Brookline Bancorp, Inc is chartered savings and loan holding company of Brookline Bank. The bank's business is focused in the greater Boston metropolitan area--as of December 31, 2010, it operated in twenty full-service offices in Brookline, Medford and adjacent communities in Middlesex County, Norfolk County and Suffolk County in Massachusetts. The activities of Brookline include loaning, checking, savings, cash management and investment advisory services.
In 2010, Brookline's net interest income grew 12% to $10.2 million, while its net interest margin improved to 3.71% in 2010 from 3.34% in 2009. These increases were primarily due to the growth in the loan portfolio and the expansion of its cash management capabilities.
With its activity in loaning, the company has high exposure to credit risk, and relies on accurately predicting how well its customers will repay their loans. The corporation must maintain proactive credit risk management and constantly weigh ongoing economic factors--should they overestimate its customers' ability to repay loans, the bank's overall performance will suffer.
Changes in interest rates inversely affect a bank's net interest margin — the difference between the yield the bank earns on assets and the interest rate it pays for deposits and other sources of funding. Interest rate fluctuations, such as in the Federal Funds Rate (the rate at which financial institutions lend federal funds to other depository institutions) and Prime Rate (rate at which banks lend to their highest-credited consumers) affect bank products such as loans, deposits, securities, and short-term lending. As interest rates rise, banks are forced to pay higher rates on deposits and other interest bearing accounts. Meanwhile consumer demand for mortgages and other loan products diminishes as borrowing becomes more expensive. The combination of these two effects reduces both the volume of loans and the profitability of each loan. Rising interest rates also have the potential to increase a bank's defaults as holders of adjustable rate mortgages find themselves unable to meet their obligations.
Brookline faces competition from financial service companies such as commercial banks, savings banks, credit unions, and insurance companies. Other community banks in Massachusetts include: