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Brookline Bancorp(BRKL) - 2022 Q4 - Annual Report
BRKLBrookline Bancorp(BRKL)2023-02-26 16:00

Net Interest Income and Margin - Net interest income increased by 17.4million(6.217.4 million (6.2%) to 299.8 million in 2022 compared to 282.4millionin2021[277]−Netinterestmarginincreasedby18basispointsto3.67282.4 million in 2021[277] - Net interest margin increased by 18 basis points to 3.67% in 2022 from 3.49% in 2021[277] - Net interest margin increased by 32 basis points to 3.49% in 2021, with 15 basis points attributed to PPP fee income[89] - Net interest income increased by 22.2 million to 282.4millionin2021,reflectinga282.4 million in 2021, reflecting a 37.5 million decrease in interest expense on deposits and borrowings[87] Net Income and Earnings Per Share - Net income decreased by 5.7million(4.95.7 million (4.9%) to 109.7 million in 2022 from 115.4millionin2021[277]−Basicandfullydilutedearningspercommonshare(EPS)decreasedto115.4 million in 2021[277] - Basic and fully diluted earnings per common share (EPS) decreased to 1.42 in 2022 from 1.48in2021[277]CapitalandRegulatoryRequirements−ThecompanyanditsbanksarerequiredtomaintainaminimumcommonequityTier1capitalratioof4.51.48 in 2021[277] Capital and Regulatory Requirements - The company and its banks are required to maintain a minimum common equity Tier 1 capital ratio of 4.5%, a minimum Tier 1 capital ratio of 6.0%, a minimum total capital requirement of 8.0%, and a minimum leverage ratio of 4.0%[327] - The company is required to maintain a capital conservation buffer of common equity Tier 1 capital above the minimum risk-based capital requirements, or face restrictions on dividends, discretionary bonuses, and share repurchases[327] - The company is considered "well capitalized" under the FRB's rules applicable to bank holding companies[301] - The company's ability to pay dividends may be restricted if it does not maintain the required capital conservation buffer[304] Deposits and Core Deposits - Core deposits decreased by 0.5 billion in 2022, with the ratio of core deposits to total deposits declining from 81.8% as of December 31, 2021, to 81.0% as of December 31, 2022[63] - As of December 31, 2022, neither of the banks had brokered deposits exceeding 10% of total assets[323] Interest Rate Risk and Sensitivity - The company's assets and liabilities are vulnerable to interest-rate risk due to differences in duration and repricing dates, which is inherent to the banking business[73] - The company's interest-rate risk position is measured using income simulation and gap analysis, remaining modestly asset-sensitive as of December 31, 2022[103] - A 300 basis points interest rate shock would result in a 22.79million(7.422.79 million (7.4%) increase in net interest income over a twelve-month horizon[104] - The company's EVE asset sensitivity decreased from 2021 to 2022 due to deposit outflows, increased wholesale funding, and an inverted yield curve[105] - The company manages interest-rate risk through strategies such as adjusting securities maturities, limiting fixed-rate deposits, and using interest rate swaps[102] Interest Income and Expenses - Interest paid on deposits decreased by 27.7 million (57.2%) in 2021, driven by lower interest rates and certificate of deposit balances[90] - Total interest income from investments increased by 20.7% to 16,417thousandin2022from16,417 thousand in 2022 from 13,602 thousand in 2021[111] - Interest income from debt securities rose by 7.4% to 13,079thousandin2022from13,079 thousand in 2022 from 12,178 thousand in 2021[111] - Interest income from marketable and restricted equity securities surged by 61.9% to 1,898thousandin2022from1,898 thousand in 2022 from 1,172 thousand in 2021[111] - Interest income from short-term investments skyrocketed by 471.4% to 1,440thousandin2022from1,440 thousand in 2022 from 252 thousand in 2021[111] - The yield on interest-earning assets decreased to 3.85% in 2021 from 3.99% in 2020[118] - Interest income from loans and leases decreased by 11.9millionto11.9 million to 297.9 million in 2021, with a yield of 4.19% compared to 4.30% in 2020[119] - The decrease in interest income from loans and leases was primarily due to a 3.4milliondecreaseinoriginationvolumeandan3.4 million decrease in origination volume and an 8.5 million decrease related to interest rate changes[119] Provision for Credit Losses - Provision for credit losses increased by 16.4millionto16.4 million to 8.6 million in 2022 from a credit of 7.8millionin2021,primarilyduetoloangrowthandeconomicforecasts[82]OtherIncomeandExpenses−Otherincomeincreasedby7.8 million in 2021, primarily due to loan growth and economic forecasts[82] Other Income and Expenses - Other income increased by 0.6 million (9.8%) to 6.5millionin2022,drivenbyhigherwealthmanagementincomeandcommissions[83]−Compensationandemployeebenefitsexpenseincreasedby6.5 million in 2022, driven by higher wealth