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EX-32.2 - EXHIBIT 32.2 - BROOKLINE BANCORP INCbrkl-ex322_20170331xq1.htm
EX-32.1 - EXHIBIT 32.1 - BROOKLINE BANCORP INCbrkl-ex321_20170331xq1.htm
EX-31.2 - EXHIBIT 31.2 - BROOKLINE BANCORP INCbrkl-ex312_20170331xq1.htm
EX-31.1 - EXHIBIT 31.1 - BROOKLINE BANCORP INCbrkl-ex311_20170331xq1.htm
 
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 March 31, 2017
 
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.)
 
 
 
131 Clarendon Street, Boston, MA
 
02116
(Address of principal executive offices)
 
(Zip Code)
 
(617) 425-4600
(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, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12-b-2 of the Exchange Act.
 
Large accelerated filer x    Accelerated filer o    Non-accelerated filer o (Do not check if a smaller reporting company)    Smaller Reporting Company o        Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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
                                                                                                                                                                                
At May 5, 2017, the number of shares of common stock, par value $0.01 per share, outstanding was 76,519,932.
 



BROOKLINE BANCORP, INC. AND SUBSIDIARIES
FORM 10-Q
Table of Contents
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



PART I — FINANCIAL INFORMATION
Item 1. Unaudited Consolidated Financial Statements
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Unaudited Consolidated Balance Sheets
 
At March 31, 2017
 
At December 31, 2016
 
(In Thousands Except Share Data)
ASSETS
 
 
 
Cash and due from banks
$
33,565

 
$
36,055

Short-term investments
29,178

 
31,602

Total cash and cash equivalents
62,743

 
67,657

Investment securities available-for-sale
528,433

 
523,634

Investment securities held-to-maturity (fair value of $99,534 and $85,271, respectively)
100,691

 
87,120

Total investment securities
629,124

 
610,754

Loans held-for-sale
1,152

 
13,078

Loans and leases:
 
 
 
Commercial real estate loans
2,951,155

 
2,918,567

Commercial loans and leases
1,520,389

 
1,495,408

Consumer loans
990,235

 
984,889

Total loans and leases
5,461,779

 
5,398,864

Allowance for loan and lease losses
(66,133
)
 
(53,666
)
Net loans and leases
5,395,646

 
5,345,198

Restricted equity securities
68,065

 
64,511

Premises and equipment, net of accumulated depreciation of $60,068 and $58,790, respectively
76,973

 
76,176

Deferred tax asset
29,859

 
25,247

Goodwill
137,890

 
137,890

Identified intangible assets, net of accumulated amortization of $32,181 and $31,649, respectively
7,601

 
8,133

Other real estate owned ("OREO") and repossessed assets, net
2,286

 
1,399

Other assets
86,382

 
88,086

Total assets
$
6,497,721

 
$
6,438,129

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Deposits:
 
 
 
Non-interest-bearing deposits:
 
 
 
Demand checking accounts
$
898,161

 
$
900,474

Interest-bearing deposits:
 
 
 
NOW accounts
321,392

 
323,160

Savings accounts
575,808

 
613,061

Money market accounts
1,765,895

 
1,733,359

Certificate of deposit accounts
1,090,647

 
1,041,022

Total interest-bearing deposits
3,753,742

 
3,710,602

Total deposits
4,651,903

 
4,611,076

Borrowed funds:
 
 
 
Advances from the Federal Home Loan Bank of Boston ("FHLBB")
930,001

 
910,774

Subordinated debentures and notes
83,147

 
83,105

Other borrowed funds
43,637

 
50,207

Total borrowed funds
1,056,785

 
1,044,086

Mortgagors' escrow accounts
8,032

 
7,645

Accrued expenses and other liabilities
69,752

 
72,573

Total liabilities
5,786,472

 
5,735,380

 
 
 
 
Commitments and contingencies (Note 12)

 

Stockholders' Equity:
 
 
 
Brookline Bancorp, Inc. stockholders' equity:
 
 
 
Common stock, $0.01 par value; 200,000,000 shares authorized; 75,744,445 shares issued
757

 
757

Additional paid-in capital
617,364

 
616,734

Retained earnings, partially restricted
143,766

 
136,671

Accumulated other comprehensive loss
(3,261
)
 
(3,818
)
Treasury stock, at cost; 4,707,096 shares and 4,707,096 shares, respectively
(53,837
)
 
(53,837
)
Unallocated common stock held by Employee Stock Ownership Plan ("ESOP"); 168,099 shares and 176,688 shares, respectively
(916
)
 
(963
)
Total Brookline Bancorp, Inc. stockholders' equity
703,873

 
695,544

Noncontrolling interest in subsidiary
7,376

 
7,205

Total stockholders' equity
711,249

 
702,749

Total liabilities and stockholders' equity
$
6,497,721

 
$
6,438,129

 
 
 
 

1


BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Income
 
Three Months Ended March 31,
 
2017
 
2016
 
(In Thousands Except Share Data)
Interest and dividend income:
 
 
 
Loans and leases
$
58,558

 
$
54,247

Debt securities
3,000

 
2,932

Marketable and restricted equity securities
726

 
680

Short-term investments
67

 
39

Total interest and dividend income
62,351

 
57,898

Interest expense:
 
 
 
Deposits
5,080

 
4,745

Borrowed funds
4,173

 
3,950

Total interest expense
9,253

 
8,695

Net interest income
53,098

 
49,203

Provision for credit losses
13,402

 
2,378

Net interest income after provision for credit losses
39,696

 
46,825

Non-interest income:
 
 
 
Deposit fees
2,252

 
2,145

Loan fees
261

 
330

Loan level derivative income, net
402

 
1,629

Gain on sales of investment securities, net
11,393

 

Gain on sales of loans and leases held-for-sale
353

 
905

Other
1,247

 
1,460

Total non-interest income
15,908

 
6,469

Non-interest expense:
 
 
 
Compensation and employee benefits
19,784

 
18,727

Occupancy
3,645

 
3,526

Equipment and data processing
4,063

 
3,714

Professional services
1,106

 
966

FDIC insurance
855

 
878

Advertising and marketing
817

 
861

Amortization of identified intangible assets
532

 
635

Other
2,954

 
2,746

Total non-interest expense
33,756

 
32,053

Income before provision for income taxes
21,848

 
21,241

Provision for income taxes
7,835

 
7,599

Net income before noncontrolling interest in subsidiary
14,013

 
13,642

Less net income attributable to noncontrolling interest in subsidiary
568

 
830

Net income attributable to Brookline Bancorp, Inc.
$
13,445

 
$
12,812

Earnings per common share:
 
 
 
