BROOKLINE BANCORP INC - Quarter Report: 2023 September (Form 10-Q)

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 September 30, 2023


☐			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)

Delaware

04-3402944

(State or other jurisdiction of
incorporation or organization)

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

131 Clarendon Street

Boston MA

02116

(Address of principal executive offices)

(Zip Code)

(617) 425-4600

(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	BRKL	Nasdaq 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

☐

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 October 31, 2023, the number of shares of common stock, par value $0.01 per share, outstanding was 88,866,235.

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

FORM 10-Q

Table of Contents


		Page
Part I	Financial Information

Item 1.	Unaudited Consolidated Financial Statements

	Unaudited Consolidated Balance Sheets at September 30, 2023 and December 31, 2022	1

	Unaudited Consolidated Statements of Income for the Three Months and Nine Months Ended September 30, 2023 and 2022	2

	Unaudited Consolidated Statements of Comprehensive Income for the Three Months and Nine Months Ended September 30, 2023 and 2022	3

	Unaudited Consolidated Statements of Changes in Equity for the Three Months and Nine Months Ended September 30, 2023 and 2022	4

	Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022	6

	Notes to Unaudited Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	52

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	89

Item 4.	Controls and Procedures	91

Part II	Other Information

Item 1.	Legal Proceedings	92

Item 1A.	Risk Factors	92

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	92

Item 3.	Defaults Upon Senior Securities	92

Item 4.	Mine Safety Disclosures	92

Item 5.	Other Information	92

Item 6.	Exhibits	93

	Signatures	94

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Unaudited Consolidated Financial Statements


BROOKLINE BANCORP, INC. AND SUBSIDIARIES Unaudited Consolidated Balance Sheets
	At September 30, 2023		At December 31, 2022
	(In Thousands Except Share Data)
ASSETS
Cash and due from banks	$	33,506	$	191,767
Short-term investments	127,495		191,192
Total cash and cash equivalents	161,001		382,959
Investment securities available-for-sale, net	880,412		656,766


Total investment securities	880,412		656,766
Allowance for investment security losses	(517)		(102)
Net investment securities	879,895		656,664

Loans and leases:
Commercial real estate loans	5,669,768		4,404,148
Commercial loans and leases	2,241,375		2,016,499
Consumer loans	1,469,639		1,223,741
Total loans and leases	9,380,782		7,644,388
Allowance for loan and lease losses	(119,081)		(98,482)
Net loans and leases	9,261,701		7,545,906
Restricted equity securities	65,460		71,307
Premises and equipment, net of accumulated depreciation of $104,266 and $92,219, respectively	90,476		71,391
Right-of-use asset operating leases	31,619		19,484
Deferred tax asset	74,491		52,237
Goodwill	241,222		160,427
Identified intangible assets, net of accumulated amortization of $45,998 and $40,123, respectively	26,172		1,781
Other real estate owned ("OREO") and repossessed assets, net	299		408
Other assets	348,219		223,272
Total assets	$	11,180,555	$	9,185,836
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand checking accounts	$	1,745,137	$	1,802,518





Interest-bearing deposits	6,820,876		4,719,628
Total deposits	8,566,013		6,522,146
Borrowed funds:
Advances from the Federal Home Loan Bank ("FHLB") of Boston and New York	899,304		1,237,823
Subordinated debentures and notes	84,152		84,044
Other borrowed funds	151,612		110,785
Total borrowed funds	1,135,068		1,432,652
Operating lease liabilities	32,807		19,484
Mortgagors' escrow accounts	12,578		5,607
Reserve for unfunded credits	21,497		20,602

Accrued expenses and other liabilities	254,721		193,220
Total liabilities	10,022,684		8,193,711

Commitments and contingencies (Note 12)
Stockholders' Equity:

Common stock, $0.01 par value; 200,000,000 shares authorized; 96,998,075 shares issued and 85,177,172 shares issued, respectively	970		852
Additional paid-in capital	901,376		736,074
Retained earnings	427,937		412,019
Accumulated other comprehensive (loss) income	(81,541)		(61,947)
Treasury stock, at cost; 7,350,981 shares and 7,731,445 shares, respectively	(90,871)		(94,873)



Total stockholders' equity	1,157,871		992,125
Total liabilities and stockholders' equity	$	11,180,555	$	9,185,836

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Income


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(In Thousands Except Share Data)
Interest and dividend income:
Loans and leases	$	136,561	$	84,375	$	390,791	$	230,383
Debt securities	6,799		3,337		22,703		9,582
Restricted equity securities	1,310		467		4,238		1,132
Short-term investments	2,390		464		7,236		686
Total interest and dividend income	147,060		88,643		424,968		241,783
Interest expense:
Deposits	49,116		7,354		121,631		15,407
Borrowed funds	13,874		3,263		47,181		6,635
Total interest expense	62,990		10,617		168,812		22,042
Net interest income	84,070		78,026		256,156		219,741
Provision for credit losses	2,947		2,845		34,017		2,854
Provision for investment losses	84		(10)		415		48
Net interest income after provision for credit losses	81,039		75,191		221,724		216,839
Non-interest income:
Deposit fees	3,024		2,759		8,547		8,003
Loan fees	639		349		1,521		1,762
Loan level derivative income, net	376		1,275		3,112		3,576
Gain on investment securities, net	—		—		1,704		—
Gain on sales of loans and leases held-for-sale	225		889		2,171		1,524

Other	1,244		1,562		6,852		4,426
Total non-interest income	5,508		6,834		23,907		19,291
Non-interest expense:
Compensation and employee benefits	33,491		28,306		103,494		83,962
Occupancy	4,983		3,906		15,076		11,997
Equipment and data processing	6,766		5,066		19,759		15,075
Professional services	2,368		1,069		5,784		3,514
FDIC insurance	2,152		709		6,005		2,176
Advertising and marketing	1,174		1,337		3,966		3,928
Amortization of identified intangible assets	1,955		120		5,875		374
Merger and acquisition expense	—		1,073		7,411		1,608
Other	4,790		3,373		12,910		9,683
Total non-interest expense	57,679		44,959		180,280		132,317
Income before provision for income taxes	28,868		37,066		65,351		103,813
Provision for income taxes	6,167		6,917		13,240		23,764


Net income	$	22,701	$	30,149	$	52,111	$	80,049
Earnings per common share:
Basic	$	0.26	$	0.39	$	0.59	$	1.04
Diluted	0.26		0.39		0.59		1.04
Weighted average common shares outstanding during the year:
Basic	88,795,270		76,779,038		88,016,190		77,159,356
Diluted	88,971,210		77,007,971		88,253,361		77,448,290
Dividends paid per common share	$	0.135	$	0.130	$	0.405	$	0.385

See accompanying notes to unaudited consolidated financial statements.

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Comprehensive Income


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(In Thousands)
Net income	$	22,701	$	30,149	$	52,111	$	80,049

Investment securities available-for-sale:
Unrealized securities holding gains (losses)	(18,842)		(29,548)		(22,209)		(87,182)

Income tax (expense) benefit	4,416		6,513		5,421		19,216
Net unrealized securities holding gains (losses) before reclassification adjustments, net of taxes	(14,426)		(23,035)		(16,788)		(67,966)







Cash flow hedges:
Change in fair value of cash flow hedges	(3,831)		(2,083)		(5,260)		(1,989)
Income tax (expense) benefit	1,012		(132)		1,384		(162)

Net change in fair value of cash flow hedges, net of taxes	(2,819)		(2,215)		(3,876)		(2,151)

Less reclassification adjustment for change in fair value of cash flow hedges:
Gain (loss) on change in fair value of cash flow hedges	(2,513)		—		(1,446)		—
Income tax (expense) benefit	653		—		376		—
Net reclassification adjustment for change in fair value of cash flow hedges	(1,860)		—		(1,070)		—

Net change in fair value of cash flow hedges	(959)		$	(2,215)	(2,806)		$	(2,151)







Other comprehensive income (loss), net of taxes	(15,385)		(25,250)		(19,594)		(70,117)



Comprehensive income	$	7,316	$	4,899	$	32,517	$	9,932

See accompanying notes to unaudited consolidated financial statements.

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Changes in Stockholders' Equity

Three Months Ended September 30, 2023 and 2022


	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 June 30, 2023	$	970	$	905,084	$	417,328	$	(66,156)	$	(94,918)	—		$	1,162,308
Net income	—		—		22,701		—		—		—		$	22,701

Other comprehensive income (loss)	—		—		—		(15,385)		—		—		$	(15,385)
Common stock dividends of $0.135 per share	—		—		(11,990)		—		—		—		$	(11,990)

Restricted stock awards issued, net of awards surrendered			(4,725)		—		—		4,047		—		$	(678)
Compensation under recognition and retention plans	—		1,017		(102)		—		—		—		$	915


Balance at September 30, 2023	$	970	$	901,376	$	427,937	$	(81,541)	$	(90,871)	$	—	$	1,157,871


	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 June 30, 2022	$	852	$	738,544	$	372,677	$	(44,977)	$	(98,525)	$	(75)	$	968,496
Net income	—		—		30,149		—		—		—		30,149



Other comprehensive income (loss)	—		—		—		(25,250)		—		—		(25,250)
Common stock dividends of $0.130 per share	—		—		(9,968)		—		—		—		(9,968)


Restricted stock awards issued, net of awards surrendered	—		(4,340)		—		—		3,659		—		(681)
Compensation under recognition and retention plan	—		863		(79)		—		—		—		784

Common stock held by ESOP committed to be released (6,609 shares)	—		52		—		—		—		36		88

Balance at September 30, 2022	$	852	$	735,119	$	392,779	$	(70,227)	$	(94,866)	$	(39)	$	963,618

See accompanying notes to unaudited consolidated financial statements.

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Changes in Stockholders' Equity

Nine Months Ended September 30, 2023 and 2022


	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, 2022	$	852	$	736,074	$	412,019	$	(61,947)	$	(94,873)	$	—	$	992,125
Net income	—		—		52,111		—		—		—		52,111

PCSB acquisition	$	118	$	167,212									167,330
Other comprehensive income (loss)	—		—		—		(19,594)		—		—		(19,594)
Common stock dividends of $0.405 per share	—		—		(35,929)		—		—		—		(35,929)


Restricted stock awards issued, net of awards surrendered	—		(4,733)		—		—		4,002		—		(731)
Compensation under recognition and retention plans	—		2,823		(264)		—		—		—		2,559



Balance at September 30, 2023	$	970	$	901,376	$	427,937	$	(81,541)	$	(90,871)	$	—	$	1,157,871



	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, 2021	$	852	$	736,826	$	342,639	$	(110)	$	(84,718)	$	(147)	$	995,342
Net Income	—		—		80,049		—		—		—		80,049



Other comprehensive income (loss)	—		—		—		(70,117)		—		—		(70,117)
Common stock dividends of $0.385 per share	—		—		(29,703)		—		—		—		(29,703)


Restricted stock awards issued, net of awards surrendered	—		(4,317)		—		—		3,632		—		(685)
Compensation under recognition and retention plans	—		2,424		(206)		—		—		—		2,218
Treasury stock, repurchase shares	—		—		—		—		(13,780)		—		(13,780)
Common stock held by ESOP committed to be released (19,827 shares)	—		186		—		—		—		108		294
Balance at September 30, 2022	$	852	$	735,119	$	392,779	$	(70,227)	$	(94,866)	$	(39)	$	963,618

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Unaudited Consolidated Statements of Cash Flows


	Nine Months Ended September 30,
	2023		2022
	(In Thousands)
Cash flows from operating activities:
Net income	$	52,111	$	80,049
Adjustments to reconcile net income to net cash provided from operating activities:

Provision for credit losses	34,432		2,902


Deferred income tax expense	8,198		1,309
Depreciation of premises and equipment	6,030		4,434
(Accretion) amortization of investment securities premiums and discounts, net	(6,750)		1,612
Amortization of deferred loan and lease origination costs, net	3,181		3,926
Amortization of identified intangible assets	5,875		374
Amortization of debt issuance costs	75		76
(Accretion) amortization of acquisition fair value adjustments, net	(7,850)		26
Gain on investment securities, net	(1,704)		—
Gain on sales of loans and leases held-for-sale	(2,171)		(1,524)



Write-down of other repossessed assets	166		180
Compensation under recognition and retention plans	2,558		2,218
ESOP shares committed to be released	—		294
Net change in:
Cash surrender value of bank-owned life insurance	(784)		(766)

Other assets	(53,745)		(52,104)
Accrued expenses and other liabilities	37,842		35,349
Net cash provided from operating activities	77,464		78,355

Cash flows from investing activities:
Proceeds from sales of investment securities available-for-sale	229,981		—
Proceeds from maturities, calls, and principal repayments of investment securities available-for-sale	242,814		79,501
Purchases of investment securities available-for-sale	(330,788)		(123,121)


Proceeds from redemption/sales of restricted equity securities	40,534		15,368
Purchase of restricted equity securities	(30,685)		(31,147)
Proceeds from sales of loans and leases held-for-investment, net	184,047		157,330
Net increase in loans and leases	(628,249)		(430,904)
Acquisitions, net of cash and cash equivalents acquired	(80,209)		—


Purchase of premises and equipment, net	(10,695)		(4,285)
Proceeds from sales of other repossessed assets	1,078		1,360

Net cash used for investing activities	(382,172)		(335,898)






			(Continued)

See accompanying notes to unaudited consolidated financial statements.

Table of Contents


	Nine Months Ended September 30,
	2023		2022
	(In Thousands)
Cash flows from financing activities:
Decrease in demand checking, NOW, savings and money market accounts	(315,009)		(139,602)
Increase (decrease) in certificates of deposit and brokered deposits	790,535		(174,699)
Proceeds from FHLB advances	4,651,000		2,898,609
Repayment of FHLB advances	(5,042,625)		(2,488,621)



Increase (decrease) in other borrowed funds, net	40,827		(8,652)
Decrease in mortgagors' escrow accounts, net	(5,339)		(511)

Repurchases of common stock	—		(13,780)


Payment of dividends on common stock	(35,929)		(29,703)
Payment of income taxes for shares withheld in share based activity	(710)		(724)




Net cash provided from financing activities	82,750		42,317
Net decrease in cash and cash equivalents	(221,958)		(215,226)
Cash and cash equivalents at beginning of period	382,959		327,737
Cash and cash equivalents at end of period	$	161,001	$	112,511

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest on deposits, borrowed funds and subordinated debt	$	166,039	$	22,274
Income taxes	8,437		19,754
Non-cash investing activities:

Transfer from loans to other repossessed assets	$	1,135	$	1,413
Acquisition of PCSB Financial Corporation:
Fair value of assets acquired, net of cash and cash equivalents acquired	$	1,931,528	$	—
Fair value of liabilities assumed	1,676,110		—
Common stock issued	118		—

See accompanying notes to unaudited consolidated financial statements.

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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; Bank Rhode Island ("BankRI"), a Rhode Island-chartered financial institution; and PCSB Bank, a New York-chartered commercial bank (collectively referred to as the "Banks"). The Banks are members of the Federal Reserve System. The Company is also the parent of Brookline Securities Corp. ("BSC") and Clarendon Private, LLC ("Clarendon Private"). 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., Eastern Funding LLC ("Eastern Funding") and First Ipswich Insurance Agency, operates 29 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., BRI Investment Corp. and its wholly-owned subsidiary, BRI MSC Corp., operates 21 full-service banking offices in the greater Providence, Rhode Island area. Macrolease Corporation, previously a subsidiary of BankRI, was merged into Eastern Funding in the second quarter of 2022. PCSB Bank, which includes its wholly-owned subsidiary, UpCounty Realty Corp., operates 14 full-service banking offices in the Lower Hudson Valley of New York. Clarendon Private is a registered investment advisor with the Securities and Exchange Commission ("SEC"). Through Clarendon Private, the Company offers a wide range of wealth management services to individuals, families, endowments and foundations to help these clients meet their long-term financial goals.

The Banks' activities include acceptance of commercial, municipal and retail deposits, origination of mortgage loans on commercial and residential real estate located principally in Central New England and the Lower Hudson Valley of New York State, 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 it subsidiary Eastern Funding, which operates out of New York City, New York, and Plainview, New York.

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 subject to supervision, examination and regulation by the Massachusetts Division of Banks. As a Rhode Island-chartered financial institution, BankRI is subject to supervision, examination and regulation by the Banking Division of the Rhode Island Department of Business Regulation. As a New York chartered commercial bank, PCSB Bank is subject to supervision, examination and regulation by the New York State Department of Financial Services. Clarendon Private is also subject to regulation by the SEC.

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.

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, 2022.

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

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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 acquired assets and liabilities, including acquired loans, 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.

Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board ("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.

In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848)" an update to address concerns around structural risk of interbank offered rates ("IBORs"), particularly, the risk of cessation of the LIBOR. The amendments in this update clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. In December 2022, FASB issued ASU 2022-06, "Reference Rate Reform (Topic 848)" which deferred the sunset date of Topic 848 to December 31, 2024, to allow for a transition period after the sunset of LIBOR. The Company has adopted the amendments in these updates and established a LIBOR transition committee to guide the Company’s transition from LIBOR. The Company has completed much of the work to transition off the LIBOR index consistent with industry timelines. The working group has identified its products that utilize LIBOR and has implemented fallback language to facilitate the transition to alternative rates. The Company has also evaluated its infrastructure and identified fallback rates as well as started offering alternative indices and new products tied to these alternative indices. The Company does not anticipate the adoption of these standards to have a material impact to the consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, "Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers" which requires that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, Revenue from Contracts with Customers. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. The Company adopted ASU 2021-08 as of January 1, 2023 on a prospective basis. The adoption did not have a material impact on the Company's consolidated financial statements.

In March 2022, the FASB issued ASU 2022-02, "Financial Instruments - Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures" which addresses concerns regarding the complex accounting for loans modified as troubled debt restructurings (“TDRs”) and also the disclosure of gross writeoff information included in required vintage disclosures. The Company adopted ASU 2022-02 as of January 1, 2023. The enhanced disclosure requirements provided for by ASU 2022-02 were adopted on a prospective basis. Reporting periods prior to the adoption of ASU 2022-02 are presented in accordance with the applicable GAAP. The adoption did not have a material impact on the Company’s consolidated financial statements. Additional details can be found in Note 5, "Allowance for Credit Losses".

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

(2) Acquisitions

PCSB Financial Corporation

On January 1, 2023, the Company completed its previously announced acquisition (the “merger”) of PCSB Financial Corporation (“PCSB”). Pursuant to the merger agreement, each share of PCSB common stock outstanding at the effective time of the merger was converted into the right to receive, at the holder’s election, either $22.00 in cash consideration or 1.3284 shares of Company common stock for each share of PCSB common stock, subject to allocation procedures to ensure that 60% of the outstanding shares of PCSB common stock was converted to Company common stock. PCSB’s bank subsidiary, PCSB Bank, operates as a separate subsidiary of the Company and has 14 banking offices throughout the Lower Hudson Valley of New York State.

The transaction was accounted for as a business combination. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their fair values as of the merger effective date. The determination of fair value required management to make estimates about discount rates, future expected cash flows, market conditions, and other future events that are highly subjective in nature and are subject to change. Fair value estimates of the assets acquired and liabilities assumed may be adjusted for a period up to one year (the measurement period) from the closing date of the merger if new information is obtained about facts and circumstances that existed as of the merger effective date that, if known, would have affected the measurement of the amounts recognized as of that date.

During the three months ended September 30, 2023, the Company did not incur any merger-related expenses. During the nine months ended September 30, 2023, the Company incurred merger-related expenses totaling $7.4 million.

The following table summarizes the preliminary purchase price allocation to the estimated fair value of the assets acquired and liabilities assumed as of the date of the acquisition:


	Net Assets Acquired at Fair Value
	(In Thousands)
Purchase price consideration	$	297,791
ASSETS
Cash	42,373
Investments	366,790
Loans (1)	1,336,737
Allowance for credit losses on PCD loans	(2,344)
Premises and equipment	14,631
Core deposit and other intangibles	30,265
Other assets	104,654
Total assets acquired	$	1,893,106
LIABILITIES
Deposits	$	1,570,563
Borrowings	52,923
Other liabilities	52,624
Total liabilities assumed	$	1,676,110
Net assets acquired	216,996
Goodwill	$	80,795

______________________________________________________________________

(1) Includes approximately $20 million of Bond Anticipation Notes ("BANs") and Tax Anticipation Notes ("TANs") that were subsequently reclassified as investments.

In connection with the merger, the Company recorded $80.8 million of goodwill, which represents the excess of the purchase price over the fair value of the net assets acquired.

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

Fair values of the major categories of assets acquired and liabilities assumed were determined as follows:

Cash and Cash Equivalents

The fair values of cash and cash equivalents approximate the respective carrying amounts because the instruments are payable on demand or have short-term maturities.

Investments

The fair values for investment securities available-for-sale were based on quoted market prices, where available. If quoted market prices were not available, fair value estimates are generally based on observable inputs, including quoted market prices for similar instruments. Investment securities held-to-maturity were reclassified to investment securities available-for-sale based on the Company's intent at closing.

