 

3,606

 

3,928

 

9

 

934

 

3,003

 

GSE CMOs

 

124,353

 

94

 

546

 

123,901

 

2,961

 

83

 

19

 

3,025

 

GSE MBS

 

102,298

 

3,240

 

95

 

105,443

 

68,181

 

3,338

 

15

 

71,504

 

Private-label CMOs

 

8,819

 

80

 

23

 

8,876

 

366

 

22

 

10

 

378

 

SBA commercial loan asset-backed securities

 

407

 

1

 

1

 

407

 

443

 

1

 

1

 

443

 

Total debt securities

 

380,121

 

4,333

 

1,476

 

382,978

 

213,721

 

4,581

 

1,733

 

216,569

 

Marketable equity securities

 

1,497

 

61

 

3

 

1,555

 

834

 

28

 

 

862

 

Total securities available-for-sale

 

$

381,618

 

$

4,394

 

$

1,479

 

$

384,533

 

$

214,555

 

$

4,609

 

$

1,733

 

$

217,431

 

 

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 June 30, 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”) commercial loan asset-backed securities with an estimated fair value of $5.3 million.

 

14



Table of Contents

 

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

At and for the Six Months Ended June 30, 2012 and 2011

 

Investment Securities as Collateral

 

At June 30, 2012 and December 31, 2011, respectively, $336.6 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.

 

Other-Than-Temporary Impairment (“OTTI”)

 

Investment securities at June 30, 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:

 

 

 

June 30, 2012

 

 

 

Less than Twelve Months

 

Twelve Months or Longer

 

Total

 

 

 

Estimated
Fair Value

 

Unrealized
Losses

 

Estimated
Fair Value

 

Unrealized
Losses

 

Estimated
Fair Value

 

Unrealized
Losses

 

 

 

(In Thousands)

 

Debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

GSEs

 

$

10,008

 

$

4

 

$

 

$

 

$

10,008

 

$

4

 

Municipal obligations

 

201

 

2

 

 

 

201

 

2

 

Auction-rate municipal obligations

 

 

 

2,268

 

132

 

2,268

 

132

 

Corporate debt obligations

 

2,968

 

32

 

2,715

 

164

 

5,683

 

196

 

Trust preferred securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

With OTTI loss

 

 

 

 

 

 

 

Without OTTI impairment loss

 

 

 

1,902

 

477

 

1,902

 

477

 

GSE CMOs

 

121,100

 

546

 

 

 

121,100

 

546

 

GSE MBS

 

27,319

 

92

 

64

 

3

 

27,383

 

95

 

Private-label CMOs

 

5,125

 

23

 

 

 

5,125

 

23

 

SBA commercial loan asset-backed securities

 

53

 

1

 

 

 

53

 

1

 

Total debt securities

 

166,774

 

700

 

6,949

 

776

 

173,723

 

1,476

 

Marketable equity securities

 

195

 

3

 

 

 

195

 

3

 

Total temporarily impaired securities

 

$

166,969

 

$

703

 

$

6,949

 

$

776

 

$

173,918

 

$

1,479

 

 

15



Table of Contents

 

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Unaudited)

At and for the Six Months Ended June 30, 2012 and 2011

 

 

 

December 31, 2011

 

 

 

Less than Twelve Months

 

Twelve Months or Longer

 

Total

 

 

 

Estimated
Fair Value

 

Unrealized
Losses

 

Estimated
Fair Value

 

Unrealized
Losses

 

Estimated
Fair Value

 

Unrealized
Losses

 

 

 

(In Thousands)

 

Debt securities: