Item 8.01. Other Events
On March 25, 2020, the U.S. Securities and Exchange Commission
(the “SEC”) issued an order under Section 36 (Release No. 34-88465) of the Securities Exchange Act of 1934, as amended
(“Exchange Act”), granting exemptions from specified provisions of the Exchange Act and certain rules thereunder, which
provides conditional relief to public companies that are unable to timely comply with their filing obligations as a result of the
novel coronavirus (“COVID-19”) outbreak (the “SEC Order”).
Brookline Bancorp, Inc. (the “Company”) is relying
on the SEC Order in filing this Current Report on Form 8-K to extend the filing deadline of its Quarterly Report on Form 10-Q for
the three months ended March 31, 2020 (the “Quarterly Report”). In compliance with public health orders related to
the COVID-19 pandemic, the Company has transitioned to a remote working environment. The Company’s management has devoted
significant time and attention to assessing the potential impact of the COVID-19 pandemic on the Company’s operations and
financial position and developing operational and financial plans to address those matters, which has diverted management resources
from completing tasks necessary to file the Quarterly Report by the original May 11, 2020 deadline. The Company expects to file
the Quarterly Report by June 1, 2020.
Regulatory Developments – The CARES Act
The following section supplements the disclosure in Part I,
Item 1, “Business – Supervision and Regulation” of our Annual Report on Form 10-K filed on February 28, 2020
(the “2019 Form 10-K”).
On March 27, 2020, Congress passed, and the President signed,
the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) to address the economic effects of the COVID-19
pandemic.
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Paycheck Protection Program. The CARES Act appropriated $349 billion for “paycheck protection loans” through
the U.S. Small Business Administration's (“SBA’s”) Paycheck Protection Program (“PPP”). The amount
appropriated was subsequently increased to $659 billion. Loans under the PPP that meet SBA requirements may be forgiven in certain
circumstances, and are 100% guaranteed by SBA. As of April 24, 2020, Brookline Bank and Bank Rhode Island (the “banks”)
have obtained SBA approval for 2,183 PPP loans totaling $518 million. PPP loans are fully guaranteed by the U.S. government, have
a two-year term and earn interest at rate of 1%. We currently expect a significant portion of these loans will ultimately be forgiven
by the SBA in accordance with the terms of the program. In conjunction with the PPP, the Board of Governors of the Federal Reserve
System (the “Federal Reserve”) has created a lending facility for qualified financial institutions. The Paycheck Protection
Program Liquidity Facility (the “PPPLF”) will extend credit to depository institutions with a term of up to two years
at an interest rate of 0.35%. Only loans issued under the PPP can be pledged as collateral to access the facility.
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Troubled Debt Restructuring Relief. From March 1, 2020 through the earlier of December 31, 2020 or 60 days after the
termination date of the national emergency declared by the President on March 13, 2020 concerning the COVID–19 outbreak (the
“national emergency”), a financial institution may elect to suspend the requirements under accounting principles generally
accepted in the U.S. for loan modifications related to the COVID–19 pandemic that would otherwise be categorized as a troubled
debt restructured, including impairment accounting. This troubled debt restructuring relief applies for the term of the loan modification
that occurs during the applicable period for a loan that was not more than 30 days past due as of December 31, 2019. Financial
institutions are required to maintain records of the volume of loans involved in modifications to which troubled debt restructuring
relief is applicable. As of April 17, 2020, the banks have granted 4,581 short-term deferments on loan balances of $1 billion,
which represented 15% of total loan balances as of March 31, 2020. These short-term deferments are not classified as troubled debt
restructured loans and will not be reported as past due provided that they are performing in accordance with the modified terms.
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CECL Delay. Banks, savings associations, credit unions, bank holding companies and their affiliates are not required
to comply with ASU 2016–13, including CECL, from the date of the law’s enactment until the earlier of the end of the
national emergency or December 31, 2020. On March 27, 2020, the Federal Reserve, the Federal Deposit Insurance Corporation (the
“FDIC”) and the Office of the Comptroller of the Currency issued an interim final rule that allows banking organizations
that are required to adopt CECL this year to mitigate the estimated cumulative regulatory capital effects for up to two years.
The relief afforded by the CARES Act and interim final rule is in addition to the three-year transition period already in place.
The Company adopted CECL effective January 1, 2020.
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Reduction of the Community Bank Leverage Ratio. The CARES Act reduced the community bank leverage ratio from 9% to 8%
until the earlier of the end of the national emergency or December 31, 2020. In response to the CARES Act, federal banking regulators
set the community bank leverage ratio at 8% for the remainder of 2020, 8.5% for 2021 and 9% thereafter.
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Revival of Bank Debt Guarantee Program. The CARES Act amends the Dodd-Frank
Act to provide the FDIC with the authority to guarantee bank-issued debt and noninterest-bearing transaction accounts that exceed
the FDIC's $250,000 limit through December 31, 2020. The FDIC has discretion to determine whether
and how to exercise this authority.
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Forbearance. The CARES Act codifies in part guidance from state and federal regulators and government-sponsored enterprises,
including the 60-day suspension of foreclosures on federally-backed mortgages and requirements that servicers grant forbearance
to borrowers affected by COVID-19.