During the nine months ended September 30, 2023, the Company restructured the investment portfolio acquired from PCSB. The Company sold approximately 75% of the portfolio which equates to $228.3 million of book value of predominantly longer dated Agency mortgage-backed securities ("MBS"), Agency collateralized mortgage obligations ("CMOs"), corporate and municipal securities. The weighted average duration of these securities was 6.1 years with an average risk weighting of assets of 33%. The Company recognized a $1.7 million gain from selling these securities.

Proceeds from the sale and additional cash on hand was used to purchase $318.5 million of short duration securities, the majority of which are US Treasuries, Agency MBS, and a small position of short term Municipal Bond Anticipation Notes. Additional details can be found in Note 3, "Investment Securities".

The weighted average duration of these securities was 2.1 years with an average risk weighting of assets of 4%.

Loans

The fair value of the loan portfolio was calculated on an individual loan basis using discounted cash flow analysis, with results presented and assumptions applied on a summary basis. This analysis took into consideration the contractual terms of the loans and assumptions related to the cost of debt, cost of equity, servicing cost and other liquidity/risk premium considerations to estimate the projected cash flows. The loss rates for the loans were estimated using Probability of Default (cumulative) and Loss Given Default assumptions. The assumptions used in determining the fair value of the loan portfolio were considered reasonable from a market-participant viewpoint.

The Company recorded a $49.8 million discount from the results of the loan accounting valuation.

Deposits - Core Deposits Intangible ("CDI")

Accounts included in the CDI include demand deposits, NOW accounts, money market accounts and savings accounts. The fair value of the CDI was derived from using a financial institution-specific income approach. Factors examined in the valuation of the CDI include customer attrition, deposit interest rates, service charge income, overhead expense, and costs of alternative funding.

The Company recorded a $30.3 million CDI from the results of the deposit valuation. The CDI is being amortized at an accelerated rate over 7 years using the sum-of-the-years method.

Certificates of Deposits

The certificates of deposits were recorded at fair value. The determination of the fair value was calculated using discounted cash flow analysis, which involved present valuing the contractual payments over the remaining life of the certificate of deposit at market based-rates.

The Company recorded a $3.2 million discount from the results of the certificate of deposit valuation.

Borrowings

The fair value of the FHLB advances were ascertained by using discounted cash flow analysis of the contractual payments over the remaining life of the advances at market-based interest rates. The FHLB advances were disaggregated on an individual advance basis and management used FHLB of New York rates as of December 30, 2022 as the market rate in the present value calculation.

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

The Company recorded a $0.3 million discount on the assumed FHLB advances.

PCD Loans and Leases

Purchased loans and leases that have experienced more-than-insignificant deterioration in credit quality since origination are considered purchase credit deteriorated ("PCD"). For PCD loans and leases, the initial estimate of expected credit losses was established through an adjustment to the unpaid principal balance and non-credit discount at acquisition.

The following table reconciles the unpaid principal balance to the fair value of PCD loans and leases:


(In Thousands)
Total unpaid principal balance	$	16,824
Allowance for credit losses at acquisition	(2,344)
Non-credit discount	(974)
Fair value	$	13,506

Supplemental Pro Forma Financial Information

The following table summarizes supplemental pro forma financial information giving effect to the merger as if it had been completed on January 1, 2022:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2023	2022	2023	2022
	(In Thousands)
Net interest income	84,070	95,106	256,156	265,712
Non-interest income	5,508	7,627	22,203	22,095
Net income	23,223	36,251	70,624	74,293

The supplemental pro forma financial information does not necessarily reflect the results of operations that would have occurred had Brookline Bancorp, Inc. merged with PCSB on January 1, 2022. The supplemental pro forma financial information includes the impact of (i) accreting and amortizing the discounts and premiums associated with the estimated fair value adjustments to acquired loans and leases, investment securities, deposits, and borrowings, (ii) the amortization of recognized intangible assets, (iii) accreting and amortizing the discounts and premiums associated with acquired premises and leases, and (iv) the related estimated income tax effects. Costs savings and other business synergies related to the merger are not included in the supplemental pro forma financial information.

In addition, the supplemental pro forma financial information was adjusted to include the $7.4 million of merger-related expenses recognized during the nine months ended September 30, 2023, as summarized in the following table:


	Nine Months Ended September 30, 2023
	(In Thousands)
Compensation and benefits (1)	$	1,750
Technology and equipment (2)	1,857
Professional and outside services (3)	3,563
Other expense (4)	242
Total merger-related expenses	$	7,413

______________________________________________________________________

(1) Comprised primarily of severance and employee retention costs.

(2) Comprised primarily of technology contract termination fees.

(3) Comprised primarily of advisory, legal, accounting, and other professional fees.

(4) Comprised primarily of costs of travel and other miscellaneous expenses.

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

Brookline Bancorp, Inc.’s operating results for three and nine months ended September 30, 2023 include the operating results of acquired assets and assumed liabilities of PCSB subsequent to the merger on January 1, 2023. The amount of net interest income, non-interest income and net income of $16.1 million, $0.6 million and $3.7 million, respectively, attributable to the acquisition of PCSB were included in Brookline Bancorp, Inc.’s Consolidated Statement of Income for the three months ended September 30, 2023. The amount of net interest income, non-interest income and net loss of $48.2 million, $3.7 million and $(0.2) million, respectively, attributable to the acquisition of PCSB were included in Brookline Bancorp, Inc.’s Consolidated Statement of Income for the nine months ended September 30, 2023. PCSB’s interest income, non-interest income and net loss noted above reflect management’s best estimates, based on information available at the reporting date.

(3) Investment Securities

The following tables set forth investment securities available-for-sale at the dates indicated:


	At September 30, 2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(In Thousands)
Investment securities available-for-sale:
U.S. Government-sponsored enterprise ("GSE") debentures	$	195,493	$	13	$	26,613	$	168,893
GSE CMOs	67,489		—		7,597		59,892
GSE MBSs	192,370		2		25,910		166,462



Municipal obligations	18,914		11		608		18,317
Corporate debt obligations	25,484		30		891		24,623
U.S. Treasury bonds	479,582		1		37,837		441,746
Foreign government obligations	500		—		21		479


Total investment securities available-for-sale	$	979,832	$	57	$	99,477	$	880,412


	December 31, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(In Thousands)
Investment securities available-for-sale:
GSE debentures	$	176,751	$	—	$	24,329	$	152,422
GSE CMOs	19,977		—		1,757		18,220
GSE MBSs	159,824		1		19,249		140,576




Corporate debt obligations	14,076		—		312		13,764
U.S. Treasury bonds	362,850		280		31,823		331,307

Foreign government obligations	500		—		23		477

Total investment securities available-for-sale	$	733,978	$	281	$	77,493	$	656,766

As of September 30, 2023, the fair value of all investment securities available-for-sale was $880.4 million, with net unrealized losses of $99.4 million, compared to a fair value of $656.8 million and net unrealized losses of $77.2 million as of December 31, 2022. As of September 30, 2023, $847.3 million, or 96.2% of the portfolio, had gross unrealized losses of $99.5 million, compared to $630.5 million, or 96.0% of the portfolio, with gross unrealized losses of $77.5 million as of December 31, 2022.

As of September 30, 2023 and December 31, 2022, the Company held no securities as held to maturity; all securities were held as available-for-sale.

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

Investment Securities as Collateral

As of September 30, 2023 and December 31, 2022, respectively, $608.8 million and $387.9 million of investment securities were pledged as collateral for repurchase agreements; municipal deposits; treasury, tax and loan deposits; swap agreements; FRB borrowings; and FHLB of Boston and FHLB of New York borrowings. The Banks had no outstanding FRB borrowings as of September 30, 2023 and December 31, 2022.

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 the Allowance for Credit Losses ("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 $3.9 million as of September 30, 2023 compared to $2.6 million as of December 31, 2022.

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 nine months ended September 30, 2023 and 2022.

Assessment for Available for Sale Securities for Impairment

Investment securities as of September 30, 2023 and December 31, 2022 that have been in a continuous unrealized loss position for less than twelve months or twelve months or longer are as follows:


	At September 30, 2023
	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	$	39,894	$	611	$	119,311	$	26,002	$	159,205	$	26,613
GSE CMOs	44,760		5,833		15,132		1,764		59,892		7,597
GSE MBSs	44,338		2,850		120,868		23,060		165,206		25,910



Municipal obligations	8,103		608		—		—		8,103		608
Corporate debt obligations	15,925		754		6,377		137		22,302		891
U.S. Treasury bonds	208,530		3,476		223,536		34,361		432,066		37,837
Foreign government obligations	—		—		479		21		479		21









Total temporarily impaired investment securities	$	361,550	$	14,132	$	485,703	$	85,345	$	847,253	$	99,477

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)


	At December 31, 2022
	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	$	56,719	$	1,255	$	95,703	$	23,076	$	152,422	$	24,331
GSE CMOs	16,411		1,563		1,809		192		18,220		1,755
GSE MBSs	97,858		9,823		42,500		9,426		140,358		19,249



Corporate debt obligations	13,764		312		—		—		13,764		312
U.S. Treasury bonds	139,103		3,723		166,150		28,100		305,253		31,823
Foreign government obligations	477		23		—		—		477		23









Total temporarily impaired investment securities	$	324,332	$	16,699	$	306,162	$	60,794	$	630,494	$	77,493

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 September 30, 2023. 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 September 30, 2023. 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 FHLB and the Federal Farm Credit Bank. As of September 30, 2023, 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 $31.1 million, all of which were backed explicitly by the full faith and credit of the U.S. Government, compared to $2.7 million as of December 31, 2022.

As of September 30, 2023, the Company owned 40 GSE debentures with a total fair value of $168.9 million, and a net unrealized loss of $26.6 million. The acquisition of PCSB accounted for $39.9 million of the total fair value at September 30,

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

2023. As of December 31, 2022, the Company held 32 GSE debentures with a total fair value of $152.4 million, with a net unrealized loss of $24.3 million. As of September 30, 2023, 37 of the 40 securities in this portfolio were in an unrealized loss position. As of December 31, 2022, 31 of the 32 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 nine months ended September 30, 2023 the Company purchased $9.7 million of purchase GSE debentures compared to the same period in 2022 when the Company did not purchase any GSE debentures.

As of September 30, 2023, the Company owned 60 GSE CMOs with a total fair value of $59.9 million and a net unrealized loss of $7.6 million. The acquisition of PCSB accounted for $44.8 million of the total fair value at September 30, 2023. As of December 31, 2022, the Company held 32 GSE CMOs with a total fair value of $18.2 million with a net unrealized loss of $1.8 million. As of September 30, 2023 and December 31, 2022 , all of the 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 nine months ended September 30, 2023 and 2022, the Company did not purchase any GSE CMOs.

As of September 30, 2023, the Company owned 149 GSE MBSs with a total fair value of $166.5 million and a net unrealized loss of $25.9 million. The acquisition of PCSB accounted for $45.4 million of the total fair value at September 30, 2023. As of December 31, 2022, the Company held 134 GSE MBSs with a total fair value of $140.6 million with a net unrealized loss of $19.2 million. As of September 30, 2023, 143 of the 149 securities in this portfolio were in an unrealized loss position. As of December 31, 2022, 128 of the 134 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 nine months ended September 30, 2023 the Company purchased $39.4 million of GSE MBSs compared to the same period in 2022 when the Company did not purchase any GSE MBSs.

Municipal Obligations

The Company invests in certain state and municipal securities with high credit ratings for portfolio diversification and tax planning purposes. As of September 30, 2023, the Company owned 46 municipal obligation securities with a total fair value of $18.3 million and a net unrealized loss of $0.6 million. The acquisition of PCSB, and purchases year to date accounted for all of the total fair value at September 30, 2023. As of December 31, 2022, the Company did not hold any municipal securities. As of September 30, 2023, 27 of the 46 securities in this portfolio were in an unrealized loss position. During the nine months ended September 30, 2023, the Company purchased $9.0 million of municipal securities compared to the same period in 2022 when the Company did not purchase any municipal securities.

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 September 30, 2023, the Company held 11 corporate obligation securities with a total fair value of $24.6 million and a net unrealized loss of $0.9 million. The acquisition of PCSB accounted for $18.2 million of the total fair value at September 30, 2023. As of December 31, 2022, the Company held 4 corporate obligation securities with a total fair value of $13.8 million and a net unrealized loss of $0.3 million. As of September 30, 2023, 10 of the 11 securities in this portfolio were in an unrealized loss position. As of December 31, 2022, all 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 nine months ended September 30, 2023 and 2022, the Company did not purchase any corporate obligations.

U.S. Treasury Bonds

The Company invests in securities issued by the U.S. government. As of September 30, 2023, the Company owned 67 U.S. Treasury bonds with a total fair value of $441.7 million and a net unrealized loss of $37.8 million. The acquisition of PCSB accounted for $162.9 million of the total fair value at September 30, 2023. As of December 31, 2022, the Company held 41 U.S. Treasury bonds with a total fair value of $331.3 million and a net unrealized loss of $31.5 million. As of September 30, 2023, 65 of the 67 securities in this portfolio were in an unrealized loss position. As of December 31, 2022, 38 of the 41 securities in this portfolio were in an unrealized loss position. During the nine months ended September 30, 2023, the Company purchased $272.7 million of U.S. Treasury bonds, compared to the same period in 2022 when the Company purchased $122.6 million U.S. Treasury bonds.

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

Foreign Government Obligations

As of September 30, 2023 and December 31, 2022, the Company owned 1 foreign government obligation security with a fair value of $0.5 million, which approximated cost. As of September 30, 2023 and December 31, 2022, respectively, the security was in an unrealized loss position. During the nine months ended September 30, 2023, the Company did not purchase any foreign government obligations, compared to the same period in 2022, when the Company repurchased the foreign government obligation that had matured.

Portfolio Maturities

The final stated maturities of the debt securities are as follows for the periods indicated:


	At September 30, 2023						At December 31, 2022
	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	$	149,452	$	148,471	4.41	%	$	119,912	$	119,075	3.10	%
After 1 year through 5 years	304,754		289,325		3.08	%	163,941		156,120		2.40	%
After 5 years through 10 years	290,413		241,485		1.73	%	291,284		244,847		1.30	%
Over 10 years	235,213		201,131		3.36	%	158,841		136,724		2.10	%
	$	979,832	$	880,412	3.00	%	$	733,978	$	656,766	2.06	%

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 September 30, 2023, issuers of debt securities with an estimated fair value of $90.8 million had the right to call or prepay the obligations. Of the $90.8 million, approximately $9.3 million matures in less then 1 year, $28.8 million matures in 1-5 years, $45.6 million matures in 6-10 years, and $7.1 million matures after ten years. As of December 31, 2022, issuers of debt securities with an estimated fair value of approximately $53.1 million had the right to call or prepay the obligations. Of the $53.1 million, approximately $2.5 million matures in less then 1 year, $6.3 million matures in 1-5 years, $37.4 million matures in 6-10 years, and $6.9 million matures after ten years.

Security Sales

The proceeds from the sale of investment securities available-for-sale were $230.0 million during the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022 where the Company did not sell any investment securities available-for-sale. Securities sales executed during the nine months ended were related to the acquisition of PCSB and the restructuring of the acquired investment portfolio.


	Nine Months Ended September 30,
	2023		2022
	(In Thousands)
Investment securities available-for-sale:
Proceeds from sales:	$	229,981	$	—
Gross gains from sales	2,705		—
Gross losses from sales	(1,001)		—
Gain on sales of securities, net	$	1,704	$	—

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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 September 30, 2023				At December 31, 2022
	Balance		Weighted Average Coupon		Balance		Weighted Average Coupon
	(Dollars In Thousands)
Commercial real estate loans:
Commercial real estate	$	3,969,956	5.41	%	$	3,046,746	4.93	%
Multi-family mortgage	1,356,056		5.12	%	1,150,597		4.74	%
Construction	343,756		6.66	%	206,805		6.51	%
Total commercial real estate loans	5,669,768		5.42	%	4,404,148		4.95	%
Commercial loans and leases:
Commercial	867,514		6.77	%	752,948		6.03	%
Equipment financing	1,329,673		7.53	%	1,216,585		7.04	%
Condominium association	44,188		4.94	%	46,966		4.80	%
Total commercial loans and leases	2,241,375		7.18	%	2,016,499		6.61	%
Consumer loans:
Residential mortgage	1,080,740		4.35	%	844,614		3.98	%
Home equity	340,550		8.00	%	322,622		7.00	%
Other consumer	48,349		7.61	%	56,505		6.65	%
Total consumer loans	1,469,639		5.30	%	1,223,741		4.90	%
Total loans and leases	$	9,380,782	5.81	%	$	7,644,388	5.38	%

Accrued interest on loans and leases, which were excluded from the amortized cost of loans and leases totaled $37.2 million and $26.1 million at September 30, 2023 and December 31, 2022, respectively, and were included in other assets in the accompanying consolidated balance sheets.

The net unamortized deferred loan origination costs and premiums and discounts on acquired loans included in total loans and leases were $(31.4) million and $11.3 million as of September 30, 2023 and December 31, 2022, respectively.

The Banks and their subsidiaries lend primarily in all New England states and New York, with the exception of equipment financing, 29.2% of which is in the greater New York and New Jersey metropolitan area and 70.8% of which is in other areas in the United States of America as of September 30, 2023.

Loans and Leases Pledged as Collateral

As of September 30, 2023 and December 31, 2022, there were $3.2 billion and $2.4 billion respectively of loans and leases pledged as collateral for repurchase agreements; municipal deposits; treasury, tax and loan deposits; swap agreements; FRB borrowings; and FHLB borrowings. The Banks did not have any outstanding FRB borrowings as of September 30, 2023 and December 31, 2022.

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

(5) Allowance for Credit 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 September 30, 2023
	Commercial Real Estate		Commercial		Consumer		Total
	(In Thousands)
Balance at June 30, 2023	$	84,301	$	35,634	$	5,882	$	125,817

Charge-offs	—		(11,047)		(29)		(11,076)
Recoveries	3		89		10		102
Provision (credit) for loan and lease losses excluding unfunded commitments	(5,524)		8,829		933		4,238

Balance at September 30, 2023	$	78,780	$	33,505	$	6,796	$	119,081


	Three Months Ended September 30, 2022
	Commercial Real Estate		Commercial		Consumer		Total
	(In Thousands)
Balance at June 30, 2022	$	70,027	$	20,105	$	3,056	$	93,188

Charge-offs	—		(584)		(14)		(598)
Recoveries	6		763		8		777
Provision (credit) for loan and lease losses excluding unfunded commitments	(2,573)		2,984		391		802
Balance at September 30, 2022	$	67,460	$	23,268	$	3,441	$	94,169



	Nine Months Ended September 30, 2023
	Commercial Real Estate		Commercial		Consumer		Total
	(In Thousands)
Balance at December 31, 2022	$	68,154	$	26,604	$	3,724	$	98,482


Charge-offs	—		(13,475)		(38)		(13,513)
Recoveries	15		951		25		991
Provision (credit) for loan and lease losses excluding unfunded commitments	10,611		19,425		3,085		33,121
Balance at September 30, 2023	$	78,780	$	33,505	$	6,796	$	119,081

The table above excludes the establishment of the initial reserve for PCD loans and leases of $2.3 million, net of $2.3 million of day one charge-offs recognized at the date of the acquisition in accordance with GAAP.

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)



	Nine Months Ended September 30, 2022
	Commercial Real Estate		Commercial		Consumer		Total
	(In Thousands)
Balance at December 31, 2021	$	69,213	$	27,055	$	2,816	$	99,084

Charge-offs	(37)		(4,417)		(20)		(4,474)
Recoveries	18		1,395		52		1,465
Provision (credit) for loan and lease losses excluding unfunded commitments	(1,734)		(765)		593		(1,906)
Balance at September 30, 2022	$	67,460	$	23,268	$	3,441	$	94,169

The allowance for credit losses for unfunded credit commitments, which is included in other liabilities, was $21.5 million, and $20.6 million at September 30, 2023 and December 31, 2022, respectively.

Provision for Credit Losses

The provision (credit) for credit losses are set forth below for the periods indicated:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(In Thousands)
Provision (credit) for loan and lease losses:
Commercial real estate	$	(5,524)	$	(2,573)	$	10,611	$	(1,734)
Commercial	8,829		2,984		19,425		(765)
Consumer	933		391		3,085		593

Total (credit) provision for loan and lease losses	4,238		802		33,121		(1,906)





Unfunded commitments	(1,291)		2,043		896		4,760
Investment securities available-for-sale	84		(10)		415		48
Total provision (credit) for credit losses	$	3,031	$	2,835	$	34,432	$	2,902

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.

To calculate the allowance for loans collectively evaluated, management uses models developed by a third party. 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 expected utilization assumptions. The expected loss estimates for two small commercial portfolios 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.

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

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 forecasts utilized at September 30, 2023 reflect the immediate and longer-term effects of a rising interest rate environment and inflationary conditions.

As of September 30, 2023, 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. 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 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.