Basic
$
0.19

 
$
0.18

Diluted
0.19

 
0.18

Weighted average common shares outstanding during the year:
 
 
 
Basic
70,386,766

 
70,186,921

Diluted
70,844,096

 
70,343,408

Dividends declared per common share
$
0.09

 
$
0.09

 
 
 
 


See accompanying notes to unaudited consolidated financial statements.
2


BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Comprehensive Income
 
Three Months Ended March 31,
 
2017
 
2016
 
(In Thousands)
Net income before noncontrolling interest in subsidiary
$
14,013

 
$
13,642

 
 
 
 
Other comprehensive income, net of taxes:
 
 
 
 
 
 
 
Investment securities available-for-sale:
 
 
 
Unrealized securities holding gains
870

 
9,074

Income tax expense
(313
)
 
(3,246
)
Net unrealized securities holding gains before reclassification adjustments
557

 
5,828

 
 
 
 
Postretirement benefits:
 
 
 
Adjustment of accumulated obligation for postretirement benefits

 

Income tax expense

 

Net adjustment of accumulated obligation for postretirement benefits

 

 
 
 
 
Other comprehensive income, net of taxes
557

 
5,828

 
 
 
 
Comprehensive income
14,570

 
19,470

Net income attributable to noncontrolling interest in subsidiary
568

 
830

Comprehensive income attributable to Brookline Bancorp, Inc.
$
14,002

 
$
18,640

 
 
 



See accompanying notes to unaudited consolidated financial statements.
3


BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Changes in Stockholders' Equity
Three Months Ended March 31, 2017 and 2016
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
(Loss) Income
 
Treasury
Stock
 
Unallocated
Common Stock
Held by ESOP
 
Total Brookline
Bancorp, Inc.
Stockholders'
Equity
 
Noncontrolling
Interest in
Subsidiary
 
Total Stockholders'
Equity
 
(In Thousands)
Balance at December 31, 2016
$
757

 
$
616,734

 
$
136,671

 
$
(3,818
)
 
$
(53,837
)
 
$
(963
)
 
$
695,544

 
$
7,205

 
$
702,749

Net income attributable to Brookline Bancorp, Inc. 

 

 
13,445

 

 

 

 
13,445

 

 
13,445

Net income attributable to noncontrolling interest in subsidiary

 

 

 

 

 

 

 
568

 
568

Issuance of noncontrolling units

 

 

 

 

 

 

 
118

 
118

Other comprehensive income

 

 


 
557

 

 

 
557

 

 
557

Common stock dividends of $0.09 per share

 

 

 

 


 

 

 

 

Dividend distribution to owners of noncontrolling interest in subsidiary

 

 
(6,350
)
 

 

 


 
(6,350
)
 
(515
)
 
(6,865
)
Compensation under recognition and retention plan

 
559

 

 

 

 

 
559

 

 
559

Common stock held by ESOP committed to be released (8,589 shares)

 
71

 

 

 

 
47

 
118

 

 
118

Balance at March 31, 2017
$
757

 
$
617,364

 
$
143,766

 
$
(3,261
)
 
$
(53,837
)
 
$
(916
)
 
$
703,873

 
$
7,376

 
$
711,249



See accompanying notes to unaudited consolidated financial statements.
4


BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Changes in Stockholders' Equity (Continued)
Three Months Ended March 31, 2017 and 2016
 
Common
Stock
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (loss)
 
Treasury
Stock
 
Unallocated
Common Stock
Held by ESOP
 
Total Brookline
Bancorp, Inc.
Stockholders'
Equity
 
Noncontrolling
Interest in
Subsidiary
 
Total Stockholders'
Equity
 
(In Thousands)
Balance at December 31, 2015
$
757

 
$
616,899

 
$
109,675

 
$
(2,476
)
 
$
(56,208
)
 
$
(1,162
)
 
$
667,485

 
$
6,001

 
$
673,486

Net income attributable to Brookline Bancorp, Inc. 

 

 
12,812

 

 

 

 
12,812

 

 
12,812

Net income attributable to noncontrolling interest in subsidiary

 

 

 

 

 

 

 
830

 
830

Issuance of non-controlling interest

 

 

 

 

 

 

 
76

 
76

Other comprehensive loss

 

 


 
5,828

 

 

 
5,828

 

 
5,828

Common stock dividends of $0.09 per share

 

 
(6,336
)
 

 

 

 
(6,336
)
 

 
(6,336
)
Dividend distribution to owners of noncontrolling interest in subsidiary

 

 

 

 

 

 

 
(530
)
 
(530
)
Compensation under recognition and retention plans

 
529

 

 

 

 

 
529

 

 
529

Common stock held by ESOP committed to be released (9,093 shares)

 
49

 

 

 

 
50

 
99

 

 
99

Balance at March 31, 2016
$
757

 
$
617,477

 
$
116,151

 
$
3,352

 
$
(56,208
)
 
$
(1,112
)
 
$
680,417

 
$
6,377

 
$
686,794

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




See accompanying notes to unaudited consolidated financial statements.
5


BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Cash Flows
 
Three Months Ended March 31,
 
2017
 
2016
 
(In Thousands)
Cash flows from operating activities:
 
 
 
Net income attributable to Brookline Bancorp, Inc.
$
13,445

 
$
12,812

Adjustments to reconcile net income to net cash provided from operating activities:
 
 
 
Net income attributable to noncontrolling interest in subsidiary
568

 
830

Provision for credit losses
13,402

 
2,378

Origination of loans and leases held-for-sale
(8,493
)
 
(11,949
)
Proceeds from sales of loans and leases held-for-sale, net
13,246

 
12,323

Deferred income tax benefit
(4,925
)
 
(611
)
Depreciation of premises and equipment
1,795

 
1,783

Amortization of investment securities premiums and discounts, net
416

 
500

Amortization of deferred loan and lease origination costs, net
1,626

 
1,453

Amortization of identified intangible assets
532

 
635

Amortization of debt issuance costs
25

 
25

Accretion of acquisition fair value adjustments, net
(617
)
 
(789
)
Gain on sales of investment securities, net
(11,393
)
 

Gain on sales of loans and leases held-for-sale
(353
)
 
(905
)
Gain on sales of OREO and other repossessed assets, net
(10
)
 
(7
)
Write-down of OREO and other repossessed assets
56

 
45

Compensation under recognition and retention plans
579

 
570

ESOP shares committed to be released
118

 
99

Net change in:
 
 
 
Cash surrender value of bank-owned life insurance
(256
)
 
(259
)
Other assets
1,986

 
(10,278
)
Accrued expenses and other liabilities
(2,781
)
 
(8,332
)
Net cash provided from operating activities
18,966

 
323

 
 
 
 
Cash flows from investing activities:
 
 
 