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Moratorium on Negative Credit Reporting. Any furnisher of credit information that agrees to defer payments, forbear
on any delinquent credit or account, or provide any other relief to consumers affected by the COVID-19 pandemic must report the
credit obligation or account as current if the credit obligation or account was current before the accommodation.
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Massachusetts COVID-19 Emergency Legislation
On April 20, 2020, legislation enacted in Massachusetts in response
to the COVID-19 emergency declared by Governor Baker was signed into law by the Governor. The legislation establishes a temporary
moratorium on foreclosures on one- to four-family, owner occupied residential real estate in Massachusetts. The legislation also
requires a creditor to grant to a borrower of a mortgage loan secured by one- to four-family, owner occupied residential real estate
in Massachusetts a forbearance of up to 180 days, if requested by the borrower, who must affirm that the borrower has experienced
a financial impact from the COVID-19 pandemic. A borrower is entitled to request a forbearance while the legislation is in effect
even if the borrower is already in default. In connection with a forbearance, a creditor may not charge fees, penalties or interest
beyond the amounts scheduled and calculated as if the borrower made all contractual payments on time and in full under the terms
of the relevant loan agreement. The legislation specifies that a payment subject to forbearance shall be added to the end of the
term of the loan unless otherwise agreed by the parties. The legislation also prohibits a creditor from furnishing negative information
to a consumer reporting agency related to mortgage payments subject to forbearance. Because the legislation was enacted on an emergency
basis, it went into effect immediately upon being signed into law. The legislation provides that the temporary moratorium on foreclosures
expires 120 days after the effective date of the legislation, which is August 18, 2020, or 45 days after the COVID-19 emergency
declaration has been lifted, whichever is sooner, but the Governor may extend the moratorium in increments of up 90 days as long
as the moratorium ends not later than 45 days after the COVID-19 emergency declaration has been lifted. A borrower may request
a forbearance under the legislation at any time while the foreclosure moratorium is in effect.
The following risk factor supplements Part I, Item 1A, “Risk
Factors” of our 2019 Form 10-K.
The COVID-19 pandemic, and the measures taken to control
its spread, will continue to adversely impact our employees, customers, business operations and financial results, and the ultimate
impact will depend on future developments, which are highly uncertain and cannot be predicted.
The COVID-19 pandemic has, and will likely continue to, severely
impact the national economy and the regional and local markets in which we operate, lower equity market valuations, create significant
volatility and disruption in capital and debt markets, and increase unemployment levels. Our business operations may be disrupted
if significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government
actions, or other restrictions in connection with the pandemic. We are subject to heightened cybersecurity, information security
and operational risks as a result of work-from-home arrangements that we have put in place for our employees. Actions taken by
the Board of Governors of the Federal Reserve System to combat the economic contraction caused by the COVID-19 pandemic, including
the reduction of the target federal funds rate and quantitative easing programs, could, if prolonged, adversely affect our net
interest income and margins, and our profitability. The continued closures of many businesses and the institution of social distancing,
shelter in place and stay home orders in the states and communities we serve, have reduced business activity and financial transactions.
It is unclear whether any COVID-19 pandemic-related businesses losses that we or our customers may suffer will be covered by existing
insurance policies. Additionally, these shelter in place and stay home orders may hinder our ability to conduct timely property
appraisals, which could delay or impact the accuracy of the recognition of credit losses in our loan portfolios. Changes in customer
behavior due to worsening business and economic conditions or legislative or regulatory initiatives may impact the demand for our
products and services, which could adversely affect our revenue, increase the recognition of credit losses in our loan portfolios
and increases in our allowance for credit losses. Similarly, because of adverse economic and market conditions affecting issuers,
we may be required to recognize further impairments on the securities we hold, goodwill, intangible assets, and deferred tax assets,
as well as reductions in other comprehensive income. While the COVID-19 pandemic negatively impacted our results of operations
for the first quarter of 2020, the extent to which the COVID-19 pandemic will continue to impact our business, results of operations,
and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, including
the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the
pandemic, as well as further actions we may take as may be required by government authorities or that we determine is in the best
interests of our employees and customers. There is no certainty that such measures will be sufficient to mitigate the risks posed
by the pandemic.
Our participation in the Small Business Administration,
or SBA, Paycheck Protection Program, or PPP, may expose us to reputational harm, increased litigation risk, as well as the risk
that the SBA may not fund some or all of the guarantees associated with PPP loans.
As of April 24, 2020, we originated 2,183 loans aggregating
$518 million through the PPP. Lenders participating in the PPP have faced increased public scrutiny about their loan application
process and procedures, and the nature and type of the borrowers receiving PPP loans. We depend on our reputation as a trusted
and responsible financial services company to compete effectively in the communities that we serve, and any negative public or
customer response to, or any litigation or claims that might arise out of, our participation in the PPP and any other legislative
or regulatory initiatives and programs that may be enacted in response to the COVID-19 pandemic, could adversely impact our business.
Other larger banks have been subject to litigation regarding the process and procedures that such banks used in processing applications
for the PPP, and we may be subject to the same or similar litigation. In addition, if the SBA determines that there is a deficiency
in the manner in which a PPP loan was originated, funded, or serviced by us, the SBA may deny its liability under the guaranty,
reduce the amount of the guaranty, or, if it has already paid under the guaranty, seek recovery of any loss related to the deficiency
from us.