The general allowance for loan and lease losses was $108.6 million as of September 30, 2023, compared to $95.4 million as of December 31, 2022. The increase in the general allowance was primarily driven by the acquisition of PCSB Bank during the year, which contributed $14.8 million of the $13.2 million increase, and was offset by an overall decrease in the general allowance of all entities, excluding PCSB Bank.

The specific allowance for loan and lease losses was $10.5 million as of September 30, 2023, compared to $3.1 million as of December 31, 2022. The specific allowance increased $7.4 million during the nine months ended September 30, 2023 primarily due to specific reserve increases totaling $4.2 million for commercial loans and $3.2 million for commercial real loans.

As of September 30, 2023, 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 modified loan.

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

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.

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.

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

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 September 30, 2023.


	September 30, 2023
	2023		2022		2021		2020		2019		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total
			(In Thousands)
Commercial Real Estate
Pass	$	259,553	$	662,571	$	781,746	$	383,485	$	450,982	$	1,263,754	$	72,357	$	10,011	$	3,884,459
OAEM	—		—		2,547		3,322		9,753		27,533		—		—		43,155
Substandard	—		—		—		—		14,757		27,585		—		—		42,342

Total	259,553		662,571		784,293		386,807		475,492		1,318,872		72,357		10,011		3,969,956
Multi-Family Mortgage
Pass	21,121		196,154		239,184		166,530		211,317		474,624		6,955		36,602		1,352,487

Substandard	—		—		—		—		1,333		2,236		—		—		3,569

Total	21,121		196,154		239,184		166,530		212,650		476,860		6,955		36,602		1,356,056
Construction
Pass	21,217		216,502		72,723		9,142		1,758		905		2,492		3,442		328,181

Substandard	—		2,106		11,153		—		1,501		815		—		—		15,575

Total	21,217		218,608		83,876		9,142		3,259		1,720		2,492		3,442		343,756
Commercial
Pass	118,707		140,910		129,487		39,709		24,277		73,512		305,625		2,989		835,216
OAEM	—		—		87		2,325		1,338		—		10,277		235		14,262
Substandard	4		—		10		—		12,575		28		4,827		589		18,033
Doubtful	—		—		—		—		—		1		—		2		3
Total	118,711		140,910		129,584		42,034		38,190		73,541		320,729		3,815		867,514
Current-period gross writeoffs	1,000		3,500		3,658		1,164		502		135		—		—		9,959
Equipment Financing
Pass	326,153		413,548		226,106		139,152		100,225		85,970		13,756		4,994		1,309,904
OAEM	—		2,279		1,312		1,014		187		55		—		—		4,847
Substandard	376		4,156		2,091		1,626		2,807		2,509		—		—		13,565
Doubtful	—		524		818		—		—		15		—		—		1,357
Total	326,529		420,507		230,327		141,792		103,219		88,549		13,756		4,994		1,329,673
Current-period gross writeoffs	—		602		1,549		108		446		814		—		—		3,519
Condominium Association
Pass	3,265		7,146		8,033		6,947		4,745		10,432		3,436		184		44,188

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)


	September 30, 2023
	2023		2022		2021		2020		2019		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total
			(In Thousands)
Total	3,265		7,146		8,033		6,947		4,745		10,432		3,436		184		44,188
Other Consumer
Pass	421		359		802		7		24		2,068		44,666		1		48,348

Substandard	—		—		—		—		—		—		—		1		1

Total	421		359		802		7		24		2,068		44,666		2		48,349
Current-period gross writeoffs	6		—		1		—		11		8		—		—		26
Total
Pass	750,437		1,637,190		1,458,081		744,972		793,328		1,911,265		449,287		58,223		7,802,783
OAEM	—		2,279		3,946		6,661		11,278		27,588		10,277		235		62,264
Substandard	380		6,262		13,254		1,626		32,973		33,173		4,827		590		93,085
Doubtful	—		524		818		—		—		16		—		2		1,360
Total	$	750,817	$	1,646,255	$	1,476,099	$	753,259	$	837,579	$	1,972,042	$	464,391	$	59,050	$	7,959,492

As of September 30, 2023, there were no loans categorized as definite loss.

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

For residential mortgage and home equity loans, the borrowers' credit scores contribute as a reserve metric in the retail loss rate model.


	At September 30, 2023
	2023		2022		2021		2020		2019		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total
			(In Thousands)
Residential
Credit Scores
Over 700	$	54,390	$	159,669	$	214,817	$	123,139	$	88,158	$	269,136	$	5,285	$	441	$	915,035
661 - 700	7,289		19,288		11,935		6,299		5,507		31,560		—		—		81,878
600 and below	2,377		20,871		7,479		8,618		4,163		22,502		—		—		66,010
Data not available*	349		1,980		—		179		515		14,794		—		—		17,817
Total	$	64,405	$	201,808	$	234,231	$	138,235	$	98,343	$	337,992	$	5,285	$	441	$	1,080,740
Current-period gross writeoffs	—		—		—		—		—		25		—		—		25
Home Equity
Credit Scores
Over 700	$	4,500	$	3,908	$	1,664	$	881	$	1,209	$	7,819	$	269,561	$	4,509	$	294,051
661 - 700	775		386		124		37		91		867		21,264		871		24,415
600 and below	73		177		—		—		41		496		16,977		2,024		19,788
Data not available*	24		—		—		—		—		21		2,231		20		2,296
Total	$	5,372	$	4,471	$	1,788	$	918	$	1,341	$	9,203	$	310,033	$	7,424	$	340,550

_______________________________________________________________________________

* Primarily represents loans made to trusts and purchased mortgages.

The following tables present the recorded investment in loans in each class as of December 31, 2022, by credit quality indicator.


	December 31, 2022
	2022		2021		2020		2019		2018		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total
	(In Thousands)
Commercial Real Estate
Pass	$	475,105	$	622,952	$	290,913	$	362,339	$	210,954	$	971,274	$	55,464	$	9,167	$	2,998,168
OAEM	—		2,600		112		14,805		2,841		25,875		—		—		46,233
Substandard	—		—		—		—		—		2,345		—		—		2,345

Total	475,105		625,552		291,025		377,144		213,795		999,494		55,464		9,167		3,046,746
Multi-Family Mortgage
Pass	162,139		226,502		132,893		114,109		142,271		324,415		4,823		36,662		1,143,814

Substandard	—		—		—		—		—		6,783		—		—		6,783

Table of Contents

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)


	December 31, 2022
	2022	2021	2020	2019	2018	Prior	Revolving Loans	Revolving Loans Converted to Term Loans	Total
	(In Thousands)
Total	162,139	226,502	132,893	114,109	142,271	331,198	4,823	36,662	1,150,597
Construction
Pass	82,650	73,995	13,787	16,421	3,306	—	6,456	—	196,615
OAEM	842	8,641	—	—	—	—	—	—	9,483
Substandard	—	—	—	—	—	707	—	—	707

Total	83,492	82,636	13,787	16,421	3,306	707	6,456	—	206,805
Commercial
Pass	178,212	116,674	48,713	22,809	29,350	52,866	273,467	1,071	723,162
OAEM	—	109	—	14,821	—	—	2,187	—	17,117
Substandard	—	3,835	1,215	494	—	30	6,461	632	12,667
Doubtful	—	—	—	—	—	1	—	1	2
Total	178,212	120,618	49,928	38,124	29,350	52,897	282,115	1,704	752,948
Equipment Financing
Pass	443,323	282,398	185,007	140,931	76,595	60,980	13,236	1,301	1,203,771
OAEM	1,019	1,453	184	455	13	—	—	—	3,124
Substandard	608	784	1,514	2,597	2,503	1,669	—	—	9,675
Doubtful	—	—	—	—	2	13	—	—	15
Total	444,950	284,635	186,705	143,983	79,113	62,662	13,236	1,301	1,216,585
Condominium Association
Pass	5,821	7,743	8,810	5,858	1,603	12,227	4,823	23	46,908

Substandard	—	—	—	—	—	58	—	—	58

Total	5,821	7,743	8,810	5,858	1,603	12,285	4,823	23	46,966
Other Consumer
Pass	411	393	15	13	1,503	750	53,418	1	56,504

Substandard	—	—	—	—	—	—	1	—	1

Total	411	393	15	13	1,503	750	53,419	1	56,505
Total
Pass	1,347,661	1,330,657	680,138	662,480	465,582	1,422,512	411,687	48,225	6,368,942
OAEM	1,861	12,803	296	30,081	2,854	25,875	2,187	—	75,957
Substandard	608	4,619	2,729	3,091	2,503	11,592	6,462	632	32,236

Table of Contents

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)


	December 31, 2022
	2022		2021		2020		2019		2018		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total
	(In Thousands)
Doubtful	—		—		—		—		2		14		—		1		17
Total	$	1,350,130	$	1,348,079	$	683,163	$	695,652	$	470,941	$	1,459,993	$	420,336	$	48,858	$	6,477,152

As of December 31, 2022, there were no loans categorized as definite loss.


	At December 31, 2022
	2022		2021		2020		2019		2018		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total
	(In Thousands)
Residential
Credit Scores
Over 700	$	108,125	$	176,341	$	95,484	$	61,763	$	38,949	$	132,359	$	4,942	$	348	$	618,311
661 - 700	15,018		21,450		17,611		11,388		8,308		29,999		—		—		103,774
600 and below	6,133		3,754		5,275		2,833		2,264		14,688		—		—		34,947
Data not available*	28,097		6,661		712		3,316		—		48,796		—		—		87,582
Total	$	157,373	$	208,206	$	119,082	$	79,300	$49,521		$	225,842	$	4,942	$	348	$	844,614
Home Equity
Credit Scores
Over 700	$	3,833	$	1,399	$	1,128	$	1,209	$	984	$	6,862	$	247,188	$	2,304	$	264,907
661 - 700	787		92		35		249		272		1,329		41,050		296		44,110
600 and below	89		87		48		93		—		360		8,744		595		10,016
Data not available*	6		6		—		—		—		1,029		2,279		269		3,589
Total	$	4,715	$	1,584	$	1,211	$	1,551	$	1,256	$	9,580	$	299,261	$	3,464	$	322,622

_______________________________________________________________________________

* Primarily represents loans made to trusts and purchased mortgages.

Table of Contents

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

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 September 30, 2023.


	At September 30, 2023
	Past Due										Past Due Greater Than 90 Days and Accruing
	31-60 Days		61-90 Days		Greater Than 90 Days		Total		Current					Total Loans and Leases			Non-accrual		Non-accrual with No Related Allowance
	(In Thousands)
Commercial real estate loans:
Commercial real estate	$	1,765	$	18,225	$	20,222	$	40,212	$	3,929,744		$	3,969,956		$	228	$	23,263	$	3,269
Multi-family mortgage	318		1,333		—		1,651		1,354,405			1,356,056			—		1,318		—
Construction	—		1,620		696		2,316		341,440			343,756			—		2,316		2,316
Total commercial real estate loans	2,083		21,178		20,918		44,179		5,625,589			5,669,768			228		26,897		5,585
Commercial loans and leases:
Commercial	366		323		5,313		6,002		861,512			867,514			—		5,406		—
Equipment financing	4,744		3,158		8,391		16,293		1,313,380			1,329,673			849		13,974		1,348
Condominium association	159		—		—		159		44,029			44,188			—		—		—
Total commercial loans and leases	5,269		3,481		13,704		22,454		2,218,921			2,241,375			849		19,380		1,348
Consumer loans:
Residential mortgage	1,086		3,536		2,453		7,075		1,073,665			1,080,740			—		4,249		2,569
Home equity	1,220		76		297		1,593		338,957			340,550			98		713		—
Other consumer	9		13		2		24		48,325			48,349			—		2		—
Total consumer loans	2,315		3,625		2,752		8,692		1,460,947			1,469,639			98		4,964		2,569
Total loans and leases	$	9,667	$	28,284	$	37,374	$	75,325	$	9,305,457		$	9,380,782		$	1,175	$	51,241	$	9,502

The Company did not recognize any interest income on nonaccrual loans for the three months ended September 30, 2023.

Table of Contents

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, 2022.


	At December 31, 2022
	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		Total		Current					Total Loans and Leases					Non-accrual
	(In Thousands)

Commercial real estate loans:
Commercial real estate	$	2,495	$	199	$	408	$	3,102	$	3,043,644		$	3,046,746		$	—	$	607	$	262
Multi-family mortgage	—		180		—		180		1,150,417			1,150,597			—		—		—
Construction	707		—		—		707		206,098			206,805			—		707		707
Total commercial real estate loans	3,202		379		408		3,989		4,400,159			4,404,148			—		1,314		969
Commercial loans and leases:
Commercial	740		—		343		1,083		751,865			752,948			—		464		—
Equipment financing	5,103		1,764		6,205		13,072		1,203,513			1,216,585			28		9,653		399
Condominium association	2,072		—		—		2,072		44,894			46,966			—		58		—
Total commercial loans and leases	7,915		1,764		6,548		16,227		2,000,272			2,016,499			28		10,175		399
Consumer loans:
Residential mortgage	677		70		1,466		2,213		842,401			844,614			1		2,680		1,091
Home equity	443		—		155		598		322,024			322,622			4		723		—
Other consumer	1		5		2		8		56,497			56,505			—		2		—
Total consumer loans	1,121		75		1,623		2,819		1,220,922			1,223,741			5		3,405		1,091
Total loans and leases	$	12,238	$	2,218	$	8,579	$	23,035	$	7,621,353		$	7,644,388		$	33	$	14,894	$	2,459

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 modified 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.

Table of Contents

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.


	At September 30, 2023
	Commercial Real Estate		Commercial		Consumer		Total
	(In Thousands)
Allowance for Loan and Lease Losses:

Individually evaluated	$	3,273	$	7,194	$	38	$	10,505
Collectively evaluated	75,507		26,311		6,758		108,576
Total	$	78,780	$	33,505	$	6,796	$	119,081









Loans and Leases:

Individually evaluated	$	60,255	$	23,729	$	4,768	$	88,752
Collectively evaluated	5,609,513		2,217,646		1,464,871		9,292,030
Total	$	5,669,768	$	2,241,375	$	1,469,639	$	9,380,782


	At December 31, 2022
	Commercial Real Estate		Commercial		Consumer		Total
	(In Thousands)
Allowance for Loan and Lease Losses:

Individually evaluated	$	62	$	2,982	$	68	$	3,112
Collectively evaluated	68,092		23,622		3,656		95,370
Total loans and leases	$	68,154	$	26,604	$	3,724	$	98,482










Loans and Leases:
Individually evaluated	$	11,039	$	14,346	$	3,863	$	29,248
Collectively evaluated	4,393,109		2,002,153		1,219,878		7,615,140








Total loans and leases	$	4,404,148	$	2,016,499	$	1,223,741	$	7,644,388

Table of Contents

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

Loan Modifications

In January 2023, the Company adopted ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”), which eliminated the accounting guidance for TDRs while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. This guidance was applied on a prospective basis. Upon adoption of this guidance, the Company estimates the reserve for modifications to borrowers experiencing financial difficulty in a manner similar to the process for non-modified loans.

The following tables present the amortized cost basis of loan modifications made to borrowers experiencing financial difficulty during the periods indicated.The loans presented in the following tables relate to three customer relationships.


	Three Months Ended September 30, 2023
	Number of Loans	Amortized Cost		% of Total Class of Loans and Leases		Financial Effect
		(In thousands)
Maturity Extension

C&I	1	$	489	0.03	%	This loan was given a 6-month maturity extension to assist the borrower. The financial effect was deemed "de minimis."





Significant Payment Delays

C&I	2	24		—	%	Both loans were given restructured payment plans to assist borrowers. The financial effect was deemed "de minimis."

Combination

C&I	1	268		0.02	%	This loan was given a 6-month maturity extension and restructured delayed payment plan to assist the borrower. The financial effect was deemed "de minimis."

Total	4	$	781	0.05	%

Table of Contents

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)


	Nine Months Ended September 30, 2023
	Number of Loans	Amortized Cost		% of Total Class of Loans and Leases		Financial Effect
		(In thousands)
Maturity Extension

C&I	11	$	14,111	0.96	%	All 11 loans were given 6-month maturity extensions to assist borrowers. The financial effect was deemed "de minimis."





Significant Payment Delays

C&I	2	$	24	—	%	Both loans were given restructured payment plans to assist borrowers. The financial effect was deemed "de minimis."

Combination

C&I	4	979		0.07	%	All 4 loans were given 6-month maturity extensions and restructured delayed payment plans to assist borrowers. The financial effect was deemed "de minimis."

Total	17	$	15,114	1.03	%

The following tables present the aging analysis of loan modifications made to borrowers experiencing financial difficulty during the periods indicated.


	Three Months Ended September 30, 2023
	Current		30-60 Days Past Due	61-90 Days Past Due	90+ Days Past Due	Modified	Paid Off	Charged Off
	(In thousands)
Total Modifications	$	781	—	—	—	—	—	5,295


	Nine Months Ended September 30, 2023
	Current		30-60 Days Past Due	61-90 Days Past Due	90+ Days Past Due	Modified	Paid Off	Charged Off
	(In thousands)
Total Modifications	$	15,114	—	—	—	—	—	5,295

Table of Contents

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

The following table sets forth information regarding TDR loans and leases at the dates indicated:


	At December 31, 2022
	(In Thousands)
Troubled debt restructurings:
On accrual	$	16,385
On nonaccrual	3,527
Total troubled debt restructurings	$	19,912

Total TDR loans and leases at December 31, 2022 were $19.9 million.

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 September 30, 2022
		Amortized Cost				Specific 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)




Equipment financing	3	$	411	$	411	$	—	$	441	—	$	—


Total loans and leases	3	$	411	$	411	$	—	$	441	—	$	—

______________________________________________________________________

(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 Nine Months Ended September 30, 2022
		Amortized Cost				Specific 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)




Equipment financing	18	1,203		1,099		—		760		5	323


Total loans and leases	18	$	1,203	$	1,099	$	—	$	760	5	$	323

______________________________________________________________________

(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.


	Three Months Ended September 30,		Nine Months Ended September 30,
	2022		2022
	(In Thousands)
Loans with one modification:
Extended maturity	$	—	$	—



Combination maturity, principal, interest rate	411		1,203










Total loans with modifications	$	411	$	1,203

The TDR loans and leases that were modified for the three months ended September 30, 2022 were $0.4 million.

Table of Contents

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

The net charge-offs for performing and nonperforming TDR loans and leases for the nine months ended September 30, 2022 were $0.1 million.

The commitments to lend funds to debtors owing receivables whose terms had been modified in TDRs was as of September 30, 2022 were $0.3 million.

(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 September 30, 2023		At December 31, 2022
	(In Thousands)
Goodwill	$	160,427	$	160,427
Additions	80,795		—

Balance at end of period	241,222		160,427
Other intangible assets:
Core deposits	25,083		692
Trade name	1,089		1,089

Total other intangible assets	26,172		1,781
Total goodwill and other intangible assets	$	267,394	$	162,208

The addition of goodwill and the increase in core deposit intangibles at September 30, 2023 are both due to the acquisition of PCSB which was closed on January 1, 2023.

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 6.22 years.

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 2023	$	1,955
Year ending:
2024	6,636
2025	5,507
2026	4,398
2027	3,329
2028	2,177
Thereafter	1,081
Total	$	25,083

(7) Accumulated Other Comprehensive Income (Loss)

For the nine months ended September 30, 2023 and 2022, 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.

Table of Contents

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

Changes in accumulated other comprehensive income (loss) by component, net of tax, were as follows for the periods indicated:


	Three Months Ended September 30, 2023
	Investment Securities Available-for-Sale		Net Change in Fair Value of Cash Flow Hedges		Postretirement Benefits		Accumulated Other Comprehensive Income (Loss)
	(In Thousands)
Balance at June 30, 2023	$	(62,554)	$	(4,090)	$	488	$	(66,156)
Other comprehensive income (loss)	(14,426)		(2,819)		—		(17,245)
Reclassification adjustment for (income) expense recognized in earnings	—		1,860		—		1,860
Balance at September 30, 2023	$	(76,980)	$	(5,049)	$	488	$	(81,541)


	Three Months Ended September 30, 2022
	Investment Securities Available-for-Sale		Net Change in Fair Value of Cash Flow Hedges		Postretirement Benefits		Accumulated Other Comprehensive Income (Loss)
	(In Thousands)
Balance at June 30, 2022	$	(45,114)	$	101	$	36	$	(44,977)
Other comprehensive income (loss)	(23,035)		(2,083)		—		(25,118)
Reclassification adjustment for (income) expense recognized in earnings	—		(132)		—		(132)
Balance at September 30, 2022	$	(68,149)	$	(2,114)	$	36	$	(70,227)



	Nine Months Ended September 30, 2023
	Investment Securities Available-for-Sale		Net Change in Fair Value of Cash Flow Hedges		Postretirement Benefits		Accumulated Other Comprehensive Income (Loss)
	(In Thousands)
Balance at December 31, 2022	$	(60,192)	$	(2,243)	$	488	$	(61,947)
Other comprehensive income (loss)	(16,788)		(3,876)		—		(20,664)
Reclassification adjustment for (income) expense recognized in earnings	—		1,070		—		1,070
Balance at September 30, 2023	$	(76,980)	$	(5,049)	$	488	$	(81,541)



	Nine Months Ended September 30, 2022
	Investment Securities Available-for-Sale		Net Change in Fair Value of Cash Flow Hedges		Postretirement Benefits		Accumulated Other Comprehensive Income (Loss)
	(In Thousands)
Balance at December 31, 2021	$	(183)	$	37	$	36	$	(110)
Other comprehensive income (loss)	(67,966)		(1,989)		—		(69,955)
Reclassification adjustment for (income) expense recognized in earnings	—		(162)		—		(162)
Balance at September 30, 2022	$	(68,149)	$	(2,114)	$	36	$	(70,227)

Table of Contents

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

(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 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 and loan portfolio. 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.

The following table reflects the Company's derivative positions as of the date indicated below for interest rate derivatives which qualify as cash flow hedges for accounts purposes.


	At September 30, 2023
	Notional Amount		Average Maturity	Weighted Average Rate				Fair Value
				Current Rate Paid		Received Fixed Swap Rate
	(in thousands)		(in years)					(in thousands)
Interest rate swaps on loans	$	225,000	3.2	5.32	%	3.39	%	$	(7,206)


	At December 31, 2022
	Notional Amount		Average Maturity	Weighted Average Rate				Fair Value
				Current Rate Paid		Received Fixed Swap Rate
	(in thousands)		(in years)					(in thousands)
Interest rate swaps on loans	$	150,000	3.77	4.11	%	3.26	%	$	(3,030)

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 in other non-interest income 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.

Table of Contents

BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

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 Positions	Less than 1 year		Less than 2 years		Less than 3 years		Less than 4 years		Thereafter		Total		Fair Value
	September 30, 2023
	(Dollars In Thousands)
Loan level derivatives
Receive fixed, pay variable	150	$	66,590	$	140,347	$	68,732	$194,562		$	1,288,563	$	1,758,794	$	152,834
Pay fixed, receive variable	150	66,590		140,347		68,732		194,562		1,288,563		1,758,794		152,834
Risk participation-out agreements	63	29,585		27,434		6,085		57,535		392,922		513,561		637
Risk participation-in agreements	9	18,188		—		—		23,432		65,004		106,624		166

Foreign exchange contracts
Buys foreign currency, sells U.S. currency	29	$	3,664	$	—	$	—	$	—	$	—	$	3,664	$	160
Sells foreign currency, buys U.S. currency	34	4,290		—		—		—		—		4,290		131


	Notional Amount Maturing
	Number of Positions	Less than 1 year		Less than 2 years		Less than 3 years		Less than 4 years		Thereafter		Total		Fair Value
	December 31, 2022
	(Dollars In Thousands)
Loan level derivatives
Receive fixed, pay variable	132	$	71,547	$	69,454	$	141,498	$	68,140	$	1,139,070	$	1,489,709	$	103,640
Pay fixed, receive variable	132	71,547		69,454		141,498		68,140		1,139,070		1,489,709		103,640
Risk participation-out agreements	54	38,931		22,979		27,508		6,222		297,984		393,624		347
Risk participation-in agreements	8	18,421		—		—		23,766		33,036		75,223		31

Foreign exchange contracts
Buys foreign currency, sells U.S. currency	12	$	2,383	$	—	$	—	$	—	$	—	$	2,383	$	130
Sells foreign currency, buys U.S. currency	12	2,400		—		—		—		—		2,400		112

Table of Contents

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 $140.6 million and $2.4 million in the normal course of business as of September 30, 2023 and December 31, 2022, 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 September 30, 2023
	Gross Amounts Recognized		Gross Amounts Offset in the Statement of Financial Position		Net Amounts Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position				Net Amount
							Financial Instruments Pledged		Cash Collateral Pledged
	(In Thousands)
Asset derivatives
Derivatives designated as hedging instruments:
Interest rate derivatives	$	—	$	—	$	—	$	—	$	—	$	—
Derivatives not designated as hedging instruments:
Loan level derivatives	$	156,802	$	—	$	156,802	$	—	$	—	$	156,802
Risk participation-out agreements	637		—		637		—		—		637
Foreign exchange contracts	160		—		160		—		—		160
Total	$	157,599	$	—	$	157,599	$	—	$	—	$	157,599

Liability derivatives
Derivatives designated as hedging instruments:
Interest rate derivatives	$	7,206	$	—	$	7,206	$	—	$	—	$	7,206
Derivatives not designated as hedging instruments:
Loan level derivatives	$	156,802	$	—	$	156,802	$	41,218	$	99,352	$	16,232
Risk participation-in agreements	166		—		166		—		—		166
Foreign exchange contracts	132		—		132		—		—		132
Total	$	164,306	$	—	$	164,306	$	41,218	$	99,352	$	23,736

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)


	At December 31, 2022
	Gross Amounts Recognized		Gross Amounts Offset in the Statement of Financial Position		Net Amounts Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position				Net Amount
							Financial Instruments Pledged		Cash Collateral Pledged
	(In Thousands)
Asset derivatives
Derivatives designated as hedging instruments:
Interest rate derivatives	$	34	$	—	$	34	$	—	$	—	$	34
Derivatives not designated as hedging instruments:
Loan level derivatives	$	108,963	$	—	$	108,963	$	—	$	—	$	108,963
Risk participation-out agreements	347		—		347		—		—		347
Foreign exchange contracts	130		—		130		—		—		130
Total	$	109,474	$	—	$	109,474	$	—	$	—	$	109,474

Liability derivatives
Derivatives designated as hedging instruments:
Interest rate derivatives	$	3,170	$	—	$	3,170	$	—	$	—	$	3,170
Derivatives not designated as hedging instruments:
Loan level derivatives	$	108,963	$	—	$	108,963	$	2,393	$	—	$	106,570
Risk participation-in agreements	31		—		31		—		—		31
Foreign exchange contracts	112		—		112		—		—		112
Total	$	112,276	$	—	$	112,276	$	2,393	$	—	$	109,883

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
	Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022
	(Dollars in Thousands)

Derivatives designated as hedges	$	(7,206)	$	(2,879)
(Loss) gain in OCI on derivatives (effective portion), net of tax	$	(5,049)	$	(2,114)
Gain (loss) reclassified from OCI into interest income or interest expense (effective portion)	$	(2,513)	$	212

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.

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

(9) Stock Based Compensation

As of September 30, 2023, the Company had one active equity plan: the Brookline Bancorp, Inc. 2021 Stock Option and Incentive Plan ("2021 Plan"). As a result of the 2021 Plan having been approved by the Company's stockholders at the 2021 annual meeting of stockholders, the Company discontinued granting awards under the Brookline Bancorp, Inc. 2014 Equity Incentive Plan (the "2014 Plan"), and no further shares will be granted as awards under the 2014 Plan. The Brookline Bancorp, Inc. 2011 Restricted Stock Plan (the "2011 Plan") expired in July 2021, and the Company has not issued shares from the 2011 Plan since the adoption of the 2014 Plan. The 2021 Plan and the 2014 Plan are together referred to as the "Plans."

Of the awarded shares under the Plans, 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 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. 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 and nine months ended September 30, 2023 and September 30, 2022, 449,265 and 310,349 shares were issued, respectively, upon satisfaction of required conditions of the Plans.

Total expense for the Plans was $1.0 million and $0.9 million for the three months ended September 30, 2023 and 2022, respectively. Total expense for the Plan was $2.8 million and $2.4 million for the nine months ended September 30, 2023 and 2022, respectively.

(10) Earnings per Share ("EPS")

The following table is a reconciliation of basic EPS and diluted EPS:


	Three Months Ended
	September 30, 2023				September 30, 2022
	Basic		Fully Diluted		Basic		Fully Diluted
	(Dollars in Thousands, Except Per Share Amounts)
Numerator:
Net income	$	22,701	$	22,701	$	30,149	$	30,149

Denominator:
Weighted average shares outstanding	88,795,270		88,795,270		76,779,038		76,779,038
Effect of dilutive securities	—		175,940		—		228,933
Adjusted weighted average shares outstanding	88,795,270		88,971,210		76,779,038		77,007,971

EPS	$	0.26	$	0.26	$	0.39	$	0.39

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)




	Nine Months Ended
	September 30, 2023				September 30, 2022
	Basic		Fully Diluted		Basic		Fully Diluted
	(Dollars in Thousands, Except Per Share Amounts)
Numerator:
Net income	$	52,111	$	52,111	$	80,049	$	80,049

Denominator:
Weighted average shares outstanding	88,016,190		88,016,190		77,159,356		77,159,356
Effect of dilutive securities	—		237,171		—		288,934
Adjusted weighted average shares outstanding	88,016,190		88,253,361		77,159,356		77,448,290

EPS	$	0.59	$	0.59	$	1.04	$	1.04

(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 and nine months ended September 30, 2023 and September 30, 2022.

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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 September 30, 2023
	Level 1		Level 2		Level 3		Total
	(In Thousands)
Assets:
Investment securities available-for-sale:
GSE debentures	$	—	$	168,893	$	—	$	168,893
GSE CMOs	—		59,892		—		59,892
GSE MBSs	—		166,462		—		166,462



Municipal obligations	—		3,052		15,265		18,317
Corporate debt obligations	—		17,326		7,297		24,623
U.S. Treasury bonds	—		441,746		—		441,746


Foreign government obligations	—		479		—		479
Total investment securities available-for-sale	$	—	$	857,850	$	22,562	$	880,412

Assets:
Interest rate derivatives	—		—		—		—
Derivatives not designated as hedging instruments:
Loan level derivatives	—		156,802		—		156,802
Risk participation-out agreements	—		637		—		637
Foreign exchange contracts	—		160		—		160
Liabilities:
Interest rate derivatives	$	—	$	7,206	$	—	$	7,206
Derivatives not designated as hedging instruments:
Loan level derivatives	—		156,802		—		156,802
Risk participation-in agreements	—		166		—		166
Foreign exchange contracts	—		132		—		132

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)


	Carrying Value as of December 31, 2022
	Level 1		Level 2		Level 3		Total
	(In Thousands)
Assets:
Investment securities available-for-sale:
GSE debentures	$	—	$	152,422	$	—	$	152,422
GSE CMOs	—		18,220		—		18,220
GSE MBSs	—		140,576		—		140,576




Corporate debt obligations	—		13,764		—		13,764
U.S. Treasury bonds	—		331,307		—		331,307
Foreign government obligations	—		477		—		477


Total investment securities available-for-sale	$	—	$	656,766	$	—	$	656,766

Interest rate derivatives	—		34		—		34
Loan level derivatives	—		108,963		—		108,963
Risk participation-out agreements	—		347		—		347
Foreign exchange contracts	—		130		—		130
Liabilities:
Interest rate derivatives	$	—	$	3,170	$	—	$	3,170
Loan level derivatives	—		108,963		—		108,963
Risk participation-in agreements	—		31		—		31
Foreign exchange contracts	—		112		—		112

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 obligations, municipal obligations and trust preferred securities, all of which are included in Level 2. As of September 30, 2023, $22.6 million of investment securities available-for-sale are included in Level 3 within the investment portfolio. The composition of these assets are primarily composed of subordinated debt of local banks and private placement municipal securities. Of these securities, approximately $15.3 million are private placement municipal Bond Anticipation Notes. As of December 31, 2022, 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.

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 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

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

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 at September 30, 2023 and December 31, 2022, respectively.

The following tables summarize information about significant unobservable inputs related to the Company's categories of Level 3 financial assets and liabilities measured on a recurring basis.

Quantitative Information About Level 3 Fair Value Measurements - Recurring Basis

Financial Instrument

Estimated Fair Value

Valuation Technique(s)

Significant Unobservable Inputs

Range of Inputs

Weighted Average

(In Thousands)

September 30, 2023

Assets

Municipal obligations

15,265

Discounted Cash Flow

Discount Rate from Bloomberg BVAL

0.0%-4.31%

2.35

Corporate debt obligations

2,321

Observable Bids

Bloomberg TRACE

Corporate debt obligations

4,976

Discounted Cash Flow

Discount Rate from Bloomberg/BVAL

5.95

The following table summarizes the changes in estimated fair value for all assets and liabilities measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3).


Changes in Estimated Fair Value of Level 3 Financial Assets and Liabilities - Recurring Basis
	Nine Months Ended September 30, 2023
	(In Thousands)
	Municipal obligations		Corporate debt obligations
Beginning balance	$	—	$	—
Purchases	8,374		—

Included in comprehensive income	(200)		(62)
Transfers in	18,881		12,058
Transfers out	—		—
Sales	—		(4,748)
Maturities, calls, and paydowns	(11,790)		49
Ending balance	$	15,265	$	7,297

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

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 September 30, 2023
	Level 1		Level 2		Level 3		Total
	(In Thousands)
Assets measured at fair value on a non-recurring basis:
Collateral-dependent impaired loans and leases	$	—	$	—	$	24,568	$	24,568

Repossessed assets	—		299		—		299
Total assets measured at fair value on a non-recurring basis	$	—	$	299	$	24,568	$	24,867


	Carrying Value as of December 31, 2022
	Level 1		Level 2		Level 3		Total
	(In Thousands)
Assets measured at fair value on a non-recurring basis:
Collateral-dependent impaired loans and leases	$	—	$	—	$	779	$	779

Repossessed assets	—		408		—		408
Total assets measured at fair value on a non-recurring basis	$	—	$	408	$	779	$	1,187

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 ("OREO")

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. As of September 30, 2023 and December 31, 2022, the Company did not record any OREO.

Repossessed Assets

Repossessed assets are carried at estimated fair value less costs to sell based on auction pricing (Level 2).

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 Value

Valuation Technique

At September 30,
2023

At December 31, 2022

(Dollars in Thousands)

Collateral-dependent impaired loans and leases

24,568

779

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.

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

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 September 30, 2023
	Carrying Value		Estimated Fair Value		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
	(In Thousands)
Financial assets:






Loans and leases, net	$	9,261,701	$	8,736,589	$	—	$	—	$	8,736,589



Financial liabilities:

Certificates of deposits	2,386,237		2,364,405		—		2,364,405		—
Borrowed funds	1,135,068		1,131,605		—		1,131,605		—


			Fair Value Measurements at December 31, 2022
	Carrying Value	Estimated Fair Value	Level 1 Inputs	Level 2 Inputs	Level 3 Inputs
	(In Thousands)
Financial assets:






Loans and leases, net	7,545,906	7,450,654	—	—	7,450,654


Financial liabilities:

Certificates of deposit	1,238,287	1,217,024	—	1,217,024	—
Borrowed funds	1,432,652	1,431,716	—	1,431,716	—

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.

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).

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BROOKLINE BANCORP, INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements (Continued)

Borrowed Funds

The fair value of federal funds purchased is equal to the amount borrowed. The fair value of FHLB 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.

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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 September 30, 2023		At December 31, 2022
	(In Thousands)
Financial instruments whose contract amounts represent credit risk:
Commitments to originate loans and leases:
Commercial real estate	$	162,380	$	414,217
Commercial	246,331		291,188
Residential mortgage	20,359		14,036
Unadvanced portion of loans and leases	1,259,927		1,202,738
Unused lines of credit:
Home equity	758,553		700,201
Other consumer	113,952		97,313
Other commercial	499		526
Unused letters of credit:
Financial standby letters of credit	16,111		13,584
Performance standby letters of credit	28,759		31,330
Commercial and similar letters of credit	4,867		2,619
Interest rate derivatives	225,000		150,000
Loan level derivatives (Notional principal amounts):
Receive fixed, pay variable	1,758,794		1,489,709
Pay fixed, receive variable	1,758,794		1,489,709
Risk participation-out agreements	513,561		393,624
Risk participation-in agreements	106,624		75,223
Foreign exchange contracts (Notional amounts):
Buys foreign currency, sells U.S. currency	3,664		2,383
Sells foreign currency, buys U.S. currency	4,290		2,400

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 Note 8.

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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 1 year 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 uses the FHLB classic advance rates available as of the lease's start dates as the discount rate to determine the net present value of the remaining lease payments.

Total lease commitments increased from $19.5 million as of December 31, 2022 to $32.8 million as of September 30, 2023. The increase is due to the addition of 12 leases for PCSB Bank branch locations.


	Nine Months Ended September 30, 2023		Nine Months Ended September 30, 2022
	(In Thousands)
The components of lease expense was as follows:
Operating lease cost	$	6,303	$	4,708





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	$	6,662	$	4,849


Right-of-use assets obtained in exchange for new lease obligations:
Operating leases assets	$	14,829	$	14
Operating leases liabilities	16,496		—


	At September 30, 2023		At December 31, 2022
	(In Thousands)
Supplemental balance sheet information related to leases was as follows:
Operating Leases
Operating lease right-of-use assets	$	31,619	$	19,484


Operating lease liabilities	32,807		19,484











Weighted Average Remaining Lease Term
Operating leases	9.23		7.39


Weighted Average Discount Rate
Operating leases	4.1%		3.5%

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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
	September 30, 2023
	(In Thousands)

Remainder of 2023	$	2,186
Year ending:
2024	7,863
2025	6,437
2026	5,028
2027	4,062
2028	2,682
Thereafter	9,676
Total	$	37,934
Less imputed interest	(5,127)
Present value of lease liability	$	32,807

Certain leases contain escalation clauses for real estate taxes and other expenditures, which are not included above. The total real estate taxes were $1.9 million and $1.5 million for the nine months ended September 30, 2023 and 2022, respectively. Total other expenditures were $0.4 million and $0.3 million for the nine months ended September 30, 2023 and 2022, respectively. Total rental expense was $2.1 million and $1.5 million for the three months ended September 30, 2023 and 2022, respectively. Total rental expense was $6.3 million and $4.5 million for the nine months ended September 30, 2023 and 2022.

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 ASC 606 ("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.

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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.

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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 important factors, the Company’s ability to achieve the synergies and value creation contemplated in connection with the recently completed acquisition of PCSB Financial Corporation ("PCSB"); turbulence in the capital and debt markets; changes in interest rates; competitive pressures from other financial institutions; general economic conditions (including inflation and concerns about liquidity) 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, 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; 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, 2022 and other filings submitted to the Securities and Exchange Commission ("SEC"). 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"); PCSB Bank and its subsidiaries; Brookline Securities Corp; and Clarendon Private, LLC.

As a commercially-focused financial institution with 64 full-service banking offices throughout greater Boston, the north shore of Massachusetts, Rhode Island and New York, the Company, through Brookline Bank, BankRI and PCSB Bank (collectively referred to as the "Banks"), 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 and the lower Hudson Valley in New York. The Banks and their subsidiaries lend primarily in all New England states and New York, with the exception of equipment financing, 29.2% of which is in the greater New York and New Jersey metropolitan area and 70.8% of which is in other areas in the United States of America as of September 30, 2023. Clarendon Private is a registered investment advisor with the SEC. Through Clarendon Private, the Company offers a wide range of wealth management services to individuals, families, endowments and foundations to help these clients meet their long-term financial goals.

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.

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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 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 strong. Loan and deposit growth are also influenced by the rate-setting actions of the Board of Governors of the Federal Reserve System (the "FRB"). Based on management's scenario analysis of deposit sensitivity to the current rate environment and customer's demand for non-depository investment alternatives, management expects that there will be further deposit mix migration and increased deposit sensitivity to interest rates, which will negatively impact net interest income and net interest margin.

Management expects pressure on the net interest margin to continue for a quarter or two after the Federal Reserve stops increasing rates, after which the net interest margin is expected to stabilize and then increase as loans continue to reprice into the higher rate environment faster than time deposits and other funding sources. Net interest income models, using a projected flat balance sheet with stable deposit balances and an average sensitivity of deposit rates of approximately 39% to market rates, forecast that a short-term increase in rates will positively affect the Company's net interest income, net interest spread, and net interest margin.

As discussed above, 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 income, manage credit risk, increase sources of non-interest income, while managing 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 subject to supervision, examination and regulation by the Massachusetts Division of Banks. As a Rhode Island-chartered financial institution, BankRI is subject to examination, supervision and regulation by the Banking Division of the Rhode Island Department of Business Regulation. As a New York-chartered commercial bank, PCSB Bank is subject to regulation, supervision and examination by the New York State Department of Financial Services. The FDIC insures each of the Banks’ deposits up to $250,000 per depositor.

On January 1, 2023, the Company completed its previously announced acquisition (the “merger”) of PCSB. Pursuant to the merger agreement, each share of PCSB common stock outstanding at the effective time of the merger was converted into the right to receive, at the holder’s election, either $22.00 in cash consideration or 1.3284 shares of Company common stock for each share of PCSB common stock, subject to allocation procedures to ensure that 60% of the outstanding shares of PCSB common stock was converted to Company common stock. Subsequent to the acquisition, PCSB Bank operates as a separate subsidiary of the Company and has 14 banking offices throughout the Lower Hudson Valley of New York State.

The Company’s common stock is traded on the Nasdaq Global Select MarketSM under the symbol “BRKL.”

