Companies: 10,793     total market cap: $134.237 T
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Brookline Bancorp
BRKL
#6031
Rank
$0.97 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
$10.95
Share price
0.00%
Change (1 day)
-51.44%
Change (1 year)
๐Ÿฆ Banks๐Ÿ’ณ Financial services
Categories
  1. Brookline Bancorp
  2. Quarterly Reports (10-Q)
  3. Financial Year FY2021 Q1

Brookline Bancorp - 10-Q quarterly report FY2021 Q1


Text size:
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

(Mark One) 
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021

OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from           N/A           to                                 .
Commission file number 0-23695

BROOKLINE BANCORP INC.
(Exact name of registrant as specified in its charter)
Delaware04-3402944
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer Identification No.)
131 Clarendon StreetBostonMA02116
(Address of principal executive offices)(Zip Code)
(617) 425-4600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common StockBRKLNasdaq Global Select Market

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  ☒  No  ☐
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).  Yes  ☒  No  ☐
 
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☒Accelerated filer☐
Non-accelerated filer
☐ (Do not check if a smaller reporting company)
Smaller Reporting Company☐
Emerging growth company☐
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. ☐


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   ☐  No  ☒   
                                                                                                                                              
At April 30, 2021, the number of shares of common stock, par value $0.01 per share, outstanding was 78,192,589.


BROOKLINE BANCORP, INC. AND SUBSIDIARIES
FORM 10-Q
Table of Contents
Page
Item 1.
1
2
3
4
5
6
43
77
79
80
  
80
  
80
  
80
  
80
  
80
  
81
  
 
82

PART I — FINANCIAL INFORMATION
Item 1. Unaudited Consolidated Financial Statements
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Unaudited Consolidated Balance Sheets
At March 31, 2021At December 31, 2020
(In Thousands Except Share Data)
ASSETS
Cash and due from banks$41,284 $36,069 
Short-term investments89,643 398,848 
Total cash and cash equivalents130,927 434,917 
Investment securities available-for-sale 729,901 745,822 
Equity securities held-for-trading518 526 
Total investment securities730,419 746,348 
Loans and leases:
Commercial real estate loans3,790,341 3,823,826 
Commercial loans and leases2,324,202 2,274,899 
Consumer loans1,153,009 1,170,828 
Total loans and leases7,267,552 7,269,553 
Allowance for loan and lease losses(109,837)(114,379)
Net loans and leases7,157,715 7,155,174 
Restricted equity securities40,400 49,786 
Premises and equipment, net of accumulated depreciation of $83,290 and $82,233, respectively
72,524 71,568 
Right-of-use asset operating leases23,180 24,143 
Deferred tax asset42,857 40,129 
Goodwill160,427 160,427 
Identified intangible assets, net of accumulated amortization of $38,984 and $38,752, respectively
2,920 3,152 
Other real estate owned ("OREO") and repossessed assets, net6,383 6,515 
Other assets192,058 250,265 
Total assets$8,559,810 $8,942,424 
LIABILITIES AND STOCKHOLDERS' EQUITY  
Deposits:  
Demand checking accounts$1,724,170 $1,592,205 
 Interest-bearing deposits5,142,616 5,318,491 
Total deposits6,866,786 6,910,696 
Borrowed funds:  
Advances from the Federal Home Loan Bank of Boston ("FHLBB")378,646 648,849 
Subordinated debentures and notes83,783 83,746 
Other borrowed funds83,574 87,652 
Total borrowed funds546,003 820,247 
Operating lease liabilities23,180 24,143 
Mortgagors' escrow accounts6,483 5,901 
Reserve for unfunded credits13,705 13,071 
Accrued expenses and other liabilities158,254 226,588 
Total liabilities7,614,411 8,000,646 
Commitments and contingencies (Note 12)
Stockholders' Equity:  
Common stock, $0.01 par value; 200,000,000 shares authorized; 85,177,172 shares issued and 85,177,172 shares issued, respectively
852 852 
Additional paid-in capital737,882 737,178 
Retained earnings, partially restricted282,301 264,892 
Accumulated other comprehensive income2,082 16,490 
Treasury stock, at cost; 6,534,602 shares and 6,525,783 shares, respectively
(77,463)(77,343)
Unallocated common stock held by Employee Stock Ownership Plan ("ESOP"); 44,502 shares and 51,114 shares, respectively
(255)(291)
Total stockholders' equity945,399 941,778 
Total liabilities and stockholders' equity$8,559,810 $8,942,424 
See accompanying notes to unaudited consolidated financial statements.
1

BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Income
Three Months Ended March 31,
20212020
(In Thousands Except Share Data)
Interest and dividend income:
Loans and leases$75,009 $79,559 
Debt securities3,118 2,976 
Marketable and restricted equity securities301 778 
Short-term investments39 209 
Total interest and dividend income78,467 83,522 
Interest expense:
Deposits6,707 16,240 
Borrowed funds 2,651 5,570 
Total interest expense9,358 21,810 
Net interest income69,109 61,712 
(Credit) provision for credit losses(2,147)54,114 
Net interest income after provision for credit losses71,256 7,598 
Non-interest income:
Deposit fees2,281 2,458 
Loan fees599 550 
Loan level derivative income, net474 2,156 
(Loss) gain on investment securities, net(7)1,330 
Gain on sales of loans and leases held-for-sale709 120 
Other738 2,714 
Total non-interest income4,794 9,328 
Non-interest expense:
Compensation and employee benefits25,821 25,219 
Occupancy4,004 3,953 
Equipment and data processing4,493 4,703 
Professional services1,226 1,651 
FDIC insurance1,044 378 
Advertising and marketing1,100 1,075 
Amortization of identified intangible assets232 336 
Other2,891 3,433 
Total non-interest expense40,811 40,748 
Income (loss) before provision for income taxes35,239 (23,822)
Provision (benefit) for income taxes8,785 (6,546)
Net income (loss) $26,454 $(17,276)
Earnings per common share:
Basic$0.34 $(0.22)
Diluted0.34 (0.22)
Weighted average common shares outstanding during the year:
Basic78,143,752 79,481,462 
Diluted78,404,063 79,665,774 
Dividends paid per common share$0.115 $0.115 

See accompanying notes to unaudited consolidated financial statements.
2

BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Comprehensive Income (Loss)
Three Months Ended March 31,
20212020
(In Thousands)
Net income (loss)$26,454 $(17,276)
Investment securities available-for-sale:
Unrealized securities holding gains (losses)(18,481)18,810 
Income tax (expense) benefit4,073 (4,146)
Net unrealized securities holding gains (losses) before reclassification adjustments, net of taxes(14,408)14,664 
Cash flow hedges:
Change in fair value of cash flow hedges2 — 
Reclassification adjustment for (income) expense recognized in earnings(2)— 
Net change in fair value of cash flow hedges— — 
Other comprehensive income (loss), net of taxes(14,408)14,664 
Comprehensive income (loss)$12,046 $(2,612)


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, 2021 and 2020


Common
Stock		Additional
Paid-in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Treasury
Stock		Unallocated
Common Stock
Held by ESOP		Total Stockholders'
Equity
 (In Thousands)
Balance at December 31, 2020$852 $737,178 $264,892 $16,490 $(77,343)$(291)$941,778 
Net income— — 26,454 — — — 26,454 
Other comprehensive income (loss)— — — (14,408)— — (14,408)
Common stock dividends of $0.115 per share
— — (8,992)— — — (8,992)
Restricted stock awards issued, net of awards surrendered— 120 — — (120)— — 
Compensation under recognition and retention plans— 537 (53)— — — 484 
Common stock held by ESOP committed to be released (6,612 shares)
— 47 — — — 36 83 
Balance at March 31, 2021$852 $737,882 $282,301 $2,082 $(77,463)$(255)$945,399 
Common
Stock		Additional
Paid-in
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
 Income (Loss)		Treasury
Stock		Unallocated
Common Stock
Held by ESOP		Total Stockholders'
Equity
 (In Thousands)
Balance at December 31, 2019$852 $736,601 $265,376 $2,283 $(59,073)$(433)$945,606 
Net loss— — (17,276)— — — (17,276)
Other comprehensive income (loss)— — — 14,664 — — 14,664 
Common stock dividends of $0.115 per share
— — (9,173)— — — (9,173)
Compensation under recognition and retention plans— 758 (45)— (134)— 579 
Treasury stock, repurchase shares— — — — (10,410)— (10,410)
Common stock held by ESOP committed to be released (7,107 shares)
— 63 — — — 38 101 
Adoption of ASU 2016-13 (CECL)— — (11,523)— — — (11,523)
Balance at March 31, 2020$852 $737,422 $227,359 $16,947 $(69,617)$(395)$912,568 



See accompanying notes to unaudited consolidated financial statements.
4


BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Cash Flows
Three Months Ended March 31,
20212020
(In Thousands)
Cash flows from operating activities:
Net income (loss)$26,454 $(17,276)
Adjustments to reconcile net income to net cash provided from operating activities:
(Credit) provision for credit losses(2,147)54,114 
Deferred income tax expense (benefit)1,345 (17,270)
Depreciation of premises and equipment1,318 1,581 
Amortization of investment securities premiums and discounts, net770 384 
Amortization of deferred loan and lease origination costs, net1,584 2,154 
Amortization of identified intangible assets232 336 
Amortization of debt issuance costs25 26 
Accretion of acquisition fair value adjustments, net(51)(372)
Loss (gain) on investment securities, net7 (1,330)
Gain on sales of loans and leases held-for-sale(709)(120)
Write-down of OREO and other repossessed assets129 354 
Compensation under recognition and retention plans536 624 
ESOP shares committed to be released83 101 
Net change in:
Cash surrender value of bank-owned life insurance(251)(254)
Other assets 58,480 (103,913)
Accrued expenses and other liabilities(68,387)173,346 
Net cash provided from operating activities19,418 92,485 
Cash flows from investing activities:
Proceeds from sales of investment securities available-for-sale— 86,434 
Proceeds from maturities, calls, and principal repayments of investment securities available-for-sale46,184 25,530 
Purchases of investment securities available-for-sale(49,514)(273,252)
Proceeds from maturities, calls, and principal repayments of investment securities held to maturity— 6,302 
Proceeds from redemption/sales of restricted equity securities9,386 2,944 
Purchase of restricted equity securities— (17,598)
Proceeds from sales of loans and leases held-for-investment, net50 5,800 
Net increase in loans and leases(995)(96,414)
Purchase of premises and equipment, net(2,347)(1,071)
Proceeds from sales of OREO and other repossessed assets385 1,972 
Net cash provided from (used for) investing activities3,149 (259,353)
(Continued)
See accompanying notes to unaudited consolidated financial statements.
5

Three Months Ended March 31,
20212020
(In Thousands)
Cash flows from financing activities:
Increase in demand checking, NOW, savings and money market accounts296,341 57,871 
(Decrease) increase in certificates of deposit(340,207)2,333 
Proceeds from FHLBB advances63,300 1,736,600 
Repayment of FHLBB advances(333,503)(1,357,638)
(Decrease) increase in other borrowed funds, net(4,078)10,054 
Increase in mortgagors' escrow accounts, net582 209 
Repurchases of common stock— (10,410)
Payment of dividends on common stock(8,992)(9,173)
Net cash (used for) provided from financing activities(326,557)429,846 
Net (decrease) increase in cash and cash equivalents(303,990)262,978 
Cash and cash equivalents at beginning of period434,917 77,790 
Cash and cash equivalents at end of period$130,927 $340,768 
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest on deposits, borrowed funds and subordinated debt$11,007 $23,227 
Income taxes2,212 2,070 
Non-cash investing activities:
Transfer from loans to other real estate owned$382 $1,733 


See accompanying notes to unaudited consolidated financial statements.
6
Table of Contents
BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements
(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 trust company and Bank Rhode Island ("BankRI"), a Rhode Island-chartered financial institution (collectively referred to as the "Banks"). The Banks are both 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 Longwood Securities Corp. ("LSC"), Eastern Funding LLC ("Eastern Funding") and First Ipswich Insurance Agency, operates 30 full-service banking offices in the greater Boston metropolitan area with two additional lending offices. 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, Rhode Island area.
The Banks' activities include acceptance of commercial, municipal and retail deposits, origination of mortgage loans on commercial and residential real estate located principally in New England, 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, respectively.
The Company and the Banks are supervised, examined and regulated by the Board of Governors of the Federal Reserve System (the "FRB"). As a Massachusetts-chartered trust company, Brookline Bank is also subject to regulation under the laws of the Commonwealth of Massachusetts and the jurisdiction of the Massachusetts Division of Banks (the "DOB"). 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 subject to supervision, examination and regulation by the FDIC. As previously disclosed, on July 31, 2019, Brookline Bank converted its charter from a Massachusetts savings bank to a Massachusetts-chartered trust company and ended its membership in the Depositors Insurance Fund (the “DIF”), a private industry-sponsored fund which insures Massachusetts-chartered savings bank deposit balances in excess of federal deposit insurance coverage. Brookline Bank’s growth in deposit size necessitated it's withdrawal from the DIF and the concurrent charter conversion of Brookline Bank. Brookline Bank’s deposit accounts are and will continue to be insured by the deposit insurance fund of the FDIC up to applicable limits. Term deposits in excess of the FDIC insurance coverage will continue to be insured by the DIF until they reach maturity.
Basis of Financial Statement Presentation
The unaudited consolidated financial statements of the Company presented herein have been prepared pursuant to the rules of the 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, 2020. 
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 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 changes in the near-term include the
7
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
determination of the allowance for credit losses, the determination of fair market values of assets and liabilities, the review of goodwill and intangible assets 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
Accounting Standards Adopted in 2021 and 2020
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 replaced the previous GAAP method of calculating credit losses. Previously, GAAP required the use of the incurred loss methodology, which used a higher threshold at which probable losses were calculated and recorded. ASU 2016-13 requires the use of an expected loss methodology, referred to as the current expected credit loss (“CECL”) methodology, which requires institutions to account for lifetime expected losses that previously would not have been part of the calculation. The CECL methodology incorporates future forecasting in addition to historical and current measures. The Company adopted all of the above mentioned ASU as of January 1, 2020. The standard had an impact on our consolidated balance sheet. On adoption, the Company recognized an increase in the allowance for loan and lease losses of $6.6 million, and an increase in the reserve for unfunded commitments of $8.9 million. The net, after-tax impact of the increase in the allowance for loan and lease losses and reserve for unfunded commitments was a decrease to retained earnings of $11.5 million shown in the Consolidated Statements of Changes in Stockholders’ Equity. Additional details can be found in Notes 3, 4 and 5.

8
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
(3) Investment Securities
Adoption of Topic 326
Effective January 1, 2020, the Company adopted the provisions of ASU 2016-13 using the modified retrospective method. There was a de minimis allowance for credit loss ("ACL") on available-for-sale debt securities recognized upon adoption and as of December 31, 2020.
The following tables set forth investment securities available-for-sale, held-to-maturity and equity securities held-for-trading at the dates indicated:
 At March 31, 2021
 Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Estimated
Fair Value
 (In Thousands)
Investment securities available-for-sale:
GSE debentures$273,315 $4,130 $5,919 $271,526 
GSE CMOs39,980 957 12 40,925 
GSE MBSs271,231 5,981 1,146 276,066 
Corporate debt obligations22,269 978 — 23,247 
U.S. Treasury bonds119,817 1,586 3,762 117,641 
Foreign government obligations500 — 4 496 
Total investment securities available-for-sale$727,112 $13,632 $10,843 $729,901 
Equity securities held-for-trading$518 
 December 31, 2020
 Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Estimated
Fair Value
 (In Thousands)
Investment securities available-for-sale:
GSE debentures$273,820 $5,455 $630 $278,645 
GSE CMOs44,937 1,103 12 46,028 
GSE MBSs312,658 10,956 5 323,609 
Corporate debt obligations22,299 1,168 — 23,467 
U.S. Treasury bonds70,339 3,318 80 73,577 
Foreign government obligations500 — 4 496 
Total investment securities available-for-sale$724,553 $22,000 $731 $745,822 
Equity securities held-for-trading$526 
As of March 31, 2021, the fair value of all investment securities available-for-sale was $729.9 million, with net unrealized gains of $2.8 million, compared to a fair value of $745.8 million and net unrealized gains of $21.3 million as of December 31, 2020. As of March 31, 2021, $261.6 million, or 35.8% of the portfolio, had gross unrealized losses of $10.8 million, compared to $86.9 million, or 11.7% of the portfolio, with gross unrealized losses of $0.7 million as of December 31, 2020.
Effective March 31, 2020, all investment securities classified as held-to-maturity were reclassified as available for sale to prudently reflect the ability and intent to not hold these assets to maturity due to the economic uncertainty created by the COVID-19 pandemic.
As of March 31, 2021 and December 31, 2020, the Company recorded a fair value of $0.5 million of equity securities held-for-trading.
9
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
Investment Securities as Collateral
As of March 31, 2021 and December 31, 2020, respectively, $413.5 million and $448.7 million of investment securities were pledged as collateral for repurchase agreements; municipal deposits; treasury, tax and loan deposits; swap agreements; FRB borrowings; and Federal Home Loan Bank of Boston ("FHLBB") borrowings. The Banks had no outstanding FRB borrowings as of March 31, 2021 and December 31, 2020.
Allowance for Credit Losses-Available-for-Sale Securities
For available-for-sale securities in an unrealized loss position, management first assesses whether (i) the Company intends to sell the security, or (ii) it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. If either criterion is met, any previously recognized allowances are charged-off and the security's amortized cost is written down to fair value through income. If neither criterion is met, the security is evaluated to determine whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency and any adverse conditions specifically related to the security, among other factors.
If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, an allowance for credit loss is recorded, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an ACL is recognized in other comprehensive income. Adjustments to the allowance are reported as a component of credit loss expense. Available-for-sale securities are charged-off against the allowance or, in the absence of any allowance, written down through income when deemed uncollectible or when either of the aforementioned criteria regarding intent or requirement to sell is met. The Company has made the accounting policy election to exclude accrued interest receivable on available-for-sale securities from the estimate of credit losses. Accrued interest receivables associated with debt securities available-for-sale totaled $2.5 million and $2.6 million, respectively, as of March 31, 2021 and December 31, 2020.
A debt security is placed on nonaccrual status at the time any principal or interest payments become more than 90 days delinquent or if full collection of interest or principal becomes uncertain. Accrued interest for a debt security placed on nonaccrual is reversed against interest income. There were no debt securities on nonaccrual status and therefore there was no accrued interest related to debt securities reversed against interest income for the three months ended March 31, 2021 and 2020.
Assessment for Available for Sale Securities for Impairment
Investment securities as of March 31, 2021 and December 31, 2020 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, 2021
 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$118,064 $5,919 $— $— $118,064 $5,919 
GSE CMOs513 10 707 2 1,220 12 
GSE MBSs70,289 1,145 95 1 70,384 1,146 
U.S. Treasury bonds71,450 3,762 — — 71,450 3,762 
Foreign government obligations— — 496 4 496 4 
Temporarily impaired investment securities available-for-sale260,316 10,836 1,298 7 261,614 10,843 
Total temporarily impaired investment securities$260,316 $10,836 $1,298 $7 $261,614 $10,843 
10
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
 At December 31, 2020
 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$72,745 $630 $— $— $72,745 $630 
GSE CMOs832 7 872 5 1,704 12 
GSE MBSs2,102 5 97 — 2,199 5 
U.S. Treasury bonds9,750 80 — — 9,750 80 
Foreign government obligations— — 496 4 496 4 
Temporarily impaired investment securities available-for-sale85,429 722 1,465 9 86,894 731 
Total temporarily impaired investment securities$85,429 $722 $1,465 $9 $86,894 $731 
The Company performs regular analyses of the investment securities available-for-sale portfolio to determine whether a decline in fair value indicates that an investment security is impaired. In making these impairment determinations, management considers, among other factors, 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 security investment is impaired 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 consolidated statement of income and the noncredit portion is recognized in accumulated other comprehensive income. The credit portion of the 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 security is impaired 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 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 impaired as of March 31, 2021.The Company has determined 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 impaired as of March 31, 2021. If market conditions for investment securities worsen or the creditworthiness of the underlying issuers deteriorates, it is possible that the Company may recognize additional impairment 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 FHLBB and the Federal Farm Credit Bank. As of March 31, 2021, the Company held GNMA MBSs and CMOs, and Small Business Administration ("SBA") commercial loan asset-backed securities in its available-for-sale portfolio with an estimated fair value of $6.3 million, all of which were backed explicitly by the full faith and credit of the U.S. Government, compared to $7.3 million as of December 31, 2020.
As of March 31, 2021, the Company owned 54 GSE debentures with a total fair value of $271.5 million, and a net unrealized loss of $1.8 million. As of December 31, 2020, the Company held 54 GSE debentures with a total fair value of
11
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
$278.6 million, with a net unrealized gain of $4.8 million. As of March 31, 2021, 12 of the 54 securities in this portfolio were in an unrealized loss position. As of December 31, 2020, 7 of the 54 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, 2021, the Company did not purchase GSE debentures. This compares to the same period in 2020 when the Company purchased $75.2 million GSE debentures. During the three months ended March 31, 2020, the Company transferred 9 held-to-maturity GSE debentures with a total fair value of $25.5 million to the available-for-sale portfolio.
As of March 31, 2021, the Company owned 33 GSE CMOs with a total fair value of $40.9 million and a net unrealized gain of $0.9 million. As of December 31, 2020, the Company held 33 GSE CMOs with a total fair value of $46.0 million with a net unrealized gain of $1.1 million. As of March 31, 2021, 2 of the 33 securities in this portfolio were in an unrealized loss position. As of December 31, 2020, 2 of the 33 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, 2021 and 2020, the Company did not purchase any GSE CMOs.
As of March 31, 2021, the Company owned 139 GSE MBSs with a total fair value of $276.1 million and a net unrealized gain of $4.8 million. As of December 31, 2020, the Company held 140 GSE MBSs with a total fair value of $323.6 million with a net unrealized gain of $11.0 million. As of March 31, 2021, 23 of the 139 securities in this portfolio were in an unrealized loss position. As of December 31, 2020, 17 of the 140 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, 2021, the Company did not purchase any GSE MBSs. This compares to the same period in 2020 when the Company purchased $176.9 million GSE MBSs. During the three months ended March 31, 2020, the Company transferred 8 held-to-maturity GSE MBSs with a total fair value of $9.0 million to the available-for-sale portfolio.
Corporate Obligations
The Company may invest in high-quality corporate obligations to provide portfolio diversification and improve the overall yield on the portfolio. As of March 31, 2021, the Company held 6 corporate obligation securities with a total fair value of $23.2 million and a net unrealized gain of $1.0 million. As of December 31, 2020, the Company held 6 corporate obligation securities with a total fair value of $23.5 million and a net unrealized gain of $1.2 million. As of March 31, 2021 and December 31, 2020, none 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, 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, 2021 and 2020, the Company did not purchase any corporate obligations. During the three months ended March 31, 2020, the Company transferred 1 held-to-maturity corporate obligation security with a total fair value of $0.5 million to the available-for-sale portfolio.
U.S. Treasury Bonds
The Company invests in securities issued by the U.S. government. As of March 31, 2021, the Company owned 17 U.S. Treasury bonds with a total fair value of $117.6 million and an unrealized loss of $2.2 million. This compares to 12 U.S. Treasury bonds with a total fair value of $73.6 million and an unrealized gain of $3.2 million as of December 31, 2020. As of March 31, 2021, 8 of the 17 securities in this portfolio were in an unrealized loss position. As of December 31, 2020, 1 of the 12 securities in this portfolio was an unrealized loss position. During the three months ended March 31, 2021 the Company purchased $49.5 million U.S. Treasury bonds, compared to the same period in 2020 when the Company purchased $21.2 million U.S. Treasury bonds.
Municipal Obligations
As of March 31, 2021 and December 31, 2020, the Company did not own any municipal obligation securities. During the three months March 31, 2021 and 2020, the Company did not purchase any municipal obligations. During the three months ended March 31, 2020, the Company transferred 93 held-to-maturity municipal obligations securities with a total fair value of $47.7 million to our available-for-sale portfolio.
Foreign Government Obligations
As of March 31, 2021 and December 31, 2020, the Company owned 1 foreign government obligation security with a fair value of $0.5 million, which approximated cost. As of March 31, 2021 and December 31, 2020 respectively, the security was
12
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
in an unrealized loss position. During the three months ended March 31, 2021 and 2020, the Company did not purchase any foreign government obligations.
Equity Securities Held-for-Trading
From time to time, the Company will invest in equity securities held-for-trading. As of March 31, 2021 and December 31, 2020, the Company owned equity securities held-for-trading with a fair value of $0.5 million.
Portfolio Maturities
The final stated maturities of the debt securities are as follows for the periods indicated:
 At March 31, 2021At December 31, 2020
 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$49,597 $50,149 1.99 %$31,633 $32,013 2.02 %
After 1 year through 5 years132,676 138,463 2.23 %146,274 153,262 2.22 %
After 5 years through 10 years261,816 254,174 1.38 %222,271 225,568 1.43 %
Over 10 years283,023 287,115 2.01 %324,375 334,979 1.86 %
$727,112 $729,901 1.84 %$724,553 $745,822 1.81 %
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, 2021, issuers of debt securities with an estimated fair value of $88.3 million had the right to call or prepay the obligations. Of the $88.3 million, approximately $12.7 million matures in 1 - 5 years, $66.2 million matures in 6 - 10 years, and $9.4 million matures after ten years. As of December 31, 2020, issuers of debt securities with an estimated fair value of approximately $90.8 million had the right to call or prepay the obligations. Of the $90.8 million, $12.9 million matures in 1-5 years, and $68.1 million matures in 6 - 10 years, and $9.8 million matures after ten years.
Security Sales
No sale of investment securities available-for-sale or equity securities held-for-trading occurred during the three months ended March 31, 2021. This compares to $86.4 million securities sold during the three months ended March 31, 2020.
Sales of investment and restricted equity securities are summarized as follows:
 Three Months Ended March 31, 2021Three Months Ended March 31, 2020
 (In Thousands)
Proceeds from sales of investment securities available-for-sale and equity securities held-for-trading$— $86,435 
Gross gains from securities sales— 2,446 
Gross losses from securities sales— (93)
Gain on sales of securities, net $— $2,353 
13
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
(4) Loans and Leases
The following table presents the amortized cost of loans and leases and weighted average coupon rates for the loan and lease portfolios at the dates indicated:
 At March 31, 2021At December 31, 2020
 BalanceWeighted
Average
Coupon		BalanceWeighted
Average
Coupon
 (Dollars In Thousands)
Commercial real estate loans:    
Commercial real estate$2,595,240 3.48 %$2,578,773 3.58 %
Multi-family mortgage1,000,474 3.48 %1,013,432 3.53 %
Construction194,627 3.60 %231,621 3.49 %
Total commercial real estate loans3,790,341 3.49 %3,823,826 3.56 %
Commercial loans and leases:    
Commercial1
1,206,977 2.35 %1,131,668 2.55 %
Equipment financing1,069,621 7.17 %1,092,461 7.26 %
Condominium association47,604 4.54 %50,770 4.55 %
Total commercial loans and leases2,324,202 4.61 %2,274,899 4.86 %
Consumer loans:    
Residential mortgage781,854 3.68 %791,317 3.74 %
Home equity334,706 3.25 %346,652 3.26 %
Other consumer36,449 2.92 %32,859 3.04 %
Total consumer loans1,153,009 3.53 %1,170,828 3.58 %
Total loans and leases$7,267,552 3.84 %$7,269,553 3.97 %
______________________________________________________________________
(1) Including $604,790 of PPP loans as of March 31, 2021. These loans are fully guaranteed by the SBA and therefore, have not been reserved for in the allowance for credit losses as of March 31, 2021.