Proceeds from sales of investment securities available-for-sale
11,515

 

Proceeds from maturities, calls, and principal repayments of investment securities available-for-sale
19,592

 
27,639

Purchases of investment securities available-for-sale
(23,935
)
 
(41,985
)
Proceeds from maturities, calls, and principal repayments of investment securities held to maturity
1,300

 
13,784

Purchases of investment securities held-to-maturity
(14,873
)
 
(3,496
)
Proceeds from redemption of restricted equity securities

 
679

Purchase of restricted equity securities
(3,676
)
 

Proceeds from sales of loans and leases held-for-investment, net
698

 
23,116

Net increase in loans and leases
(59,893
)
 
(149,323
)
Purchase of premises and equipment, net
(2,659
)
 
(796
)
Proceeds from sales of OREO and other repossessed assets
413

 
1,547

Net cash used for investing activities
(71,518
)
 
(128,835
)
 
 
 
(Continued)


See accompanying notes to unaudited consolidated financial statements.
6


BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Cash Flows (Continued)
 
Three Months Ended March 31,
 
2017
 
2016
 
(In Thousands)
Cash flows from financing activities:
 
 
 
(Decrease) increase in demand checking, NOW, savings and money market accounts
(8,798
)
 
67,160

Increase in certificates of deposit
49,625

 
20,302

Proceeds from FHLBB advances
1,294,000

 
2,244,237

Repayment of FHLBB advances
(1,274,259
)
 
(2,199,504
)
(Decrease) increase in other borrowed funds, net
(6,570
)
 
1,151

Increase in mortgagors' escrow accounts, net
387

 
389

Payment of dividends on common stock
(6,350
)
 
(6,336
)
Proceeds from issuance of noncontrolling units
118

 
76

Payment of dividends to owners of noncontrolling interest in subsidiary
(515
)
 
(530
)
Net cash provided from financing activities
47,638

 
126,945

Net decrease in cash and cash equivalents
(4,914
)
 
(1,567
)
Cash and cash equivalents at beginning of period
67,657

 
75,489

Cash and cash equivalents at end of period
$
62,743

 
$
73,922

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid during the period for:
 
 
 
Interest on deposits, borrowed funds and subordinated debt
$
10,789

 
$
10,447

Income taxes
4,861

 
8,286

Non-cash investing activities:
 
 
 
Transfer from loans and leases to loan and leases held-for-sale
$
7,500

 
$
10,000

Transfer from loans to other real estate owned
1,346

 
807




See accompanying notes to unaudited consolidated financial statements.
7


BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
At and for the Three Months Ended March 31, 2017 and 2016
(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 financial institution; and First Ipswich Bank ("First Ipswich"), a Massachusetts-chartered trust company (collectively referred to as the "Banks"). The Banks are all members of the Federal Reserve System. 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 retail customers through the Banks and its non-bank subsidiaries.
Brookline Bank, which includes its wholly-owned subsidiaries BBS Investment Corp., Longwood Securities Corp. and its 84.2%-owned subsidiary, Eastern Funding LLC ("Eastern Funding"), operates 25 full-service banking offices in the greater Boston metropolitan area. BankRI, which includes its wholly-owned subsidiaries, Acorn Insurance Agency, BRI Realty Corp., Macrolease Corporation ("Macrolease"), BRI Investment Corp. and its wholly-owned subsidiary, BRI MSC Corp., operates 20 full-service banking offices in the greater Providence area. First Ipswich, which includes its wholly-owned subsidiaries, First Ipswich Insurance Agency and First Ipswich Securities II Corp., operates six full-service banking offices on the north shore of eastern Massachusetts.
The Company's activities include acceptance of commercial, municipal 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, 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, New York, and Macrolease, which is based in Plainview, New York.
The Company and the Banks are supervised, examined and regulated by the Board of Governors of the Federal Reserve System ("FRB"). As Massachusetts-chartered savings bank and trust companies, Brookline Bank and First Ipswich, respectively, are also subject to regulation under the laws of the Commonwealth of Massachusetts and the jurisdiction of the Massachusetts Division of Banks. As a Rhode Island-chartered financial institution, 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.
The Federal Deposit Insurance Corporation ("FDIC") offers insurance coverage on all deposits up to $250,000 per depositor at each of the Banks. As FDIC-insured depository institutions, the Banks are also secondarily subject to supervision, examination and regulation by the FDIC. Additionally, as a Massachusetts-chartered savings bank, Brookline Bank is also insured by the Depositors Insurance Fund ("DIF"), a private industry-sponsored insurance company. The DIF insures savings bank deposits in excess of the FDIC insurance limits. As such, Brookline Bank offers 100% insurance on all deposits as a result of a combination of insurance from the FDIC and the DIF. Brookline Bank is required to file reports with the DIF.
Basis of Financial Statement Presentation
The unaudited consolidated financial statements of the Company presented herein have been prepared pursuant to the rules of the Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by U.S. generally accepted accounting principles (“GAAP”). In the opinion of Management, all adjustments (consisting of normal recurring adjustments) and disclosures considered necessary for the fair presentation of the accompanying consolidated financial statements have been included. Interim results are not necessarily reflective of the results of the entire year. The accompanying unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2016

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.


8

BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
At and for the Three Months Ended March 31, 2017 and 2016

In preparing these consolidated financial statements, Management is required to make significant estimates and assumptions that affect the reported amounts of assets, liabilities, income, expenses and disclosure of contingent assets and liabilities. 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, including acquired loans and leases, the review of goodwill and intangibles for impairment and the review of deferred tax assets for valuation allowances.
 
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.