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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
	September 30,			June 30,			March 31,			December 31,			September 30,
	2023			2023			2023			2022			2022
	(Dollars in Thousands, Except Per Share Data)
PER COMMON SHARE DATA
Earnings per share - Basic	$	0.26		$	0.25		$	0.09		$	0.39		$	0.39
Earnings per share - Diluted	0.26			0.25			0.09			0.39			0.39
Book value per share (end of period)	13.03			13.11			13.14			12.91			12.54
Tangible book value per share (end of period) (1)	10.02			10.07			10.08			10.80			10.43
Dividends paid per common share	0.135			0.135			0.135			0.135			0.130
Stock price (end of period)	9.11			8.74			10.50			14.15			11.65

PERFORMANCE RATIOS (2)
Net interest margin (taxable equivalent basis)	3.18		%	3.26		%	3.36		%	3.81		%	3.80		%
Return on average assets	0.81		%	0.78		%	0.27		%	1.34		%	1.40		%
Return on average tangible assets (1)	0.83		%	0.79		%	0.28		%	1.37		%	1.43		%
Return on average stockholders' equity	7.78		%	7.44		%	2.61		%	12.09		%	12.29		%
Return on average tangible stockholders' equity (1)	10.09		%	9.67		%	3.43		%	14.48		%	14.72		%
Dividend payout ratio (1)	52.81		%	54.78		%	158.33		%	34.94		%	33.07		%
Efficiency ratio (3)	64.39		%	63.20		%	65.44		%	53.01		%	52.98		%

ASSET QUALITY RATIOS
Net loan and lease charge-offs as a percentage of average loans and leases (annualized)	0.47		%	0.05		%	0.02		%	0.02		%	(0.01)		%
Nonperforming loans and leases as a percentage of total loans and leases	0.55		%	0.50		%	0.31		%	0.19		%	0.24		%
Nonperforming assets as a percentage of total assets	0.46		%	0.42		%	0.25		%	0.17		%	0.21		%
Total allowance for loan and lease losses as a percentage of total loans and leases	1.27		%	1.35		%	1.31		%	1.29		%	1.27		%

CAPITAL RATIOS
Stockholders' equity to total assets	10.36		%	10.37		%	10.11		%	10.80		%	11.08		%
Tangible equity ratio (1)	8.16		%	8.16		%	7.94		%	9.20		%	9.39		%

FINANCIAL CONDITION DATA
Total assets	$	11,180,555		$	11,206,078		$	11,522,485		$	9,185,836		$	8,695,708
Total loans and leases	9,380,782			9,340,799			9,246,965			7,644,388			7,421,304
Allowance for loan and lease losses	119,081			125,817			120,865			98,482			94,169
Allowance for investment security losses	517			433			301			102			48
Investment securities available-for-sale	880,412			910,210			1,067,032			656,766			675,692


Goodwill and identified intangible assets	267,394			269,348			271,302			162,208			162,329
Total deposits	8,566,013			8,517,013			8,456,462			6,522,146			6,735,605
Total borrowed funds	1,135,068			1,226,270			1,630,102			1,432,652			758,768
Stockholders' equity	1,157,871			1,162,308			1,165,066			992,125			963,618


													(Continued)

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	At and for the Three Months Ended
	September 30,		June 30,		March 31,		December 31,		September 30,
	2023		2023		2023		2022		2022
	(Dollars in Thousands, Except Per Share Data)
EARNINGS DATA
Net interest income	$	84,070	$	86,037	$	86,049	$	80,030	$	78,026
Provision (credit) for credit losses	2,947		5,726		25,542		5,725		2,835
Non-interest income	5,508		5,462		12,937		9,056		6,834
Non-interest expense	57,679		57,825		64,776		47,225		44,959
Net income	22,701		21,850		7,560		29,695		30,149

_______________________________________________________________________________

(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 increased $2.0 billion to $11.2 billion as of September 30, 2023 from $9.2 billion as of December 31, 2022. The increase was primarily driven by the acquisition of PCSB.

Cash and cash equivalents decreased $222.0 million to $161.0 million as of September 30, 2023 from $383.0 million as of December 31, 2022.

Total investment securities increased $223.6 million to $880.4 million as of September 30, 2023 from $656.8 million as of December 31, 2022.

Total loans and leases increased $1.7 billion to $9.4 billion as of September 30, 2023 from $7.6 billion as of December 31, 2022. The Company's commercial loan portfolios, which are composed of commercial real estate loans and commercial loans and leases, totaled $7.9 billion, or 84.3% of total loans and leases as of September 30, 2023, an increase of $1.5 billion from $6.4 billion, or 84.0% of total loans and leases as of December 31, 2022.

Total deposits increased $2.0 billion to $8.6 billion as of September 30, 2023 from $6.5 billion as of December 31, 2022. Core deposits, which include demand checking, NOW, money market and savings accounts, totaled $6.2 billion, or 72.1% of total deposits as of September 30, 2023, an increase of $895.9 million from $5.3 billion, or 81.0% of total deposits as of December 31, 2022. Certificate of deposit balances totaled $1.5 billion, or 17.4% of total deposits as of September 30, 2023, an increase of $563.7 million from $928.1 million, or 14.2% of total deposits as of December 31, 2022. Brokered deposits totaled $894.4 million, or 10.4% of total deposits as of September 30, 2023, an increase of $584.2 million from $310.1 million, or 4.8% of total deposits as of December 31, 2022.

Total borrowed funds decreased $297.6 million to $1.1 billion as of September 30, 2023 from $1.4 billion as of December 31, 2022.

Asset Quality

Nonperforming assets as of September 30, 2023 totaled $51.5 million, or 0.46% of total assets, compared to $15.3 million, or 0.17% of total assets, as of December 31, 2022. Net charge-offs for the three months ended September 30, 2023 were $11.0 million, or 0.47% of average loans and leases on an annualized basis, compared to net recoveries of $0.2 million, or (0.01)% of average loans and leases on an annualized basis, for the three months ended September 30, 2022.

The ratio of the allowance for loan and lease losses to total loans and leases was 1.27% as of September 30, 2023, compared to 1.29% as of December 31, 2022.

The ratio of the allowance for loan and lease losses to nonaccrual loans and leases was 232.39% as of September 30, 2023, compared to 661.22% as of December 31, 2022.

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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 10.24% as of September 30, 2023, compared to 12.05% as of December 31, 2022. The Company's Tier 1 leverage ratio was 8.96% as of September 30, 2023, compared to 10.26% as of December 31, 2022. As of September 30, 2023, the Company's Tier 1 risk-based capital ratio was 10.35%, compared to 12.18% as of December 31, 2022. The Company's Total risk-based capital ratio was 12.38% as of September 30, 2023, compared to 14.44% as of December 31, 2022.

The Company's ratio of stockholders' equity to total assets was 10.36% and 10.80% as of September 30, 2023 and December 31, 2022, respectively. The Company's ratio of tangible stockholders' equity to tangible assets was 8.16% and 9.20% as of September 30, 2023 and December 31, 2022, respectively.

Net Income

For the three months ended September 30, 2023, the Company reported net income of $22.7 million, or $0.26 per basic and diluted share, a decrease of $7.4 million, or 24.7%, from net income of $30.1 million, or $0.39 per basic and diluted share, for the three months ended September 30, 2022. This decrease in net income is primarily the result of an increase in non-interest expense of $12.7 million, an increase in the provision for credit losses of $0.1 million, and a decrease in non-interest income of $1.3 million, partially offset by an increase in net interest income of $6.0 million and a decrease in the provision for income taxes of $0.8 million. Refer to “Results of Operations" below for further discussion.

For the nine months ended September 30, 2023, the Company reported net income of $52.1 million, or $0.59 per basic and diluted share, a decrease of $27.9 million, or 34.9%, from $80.0 million, or $1.04 per basic and diluted share for the nine months ended September 30, 2022. This decrease in net income is primarily the result of an increase in non-interest expense of $48.0 million and an increase in the provision for credit losses of $31.2 million, partially offset by an increase in net interest income of $36.4 million, an increase in non-interest income of $4.6 million, and a decrease in the provision for income taxes of $10.5 million. Refer to “Results of Operations" below for further discussion.

The annualized return on average assets was 0.81% for the three months ended September 30, 2023, compared to 1.40% for the three months ended September 30, 2022. The annualized return on average stockholders' equity was 7.78% for the three months ended September 30, 2023, compared to 12.29% for the three months ended September 30, 2022.

The net interest margin was 3.18% for the three months ended September 30, 2023, down from 3.80% for the three months ended September 30, 2022. The decrease in the net interest margin is a result of an increase of 200 basis points in the Company's overall cost of funds (including non-interest-bearing demand checking accounts) to 2.57% for the three months ended September 30, 2023 from 0.57% for the three months ended September 30, 2022, partially offset by an increase in the yield on interest-earning assets of 126 basis points to 5.61% for the three months ended September 30, 2023 from 4.35% for the three months ended September 30, 2022.

The net interest margin was 3.27% for the nine months ended September 30, 2023, down from 3.62% for the nine months ended September 30, 2022. The decrease in the net interest margin is a result of an increase of 191 basis points in the Company's overall cost of funds (including non-interest-bearing demand checking accounts) to 2.31% for the nine months ended September 30, 2023 from 0.40% for the nine months ended September 30, 2022, partially offset by an increase in the yield on interest-earning assets of 143 basis points to 5.40% for the nine months ended September 30, 2023 from 3.97% for the nine months ended September 30, 2022.

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 and Estimates

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 2022 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.

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Recent Accounting Developments

In March 2023, the FASB issued ASU 2023-02, "Investments – Equity Method and Joint Ventures (Topic 323), Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method" which allows entities to use the proportional amortization method to account for tax equity investments, under certain conditions. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years for public entities. Management has determined that ASU 2023-02 does apply to the Company and is currently determining the impact as of September 30, 2023.

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 September 30,						At and for the Nine Months Ended September 30,
	2023			2022			2023			2022
	(Dollars in Thousands)
Reported Pretax Income	$	28,868		$	37,066		$	65,351		$	103,813

Less:
Gains on the sale of investment securities (1)	—			—			1,704			—
Add:
Day 1 PCSB CECL provision	—			—			16,744			—
Merger and acquisition expense (2)	—			1,073			7,411			1,608
Operating Pretax Income	$	28,868		38,139			87,802			105,421
Effective tax rate	21.4		%	18.7		%	20.3		%	22.9		%
Provision for income taxes	6,167			7,118			17,789			24,132
Operating earnings after tax	$	22,701		$	31,021		$	70,013		$	81,289

Operating earnings per common share:
Basic	$	0.26		$	0.40		$	0.80		$	1.05
Diluted	$	0.26		$	0.40		0.79			$	1.05

_______________________________________________________________________________

(1) Realized gain related to the rebalancing of the PCSB investment portfolio after acquisition.

(2) Merger and acquisition expense related to the acquisition of PCSB.

The following tables reconcile the Company’s return on average tangible assets and return on average tangible stockholders’ equity for the periods indicated:



	Three Months Ended
	September 30, 2023		June 30, 2023		March 31, 2023		December 31, 2022		September 30, 2022
	(Dollars in Thousands)
Operating earnings	$	22,701	$	23,227	$	23,283	$	30,015	$	31,021

Average total assets	$	11,180,635	$	11,272,672	$	11,131,087	$	8,857,631	$	8,586,420
Less: Average goodwill and average identified intangible assets, net	268,199		270,147		278,135		162,266		162,387
Average tangible assets	$	10,912,436	$	11,002,525	$	10,852,952	$	8,695,365	$	8,424,033

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	Three Months Ended
	September 30, 2023			June 30, 2023		March 31, 2023		December 31, 2022		September 30, 2022
	(Dollars in Thousands)

Return on average assets (annualized)	0.81%			0.78%		0.27%		1.34%		1.40%
Less:
Gains on the sale of investment securities	—%			—%		0.05%		0.01%		—%
Add:
Day 1 PCSB CECL provision	—%			—%		0.47%		—%		—%
Merger and acquisition expenses	—%			0.03%		0.18%		0.02%		0.04%

Operating return on average assets (annualized)	0.81%			0.81%		0.87%		1.35%		1.44%

Return on average tangible assets (annualized)	0.83%			0.79%		0.28%		1.37%		1.43%
Less:
Gains on the sale of investment securities	—%			—%		0.05%		0.01%		—%

Add:
Day 1 PCSB CECL provision	—		%	—%		0.48%		—%		—%
Merger and acquisition expenses	—%			0.03%		0.18%		0.02%		0.04%

Operating return on average tangible assets (annualized)	0.83%			0.82%		0.89%		1.38%		1.47%

Average total stockholders' equity	$	1,167,727		$	1,174,167	$	1,159,635	$	982,306	$	981,379
Less: Average goodwill and average identified intangible assets, net	268,199			270,147		278,135		162,266		162,387
Average tangible stockholders' equity	$	899,528		$	904,020	$	881,500	$	820,040	$	818,992

Return on average stockholders' equity (annualized)	7.78%			7.44%		2.61%		12.09%		12.29%
Less:
Gains on the sale of investment securities	—%			—%		0.45%		0.11%		—%
Add:
Day 1 PCSB CECL provision	—%			—%		4.46%		—%		—%
Merger and acquisition expenses	—%			0.28%		1.71%		0.21%		0.36%

Operating return on average stockholders' equity (annualized)	7.78%			7.72%		8.33%		12.19%		12.65%




Return on average tangible stockholders' equity (annualized)	10.09%			9.67%		3.43%		14.48%		14.72%
Less:
Gains on the sale of investment securities	—%			—%		0.60%		0.13%		—%
Add:
Day 1 PCSB CECL provision	—%			—%		5.87%		—%		—%
Merger and acquisition expenses	—%			0.36%		2.25%		0.26%		0.43%

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Three Months Ended

September 30,
2023

June 30,
2023

March 31,
2023

December 31,
2022

September 30,
2022

(Dollars in Thousands)

Operating return on average tangible stockholders' equity (annualized)

10.09%

10.03%

10.95%

14.61%

15.15%


	Three Months Ended
	September 30, 2023		June 30, 2023		March 31, 2023		December 31, 2022		September 30, 2022
	(Dollars in Thousands)
Net income, as reported	$	22,701	$	21,850	$	7,560	$	29,695	$	30,149

Average total assets	$	11,180,635	$	11,272,672	$	11,131,087	$	8,857,631	$	8,586,420
Less: Average goodwill and average identified intangible assets, net	268,199		270,147		278,135		162,266		162,387
Average tangible assets	$	10,912,436	$	11,002,525	$	10,852,952	$	8,695,365	$	8,424,033

Return on average tangible assets (annualized)	0.83%		0.79%		0.28%		1.37%		1.43%

Average total stockholders' equity	$	1,167,727	$	1,174,167	$	1,159,635	$	982,306	$	981,379
Less: Average goodwill and average identified intangible assets, net	268,199		270,147		278,135		162,266		162,387
Average tangible stockholders' equity	$	899,528	$	904,020	$	881,500	$	820,040	$	818,992

Return on average tangible stockholders' equity (annualized)	10.09%		9.67%		3.43%		14.48%		14.72%

The following table reconciles the Company's tangible equity ratio for the periods indicated:


	Three Months Ended
	September 30, 2023		June 30, 2023		March 31, 2023		December 31, 2022		September 30, 2022
	(Dollars in Thousands)
Total stockholders' equity	$	1,157,871	$	1,162,308	$	1,165,066	$	992,125	$	963,618
Less: Goodwill and identified intangible assets, net	267,394		269,348		271,302		162,208		162,329
Tangible stockholders' equity	$	890,477	$	892,960	$	893,764	$	829,917	$	801,289

Total assets	$	11,180,555	$	11,206,078	$	11,522,485	$	9,185,836	$	8,695,708
Less: Goodwill and identified intangible assets, net	267,394		269,348		271,302		162,208		162,329
Tangible assets	$	10,913,161	$	10,936,730	$	11,251,183	$	9,023,628	$	8,533,379

Tangible equity ratio	8.16%		8.16%		7.94%		9.20%		9.39%

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The following table reconciles the Company's tangible book value per share for the periods indicated:


	Three Months Ended
	September 30, 2023		June 30, 2023		March 31, 2023		December 31, 2022		September 30, 2022
	(Dollars in Thousands)
Tangible stockholders' equity	$	890,477	$	892,960	$	893,764	$	829,917	$	801,289

Common shares issued	96,998,075		96,998,075		96,998,075		85,177,172		85,177,172
Less:
Treasury shares	7,350,981		7,734,891		7,734,891		7,731,445		7,730,945
Unallocated ESOP	—		—		—		—		4,833
Unvested restricted stock	780,859		598,049		598,049		601,495		601,995
Common shares outstanding	88,866,235		88,665,135		88,665,135		76,844,232		76,839,399

Tangible book value per share	$	10.02	$	10.07	$	10.08	$	10.80	$	10.43

The following table reconciles the Company's dividend payout ratio for the periods indicated:


	Three Months Ended
	September 30, 2023		June 30, 2023		March 31, 2023		December 31, 2022		September 30, 2022
	(Dollars in Thousands)
Dividends paid	$	11,989	$	11,969	$	11,970	$	10,374	$	9,969

Net income, as reported	$	22,701	$	21,850	$	7,560	$	29,695	$	30,149

Dividend payout ratio	52.81%		54.78%		158.33%		34.94%		33.07%

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Financial Condition

Loans and Leases

The following table summarizes the Company's portfolio of loan and lease receivables as of the dates indicated:


	At September 30, 2023				At December 31, 2022
	Balance		Percent of Total		Balance		Percent of Total
	(Dollars in Thousands)
Commercial real estate loans:
Commercial real estate	$	3,969,956	42.3	%	$	3,046,746	39.9	%
Multi-family mortgage	1,356,056		14.5	%	1,150,597		15.1	%
Construction	343,756		3.7	%	206,805		2.7	%
Total commercial real estate loans	5,669,768		60.5	%	4,404,148		57.7	%
Commercial loans and leases:
Commercial	867,514		9.2	%	752,948		9.9	%
Equipment financing	1,329,673		14.2	%	1,216,585		15.9	%
Condominium association	44,188		0.5	%	46,966		0.6	%

Total commercial loans and leases	2,241,375		23.9	%	2,016,499		26.4	%
Consumer loans:
Residential mortgage	1,080,740		11.5	%	844,614		11.0	%
Home equity	340,550		3.6	%	322,622		4.2	%
Other consumer	48,349		0.5	%	56,505		0.7	%
Total consumer loans	1,469,639		15.6	%	1,223,741		15.9	%
Total loans and leases	9,380,782		100.0	%	7,644,388		100.0	%
Allowance for loan and lease losses	(119,081)				(98,482)
Net loans and leases	$	9,261,701			$	7,545,906

The following table sets forth the growth in the Company’s loan and lease portfolios during the nine months ended September 30, 2023:


	At September 30, 2023		At December 31, 2022		Dollar Change		Percent Change (Annualized)
	(Dollars in Thousands)
Commercial real estate	$	5,669,768	$	4,404,148	$	1,265,620	38.3	%
Commercial	2,241,375		2,016,499		224,876		14.9	%
Consumer	1,469,639		1,223,741		245,898		26.8	%
Total loans and leases	$	9,380,782	$	7,644,388	$	1,736,394	30.3	%

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 $60.0 million unless approved by the Company's Credit Committee. As of September 30, 2023, there were four borrowers with loans and commitments over $60.0 million. The total of those loans and commitments was $260.0 million, or 2.3% of total loans and commitments, as of September 30, 2023. As of December 31, 2022, there were three borrowers with loans and commitments

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over $60.0 million. The total of those loans and commitments was $208.5 million, or 2.2% of total loans and commitments, as of December 31, 2022.

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 composed 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 60.5% of total loans and leases outstanding as of September 30, 2023.

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 ($1.3 billion), office buildings ($849.9 million), retail stores ($953.9 million), industrial properties ($751.0 million), mixed-use properties ($508.0 million), lodging services ($195.3 million), and food services ($77.7 million) as of September 30, 2023. At that date, approximately 78.3% of the commercial real estate loans outstanding were secured by properties located in New England, and approximately 18.0% of the commercial real estate loans outstanding were secured by properties located in the greater New York and New Jersey Metropolitan area.

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 composed of commercial loans, equipment financing loans and leases and condominium association loans, which represented 23.9% of total loans outstanding as of September 30, 2023.

The Company's commercial loan and lease portfolio is composed primarily of loans and leases to small to medium sized businesses ($820.9 million), transportation services ($359.3 million), food services ($195.6 million), recreation services ($142.6 million), manufacturing ($110.6 million), retail ($149.9 million), and rental and leasing services ($59.4 million) as of September 30, 2023.

The Company provides commercial banking services to companies in its market area. Approximately 39.0% of the commercial loans outstanding as of September 30, 2023 were made to borrowers located in New England. The remaining 61.0% 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 FHLB of Boston and FHLB of New York 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 $0.3 million as of September 30, 2023.