management income and commissions[83] - Compensation and employee benefits expense increased by 6.7 million (6.3%) to 113.5millionin2022,duetohigheremployeeheadcountandsalaries[85]−Totalnon−interestexpenseincreasedby113.5 million in 2022, due to higher employee headcount and salaries[85] - Total non-interest expense increased by 16.9 million (10.4%) to 179.5millionin2022,drivenbyhighercompensation,occupancy,andequipmentcosts[115]−Mergerandacquisitionexpensesincreasedby179.5 million in 2022, driven by higher compensation, occupancy, and equipment costs[115] - Merger and acquisition expenses increased by 2.2 million to 2.2millionin2022,primarilyduetothePCSBacquisition[116]TaxRateandDividends−Thecompany′seffectivetaxratedecreasedto21.62.2 million in 2022, primarily due to the PCSB acquisition[116] Tax Rate and Dividends - The company's effective tax rate decreased to 21.6% in 2022 from 25.3% in 2021, reflecting participation in energy tax credit deals[117] - Dividend payout ratio increased to 36.5% in 2022 from 32.5% in 2021, with quarterly dividends of 0.125, 0.130,0.130, 0.130, and 0.135persharerespectively[71]RegulatoryComplianceandLegalRequirements−ThecompanyissubjecttotheBankSecrecyActandtheUSAPATRIOTAct,requiringsystemstodetectandreportcashtransactionsofatleast0.135 per share respectively[71] Regulatory Compliance and Legal Requirements - The company is subject to the Bank Secrecy Act and the USA PATRIOT Act, requiring systems to detect and report cash transactions of at least 10,000 and suspicious activity involving more than 5,000[337]−ThecompanymustcomplywiththeGramm−Leach−BlileyAct(GLBA),whichmandatespoliciesandproceduresfordisclosingnonpublicpersonalinformationandmaintainingacomprehensiveinformationsecurityprogram[336]−ThecompanyissubjecttotheCommunityReinvestmentActandmustseekpriorapprovalfromregulatorybodiesforacquisitionsornewbranchestablishments[321][324]−Thecompanydidnothaveanytransactionswithsanctionedcountries,nationals,orothersasofDecember31,2022[311]MarketandEconomicConditions−ThecompanyprimarilyservesindividualsandbusinessesinthegreaterBostonmetropolitanarea,easternMassachusetts,RhodeIsland,NewYork,andNewJersey,makingitvulnerabletolocaleconomicconditions[340]AssetandLiabilityManagement−Interest−earningassetsmaturingorrepricingwithinoneyearamountedto5,000[337] - The company must comply with the Gramm-Leach-Bliley Act (GLBA), which mandates policies and procedures for disclosing nonpublic personal information and maintaining a comprehensive information security program[336] - The company is subject to the Community Reinvestment Act and must seek prior approval from regulatory bodies for acquisitions or new branch establishments[321][324] - The company did not have any transactions with sanctioned countries, nationals, or others as of December 31, 2022[311] Market and Economic Conditions - The company primarily serves individuals and businesses in the greater Boston metropolitan area, eastern Massachusetts, Rhode Island, New York, and New Jersey, making it vulnerable to local economic conditions[340] Asset and Liability Management - Interest-earning assets maturing or repricing within one year amounted to 4.19 billion, with a weighted average rate of 5.77%[106] - Interest-bearing liabilities maturing or repricing within one year amounted to 4.18billion,withaweightedaveragerateof2.354.18 billion, with a weighted average rate of 2.35%[106] - The cumulative one-year positive gap position was 9.3 million, or 0.11% of total interest-earning assets, as of December 31, 2022[107] Commercial Lending and Risk Management - The largest commercial relationship in the company's portfolio as of December 31, 2022, was 66.1million[281]−Thecompanyfocusesongrowingitscommerciallendingbusinessesorganicallyandthroughacquisitions,emphasizingcustomerrelationshipsandriskmanagement[122]FDICInsuranceandCosts−Thecompany′sFDICinsuranceassessmentcostsfortheyearendingDecember31,2022,wereapproximately66.1 million[281] - The company focuses on growing its commercial lending businesses organically and through acquisitions, emphasizing customer relationships and risk management[122] FDIC Insurance and Costs - The company's FDIC insurance assessment costs for the year ending December 31, 2022, were approximately 3.2 million[319] Volcker Rule and Asset Size - The company's total consolidated assets exceeded 10billionasofJanuary1,2023,makingitsubjecttotheVolckerRule[307]StockMarketListing−Thecompany′scommonstockistradedontheNasdaqGlobalSelectMarketunderthesymbol"BRKL"[286]PrepaymentPenaltiesandLateCharges−Thecompanyrecorded10 billion as of January 1, 2023, making it subject to the Volcker Rule[307] Stock Market Listing - The company's common stock is traded on the Nasdaq Global Select Market under the symbol "BRKL"[286] Prepayment Penalties and Late Charges - The company recorded 5.9 million in prepayment penalties and late charges in 2021, contributing 7 basis points to yields on interest-earning assets[118]