Reclassification

Certain previously reported amounts have been reclassified to conform to the current year's presentation.
(2) Recent Accounting Pronouncements
In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2017-08, Premium Amortization on Purchased Callable debt Securities (Subtopic 310-20). This ASU was issued to clarify the Subtopic 310-20, and to amend the amortization period for certain purchased callable debt securities held at a premium. For public entities, this ASU is effective for annual reporting periods beginning after December 15, 2018. The Company adopted ASU 2017-08 effective January 1, 2017 and the adoption did not have a material impact on the Company’s consolidated financial statements.
In March 2017, the FASB issued Accounting Standards Update ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (Topic 715). This ASU was issued primarily to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost. This ASU is effective for annual reporting periods beginning after December 15, 2017. Management has determined that ASU 2017-07 does apply, but has not determined the impact, if any, as of March 31, 2017. Management will meet to discuss and will put together a project team to assess steps to adoption prior to implementation of the standard in 2018.
In February 2017, the FASB issued ASU 2017-05, Other Income Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20). This ASU was issued to clarify the scope of Subtopic 610-20, and to add guidance for partial sales of nonfinancial assets. For public entities, this ASU is effective for annual reporting periods beginning after December 15, 2017. Management believes that this ASU applies and is assessing the impact, if any, as of March 31, 2017. Management will form a project team to determine the impact and if the Company will early adopt the ASU.
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350). This ASU was issued to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. For public entities, this ASU is effective for the fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted and application should be on a prospective basis. Management has evaluated this ASU and believes that ASU 2017-04 does apply. Management will form a project team to determine the impact and if the Company will early adopt the ASU.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230). This ASU was issued to provide clarification and uniformity on the presentation and classification of certain cash receipts and cash payments in the statement of cash flows under Topic 230. This amendments presented in this ASU are effective for fiscal years beginning after December 15, 2017. As of March 31, 2017, management believes that ASU 2016-15 does apply, and after completing an internal analysis has determined the impact of adoption of this ASU in 2018 will be related to financial statement presentation.
In June 2016, the FASB issued ASU 2016-13, Financial instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The intent of this ASU is to replace the current GAAP method of calculating credit losses. Current GAAP uses a higher threshold at which likely losses can be calculated and recorded. The new process will require institutions to account for likely losses that originally would not have been part of the calculation. The calculation will

9

BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
At and for the Three Months Ended March 31, 2017 and 2016

incorporate future forecasting in addition to historical and current measures. For public entities that file with the SEC, this ASU is effective for the fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. This ASU must be applied prospectively to debt securities marked as other than temporarily impaired. A retrospective approach will be applied cumulatively to retained earnings. Early adoption is permitted as of the fiscal years beginning after December 15, 2018. Management has determined that ASU 2016-13 does apply, but has not determined the impact, if any, as of March 31, 2017. In preparation for the adoption in 2019 of this ASU, management formed a steering committee which has developed an approach for implementation which includes the selection of a third party software service provider.
In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The intention of this ASU is to provide additional clarification on specific issues brought forth by the FASB and the International Accounting Standards Board Joint Transition Resource Group for Revenue Recognition in relation to Topic 606 and revenue recognition. This ASU is to have the same effective date as ASU 2015-14 which deferred the effective date of ASU 2014-09 to December 15, 2017. Management has determined that ASU 2016-12 does apply, but has not determined the impact, if any, as of March 31, 2017. Management assembled a project team to address the changes pursuant to Topic 606. The project team has made an initial scope assessment and additional progress over the topic is expected to be made in the second quarter of 2017.
In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This ASU was issued as part of the FASB Simplification Initiative which intends to reduce the complexity of GAAP while improving usefulness to users. The ASU was effective for annual periods beginning after December 15, 2016, and interim periods within those annual reporting periods with early adoption available. The Company adopted ASU 2016-09 effective January 1, 2017 and the adoption did not have a material impact on the Company’s consolidated financial statements.
The requirement to report the excess tax benefit related to settlements of share-based payment awards in earnings as an increase to or reduction in provision for income taxes has been applied to settlements occurring on or after January 1, 2017. Previously, such amounts were recorded in the pool of excess tax benefits included in additional paid-in capital, if such pool was available. Excess tax benefits are no longer recognized in additional paid-in capital and as a result, the assumed proceeds from applying the treasury stock method when computing earnings per share should exclude the amount of excess tax benefits that would have previously been recognized in additional paid-in capital. Additionally, consistent with this change, excess tax benefits are now classified along with other income tax cash flows as an operating activity rather than a financing activity in the statement of cash flows. ASU 2016-09 also amended the classification and statutory tax withholding requirements in order to qualify as an equity awards and the classification on the statement of cash flows for employee taxes paid when the Company withholds shares, and as a result, will be presented as a financing activity on the statement of cash flows. The Company did not have any settlements of share-based payment awards for the three months ended March 31, 2017, therefore there was no impact in applying this guidance.
ASU 2016-09 also provided that an entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest (current GAAP) or account for forfeitures when they occur. The Company chose a modified retrospective approach and a policy election to account for forfeitures when they occur. This change resulted in a cumulative adjustment that is immaterial to all periods presented.
In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). This ASU was issued to clarify how to recognize revenue depending on an entities position, in relation to another entity involved, on contracts with customers. The entity can either be a principal party or an agent, and must record revenue accordingly. This ASU is not yet effective. Since this ASU affects ASU 2014-09, and that effective date was deferred, this ASU remains suspended too. Management believes that this ASU applies and is assessing the impact, if any, as of March 31, 2017. Management assembled a project team to address the changes pursuant to Topic 606. The project team has made an initial scope assessment and additional progress over the topic is expected to be made in the second quarter of 2017.
In February 2016, FASB issued ASU 2016-02, Leases. This ASU requires lessees to put most leases on their balance sheet but recognize expenses on their income statements in a manner similar to current accounting. This ASU also eliminates current real estate-specific provisions for all companies. For lessors, this ASU modifies the classification criteria and the accounting for sales-type and direct financing leases. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods therein. Early adoption is permitted. Management believes that this ASU applies and is assessing the

10

BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
At and for the Three Months Ended March 31, 2017 and 2016

impact, if any, as of March 31, 2017. Management has met to discuss the impact and will assemble a project team to assess steps required for adoption prior to implementation of the standard in 2019.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments. This ASU significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. It also amends certain disclosure requirements associated with the fair value of financial instruments. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods therein. Management believes that this ASU applies and is assessing the impact, if any, as of March 31, 2017. Management has put together a steering committee which has made progress identifying the additional data requirements necessary to implement the ASU and has determined an approach for implementation which includes the selection of a third party software service provider.
In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. This ASU was issued to defer the effective date of ASU 2014-09 for all entities by one year. In effect, public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods (including interim reporting periods within those period) beginning after December 15, 2017. Management believes that this ASU applies and is assessing the impact, if any, as of March 31, 2017. Management assembled a project team to address the changes pursuant to Topic 606. The project team has made an initial scope assessment and additional progress over the topic is expected to be made in the second quarter of 2017.
(3) Investment Securities
The following tables set forth investment securities available-for-sale and held-to-maturity at the dates indicated:
 
At March 31, 2017
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
 
(In Thousands)
Investment securities available-for-sale:
 
 
 
 
 
 
 
GSE debentures
$
121,800

 
$
273

 
$
960

 
$
121,113

GSE CMOs
153,037

 
37

 
3,397

 
149,677

GSE MBSs
203,636

 
602

 
2,314

 
201,924

SBA commercial loan asset-backed securities
103

 

 

 
103

Corporate debt obligations
48,309

 
366

 
153

 
48,522

U.S. Treasury bonds
4,808

 

 
43

 
4,765

Trust preferred securities
1,469

 