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 17.3% 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 composed of residential mortgage loans, home equity loans and lines of credit, and other consumer loans, represented 15.6% of total loans outstanding as of September 30, 2023. 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, Lower Hudson Valley of New York, 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 September 30, 2023, other consumer loans equaled $48.3 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 September 30, 2023, the Company had $156.7 million of total assets that were designated as criticized. This compares to $108.2 million of assets designated as criticized as of December 31, 2022. The increase of $48.5 million in criticized assets was primarily driven by increases in commercial real estate and equipment financing relationships for the nine months ended September 30, 2023.

Nonperforming Assets

"Nonperforming assets" consist of nonaccrual 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. When a loan is placed on nonaccrual status, interest accruals cease and all previously accrued and uncollected interest is reversed and charged against current interest income. Interest payments on nonaccrual 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 modified 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 September 30, 2023, the Company had nonperforming assets of $51.5 million, representing 0.46% of total assets, compared to nonperforming assets of $15.3 million, or 0.17% of total assets as of December 31, 2022. The increase of $36.2 million in nonperforming assets was primarily driven by the $22.7 million increase in commercial real estate loans, the $4.9 million increase in commercial loans, and the $4.3 million increase in equipment financing loans during the nine months ended September 30, 2023.

The Company evaluates the underlying collateral of each nonaccrual 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 September 30, 2023, the Company had $1.2 million loans and leases greater than 90 days past due and accruing, compared to minimal to no loans as of December 31, 2022. The $1.2 million increase in loans and leases greater than 90 days past due and accruing is primarily due to one equipment financing relationship totaling $0.9 million.

The following table sets forth information regarding nonperforming assets for the periods indicated:


	At September 30, 2023			At December 31, 2022
	(Dollars in Thousands)
Nonperforming loans and leases:
Nonaccrual loans and leases:
Commercial real estate	$	23,263		$	607
Multi-family mortgage	1,318			—
Construction	2,316			707
Total commercial real estate loans	26,897			1,314

Commercial	5,406			464
Equipment financing	13,974			9,653
Condominium association	—			58
Total commercial loans and leases	19,380			10,175

Residential mortgage	4,249			2,680
Home equity	713			723
Other consumer	2			2
Total consumer loans	4,964			3,405

Total nonaccrual loans and leases	51,241			14,894


Other repossessed assets	299			408
Total nonperforming assets	$	51,540		$	15,302

Loans and leases past due greater than 90 days and accruing	$	1,175		$	33
Total delinquent loans and leases 61-90 days past due	28,284			2,218
Restructured loans and leases not included in nonperforming assets	—			16,385

Total nonperforming loans and leases as a percentage of total loans and leases	0.55		%	0.19		%
Total nonperforming assets as a percentage of total assets	0.46		%	0.17		%
Total delinquent loans and leases 61-90 days past due as a percentage of total loans and leases	0.30		%	0.03		%

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

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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 estimated losses in the portfolio. Under the current methodology, management estimates losses over the life of the loan using reasonable and supportable forecasts. Forecasts, loan data, and model documentation are extensively analyzed and reviewed throughout the quarter to ensure estimated losses are appropriate 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 September 30, 2023, qualitative adjustments were applied to the commercial real estate, commercial, and consumer 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 and nine months ended September 30, 2023 and 2022.


	At and for the Three Months Ended September 30, 2023
	Commercial Real Estate			Commercial			Consumer			Total
	(In Thousands)
Balance at June 30, 2023	$	84,301		$	35,634		$	5,882		$	125,817

Charge-offs	—			(11,047)			(29)			(11,076)
Recoveries	3			89			10			102
Provision (credit) for loan and lease losses	(5,524)			8,829			933			4,238
Balance at September 30, 2023	$	78,780		$	33,505		$	6,796		$	119,081

Total loans and leases	$	5,669,768		$	2,241,375		$	1,469,639		$	9,380,782
Total allowance for loan and lease losses as a percentage of total loans and leases	1.39		%	1.49		%	0.46		%	1.27		%


	At and for the Three Months Ended September 30, 2022
	Commercial Real Estate			Commercial			Consumer			Total
	(In Thousands)
Balance at June 30, 2022	$	70,027		$	20,105		$	3,056		$	93,188

Charge-offs	—			(584)			(14)			(598)
Recoveries	6			763			8			777
Provision (credit) for loan and lease losses	(2,573)			2,984			391			802
Balance at September 30, 2022	$	67,460		$	23,268		$	3,441		$	94,169

Total loans and leases	$	4,269,512		$	1,933,645		$	1,218,147		$	7,421,304
Total allowance for loan and lease losses as a percentage of total loans and leases	1.58		%	1.20		%	0.28		%	1.27		%

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	At and for the Nine Months Ended September 30, 2023
	Commercial Real Estate			Commercial			Consumer			Total
	(In Thousands)
Balance at December 31, 2022	$	68,154		$	26,604		$	3,724		$	98,482


Charge-offs	—			(13,475)			(38)			(13,513)
Recoveries	15			951			25			991
Provision (credit) for loan and lease losses	10,611			19,425			3,085			33,121
Balance at September 30, 2023	$	78,780		$	33,505		$	6,796		$	119,081

Total loans and leases	$	5,669,768		$	2,241,375		$	1,469,639		$	9,380,782
Total allowance for loan and lease losses as a percentage of total loans and leases	1.39		%	1.49		%	0.46		%	1.27		%



	At and for the Nine Months Ended September 30, 2022
	Commercial Real Estate			Commercial			Consumer			Total
	(In Thousands)
Balance at December 31, 2021	$	69,213		$	27,055		$	2,816		$	99,084


Charge-offs	(37)			(4,417)			(20)			(4,474)
Recoveries	18			1,395			52			1,465
Provision (credit) for loan and lease losses	(1,734)			(765)			593			(1,906)
Balance at September 30, 2022	$	67,460		$	23,268		$	3,441		$	94,169

Total loans and leases	$	4,269,512		$	1,933,645		$	1,218,147		$	7,421,304
Total allowance for loan and lease losses as a percentage of total loans and leases	1.58		%	1.20		%	0.28		%	1.27		%

At September 30, 2023, the allowance for loan and lease losses increased to $119.1 million, or 1.27% of total loans and leases outstanding, which included $2.3 million in provision (credit) for loan and lease losses on purchase credit deteriorated ("PCD") loans. This compared to an allowance for loan and lease losses of $98.5 million, or 1.29% of total loans and leases outstanding, as of December 31, 2022. Both figures exclude Paycheck Protection Program ("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 September 30, 2023 were $11.0 million compared to net recoveries for the three months ended September 30, 2022 of $0.2 million. As a percentage of average loans and leases, annualized net charge-offs for the three months ended September 30, 2023 and 2022 were 0.47% and a negative 0.01%, respectively. The year over year increase in the net charge-offs was primarily due to increases in net charge-offs of $9.8 million in commercial loans and $1.3 million in equipment financing loans.

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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 September 30, 2023						At December 31, 2022
	Amount		Percent of Allowance in Each Category to Total Allowance		Percent of Loans in Each Category to Total Loans		Amount		Percent of Allowance in Each Category to Total Allowance		Percent of Loans in Each Category to Total Loans
	(Dollars in Thousands)
Commercial real estate	$	50,688	42.5	%	42.3	%	$	44,536	45.3	%	39.9	%
Multi-family mortgage	17,045		14.3	%	14.5	%	16,885		17.1	%	15.1	%
Construction	11,047		9.3	%	3.7	%	6,733		6.8	%	2.7	%
Total commercial real estate loans	78,780		66.1	%	60.5	%	68,154		69.2	%	57.7	%
Commercial	16,744		14.1	%	9.2	%	12,190		12.4	%	9.9	%
Equipment financing	16,624		14.0	%	14.2	%	14,315		14.5	%	15.9	%
Condominium association	137		0.1	%	0.5	%	99		0.1	%	0.6	%
Total commercial loans	33,505		28.2	%	23.9	%	26,604		27.0	%	26.4	%
Residential mortgage	3,966		3.3	%	11.5	%	1,894		1.9	%	11.0	%
Home equity	2,222		1.9	%	3.6	%	1,478		1.5	%	4.2	%
Other consumer	608		0.5	%	0.5	%	352		0.4	%	0.7	%
Total consumer loans	6,796		5.7	%	15.6	%	3,724		3.8	%	15.9	%

Total	$	119,081	100.0	%	100.0	%	$	98,482	100.0	%	100.0	%

Management believes that the allowance for loan and lease losses as of September 30, 2023 is appropriate.

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 increased $1.7 million, or 0.2% on an annualized basis remaining at $1.0 billion as of September 30, 2023 and December 31, 2022. The increase was driven by an increase in investment securities available for sale. Cash, cash equivalents, and investment securities were 9.3% of total assets as of September 30, 2023, compared to 11.32% of total assets at December 31, 2022.

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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 September 30, 2023				At December 31, 2022
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(In Thousands)
Investment securities available-for-sale:
GSE debentures	$	195,493	$	168,893	$	176,751	$	152,422
GSE CMOs	67,489		59,892		19,977		18,220
GSE MBSs	192,370		166,462		159,824		140,576



Municipal obligations	18,914		18,317		—		—
Corporate debt obligations	25,484		24,623		14,076		13,764
U.S. Treasury bonds	479,582		441,746		362,850		331,307


Foreign government obligations	500		479		500		477
Total investment securities available-for-sale	$	979,832	$	880,412	$	733,978	$	656,766

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. 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 $242.8 million for the nine months ended September 30, 2023 compared to $79.5 million for the same period in 2022. For the nine months ended September 30, 2023, the Company sold $230.0 million of investment securities available-for-sale. For the same period in 2022, the Company did not sell any investment securities available-for-sale. For the nine months ended September 30, 2023, the Company purchased $330.8 million of investment securities available-for-sale, compared to $123.1 million for the same period in 2022.

As of September 30, 2023, the fair value of all investment securities available-for-sale was $880.4 million with $99.4 million of net unrealized losses, compared to a fair value of $656.8 million and net unrealized losses of $77.2 million as of December 31, 2022. As of September 30, 2023, $847.3 million, or 96.2%, of the portfolio, had gross unrealized losses of $99.5 million. This compares to $630.5 million, or 96.0%, of the portfolio with gross unrealized losses of $77.5 million as of December 31, 2022. The Company's unrealized loss position decreased in 2023 primarily driven by a rebalancing of the portfolio to more closely align it with current market rates.

Restricted Equity Securities

FHLB of Boston and FHLB of New York Stock—The Company invests in the stock of the FHLB of Boston and FHLB of New York as one of the requirements to borrow funds from the FHLB. The Company generally maintains an excess balance of capital stock, which allows for additional borrowing capacity at each of the Banks. As of September 30, 2023, the excess balance of capital stock was $1.2 million, compared to no excess balance of capital stock as of December 31, 2022.

As of September 30, 2023, the Company owned stock in the FHLB of Boston with a carrying value of $40.8 million, a decrease of $12.1 million from $52.9 million as of December 31, 2022. As of September 30, 2023, the FHLB of Boston had total assets of $62.7 billion and total capital of $3.5 billion, of which $1.8 billion was retained earnings. As of September 30,

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2023, the Company owned stock in the FHLB of New York with a carrying value of $2.9 million. As of September 30, 2023, the FHLB of New York had total assets of $144.4 billion and total capital of $7.9 billion, of which $2.3 billion was retained earnings. The FHLB of Boston stated that it remained in compliance with all regulatory capital ratios as of September 30, 2023 and was classified as "adequately capitalized" by its regulator, based on the FHLB of Boston's financial information as of June 30, 2023. The FHLB of New York stated that it met all of its regulatory capital requirements and liquidity requirements at September 30, 2023.

Federal Reserve Bank Stock—The Company invests in the stock of the Federal Reserve Bank of Boston and the Federal Reserve Bank of New York, as a condition to the Banks' membership in the Federal Reserve System. As of September 30, 2023, the Company owned stock in the Federal Reserve Bank with a carrying value of $21.5 million. As of December 31, 2022, the Company owned stock in the Federal Reserve Bank of $18.2 million.

Other Stock—The Company invests in a small number of other restricted equity securities which includes American Financial Exchange and Statewide Zone. As of September 30, 2023, the Company owned stock in other restricted equity securities with a carrying value of $0.2 million, unchanged from December 31, 2022.

Deposits

The following table presents the Company's deposit mix at the dates indicated.


	At September 30, 2023						At December 31, 2022
	Amount		Percent of Total		Weighted Average Rate		Amount		Percent of Total		Weighted Average Rate
	(Dollars in Thousands)
Non-interest-bearing deposits:
Demand checking accounts	$	1,745,137	20.4	%	—	%	$	1,802,518	27.6	%	—	%
Interest-bearing deposits:
NOW accounts	647,476		7.6	%	0.68	%	544,118		8.3	%	0.18	%
Savings accounts	1,625,804		19.0	%	3.40	%	762,271		11.7	%	0.70	%
Money market accounts	2,161,359		25.2	%	2.23	%	2,174,952		33.4	%	1.63	%
Certificate of deposit accounts	1,491,844		17.4	%	3.49	%	928,143		14.2	%	1.68	%
Brokered deposit accounts	894,393		10.4	%	4.26	%	310,144		4.8	%	3.00	%
Total interest-bearing deposits	6,820,876		79.6	%	2.90	%	4,719,628		72.4	%	1.41	%
Total deposits	$	8,566,013	100.0	%	2.31	%	$	6,522,146	100.0	%	1.02	%

Total deposits increased $2.0 billion to $8.6 billion as of September 30, 2023, compared to $6.5 billion as of December 31, 2022. Deposits as a percentage of total assets increased to 76.6% as of September 30, 2023, compared to 71.0% as of December 31, 2022.

During the nine months ended September 30, 2023, core deposits increased $895.9 million. The ratio of core deposits to total deposits decreased from 81.0% as of December 31, 2022 to 72.1% as of September 30, 2023, primarily due to a decrease in percentage of money market accounts and demand checking accounts to total deposits.

Certificate of deposit accounts increased $0.5 billion to $1.5 billion as of September 30, 2023, compared to $0.9 billion as of December 31, 2022. Certificate of deposit accounts increased as a percentage of total deposits to 17.4% as of September 30, 2023 from 14.2% as of December 31, 2022.

Brokered deposits increased $584.2 million to $894.4 million as of September 30, 2023, compared to $310.1 million as of December 31, 2022. Brokered deposits increased as a percentage of total deposits to 10.4% as of September 30, 2023 from 4.8% as of December 31, 2022. The increase in brokered deposits was driven by the purchase of brokered certificates of deposit. 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 total amount of brokered deposits the Company may hold to 15% of total assets.

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.

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	Three Months Ended September 30,
	2023						2022
	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	$	1,794,225	21.0	%	—	%	$	1,908,459	27.6	%	—	%
NOW accounts	681,929		8.0	%	0.67	%	607,210		8.8	%	0.38	%
Savings accounts	1,557,911		18.3	%	2.26	%	881,988		12.8	%	0.30	%
Money market accounts	2,177,528		25.5	%	2.88	%	2,423,920		35.1	%	0.66	%
Total core deposits	6,211,593		73.9	%	1.66	%	5,821,577		84.3	%	0.36	%
Certificate of deposit accounts	1,444,269		16.9	%	3.33	%	964,112		14.0	%	0.74	%
Brokered deposit accounts	882,351		10.3	%	5.03	%	117,058		1.7	%	0.92	%
Total deposits	$	8,538,213	100.0	%	2.28	%	$	6,902,747	100.0	%	0.43	%



	Nine Months Ended September 30,
	2023						2022
	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	$	1,857,429	22.2	%	—	%	$	1,891,698	27.1	%	—	%
NOW accounts	741,951		8.8	%	0.56	%	603,243		8.6	%	0.20	%
Savings accounts	1,365,541		16.3	%	1.69	%	915,185		13.1	%	0.16	%
Money market accounts	2,227,404		26.6	%	2.52	%	2,423,207		34.8	%	0.42	%
Total core deposits	6,192,325		73.8	%	1.34	%	5,833,333		83.6	%	0.22	%
Certificate of deposit accounts	1,394,338		16.6	%	2.84	%	1,024,303		14.7	%	0.70	%
Brokered deposit accounts	798,800		9.5	%	4.97	%	121,724		1.7	%	0.45	%
Total deposits	$	8,385,463	100.0	%	1.94	%	$	6,979,360	100.0	%	0.29	%

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As of September 30, 2023 and December 31, 2022, the Company had outstanding certificates of deposit of $250,000 or more, maturing as follows:


	At September 30, 2023				At December 31, 2022
	Amount		Weighted Average Rate		Amount		Weighted Average Rate
	(Dollars in Thousands)
Maturity period:
Three months or less	$	75,979	3.34	%	$	66,092	1.00	%
Over 3 months through 6 months	118,395		3.66	%	42,008		1.83	%
Over 6 months through 12 months	207,047		4.20	%	62,489		1.82	%
Over 12 months	43,279		3.89	%	101,654		2.96	%
Total certificate of deposit of $250,000 or more	$	444,700	3.88	%	$	272,243	2.05	%

The following table presents the Company's insured and uninsured deposit mix at the date indicated.


	At September 30, 2023
	(Dollars in Millions)
	Commercial			Consumer			Municipal			Brokered			Total			%
Insured or Collateralized	$	1,897		$	2,954		$	301		$	894		$	6,046		71	%
Uninsured	1,496			1,023			—			—			2,519			29	%
Total	$	3,393		$	3,977		$	301		$	894		$	8,565		100	%
Composition	40		%	46		%	4		%	10		%	100		%

The collateral balances in the table above represent municipal deposit accounts which are covered by specific collateral and FHLB letters of credit. The remaining deposits are insured with the FDIC or via reciprocal products.

Borrowed Funds

The following table sets forth certain information regarding advances from the FHLB, subordinated debentures and notes and other borrowed funds for the periods indicated:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
	(Dollars in Thousands)
Borrowed funds:
Average balance outstanding	$	1,156,654		$	504,848		$	1,340,768		$	399,379
Maximum amount outstanding at any month-end during the period	1,153,424			758,768			1,630,102			758,768
Balance outstanding at end of period	1,135,068			758,768			1,135,068			758,768
Weighted average interest rate for the period	4.69		%	2.53		%	4.64		%	2.19		%
Weighted average interest rate at end of period	4.55		%	3.17		%	4.55		%	3.17		%

Advances from the FHLB of Boston and FHLB of New York

On a long-term basis, the Company intends to continue to increase its core deposits. The Company also uses FHLB borrowings and other wholesale borrowings 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 FHLBs will advance to member institutions, including the Company, fluctuates from time to time in accordance with the policies of the FHLBs.

FHLB borrowings decreased $338.5 million to $0.9 billion as of September 30, 2023 with a total capacity of $2.4 billion. As of December 31, 2022, FHLB borrowings stood at $1.2 billion with a total capacity of $1.7 billion.

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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 fallback plus 3.10% and 3-month LIBOR fallback 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 fallback 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 Date

Rate

Maturity Date

Next Call Date

September 30,
2023

December 31, 2022

(Dollars in Thousands)

June 26, 2003

Variable;
3-month LIBOR fallback + 3.10%

June 26, 2033

December 25, 2023

4,900

4,887

March 17, 2004

Variable;
3-month LIBOR fallback + 2.79%

March 17, 2034

December 17, 2023

4,850

4,830

September 15, 2014

6.0% Fixed-to-Variable;
3-month LIBOR fallback + 3.315%

September 15, 2029

September 15, 2024

74,402

74,327

Total

84,152

84,044

The above carrying amounts of the subordinated debentures included $0.3 million of accretion adjustments and $0.6 million of capitalized debt issuance costs as of September 30, 2023. This compares to $0.3 million of accretion adjustments and $0.7 million of capitalized debt issuance costs as of December 31, 2022.

Other Borrowed Funds

In addition to advances from the FHLB 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 $15.0 million to $37.0 million as of September 30, 2023 from $52.0 million as of December 31, 2022.

The Company has access to a $30.0 million committed line of credit as of September 30, 2023. As of September 30, 2023 and December 31, 2022, the Company did not have any borrowings on this committed line of credit.

As of September 30, 2023, the Banks also have access to funding through certain uncommitted lines via American Financial Exchange (AFX) as well as other large financial institution specific lines.

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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, interest rate derivatives, risk participation agreements, and foreign exchange contracts at September 30, 2023 and December 31, 2022:


	At September 30, 2023			At December 31, 2022
	(Dollars in Thousands)
Interest rate derivatives (Notional amounts):	$	225,000		$	150,000
Loan level derivatives (Notional principal amounts):
Receive fixed, pay variable	$	1,758,794		$	1,489,709
Pay fixed, receive variable	1,758,794			1,489,709
Risk participation-out agreements	513,561			393,624
Risk participation-in agreements	106,624			75,223
Foreign exchange contracts (Notional amounts):
Buys foreign currency, sells U.S. currency	$	3,664		$	2,383
Sells foreign currency, buys U.S. currency	4,290			2,400
Fixed weighted average interest rate from the Company to counterparty	2.93		%	2.65		%
Floating weighted average interest rate from counterparty to the Company	5.68		%	4.68		%
Weighted average remaining term to maturity (in months)	77			69
Fair value:
Recognized as an asset:

Interest rate derivatives	$	—		$	34

Loan level derivatives	156,802			108,963
Risk participation-out agreements	637			347
Foreign exchange contracts	160			130
Recognized as a liability:

Interest rate derivatives	$	7,206		$	3,170
Loan level derivatives	156,802			108,963
Risk participation-in agreements	166			31
Foreign exchange contracts	132			112

Stockholders' Equity and Dividends

The Company's total stockholders' equity was $1.2 billion as of September 30, 2023, representing a $165.7 million increase compared to $992.1 million at December 31, 2022. The increase for the nine months ended September 30, 2023, primarily reflects the PCSB purchase of $167 million and net income attributable to the Company of $52.1 million, partially offset by dividends paid by the Company of $35.9 million and unrealized loss on securities available-for-sale of $16.8 million.