Accrued interest on loans and leases, which were excluded from the amortized cost of loans and leases totaled $21.0 million and $20.5 million at March 31, 2021 and December 31, 2020, respectively, and were included in other assets in the accompanying consolidated balance sheets.
 
The net unamortized deferred loan origination costs included in total loans and leases were $5.6 million and $4.1 million as of March 31, 2021 and December 31, 2020, respectively.
The Banks and their subsidiaries lend primarily in all New England states, with the exception of equipment financing, 12.7% of which is in the greater New York and New Jersey metropolitan area and 87.3% of which is in other areas in the United States of America as of March 31, 2021.
Loans and Leases Pledged as Collateral
As of March 31, 2021 and 2020, there were $3.3 billion and $3.5 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, 2021 and December 31, 2020.
14
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
(5) Allowance for Loan and Lease Losses
The following tables present the changes in the allowance for loan and lease losses in loans and leases by portfolio segment for the periods indicated:
 Three Months Ended March 31, 2021
 Commercial
Real Estate		CommercialConsumerTotal
 (In Thousands)
Balance at December 31, 2020$80,132 $29,498 $4,749 $114,379 
Charge-offs— (2,140)(3)(2,143)
Recoveries— 331 52 383 
(Credit) provision for loan and lease losses excluding unfunded commitments(203)(1,864)(715)(2,782)
Balance at March 31, 2021$79,929 $25,825 $4,083 $109,837 
 Three Months Ended March 31, 2020
 Commercial
Real Estate		CommercialConsumerTotal
 (In Thousands)
Balance at December 31, 2019$30,285 $24,826 $5,971 $61,082 
Adoption of ASU 2016-13 (CECL)11,694 (2,672)(2,390)6,632 
Charge-offs— (2,527)(12)(2,539)
Recoveries— 247 58 305 
Provision for loan and lease losses40,200 6,900 601 47,701 
Balance at March 31, 2020$82,179 $26,774 $4,228 $113,181 
The allowance for credit losses for unfunded credit commitments, which is included in other liabilities, was $13.7 million and $13.1 million at March 31, 2021 and December 31, 2020, respectively.
Provision for Credit Losses
The provisions for credit losses are set forth below for the periods indicated:
 Three Months Ended March 31,
 20212020
 (In Thousands)
Provision for loan and lease losses:  
Commercial real estate$(203)$40,200 
Commercial(1,864)6,900 
Consumer(715)601 
Total (credit) provision for loan and lease losses(2,782)47,701 
Unfunded commitments635 6,413 
Total (credit) provision for credit losses$(2,147)$54,114 
Allowance for Loan and Lease Losses Methodology
Management has established a methodology to determine the adequacy of the allowance for credit losses that assesses the risks and losses expected on the loan and lease portfolio and unfunded commitments. Additions to the allowance for credit losses are made by charges to the provision for credit losses. Losses on loans and leases are charged off against the allowance when all or a portion of a loan or lease is considered uncollectible. Subsequent recoveries on loans previously charged off, if any, are credited to the allowance when realized.
15
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
To calculate the allowance for loans collectively evaluated, management uses models developed by a third party. The models include: Commercial real estate ("CRE"), Commercial and industrial ("C&I"), and Retail lifetime loss rate models calculate the expected losses over the life of the loan based on exposure at default loan attributes and reasonable, supportable economic forecasts. The exposure at default considers the current unpaid balance, prepayment assumptions and utilization of expected utilization assumptions. The expected loss estimates for two small commercial portfolios and a runoff auto portfolio are based on historical loss rates.
Key assumptions used in the models include portfolio segmentation, prepayments, and the expected utilization of unfunded commitments, among others. The portfolios are segmented by loan level attributes such as loan type, loan size, date of origination, and delinquency status to create homogenous loan pools. Pool level metrics are calculated and loss rates are subsequently applied to the pools as the loans have like characteristics. Prepayment assumptions are embedded within the models and are based on the same data used for model development and incorporate adjustments for reasonable and supportable forecasts. Model development data and developmental time periods vary by model, but all use at least ten years of historical data and capture at least one recessionary period. Expected utilization is based on current utilization and a loan equivalency ("LEQ") factor. LEQ varies by current utilization and provides a reasonable estimate of expected draws and borrower behavior. Assumptions and model inputs are reviewed in accordance with model monitoring practices and as information becomes available.
The ACL estimate incorporates reasonable and supportable forecasts of various macro-economic variables over the remaining life of loans and leases. The development of the reasonable and supportable forecast assume each macro-economic variable will revert to long-term expectations, with reversion characteristics unique to specific economic indicators and forecasts. Reversion towards long-term expectations generally begins two to three years from the forecast start date and largely completes within the first five years. Because the reasonable and supportable economic forecasts used in the models are mean reverting, the models are therefore considered to be implicitly mean reverting.

Management elected to use multiple economic forecasts in determining the reserve to account for economic uncertainty. The forecasts include various projections of Gross Domestic Product ("GDP"), interest rates, property price indices, and employment measures. Scenario weighting and model parameters are reviewed for each calculation and updated to reflect facts and circumstances as of the financial statement date. The March 31, 2021 forecasts reflect the immediate and longer-term effects of the COVID-19 pandemic as well as the associated policies and fiscal support provided by local and national authorities.

The CRE lifetime loss rate, C&I lifetime loss rate, and Retail lifetime loss rate models were developed using the historical loss experience of all banks in the model’s developmental dataset. Banks in the model’s developmental dataset may have different loss experiences due to geography and portfolio as well as variances in operational and underwriting procedures from the Company, and therefore, the Company calibrates expected losses using a scalar for each model. Each scalar was calculated by examining the loss rates of peer banks that have similar operations and asset bases to the Company and comparing these peer group loss rates to the model results. Peer group loss rates were used in the scalar calculation because management believes the peer group’s historical losses provide a better reflection of the Company’s current portfolio and operating procedures than the Company’s historical losses. Qualitative adjustments are also applied to the results of the three loss rate models.

For March 31, 2021, management applied qualitative adjustments to the CRE lifetime loss rate, C&I lifetime loss rate, and Retail lifetime loss rate models. These adjustments addressed model limitations, were based on historical loss patterns, and targeted specific risks within the certain portfolios. A general qualitative adjustment was applied to all models to account for general economic uncertainty by placing a greater probability on negative economic forecasts as compared to previous quarters. Additional qualitative adjustments were applied to the Commercial, Multifamily, and commercial real estate (includes owner occupied, non-owner occupied, and construction) portfolios based on the Company’s historical loss experience and the loss experience of the Company’s peer group. High risk segments of the Eastern Funding and Macrolease portfolios also received additional qualitative adjustments based on recent loss history and expected liquidation values. These qualitative adjustments resulted in additions to reserves for all portfolios, as compared to the model output.
Specific reserves are established for loans individually evaluated for impairment when amortized cost basis is greater than the discounted present value of expected future cash flows or, in the case of collateral-dependent loans, when there is an excess of a loan's amortized cost basis over the fair value of its underlying collateral. When loans and leases do not share risk characteristics with other financial assets they are evaluated individually. Individually evaluated loans are reviewed quarterly with adjustments made to the calculated reserve as necessary.
16
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
Beginning January 1, 2020, the Company implemented the CECL methodology to calculate the allowance for credit losses. Prior to January 1, 2020, the Company calculated the allowance for loan and lease losses using the incurred losses methodology.
The general allowance for loan and lease losses was $108.7 million as of March 31, 2021, compared to $112.1 million as of December 31, 2020. The reduction in the ACL is attributable to portfolio contraction, continued low level of net charge-offs, an improving macro-economic forecast, and qualitative adjustments that consider longer-term risks.

The specific allowance for loan and lease losses was $1.1 million as of March 31, 2021, compared to $2.3 million as of December 31, 2020. The specific allowance decreased by $1.2 million during the three months ended March 31, 2021 primarily due to the payoff of two commercial relationship which had a specific reserve of $0.3 million, one equipment financing relationship which had a specific reserve of $0.1 million, a partial charge off on one equipment financing relationship of $0.7 million and the and the decrease in specific reserves for the remaining individually evaluated loans due to improving collection prospects.
As of March 31, 2021, management believes that the methodology for calculating the allowance is sound and that the allowance provides a reasonable basis for determining and reporting on expected losses over the lifetime of the Company’s loan portfolios.
Credit Quality Assessment
At the time of loan origination, a rating is assigned based on the capacity to pay and general financial strength of the borrower, the value of assets pledged as collateral, and the evaluation of third party support such as a guarantor. The Company continually monitors the credit quality of the loan portfolio using all available information. The officer responsible for handling each loan is required to initiate changes to risk ratings when changes in facts and circumstances occur that warrant an upgrade or downgrade in a loan rating. Based on this information, loans demonstrating certain payment issues or other weaknesses may be categorized as delinquent, adversely risk-rated, nonperforming and/or put on nonaccrual status. Additionally, in the course of resolving such loans, the Company may choose to restructure the contractual terms of certain loans to match the borrower's ability to repay the loan based on their current financial condition. If a restructured loan meets certain criteria, it may be categorized as a troubled debt restructuring ("TDR") loan.
The Company reviews numerous credit quality indicators when assessing the risk in its loan portfolio. For all loans, the Company utilizes an eight-grade loan rating system, which assigns a risk rating to each borrower based on a number of quantitative and qualitative factors associated with a loan transaction. Factors considered include industry and market conditions; position within the industry; earnings trends; operating cash flow; asset/liability values; debt capacity; guarantor strength; management and controls; financial reporting; collateral; and other considerations. In addition, the Company's independent loan review group evaluates the credit quality and related risk ratings in all loan portfolios. The results of these reviews are reported to the Risk Committee of the Board of Directors on a periodic basis and annually to the Board of Directors. For the consumer loans, the Company heavily relies on payment status for calibrating credit risk.
The ratings categories used for assessing credit risk in the commercial real estate, multi-family mortgage, construction, commercial, equipment financing, condominium association and other consumer loan and lease classes are defined as follows:
1 -4 Rating—Pass
Loan rating grades "1" through "4" are classified as "Pass," which indicates borrowers are performing in accordance with the terms of the loan and are less likely to result in loss due to the capacity of the borrower to pay and the adequacy of the value of assets pledged as collateral.
5 Rating—Other Assets Especially Mentioned ("OAEM")
Borrowers exhibit potential credit weaknesses or downward trends deserving management's attention. If not checked or corrected, these trends will weaken the Company's asset and position. While potentially weak, currently these borrowers are marginally acceptable; no loss of principal or interest is envisioned.
17
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
6 Rating—Substandard
Borrowers exhibit well defined weaknesses that jeopardize the orderly liquidation of debt. Substandard loans may be inadequately protected by the current net worth and paying capacity of the obligors or by the collateral pledged, if any. Normal repayment from the borrower is in jeopardy. Although no loss of principal is envisioned, there is a distinct possibility that a partial loss of interest and/or principal will occur if the deficiencies are not corrected. Collateral coverage may be inadequate to cover the principal obligation.
7 Rating—Doubtful
Borrowers exhibit well-defined weaknesses that jeopardize the orderly liquidation of debt with the added provision that the weaknesses make collection of the debt in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Serious problems exist to the point where partial loss of principal is likely.
8 Rating—Definite Loss
Borrowers deemed incapable of repayment. Loans to such borrowers are considered uncollectible and of such little value that continuation as active assets of the Company is not warranted.
Assets rated as "OAEM," "substandard" or "doubtful" based on criteria established under banking regulations are collectively referred to as "criticized" assets.
Credit Quality Information
The following table presents the amortized cost basis of loans in each class by credit quality indicator and year of origination as of March 31, 2021.
March 31, 2021
20212020201920182017PriorRevolving LoansRevolving Loans Converted to Term LoansTotal
 (In Thousands)
Commercial Real Estate     
Pass$80,520 $357,115 $366,961 $283,214 $252,971 $1,115,585 $55,390 $12,645 $2,524,401 
OAEM693 736 27,369 — — 35,014 — — 63,812 
Substandard— 210 — — 1,617 5,139 — 61 7,027 
Total81,213 358,061 394,330 283,214 254,588 1,155,738 55,390 12,706 2,595,240 
Multi-Family Mortgage
Pass14,673 124,227 145,143 165,079 99,440 416,861 5,218 27,457 998,098 
OAEM— — — — — 2,376 — — 2,376 
Total14,673 124,227 145,143 165,079 99,440 419,237 5,218 27,457 1,000,474 
Construction
Pass2,272 46,896 46,555 85,292 665 632 4,697 — 187,009 
Substandard— — 4,853 — — 2,765 7,618 
Total2,272 46,896 51,408 85,292 665 3,397 4,697 — 194,627 
Commercial
18
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
March 31, 2021
20212020201920182017PriorRevolving LoansRevolving Loans Converted to Term LoansTotal
 (In Thousands)
Pass237,440 451,623 55,419 37,516 35,407 129,638 226,438 1,716 1,175,197 
OAEM— 1,589 4,436 — 16,242 12 1,840 — 24,119 
Substandard— — — 118 345 2,902 3,716 578 7,659 
Doubtful— — — — — — — 2 2 
Total237,440 453,212 59,855 37,634 51,994 132,552 231,994 2,296 1,206,977 
Equipment Financing
Pass65,631 318,891 286,098 186,109 105,056 86,647 1,868 556 1,050,856 
OAEM— 196 1,058 293 96 709 — — 2,352 
Substandard— 1,000 2,787 5,224 3,678 2,529 — — 15,218 
Doubtful— 1 450 65 27 652 — — 1,195 
Total65,631 320,088 290,393 191,691 108,857 90,537 1,868 556 1,069,621 
Condominium Association
Pass187 7,409 9,206 5,194 7,385 16,769 1,172 176 47,498 
Substandard— — — — — 106 — — 106 
Total187 7,409 9,206 5,194 7,385 16,875 1,172 176 47,604 
Other Consumer
Pass35 852 523 1,827 31 869 32,295 15 36,447 
Substandard— — — — — 1 — 1 2 
Total35 852 523 1,827 31 870 32,295 16 36,449 
Total
Pass400,758 1,307,013 909,905 764,231 500,955 1,767,001 327,078 42,565 6,019,506 
OAEM693 2,521 32,863 293 16,338 38,111 1,840 — 92,659 
Substandard— 1,210 7,640 5,342 5,640 13,442 3,716 640 37,630 
Doubtful— 1 450 65 28 652 — 2 1,198 
Total$401,451 $1,310,745 $950,858 $769,931 $522,961 $1,819,206 $332,634 $43,207 $6,150,993 
As of March 31, 2021, there were no loans categorized as definite loss.

For residential mortgage and home equity loans, the borrowers' credit scores contribute as a reserve metric in the retail loss rate model.
19
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
At March 31, 2021
20212020201920182017PriorRevolving LoansRevolving Loans Converted to Term LoansTotal
 (In Thousands)
Residential  
Credit Scores  
Over 700$22,650 $119,549 $89,528 $57,286 $49,514 $162,830 $4,002 $— $505,359 
661 - 7003,036 24,134 18,328 10,110 13,852 30,005 — — 99,465 
600 and below682 6,914 4,700 5,053 4,234 16,956 — — 38,539 
Data not available*2,177 17,969 17,003 15,591 13,248 71,181 — 1,322 138,491 
Total$28,545 $168,566 $129,559 $88,040 $80,848 $280,972 $4,002 $1,322 $781,854 
Home Equity
Credit Scores  
Over 700$553 $1,534 $2,421 $2,249 $2,507 $12,331 $239,483 $2,303 $263,381 
661 - 70051 118 440 476 260 2,354 44,625 616 48,940 
600 and below— 58 106 260 13 550 10,267 1,058 12,312 
Data not available*— 68 — — — 1,318 7,719 968 10,073 
Total$604 $1,778 $2,967 $2,985 $2,780 $16,553 $302,094 $4,945 $334,706 
_______________________________________________________________________________
* Represents loans and leases for which data are not available.

The following tables present the recorded investment in loans in each class as of December 31, 2020, by credit quality indicator.
December 31, 2020
20202019201820172016PriorRevolving LoansRevolving Loans Converted to Term LoansTotal
 (In Thousands)
Commercial Real Estate      
Pass$352,832 $412,071 $282,629 $255,786 $243,477 $944,676 $55,392 $12,585 $2,559,448 
OAEM— 477 — — 3,312 8,991 — — 12,780 
Substandard— — — 1,261 2 5,220 — 62 6,545 
Doubtful— — — — — — — — — 
Total352,832 412,548 282,629 257,047 246,791 958,887 55,392 12,647 2,578,773 
Multi-Family Mortgage
Pass125,434 136,620 162,180 103,997 127,873 304,224 15,845 34,871 1,011,044 
OAEM— — — — — 2,388 — — 2,388 
Total125,434 136,620 162,180 103,997 127,873 306,612 15,845 34,871 1,013,432 
Construction
20
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
December 31, 2020
20202019201820172016PriorRevolving LoansRevolving Loans Converted to Term LoansTotal
 (In Thousands)
Pass46,249 56,074 112,856 1,799 2,788 404 3,834 — 224,004 
Substandard— 4,853 — — 2,764 — — — 7,617 
Total46,249 60,927 112,856 1,799 5,552 404 3,834 — 231,621 
Commercial
Pass574,542 66,278 41,325 62,112 22,085 113,715 226,495 1,687 1,108,239 
OAEM310 4,850 — — 35 17 5,382 — 10,594 
Substandard80 — 129 389 29 7,612 3,930 664 12,833 
Doubtful— — — — — — — 2 2 
Total574,932 71,128 41,454 62,501 22,149 121,344 235,807 2,353 1,131,668 
Equipment Financing
Pass332,375 306,231 209,219 121,845 56,241 45,451 636 576 1,072,574 
OAEM196 1,066 290 93 609 85 — 2,339 
Substandard402 4,385 5,280 3,545 1,891 631 — — 16,134 
Doubtful1 64 24 27 1,292 6 — — 1,414 
Total332,974 311,746 214,813 125,510 60,033 46,173 636 576 1,092,461 
Condominium Association
Pass6,455 9,918 5,399 7,928 5,213 12,682 2,684 379 50,658 
Substandard— — — — 112 — — — 112 
Total6,455 9,918 5,399 7,928 5,325 12,682 2,684 379 50,770 
Other Consumer
Pass694 549 1,938 32 570 301 28,755 18 32,857 
Substandard— — — — — — — 2 2 
Total694 549 1,938 32 570 301 28,755 20 32,859 
Total
Pass1,438,581 987,741 815,546 553,499 458,247 1,421,453 333,641 50,116 6,058,824 
OAEM506 6,393 290 93 3,956 11,481 5,382 — 28,101 
Substandard482 9,238 5,409 5,195 4,798 13,463 3,930 728 43,243 
Doubtful1 64 24 27 1,292 6 — 2 1,416 
Total$1,439,570 $1,003,436 $821,269 $558,814 $468,293 $1,446,403 $342,953 $50,846 $6,131,584 
As of December 31, 2020, there were no loans categorized as definite loss.
21
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)

At December 31, 2020
20202019201820172016PriorRevolvingConvertedTotal
 (In Thousands)
Residential  
Credit Scores  
Over 700$119,566 $94,300 $62,452 $53,662 $47,327 $124,999 $4,442 $— $506,748 
661 - 70021,820 19,426 10,943 15,616 8,132 23,282 — — 99,219 
600 and below6,901 5,659 4,763 4,318 4,553 13,997 — — 40,191 
Data not available*19,209 17,082 16,199 14,153 5,729 71,456 — 1,331 145,159 
Total$167,496 $136,467 $94,357 $87,749 $65,741 $233,734 $4,442 $1,331 $791,317 
Home Equity
Credit Scores
Over 700$1,546 $2,832 $2,440 $2,770 $910 $12,804 $247,538 $2,397 $273,237 
661 - 700122 459 499 566 305 2,793 45,356 1,334 51,434 
600 and below59 108 266 13 39 541 10,139 878 12,043 
Data not available*61 — — — — 1,387 7,330 1,160 9,938 
Total$1,788 $3,399 $3,205 $3,349 $1,254 $17,525 $310,363 $5,769 $346,652 
Age Analysis of Past Due Loans and Leases
The following table presents an age analysis of the amortized cost basis in loans and leases as of March 31, 2021.
22
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
 At March 31, 2021
 Past Due  Past
Due Greater
Than 90 Days
and Accruing		 
 31-60
Days		61-90
Days		Greater
Than
90 Days		TotalCurrentTotal Loans
and Leases		Non-accrual
Non-accrual
with No Related Allowance
 (In Thousands)
Commercial real estate loans:
Commercial real estate$5,489 $3,946 $3,366 $12,801 $2,582,439 $2,595,240 $— $3,611 $2,902 
Multi-family mortgage1,141 — — 1,141 999,333 1,000,474 — — — 
Construction3,764 — 3,853 7,617 187,010 194,627 — 3,853 3,853 
Total commercial real estate loans10,394 3,946 7,219 21,559 3,768,782 3,790,341 — 7,464 6,755 
Commercial loans and leases:
Commercial229 — 1,213 1,442 1,205,535 1,206,977 62 3,161 1,882 
Equipment financing4,010 2,115 9,501 15,626 1,053,995 1,069,621 1,113 15,772 4,260 
Condominium association— — — — 47,604 47,604 — 106 106 
Total commercial loans and leases4,239 2,115 10,714 17,068 2,307,134 2,324,202 1,175 19,039 6,248 
Consumer loans:
Residential mortgage1,979 459 3,254 5,692 776,162 781,854 — 3,722 3,260 
Home equity1,056 1 531 1,588 333,118 334,706 4 792 557 
Other consumer12 1 1 14 36,435 36,449 — 2 — 
Total consumer loans3,047 461 3,786 7,294 1,145,715 1,153,009 4 4,516 3,817 
Total loans and leases$17,680 $6,522 $21,719 $45,921 $7,221,631 $7,267,552 $1,179 $31,019 $16,820 
There is no interest income recognized on non-accrual loans for the three months ended March 31, 2021.