 
114

 
1,355

Marketable equity securities
969

 
13

 
8

 
974

Total investment securities available-for-sale
$
534,131

 
$
1,291

 
$
6,989

 
$
528,433

Investment securities held-to-maturity:
 
 
 
 
 
 
 
GSE debentures
$
29,608

 
$
12

 
$
609

 
$
29,011

GSEs MBSs
16,494

 
3

 
111

 
16,386

Municipal obligations
54,089

 
102

 
543

 
53,648

Foreign government obligations
500

 

 
11

 
489

Total investment securities held-to-maturity
$
100,691


$
117


$
1,274


$
99,534



11

BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
At and for the Three Months Ended March 31, 2017 and 2016

 
December 31, 2016
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
 
(In Thousands)
Investment securities available-for-sale:
 
 
 
 
 
 
 
GSE debentures
$
98,122

 
$
188

 
$
1,290

 
$
97,020

GSE CMOs
161,483

 
37

 
3,480

 
158,040

GSE MBSs
214,946

 
794

 
2,825

 
212,915

SBA commercial loan asset-backed securities
107

 

 

 
107

Corporate debt obligations
48,308

 
360

 
183

 
48,485

U.S. Treasury bonds
4,801

 

 
64

 
4,737

Trust preferred securities
1,469

 

 
111

 
1,358

Marketable equity securities
966

 
15

 
9

 
972

Total investment securities available-for-sale
$
530,202

 
$
1,394

 
$
7,962

 
$
523,634

Investment securities held-to-maturity:
 
 
 
 
 
 
 
GSE debentures
$
14,735

 
$

 
$
634

 
$
14,101

GSEs MBSs
17,666

 

 
187

 
17,479

Municipal obligations
54,219

 
5

 
1,020

 
53,204

Foreign government obligations
500

 

 
13

 
487

Total investment securities held-to-maturity
$
87,120

 
$
5

 
$
1,854

 
$
85,271

As of March 31, 2017, the fair value of all investment securities available-for-sale was $528.4 million, with net unrealized losses of $5.7 million, compared to a fair value of $523.6 million and net unrealized losses of $6.6 million as of December 31, 2016. As of March 31, 2017, $390.0 million, or 73.8% of the portfolio, had gross unrealized losses of $7.0 million, compared to $389.0 million, or 74.3% of the portfolio, with gross unrealized losses of $8.0 million as of December 31, 2016.
As of March 31, 2017, the fair value of all investment securities held-to-maturity was $99.5 million, with net unrealized losses of $1.2 million, compared to a fair value of $85.3 million with net unrealized losses of $1.8 million as of December 31, 2016. As of March 31, 2017, $67.2 million, or 66.8% of the portfolio, had gross unrealized losses of $1.3 million. There were $82.0 million, or 94.1% of the portfolio, with net unrealized losses $1.9 million as of December 31, 2016.
Investment Securities as Collateral
As of March 31, 2017 and December 31, 2016, respectively, $437.0 million and $429.1 million of investment securities were pledged as collateral for repurchase agreements; municipal deposits; treasury, tax and loan deposits; swap agreements; FRB borrowings; and FHLBB borrowings. The Banks did not have any outstanding FRB borrowings as of March 31, 2017 and December 31, 2016.

12

BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
At and for the Three Months Ended March 31, 2017 and 2016

Other-Than-Temporary Impairment ("OTTI")
Investment securities as of March 31, 2017 and December 31, 2016 that have been in a continuous unrealized loss position for less than twelve months or twelve months or longer are as follows:
 
At March 31, 2017
 
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)
Investment securities available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
GSE debentures
$
72,568

 
$
960

 
$

 
$

 
$
72,568

 
$
960

GSE CMOs
112,140

 
2,087

 
36,834

 
1,310

 
148,974

 
3,397

GSE MBSs
156,605

 
2,311

 
195

 
3

 
156,800

 
2,314

SBA commercial loan asset-backed securities

 

 
70

 

 
70

 

Corporate debt obligations
4,961

 
153

 

 

 
4,961

 
153

U.S. Treasury bonds
4,764

 
43

 

 

 
4,764

 
43

Trust preferred securities

 

 
1,355

 
114

 
1,355

 
114

Marketable equity securities
503

 
8

 

 

 
503

 
8

Temporarily impaired investment securities available-for-sale
351,541

 
5,562

 
38,454

 
1,427

 
389,995

 
6,989

Investment securities held-to-maturity:
 
 
 
 
 
 
 
 
 
 
 
GSE debentures
17,104

 
609

 

 

 
17,104


609

GSEs MBSs
14,091

 
111

 

 

 
14,091

 
111

Municipal obligations
35,534

 
543

 

 

 
35,534

 
543

Foreign government obligations
489

 
11

 

 

 
489

 
11

Temporarily impaired investment securities held-to-maturity
67,218


1,274






67,218


1,274

Total temporarily impaired investment securities
$
418,759


$
6,836


$
38,454


$
1,427


$
457,213


$
8,263


13

BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
At and for the Three Months Ended March 31, 2017 and 2016

 
December 31, 2016
 
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)
Investment securities available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
GSE debentures
$
67,216

 
$
1,290

 
$

 
$

 
$
67,216

 
$
1,290

GSE CMOs
118,450

 
2,162

 
38,852

 
1,318

 
157,302

 
3,480

GSE MBSs
149,687

 
2,822

 
198

 
3

 
149,885

 
2,825

SBA commercial loan asset-backed securities

 

 
72

 

 
72

 

Corporate debt obligations
7,953

 
183

 

 

 
7,953

 
183

U.S. Treasury bonds
4,737

 
64

 

 

 
4,737

 
64

Trust preferred securities

 

 
1,358

 
111

 
1,358

 
111

Marketable equity securities
503

 
9

 

 

 
503

 
9

Temporarily impaired investment securities available-for-sale
348,546

 
6,530

 
40,480

 
1,432

 
389,026

 
7,962

Investment securities held-to-maturity:
 
 
 
 
 
 
 
 
 
 
 
GSE debentures
14,101

 
634

 

 

 
14,101

 
634

GSEs MBSs
17,289

 
187

 

 

 
17,289

 
187

Municipal obligations
50,098

 
1,020

 

 

 
50,098

 
1,020

Foreign government obligations
487

 
13

 

 

 
487

 
13

Temporarily impaired investment securities held-to-maturity
81,975

 
1,854

 

 