Stockholders' equity represented 10.36% of total assets as of September 30, 2023 and 10.80% of total assets as of December 31, 2022. Tangible stockholders' equity (total stockholders' equity less goodwill and identified intangible assets, net) represented 8.16% of tangible assets (total assets less goodwill and identified intangible assets, net) as of September 30, 2023 and 9.20% as of December 31, 2022.

On November 10, 2021, the Company's Board of Directors approved a stock repurchase program authorizing management to repurchase up to $20.0 million of the Company's common stock, commencing on November 15, 2021 and ending on December 31, 2022. On June 24, 2022, the Company suspended the program. As of June 24, 2022, 956,341 shares of the Company's common stock were repurchased by the Company at a weighted average price of $14.41.

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The dividend payout ratio was 52.81% for the three months ended September 30, 2023, compared to 33.07% for the same period in 2022.

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 $6.0 million to $84.1 million for the three months ended September 30, 2023 from $78.0 million for the three months ended September 30, 2022. This increase reflects a $52.2 million increase in interest income on loans and leases, along with a $6.2 million increase in interest income on debt securities, short term investments and restricted equity securities, offset by a $52.4 million increase in interest expense on deposits and borrowings, which is reflective of the rising interest rate environment. Refer to “Results of Operations - Comparison of the Three-Month Period Ended September 30, 2023 and September 30, 2022 — Interest Income” and “Results of Operations - Comparison of the Three-Month Period Ended September 30, 2023 and September 30, 2022 — Interest Expense -Deposit and Borrowed Funds” below for more details.

Net interest income increased $36.4 million to $256.2 million for the nine months ended September 30, 2023 from $219.7 million for the nine months ended September 30, 2022. This overall increase reflects a $160.4 million increase in interest income on loans and leases and a $22.8 million increase in interest income on investments, offset by a $146.8 million increase in interest expense on deposit and borrowings, which is reflective of the rising interest rate environment. Refer to “Results of Operations - Comparison of the Nine-Month Period Ended September 30, 2023 and September 30, 2022 — Interest Income” and “Results of Operations - Comparison of the Nine-Month Period Ended September 30, 2023 and September 30, 2022 — Interest Expense Deposit and Borrowed Funds” below for more details.

Net interest margin decreased 62 basis points to 3.18% for the three months ended September 30, 2023 from 3.80% for the three months ended September 30, 2022. The Company's weighted average interest rate on loans (prior to purchase accounting adjustments) increased to 5.84% for the three months ended September 30, 2023 from 4.60% for the three months ended September 30, 2022.

Net interest margin decreased 35 basis points to 3.27% for the nine months ended September 30, 2023 from 3.62% for the nine months ended September 30, 2022. The Company's weighted average interest rate on loans (prior to purchase accounting adjustments) increased to 5.62% for the nine months ended September 30, 2023 from 4.24% for the nine months ended September 30, 2022.

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The yield on interest-earning assets increased to 5.61% for the three months ended September 30, 2023 from 4.35% for the three months ended September 30, 2022. The increase is the result of higher yields on loans and leases and investments. During the three months ended September 30, 2023, the Company recorded $0.8 million in prepayment penalties and late charges, which contributed 3 basis points to yields on interest-earning assets, compared to $1.0 million, or 5 basis points, for the three months ended September 30, 2022.

The yield on interest-earning assets increased to 5.40% for the nine months ended September 30, 2023 from 3.97% for the nine months ended September 30, 2022. The increase is primarily due to higher yields on loans and leases and investments. During the nine months ended September 30, 2023, the Company recorded $2.2 million in prepayment penalties and late charges, which contributed 3 basis points to yields on interest-earning assets, compared to $3.5 million in prepayment penalties and late charges, which contributed 6 basis points to yields on interest-earning assets in the nine months ended September 30, 2022.

The overall cost of funds (including non-interest-bearing demand checking accounts) increased 200 basis points to 2.57% for the three months ended September 30, 2023 from 0.57% for the three months ended September 30, 2022. The overall cost of funds (including non-interest-bearing demand checking accounts) increased 191 basis points to 2.31% for the nine months ended September 30, 2023 from 0.40% for the nine months ended September 30, 2022. Refer to "Financial Condition - Borrowed Funds" above for more details. Refer to "Financial Condition - Borrowed Funds" above for more details.

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 2020, interest rates declined sharply in response to the economic impact of the COVID-19 pandemic, and began to increase in the first quarter of 2022. In recent months, the Treasury yield curve has inverted and flattened at the long end. Short term rates have risen sharply due to multiple rate hikes implemented by the FRB. The shape of the curve indicates rates will begin to decline within a year and flatten around the 7-year mark. The short term increase in rates positively affected the Company's net interest income, net interest spread, and net interest margin initially. In the first nine months of 2023 and as expected in the near term, the net interest margin is expected to compress as deposit pricing "catches up" and investable funds migrate among depository and non-depository categories. Management expects this to persist for a quarter or two after the Federal Reserve stops increasing rates after which time net interest margin is expected to stabilize and then increase as loans continue to reprice into the higher rate environment.

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 and nine months ended September 30, 2023 and September 30, 2022. 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.

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	Three Months Ended
	September 30, 2023						September 30, 2022
	Average Balance		Interest (1)		Average Yield/ Cost		Average Balance		Interest (1)		Average Yield/ Cost
	(Dollars in Thousands)
Assets:
Interest-earning assets:
Debt securities	$	887,612	$	6,840	3.08	%	$	714,226	$	3,337	1.87	%
Marketable and restricted equity securities	67,824		1,310		7.73	%	36,525		467		5.12	%
Short-term investments	172,483		2,390		5.54	%	66,257		464		2.80	%
Total investments	1,127,919		10,540		3.74	%	817,008		4,268		2.09	%
Commercial real estate loans (2)	5,667,373		78,750		5.44	%	4,239,155		44,729		4.13	%
Commercial loans (2)	939,492		15,295		6.38	%	731,095		8,492		4.55	%
Equipment financing (2)	1,280,033		23,331		7.29	%	1,157,829		19,042		6.58	%

Consumer loans (2)	1,471,985		19,237		5.21	%	1,206,968		12,165		4.02	%
Total loans and leases	9,358,883		136,613		5.84	%	7,335,047		84,428		4.60	%
Total interest-earning assets	10,486,802		147,153		5.61	%	8,152,055		88,696		4.35	%
Allowance for loan and lease losses	(127,077)						(93,520)
Non-interest-earning assets	820,910						527,885
Total assets	$	11,180,635					$	8,586,420
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts	$	681,929	1,159		0.67	%	$	607,210	579		0.38	%
Savings accounts	1,557,911		8,859		2.26	%	881,988		664		0.30	%
Money market accounts	2,177,528		15,785		2.88	%	2,423,920		4,038		0.66	%
Certificate of deposit accounts	1,444,269		12,128		3.33	%	964,112		1,803		0.74	%
Brokered deposit accounts	882,351		11,185		5.03	%	117,058		270		0.92	%
Total interest-bearing deposits (3)	6,743,988		49,116		2.89	%	4,994,288		7,354		0.58	%
Advances from the FHLB	954,989		11,706		4.80	%	331,840		1,700		2.00	%
Subordinated debentures and notes	84,134		1,378		6.55	%	83,989		1,295		6.17	%
Other borrowed funds	117,531		790		2.67	%	89,019		268		1.20	%
Total borrowed funds	1,156,654		13,874		4.69	%	504,848		3,263		2.53	%
Total interest-bearing liabilities	7,900,642		62,990		3.16	%	5,499,136		10,617		0.77	%
Non-interest-bearing liabilities:
Non-interest-bearing demand checking accounts (3)	1,794,225						1,908,459
Other non-interest-bearing liabilities	318,041						197,446
Total liabilities	10,012,908						7,605,041
Total stockholders' equity	1,167,727						981,379

Total liabilities and stockholders' equity	$	11,180,635					$	8,586,420
Net interest income (tax-equivalent basis) / Interest-rate spread (4)			84,163		2.45	%			78,079		3.58	%
Less adjustment of tax-exempt income			93						53
Net interest income			$	84,070					$	78,026
Net interest margin (5)					3.18	%					3.80	%

_________________________________________________________________________

(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 2.28% and 0.42% in the three months ended September 30, 2023 and September 30, 2022, 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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	Nine Months Ended
	September 30, 2023						September 30, 2022
	Average Balance		Interest (1)		Average Yield/ Cost		Average Balance		Interest (1)		Average Yield/ Cost
	(Dollars in Thousands)
Assets:
Interest-earning assets:
Debt securities	$	971,855	$	22,905	3.14	%	$	720,266	$	9,582	1.77	%
Marketable and restricted equity securities	74,000		4,238		7.64	%	31,663		1,132		4.77	%
Short-term investments	183,295		7,236		5.26	%	119,083		686		0.77	%
Total investments	1,229,150		34,379		3.73	%	871,012		11,400		1.75	%
Commercial real estate loans (2)	5,629,600		225,999		5.29	%	4,204,260		119,723		3.76	%
Commercial loans (2)	915,420		42,814		6.17	%	727,333		23,564		4.28	%
Equipment financing (2)	1,253,512		66,901		7.12	%	1,131,069		54,951		6.48	%

Consumer loans (2)	1,469,025		55,210		5.01	%	1,191,294		32,304		3.62	%
Total loans and leases	9,267,557		390,924		5.62	%	7,253,956		230,542		4.24	%
Total interest-earning assets	10,496,707		425,303		5.40	%	8,124,968		241,942		3.97	%
Allowance for loan and lease losses	(121,174)						(95,733)
Non-interest-earning assets	819,447						515,234
Total assets	$	11,194,980					$	8,544,469
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
Interest-bearing deposits:
NOW accounts	$	741,951	3,129		0.56	%	$	603,243	898		0.20	%
Savings accounts	1,365,541		17,290		1.69	%	915,185		1,073		0.16	%
Money market accounts	2,227,404		41,914		2.52	%	2,423,207		7,681		0.42	%
Certificate of deposit accounts	1,394,338		29,605		2.84	%	1,024,303		5,345		0.70	%
Brokered deposit accounts	798,800		29,693		4.97	%	121,724		410		0.45	%
Total interest-bearing deposits (3)	6,528,034		121,631		2.49	%	5,087,662		15,407		0.40	%
Advances from the FHLBB	1,135,845		40,524		4.70	%	207,090		2,376		1.51	%
Subordinated debentures and notes	84,098		4,095		6.49	%	83,952		3,801		6.04	%
Other borrowed funds	120,825		2,562		2.83	%	108,337		458		0.57	%
Total borrowed funds	1,340,768		47,181		4.64	%	399,379		6,635		2.19	%
Total interest-bearing liabilities	7,868,802		168,812		2.87	%	5,487,041		22,042		0.54	%
Non-interest-bearing liabilities:
Non-interest-bearing demand checking accounts (3)	1,857,429						1,891,698
Other non-interest-bearing liabilities	301,543						180,842
Total liabilities	10,027,774						7,559,581
Total stockholders' equity	1,167,206						984,888

Total liabilities and stockholders' equity	$	11,194,980					$	8,544,469
Net interest income (tax-equivalent basis) / Interest-rate spread (4)			256,491		2.53	%			219,900		3.43	%
Less adjustment of tax-exempt income			335						159
Net interest income			$	256,156					$	219,741
Net interest margin (5)					3.27	%					3.62	%

_________________________________________________________________________

(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 1.94% and 0.30% in the nine months ended September 30, 2023 and September 30, 2022, 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 September 30, 2023 as Compared to the Three Months Ended September 30, 2022						Nine Months Ended September 30, 2023 as Compared to the Nine Months Ended September 30, 2022
	Increase (Decrease) Due To						Increase (Decrease) Due To
	Volume		Rate		Net Change		Volume		Rate		Net Change
	(In Thousands)
Interest and dividend income:
Investments:
Debt securities	$	956	$	2,547	$	3,503	$	4,143	$	9,180	$	13,323
Marketable and restricted equity securities	529		314		843		2,142		964		3,106
Short-term investments	1,196		730		1,926		554		5,996		6,550
Total investments	2,681		3,591		6,272		6,839		16,140		22,979
Loans and leases:
Commercial real estate loans	17,523		16,498		34,021		48,302		57,974		106,276
Commercial loans and leases	2,822		3,981		6,803		7,110		12,140		19,250
Equipment financing	2,121		2,168		4,289		6,249		5,701		11,950

Consumer loans	2,742		4,330		7,072		8,318		14,588		22,906
Total loans	25,208		26,977		52,185		69,979		90,403		160,382
Total change in interest and dividend income	27,889		30,568		58,457		76,818		106,543		183,361
Interest expense:
Deposits:
NOW accounts	81		499		580		253		1,978		2,231
Savings accounts	860		7,335		8,195		794		15,423		16,217
Money market accounts	(451)		12,198		11,747		(666)		34,899		34,233
Certificate of deposit accounts	1,286		9,039		10,325		2,564		21,696		24,260
Brokered deposit accounts	6,484		4,431		10,915		10,437		18,846		29,283
Total deposits	8,260		33,502		41,762		13,382		92,842		106,224
Borrowed funds:
Advances from the FHLB	5,732		4,274		10,006		25,932		12,216		38,148
Subordinated debentures and notes	2		81		83		7		287		294
Other borrowed funds	108		414		522		59		2,045		2,104
Total borrowed funds	5,842		4,769		10,611		25,998		14,548		40,546
Total change in interest expense	14,102		38,271		52,373		39,380		107,390		146,770
Change in tax-exempt income	40		—		40		176		—		176
Change in net interest income	$	13,747	$	(7,703)	$	6,044	$	37,262	$	(847)	$	36,415

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Interest Income

Loans and Leases


	Three Months Ended September 30,				Dollar Change		Percent Change		Nine Months Ended September 30,				Dollar Change		Percent Change
	2023		2022						2023		2022
	(Dollars in Thousands)
Interest income—loans and leases:
Commercial real estate loans	$	78,749	$	44,727	$	34,022	76.1	%	$	225,998	$	119,723	$	106,275	88.8	%
Commercial loans	15,245		8,441		6,804		80.6	%	42,683		23,405		19,278		82.4	%
Equipment financing	23,331		19,042		4,289		22.5	%	66,901		54,951		11,950		21.7	%
Residential mortgage loans	11,691		7,560		4,131		54.6	%	34,194		21,675		12,519		57.8	%
Other consumer loans	7,545		4,605		2,940		63.8	%	21,015		10,629		10,386		97.7	%
Total interest income—loans and leases	$	136,561	$	84,375	$	52,186	61.9	%	$	390,791	$	230,383	$	160,408	69.6	%

Total interest from loans and leases was $136.6 million for the three months ended September 30, 2023, and represented a yield on total loans of 5.84%. This compares to $84.4 million of interest on loans and a yield of 4.60% for the three months ended September 30, 2022. The $52.2 million increase in interest income from loans and leases was primarily due to an increase of $27.0 million in changes to interest rates, and an increase of $25.2 million in origination volume.

Interest income from loans and leases was $390.8 million for the nine months ended September 30, 2023, and represented a yield on total loans of 5.62%. This compares to $230.4 million of interest on loans and a yield of 4.24% for the nine months ended September 30, 2022. The $160.4 million increase in interest income from loans and leases was primarily attributable to an increase of $70.0 million due to an increase in origination volume and an increase of $90.4 million due to the changes in interest rates.

Investments


	Three Months Ended September 30,				Dollar Change		Percent Change		Nine Months Ended September 30,				Dollar Change		Percent Change
	2023		2022						2023		2022
	(Dollars in Thousands)
Interest income—investments:
Debt securities	$	6,799	$	3,337	$	3,462	103.7	%	$	22,703	$	9,582	$	13,121	136.9	%
Marketable and restricted equity securities	1,310		467		843		180.5	%	4,238		1,132		3,106		274.4	%
Short-term investments	2,390		464		1,926		415.1	%	7,236		686		6,550		954.8	%
Total interest income—investments	$	10,499	$	4,268	$	6,231	146.0	%	$	34,177	$	11,400	$	22,777	199.8	%

Total interest income from investments was $10.5 million for the three months ended September 30, 2023, compared to $4.3 million for the three months ended September 30, 2022. For the three months ended September 30, 2023 and 2022, the yield on total investments was 3.7% and 2.1%. respectively. The year over year increase in interest income on investments of $6.2 million, or 146.0%, was primarily driven by a $2.7 million increase due to volume and a $3.6 million increase due to rates.

Total investment income was $34.2 million and $11.4 million for the nine months ended September 30, 2023 and September 30, 2022, respectively. For the nine months ended September 30, 2023 and 2022, the yield on total investments was 3.7% and 1.8%, respectively. The year over year increase in interest income on investments of $22.8 million, or 199.8%, was primarily driven by a $16.1 million increase due to rates and a $6.8 million increase due to volume.

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Interest Expense—Deposits and Borrowed Funds


	Three Months Ended September 30,				Dollar Change		Percent Change		Nine Months Ended September 30,				Dollar Change		Percent Change
	2023		2022						2023		2022
	(Dollars in Thousands)
Interest expense:
Deposits:
NOW accounts	$	1,159	$	579	$	580	100.2	%	$	3,129	$	898	$	2,231	248.4	%
Savings accounts	8,859		664		8,195		1,234.2	%	17,290		1,073		16,217		1,511.4	%
Money market accounts	15,785		4,038		11,747		290.9	%	41,914		7,681		34,233		445.7	%
Certificate of deposit accounts	12,128		1,803		10,325		572.7	%	29,605		5,345		24,260		453.9	%
Brokered deposit accounts	11,185		270		10,915		4,042.6	%	29,693		410		29,283		7,142.2	%
Total interest expense - deposits	49,116		7,354		41,762		567.9	%	121,631		15,407		106,224		689.5	%
Borrowed funds:
Advances from the FHLB	11,706		1,700		10,006		588.6	%	40,524		2,376		38,148		1,605.6	%
Subordinated debentures and notes	1,378		1,295		83		6.4	%	4,095		3,801		294		7.7	%
Other borrowed funds	790		268		522		194.8	%	2,562		458		2,104		459.4	%
Total interest expense - borrowed funds	13,874		3,263		10,611		325.2	%	47,181		6,635		40,546		611.1	%
Total interest expense	$	62,990	$	10,617	$	52,373	493.3	%	$	168,812	$	22,042	$	146,770	665.9	%

Deposits

For the three months ended September 30, 2023, interest expense on deposits increased $41.8 million, compared to the same period in 2022. The increase in interest expense on deposits was driven by an increase of $33.5 million due to higher interest rates and an increase of $8.3 million primarily driven by the growth in volume of average brokered deposit and certificate of deposit balances. Purchase accounting amortization on acquired deposits for the three months ended September 30, 2023 was $324 thousand and one basis point. For the same period in 2022, the Company did not record any purchase accounting amortization.

Interest expense on deposits increased $106.2 million to $121.6 million for the nine months ended September 30, 2023 from $15.4 million for the nine months ended September 30, 2022. The increase in interest expense on deposits was driven by a $92.8 million increase due to higher interest rates and a $13.4 million increase primarily driven by the growth in volume of average brokered deposit and certificate of deposit balances. Purchase accounting amortization on acquired deposits for the nine months ended September 30, 2023 was $972 thousand and one basis point. For the nine months ended September 30, 2022, the Company did not record any purchase accounting amortization.

Borrowed Funds

For the three months ended September 30, 2023, interest paid on borrowed funds increased $10.6 million year over year, primarily driven by an increase in the volume and rate paid on FHLB borrowings. The cost of borrowed funds increased to 4.69% for the three months ended September 30, 2023 from 2.53% for the three months ended September 30, 2022. The increase in interest expense was driven by an increase of $5.8 million due to volume and an increase of $4.8 million due to borrowing rates. For the three months ended September 30, 2023, the purchase accounting amortization on acquired borrowed funds was $43 thousand compared to $12 thousand for the three months ended September 30, 2022. Purchase accounting amortization had no impact on the Company's net interest margin.