23
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
The following tables present an age analysis of the recorded investment in originated and acquired loans and leases as of December 31, 2020.
 At December 31, 2020
 Past Due  Loans and
Leases Past
Due Greater
Than 90 Days
and Accruing		 Non-accrual
with No Related Allowance
 31-60
Days		61-90
Days		Greater
Than
90 Days		TotalCurrentTotal Loans
and Leases		Non-accrual
 (In Thousands)
        
Commercial real estate loans:
Commercial real estate$18,294 $12,402 $7,272 $37,968 $2,540,805 $2,578,773 $4,722 $3,300 $2,580 
Multi-family mortgage813 — — 813 1,012,619 1,013,432 — — — 
Construction— — 7,617 7,617 224,004 231,621 3,764 3,853 3,853 
Total commercial real estate loans19,107 12,402 14,889 46,398 3,777,428 3,823,826 8,486 7,153 6,433 
Commercial loans and leases:
Commercial451 304 9,171 9,926 1,121,742 1,131,668 3,486 7,702 6,263 
Equipment financing5,970 2,263 9,391 17,624 1,074,837 1,092,461 — 16,757 4,062 
Condominium association282 297 — 579 50,191 50,770 — 112 112 
Total commercial loans and leases6,703 2,864 18,562 28,129 2,246,770 2,274,899 3,486 24,571 10,437 
Consumer loans:
Residential mortgage2,161 648 3,841 6,650 784,667 791,317 — 5,587 5,117 
Home equity580 215 588 1,383 345,269 346,652 3 1,136 824 
Other consumer13 — 1 14 32,845 32,859 — 1 — 
Total consumer loans2,754 863 4,430 8,047 1,162,781 1,170,828 3 6,724 5,941 
Total loans and leases$28,564 $16,129 $37,881 $82,574 $7,186,979 $7,269,553 $11,975 $38,448 $22,811 

Impaired Loans and Leases
A loan is considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due (both interest and principal) according to the contractual terms of the loan agreement. The loans and leases risk-rated "substandard" or worse are considered impaired. The Company has also defined the population of impaired loans to include nonaccrual loans and TDR loans. Impaired loans and leases which do not share similar risk characteristics with other loans are individually evaluated for credit losses. Specific reserves are established for loans and leases with deterioration in the present value of expected future cash flows or, in the case of collateral-dependent loans and leases, any increase in the loan or lease amortized cost basis over the fair value of the underlying collateral discounted for estimated selling costs. In contrast, the loans and leases which share similar risk characteristics and are not included in the individually evaluated population are collectively evaluated for credit losses.
24
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
The following tables present information regarding individually evaluated and collectively evaluated allowance for loan and lease losses for credit losses on loans and leases at the dates indicated. Periods prior to January 1, 2020 are presented in accordance with accounting rules effective at that time.
At March 31, 2021
Commercial Real EstateCommercialConsumerTotal
(In Thousands)
Allowance for Loan and Lease Losses:
Individually evaluated$132 $907 $94 $1,133 
Collectively evaluated79,797 24,918 3,989 108,704 
Total$79,929 $25,825 $4,083 $109,837 
Loans and Leases:
Individually evaluated$14,927 $20,198 $6,414 $41,539 
Collectively evaluated3,775,414 2,304,004 1,146,595 7,226,013 
Total$3,790,341 $2,324,202 $1,153,009 $7,267,552 

At December 31, 2020
Commercial Real EstateCommercialConsumerTotal
(In Thousands)
Allowance for Loan and Lease Losses:
Individually evaluated $183 $2,020 $108 $2,311 
Collectively evaluated 79,949 27,478 4,641 112,068 
Total loans and leases$80,132 $29,498 $4,749 $114,379 
Loans and Leases:
Individually evaluated $14,159 $24,727 $8,760 $47,646 
Collectively evaluated 3,809,667 2,250,172 1,162,068 7,221,907 
Total loans and leases$3,823,826 $2,274,899 $1,170,828 $7,269,553 


25
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
Troubled Debt Restructuring Loans and Leases
The following table sets forth information regarding TDR loans and leases at the dates indicated:
At March 31, 2021At December 31, 2020
 (In Thousands)
Troubled debt restructurings:
On accrual$16,770 $11,483 
On nonaccrual6,293 7,476 
Total troubled debt restructurings$23,063 $18,959 

Total TDR loans and leases increased by $4.1 million to $23.1 million at March 31, 2021 from $19.0 million at December 31, 2020, primarily driven by two new TDR relationships, consisting of one $3.7 million construction relationship and one $1.3 million equipment financing relationship, partially offset by the payoff of one TDR relationship during the three months ended March 31, 2021.
The amortized cost basis in TDR loans and the associated specific credit losses for the loan and lease portfolios, that were modified during the periods indicated, are as follows.
 At and for the Three Months Ended March 31, 2021
  Amortized CostSpecific
Allowance for
Credit Losses		 
Defaulted (1)
 Number of
Loans/
Leases		At
Modification		At End of
Period		Nonaccrual
Loans and
Leases		Number of
Loans/
Leases		Amortized Cost
 (Dollars in Thousands)
       
Commercial real estate1 $497 $497 — — — — 
Construction4 2,764 2,764 
Equipment financing12 1,718 1,731 — 234 — — 
Total loans and leases17 $4,979 $4,992 $— $234 $— $— 
______________________________________________________________________
(1) Includes loans and leases that have been modified within the past twelve months and subsequently had payment defaults during the period indicated.
 At and for the Three Months Ended March 31, 2020
  Recorded InvestmentSpecific
Allowance for
Loan and
Lease Losses		 
Defaulted (1)
 Number of
Loans/
Leases		At
Modification		At End of
Period		Nonaccrual
Loans and
Leases		Number of
Loans/
Leases		Recorded
Investment
 (Dollars in Thousands)
       
Commercial real estate— — — — 1 228 
Commercial1 297 295 — 295 — — 
Equipment financing2 200 200 — — — — 
Total loans and leases3 $497 $495 $— $295 1 $228 
______________________________________________________________________
(1) Includes loans and leases that have been modified within the past twelve months and subsequently had payment defaults during the period indicated.
The following table sets forth the Company's end-of-period amortized cost basis for TDRs that were modified during the periods indicated, by type of modification.
26
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
 Three Months Ended March 31,
 20212020
 (In Thousands)
Extended maturity$4,300 $295 
Combination maturity, principal, interest rate693 200 
Total$4,993 $495 
The TDR loans and leases that were modified for the three months ended March 31, 2021 and 2020 were $5.0 million and $0.5 million, respectively. The increases in TDR loans and leases that were modified for the three months ended March 31, 2021 were primarily due to the modification of two construction relationships totaling $2.7 million and five equipment finance relationships totaling $1.7 million during the three months ended March 31, 2020.
The net charge-offs for performing and nonperforming TDR loans and leases for the three months ended March 31, 2021 and 2020 were $0.6 million and $0.1 million, respectively.
The commitments to lend funds to debtors owing receivables whose terms had been modified in TDRs as of March 31, 2021 was $2.1 million. As of March 31, 2020, there were $2.3 million commitments to lend funds to debtors owing receivables whose terms had been modified in TDRs.
The Coronavirus Aid, Relief and Economic Security ("CARES") Act and regulatory guidance issued by the Federal banking agencies provides that certain short-term loan modifications to borrowers experiencing financial distress as a result of the economic impacts created by the COVID-19 pandemic are not required to be treated as TDRs under GAAP. As such, the Company suspended TDR accounting for COVID-19 pandemic related loan modifications meeting the loan modification criteria set forth under the CARES Act or as specified in the regulatory guidance. Further, loans granted payment deferrals related to the COVID-19 pandemic are not required to be reported as past due or placed on non-accrual status (provided the loans were not past due or on non-accrual status prior to the deferral). As of March 31, 2021, the Company granted 4,603 short-term deferments on loan and lease balances of $1.1 billion of which 4,262 loans and leases representing balances $955.6 million returned to payment and 341 loans and leases representing balances of $125.7 million remain in deferment. The outstanding deferred loans and leases represent 1.7% of the Company's total loan and lease balances.
(6) Goodwill and Other Intangible Assets
The following table sets forth the carrying value of goodwill and other intangible assets at the dates indicated:
 At March 31, 2021At December 31, 2020
 (In Thousands)
Goodwill$160,427 $160,427 
Other intangible assets:
Core deposits1,831 2,063 
Trade name1,089 1,089 
Total other intangible assets2,920 3,152 
Total goodwill and other intangible assets$163,347 $163,579 
At December 31, 2013, the Company concluded that the BankRI name would continue to be utilized in its marketing strategies; therefore, the trade name with carrying value of $1.1 million, has an indefinite life and ceased to amortize.
The weighted-average amortization period for the core deposit intangible is 5.5 years.
27
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
The estimated aggregate future amortization expense (in thousands) for other intangible assets for each of the next five years and thereafter is as follows:
Remainder of 2021$644 
Year ending:
2022494 
2023263 
2024151 
2025103 
202674 
Thereafter102 
Total$1,831 
(7) Accumulated Other Comprehensive Income (Loss)
For the three months ended March 31, 2021 and 2020, the Company’s accumulated other comprehensive income (loss) includes the following three components: (i) unrealized holding gains (losses) on investment securities available-for-sale; (ii) change in the fair value of cash flow hedges and (iii) adjustment of accumulated obligation for postretirement benefits.
 
Changes in accumulated other comprehensive income (loss) by component, net of tax, were as follows for the periods indicated:
 Three Months Ended March 31, 2021
 
Investment
Securities
 Available-for-Sale
Net Change in Fair Value of Cash Flow HedgesPostretirement
Benefits		Accumulated Other
Comprehensive
Income (Loss)
 (In Thousands)
Balance at December 31, 2020$16,582 $7 $(99)$16,490 
Other comprehensive income (loss)(14,408)2 — (14,406)
Reclassification adjustment for (income) expense recognized in earnings— (2)— (2)
Balance at March 31, 2021$2,174 $7 $(99)$2,082 
 Three Months Ended March 31, 2020
 
Investment
Securities
 Available-for-Sale
Net Change in Fair Value of Cash Flow HedgesPostretirement
Benefits		Accumulated Other
Comprehensive
Income (Loss)
 (In Thousands)
Balance at December 31, 2019$2,199 $— $84 $2,283 
Other comprehensive income (loss)14,664 — — 14,664 
Balance at March 31, 2020$16,863 $— $84 $16,947 
(8) Derivatives and Hedging Activities
The Company executes loan level derivative products such as interest rate swap agreements with commercial banking customers to aid them in managing their interest rate risk. The interest rate swap contracts allow the commercial banking customers to convert floating rate loan payments to fixed rate loan payments. The Company concurrently enters into offsetting swaps with a third party financial institution, effectively minimizing its net risk exposure resulting from such transactions. The third party financial institution exchanges the customer's fixed rate loan payments for floating rate loan payments. As the interest rate swap agreements associated with this program do not meet hedge accounting requirements, changes in the fair value are recognized directly in earnings. Based on the Company's intended use for the loan level derivatives at inception, the
28
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
Company designates the derivative as either an economic hedge of an asset or liability, or a hedging instrument subject to the hedge accounting provisions of FASB ASC Topic 815, "Derivatives and Hedging".
The Company believes using interest rate derivatives adds stability to interest income and expense and allows the Company to manage its exposure to interest rate movements. The Company enters into interest rate swaps as part of its interest rate risk management strategy. These interest rate swaps are designated as cash flow hedges and involve the receipt of variable rate amounts from a counterparty in exchange for the Company making fixed payments. The Company enters into interest rate swaps as hedging instruments against the interest rate risk associated with the Company's FHLB borrowings. For derivative instruments that are designated and qualify as cash flow hedging instruments, the effective portion of the gains or losses is reported as a component of other comprehensive income ("OCI"), and is reclassified into earnings in the period that the hedged forecasted transaction affects earnings.
As of March 31, 2021, the Company paid its counterparties a fixed weighted average interest rate of 0.08% over a maximum period of 2 years for derivative instruments that are designated as and qualify as cash flow hedging instruments.
The Company utilizes risk participation agreements with other banks participating in commercial loan arrangements. Participating banks guarantee the performance on borrower-related interest rate swap contracts. Risk participation agreements are derivative financial instruments and are recorded at fair value. These derivatives are not designated as hedges and therefore, changes in fair value are recorded directly through earnings at each reporting period. Under a risk participation-out agreement, a derivative asset, the Company participates out a portion of the credit risk associated with the interest rate swap position executed with the commercial borrower, for a fee paid to the participating bank.
The Company offers foreign exchange contracts to commercial borrowers to accommodate their business needs. These foreign exchange contracts do not qualify as hedges for accounting purposes. To mitigate the market and liquidity risk associated with these foreign exchange contracts, the Company enters into similar offsetting positions.
Asset derivatives and liability derivatives are included in other assets and accrued expenses and other liabilities on the unaudited consolidated balance sheets.
The following tables present the Company's customer related derivative positions for the periods indicated below for those derivatives not designated as hedging.
 Notional Amount Maturing
 Number of PositionsLess than 1 yearLess than 2 yearsLess than 3 yearsLess than 4 yearsThereafterTotalFair Value
March 31, 2021
 (Dollars In Thousands)
Loan level derivatives
Receive fixed, pay variable134 $— $10,876 $13,949 $118,504$1,089,153 $1,232,482 $71,310 
Pay fixed, receive variable134 — 10,876 13,949 118,5041,089,153 1,232,482 71,310 
Risk participation-out agreements37 — — 6,975 22,718233,737 263,430 1,019 
Risk participation-in agreements8 — — 18,929 — 41,360 60,289 205 
Foreign exchange contracts
Buys foreign currency, sells U.S. currency16 $1,416 $— $— $— $— $1,416 $99 
Sells foreign currency, buys U.S. currency21 1,422 — — — — 1,422 93 
29
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
 Notional Amount Maturing
 Number of PositionsLess than 1 yearLess than 2 yearsLess than 3 yearsLess than 4 yearsThereafterTotalFair Value
December 31, 2020
(Dollars In Thousands)
Loan level derivatives
Receive fixed, pay variable136 $— $8,541 $16,447 $99,014 $1,090,144 $1,214,146 $129,284 
Pay fixed, receive variable136 — 8,541 16,447 99,014 1,090,144 1,214,146 129,284 
Risk participation-out agreements37 — — 7,009 22,733 222,913 252,655 1,843 
Risk participation-in agreements8 — — 19,000 — 41,619 60,619 361 
Foreign exchange contracts
Buys foreign currency, sells U.S. currency18 $1,266 $— $— $— $— $1,266 $156 
Sells foreign currency, buys U.S. currency20 1,273 — — — — 1,273 148 
30
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
Certain derivative agreements contain provisions that require the Company to post collateral if the derivative exposure exceeds a threshold amount. The Company posted collateral to dealer counterparties of $149.4 million and $166.5 million in the normal course of business as of March 31, 2021 and December 31, 2020, respectively.
The tables below present the offsetting of derivatives and amounts subject to master netting agreements not offset in the unaudited consolidated balance sheet at the dates indicated.
 At March 31, 2021
Gross
Amounts Recognized		Gross Amounts
Offset in the
Statement of Financial Position		Net Amounts  Presented in the Statement of Financial PositionGross Amounts Not Offset in the
Statement of Financial Position		Net Amount
 Financial Instruments PledgedCash Collateral Pledged
 (In Thousands)
Asset derivatives
Derivatives designated as hedging instruments:
Interest rate derivatives$10 $— $10 $— $— $10 
Derivatives not designated as hedging instruments:
Loan level derivatives$84,128 $— $84,128 $— $— $84,128 
Risk participation-out agreements1,019 — 1,019 — — 1,019 
Foreign exchange contracts99 — 99 — — 99 
Total$85,256 $— $85,256 $— $— $85,256 
Liability derivatives
Derivatives designated as hedging instruments:
Interest rate derivatives$2 $— $2 $— $— $2 
Derivatives not designated as hedging instruments:
Loan level derivatives$84,128 $— $84,128 $138,110 $11,280 $(65,262)
Risk participation-in agreements205 — 205 — — 205 
Foreign exchange contracts93 — 93 — — 93 
Total$84,428 $— $84,428 $138,110 $11,280 $(64,962)
31
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
 At December 31, 2020
Gross
Amounts Recognized		Gross Amounts
Offset in the
Statement of Financial Position		Net Amounts  Presented in the Statement of Financial PositionGross Amounts Not Offset in the
Statement of Financial Position		Net Amount
 Financial Instruments PledgedCash Collateral Pledged
 (In Thousands)
Asset derivatives
Interest rate derivatives$8 $— $8 $— $— $8 
Loan level derivatives131,328 — 131,328 — — 131,328 
Risk participation-out agreements1,843 — 1,843 — — 1,843 
Foreign exchange contracts156 — 156 — — 156 
Total$133,335 $— $133,335 $— $— $133,335 
Liability derivatives
Loan level derivatives$131,328 $— $131,328 $155,220 $11,280 $(35,172)
Risk participation-in agreements361 — 361 — — 361 
Foreign exchange contracts148 — 148 — — 148 
Total$131,837 $— $131,837 $155,220 $11,280 $(34,663)
The Company has agreements with certain of its derivative counterparties that contain credit-risk-related contingent provisions. These provisions provide the counterparty with the right to terminate its derivative positions and require the Company to settle its obligations under the agreements if the Company defaults on certain of its indebtedness or if the Company fails to maintain its status as a well-capitalized institution.

Fair Value
Three Months Ended 
 March 31, 2021		Three Months Ended 
 March 31, 2020
 (Dollars in Thousands)
Derivatives designated as hedges$8 $— 
Gain in OCI on derivatives (effective portion), net of tax$7 $— 
Gain (loss) reclassified from OCI into interest income or interest expense (effective portion)$2 $— 

The guidance in ASU 2017-12 requires that amounts in accumulated other comprehensive income that are included in the assessment of effectiveness should be reclassified into earnings in the same period in which the hedged forecasted transactions impact earnings. A portion of the balance reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made or received on the Company’s interest rate swaps. The Company monitors the risk of counterparty default on an ongoing basis.