 
81,975

 
1,854

Total temporarily impaired investment securities
$
430,521

 
$
8,384

 
$
40,480

 
$
1,432

 
$
471,001

 
$
9,816

The Company performs regular analysis on the investment securities available-for-sale portfolio to determine whether a decline in fair value indicates that an investment security is OTTI. In making these OTTI 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 investment 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 investment security before recovery of its amortized cost, the credit portion of the impairment loss is recognized in the Company's unaudited consolidated statement of income 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 investment 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 investment 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 the Company's unaudited consolidated statement of income.
Investment Securities Available-For-Sale Impairment Analysis
The following discussion summarizes, by investment security type, the basis for evaluating if the applicable investment securities within the Company’s available-for-sale portfolio were OTTI as of March 31, 2017. Based on the analysis below and the determination that, it is more likely than not that the Company will not sell or be required to sell the investment securities before recovery of its amortized cost. The Company's ability and intent to hold these investment securities until recovery is supported by the Company's strong capital and liquidity positions as well as its historically low portfolio turnover. As such, management has determined that the investment securities are not OTTI as of March 31, 2017. If market conditions for

14

BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
At and for the Three Months Ended March 31, 2017 and 2016

investment securities worsen or the creditworthiness of the underlying issuers deteriorates, it is possible that the Company may recognize additional OTTI in future periods.
U.S. Government-Sponsored Enterprises
The Company invests in securities issued by U.S. Government-sponsored enterprises ("GSEs"), including GSE debentures, mortgage-backed securities ("MBSs"), and collateralized mortgage obligations ("CMOs"). GSE securities include obligations issued by the Federal National Mortgage Association ("FNMA"), the Federal Home Loan Mortgage Corporation ("FHLMC"), the Government National Mortgage Association ("GNMA"), the Federal Home Loan Banks ("FHLB") and the Federal Farm Credit Bank. As of March 31, 2017, only GNMA MBSs and CMOs, and Small Business Administration ("SBA") commercial loan asset-backed securities in our available-for-sale portfolio with an estimated fair value of $27.2 million were backed explicitly by the full faith and credit of the U.S. Government, compared to $26.2 million as of December 31, 2016.
As of March 31, 2017, the Company owned thirty-seven GSE debentures with a total fair value of $121.1 million, and a net unrealized loss of $0.7 million. As of December 31, 2016, the Company held twenty-nine GSE debentures with a total fair value of $97.0 million, and a net unrealized loss of $1.1 million. As of March 31, 2017, twenty-two of the thirty-seven securities in this portfolio were in an unrealized loss position. As of December 31, 2016, twenty-one of the twenty-nine securities in this portfolio were in an unrealized loss position. All securities are performing and backed by the implicit (FHLB/FNMA/FHLMC) or explicit (GNMA/SBA) guarantee of the U.S Government. During the three months ended March 31, 2017, the Company purchased a total of $23.9 million GSE debentures. This compares to $21.5 million purchased during the same period in 2016.
As of March 31, 2017, the Company owned 62 GSE CMOs with a total fair value of $149.7 million and a net unrealized loss of $3.4 million. As of December 31, 2016, the Company held 62 GSE CMOs with a total fair value of $158.0 million with a net unrealized loss of $3.4 million. As of March 31, 2017, 47 of the 62 securities in this portfolio were in an unrealized loss position. As of December 31, 2016, 47 of the 62 securities in this portfolio were in an unrealized loss position. All securities are performing and backed by the implicit (FHLB/FNMA/FHLMC) or explicit (GNMA) guarantee of the U.S Government. During the three months ended March 31, 2017 and 2016, the Company did not purchase any GSE CMOs.
As of March 31, 2017, the Company owned 192 GSE MBSs with a total fair value of $201.9 million and a net unrealized loss of $1.7 million. As of December 31, 2016, the Company held 195 GSE MBSs with a total fair value of $212.9 million with a net unrealized loss of $2.0 million. As of March 31, 2017, 67 of the 192 securities in this portfolio were in an unrealized loss position. As of December 31, 2016, 60 of the 195 securities in this portfolio were in an unrealized loss position. All securities are performing and backed by the implicit (FHLB/FNMA/FHLMC) or explicit (GNMA) guarantee of the U.S Government. During the three months ended March 31, 2017, the Company did not purchase any GSE MBSs, as compared to the same period in 2016, when the Company purchased a total of $20.5 million of GSE MBSs.
SBA Commercial Loan Asset-Backed
As of March 31, 2017 and December 31, 2016, the Company owned SBA securities with a total fair value of $0.1 million and $0.1 million, respectively, which approximated amortized cost. As of March 31, 2017, four of the six securities in this portfolio were in an unrealized loss position. As of December 31, 2016, four of the six securities in this portfolio were in an unrealized loss position. All securities are performing and backed by the explicit (SBA) guarantee of the U.S Government.
Corporate Obligations
From time to time, the Company may invest in high-quality corporate obligations to provide portfolio diversification and improve the overall yield on the portfolio. The Company owned sixteen corporate obligation securities with a total fair value of $48.5 million and a net unrealized gain of $0.2 million as of March 31, 2017. This compares to sixteen corporate obligation securities with a total fair value of $48.5 million and a net unrealized gain of $0.2 million as of December 31, 2016. As of March 31, 2017, two of the sixteen securities in this portfolio were in an unrealized loss position. As of December 31, 2016, three of the sixteen securities in this portfolio was in an unrealized loss position. Full collection of the obligations is expected because the financial condition of the issuers is sound, they have not defaulted on scheduled payments, the obligations are rated investment grade, and the Company has the ability and intent to hold the obligations for a period of time to recover the amortized cost. During the three months ended March 31, 2017 and 2016, the Company did not purchase any corporate obligations.

15

BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
At and for the Three Months Ended March 31, 2017 and 2016