During the nine months ended September 30, 2023, interest paid on borrowed funds increased $40.5 million year over year, primarily driven by an increase in the volume and rate paid on FHLB borrowings. The cost of borrowed funds increased to 4.64% for the nine months ended September 30, 2023 from 2.19% for the nine months ended September 30, 2022. The increase in interest expense was driven by an increase of $26.0 million due to volume and an increase of $14.5 million due to

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borrowing rates. For the nine months ended September 30, 2023, there was purchase accounting amortization of $215 thousand on acquired borrowed funds compared to amortization of $35 thousand for the nine months ended September 30, 2022. Purchase accounting amortization 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 September 30,				Dollar Change		Percent Change		Nine Months Ended September 30,						Dollar Change		Percent Change
	2023		2022						2023				2022
	(Dollars in Thousands)
Provision (credit) for loan and lease losses:
Commercial real estate	$	(5,524)	$	(2,573)	$	(2,951)	(114.7)	%	$	10,611			$	(1,734)	$	12,345	711.9	%
Commercial	8,829		2,984		5,845		195.9	%	19,425				(765)		20,190		2,639.2	%
Consumer	933		391		542		138.6	%	3,085				593		2,492		420.2	%

Total provision (credit) for loan and lease losses	4,238		802		3,436		428.4	%	33,121				(1,906)		35,027		1,837.7	%





Unfunded credit commitments	(1,291)		2,043		(3,334)		(163.2)	%	896				4,760		(3,864)		(81.2)	%
Investment securities available-for-sale	84		(10)		94		940.0	%	415				48		367		764.6	%
Total provision (credit) for credit losses	$	3,031	$	2,835	$	196	6.9	%	$	34,432	$	—	$	2,902	$	31,530	1,086.5	%

For the three months ended September 30, 2023, the Allowance for Credit Losses ("ACL") increased $0.2 million resulting in a provision (credit) for credit and investment losses of $3.0 million.

For the nine months ended September 30, 2023, the ACL increased $31.5 million resulting in a provision (credit) for credit and investment losses of $34.4 million. The increase in the ACL for the nine months ended September 30, 2023 is related to acquired loans as a result of the PCSB acquisition.

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 September 30,				Dollar Change		Percent Change		Nine Months Ended September 30,				Dollar Change		Percent Change
	2023		2022						2023		2022
	(Dollars in Thousands)
Deposit fees	$	3,024	$	2,759	$	265	9.6	%	$	8,547	$	8,003	$	544	6.8	%
Loan fees	639		349		290		83.1	%	1,521		1,762		(241)		(13.7)	%
Loan level derivative income, net	376		1,275		(899)		(70.5)	%	3,112		3,576		(464)		(13.0)	%
Gain (loss) on investment securities, net	—		—		—		N/A		1,704		—		1,704		N/A
Gain on sales of loans and leases held-for-sale	225		889		(664)		(74.7)	%	2,171		1,524		647		42.5	%

Other	1,244		1,562		(318)		(20.4)	%	6,852		4,426		2,426		54.8	%
Total non-interest income	$	5,508	$	6,834	$	(1,326)	(19.4)	%	$	23,907	$	19,291	$	4,616	23.9	%

For the three months ended September 30, 2023, non-interest income decreased $1.3 million, or 19.4%, to $5.5 million compared to $6.8 million for the same period of 2022. The decrease was primarily driven by decreases of $0.9 million in loan level derivative income, net, and $0.7 million in gain on sales of loans and leases held-for-sale.

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For the nine months ended September 30, 2023, non-interest income increased $4.6 million, or 23.9%, to $23.9 million compared to $19.3 million for the same period in 2022. The increase was primarily driven by increases of $2.4 million in other income, $1.7 million in gain on investment securities, net, and $0.6 million in gain on sales of loans and leases held-for-sale.

Loan level derivative income decreased $0.9 million, or 70.5%, to $0.4 million for the three months ended September 30, 2023 from $1.3 million for the same period in 2022, primarily driven by lower volume in loan level derivative transactions completed for the three months ended September 30, 2023, and decreased $0.5 million, or 13.0%, to $3.1 million for the nine months ended September 30, 2023 from $3.6 million for the same period in 2022, primarily driven by lower volume in loan level derivative transactions completed for the nine months ended September 30, 2023.

Gain (loss) on investment securities was $1.7 million for the nine months ended September 30, 2023. The Company did not have any gain (loss) on investment securities for the same period in 2022. The increase was primarily driven by gain on sale of PCSB investments.

Gain on sales of loans and leases held-for-sale decreased $0.7 million, or 74.7%, to $0.2 million for the three months ended September 30, 2023 from $0.9 million for the same period in 2022, and increased $0.6 million, or 42.5% to $2.2 million for the nine months ended September 30, 2023 from $1.5 million for the same period in 2022, primarily driven by higher gain on sale to participants.

Other income decreased $0.3 million, or 20.4%, to $1.2 million for the three months ended September 30, 2023 from $1.6 million for the same period in 2022, primarily driven by the mark to market on interest rate swaps on participated loans, partially offset by higher bank owned life insurance income, gain on sale of fixed assets, and wealth management fees. Other income increased $2.4 million, or 54.8%, to $6.9 million for the nine months ended September 30, 2023 from $4.4 million for the same period in 2022, primarily driven by the mark to market on interest rate swaps on participated loans, higher bank owned life insurance income, and higher wealth management fees.

Non-Interest Expense

The following table sets forth the components of non-interest expense:


	Three Months Ended September 30,				Dollar Change		Percent Change		Nine Months Ended September 30,				Dollar Change		Percent Change
	2023		2022						2023		2022
	(Dollars in Thousands)
Compensation and employee benefits	$	33,491	$	28,306	$	5,185	18.3	%	$	103,494	$	83,962	$	19,532	23.3	%
Occupancy	4,983		3,906		1,077		27.6	%	15,076		11,997		3,079		25.7	%
Equipment and data processing	6,766		5,066		1,700		33.6	%	19,759		15,075		4,684		31.1	%
Professional services	2,368		1,069		1,299		121.5	%	5,784		3,514		2,270		64.6	%
FDIC insurance	2,152		709		1,443		203.5	%	6,005		2,176		3,829		176.0	%
Advertising and marketing	1,174		1,337		(163)		(12.2)	%	3,966		3,928		38		1.0	%
Amortization of identified intangible assets	1,955		120		1,835		1,529.2	%	5,875		374		5,501		1,470.9	%
Merger and acquisition expense	—		1,073		(1,073)		(100.0)	%	7,411		1,608		5,803		360.9	%
Other	4,790		3,373		1,417		42.0	%	12,910		9,683		3,227		33.3	%
Total non-interest expense	$	57,679	$	44,959	$	12,720	28.3	%	$	180,280	$	132,317	$	47,963	36.2	%

For the three months ended September 30, 2023, non-interest expense increased $12.7 million, or 28.3%, compared to the same period in 2022. The increase was primarily driven by increases of $5.2 million in compensation and employee benefits,$1.8 million in amortization of identified intangible assets, and $1.7 million in equipment and data processing.

For the nine months ended September 30, 2023, non-interest expense increased $48.0 million, or 36.2%, to $180.3 million compared to the same period in 2022. This increase is primarily driven by increases of $19.5 million in compensation and employee benefits, $5.8 million in merger and acquisition expense, $5.5 million in amortization of identified intangible assets, and $4.7 million in equipment and data processing.

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Compensation and employee benefits expense increased $5.2 million, or 18.3%, to $33.5 million for the three months ended September 30, 2023 from $28.3 million for the same period in 2022, and increased $19.5 million, or 23.3%, to $103.5 million for the nine months ended September 30, 2023 from $84.0 million for the same period in 2022, primarily driven by increases in employee headcount, higher salaries, higher health care benefits, lower deferred salaries, and higher retirement benefits, partially offset by lower incentive/bonus.

Equipment and data processing expense increased $1.7 million, or 33.6%, to $6.8 million for the three months ended September 30, 2023 from $5.1 million for the same period in 2022, and increased $4.7 million, or 31.1%, to $19.8 million for the nine months ended September 30, 2023 from $15.1 million for the same period in 2022, primarily driven by higher software licenses and subscriptions, depreciation, core processing, and data communications expenses.

Merger and acquisition expense decreased $1.1 million, or 100.0% to $0.0 million, for the three months ended September 30, 2023, and increased $5.8 million, or 360.9%, to $7.4 million for the nine months ended September 30, 2023. The increase in 2023 was primarily driven by merger-related expenses for PCSB.

Amortization expense of identified intangible assets increased $1.8 million, or 1,529.2%, to $2.0 million for the three months ended September 30, 2023 from $0.1 million for the same period in 2022, and increased $5.5 million, or 1,470.9%, to $5.9 million for the nine months ended September 30, 2023, primarily driven by higher core deposit intangible expense for PCSB.

Provision for Income Taxes


	Three Months Ended September 30,						Dollar Change		Percent Change		Nine Months Ended September 30,						Dollar Change		Percent Change
	2023			2022							2023			2022
	(Dollars in Thousands)
Income before provision for income taxes	$	28,868		$	37,066		$	(8,198)	(22.1)	%	$	65,351		$	103,813		$	(38,462)	(37.0)	%
Provision (benefit) for income taxes	6,167			6,917			(750)		(10.8)	%	13,240			23,764			(10,524)		(44.3)	%
Net income	$	22,701		$	30,149		$	(7,448)	(24.7)	%	$	52,111		$	80,049		$	(27,938)	(34.9)	%
Effective tax rate	21.4		%	18.7		%	N/A		14.4	%	20.3		%	22.9		%	N/A		(11.4)	%

The Company recorded an income tax expense of $6.2 million for the three months ended September 30, 2023, compared to an income tax expense of $6.9 million for the three months ended September 30, 2022, representing effective tax rates of 21.4% and 18.7%, respectively.

The Company recorded an income tax expense of $13.2 million for the nine months ended September 30, 2023, compared to an income tax expense of $23.8 million for the nine months ended September 30, 2022, representing effective tax rates of 20.3% and 22.9%, respectively. The overall decrease in the effective tax rate is primarily due to energy tax credit deals entered during the year, partially offset by merger expenses relating to the acquisition of PCSB Bank.

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 third quarter, the Company operated with increased liquidity. During the year, the Company 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 position.

The Company held lower levels of on balance sheet liquidity in the form of cash and available for sale securities in the third quarter. Cash and equivalents at the end of the quarter were $161.0 million, or 1.4% of the balance sheet, compared to $383.0 million, or 4.2% of the balance sheet, as of December 31, 2022. 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 8%

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and 10% of total assets. As of September 30, 2023, cash, cash equivalents and investment securities available-for-sale totaled $1.0 billion, or 9.3% of total assets. This compares to $1.0 billion, or 11.3% of total assets, as of December 31, 2022.

Deposits, which are considered the most stable source of liquidity, totaled $8.6 billion as of September 30, 2023 and represented 88.3% of total funding (the sum of total deposits and total borrowings), compared to deposits of $6.5 billion, or 82.0% of total funding, as of December 31, 2022. Core deposits, which consist of demand checking, NOW, savings and money market accounts, totaled $6.2 billion as of September 30, 2023 and represented 72.1% of total deposits, compared to core deposits of $5.3 billion, or 81.0% of total deposits, as of December 31, 2022. Additionally, the Company had $894.4 million of brokered deposits as of September 30, 2023, which represented 10.4% of total deposits, compared to $310.1 million or 4.8% of total deposits, as of December 31, 2022. 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 $1.1 billion as of September 30, 2023, representing 11.7% of total funding, compared to $1.4 billion, or 18.0% of total funding, as of December 31, 2022. The growth in the balance sheet is driven by 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 FHLB, the Banks have access to both short- and long-term borrowings. As of September 30, 2023, the Company's total borrowing limit from the FHLB for advances and repurchase agreements was $2.4 billion, compared to $1.7 billion as of December 31, 2022, the increase based on the level of qualifying collateral available for these borrowings.

As of September 30, 2023, the Banks also have access to funding of uncommitted lines via American Financial Exchange ("AFX") as well as other large financial institution specific lines.

The Company had a $30.0 million committed line of credit for contingent liquidity as of September 30, 2023. As of September 30, 2023, 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 had $245.0 million of borrowing capacity at the Federal Reserve Bank as of September 30, 2023. As of September 30, 2023, 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.

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. See Note 12, "Commitments and Contingencies", to the consolidated financial statements for a description of off-balance-sheet financial instruments.

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Financial instruments with off-balance-sheet risk at the dates indicated follow:


	At September 30, 2023		At December 31, 2022
	(In Thousands)
Financial instruments whose contract amounts represent credit risk:
Commitments to originate loans and leases:
Commercial real estate	$	162,380	$	414,217
Commercial	246,331		291,188
Residential mortgage	20,359		14,036
Unadvanced portion of loans and leases	1,259,927		1,202,738
Unused lines of credit:
Home equity	758,553		700,201
Other consumer	113,952		97,313
Other commercial	499		526
Unused letters of credit:
Financial standby letters of credit	16,111		13,584
Performance standby letters of credit	28,759		31,330
Commercial and similar letters of credit	4,867		2,619
Interest rate derivatives	$	225,000	$	150,000
Loan level derivatives:
Receive fixed, pay variable	1,758,794		1,489,709
Pay fixed, receive variable	1,758,794		1,489,709
Risk participation-out agreements	513,561		393,624
Risk participation-in agreements	106,624		75,223
Foreign exchange contracts:
Buys foreign currency, sells U.S. currency	3,664		2,383
Sells foreign currency, buys U.S. currency	4,290		2,400

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Capital Resources

As of September 30, 2023, 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 September 30, 2023, 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 September 30, 2023 for the Company and the Banks.


	Actual				Minimum Required for Capital Adequacy Purposes				Minimum Required for Fully Phased in Capital Adequacy Purposes plus Capital Conservation Buffer				Minimum Required to be Considered “Well-Capitalized” Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in Thousands)
At September 30, 2023:
Brookline Bancorp, Inc.
Common equity Tier 1 capital ratio (1)	$	979,999	10.24	%	$	430,664	4.50	%	$	669,921	7.00	%	N/A		N/A
Tier 1 leverage capital ratio (2)	989,749		8.96	%	441,852		4.00	%	441,852		4.00	%	N/A		N/A
Tier 1 risk-based capital ratio (3)	989,749		10.35	%	573,768		6.00	%	812,837		8.50	%	N/A		N/A
Total risk-based capital ratio (4)	1,183,982		12.38	%	765,093		8.00	%	1,004,185		10.50	%	N/A		N/A
Brookline Bank
Common equity Tier 1 capital ratio (1)	$	579,269	10.47	%	$	248,969	4.50	%	$	387,286	7.00	%	$	359,623	6.50	%
Tier 1 leverage capital ratio (2)	579,269		9.53	%	243,135		4.00	%	243,135		4.00	%	303,919		5.00	%
Tier 1 risk-based capital ratio (3)	579,269		10.47	%	331,959		6.00	%	470,276		8.50	%	442,612		8.00	%
Total risk-based capital ratio (4)	648,634		11.72	%	442,754		8.00	%	581,114		10.50	%	553,442		10.00	%
BankRI
Common equity Tier 1 capital ratio (1)	$	275,116	10.21	%	$	121,256	4.50	%	$	188,620	7.00	%	$	175,147	6.50	%
Tier 1 leverage capital ratio (2)	275,116		8.71	%	126,345		4.00	%	126,345		4.00	%	157,931		5.00	%
Tier 1 risk-based capital ratio (3)	275,116		10.21	%	161,674		6.00	%	229,039		8.50	%	215,566		8.00	%
Total risk-based capital ratio (4)	308,867		11.47	%	215,426		8.00	%	282,747		10.50	%	269,282		10.00	%
PCSB Bank
Common equity Tier 1 capital ratio (1)	179,974		13.41	%	$	60,394	4.50	%	$	93,946	7.00	%	$	87,236	6.50	%
Tier 1 leverage capital ratio (2)	179,974		9.59	%	$	75,067	4.00	%	$	75,067	4.00	%	$	93,834	5.00	%
Tier 1 risk-based capital ratio (3)	179,974		13.41	%	$	80,525	6.00	%	$	114,077	8.50	%	$	107,367	8.00	%
Total risk-based capital ratio (4)	196,341		14.63	%	$	107,363	8.00	%	$	140,915	10.50	%	$	134,204	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.

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The following table presents actual and required capital amounts and capital ratios as of December 31, 2022 for the Company and the Banks.


	Actual				Minimum Required for Capital Adequacy Purposes				Minimum Required for Fully Phased in Capital Adequacy Purposes plus Capital Conservation Buffer				Minimum Required To Be Considered “Well-Capitalized” Under Prompt Corrective Action Provisions
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in Thousands)
At December 31, 2022:
Brookline Bancorp, Inc.
Common equity Tier 1 capital ratio (1)	$	893,978	12.05	%	$	333,851	4.50	%	$	519,323	7.00	%	N/A		N/A
Tier 1 leverage capital ratio (2)	903,695		10.26	%	352,318		4.00	%	352,318		4.00	%	N/A		N/A
Tier 1 risk-based capital ratio (3)	903,695		12.18	%	445,170		6.00	%	630,657		8.50	%	N/A		N/A
Total risk-based capital ratio (4)	1,071,078		14.44	%	593,395		8.00	%	778,831		10.50	%	N/A		N/A
Brookline Bank
Common equity Tier 1 capital ratio (1)	$	570,530	11.24	%	$	228,415	4.50	%	$	355,312	7.00	%	$	329,933	6.50	%
Tier 1 leverage capital ratio (2)	570,530		9.72	%	234,786		4.00	%	234,786		4.00	%	293,483		5.00	%
Tier 1 risk-based capital ratio (3)	570,530		11.24	%	304,553		6.00	%	431,451		8.50	%	406,071		8.00	%
Total risk-based capital ratio (4)	634,226		12.50	%	405,905		8.00	%	532,750		10.50	%	507,381		10.00	%
BankRI
Common equity Tier 1 capital ratio (1)	$	244,422	10.32	%	$	106,579	4.50	%	$	165,790	7.00	%	$	153,948	6.50	%
Tier 1 leverage capital ratio (2)	244,422		8.13	%	120,257		4.00	%	120,257		4.00	%	150,321		5.00	%
Tier 1 risk-based capital ratio (3)	244,422		10.32	%	142,106		6.00	%	201,317		8.50	%	189,474		8.00	%
Total risk-based capital ratio (4)	274,091		11.57	%	189,518		8.00	%	248,743		10.50	%	236,898		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.

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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 FHLB 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 September 30, 2023.

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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 September 30, 2023, 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 while maintaining a flat balance sheet:


	Estimated Exposure to Net Interest Income over Twelve-Month Horizon Beginning
	September 30, 2023				December 31, 2022
Change in Interest Rate Levels	Dollar Change		Percent Change		Dollar Change		Percent Change
	(Dollars in Thousands)
Up 300 basis points shock	$	7,923	2.4	%	$	22,790	7.4	%
Up 200 basis points ramp	6,558		2.0	%	8,747		2.8	%
Up 100 basis points ramp	3,603		1.1	%	4,477		1.5	%
Down 100 basis points ramp	(3,720)		(1.1)	%	(6,160)		(2.0)	%

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 2.4% as of September 30, 2023, compared to 7.4% as of December 31, 2022.

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 September 30, 2023, the Company’s one-year cumulative gap was a negative $673.1 million, or 6.48% of total interest-earning assets, compared with a positive $9.3 million, or 0.11% of total interest-earning assets, at December 31, 2022.

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 2022 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.


	Estimated Percent Change in Economic Value of Equity
Parallel Shock in Interest Rate Levels	At September 30, 2023		At December 31, 2022
Up 300 basis points	(8.25)	%	0.30	%
Up 200 basis points	(6.42)	%	0.51	%
Up 100 basis points	(2.33)	%	0.83	%
Down 100 basis points	0.76	%	(2.95)	%

The Company's EVE-at-risk asset sensitivity decreased from December 31, 2022 to September 30, 2023 due to wholesale funding balances, as well as a more inverted yield curve.

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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. There has been no change in the Company’s internal controls over financial reporting during the quarter ended September 30, 2023 that has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting as of December 31, 2022 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, 2022.

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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 in the risk factors described in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 27, 2023 and Part II. Item 1A “Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 (the “First Quarter 10-Q”) filed with the SEC on May 10, 2023.

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

a) Not applicable.

b) Not applicable.

c) Not applicable.

Item 3. Defaults Upon Senior Securities

a) None.

b) None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the three months ended September 30, 2023, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934) adopted, terminated or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K).

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Item 6. Exhibits

Exhibits




Exhibit 31.1*						Certification of Chief Executive Officer

Exhibit 31.2*						Certification of Chief Financial Officer

Exhibit 32.1**						Section 1350 Certification of Chief Executive Officer

Exhibit 32.2**						Section 1350 Certification of Chief Financial Officer


101.INS						XBRL 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.SCH						XBRL Taxonomy Extension Schema Document
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						XBRL Taxonomy Extension Label Linkbase Document
101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File (formatted in Inline XBRL and included in Exhibit 101)

_______________________________________________________________________________

* Filed herewith

** Furnished herewith

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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: November 6, 2023	By:	/s/ Paul A. Perrault
		Paul A. Perrault
		Chief Executive Officer
		(Principal Executive Officer)

Date: November 6, 2023	By:	/s/ Carl M. Carlson
		Carl M. Carlson
		Co-President and Chief Financial Officer
		(Principal Financial Officer)