32
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
(9) Stock Based Compensation
As of March 31, 2021, the Company had 2 active equity plans: the 2011 Restricted Stock Award Plan ("2011 RSA") with 500,000 authorized shares and the 2014 Equity Incentive Plan ("2014 Plan") with 1,750,000 authorized shares. The 2011 RSA and the 2014 Plan are collectively referred to as the "Plans". The purpose of the Plans is to promote the long-term financial success of the Company and its subsidiaries by providing a means to attract, retain and reward individuals who contribute to such success and to further align their interests with those of the Company's stockholders.
Of the awarded shares, generally 50% vest ratably over three years with one-third of such shares vesting at each of the first, second and third anniversary dates of the awards. These are referred to as "time-based shares". The remaining 50% of each award has a cliff vesting schedule and will vest three years after the award date based on the level of the Company's achievement of identified performance targets in comparison to the level of achievement of such identified performance targets by a defined peer group comprised of 14 financial institutions. These are referred to as "performance-based shares". If a participant leaves the Company prior to the third anniversary date of an award, any unvested shares are usually forfeited. Dividends declared with respect to shares awarded will be held by the Company and paid to the participant only when the shares vest.
Under the Plans, shares of the Company's common stock are reserved for issuance as restricted stock awards to officers, employees, and non-employee directors of the Company. Shares issued upon vesting may be either authorized but unissued shares or reacquired shares held by the Company as treasury shares. Any shares not issued because vesting requirements are not met will be retired back to treasury and be made available again for issuance under the Plans.
During the three months ended March 31, 2021 and March 31, 2020, no shares were issued upon satisfaction of required conditions of the Plans.
Total expense for the Plans was $0.5 million and $0.6 million for the three months ended March 31, 2021 and 2020, respectively.
(10) Earnings per Share ("EPS")
The following table is a reconciliation of basic EPS and diluted EPS:
Three Months Ended
 March 31, 2021March 31, 2020
 BasicFully
Diluted		BasicFully
Diluted
(Dollars in Thousands, Except Per Share Amounts)
Numerator:
Net income$26,454 $26,454 $(17,276)$(17,276)
Denominator:
Weighted average shares outstanding78,143,752 78,143,752 79,481,462 79,481,462 
Effect of dilutive securities— 260,311 — 184,312 
Adjusted weighted average shares outstanding78,143,752 78,404,063 79,481,462 79,665,774 
EPS$0.34 $0.34 $(0.22)$(0.22)
(11) Fair Value of Financial Instruments
A description of the valuation methodologies used for assets and liabilities measured at fair value on a recurring and non-recurring basis, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. There were no changes in the valuation techniques used during the three months ended March 31, 2021 and December 31, 2020.
33
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
The following tables set forth the carrying value of assets and liabilities measured at fair value on a recurring basis at the dates indicated:
 Carrying Value as of March 31, 2021
 Level 1Level 2Level 3Total
 (In Thousands)
Assets:    
Investment securities available-for-sale:    
GSE debentures$— $271,526 $— $271,526 
GSE CMOs— 40,925 — 40,925 
GSE MBSs— 276,066 — 276,066 
Corporate debt obligations— 23,247 — 23,247 
U.S. Treasury bonds— 117,641 — 117,641 
Foreign government obligations— 496 — 496 
Total investment securities available-for-sale$— $729,901 $— $729,901 
Equity securities held-for-trading$— $518 $— $518 
Interest rate derivatives— 10 — 10 
Loan level derivatives— 84,128 — 84,128 
Risk participation-out agreements— 1,019 — 1,019 
Foreign exchange contracts— 99 — 99 
Liabilities:    
Interest rate derivatives$— $2 $— $2 
Loan level derivatives— 84,128 — 84,128 
Risk participation-in agreements— 205 — 205 
Foreign exchange contracts— 93 — 93 
34
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
 Carrying Value as of December 31, 2020
 Level 1Level 2Level 3Total
 (In Thousands)
Assets:    
Investment securities available-for-sale:    
GSE debentures$— $278,645 $— $278,645 
GSE CMOs— 46,028 — 46,028 
GSE MBSs— 323,609 — 323,609 
Corporate debt obligations— 23,467 — 23,467 
U.S. Treasury bonds— 73,577 — 73,577 
Foreign government obligations— 496 — 496 
Total investment securities available-for-sale$— $745,822 $— $745,822 
Equity securities held-for-trading$— $526 $— $526 
Interest rate derivatives— 8 — 8 
Loan level derivatives— 131,328 — 131,328 
Risk participation-out agreements— 1,843 — 1,843 
Foreign exchange contracts— 156 — 156 
Liabilities:   
Loan level derivatives— 131,328 — 131,328 
Risk participation-in agreements— 361 — 361 
Foreign exchange contracts— 148 — 148 
Investment Securities Available-for-Sale
The fair value of investment securities is based principally on market prices and dealer quotes received from third-party and nationally-recognized pricing services for identical investment securities such as U.S. Treasury and agency securities. These prices are validated by comparing the primary pricing source with an alternative pricing source when available. When quoted market prices for identical securities are unavailable, the Company uses market prices provided by independent pricing services based on recent trading activity and other observable information, including but not limited to market interest-rate curves, referenced credit spreads and estimated prepayment speeds, where applicable. These investments include GSE debentures, GSE mortgage-related securities, SBA commercial loan asset backed securities, corporate debt securities, and trust preferred securities, all of which are included in Level 2. As of March 31, 2021 and December 31, 2020, none of the investment securities were valued using pricing models included in Level 3.
Additionally, management reviews changes in fair value from period to period and performs testing to ensure that prices received from the third parties are consistent with management's expectation of the market. Changes in the prices obtained from the pricing service are analyzed from month to month, taking into consideration changes in market conditions including changes in mortgage spreads, changes in U.S. Treasury security yields and changes in generic pricing of 15-year and 30-year securities. Additional analysis may include a review of prices provided by other independent parties, a yield analysis, a review of average life changes using Bloomberg analytics and a review of historical pricing for a particular security.
Equity Securities Held-for-Trading
The fair value of equity securities held-for-trading is based principally on market prices and dealer quotes received from third-party and nationally-recognized pricing services. The Company's equity securities are priced this way and are included in Level 1 and Level 2. These prices are validated by comparing the primary pricing source with an alternative pricing source when available.
Derivatives and Hedging Instruments
The fair value of interest rate derivatives designated as hedging instruments, loan level derivatives, risk participation agreements (RPA in/out), and foreign exchange contracts represent a Level 2 valuation and are based on settlement values
35
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
adjusted for credit risks associated with the counterparties and the Company and observable market interest rate curves and foreign exchange rates where applicable. Credit risk adjustments consider factors such as the likelihood of default by the Company and its counterparties, its net exposures and remaining contractual life. To date, the Company has not realized any losses due to a counterparty's inability to pay any net uncollateralized position. Refer also to Note 8, "Derivatives and Hedging Activities."
There were no transfers between levels for assets and liabilities recorded at fair value on a recurring basis during the three months ended March 31, 2021 and December 31, 2020, respectively.
Assets and Liabilities Recorded at Fair Value on a Non-Recurring Basis
Assets and liabilities measured at fair value on a non-recurring basis are summarized below at the dated indicated:
 Carrying Value as of March 31, 2021
 Level 1Level 2Level 3Total
 (In Thousands)
Assets measured at fair value on a non-recurring basis:    
Collateral-dependent impaired loans and leases$— $— $844 $844 
OREO— — 5,328 5,328 
Repossessed assets— 1,055 — 1,055 
Total assets measured at fair value on a non-recurring basis$— $1,055 $6,172 $7,227 
 Carrying Value as of December 31, 2020
 Level 1Level 2Level 3Total
 (In Thousands)
Assets measured at fair value on a non-recurring basis:    
Collateral-dependent impaired loans and leases$— $— $3,445 $3,445 
OREO— — 5,415 5,415 
Repossessed assets— 1,100 — 1,100 
Total assets measured at fair value on a non-recurring basis$— $1,100 $8,860 $9,960 
Collateral-Dependent Impaired Loans and Leases
For nonperforming loans and leases where the credit quality of the borrower has deteriorated significantly, fair values of the underlying collateral were estimated using purchase and sales agreements (Level 2), or comparable sales or recent appraisals (Level 3), adjusted for selling costs and other expenses.
Other Real Estate Owned
The Company records OREO at the lower of cost or fair value. In estimating fair value, the Company utilizes purchase and sales agreements (Level 2) or comparable sales, recent appraisals or cash flows discounted at an interest rate commensurate with the risk associated with these cash flows (Level 3), adjusted for selling costs and other expenses.
Repossessed Assets
Repossessed assets are carried at estimated fair value less costs to sell based on auction pricing (Level 2).
36
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
The table below presents quantitative information about significant unobservable inputs (Level 3) for assets measured at fair value on a non-recurring basis at the dates indicated.
Fair ValueValuation Technique
At March 31,
2021		At December 31, 2020
 (Dollars in Thousands)
Collateral-dependent impaired loans and leases$844 $3,445 
Appraisal of collateral (1)
Other real estate owned5,328 5,415 
Appraisal of collateral (1)
________________________________________________________________________
(1) Fair value is generally determined through independent appraisals of the underlying collateral. The Company may also use another available source of collateral assessment to determine a reasonable estimate of the fair value of the collateral. Appraisals may be adjusted by management for qualitative factors such as economic factors and estimated liquidation expenses. The range of the unobservable inputs used may vary but is generally 0% - 10% on the discount for costs to sell and 0% - 15% on appraisal adjustments.
Summary of Estimated Fair Values of Financial Instruments
The following table presents the carrying amount, estimated fair value, and placement in the fair value hierarchy of the Company's financial instruments at the dates indicated. This table excludes financial instruments for which the carrying amount approximates fair value. Financial assets for which the fair value approximates carrying value include cash and cash equivalents, restricted equity securities, and accrued interest receivable. Financial liabilities for which the fair value approximates carrying value include non-maturity deposits, short-term borrowings, and accrued interest payable.
   Fair Value Measurements at March 31, 2021
 Carrying
Value		Estimated
Fair Value		Level 1
Inputs		Level 2
Inputs		Level 3
Inputs
 (In Thousands)
Financial assets:     
Loans and leases, net$7,157,715 $7,122,319 $— $— $7,122,319 
Restricted equity securities40,400 40,400 — — 40,400 
Financial liabilities:    
Certificates of deposits1,743,656 1,751,374 — 1,751,374 — 
Borrowed funds546,003 539,957 — 539,957 — 
   Fair Value Measurements at December 31, 2020
 Carrying
Value		Estimated
Fair Value		Level 1
Inputs		Level 2
Inputs		Level 3
Inputs
 (In Thousands)
Financial assets:     
Loans and leases, net7,155,174 7,116,854 — — 7,116,854 
Restricted equity securities49,786 49,786 — — 49,786 
Financial liabilities: 
Certificates of deposit2,083,907 2,092,867 — 2,092,867 — 
Borrowed funds820,247 818,681 — 818,681 — 
37
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
Loans and Leases
The fair values of performing loans and leases was estimated by segregating the portfolio into its primary loan and lease categories—commercial real estate mortgage, multi-family mortgage, construction, commercial, equipment financing, condominium association, residential mortgage, home equity and other consumer. These categories were further disaggregated based upon significant financial characteristics such as type of interest rate (fixed / variable) and payment status (current / past-due). Using the exit price valuation method, the Company discounts the contractual cash flows for each loan category using interest rates currently being offered for loans with similar terms to borrowers of similar quality and incorporates estimates of future loan prepayments.
Restricted Equity Securities
The fair values of certain restricted equity securities are estimated using observable inputs adjusted for other unobservable information, including but not limited to probability assumptions and similar discounts where applicable. These restricted equity securities are considered to be Level 3.
Deposits
The fair values of deposit liabilities with no stated maturity (demand, NOW, savings and money market savings accounts) are equal to the carrying amounts payable on demand. The fair value of certificates of deposit represents contractual cash flows discounted using interest rates currently offered on deposits with similar characteristics and remaining maturities. The fair value estimates for deposits do not include the benefit that results from the low-cost funding provided by the Company's core deposit relationships (deposit-based intangibles).
Borrowed Funds
The fair value of federal funds purchased is equal to the amount borrowed. The fair value of FHLBB advances and repurchase agreements represents contractual repayments discounted using interest rates currently available for borrowings with similar characteristics and remaining maturities. The fair values reported for retail repurchase agreements are based on the discounted value of contractual cash flows. The discount rates used are representative of approximate rates currently offered on borrowings with similar characteristics and maturities. The fair values reported for subordinated deferrable interest debentures are based on the discounted value of contractual cash flows. The discount rates used are representative of approximate rates currently offered on instruments with similar terms and maturities.
(12) Commitments and Contingencies
Off-Balance Sheet Financial Instruments
The Company is party to off-balance sheet financial instruments in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments include loan commitments, standby and commercial letters of credit, and loan level derivatives. According to GAAP, these financial instruments are not recorded in the financial statements until they are funded or related fees are incurred or received.
The contract amounts reflect the extent of the involvement the Company has in particular classes of these instruments. Such commitments involve, to varying degrees, elements of credit risk and interest-rate risk in excess of the amount recognized in the consolidated balance sheets. The Company's exposure to credit loss in the event of non-performance by the counterparty is represented by the fair value of the instruments. The Company uses the same policies in making commitments and conditional obligations as it does for on-balance sheet instruments.
38
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
Financial instruments with off-balance-sheet risk at the dates indicated follow:
 At March 31, 2021At December 31, 2020
 (In Thousands)
Financial instruments whose contract amounts represent credit risk:  
Commitments to originate loans and leases:  
Commercial real estate$107,597 $174,240 
Commercial105,426 80,291 
Residential mortgage82,366 30,418 
Unadvanced portion of loans and leases826,545 759,053 
Unused lines of credit:  
Home equity591,377 584,881 
Other consumer41,583 38,954 
Other commercial431 408 
Unused letters of credit: 
     Financial standby letters of credit15,953 14,746 
Performance standby letters of credit6,607 5,903 
Commercial and similar letters of credit5,369 5,105 
Loan level derivatives (Notional principal amounts):
Receive fixed, pay variable1,232,482 1,214,146 
Pay fixed, receive variable1,232,482 1,214,146 
Risk participation-out agreements263,430 252,655 
Risk participation-in agreements60,289 60,619 
Foreign exchange contracts (Notional amounts):
Buys foreign currency, sells U.S. currency1,416 1,266 
Sells foreign currency, buys U.S. currency1,422 1,273 
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee by the customer. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if any, is based on management's credit evaluation of the borrower.
Standby and commercial letters of credit are conditional commitments issued by the Company to guarantee performance of a customer to a third party. These standby and commercial letters of credit are primarily issued to support the financing needs of the Company's commercial customers. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers.
From time to time, the Company enters into loan level derivatives, risk participation agreements or foreign exchange contracts with commercial customers and third-party financial institutions. These derivatives allow the Company to offer long-term fixed-rate commercial loans while mitigating the interest-rate or foreign exchange risk of holding those loans. In a loan level derivative transaction, the Company lends to a commercial customer on a floating-rate basis and then enters into a loan level derivative with that customer. Concurrently, the Company enters into offsetting swaps with a third-party financial institution, effectively minimizing its net interest-rate risk exposure resulting from such transactions. The fair value of these derivatives are presented in Footnote 8.
39
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
Lease Commitments
The Company leases certain office space under various noncancellable operating leases as well as certain other assets. These leases have original terms ranging from 3 years to over 25 years. Certain leases contain renewal options and escalation clauses which can increase rental expenses based principally on the consumer price index and fair market rental value provisions. All of the Company's current outstanding leases are classified as operating leases.
The Company considered the following criteria when determining whether a contract contains a lease, the existence of an identifiable asset and the right to obtain substantially all of the economic benefits from use of the asset through the period. The Company used the FHLB classic advance rates available as of March 31, 2021 as the discount rate to determine the net present value of the remaining lease payments.
Three Months Ended March 31, 2021Three Months Ended March 31, 2020
(In Thousands)
The components of lease expense were as follow:
Operating lease cost$1,563 $1,611 
Supplemental cash flow information related to leases was as follows:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases$1,579 $1,658 
At March 31, 2021At December 31, 2020
(In Thousands)
Supplemental balance sheet information related to leases was as follows:
Operating Leases
Operating lease right-of-use assets$23,180 $24,143 
Operating lease liabilities23,180 24,143 
Weighted Average Remaining Lease Term
Operating leases6.806.95
Weighted Average Discount Rate
Operating leases3.2 %3.2 %

40
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
A summary of future minimum rental payments under such leases at the dates indicated follows:
Minimum Rental Payments
March 31, 2021
 (In Thousands)
Remainder of 2021$4,596 
Year ending:
20225,569 
20234,643 
20243,366 
20252,343 
20261,559 
Thereafter3,571 
Total$25,647 
Less imputed interest(2,467)
Present value of lease liability$23,180 
Certain leases contain escalation clauses for real estate taxes and other expenditures, which are not included above. The total real estate taxes were $0.5 million and other expenditures were $0.1 million for both the three months ended March 31, 2021, and 2020. Total rental expense was $1.5 million and $1.6 million for the three months ended March 31, 2021 and 2020, respectively.
Legal Proceedings
In the normal course of business, there are various outstanding legal proceedings. In the opinion of management, after consulting with legal counsel, the consolidated financial position and results of operations of the Company are not expected to be affected materially by the outcome of such proceedings.
(13) Revenue from Contracts with Customers
Overview
Revenue from contracts with customers in the scope of Accounting Standards Codification (“ASC”) ("Topic 606") is measured based on the consideration specified in the contract with a customer and excludes amounts collected on behalf of third parties. The Company recognizes revenue from contracts with customers when it satisfies its performance obligations.
The Company’s performance obligations are generally satisfied as services are rendered and can either be satisfied at a point in time or over time. Unsatisfied performance obligations at the report date are not material to our consolidated financial statements.
In certain cases, other parties are involved with providing services to our customers. If the Company is a principal in the transaction (providing services itself or through a third party on its behalf), revenues are reported based on the gross consideration received from the customer and any related expenses are reported in gross noninterest expense. If the Company is an agent in the transaction (referring to another party to provide services), the Company reports its net fee or commission retained as revenue.
A substantial portion of the Company’s revenue is specifically excluded from the scope of Topic 606. This exclusion is associated with financial instruments, including interest income on loans and investment securities, in addition to loan derivative income and gains on loan and investment sales. For the revenue that is in-scope of Topic 606, the following is a description of principal activities from which the Company generates its revenue from contracts with customers, separated by the timing of revenue recognition.
41
BROOKLINE BANCORP, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements (Continued)
Revenue Recognized at a Point in Time
The Company recognizes revenue that is transactional in nature and such revenue is earned at a point in time. Revenue that is recognized at a point in time includes card interchange fees (fee income related to debit card transactions), ATM fees, wire transfer fees, overdraft charge fees, and stop-payment and returned check fees. Additionally, revenue is collected from loan fees, such as letters of credit, line renewal fees and application fees. Such revenue is derived from transactional information and is recognized as revenue immediately as the transactions occur or upon providing the service to complete the customer’s transaction.
Revenue Recognized Over Time
The Company recognizes revenue over a period of time, generally monthly, as services are performed and performance obligations are satisfied. Such revenue includes commissions on investments, insurance sales and service charges on deposit accounts. Fee revenue from service charges on deposit accounts represents the service charges assessed to customers who hold deposit accounts at the Banks.
42
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Certain statements contained in this Quarterly Report on Form 10-Q that are not historical facts may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties. These statements, which are based on certain assumptions and describe Brookline Bancorp, Inc.’s (the “Company’s”) future plans, strategies and expectations, can generally be identified by the use of the words “may,” “will,” “should,” “could,” “would,” “plan,” “potential,” “estimate,” “project,” “believe,” “intend,” “anticipate,” “expect,” “target” and similar expressions. These statements include, among others, statements regarding the Company’s intent, belief or expectations with respect to economic conditions, trends affecting the Company’s financial condition or results of operations, and the Company’s exposure to market, liquidity, interest-rate and credit risk.
Forward-looking statements are based on the current assumptions underlying the statements and other information with respect to the beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions of management and the financial condition, results of operations, future performance and business are only expectations of future results. Although the Company believes that the expectations reflected in the Company’s forward-looking statements are reasonable, the Company’s actual results could differ materially from those projected in the forward-looking statements as a result of, among other factors, the negative impacts and disruptions of the COVID-19 pandemic and measures taken to contain its spread on our employees, customers, business operations, credit quality, financial position, liquidity and results of operations; turbulence in the capital and debt markets; changes in interest rates; competitive pressures from other financial institutions; the effects of weakness in general economic conditions on a national basis or in the local markets in which the Company operates; changes in consumer behavior due to changing political, business and economic conditions, including increased unemployment, or legislative or regulatory initiatives; changes in the value of securities and other assets in the Company’s investment portfolio; increases in loan and lease default and charge-off rates; the adequacy of allowances for loan and lease losses; decreases in deposit levels that necessitate increases in borrowing to fund loans and investments; operational risks including, but not limited to, cybersecurity incidents, fraud, natural disasters and future pandemics; changes in regulation; reputational risks relating to the Company’s participation in the Paycheck Protection Program, and other pandemic-related legislative and regulatory initiatives and programs; the possibility that future credit losses may be higher than currently expected; due to changes in economic assumptions and adverse economic developments; the risk that goodwill and intangibles recorded in the Company’s financial statements will become impaired; and changes in assumptions used in making such forward-looking statements; and the other risks and uncertainties detailed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and other filings submitted to the Securities and Exchange Commission. Forward-looking statements speak only as of the date on which they are made. The Company does not undertake any obligation to update any forward-looking statement to reflect circumstances or events that occur after the date the forward-looking statements are made.
Introduction
Brookline Bancorp, Inc., a Delaware corporation, operates as a multi-bank holding company for Brookline Bank and its subsidiaries; Bank Rhode Island and its subsidiaries ("BankRI"); and Brookline Securities Corp.
As a commercially-focused financial institution with 50 full-service banking offices throughout greater Boston, the north shore of Massachusetts and Rhode Island, the Company, through Brookline Bank and BankRI, offers a wide range of commercial, business and retail banking services, including a full complement of cash management products, foreign exchange services, on-line and mobile banking services, consumer and residential loans and investment advisory services, designed to meet the financial needs of small- to mid-sized businesses and individuals throughout central New England. Specialty lending activities include equipment financing, 12.7% of which is in the greater New York and New Jersey metropolitan area and 87.3% of which is in other areas in the United States of America as of March 31, 2021.
The Company focuses its business efforts on profitably growing its commercial lending businesses, both organically and through acquisitions. The Company’s customer focus, multi-bank structure, and risk management are integral to its organic growth strategy and serve to differentiate the Company from its competitors. As full-service financial institutions, the Banks and their subsidiaries focus their efforts on developing and deepening long-term banking relationships with qualified customers through a full complement of products, excellent customer service, and strong risk management.
The Company manages the Banks under a uniform strategic objective, with one set of uniform policies consistently applied by one executive management team. Within this environment, the Company believes that the ability to make customer decisions locally enhances management's motivation, service levels and, as a consequence, the Company's financial results. As such, while most back-office functions are consolidated at the holding company level, branding and decision-making, including credit decisions and pricing, remain largely local in order to better meet the needs of bank customers and further motivate the
43
Banks’ commercial, business and retail bankers. These credit decisions, at the local level, are executed through corporate policies overseen by the Company's credit department.
The competition for loans and leases and deposits remains intense. The Company expects the operating environment to remain challenging. The volume of loan and lease originations and loan and lease losses will depend, to a large extent, on how the economy performs. Loan and lease growth and deposit growth are also greatly influenced by the rate-setting actions of the FRB. A sustained, low interest rate environment with a flat interest rate curve may negatively impact the Company's yields and net interest margin. While the Company is slightly asset sensitive and should benefit from rising rates, changes in interest rates could also precipitate a change in the mix and volume of the Company's deposits and loans. The future operating results of the Company will depend on its ability to maintain or increase the current net interest margin, while minimizing exposure to credit risk, along with increasing sources of non-interest income, while controlling the growth of non-interest expenses.
The Company and the Banks are supervised, examined and regulated by the FRB. As a Massachusetts-chartered trust company, Brookline Bank is 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 also subject to regulation under the laws of the State of Rhode Island and the jurisdiction of the Banking Division of the Rhode Island Department of Business Regulation. The FDIC continues to insure each of the Banks’ deposits up to $250,000 per depositor. As previously disclosed, on July 31, 2019, Brookline Bank converted its charter from a Massachusetts savings bank to a Massachusetts-chartered trust company and ended its membership in the Depositors Insurance Fund (the “DIF”), a private industry-sponsored fund which insures Massachusetts-chartered savings bank deposit balances in excess of federal deposit insurance coverage. Brookline Bank’s growth in deposit size necessitated Brookline Bank’s withdrawal from the DIF and the concurrent charter conversion of Brookline Bank. Brookline Bank’s deposit accounts will continue to be insured by the deposit insurance fund of the FDIC up to applicable limits. Term deposits in excess of the FDIC insurance coverage will continue to be insured by the DIF until they reach maturity.
On March 27, 2020, Congress passed, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted to address the economic effects of the COVID-19 pandemic.
•Paycheck Protection Program The CARES Act appropriated $349 billion for “paycheck protection loans” through the U.S. Small Business Administration's ("SBA's") Paycheck Protection Program ("PPP"). The amount appropriated was subsequently increased to $659 billion. Loans under the PPP that meet SBA requirements may be forgiven in certain circumstances, and are 100% guaranteed by SBA. Additionally, on December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the “Economic Aid Act”) was signed into law and provides for a second round of PPP loans (the "PPP-2"). The Banks are participating in the PPP-2 as of March 31, 2021. PPP loans are fully guaranteed by the U.S. government, have an initial term of up to five years and earn interest at a rate of 1%. We currently expect a significant portion of these loans will ultimately be forgiven by the SBA in accordance with the terms of the program. Through March 31, 2021, the Banks funded 1,342 PPP-2 loans representing $249.5 million. In the first round of PPP funding, the Banks funded 2,922 PPP loans totaling $581.7 million. In conjunction with the PPP, the FRB has created a lending facility for qualified financial institutions. The FRB's Paycheck Protection Program Liquidity Facility ("PPPLF") will extend credit to depository institutions with a term of up to five years at an interest rate of 0.35%. Only loans issued under the PPP can be pledged as collateral to access the facility. The Company is participating in the PPPLF program. As of the filing date, the Banks have obtained SBA approval for 1,613 PPP-2 loans totaling $260 million. All PPP-2 loans have been funded.
•Troubled Debt Restructuring Relief. From March 1, 2020 through the earlier of January 1, 2022 or 60 days after the termination date of the national emergency, a financial institution may elect to suspend the requirements under accounting principles generally accepted in the U.S. for loan modifications related to the COVID-19 pandemic that would otherwise be categorized as a troubled debt restructured, including impairment accounting. This troubled debt restructuring relief applies for the term of the loan modification that occurs during the applicable period for a loan that was not more than 30 days past due as of December 31, 2019. Financial institutions are required to maintain records of the volume of loans involved in modifications to which troubled debt restructuring relief is applicable. As of March 31, 2021, the Company granted 4,603 short-term deferments on loan and lease balances of $1.1 billion. Of these modifications, 4,262 loans and leases with total balances of $955.6 million have returned to the payment status and 341 loans and leases with total balances of $125.7 million remain on the deferral status, which represents 1.7% of the Company's total loan and lease balances. These short-term deferments are not classified as troubled debt restructured loans and will not be reported as past due provided that they are performing in accordance with the modified terms.
The Company’s common stock is traded on the Nasdaq Global Select MarketSM under the symbol “BRKL.”
44
Selected Financial Data
    The following is based in part on, and should be read in conjunction with, the consolidated financial statements and accompanying notes, and other information appearing elsewhere in this Quarterly Report on Form 10-Q.
At and for the Three Months Ended
March 31,December 31,September 30,June 30,March 31,
20212020202020202020
(Dollars in Thousands, Except Per Share Data)
PER COMMON SHARE DATA
Earnings per share - Basic $0.34 $0.34 $0.24 $0.25 $(0.22)
Earnings per share - Diluted0.34 0.34 0.24 0.25 (0.22)
Book value per share (end of period) 12.10 12.05 11.84 11.75 11.57 
Tangible book value per share (end of period) (1)10.01 9.96 9.77 9.67 9.49 
Dividends paid per common share0.115 0.115 0.115 0.115 0.115 
Stock price (end of period)15.00 12.04 8.65 10.08 11.28 
PERFORMANCE RATIOS (2)
Net interest margin (taxable equivalent basis)3.39 %3.23 %3.08 %3.09 %3.31 %
Return on average assets 1.21 %1.20 %0.83 %0.88 %(0.87)%
Return on average tangible assets (1)1.24 %1.22 %0.84 %0.90 %(0.89)%
Return on average stockholders' equity 11.18 %11.38 %7.99 %8.45 %(7.30)%
Return on average tangible stockholders' equity (1)13.51 %13.79 %9.70 %10.28 %(8.84)%
Dividend payout ratio (1)33.99 %33.96 %48.67 %46.37 %(53.10)%
Efficiency ratio (3)55.22 %55.27 %57.83 %55.46 %57.36 %
ASSET QUALITY RATIOS
Net loan and lease charge-offs as a percentage of average loans and leases (annualized)0.10 %0.24 %0.27 %0.08 %0.13 %
Nonperforming loans and leases as a percentage of total loans and leases0.43 %0.53 %0.51 %0.56 %0.57 %
Nonperforming assets as a percentage of total assets 0.44 %0.50 %0.44 %0.47 %0.49 %
Total allowance for loan and lease losses as a percentage of total loans and leases1.51 %1.57 %1.62 %1.61 %1.66 %
CAPITAL RATIOS
Stockholders' equity to total assets 11.04 %10.53 %10.39 %10.21 %10.78 %
Tangible equity ratio (1)9.31 %8.86 %8.73 %8.56 %9.02 %
FINANCIAL CONDITION DATA
Total assets $8,559,810 $8,942,424 $9,000,192 $9,069,667 $8,461,591 
Total loans and leases7,267,552 7,269,553 7,396,358 7,407,697 6,822,527 
Allowance for loan and lease losses109,837 114,379 119,971 119,553 113,181 
Investment securities available-for-sale729,901 745,822 783,867 854,505 761,539 
Investment securities held-to-maturity— — — — — 
Equity securities held-for-trading518 526 525 1,992 2,558 
Goodwill and identified intangible assets163,347 163,579 163,891 164,203 164,514 
Total deposits6,866,786 6,910,696 6,792,523 6,440,233 5,889,938 
Total borrowed funds546,003 820,247 1,005,045 1,406,669 1,291,804 
Stockholders' equity 945,399 941,778 935,558 926,413 912,568 
(Continued)
45
At and for the Three Months Ended
March 31,December 31,September 30,June 30,March 31,
20212020202020202020
(Dollars in Thousands, Except Per Share Data)
EARNINGS DATA
Net interest income$69,109 $68,225 $65,938 $64,288 $61,712 
Provision for credit losses(2,147)(2,103)4,528 5,347 54,114 
Non-interest income 4,794 4,219 4,862 6,235 9,328 
Non-interest expense 40,811 40,038 40,947 39,109 40,748 
Net income (loss)26,454 26,663 18,679 19,571 (17,276)
_______________________________________________________________________________
(1) Refer to "Non-GAAP Financial Measures and Reconciliations to GAAP".