U.S. Treasury Bonds
The Company invests in securities issued by the U.S. government. As of March 31, 2017, the Company owned one U.S. treasury bond with a total fair value of $4.8 million and an unrealized loss of $43.0 thousand. This compares to one U.S. treasury bond with a total fair value of $4.7 million and an unrealized loss of $0.1 million as of December 31, 2016. During the three months ended March 31, 2017 and 2016, the Company did not purchase any U.S. treasury bonds.
Trust Preferred Securities
Trust preferred securities represent subordinated debt issued by financial institutions. As of March 31, 2017, the Company owned two trust preferred securities with a total fair value of $1.4 million and a net unrealized loss of $0.1 million. This compares to two trust preferred securities with a total fair value of $1.4 million and a net unrealized loss of $0.1 million as of December 31, 2016. As of March 31, 2017 and December 31, 2016, both of the securities in this portfolio were in an unrealized loss position. Full collection of the obligations is expected because the financial condition of the issuers is sound, neither of the
issuers has defaulted on scheduled payments, the obligations are rated investment grade, and the Company has the ability and
intent to hold the obligations for a period of time to recover the amortized cost.
Marketable Equity Securities
As of March 31, 2017, the Company owned marketable equity securities with a fair value of $1.0 million, which approximated amortized cost, compared to a fair value of $1.0 million, which approximated amortized cost as of December 31, 2016. As of March 31, 2017, one of the two securities in this portfolio was in an unrealized loss position. As of December 31, 2016, one of the two securities in this portfolio was in an unrealized loss position.
Investment Securities Held-to-Maturity Impairment Analysis
The following discussion summarizes by investment security type, the basis for evaluating if the applicable investment securities within the Company's held-to-maturity portfolio were OTTI at March 31, 2017. Management has the ability and the intent to hold the securities until maturity.
U.S. Government-Sponsored Enterprises
As of March 31, 2017, the Company owned ten GSE debentures with a total fair value of $29.0 million and a net unrealized loss of $0.6 million. As of December 31, 2016, the Company owned five GSE debentures with a total fair value of $14.1 million and a net unrealized loss of $0.6 million. As of March 31, 2017, six of the ten securities in this portfolio were in an unrealized loss position. At December 31, 2016, five of the five securities in this portfolio were in an unrealized loss position. All securities are performing and backed by the implicit (FHLB/FNMA/FHLMC) or explicit (GNMA) guarantee of the U.S Government. During the three months ended March 31, 2017 and 2016, the Company purchased a total of $14.9 million and $3.0 million in GSE debentures, respectively.
As of March 31, 2017, the Company owned eleven GSE MBSs with a total fair value of $16.4 million and a net unrealized loss of $0.1 million. As of December 31, 2016, the Company owned eleven GSE MBSs with a total fair value of $17.5 million and an unrealized loss of $0.2 million. As of March 31, 2017, seven of the eleven securities in this portfolio were in an unrealized loss position as compared to December 31, 2016, when eight of the eleven securities were in an unrealized loss position. All securities are performing and backed by the implicit (FHLB/FNMA/FHLMC) or explicit (GNMA) guarantee of the U.S Government. During the three months ended March 31, 2017 and 2016, the Company did not purchase any GSE MBSs.
Municipal Obligations
As of March 31, 2017, the Company owned 100 municipal obligation securities with a total fair value and total amortized cost of $53.6 million and $54.1 million, respectively. As of December 31, 2016, the Company owned 100 municipal obligation securities with a total fair value and total amortized cost of $53.2 million and $54.2 million, respectively. As of March 31, 2017, 66 of the 100 securities in this portfolio were in an unrealized loss position as compared to December 31, 2016, when 93 of the 100 securities were in an unrealized loss position. During the three months ended March 31, 2017 and 2016, the Company did not purchase any municipal obligations.
Foreign Government Obligations
As of March 31, 2017 and December 31, 2016, the Company owned one foreign government obligation security with a fair value and amortized cost of $0.5 million. As of March 31, 2017 and December 31, 2016 respectively, the security was in an

16

BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
At and for the Three Months Ended March 31, 2017 and 2016

unrealized loss position. During the three months ended March 31, 2017, the Company did not purchase any foreign government obligations. During the three months ended March 31, 2016, the Company repurchased the foreign government obligation security that matured in the same period.
Portfolio Maturities
The final stated maturities of the debt securities are as follows for the periods indicated:
 
At March 31, 2017
 
At December 31, 2016
 
Amortized
Cost
 
Estimated
Fair Value
 
Weighted
Average
Rate
 
Amortized
Cost
 
Estimated
Fair Value
 
Weighted
Average
Rate
 
(Dollars in Thousands)
Investment securities available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
Within 1 year
$
3,056

 
$
3,070

 
2.26%
 
$
13

 
$
13

 
0.17%
After 1 year through 5 years
109,779

 
110,215

 
2.11%
 
81,524

 
81,833

 
2.14%
After 5 years through 10 years
119,741

 
118,848

 
2.04%
 
128,956

 
127,952

 
2.03%
Over 10 years
300,586

 
295,326

 
2.02%
 
318,743

 
312,864

 
2.03%
 
$
533,162

 
$
527,459

 
2.05%
 
$
529,236

 
$
522,662

 
2.04%
Investment securities held-to-maturity:
 
 
 
 
 
 
 
 
 
 
 
Within 1 year
$
672

 
$
671

 
1.00%
 
$
190

 
$
190

 
1.00%
After 1 year through 5 years
37,871

 
37,847

 
1.64%
 
23,012

 
22,750

 
1.30%
After 5 years through 10 years
45,729

 
44,705

 
1.75%
 
46,442

 
45,042

 
1.75%
Over 10 years
16,419

 
16,311

 
2.09%
 
17,476

 
17,289

 
2.11%
 
$
100,691

 
$
99,534

 
1.76%
 
$
87,120

 
$
85,271

 
1.70%
Actual maturities of debt securities will differ from those presented above since certain obligations amortize and may also provide the issuer the right to call or prepay the obligation prior to scheduled maturity without penalty. MBSs and CMOs are included above based on their final stated maturities; the actual maturities, however, may occur earlier due to anticipated prepayments and stated amortization of cash flows.
As of March 31, 2017, issuers of debt securities with an estimated fair value of $42.8 million had the right to call or prepay the obligations. Of the $42.8 million, approximately $17.9 million matures in 1 - 5 years, $24.0 million matures in 6 - 10 years, and $0.9 million matures after ten years. As of December 31, 2016, issuers of debt securities with an estimated fair value of approximately $27.9 million had the right to call or prepay the obligations. Of the $27.9 million, $3.0 million matures in 1-5 years, $23.5 million matures in 6-10 years, and $1.4 million matures after ten years.











17

BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
At and for the Three Months Ended March 31, 2017 and 2016


Security Sales
On February 3, 2017, the Company, through its wholly owned subsidiary, Brookline Securities Corp., received $319.04 in cash and 14.876 shares of Community Bank Systems, Inc. (“CBU”) common stock in exchange for each of the 9,721 shares of Northeast Retirement Services, Inc. (“NRS”) stock held by Brookline Securities Corp.  The exchange was completed in accordance with the merger agreement entered into between NRS and CBU.  As part of the merger agreement, the Company was restricted to selling 5,071 shares of CBU per day in the open market. During the quarter ended March 31, 2017, the Company completed the sale of all the CBU shares. When securities are sold, the adjusted cost of the specific security sold is used to compute the gain or loss on the sale. The table below summarizes the activity with respect to the sale of the CBU shares.
 
