SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 23, 2003
BROOKLINE BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-23695 04-3402944
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(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation) Identification No.)
160 Washington Street, Brookline, MA 02447-0469
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 730-3500
Not Applicable
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(Former name or former address, if changed since last report)
Item 5. Other Events
Brookline Bancorp Announces Settlement of REIT Tax Dispute, a $1.1 Million
Pre-Tax Charge Relating to Investment Premiums and Enhanced Growth of its
Indirect Automobile Lending Business
On June 23, 2003, the Company signed an agreement with the Commissioner of
Revenue of the Commonwealth of Massachusetts to settle all disputes relating to
assessments and tax liabilities involving the Company's real estate investment
trust ("REIT") subsidiary for the years 1999 through 2002. As previously
reported, $8,580,000 ($5,515,000 on an after-tax basis) was charged to the
Company's earnings in the first quarter of 2003 to recognize liabilities for
taxes and interest resulting from a new law enacted in Massachusetts on March 5,
2003 disallowing the deduction for dividends received from REITs retroactive to
tax years ending on or after December 31, 1999. In accordance with the agreement
signed today, the Company paid $4,341,000 as full settlement of the liabilities
for taxes and interest mentioned above. As a result, earnings of the Company on
an after-tax basis will be credited for $2,752,000 in the second quarter of
2003. This amount represents the difference between the liability recorded in
the first quarter of 2003 and the amount of the settlement paid today, net of
related tax benefits.
At May 31, 2003, the Company had an investment of $255 million in
collateralized mortgage obligations ("CMOs"). CMOs are a type of debt
security that entitle investors to cash flows in accordance with a
predetermined priority with respect to the distribution of principal
and interest payments from underlying mortgages that serve as
collateral. Premiums paid to purchase CMOs are amortized over the
estimated repayment period determined at the time of purchase. Due to
recent unprecedented levels of mortgage prepayments, the expected
average life of the Company's CMO investments has shortened
considerably, resulting in the need to amortize related premiums over a
shorter time frame. Accordingly, as of May 31, 2003, the Company
charged earnings by approximately $1.1 million ($647,000 on an
after-tax basis) to write down part of the unamortized premiums at that
date. After the write-down, unamortized premiums amounted to
approximately $4.6 million. If very high levels of mortgage prepayments
continue, additional write-downs of unamortized premiums could be
necessary in the future. The Company will again evaluate CMO mortgage
prepayments at the end of June 2003.
The Company entered the indirect automobile lending business in the
first quarter of 2003. In a prior communication, the Company projected
that it would originate $70 million to $100 million of indirect
automobile loans in 2003 and that the indirect automobile loan business
would reduce 2003 earnings by around $0.01 per share and operate
profitably by the second half of 2004. Activity to date with respect to
the volume and credit quality of loans originated has been encouraging.
As a result, we expect the total of indirect automobile loan
originations in 2003 to be in the range of $175 million to $200 million
and the indirect automobile loan business to contribute modestly to the
Company's net earnings in the second half of 2003. The total of
indirect automobile loans outstanding at May 31, 2003 was approximately
$63 million.
The above contains statements about future events that constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Projections about future events are
subject to risks and uncertainties that could cause actual results to
differ materially. Factors that might cause such differences include,
but are not limited to, general economic conditions, changes in
interest rates and competition.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
BROOKLINE BANCORP, INC.
Date: June 24, 2003 By: /s/ Paul R. Bechet
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Paul R. Bechet, Chief Financial Officer