(2) All performance ratios are annualized and are based on average balance sheet amounts, where applicable.

(3) Efficiency ratio is calculated by dividing non-interest expense by the sum of non-interest income and net interest income.
Executive Overview
Balance Sheet
Total assets of $8.6 billion as of March 31, 2021 decreased $382.6 million, or 17.1% on an annualized basis, from December 31, 2020. The decrease was primarily driven by decreases in cash and cash equivalents and other assets.
Cash and cash equivalents as of March 31, 2021 decreased $304.0 million, or 279.6% on an annualized basis, to $130.9 million from December 31, 2020.
Total loans and leases as of March 31, 2021 decreased $2.0 million, or 0.1% on an annualized basis, to $7.3 billion from December 31, 2020. The Company's commercial loan portfolios, which are comprised of commercial real estate loans and commercial loans and leases, totaled $6.1 billion, or 84.1% of total loans and leases as of March 31, 2021, an increase of $15.8 million, or 1.0% on an annualized basis, from $6.1 billion, or 83.9% of total loans and leases, as of December 31, 2020.
Total deposits of $6.9 billion as of March 31, 2021 decreased $43.9 million, or 2.5% on an annualized basis, from December 31, 2020. Core deposits, which include demand checking, NOW, money market and savings accounts, totaled $5.1 billion, or 74.6% of total deposits as of March 31, 2021, an increase of $296.3 million, or 24.6% on an annualized basis from $4.8 billion, or 69.8% of total deposits, as of December 31, 2020. Certificate of deposit balances totaled $1.3 billion, or 18.5% of total deposits as of March 31, 2021, a decrease of $116.9 million, or 33.6% on an annualized basis from $1.4 billion, or 20.1% of total deposits, as of December 31, 2020. Brokered deposits totaled $470.6 million, or 6.9% of total deposits as of March 31, 2021, a decrease of $223.4 million, or 128.8% on an annualized basis from $693.9 million, or 10.0% of total deposits, as of December 31, 2020.
Total borrowed funds as of March 31, 2021 decreased $274.2 million, or 133.7% on an annualized basis, to $0.5 billion from December 31, 2020.
Asset Quality
Nonperforming assets as of March 31, 2021 totaled $37.4 million, or 0.44% of total assets, compared to $45.0 million, or 0.50% of total assets, as of December 31, 2020. Net charge-offs for the three months ended March 31, 2021 were $1.8 million, or 0.10% of average loans and leases on an annualized basis, compared to $2.2 million, or 0.13% of average loans and leases on an annualized basis, for the three months ended March 31, 2020.
The ratio of the allowance for loan and lease losses to total loans and leases was 1.51% as of March 31, 2021, compared to 1.57% as of December 31, 2020. On January 1, 2020, the Company implemented the CECL methodology to calculate the allowance for credit losses. Refer also to Note 5, "Allowance for Loan and Lease Losses."
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Capital Strength
The Company is a "well-capitalized" bank holding company as defined in the FRB's Regulation Y. The Company's common equity Tier 1 capital ratio was 11.65% as of March 31, 2021, compared to 11.04% as of December 31, 2020. The Company's Tier 1 leverage ratio was 9.26% as of March 31, 2021, compared to 8.92% as of December 31, 2020. As of March 31, 2021, the Company's Tier 1 risk-based capital ratio was 11.79%, compared to 11.18% as of December 31, 2020. The Company's Total risk-based capital ratio was 14.15% as of March 31, 2021, compared to 13.51% as of December 31, 2020.
The Company's ratio of stockholders' equity to total assets was 11.04% and 10.53% as of March 31, 2021 and December 31, 2020, respectively. The Company's tangible equity ratio was 9.31% and 8.86% as of March 31, 2021 and December 31, 2020, respectively.
Net Income (Loss)
For the three months ended March 31, 2021, the Company reported net income of $26.5 million, or $0.34 per basic and diluted share, an increase of $43.7 million, or 253.1%, from net loss of $(17.3) million, or $(0.22) per basic and diluted share for the three months ended March 31, 2020. This increase in net income is primarily the result of a decrease in the provision for credit losses of $56.3 million and an increase in net interest income of $7.4 million, partially offset by an increase in the provision for income taxes of $15.3 million and a decrease in non-interest income of $4.5 million. Refer to “Results of Operations" below for further discussion.
The annualized return on average assets was 1.21% for the three months ended March 31, 2021, compared to (0.87)% for the three months ended March 31, 2020. The annualized return on average stockholders' equity was 11.18% for the three months ended March 31, 2021, compared to (7.30)% for the three months ended March 31, 2020.
The net interest margin was 3.39% for the three months ended March 31, 2021, up from 3.31% for the three months ended March 31, 2020. The increase in the net interest margin is a result of a decrease of 79 basis points in the Company's overall cost of funds to 0.50% for the three months ended March 31, 2021 from 1.29% for the three months ended March 31, 2020, partially offset by a decrease in the yield on interest-earning assets of 66 basis points to 3.80% for the three months ended March 31, 2021 from 4.46% for the three months ended March 31, 2020.
The Company’s net interest margin and net interest income is sensitive to the structure and level of interest rates as well as competitive pricing in all loan and deposit categories.
Critical Accounting Policies
The SEC defines “critical accounting policies” as those involving significant judgments and difficult or complex assumptions by management, often as a result of the need to make estimates about matters that are inherently uncertain or variable, which have, or could have, a material impact on the carrying value of certain assets or net income. The preparation of financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates. As discussed in the Company’s 2020 Annual Report on Form 10-K, management has identified the determination of the allowance for credit losses and the review of goodwill for impairment as the Company’s most critical accounting policies.
Recent Accounting Developments
In March 2020, the FASB issued ASU 2020-04, " Reference Rate Reform (Topic 848)-Facilitation of the Effects of Reference Rate Reform on Financial Reporting" ("ASU 2020-04") to provide optional expedients and exceptions for applying GAAP to certain contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships existing as of December 31, 2022, for which an entity has elected certain optional expedients provided that those elections are retained through the end of the hedging relationship. The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022 and do not apply to contract modifications made after December 31, 2022. The Company has not yet adopted the amendments in this update and is currently in the process of reviewing its contracts and existing processes in order to assess the risks and potential impact to the Company.

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Non-GAAP Financial Measures and Reconciliation to GAAP
In addition to evaluating the Company’s results of operations in accordance with GAAP, management periodically supplements this evaluation with an analysis of certain non-GAAP financial measures, such as operating earnings metrics, the return on average tangible assets, return on average tangible equity, the tangible equity ratio, tangible book value per share, and dividend payout ratio. Management believes that these non-GAAP financial measures provide information useful to investors in understanding the Company’s underlying operating performance and trends, and facilitates comparisons with the performance assessment of financial performance, including non-interest expense control, while the tangible equity ratio and tangible book value per share are used to analyze the relative strength of the Company’s capital position.
The following table reconciles the Company’s operating earnings, operating return on average assets and operating return on average stockholders’ equity for the periods indicated:
At and for the Three Months Ended 
 March 31,
20212020
(Dollars in Thousands)
Net income (loss), as reported$26,454 $(17,276)
Less:
Security (losses) gains (after-tax) (5)964 
Operating earnings (loss)$26,459 $(18,240)
Basic earnings (loss) per share, as reported$0.34 $(0.22)
Less:
Security (losses) gains (after-tax)— 0.01 
Basic operating earnings (loss) per share$0.34 $(0.23)

The following tables reconcile the Company’s return on average tangible assets and return on average tangible stockholders’ equity for the periods indicated:
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Three Months Ended
March 31,
2021		December 31,
2020		September 30,
2020		June 30,
2020		March 31,
2020
(Dollars in Thousands)
Operating earnings (loss)$26,459 $26,663 $18,639 $19,131 $(18,240)
Average total assets $8,714,158 $8,874,467 $9,018,672 $8,869,540 $7,965,826 
Less: Average goodwill and average identified intangible assets, net163,457 163,758 164,072 164,385 164,701 
Average tangible assets $8,550,701 $8,710,709 $8,854,600 $8,705,155 $7,801,125 
Return on average assets (annualized)1.21 %1.20 %0.83 %0.88 %(0.87)%
Less:
Security gains — %— %— %0.02 %0.05 %
Operating return on average assets (annualized)1.21 %1.20 %0.83 %0.86 %(0.92)%
Return on average tangible assets (annualized)1.24 %1.22 %0.84 %0.90 %(0.89)%
Less:
Security gains — %— %— %0.02 %0.05 %
Operating return on average tangible assets (annualized)1.24 %1.22 %0.84 %0.88 %(0.94)%
Average total stockholders' equity $946,482 $937,294 $934,632 $926,239 $946,138 
Less: Average goodwill and average identified intangible assets, net163,457 163,758 164,072 164,385 164,701 
Average tangible stockholders' equity $783,025 $773,536 $770,560 $761,854 $781,437 
Return on average stockholders' equity (annualized)11.18 %11.38 %7.99 %8.45 %(7.30)%
Less:
Security gains (losses)— %— %0.01 %0.19 %0.41 %
Operating return on average stockholders' equity (annualized)11.18 %11.38 %7.98 %8.26 %(7.71)%
Return on average tangible stockholders' equity (annualized)13.51 %13.79 %9.70 %10.28 %(8.84)%
Less:
Security gains (losses)— %— %0.02 %0.24 %0.49 %
Operating return on average tangible stockholders' equity (annualized)13.51 %13.79 %9.68 %10.04 %(9.33)%
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Three Months Ended
March 31,
2021		December 31,
2020		September 30,
2020		June 30,
2020		March 31,
2020
(Dollars in Thousands)
Net income (loss), as reported $26,454 $26,663 $18,679 $19,571 $(17,276)
Average total assets $8,714,158 $8,874,467 $9,018,672 $8,869,540 $7,965,826 
Less: Average goodwill and average identified intangible assets, net163,457 163,758 164,072 164,385 164,701 
Average tangible assets $8,550,701 $8,710,709 $8,854,600 $8,705,155 $7,801,125 
Return on average tangible assets (annualized)1.24 %1.22 %0.84 %0.90 %(0.89)%
Average total stockholders' equity $946,482 $937,294 $934,632 $926,239 $946,138 
Less: Average goodwill and average identified intangible assets, net163,457 163,758 164,072 164,385 164,701 
Average tangible stockholders' equity $783,025 $773,536 $770,560 $761,854 $781,437 
Return on average tangible stockholders' equity (annualized)13.51 %13.79 %9.70 %10.28 %(8.84)%

The following table reconciles the Company's tangible equity ratio for the periods indicated:
Three Months Ended
March 31,
2021		December 31,
2020		September 30,
2020		June 30,
2020		March 31,
2020
(Dollars in Thousands)
Total stockholders' equity $945,399 $941,778 $935,558 $926,413 $912,568 
Less: Goodwill and identified intangible assets, net163,347 163,579 163,891 164,203 164,514 
Tangible stockholders' equity $782,052 $778,199 $771,667 $762,210 $748,054 
Total assets $8,559,810 $8,942,424 $9,000,192 $9,069,667 $8,461,591 
Less: Goodwill and identified intangible assets, net163,347 163,579 163,891 164,203 164,514 
Tangible assets $8,396,463 $8,778,845 $8,836,301 $8,905,464 $8,297,077 
Tangible equity ratio 9.31 %8.86 %8.73 %8.56 %9.02 %

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The following table reconciles the Company's tangible book value per share for the periods indicated:
Three Months Ended
March 31,
2021		December 31,
2020		September 30,
2020		June 30,
2020		March 31,
2020
(Dollars in Thousands)
Tangible stockholders' equity $782,052 $778,199 $771,667 $762,210 $748,054 
Common shares issued85,177,172 85,177,172 85,177,172 85,177,172 85,177,172 
Less:
Treasury shares6,534,602 6,525,783 5,629,854 5,859,708 5,862,811 
Unallocated ESOP44,502 51,114 58,227 65,334 72,441 
Unvested restricted stock449,981 458,800 487,318 398,188 395,085 
Common shares outstanding78,148,087 78,141,475 79,001,773 78,853,942 78,846,835 
Tangible book value per share $10.01 $9.96 $9.77 $9.67 $9.49 

The following table reconciles the Company's dividend payout ratio for the periods indicated:
Three Months Ended
March 31,
2021		December 31,
2020		September 30,
2020		June 30,
2020		March 31,
2020
(Dollars in Thousands)
Dividends paid$8,992 $9,055 $9,092 $9,076 $9,173 
Net income (loss), as reported $26,454 $26,663 $18,679 $19,571 $(17,276)
Dividend payout ratio 33.99 %33.96 %48.67 %46.37 %(53.10)%
Three Months Ended
March 31,
2021		December 31,
2020		September 30,
2020		June 30,
2020		March 31,
2020
(Dollars in Thousands)
Allowance for loan and lease losses$109,837 $114,379 $119,971 $119,553 $113,181 
Total loans and leases$7,267,552 $7,269,553 $7,396,358 $7,407,697 $6,822,527 
Less: Total PPP loans604,790 489,216 568,383 565,768 — 
Total loans and leases excluding PPP loans$6,662,762 $6,780,337 $6,827,975 $6,841,929 $6,822,527 
Allowance for loan and lease losses as a percentage of total loans and leases less PPP loans1.65 %1.69 %1.76 %1.75 %1.66 %

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Financial Condition
Loans and Leases
The following table summarizes the Company's portfolio of loans and leases receivables as of the dates indicated:
At March 31, 2021At December 31, 2020
BalancePercent
of Total		BalancePercent
of Total
(Dollars in Thousands)
Commercial real estate loans:
Commercial real estate$2,595,240 35.6 %$2,578,773 35.4 %
Multi-family mortgage1,000,474 13.8 %1,013,432 13.9 %
Construction194,627 2.7 %231,621 3.2 %
Total commercial real estate loans3,790,341 52.1 %3,823,826 52.5 %
Commercial loans and leases:  
Commercial1,206,977 16.6 %1,131,668 15.6 %
Equipment financing1,069,621 14.7 %1,092,461 15.0 %
Condominium association47,604 0.7 %50,770 0.7 %
Total commercial loans and leases2,324,202 32.0 %2,274,899 31.3 %
Consumer loans:   
Residential mortgage781,854 10.8 %791,317 10.9 %
Home equity334,706 4.6 %346,652 4.8 %
Other consumer36,449 0.5 %32,859 0.5 %
Total consumer loans1,153,009 15.9 %1,170,828 16.2 %
Total loans and leases7,267,552 100.0 %7,269,553 100.0 %
Allowance for loan and lease losses(109,837)(114,379)
Net loans and leases$7,157,715 $7,155,174 

The following table sets forth the growth in the Company’s loan and lease portfolios during the three months ended March 31, 2021:
 At March 31,
2021		At December 31,
2020		Dollar ChangePercent Change
(Annualized)
 (Dollars in Thousands)
Commercial real estate$3,790,341 $3,823,826 $(33,485)-3.5 %
Commercial2,324,202 2,274,899 49,303 8.7 %
Consumer1,153,009 1,170,828 (17,819)-6.1 %
Total loans and leases$7,267,552 $7,269,553 $(2,001)(0.11)%
The Company's loan portfolio consists primarily of first mortgage loans secured by commercial, multi-family and residential real estate properties located in the Company's primary lending area, loans to business entities, including commercial lines of credit, loans to condominium associations and loans and leases used to finance equipment used by small businesses. The Company also provides financing for construction and development projects, home equity and other consumer loans.
The Company employs seasoned commercial lenders and retail bankers who rely on community and business contacts as well as referrals from customers, attorneys and other professionals to generate loans and deposits. Existing borrowers are also an important source of business since many of them have more than one loan outstanding with the Company. The Company's ability to originate loans depends on the strength of the economy, trends in interest rates, and levels of customer demand and market competition.
The Company's current policy is that a total credit exposure to one obligor relationship may not exceed $50.0 million unless approved by the Company's Credit Committee. As of March 31, 2021, there were 2 borrowers with loans and commitments over $50.0 million. The total of those loans and commitments was $118.2 million, or 1.4% of total loans and commitments, as of March 31, 2021. As of December 31, 2020, there were 2 borrowers with loans and commitments over
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$50.0 million. The total of those loans and commitments was $114.4 million, or 1.3% of total loans and commitments, as of December 31, 2020.
The Company has written underwriting policies to control the inherent risks in loan origination. The policies address approval limits, loan-to-value ratios, appraisal requirements, debt service coverage ratios, loan concentration limits and other matters relevant to loan underwriting.
Commercial Real Estate Loans
The commercial real estate portfolio is comprised of commercial real estate loans, multi-family mortgage loans, and construction loans and is the largest component of the Company's overall loan portfolio, representing 52.1% of total loans and leases outstanding as of March 31, 2021.
Typically, commercial real estate loans are larger in size and involve a greater degree of risk than owner-occupied residential mortgage loans. Loan repayment is usually dependent on the successful operation and management of the properties and the value of the properties securing the loans. Economic conditions can greatly affect cash flows and property values.
A number of factors are considered in originating commercial real estate and multi-family mortgage loans. The qualifications and financial condition of the borrower (including credit history), as well as the potential income generation and the value and condition of the underlying property, are evaluated. When evaluating the qualifications of the borrower, the Company considers the financial resources of the borrower, the borrower's experience in owning or managing similar property and the borrower's payment history with the Company and other financial institutions. Factors considered in evaluating the underlying property include the net operating income of the mortgaged premises before debt service and depreciation, the debt service coverage ratio (the ratio of cash flow before debt service to debt service), the use of conservative capitalization rates, and the ratio of the loan amount to the appraised value. Generally, personal guarantees are obtained from commercial real estate loan borrowers.
Commercial real estate and multi-family mortgage loans are typically originated for terms of five to fifteen years with amortization periods of 20 to 30 years. Many of the loans are priced at inception on a fixed-rate basis generally for periods ranging from two to five years with repricing periods for longer-term loans. When possible, prepayment penalties are included in loan covenants on these loans. For commercial customers who are interested in loans with terms longer than five years, the Company offers loan level derivatives to accommodate customer need.
The Company's urban and suburban market area is characterized by a large number of apartment buildings, condominiums and office buildings. As a result, commercial real estate and multi-family mortgage lending has been a significant part of the Company's activities for many years. These types of loans typically generate higher yields, but also involve greater credit risk. Many of the Company's borrowers have more than one multi-family or commercial real estate loan outstanding with the Company.
The Company's commercial real estate portfolio is composed primarily of loans secured by apartment buildings ($939.1 million), office buildings ($677.5 million), retail stores ($593.9 million), industrial properties ($443.3 million), mixed-use properties ($303.3 million), lodging services ($150.5 million) and food services ($55.5 million) as of March 31, 2021. At that date, approximately 96.3% of the commercial real estate loans outstanding were secured by properties located in New England.
Construction and development financing is generally considered to involve a higher degree of risk than long-term financing on improved, occupied real estate and thus has lower concentration limits than do other commercial credit classes. Risk of loss on a construction loan is largely dependent upon the accuracy of the initial estimate of construction costs, the estimated time to sell or rent the completed property at an adequate price or rate of occupancy, and market conditions. If the estimates and projections prove to be inaccurate, the Company may be confronted with a project which, upon completion, has a value that is insufficient to assure full loan repayment.
Criteria applied in underwriting construction loans for which the primary source of repayment is the sale of the property are different from the criteria applied in underwriting construction loans for which the primary source of repayment is the stabilized cash flow from the completed project. For those loans where the primary source of repayment is from resale of the property, in addition to the normal credit analysis performed for other loans, the Company also analyzes project costs, the attractiveness of the property in relation to the market in which it is located and demand within the market area. For those construction loans where the source of repayment is the stabilized cash flow from the completed project, the Company analyzes not only project costs but also how long it might take to achieve satisfactory occupancy and the reasonableness of projected rental rates in relation to market rental rates.
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Commercial Loans
The Company's commercial loan and lease portfolio is comprised of commercial loans, equipment financing loans and leases and condominium association loans and represented 32.0% of total loans outstanding as of March 31, 2021.
The Company's commercial loan and lease portfolio is composed primarily of loans and leases to small to medium sized businesses ($663.2 million), transportation services ($374.3 million), food services ($251.1 million), manufacturing ($147.8 million), recreation services ($137.3 million), rental and leasing services ($117.0 million), and retail ($99.5 million) as of March 31, 2021.
The Company provides commercial banking services to companies in its market area. Approximately 55.7% of the commercial loans outstanding as of March 31, 2021 were made to borrowers located in New England. The remaining 44.3% of the commercial loans outstanding were made to borrowers in other areas in the United States of America, primarily by the Company's equipment financing divisions. Product offerings include lines of credit, term loans, letters of credit, deposit services and cash management. These types of credit facilities have as their primary source of repayment cash flows from the operations of a business. Interest rates offered are available on a floating basis tied to the prime rate or a similar index or on a fixed-rate basis referenced on the Federal Home Loan Bank of Boston ("FHLBB") index.
Credit extensions are made to established businesses on the basis of loan purpose and assessment of capacity to repay as determined by an analysis of their financial statements, the nature of collateral to secure the credit extension and, in most instances, the personal guarantee of the owner of the business as well as industry and general economic conditions. The Company also participates in U.S. Government programs such as the SBA 7A program and as an SBA preferred lender. Included in the commercial loans balances are the PPP loans totaling $604.8 million as of March 31, 2021.
The Company’s equipment financing divisions focus on market niches in which its lenders have deep experience and industry contacts, and on making loans to customers with business experience. An important part of the Company’s equipment financing loan origination volume comes from equipment manufacturers and existing customers as they expand their operations. The equipment financing portfolio is composed primarily of loans to finance laundry, tow trucks, fitness, dry cleaning and convenience store equipment. Approximately 12.7% of the commercial loans outstanding in the equipment financing divisions were made to borrowers located primarily in the greater New York and New Jersey metropolitan area. Typically, the loans are priced at a fixed rate of interest and require monthly payments over their 3- to 7-year life. The yields earned on equipment financing loans are higher than those earned on the commercial loans made by the Banks because they involve a higher degree of credit risk. Equipment financing customers are typically small-business owners who operate with limited financial resources and who face greater risks when the economy weakens or unforeseen adverse events arise. Because of these characteristics, personal guarantees of borrowers are usually obtained along with liens on available assets. The size of loan is determined by an analysis of cash flow and other characteristics pertaining to the business and the equipment to be financed, based on detailed revenue and profitability data of similar operations.
Loans to condominium associations are for the purpose of funding capital improvements, are made for five- to ten-year terms and are secured by a general assignment of condominium association revenues. Among the factors considered in the underwriting of such loans are the level of owner occupancy, the financial condition and history of the condominium association, the attractiveness of the property in relation to the market in which it is located and the reasonableness of estimates of the cost of capital improvements to be made. Depending on loan size, funds are advanced as capital improvements are made and, in more complex situations, after completion of engineering inspections.
Consumer Loans
The consumer loan portfolio, which is comprised of residential mortgage loans, home equity loans and lines of credit, and other consumer loans, represented 15.9% of total loans outstanding as of March 31, 2021. The Company focuses its mortgage and home equity lending on existing and new customers within its branch networks in its urban and suburban marketplaces in the greater Boston and Providence metropolitan areas.
The Company originates adjustable- and fixed-rate residential mortgage loans secured by one- to four-family residences. Each residential mortgage loan granted is subject to a satisfactorily completed application, employment verification, credit history and a demonstrated ability to repay the debt. Generally, loans are not made when the loan-to-value ratio exceeds 80% unless private mortgage insurance is obtained and/or there is a financially strong guarantor. Appraisals are performed by outside independent fee appraisers.
Underwriting guidelines for home equity loans and lines of credit are similar to those for residential mortgage loans. Home equity loans and lines of credit are limited to no more than 80% of the appraised value of the property securing the loan including the amount of any existing first mortgage liens.
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Other consumer loans have historically been a modest part of the Company's loan originations. As of March 31, 2021, other consumer loans equaled $36.4 million, or 0.5% of total loans outstanding.
Asset Quality
Criticized and Classified Assets
The Company's management rates certain loans and leases as "other assets especially mentioned" ("OAEM"), "substandard" or "doubtful" based on criteria established under banking regulations. These loans and leases are collectively referred to as "criticized" assets. Loans and leases rated OAEM have potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects of the loan or lease at some future date. Loans and leases rated as substandard are inadequately protected by the payment capacity of the obligor or of the collateral pledged, if any. Substandard loans and leases have a well-defined weakness or weaknesses that jeopardize the liquidation of debt and are characterized by the distinct possibility that the Company will sustain some loss if existing deficiencies are not corrected. Loans and leases rated as doubtful have well-defined weaknesses that jeopardize the orderly liquidation of debt and partial loss of principal is likely. As of March 31, 2021, the Company had $131.5 million of total assets that were designated as criticized. This compares to $72.8 million of assets designated as criticized as of December 31, 2020. The increase of $58.7 million in criticized assets was primarily driven by seven commercial real estate relationships totaling $54.7 million, two commercial loan relationships totaling $4.3 million which became criticized, partially offset by the relationships which were upgraded to pass risk rating during the first quarter of 2021.
Nonperforming Assets
"Nonperforming assets" consist of non-accrual loans and leases, other real estate owned ("OREO") and other repossessed assets. Under certain circumstances, the Company may restructure the terms of a loan or lease as a concession to a borrower, except for acquired loans and leases which are individually evaluated against expected performance on the date of acquisition. These restructured loans and leases are generally considered "nonperforming loans and leases" until a history of collection of at least six months on the restructured terms of the loan or lease has been established. OREO consists of real estate acquired through foreclosure proceedings and real estate acquired through acceptance of a deed in lieu of foreclosure. Other repossessed assets consist of assets that have been acquired through foreclosure that are not real estate and are included in other assets on the Company's unaudited consolidated balance sheets.
Accrual of interest on loans generally is discontinued when contractual payment of principal or interest becomes past due 90 days or, if in management's judgment, reasonable doubt exists as to the full timely collection of interest. Prior to the adoption of ASC 326, loans categorized as ASC 310-30 (purchased loans with deteriorating credit quality) accrued regardless of past due status. Exceptions may be made if the loan has matured and is in the process of renewal or is well-secured and in the process of collection. When a loan is placed on non-accrual status, interest accruals cease and uncollected accrued interest is reversed and charged against current interest income. Interest payments on non-accrual loans are generally applied to principal. If collection of the principal is reasonably assured, interest payments are recognized as income on the cash basis. Loans are generally returned to accrual status when principal and interest payments are current, full collectability of principal and interest is reasonably assured and a consistent record of at least six months of performance has been achieved.
In cases where a borrower experiences financial difficulties and the Company makes or reasonably expects to make certain concessionary modifications to contractual terms, the loan is classified as a troubled debt restructured loan. In determining whether a debtor is experiencing financial difficulties, the Company considers, among other factors, if the debtor is in payment default or is likely to be in payment default in the foreseeable future without the modification, the debtor declared or is in the process of declaring bankruptcy, there is substantial doubt that the debtor will continue as a going concern, the debtor's entity-specific projected cash flows will not be sufficient to service its debt, or the debtor cannot obtain funds from sources other than the existing creditors at market terms for debt with similar risk characteristics.
As of March 31, 2021, the Company had nonperforming assets of $37.4 million, representing 0.44% of total assets, compared to nonperforming assets of $45.0 million, or 0.50% of total assets as of December 31, 2020. The decrease in nonperforming assets was primarily driven by the payoff of one commercial relationship of $4.3 million, and the payoff of several equipment finance relationships totaling $2.4 million as well as several residential relationships that were removed from non-accrual status totaling $2.0 million, partially offset by the relationships that were placed on non-accrual status during the first quarter of 2021.
The Company evaluates the underlying collateral of each non-accrual loan and lease and continues to pursue the collection of interest and principal. Management believes that the current level of nonperforming assets remains manageable relative to the size of the Company's loan and lease portfolio. If economic conditions were to worsen or if the marketplace were to experience prolonged economic stress, it is likely that the level of nonperforming assets would increase, as would the level of charged-off loans.        
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Past Due and Accruing
As of March 31, 2021, the Company had loans and leases greater than 90 days past due and accruing of $1.2 million, or 0.02% of total loans and leases, compared to $12.0 million, or 0.16% of total loans and leases, as of December 31, 2020, representing a decrease of $10.8 million. The decrease in past due and accruing loans was primarily due to two commercial real estate relationships becoming current for $4.7 million, and one construction relationship becoming past due less than 90 days for $3.7 million, and the payoff of one commercial relationship of $3.4 million. Partially offset by several equipment financing relationships becoming past due greater than 90 days and accruing for $1.1 million during the first quarter of 2021.
The following table sets forth information regarding nonperforming assets for the periods indicated:
At March 31, 2021At December 31, 2020
(Dollars in Thousands)
Nonperforming loans and leases:
Nonaccrual loans and leases:
Commercial real estate$3,611 $3,300 
Multi-family mortgage— — 
Construction3,853 3,853 
Total commercial real estate loans7,464 7,153 
Commercial3,161 7,702 
Equipment financing15,772 16,757 
Condominium association106 112 
Total commercial loans and leases19,039 24,571 
Residential mortgage3,722 5,587 
Home equity792 1,136 
Other consumer2 1 
Total consumer loans4,516 6,724 
Total nonaccrual loans and leases31,019 38,448 
Other real estate owned5,328 5,415 
Other repossessed assets1,055 1,100 
Total nonperforming assets$37,402 $44,963 
Loans and leases past due greater than 90 days and accruing$1,179 $11,975 
Total delinquent loans and leases 61-90 days past due6,522 16,129 
Restructured loans and leases not included in nonperforming assets16,770 11,483 
Total nonperforming loans and leases as a percentage of total loans and leases0.43 %0.53 %
Total nonperforming assets as a percentage of total assets0.44 %0.50 %
Total delinquent loans and leases 61-90 days past due as a percentage of total loans and leases0.09 %0.22 %

Troubled Debt Restructuring Loans and Leases
Total TDR loans increased by $4.1 million to $23.1 million at March 31, 2021 from $19.0 million at December 31, 2020. The increase was driven primarily by one construction relationship for $3.8 million and one commercial real estate relationship for $0.4 million becoming TDR during the three months ended March 31, 2021.
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As of March 31, 2021, total TDR loans included $6.4 million of commercial loans, $7.2 million of equipment financing loans and leases, $1.8 million of residential mortgage loans, $1.8 million of home equity loans, and $2.1 million of commercial real estate loans. As of December 31, 2020, total TDR loans included $6.5 million of commercial loans, $6.7 million of equipment financing loans and leases, $2.1 million of residential mortgage loans, $2.1 million of home equity loans, and $1.6 million of commercial real estate loans. A TDR loan is a loan for which the maturity date was extended, the principal was reduced, and/or the interest rate was modified to drop the required monthly payment to a more manageable amount for the borrower.
The following table sets forth information regarding TDR loans and leases at the dates indicated:
 At March 31, 2021At December 31, 2020
 (Dollars in Thousands)
Troubled debt restructurings:  
On accrual$16,770 $11,483 
On nonaccrual6,293 7,476 
Total troubled debt restructurings$23,063 $18,959 

Changes in TDR loans and leases were as follows for the periods indicated:
Three Months Ended March 31,
20212020
(Dollars in Thousands)
Balance at beginning of period$18,959 $23,180 
Additions4,980 497 
Net charge-offs (598)(140)
Repayments(278)(1,238)
Balance at end of period$23,063 $22,299 

From March 1, 2020 through the earlier of January 1, 2022 or 60 days after the termination date of the national emergency declared by the President on March 13, 2020 concerning the COVID-19 pandemic (the “national emergency”), a financial institution may elect to suspend the requirements under accounting principles generally accepted in the U.S. for loan modifications related to the COVID-19 pandemic that would otherwise be categorized as a troubled debt restructured, including impairment accounting. This troubled debt restructuring relief applies for the term of the loan modification that occurs during the applicable period for a loan that was not more than 30 days past due as of December 31, 2019. Financial institutions are required to maintain records of the volume of loans involved in modifications to which troubled debt restructuring relief is applicable. Through March 31, 2021, the Company granted 4,603 short-term deferments on loan and leases balances of $1.1 billion of which 4,262 loans and leases representing balances of $955.6 million returned to the payment status and 341 loans and leases representing balances of $125.7 million remain in deferment.The outstanding deferred loans and leases represent 1.7% of the Company's total loan and lease balances.
Allowance for Credit Losses
The allowance for credit losses consists of general and specific allowances and reflects management's estimate of expected loan and lease losses over the life of the loan or lease. Management uses a consistent and systematic process and methodology to evaluate the adequacy of the allowance for credit losses on a quarterly basis. Management continuously evaluates and challenges inputs and assumptions in the allowance for credit losses.
While management evaluates currently available information in establishing the allowance for credit losses, future adjustments to the allowance for loan and lease losses may be necessary if conditions differ substantially from the assumptions used in making the evaluations. Management performs a comprehensive review of the allowance for credit losses on a quarterly basis. In addition, various regulatory agencies, as an integral part of their examination process, periodically review a financial institution's allowance for credit losses and carrying amounts of other real estate owned. Such agencies may require the financial institution to recognize additions or reductions to the allowance based on their judgments about information available to them at the time of their examination.
The Company’s allowance methodology provides a quantification of probable losses in the portfolio. Under the current methodology, management estimates losses over the life of the loan using reasonable and supportable forecasts. Forecasts, loan
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data, and model documentation are extensively analyzed and reviewed throughout the quarter to ensure estimated losses are accurate at quarter end. Qualitative adjustments are applied when model output does not align with management expectations. These adjustments are thoroughly reviewed and documented to provide clarity and a reasonable basis for any deviations from the model. For March 31, 2021, qualitative adjustments were applied to the CRE, C&I, and Retail portfolios resulting in a net addition in total reserves compared to modeled calculations.
The following tables present the changes in the allowance for loan and lease losses by portfolio category for the three months ended March 31, 2021 and 2020.
At and for the Three Months Ended March 31, 2021
Commercial
Real Estate		CommercialConsumerTotal
(In Thousands)
Balance at December 31, 2020$80,132 $29,498 $4,749 $114,379 
Charge-offs— (2,140)(3)(2,143)
Recoveries— 331 52 383 
Provision (credit) for loan and lease losses(203)(1,864)(715)(2,782)
Balance at March 31, 2021$79,929 $25,825 $4,083 $109,837 
Total loans and leases$3,790,341 $2,324,202 $1,153,009 $7,267,552 
Total allowance for loan and lease losses as a percentage of total loans and leases2.11 %1.11 %0.35 %1.51 %
At and for the Three Months Ended March 31, 2020
Commercial
Real Estate		CommercialConsumerTotal
(In Thousands)
Balance at December 31, 2019$30,285 $24,826 $5,971 $61,082 
Adoption of ASU 2016-13 (CECL)11,694 (2,672)(2,390)6,632 
Charge-offs— (2,527)(12)(2,539)
Recoveries— 247 58 305 
Provision for loan and lease losses40,200 6,900 601 47,701 
Balance at March 31, 2020$82,179 $26,774 $4,228 $113,181 
Total loans and leases$3,762,158 $1,826,866 $1,233,503 $6,822,527 
Total allowance for loan and lease losses as a percentage of total loans and leases2.18 %1.47 %0.34 %1.66 %
Beginning January 1, 2020, the Company implemented the CECL methodology to calculate the allowance for credit losses. As of January 1, 2020, the Company increased the allowance for loan and lease losses by $6.6 million due to CECL which requires the inclusion of the credit losses over the expected life of the loans, as well as consideration of the risks based on the current conditions and reasonable and supportable forecasts about the future.
At March 31, 2021, the allowance for loan and lease losses decreased to $109.8 million, or 1.51% of total loans and leases outstanding. This compared to an allowance for loan and lease losses of $114.4 million, or 1.57% of total loans and leases outstanding, as of December 31, 2020. Excluding PPP loans which are not subject to an allowance reserve since they are guaranteed by the SBA.
Net charge-offs in the loans and leases for the three months ended March 31, 2021 and 2020 were $1.8 million and $2.2 million, respectively. As a percentage of average loans and leases, annualized net charge-offs for the three months ended March 31, 2021 and 2020 were 0.10% and 0.13%, respectively. The decrease in the net charge-off for the three months ended March 31, 2021 was primarily due to the decrease in the net charge-off by $0.5 million on equipment financing loans, partially offset by the increase in the net charge off in commercial loans by $0.1 million.
Management believes that the allowance for loan and lease losses as of March 31, 2021 is appropriate.
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The following table sets forth the Company's percent of allowance for loan and lease losses to the total allowance for loan and lease losses and the percent of loans to total loans for each of the categories listed at the dates indicated.
At March 31, 2021At December 31, 2020
AmountPercent of
Allowance in Each Category
to Total
Allowance		Percent of
Loans
in Each
Category to
Total
Loans		AmountPercent of
Allowance in Each Category
to Total Allowance		Percent of
Loans
in Each
Category to
Total
Loans
(Dollars in Thousands)
Commercial real estate$46,945 42.7 %35.6 %$46,357 40.6 %35.4 %
Multi-family mortgage22,361 20.4 %13.8 %22,559 19.7 %13.9 %
Construction10,623 9.7 %2.7 %11,216 9.8 %3.2 %
Total commercial real estate loans79,929 72.8 %52.1 %80,132 70.1 %52.5 %
Commercial8,584 7.8 %16.6 %8,089 7.1 %15.6 %
Equipment financing17,122 15.6 %14.7 %21,292 18.6 %15.0 %
Condominium association119 0.1 %0.7 %117 0.1 %0.7 %
Total commercial loans and leases25,825 23.5 %32.0 %29,498 25.8 %31.3 %
Residential mortgage1,797 1.6 %10.8 %1,967 1.7 %10.9 %
Home equity2,020 1.8 %4.6 %2,504 2.2 %4.8 %
Other consumer266 0.2 %0.5 %278 0.2 %0.5 %
Total consumer loans4,083 3.6 %15.9 %4,749 4.1 %16.2 %
Total$109,837 99.9 %100.0 %$114,379 100.0 %100.0 %
Investment Securities
The investment portfolio exists primarily for liquidity purposes, and secondarily as a source of interest and dividend income, interest-rate risk management and tax planning as a counterbalance to loan and deposit flows. Investment securities are utilized as part of the Company's asset/liability management and may be sold in response to, or in anticipation of, factors such as changes in market conditions and interest rates, security prepayment rates, deposit outflows, liquidity concentrations and regulatory capital requirements.
The investment policy of the Company, which is reviewed and approved by the Board of Directors on an annual basis, specifies the types of investments that are acceptable, required investment ratings by at least one nationally recognized rating agency, concentration limits and duration guidelines. Compliance with the investment policy is monitored on a regular basis. In general, the Company seeks to maintain a high degree of liquidity and targets cash, cash equivalents and investment securities available-for-sale balances between 10% and 30% of total assets.
Cash, cash equivalents, and investment securities decreased $319.9 million, or 108.3% on an annualized basis, to $861.3 million as of March 31, 2021 from $1.2 billion as of December 31, 2020. The decrease was driven by decreases in total cash, cash equivalents. Cash, cash equivalents, and investment securities were 10.1% of total assets as of March 31, 2021, compared to 13.2% of total assets at December 31, 2020.
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The following table sets forth certain information regarding the amortized cost and market value of the Company's investment securities at the dates indicated:
 At March 31, 2021At December 31, 2020
 Amortized
Cost		Fair ValueAmortized
Cost		Fair Value
 (In Thousands)
Investment securities available-for-sale:    
GSE debentures$273,315 $271,526 $273,820 $278,645 
GSE CMOs39,980 40,925 44,937 46,028 
GSE MBSs271,231 276,066 312,658 323,609 
Corporate debt obligations22,269 23,247 22,299 23,467 
U.S. Treasury bonds119,817 117,641 70,339 73,577 
Foreign government obligations$500 $496 500 496
Total investment securities available-for-sale$727,112 $729,901 $724,553 $745,822 
Equity securities held-for-trading$518 $526 

The fair value of investment securities is based principally on market prices and dealer quotes received from third-party, nationally-recognized pricing services for identical investment securities such as U.S. Treasury and agency securities. The Company's marketable equity securities are priced this way and are included in Level 1 of the fair value hierarchy in accordance with ASC 820. These prices are validated by comparing the primary pricing source with an alternative pricing source when available. When quoted market prices for identical securities are unavailable, the Company uses market prices provided by independent pricing services based on recent trading activity and other observable information, including but not limited to market interest-rate curves, referenced credit spreads and estimated prepayment speeds where applicable. These investments include certain U.S. and government agency debt securities, municipal and corporate debt securities, GSE residential MBSs and CMOs, all of which are included in Level 2 and equity securities held-for-trading, which are included in Level 1 and Level 2. Certain fair values are estimated using pricing models and are included in Level 3.

Additionally, management reviews changes in fair value from period to period and performs testing to ensure that prices received from the third parties are consistent with their expectation of the market. Changes in the prices obtained from the pricing service are analyzed from month to month, taking into consideration changes in market conditions including changes in mortgage spreads, changes in U.S. Treasury security yields and changes in generic pricing of 15-year and 30-year securities. Additional analysis may include a review of prices provided by other independent parties, a yield analysis, a review of average life changes using Bloomberg analytics and a review of historical pricing for the particular security.

Maturities, calls and principal repayments for investment securities available-for-sale totaled $46.2 million for the three months ended March 31, 2021 compared to $25.5 million for the same period in 2020. For the three months ended March 31, 2021, the Company did not sell any investment securities available for sale, compared to $86.4 million for the same period in 2020. For the three months ended March 31, 2021, the Company purchased $49.5 million of investment securities available-for-sale, compared to $273.3 million for the same period in 2020.

For the three months ended March 31, 2021 the Company did not own held-to-maturity securities. Compared to the three months ended March 31, 2020 the Company had maturities, calls and principal repayments of $6.3 million. The Company made no sales or purchases of held-to-maturity securities for the three months ended March 31, 2020. During the three months ended March 31, 2020, all held-to-maturity securities were transferred to the available-for-sale portfolio.
As of March 31, 2021, the fair value of all investment securities available-for-sale was $729.9 million and carried a total of $2.8 million of net unrealized gains, compared to a fair value of $745.8 million and net unrealized gains of $21.3 million as of December 31, 2020. As of March 31, 2021, $261.6 million, or 35.8%, of the portfolio, had gross unrealized losses of $10.8 million. This compares to $86.9 million, or 11.7%, of the portfolio with gross unrealized losses of $0.7 million as of December 31, 2020. The Company's unrealized gain position has decreased in 2021 driven by higher long-term interest rates.

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Restricted Equity Securities
FHLBB Stock—The Company invests in the stock of the FHLBB as one of the requirements to borrow from the FHLBB. The Company maintains an excess balance of capital stock, which allows for additional borrowing capacity at each of the Banks. As of March 31, 2021, the excess balance of capital stock was $1.1 million, as compared to a $1.0 million excess balance as of December 31, 2020.
As of March 31, 2021, the Company owned stock in the FHLBB with a carrying value of $21.9 million, a decrease of $9.4 million from $31.3 million as of December 31, 2020. As of March 31, 2021, the FHLBB had total assets of $36.7 billion and total capital of $2.7 billion, of which $1.5 billion was retained earnings. The FHLBB stated that it remained in compliance with all regulatory capital ratios as of March 31, 2021 and was classified as "adequately capitalized" by its regulator, based on the FHLBB's financial information as of December 31, 2020 .
Federal Reserve Bank Stock—The Company invests in the stock of the Federal Reserve Bank of Boston, as a condition to the Banks' membership in the Federal Reserve System. As of March 31, 2021 and December 31, 2020, the Company owned stock in the Federal Reserve Bank of Boston with a carrying value of $18.2 million.
Other Stock—The Company invests in a small number of other restricted equity securities which includes Infinex Financial Group and American Financial Exchange. As of March 31, 2021, the Company owned stock in other restricted equity securities with a carrying value of $0.3 million, unchanged from December 31, 2020.
Deposits

The following table presents the Company's deposit mix at the dates indicated.
 At March 31, 2021At December 31, 2020
 AmountPercent
of Total		Weighted
Average
Rate		AmountPercent
of Total		Weighted
Average
Rate
 (Dollars in Thousands)
Non-interest-bearing deposits:
Demand checking accounts$1,724,170 25.1 %— %$1,592,205 23.0 %— %
Interest-bearing deposits:   
NOW accounts481,988 7.0 %0.09 %513,948 7.4 %0.09 %
Savings accounts724,504 10.6 %0.14 %701,659 10.2 %0.13 %
Money market accounts2,192,468 31.9 %0.28 %2,018,977 29.2 %0.31 %
Certificate of deposit accounts1,273,105 18.5 %1.13 %1,389,998 20.2 %1.44 %
Brokered deposit accounts470,551 6.9 %0.30 %693,909 10.0 %0.39 %
Total interest-bearing deposits5,142,616 74.9 %0.45 %5,318,491 77.0 %0.57 %
Total deposits$6,866,786 100.0 %0.34 %$6,910,696 100.0 %0.44 %

Total deposits decreased $43.9 million to $6.87 billion as of March 31, 2021, compared to $6.91 billion as of December 31, 2020. Deposits as a percentage of total assets increased to 80.2% as of March 31, 2021, compared to 77.3% as of December 31, 2020.

During the three months ended March 31, 2021, core deposits increased $296.3 million. The ratio of core deposits to total deposits increased from 69.8% as of December 31, 2020 to 74.6% as of March 31, 2021, primarily due to an increase in demand checking and money market accounts.

Certificate of deposit accounts decreased $116.9 million to $1.3 billion as of March 31, 2021, compared to $1.4 billion as of December 31, 2020. Certificate of deposit accounts decreased as a percentage of total deposits to 18.5% as of March 31, 2021 from 20.2% as of December 31, 2020.