Three Months Ended March 31, 2017
 
(In Thousands)
Sales of marketable and restricted equity securities
$
11,393

 
 
Gross gains from sales
11,612

Gross losses from sales
219

Gain on sales of securities, net
$
11,393

There were no security sales during the three months ended March 31, 2016.
(4) Loans and Leases
The following tables present loan and lease balances and weighted average coupon rates for the originated and acquired loan and lease portfolios at the dates indicated:
 
At March 31, 2017
 
Originated
 
Acquired
 
Total
 
Balance
 
Weighted
Average
Coupon
 
Balance
 
Weighted
Average
Coupon
 
Balance
 
Weighted
Average
Coupon
 
(Dollars In Thousands)
Commercial real estate loans:
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate
$
1,932,173

 
4.01%
 
$
134,426

 
4.27%
 
$
2,066,599

 
4.03%
Multi-family mortgage
705,705

 
3.86%
 
28,117

 
4.51%
 
733,822

 
3.88%
Construction
150,524

 
4.20%
 
210

 
3.67%
 
150,734

 
4.20%
Total commercial real estate loans
2,788,402

 
3.98%
 
162,753

 
4.31%
 
2,951,155

 
4.00%
Commercial loans and leases:
 
 
 
 
 
 
 
 
 
 
 
Commercial
633,812

 
4.20%
 
10,428

 
5.52%
 
644,240

 
4.22%
Equipment financing
810,258

 
7.12%
 
5,495

 
5.88%
 
815,753

 
7.11%
Condominium association
60,396

 
4.39%
 

 
—%
 
60,396

 
4.39%
Total commercial loans and leases
1,504,466

 
5.78%
 
15,923

 
5.64%
 
1,520,389

 
5.78%
Consumer loans:
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
565,666

 
3.69%
 
66,197

 
4.02%
 
631,863

 
3.72%
Home equity
293,323

 
3.71%
 
50,063

 
4.37%
 
343,386

 
3.81%
Other consumer
14,867

 
5.48%
 
119

 
17.95%
 
14,986

 
5.58%
Total consumer loans
873,856

 
3.73%
 
116,379

 
4.18%
 
990,235

 
3.78%
Total loans and leases
$
5,166,724

 
4.46%
 
$
295,055

 
4.33%
 
$
5,461,779

 
4.45%

18

BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
At and for the Three Months Ended March 31, 2017 and 2016

 
At December 31, 2016
 
Originated
 
Acquired
 
Total
 
Balance
 
Weighted
Average
Coupon
 
Balance
 
Weighted
Average
Coupon
 
Balance
 
Weighted
Average
Coupon
 
(Dollars In Thousands)
Commercial real estate loans:
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate
$
1,907,254

 
3.95%
 
$
143,128

 
4.24
%
 
$
2,050,382

 
3.97%
Multi-family mortgage
701,450

 
3.79%
 
29,736

 
4.53
%
 
731,186

 
3.82%
Construction
136,785

 
3.79%
 
214

 
3.67
%
 
136,999

 
3.79%
Total commercial real estate loans
2,745,489

 
3.90%
 
173,078

 
4.29
%
 
2,918,567

 
3.92%
Commercial loans and leases:
 
 
 
 
 
 
 
 
 
 
 
Commercial
621,285

 
4.11%
 
14,141

 
5.44
%
 
635,426

 
4.14%
Equipment financing
793,702

 
7.06%
 
6,158

 
5.86
%
 
799,860

 
7.05%
Condominium association
60,122

 
4.39%
 

 
%
 
60,122

 
4.39%
Total commercial loans and leases
1,475,109

 
5.71%
 
20,299

 
5.57
%
 
1,495,408

 
5.71%
Consumer loans:
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
555,430

 
3.67%
 
68,919

 
3.98
%
 
624,349

 
3.70%
Home equity
289,361

 
3.50%
 
52,880

 
4.26
%
 
342,241

 
3.62%
Other consumer
18,171

 
5.48%
 
128

 
17.92
%
 
18,299

 
5.57%
Total consumer loans
862,962

 
3.65%
 
121,927

 
4.12
%
 
984,889

 
3.71%
Total loans and leases
$
5,083,560

 
4.38%
 
$
315,304

 
4.31
%
 
$
5,398,864

 
4.38%
The net unamortized deferred loan origination fees and costs included in total loans and leases were $14.5 million and $14.2 million as of March 31, 2017 and December 31, 2016, respectively.
The Company's Banks and subsidiaries lend primarily in eastern Massachusetts, southern New Hampshire and Rhode Island, with the exception of equipment financing, 29.3% of which is in the greater New York and New Jersey metropolitan area and 70.7% of which is in other areas in the United States of America as of March 31, 2017.
Accretable Yield for the Acquired Loan Portfolio
The following table summarizes activity in the accretable yield for the acquired loan portfolio for the periods indicated:
 
Three Months Ended March 31,
 
2017
 
2016
 
(In Thousands)
Balance at beginning of period
$
14,353

 
$
20,796

Accretion
(1,407
)
 
(1,184
)
Reclassification from (to) nonaccretable difference as a result of changes in expected cash flows
126

 
188

Balance at end of period
$
13,072

 
$
19,800

On a quarterly basis, subsequent to acquisition, management reforecasts the expected cash flows for acquired ASC 310-30 loans, taking into account prepayment speeds, probability of default and loss given defaults. Management compares cash flow projections per the reforecast to the original cash flow projections and determines whether any reduction in cash flow expectations are due to deterioration, or if the change in cash flow expectation is related to noncredit events. This cash flow analysis is used to evaluate the need for a provision for loan and lease losses and/or prospective yield adjustments. During the three months ended March 31, 2017 and 2016, accretable yield adjustments totaling $0.1 million and $0.2 million, respectively, were made for certain loan pools. These accretable yield adjustments, which are subject to continued re-assessment, will be recognized over the remaining lives of those pools.

19

BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
At and for the Three Months Ended March 31, 2017 and 2016

Loans and Leases Pledged as Collateral
As of March 31, 2017 and December 31, 2016, there were $1.9 billion and $2.1 billion, respectively, of loans and leases pledged as collateral for repurchase agreements; municipal deposits; treasury, tax and loan deposits; swap agreements; FRB borrowings; and FHLBB borrowings. The Banks did not have any outstanding FRB borrowings as of March 31, 2017 and December 31, 2016.
(5) Allowance for Loan and Lease Losses
The following tables present the changes in the allowance for loan and lease losses and the recorded investment in loans and leases by portfolio segment for the periods indicated:
 
Three Months Ended March 31, 2017
 
Commercial
Real Estate
 
Commercial
 
Consumer
 
Total
 
(In Thousands)
Balance at December 31, 2016
$
27,645

 
$
20,906

 
$
5,115

 
$
53,666

Charge-offs
(24
)
 
(1,207
)
 
(151
)
 
(1,382
)
Recoveries
140

 
142

 
105

 
387

Provision (credit) for loan and lease losses
227

 
13,442

 
(207
)
 
13,462