Brokered deposits decreased $223.4 million to $470.6 million as of March 31, 2021, compared to $693.9 million as of December 31, 2020. Brokered deposits decreased as a percentage of total deposits to 6.9% as of March 31, 2021 from 10.0% as of December 31, 2020. The decrease in brokered deposits was driven by market rates. Brokered deposits allow the Company to seek additional funding by attracting deposits from outside the Company's core market. The Company's investment policy limits the amount of brokered deposits to 15% of total assets.
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The following table sets forth the distribution of the average balances of the Company's deposit accounts for the periods indicated and the weighted average interest rates on each category of deposits presented. Averages for the periods presented are based on daily balances.
Three Months Ended March 31,
20212020
Average
Balance		Percent
of Total
Average
Deposits		Weighted
Average
Rate		Average
Balance		Percent
of Total
Average
Deposits		Weighted
Average
Rate
(Dollars in Thousands)
Core deposits:
Non-interest-bearing demand checking accounts$1,643,373 23.9 %— %$1,134,314 19.4 %— %
NOW accounts477,893 7.0 %0.11 %359,641 6.2 %0.13 %
Savings accounts712,728 10.4 %0.13 %626,945 10.7 %0.41 %
Money market accounts2,084,503 30.4 %0.29 %1,678,649 28.8 %1.02 %
Total core deposits4,918,497 71.7 %0.15 %3,799,549 65.1 %0.53 %
Certificate of deposit accounts1,328,112 19.4 %1.27 %1,682,900 28.8 %2.21 %
Brokered deposit accounts610,824 8.9 %0.47 %358,003 6.1 %2.23 %
Total deposits$6,857,433 100.0 %0.39 %$5,840,452 100.0 %1.11 %

As of March 31, 2021 and December 31, 2020, the Company had outstanding certificates of deposit of $100,000 or more, maturing as follows:
At March 31, 2021At December 31, 2020
AmountWeighted
Average Rate		AmountWeighted
Average Rate
(Dollars in Thousands)
Maturity period:
Six months or less$442,310 1.27 %$459,828 1.63 %
Over six months through 12 months226,963 0.68 %302,576 1.15 %
Over 12 months159,610 1.71 %154,343 1.83 %
Total certificate of deposit of $100,000 or more$828,883 1.29 %$916,747 1.51 %
Borrowed Funds
The following table sets forth certain information regarding advances from the FHLBB, subordinated debentures and notes and other borrowed funds for the periods indicated:
Three Months Ended 
 March 31,
20212020
(Dollars in Thousands)
Borrowed funds:
Average balance outstanding$664,692 $947,123 
Maximum amount outstanding at any month-end during the period686,346 1,291,804 
Balance outstanding at end of period546,003 1,291,804 
Weighted average interest rate for the period1.60 %2.33 %
Weighted average interest rate at end of period2.33 %1.76 %
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Advances from the FHLBB
On a long-term basis, the Company intends to continue to increase its core deposits. The Company also uses FHLBB borrowings and other wholesale borrowing as part of the Company's overall strategy to fund loan growth and manage interest-rate risk and liquidity. The advances are secured by a blanket security agreement which requires the Banks to maintain certain qualifying assets as collateral, principally mortgage loans and securities in an aggregate amount at least equal to outstanding advances. The maximum amount that the FHLBB will advance to member institutions, including the Company, fluctuates from time to time in accordance with the policies of the FHLBB.
FHLBB borrowings decreased by $270.2 million to $378.6 million as of March 31, 2021 from the December 31, 2020 balance of $648.8 million. The decrease in FHLBB borrowings was primarily due to borrowing maturities.
Subordinated Debentures and Notes
As part of the acquisition of BankRI, the Company acquired two $5.0 million subordinated debentures due on June 26, 2033 and March 17, 2034, respectively. The Company is obligated to pay 3-month LIBOR plus 3.10% and 3-month LIBOR plus 2.79%, respectively, on a quarterly basis until the debentures mature.
The Company sold $75.0 million of 6.0% fixed-to-floating rate subordinated notes due September 15, 2029. The Company is obligated to pay 6.0% interest semiannually between September 2014 and September 2024. Subsequently, the Company is obligated to pay 3-month LIBOR plus 3.315% quarterly until the notes mature in September 2029.
The following table summarizes the Company's subordinated debentures and notes at the dates indicated.
Carrying Amount
Issue DateRateMaturity DateNext Call DateMarch 31,
2021		December 31, 2020
 (Dollars in Thousands)
June 26, 2003Variable;
3-month LIBOR + 3.10%		June 26, 2033June 25, 2021$4,853 $4,848 
March 17, 2004Variable;
3-month LIBOR + 2.79%		March 17, 2034June 16, 20214,779 4,772 
September 15, 20146.0% Fixed-to-Variable;
3-month LIBOR + 3.315%		September 15, 2029September 15, 202474,151 74,126 
Total$83,783 $83,746 
The above carrying amounts of the subordinated debentures included $0.4 million of accretion adjustments and $0.8 million of capitalized debt issuance costs as of March 31, 2021. This compares to $0.4 million of accretion adjustments and $0.9 million of capitalized debt issuance costs as of December 31, 2020.
Other Borrowed Funds
In addition to advances from the FHLBB and subordinated debentures and notes, the Company utilizes other funding sources as part of the overall liquidity strategy. Those funding sources include repurchase agreements, and committed and uncommitted lines of credit with several financial institutions.
The Company periodically enters into repurchase agreements with its larger deposit and commercial customers as part of its cash management services which are typically overnight borrowings. Repurchase agreements with customers decreased $4.1 million to $53.6 million as of March 31, 2021 from $57.7 million as of December 31, 2020.
The Company has access to a $12.0 million committed line of credit as of March 31, 2021. As of March 31, 2021 and December 31, 2020, the Company did not have any borrowings on this committed line of credit.
The Banks also have access to funding through several uncommitted lines of credit of $746.0 million. As of March 31, 2021, the Company had $30.0 million borrowings on outstanding uncommitted lines of credit as compared to $30.0 million as of December 31, 2020.
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Derivative Financial Instruments
The Company has entered into loan level derivatives, risk participation agreements, and foreign exchange contracts with certain of its commercial customers and concurrently enters into offsetting swaps with third-party financial institutions. The Company may also, from time to time, enter into risk participation agreements. The Company uses interest rate futures that are designated and qualify as cash flow hedging instruments.
The following table summarizes certain information concerning the Company's loan level derivatives, risk participation agreements, and foreign exchange contracts at March 31, 2021 and December 31, 2020:
At March 31, 2021At December 31, 2020
(Dollars in Thousands)
Loan level derivatives (Notional principal amounts):
Receive fixed, pay variable$1,232,482 $1,214,146 
Pay fixed, receive variable1,232,482 1,214,146 
Risk participation-out agreements263,430 252,655 
Risk participation-in agreements60,289 60,619 
Foreign exchange contracts (Notional amounts):
Buys foreign currency, sells U.S. currency$1,416 $1,266 
Sells foreign currency, buys U.S. currency1,422 1,273 
Fixed weighted average interest rate from the Company to counterparty3.06 %3.07 %
Floating weighted average interest rate from counterparty to the Company0.93 %0.99 %
Weighted average remaining term to maturity (in months)83 85 
Fair value: 
Recognized as an asset:
Interest rate derivatives$10 $8 
Loan level derivatives84,128 131,328 
Risk participation-out agreements1,019 1,843 
Foreign exchange contracts99 156 
Recognized as a liability:
Interest rate derivatives$2 $— 
Loan level derivatives84,128 131,328 
Risk participation-in agreements205 361 
Foreign exchange contracts93 148 
Stockholders' Equity and Dividends
The Company's total stockholders' equity was $945.4 million as of March 31, 2021, representing a $3.6 million increase compared to $941.8 million at December 31, 2020. The increase primarily reflects net income attributable to the Company of $26.5 million for the three months ended March 31, 2021, offset by the unrealized loss on securities available-for-sale of $14.4 million and dividends paid by the Company of $9.0 million for the three months ended March 31, 2021.
Stockholders' equity represented 11.04% of total assets as of March 31, 2021 and 10.53% of total assets as of December 31, 2020. Tangible stockholders' equity (total stockholders' equity less goodwill and identified intangible assets, net) represented 9.31% of tangible assets (total assets less goodwill and identified intangible assets, net) as of March 31, 2021 and 8.86% as of December 31, 2020.
On December 4, 2019, the Board of Directors (the "Board") approved a stock repurchase program (the "Program") authorizing management to repurchase up to $10.0 million of the Company’s common stock over a period of twelve months commencing on January 1, 2020. On March 9, 2020, the Board approved an increase in the repurchase amount of $10.0 million bringing the total authorized amount to $20.0 million. Effective March 24, 2020, the Company suspended the Program. On October 28, 2020, the Board authorized the resumption of the Program. As of December 31, 2020, the Company has repurchased 1,715,730 shares at a weighted average price of $11.66. As of December 31, 2020, the Company had completed the program.
64

On January 27, 2021, the Board approved a stock repurchase program authorizing management to repurchase up to $10.0 million of the Company's common stock commencing on February 1, 2021 and ending on December 31, 2021.
The dividend payout ratio was 33.99% for the three months ended March 31, 2021, compared to 53.10% for the same period in 2020.
Results of Operations
The primary drivers of the Company's net income are net interest income, which is strongly affected by the net yield on and growth of interest-earning assets and liabilities, the quality of the Company's assets, its levels of non-interest income and non-interest expense, and its tax provision.
The Company's net interest income represents the difference between interest income earned on its investments, loans and leases, and its cost of funds. Interest income is dependent on the amount of interest-earning assets outstanding during the period and the yield earned thereon. Cost of funds is a function of the average amount of deposits and borrowed money outstanding during the year and the interest rates paid thereon. The net interest margin is calculated by dividing net interest income by average interest-earning assets. Net interest spread is the difference between the average rate earned on interest-earning assets and the average rate paid on interest-bearing liabilities. The increases or decreases, as applicable, in the components of interest income and interest expense, expressed in terms of fluctuation in average volume and rate, are summarized under "Rate/Volume Analysis" below. Information as to the components of interest income, interest expense and average rates is provided under "Average Balances, Net Interest Income, Interest-Rate Spread and Net Interest Margin" below.
Because the Company's assets and liabilities are not identical in duration and in repricing dates, the differential between the two is vulnerable to changes in market interest rates as well as the overall shape of the yield curve. These vulnerabilities are inherent to the business of banking and are commonly referred to as "interest-rate risk." How interest-rate risk is measured and, once measured, how much interest-rate risk is taken on, are based on numerous assumptions and other subjective judgments. See the discussion in “Item 3. Quantitative and Qualitative Disclosures about Market Risk” below.
The quality of the Company's assets also influences its earnings. Loans and leases that are not paid on a timely basis and exhibit other weaknesses can result in the loss of principal and/or interest income. Additionally, the Company must make timely provisions to the allowance for loan and lease losses based on estimates of probable losses inherent in the loan and lease portfolio. These additions, which are charged against earnings, are necessarily greater when greater probable losses are expected. Further, the Company incurs expenses as a result of resolving troubled assets. These variables reflect the "credit risk" that the Company takes on in the ordinary course of business and are further discussed under "Financial Condition—Asset Quality" above.
Net Interest Income
Net interest income increased $7.4 million to $69.1 million for the three months ended March 31, 2021 from $61.7 million for the three months ended March 31, 2020. This increase reflects a $4.6 million decrease in interest income on loans and leases and a $0.5 million decrease in interest income on investment securities, offset by a $12.5 million decrease in interest expense on deposit and borrowings, which is reflective of the sustained, low interest rate environment. Refer to “Results of Operations - Comparison of the Three-Month Period Ended March 31, 2021 and March 31, 2020 — Interest Income” and “Results of Operations - Comparison of the Three-Month Period Ended March 31, 2021 and March 31, 2020 — Interest Expense -Deposit and Borrowed Funds” below for more details.
Net interest margin increased by 8 basis points to 3.39% for the three months ended March 31, 2021 from 3.31% for the three months ended March 31, 2020. The Company's weighted average interest rate on loans (prior to purchase accounting adjustments) decreased to 4.13% for the three months ended March 31, 2021 from 4.71% for the three months ended March 31, 2020. The increase in net interest margin over the period is a result of additional fee income from participation in the PPP.
The yield on interest-earning assets decreased to 3.80% for the three months ended March 31, 2021 from 4.46% for the three months ended March 31, 2020. This decrease is the result of lower yields on loans and leases and lower yields on investments. During the three months ended March 31, 2021, the Company recorded $1.2 million in prepayment penalties and late charges, which contributed 6 basis points to yields on interest-earning assets in the three months ended March 31, 2021, compared to $0.8 million, or 4 basis points, for the three months ended March 31, 2020.
The overall cost of funds (including non-interest-bearing demand checking accounts) decreased 79 basis points to 0.50% for the three months ended March 31, 2021 from 1.29% for the three months ended March 31, 2020. Refer to "Financial Condition - Borrowed Funds" above for more details.
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Management seeks to position the balance sheet to be neutral to asset sensitive changes in interest rates. From 2017 through 2019, short term interest rates rose while at the same time net interest income, net interest spread, and net interest margin also increased. During the first three quarters of 2020 interest rates declined sharply in response to the economic impact of the COVID-19 pandemic. In general, the Company's balance sheet position should respond positively in a rising interest rate environment and when the rate curves are steepening which should result in a positive impact to net interest income, net interest spread, and the net interest margin. A declining interest rate or flattening yield curve environment is expected to have a negative impact on the Company's yields and net interest margin. Due to, among other things, ongoing pricing pressures in the loan and deposit portfolios, net interest income may also be negatively affected by changes in the amount of accretion on acquired loans and leases, deposits and borrowed funds, which is included in interest income and interest expense, respectively.
Average Balances, Net Interest Income, Interest-Rate Spread and Net Interest Margin
The following table sets forth information about the Company's average balances, interest income and interest rates earned on average interest-earning assets, interest expense and interest rates paid on average interest-bearing liabilities, interest-rate spread and net interest margin for the three months ended March 31, 2021 and March 31, 2020. Average balances are derived from daily average balances and yields include fees, costs and purchase-accounting-related premiums and discounts which are considered adjustments to coupon yields in accordance with GAAP. Certain amounts previously reported have been reclassified to conform to the current presentation.
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Three Months Ended
March 31, 2021March 31, 2020
Average
Balance		Interest (1)Average
Yield/
Cost		Average
Balance		Interest (1)Average
Yield/
Cost
(Dollars in Thousands)
Assets:
Interest-earning assets:
Debt securities$754,699 $3,118 1.65 %$605,885 $3,024 2.00 %
Marketable and restricted equity securities45,673 301 2.64 %58,881 786 5.33 %
Short-term investments191,751 39 0.08 %84,309 209 0.99 %
Total investments992,123 3,458 1.39 %749,075 4,019 2.15 %
Commercial real estate loans (2)
3,785,897 34,245 3.62 %3,697,011 40,468 4.33 %
Commercial loans (2)
1,249,824 12,746 4.08 %783,309 8,328 4.21 %
Equipment financing (2)
1,079,039 18,043 6.69 %1,052,846 18,946 7.20 %
Residential mortgage loans (2)
780,785 7,232 3.71 %810,583 7,934 3.92 %
Other consumer loans (2)
375,590 2,795 3.02 %417,815 3,955 3.79 %
Total loans and leases7,271,135 75,061 4.13 %6,761,564 79,631 4.71 %
Total interest-earning assets8,263,258 78,519 3.80 %7,510,639 83,650 4.46 %
Allowance for loan and lease losses(115,458)(68,581)
Non-interest-earning assets566,358 523,768 
Total assets$8,714,158 $7,965,826 
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts$477,893 130 0.11 %$359,641 116 0.13 %
Savings accounts712,728 235 0.13 %626,945 643 0.41 %
Money market accounts2,084,503 1,486 0.29 %1,678,649 4,241 1.02 %
Certificate of deposit accounts1,328,112 4,154 1.27 %1,682,900 9,251 2.21 %
Brokered deposit accounts610,824 702 0.47 %358,003 1,989 2.23 %
Total interest-bearing deposits (3)
5,214,060 6,707 0.52 %4,706,138 16,240 1.39 %
Advances from the FHLBB488,537 1,370 1.12 %772,462 4,097 2.10 %
Subordinated debentures and notes83,764 1,242 5.93 %83,609 1,284 6.14 %
Other borrowed funds92,391 39 0.17 %91,052 189 0.84 %
Total borrowed funds664,692 2,651 1.60 %947,123 5,570 2.33 %
Total interest-bearing liabilities5,878,752 9,358 0.65 %5,653,261 21,810 1.55 %
Non-interest-bearing liabilities:      
Non-interest-bearing demand checking accounts (3)
1,643,373   1,134,314   
Other non-interest-bearing liabilities245,551   232,113   
Total liabilities7,767,676   7,019,688   
 Total stockholders' equity946,482   946,138   
Total liabilities and stockholders' equity$8,714,158   $7,965,826   
Net interest income (tax-equivalent basis) / Interest-rate spread (4)
 69,161 3.15 % 61,840 2.91 %
Less adjustment of tax-exempt income 52   128  
Net interest income $69,109   $61,712  
Net interest margin (5)
  3.39 %  3.31 %
_________________________________________________________________________
(1) Tax-exempt income on debt securities, equity securities and industrial revenue bonds are included in commercial real estate loans on a tax-equivalent basis.
(2) Loans on nonaccrual status are included in the average balances.
(3) Including non-interest-bearing checking accounts, the average interest rate on total deposits was 0.40% and 1.12% in the three months ended March 31, 2021 and March 31, 2020, respectively.
(4) Interest-rate spread represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.
(5) Net interest margin represents net interest income (tax equivalent basis) divided by average interest-earning assets.
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Rate/Volume Analysis
The following table presents, on a tax-equivalent basis, the extent to which changes in interest rates and changes in volume of interest-earning assets and interest-bearing liabilities have affected the Company's interest income and interest expense during the periods indicated. Information is provided in each category with respect to: (i) changes attributable to changes in volume (changes in volume multiplied by prior rate), (ii) changes attributable to changes in rate (changes in rate multiplied by prior volume), and (iii) the net change. The changes attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to volume and the changes due to rate.
Three Months Ended March 31, 2021 as Compared to the Three Months Ended March 31, 2020
Increase
(Decrease) Due To
VolumeRateNet Change
(In Thousands)
Interest and dividend income:
Investments:
Debt securities$666 $(572)$94 
Marketable and restricted equity securities(149)(336)(485)
Short-term investments121 (291)(170)
Total investments638 (1,199)(561)
Loans and leases:
Commercial real estate loans860 (7,083)(6,223)
Commercial loans and leases4,678 (260)4,418 
Equipment financing454 (1,357)(903)
Residential mortgage loans(286)(416)(702)
Other consumer loans(385)(775)(1,160)
Total loans5,321 (9,891)(4,570)
Total change in interest and dividend income5,959 (11,090)(5,131)
Interest expense:
Deposits:
NOW accounts34 (20)14 
Savings accounts76 (484)(408)
Money market accounts830 (3,585)(2,755)
Certificate of deposit accounts(1,689)(3,408)(5,097)
Brokered deposit accounts860 (2,147)(1,287)
Total deposits111 (9,644)(9,533)
Borrowed funds:
Advances from the FHLBB(1,202)(1,525)(2,727)
Subordinated debentures and notes2 (44)(42)
Other borrowed funds3 (153)(150)
Total borrowed funds(1,197)(1,722)(2,919)
Total change in interest expense(1,086)(11,366)(12,452)
Change in tax-exempt income(76)— (76)
Change in net interest income$7,121 $276 $7,397 

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Interest Income

Loans and Leases
Three Months Ended March 31,Dollar
Change		Percent
Change
20212020
(Dollars in Thousands)
Interest income—loans and leases:
Commercial real estate loans$34,245 $40,468 $(6,223)(15.4)%
Commercial loans12,692 8,256 4,436 53.7 %
Equipment financing18,043 18,946 (903)(4.8)%
Residential mortgage loans7,232 7,934 (702)(8.8)%
Other consumer loans2,797 3,955 (1,158)(29.3)%
Total interest income—loans and leases$75,009 $79,559 $(4,550)(5.7)%
Total interest from loans and leases was $75.0 million for the three months ended March 31, 2021, and represented a yield on total loans of 4.13%. This compares to $79.6 million of interest on loans and a yield of 4.71% for the three months ended March 31, 2020. The $4.6 million decrease in interest income from loans and leases was primarily attributable to a decrease of $9.9 million due to changes in interest rates, offset by an increase of $5.3 million due to an increase in origination volume.
Investments
Three Months Ended March 31,Dollar
Change		Percent
Change
20212020
(Dollars in Thousands)
Interest income—investments:
Debt securities$3,118 $2,976 $142 4.8 %
Marketable and restricted equity securities301 778 (477)(61.3)%
Short-term investments39 209 (170)(81.3)%
Total interest income—investments$3,458 $3,963 $(505)(12.7)%
Total interest income from investments was $3.5 million for the three months ended March 31, 2021 compared to $4.0 million for the three months ended March 31, 2020. For the three months ended March 31, 2021 and 2020, the yield on total investments was 1.4% and 2.2%, respectively. The year-over-year decrease in interest income on investments of $0.5 million, or 12.7%, was primarily driven by a $0.7 million increase due to volume, partially offset by a $1.2 million decrease due to rates.

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Interest Expense—Deposits and Borrowed Funds
Three Months Ended March 31,Dollar
Change		Percent
Change
20212020
(Dollars in Thousands)
Interest expense:
Deposits:
NOW accounts$130 $116 $14 12.1 %
Savings accounts235 643 (408)(63.5)%
Money market accounts1,486 4,241 (2,755)(65.0)%
Certificate of deposit accounts4,154 9,251 (5,097)(55.1)%
Brokered deposit accounts702 1,989 (1,287)(64.7)%
Total interest expense - deposits6,707 16,240 (9,533)(58.7)%
Borrowed funds:
Advances from the FHLBB1,370 4,097 (2,727)(66.6)%
Subordinated debentures and notes1,242 1,284 (42)(3.3)%
Other borrowed funds39 189 (150)(79.4)%
Total interest expense - borrowed funds2,651 5,570 (2,919)(52.4)%
Total interest expense$9,358 $21,810 $(12,452)(57.1)%
Deposits
For the three months ended March 31, 2021, interest expense on deposits decreased $9.5 million, or 58.7%, as compared to the same period in 2020. The decrease in interest expense on deposits was driven by a decrease of $9.6 million due to lower interest rates, partially offset by an increase of $0.1 million due to the growth in deposits. There was no purchase accounting amortization on acquired deposits for the three months ended March 31, 2021, compared to $44 thousand for the three months ended March 31, 2020. Purchase accounting amortization had no impact on the Company's net interest margin.
Borrowed Funds
During the three months ended March 31, 2021, interest paid on borrowed funds decreased $2.9 million, or 52.4% year over year. The cost of borrowed funds decreased to 1.60% for the three months ended March 31, 2021 from 2.33% for the three months ended March 31, 2020. The decrease in interest expense was driven by a decrease of $1.7 million due to borrowing rates and a decrease of $1.2 million due to volume. For the three months ended March 31, 2021, the purchase accounting accretion on acquired borrowed funds was $13.0 thousand compared to accretion of $14.0 thousand for the three months ended March 31, 2020. Purchase accounting accretion had no impact on the Company's net interest margin.
Provision for Credit Losses
The provisions for credit losses are set forth below:
Three Months Ended March 31,Dollar
Change		Percent
Change
20212020
(Dollars in Thousands)
Provision (credit) for loan and lease losses:
Commercial real estate$(203)$40,200 $(40,403)(100.5)%
Commercial(1,864)6,900 (8,764)(127.0)%
Consumer(715)601 (1,316)(219.0)%
Total provision (credit) for loan and lease losses(2,782)47,701 (50,483)(105.8)%
Unfunded credit commitments635 6,413 (5,778)(90.1)%
Total provision (credit) for credit losses$(2,147)$54,114 $(56,261)(104.0)%
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For the three months ended March 31, 2021, the Allowance for Credit Losses ("ACL") decreased $3.9 million resulting in a Provision for Credit Losses of ($2.1 million). The reduction in the ACL is attributable to portfolio contraction, continued low level of net charge-offs, an improving macro-economic forecast, and qualitative adjustments that consider longer-term risks.
See management’s discussion of “Financial Condition — Allowance for Loan and Lease Losses” and Note 5, “Allowance for Loan and Lease Losses,” to the unaudited consolidated financial statements for a description of how management determined the allowance for loan and lease losses for each portfolio and class of loans.
Non-Interest Income
The following table sets forth the components of non-interest income:
Three Months Ended March 31,Dollar
Change		Percent
Change
20212020
(Dollars in Thousands)
Deposit fees$2,281 $2,458 $(177)(7.2)%
Loan fees599 550 49 8.9 %
Loan level derivative income, net474 2,156 (1,682)(78.0)%
(Loss) gain on investment securities(7)1,330 (1,337)(100.5)%
Gain on sales of loans and leases held-for-sale709 120 589 490.8 %
Other 738 2,714 (1,976)(72.8)%
Total non-interest income$4,794 $9,328 $(4,534)(48.6)%
For the three months ended March 31, 2021, non-interest income decreased $4.5 million, or 48.6%, to $4.8 million as compared to $9.3 million for the same period of 2020. This decrease was primarily driven by decreases of $2.0 million in other non-interest income, $1.7 million in loan level derivative income, net, and $1.3 million in gain on investment securities, partially offset by an increase of $0.6 million in gain on sales of loans and leases held-for-sale.
Loan level derivative income decreased $1.7 million, or 78.0%, to $0.5 million for the three months ended March 31, 2021 from $2.2 million for the same period in 2020, primarily driven by lower volume in loan level derivatives transactions completed for the three months ended March 31, 2021.
Gain on investment securities decreased $1.3 million, or 100.5%, to a loss of $7.0 thousand for the three months ended March 31, 2021 from a gain of $1.3 million for the same period in 2020, primarily driven by a $2.3 million gain on sales of investment securities, partially offset by a $1.0 million loss on equity securities held-for-trading in the first quarter of 2020 as compared to no sales of investment securities and a small change in market value on equity securities held-for-trading due to the majority of equity securities sold in December 2020 for the same period in 2021.
Gain on sales of loans and leases held-for-sales increased $0.6 million or 490.8%, to 0.7 million for the three months ended March 31, 2021 from $0.1 million for the same period in 2020, primarily driven by higher gain on sale to participant, partially offset by lower loan sale volume with servicing retained.
Other income decreased $2.0 million, or 72.8%, to $0.7 million for the three months ended March 31, 2021 from $2.7 million for the same period in 2020, primarily driven by interest rate derivatives market value adjustment due to volatility in rates and lower commission income generated by investment sales transactions.
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Non-Interest Expense
The following table sets forth the components of non-interest expense:
Three Months Ended March 31,Dollar
Change		Percent
Change
20212020
(Dollars in Thousands)
Compensation and employee benefits$25,821 $25,219 $602 2.4 %
Occupancy4,004 3,953 51 1.3 %
Equipment and data processing4,493 4,703 (210)(4.5)%
Professional services1,226 1,651 (425)(25.7)%
FDIC insurance1,044 378 666 176.2 %
Advertising and marketing1,100 1,075 25 2.3 %
Amortization of identified intangible assets232 336 (104)(31.0)%
Other2,891 3,433 (542)(15.8)%
Total non-interest expense$40,811 $40,748 $63 0.2 %
For the three months ended March 31, 2021, non-interest expense increased $0.1 million, or 0.2%, to $40.8 million as compared to $40.7 million for the same period in 2020. The increase was primarily driven by increases of $0.7 million in FDIC insurance expense and $0.6 million in compensation and employee benefits expense, partially offset by decreases of $0.5 million in other non-interest expenses, $0.4 million in professional services and $0.2 million in equipment and data processing expense.
Compensation and employee benefits expense increased $0.6 million, or 2.4%, to $25.8 million for the three months ended March 31, 2021 from $25.2 million for the same period in 2020, primarily driven by increases in employee headcount, annual merit increases and bonuses, partially offset by decreases in commissions, retirement plan and health care benefits.
Equipment and data processing expense decreased $0.2 million, or 4.5%, to $4.5 million for the three months ended March 31, 2021 from $4.7 million for the same period in 2020, primarily driven by lower core processing expenses, purchased software depreciation, other furniture and equipment depreciation, and data communications expenses, partially offset by higher software licenses and subscriptions.
Professional services expense decreased $0.4 million, or 25.7%, to $1.2 million for the three months ended March 31, 2021 from $1.7 million for the same period in 2020, primarily driven by lower legal fees, audit fees and accounting fees, and outsourced internal audit fees.
FDIC insurance expense increased $0.7 million, or 176.2%, to $1.0 million for the three months ended March 31, 2021 from $0.4 million for the same period in 2020, primarily driven by higher bank assessment fees from the FDIC.

Provision for Income Taxes
Three Months Ended March 31,Dollar
Change		Percent
Change
20212020
(Dollars in Thousands)
Income before provision for income taxes$35,239 $(23,822)$59,061 (247.9)%
Provision (benefit) for income taxes8,785 (6,546)15,331 (234.2)%
Net income (loss)$26,454 $(17,276)$43,730 (253.1)%
Effective tax rate24.9 %27.5 %N/A(9.5)%
The Company recorded an income tax expense of $8.8 million for the three months ended March 31, 2021, compared to an income tax benefit of $6.5 million for the three months ended March 31, 2020, representing effective tax rates of 24.9% and 27.5%, respectively.


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Liquidity and Capital Resources
Liquidity
Liquidity is defined as the ability to meet current and future financial obligations of a short-term nature. The Company further defines liquidity as the ability to respond to the needs of depositors and borrowers, as well as to earnings enhancement opportunities, in a changing marketplace. Liquidity management is monitored by an Asset/Liability Committee ("ALCO"), consisting of members of management, which is responsible for establishing and monitoring liquidity targets as well as strategies and tactics to meet these targets. The primary source of funds for the payment of dividends and expenses by the Company is dividends paid to it by the Banks and Brookline Securities Corp. The primary sources of liquidity for the Banks consist of deposit inflows, loan repayments, borrowed funds, and maturing investment securities.
In the first quarter, the Company continued to operate with increased liquidity as a precautionary measure due to economic uncertainty associated with the COVID-19 pandemic. In particular, the Company has shifted its balance sheet asset mix to include additional cash and available for sale securities. Management will continue to monitor the economic markets and evaluate changes to the Company’s liquidity as economic conditions improve.
Management continued holding higher levels of on balance sheet liquidity in the form of cash and available for sale securities in the first quarter. Cash and equivalents at the end of the quarter were $130.9 million, or 1.5% of the balance sheet, compared to $434.9 million, or 4.9% of the balance sheet, as of December 31, 2020. In general, in a normal operating environment, the Company seeks to maintain liquidity levels of cash, cash equivalents and investment securities available-for-sale of between 5% and 10% of total assets. Due to the current environment, management increased this target operating range to between 5% and 15% of total assets. As of March 31, 2021, cash, cash equivalents and investment securities available-for-sale totaled $860.8 million, or 10.1% of total assets. This compares to $1.2 billion, or 13.2% of total assets, as of December 31, 2020.
Deposits, which are considered the most stable source of liquidity, totaled $6.9 billion as of March 31, 2021 and represented 92.6% of total funding (the sum of total deposits and total borrowings), compared to deposits of $6.9 billion, or 89.4% of total funding, as of December 31, 2020. Core deposits, which consist of demand checking, NOW, savings and money market accounts, totaled $5.1 billion as of March 31, 2021 and represented 74.6% of total deposits, compared to core deposits of $4.8 billion, or 69.8% of total deposits, as of December 31, 2020. Additionally, the Company had $470.6 million of brokered deposits as of March 31, 2021, which represented 6.9% of total deposits, compared to $693.9 million or 10.0% of total deposits, as of December 31, 2020. The Company offers attractive interest rates based on market conditions to increase deposits balances, while managing cost of funds.
Borrowings are used to diversify the Company's funding mix and to support asset growth. When profitable lending and investment opportunities exist, access to borrowings provides a means to grow the balance sheet. Borrowings totaled $546.0 million as of March 31, 2021, representing 7.4% of total funding, compared to $820.2 million, or 10.6% of total funding, as of December 31, 2020. The growth in the balance sheet is directly tied to the current operating environment, management will continue to monitor economic conditions and make adjustments to the balance sheet mix as appropriate.
As members of the FHLBB, the Banks have access to both short- and long-term borrowings. As of March 31, 2021, the Company's total borrowing limit from the FHLBB for advances and repurchase agreements was $1.8 billion, compared to $1.9 billion as of December 31, 2020, based on the level of qualifying collateral available for these borrowings.
As of March 31, 2021, the Banks also have access to funding through certain uncommitted lines of credit of $746.0 million.
The Company had a $12.0 million committed line of credit for contingent liquidity as of March 31, 2021. As of March 31, 2021, the Company did not have any outstanding borrowings on this line.
The Company has access to the Federal Reserve Bank's "discount window" to supplement its liquidity. The Company has $590.9 million of borrowing capacity at the Federal Reserve Bank as of March 31, 2021. As of March 31, 2021, the Company did not have any outstanding borrowings with the Federal Reserve Bank.
Additionally, the Banks have access to liquidity through repurchase agreements and additional untapped brokered deposits.
While management believes that the Company has adequate liquidity to meet its commitments and to fund the Banks' lending and investment activities, the availabilities of these funding sources are subject to broad economic conditions and could be restricted in the future. Such restrictions would impact the Company's immediate liquidity and/or additional liquidity needs.

73
Off-Balance-Sheet Financial Instruments

The Company is party to off-balance-sheet financial instruments in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates. These financial instruments include loan commitments, standby and commercial letters of credit and interest-rate swaps. According to GAAP, these financial instruments are not recorded in the financial statements until they are funded or related fees are incurred or received.
 
The contract amounts reflect the extent of the involvement the Company has in particular classes of these instruments. Such commitments involve, to varying degrees, elements of credit risk and interest-rate risk in excess of the amount recognized in the consolidated balance sheet. The Company’s exposure to credit loss in the event of non-performance by the counterparty is represented by the contractual amount of the instruments. The Company uses the same policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.
 
Financial instruments with off-balance-sheet risk at the dates indicated follow:
 At March 31, 2021At December 31, 2020
 (In Thousands)
Financial instruments whose contract amounts represent credit risk:  
Commitments to originate loans and leases:  
Commercial real estate$107,597 $174,240 
Commercial105,426 80,291 
Residential mortgage82,366 30,418 
Unadvanced portion of loans and leases826,545 759,053 
Unused lines of credit:  
Home equity591,377 584,881 
Other consumer41,583 38,954 
Other commercial431 408 
Unused letters of credit:  
Financial standby letters of credit15,953 14,746 
Performance standby letters of credit6,607 5,903 
Commercial and similar letters of credit5,369 5,105 
Loan level derivatives:
Receive fixed, pay variable1,232,482 1,214,146 
Pay fixed, receive variable1,232,482 1,214,146 
Risk participation-out agreements263,430 252,655 
Risk participation-in agreements60,289 60,619 
Foreign exchange contracts:
Buys foreign currency, sells U.S. currency1,416 1,266 
Sells foreign currency, buys U.S. currency1,422 1,273 

74
Capital Resources
As of March 31, 2021, the Company and the Banks are each under the primary regulation of, and must comply with, the capital requirements of the FRB. Under these rules, the Company and the Banks are each required to maintain a minimum common equity Tier 1 capital ratio of 4.5%, a minimum Tier 1 capital leverage ratio of 6.0%, a minimum total risk based capital ratio of 8% and a minimum Tier 1 leverage ratio of 4%. Additionally, the Company and the Banks are required to establish a capital conservation buffer of common equity Tier 1 capital in an amount above the minimum risk-based capital requirements for “adequately capitalized” institutions equal to 2.5% of total risk weighted assets, or face restrictions on the ability to pay dividends, pay discretionary bonuses, and to engage in share repurchases. As of March 31, 2021, the Company and the Banks exceeded all regulatory capital requirements, and the Banks were each considered “well-capitalized” under prompt corrective action regulations.

The following table presents actual and required capital amounts and capital ratios as of March 31, 2021 for the Company and the Banks.
ActualMinimum Required for Capital Adequacy PurposesMinimum Required for Fully Phased in Capital Adequacy Purposes plus Capital Conservation Buffer
Minimum Required  to be Considered “Well-Capitalized” Under Prompt Corrective Action Provisions
AmountRatioAmountRatioAmountRatioAmountRatio
(Dollars in Thousands)
At March 31, 2021:
Brookline Bancorp, Inc.
Common equity Tier 1 capital ratio (1)
$782,378 11.65 %$302,206 4.50 %$470,098 7.00 %N/AN/A
Tier 1 leverage capital ratio (2)
792,010 9.26 %342,121 4.00 %342,121 4.00 %N/AN/A
Tier 1 risk-based capital ratio (3)
792,010 11.79 %403,059 6.00 %571,000 8.50 %N/AN/A
Total risk-based capital ratio (4)
950,627 14.15 %537,457 8.00 %705,412 10.50 %N/AN/A
Brookline Bank      
Common equity Tier 1 capital ratio (1)
$562,089 12.21 %$207,158 4.50 %$322,246 7.00 %$299,228 6.50 %
Tier 1 leverage capital ratio (2)
562,089 10.15 %221,513 4.00 %221,513 4.00 %276,891 5.00 %
Tier 1 risk-based capital ratio (3)
562,089 12.21 %276,211 6.00 %391,299 8.50 %368,281 8.00 %
Total risk-based capital ratio (4)
619,931 13.47 %368,185 8.00 %483,242 10.50 %460,231 10.00 %
BankRI      
Common equity Tier 1 capital ratio (1)
$243,118 11.42 %$95,800 4.50 %$149,022 7.00 %$138,377 6.50 %
Tier 1 leverage capital ratio (2)
243,118 7.84 %124,040 4.00 %124,040 4.00 %155,050 5.00 %
Tier 1 risk-based capital ratio (3)
243,118 11.42 %127,733 6.00 %180,955 8.50 %170,310 8.00 %
Total risk-based capital ratio (4)
269,903 12.68 %170,286 8.00 %223,500 10.50 %212,857 10.00 %
_______________________________________________________________________________
(1) Common equity Tier 1 capital ratio is calculated by dividing common equity Tier 1 capital by risk-weighted assets.
(2) Tier 1 leverage capital ratio is calculated by dividing Tier 1 capital by average assets.
(3) Tier 1 risk-based capital ratio is calculated by dividing Tier 1 capital by risk-weighted assets.
(4) Total risk-based capital ratio is calculated by dividing total capital by risk-weighted assets.



75

The following table presents actual and required capital amounts and capital ratios as of December 31, 2020 for the Company and the Banks.
ActualMinimum Required for Capital Adequacy PurposesMinimum Required for Fully Phased in Capital Adequacy Purposes plus Capital Conservation Buffer
Minimum Required To
Be Considered
 “Well-Capitalized” Under Prompt Corrective Action Provisions
AmountRatioAmountRatioAmountRatioAmountRatio
(Dollars in Thousands)
At December 31, 2020:      
Brookline Bancorp, Inc.      
Common equity Tier 1 capital ratio (1)
$764,157 11.04 %$311,477 4.50 %$484,520 7.00 %N/AN/A
Tier 1 leverage capital ratio (2)
773,777 8.92 %346,985 4.00 %346,985 4.00 %N/AN/A
Tier 1 risk-based capital ratio (3)
773,777 11.18 %415,265 6.00 %588,292 8.50 %N/AN/A
Total risk-based capital ratio (4)
934,933 13.51 %553,624 8.00 %726,632 10.50 %N/AN/A
Brookline Bank      
Common equity Tier 1 capital ratio (1)
$557,310 11.72 %$213,984 4.50 %$332,864 7.00 %$309,088 6.50 %
Tier 1 leverage capital ratio (2)
557,310 9.82 %227,010 4.00 %227,010 4.00 %283,763 5.00 %
Tier 1 risk-based capital ratio (3)
557,310 11.72 %285,312 6.00 %404,192 8.50 %380,416 8.00 %
Total risk-based capital ratio (4)
617,101 12.97 %380,633 8.00 %499,581 10.50 %475,791 10.00 %
BankRI
Common equity Tier 1 capital ratio (1)
$239,337 11.03 %$97,644 4.50 %$151,891 7.00 %$141,042 6.50 %
Tier 1 leverage capital ratio (2)
239,337 7.78 %123,052 4.00 %123,052 4.00 %153,816 5.00 %
Tier 1 risk-based capital ratio (3)
239,337 11.03 %130,192 6.00 %184,439 8.50 %173,590 8.00 %
Total risk-based capital ratio (4)
266,633 12.29 %173,561 8.00 %227,799 10.50 %216,951 10.00 %
_______________________________________________________________________________
(1) Common equity Tier 1 capital ratio is calculated by dividing common equity Tier 1 capital by risk-weighted assets.
(2) Tier 1 leverage capital ratio is calculated by dividing Tier 1 capital by average assets.
(3) Tier 1 risk-based capital ratio is calculated by dividing Tier 1 capital by risk-weighted assets.
(4) Total risk-based capital ratio is calculated by dividing total capital by risk-weighted assets.

76
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market Risk
Market risk is the risk that the market value or estimated fair value of the Company's assets, liabilities, and derivative financial instruments will decline as a result of changes in interest rates or financial market volatility, or that the Company's net income will be significantly reduced by interest-rate changes.
Interest-Rate Risk
The principal market risk facing the Company is interest-rate risk, which can occur in a variety of forms, including repricing risk, yield-curve risk, basis risk, and prepayment risk. Repricing risk occurs when the change in the average yield of either interest-earning assets or interest-bearing liabilities is more sensitive than the other to changes in market interest rates. Such a change in sensitivity could reflect a number of possible mismatches in the repricing opportunities of the Company's assets and liabilities. Yield-curve risk reflects the possibility that changes in the shape of the yield curve could have different effects on the Company's assets and liabilities. Basis risk occurs when different parts of the balance sheet are subject to varying base rates reflecting the possibility that the spread from those base rates will deviate. Prepayment risk is associated with financial instruments with an option to prepay before the stated maturity, often a disadvantage to person selling the option; this risk is most often associated with the prepayment of loans, callable investments, and callable borrowings.
Asset/Liability Management
Market risk and interest-rate risk management is governed by the Company's ALCO. The ALCO establishes exposure limits that define the Company's tolerance for interest-rate risk. The ALCO and the Company's Treasury Group measure and manage the composition of the balance sheet over a range of possible changes in interest rates while remaining responsive to market demand for loan and deposit products. The ALCO monitors current exposures versus limits and reports those results to the Board of Directors. The policy limits and guidelines serve as benchmarks for measuring interest-rate risk and for providing a framework for evaluation and interest-rate risk-management decision-making. The Company measures its interest-rate risk by using an asset/liability simulation model. The model considers several factors to determine the Company's potential exposure to interest-rate risk, including measurement of repricing gaps, duration, convexity, value-at-risk, market value of portfolio equity under assumed changes in the level of interest rates, the shape of yield curves, and general market volatility.
Management controls the Company's interest-rate exposure using several strategies, which include adjusting the maturities of securities in the Company's investment portfolio, limiting or expanding the terms of loans originated, limiting fixed-rate deposits with terms of more than five years, and adjusting maturities of FHLBB advances. The Company limits this risk by restricting the types of MBSs it invests into those with limited average life changes under certain interest-rate-shock scenarios, or securities with embedded prepayment penalties. The Company also places limits on holdings of fixed-rate mortgage loans with maturities greater than five years. The Company enters into interest rate swaps as part of its interest rate risk management strategy. These interest rate swaps are designated as cash flow hedges and involve the receipt of variable rate amounts from a counterparty in exchange for the Company making fixed payments.
Measuring Interest-Rate Risk
As noted above, interest-rate risk can be measured by analyzing the extent to which the repricing of assets and liabilities are mismatched to create an interest-rate sensitivity gap. An asset or liability is said to be interest-rate sensitive within a specific period if it will mature or reprice within that period. The interest-rate sensitivity gap is defined as the difference between the amount of interest-earning assets maturing or repricing within a specific time period and the amount of interest-bearing liabilities maturing or repricing within that same time period. A gap is considered positive when the amount of interest-rate-sensitive assets exceeds the amount of interest-rate-sensitive liabilities. A gap is considered negative when the amount of interest-rate-sensitive liabilities exceeds the amount of interest-rate-sensitive assets. During a period of falling interest rates, therefore, a positive gap would tend to adversely affect net interest income. Conversely, during a period of rising interest rates, a positive gap position would tend to result in an increase in net interest income.
The Company's interest-rate risk position is measured using both income simulation and interest-rate sensitivity "gap" analysis. Income simulation is the primary tool for measuring the interest-rate risk inherent in the Company's balance sheet at a given point in time by showing the effect on net interest income, over a twelve-month period, of a variety of interest-rate shocks. These simulations take into account repricing, maturity, and prepayment characteristics of individual products. The ALCO reviews simulation results to determine whether exposure resulting from changes in market interest rates remains within established tolerance levels over a twelve-month horizon, and develops appropriate strategies to manage this exposure. The Company's interest-rate risk analysis remains modestly asset-sensitive as of March 31, 2021.
77
The assumptions used in the Company’s interest-rate sensitivity simulation discussed above are inherently uncertain and, as a result, the simulations cannot precisely measure net interest income or precisely predict the impact of changes in interest rates.
As of March 31, 2021, net interest income simulation indicated that the Company's exposure to changing interest rates was within tolerance. The ALCO reviews the methodology utilized for calculating interest-rate risk exposure and may periodically adopt modifications to this methodology. The following table presents the estimated impact of interest-rate changes on the Company's estimated net interest income over the twelve-month periods indicated:
Estimated Exposure to Net Interest Income
over Twelve-Month Horizon Beginning
March 31, 2021December 31, 2020
Change in Interest Rate LevelsDollar
Change		Percent
Change		Dollar
Change		Percent
Change
 (Dollars in Thousands)
Up 300 basis points shock$17,032 6.4 %$19,249 7.1 %
Up 200 basis points ramp9,128 3.4 %10,698 3.9 %
Up 100 basis points ramp4,521 1.7 %5,193 1.9 %
Down 100 basis points ramp(5,702)(2.1)%(5,999)(2.2)%

The estimated impact of a 300 basis point increase in market interest rates on the Company's estimated net interest income over a twelve-month horizon was a positive 6.4% as of March 31, 2021, compared to a positive 7.1% as of December 31, 2020. The decrease in asset sensitivity was due to an extension in the investment portfolio.
The Company also uses interest-rate sensitivity “gap” analysis to provide a more general overview of its interest-rate risk profile. The interest-rate sensitivity gap is defined as the difference between interest-earning assets and interest-bearing liabilities maturing or repricing within a given time period. At March 31, 2021, the Company’s one-year cumulative gap was a negative $135.9 million, or 1.68% of total interest-earning assets, compared with a negative $330.0 million, or 3.92% of total interest-earning assets, at December 31, 2020.
The assumptions used in the Company's interest-rate sensitivity simulation discussed above are inherently uncertain and, as a result, the simulations cannot precisely measure net interest income or precisely predict the impact of changes in interest rates. For additional discussion on interest-rate risk see Item 7A, “Quantitative and Qualitative Disclosures about Market Risk” of the Company’s 2020 Annual Report on Form 10-K.
Economic Value of Equity ("EVE") at Risk Simulation is conducted in tandem with net interest income simulations to ascertain a longer term view of the Company’s interest-rate risk position by capturing longer-term repricing risk and options risk embedded in the balance sheet. It measures the sensitivity of the economic value of equity to changes in interest rates. The EVE at Risk Simulation values only the current balance sheet and does not incorporate growth assumptions. As with the net interest income simulation, this simulation captures product characteristics such as loan resets, repricing terms, maturity dates, and rate caps and floors. Key assumptions include loan prepayment speeds, deposit pricing elasticity, and non-maturity deposit attrition rates. These assumptions can have significant impacts on valuation results as the assumptions remain in effect for the entire life of each asset and liability. The Company conducts non-maturity deposit behavior studies on a periodic basis to support deposit assumptions used in the valuation process. All key assumptions are subject to a periodic review.
EVE at Risk is calculated by estimating the net present value of all future cash flows from existing assets and liabilities using current interest rates as well as parallel shocks to the current interest-rate environment. The following table sets forth the estimated percentage change in the Company’s EVE at Risk, assuming various shifts in interest rates. Given the interest rate environment as of March 31, 2021, simulations for interest rate declines of more than 100 basis points were not deemed to be meaningful.
Estimated Percent Change in Economic Value of Equity
Parallel Shock in Interest Rate LevelsAt March 31, 2021At December 31, 2020
Up 300 basis points10.9 %11.2 %
Up 200 basis points7.7 %8.3 %
Up 100 basis points4.7 %5.4 %
Down 100 basis points(11.3)%(13.6)%

78
The Company's EVE sensitivity increased from December 31, 2020 to March 31, 2021 due to the lengthened duration of the investment portfolio.

Item 4. Controls and Procedures
 
Controls and Procedures
 
Under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), the Company has evaluated the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer considered that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the Company’s management, including its Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a -15(f). The Company’s internal control system was designed to provide reasonable assurance to its management and the Board of Directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. The Company’s management assessed the effectiveness of its internal control over financial reporting as of the end of the period covered by this report.
 
Management’s Report on Internal Control Over Financial Reporting as of December 31, 2020 and the related Report of Independent Registered Public Accounting Firm thereon appear on pages F-1 and F-2 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
79
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
 
There are no material pending legal proceedings other than those that arise in the normal course of business. In the opinion of Management, after consulting with legal counsel, the consolidated financial position and results of operations of the Company are not expected to be affected materially by the outcome of such proceedings. 

Item 1A.    Risk Factors

There have been no material changes to the risk factors disclosed in Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2020.


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

a)        Not applicable.
 
b)        Not applicable.
 
c)         None.

Item 3. Defaults Upon Senior Securities

a)        None.
 
b)        None.

Item 4.    Mine Safety Disclosures

Not applicable.

Item 5.    Other Information

None.

80
Table of Contents
Item 6. Exhibits
 
Exhibits
Exhibit 10.1
Exhibit 31.1*
  
Exhibit 31.2*
  
Exhibit 32.1**
  
Exhibit 32.2**
  
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted in Inline XBRL and included in Exhibit 101)
_______________________________________________________________________________
* Filed herewith
** Furnished herewith
81
SIGNATURES
 
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 thereunto duly authorized.
 BROOKLINE BANCORP, INC.
    
    
Date: May 5, 2021By:/s/ Paul A. Perrault
  Paul A. Perrault 
  President and Chief Executive Officer 
  (Principal Executive Officer) 
    
Date: May 5, 2021By:/s/ Carl M. Carlson
  Carl M. Carlson 
  Chief Financial Officer 
  (Principal Financial Officer) 



82

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