Western New England Bancorp, Inc. Reports Results for Three Months Ended March 31, 2022 and Declares Quarterly Cash Dividend
WESTFIELD, Mass., April 26, 2022 (GLOBE NEWSWIRE) -- Western New England Bancorp, Inc. (the “Company” or “WNEB”) (NasdaqGS: WNEB), the holding company for Westfield Bank (the “Bank”), announced today the unaudited results of operations for the three months ended March 31, 2022. The Company reported net income of $5.3 million, or $0.24 per diluted share, for the three months ended March 31, 2022, as compared to net income of $5.8 million, or $0.24 per diluted share, for the three months ended March 31, 2021. On a linked quarter basis, net income was $5.3 million, or $0.24 per diluted share, as compared to net income of $6.2 million, or $0.28 per diluted share, for the three months ended December 31, 2021.
The Company also announced that the Board of Directors declared a quarterly cash dividend of $0.06 per share on the Company’s common stock. The dividend will be payable on or about May 25, 2022 to shareholders of record on May 11, 2022.
“We continue to build off a record year in 2021 and are pleased to announce strong first quarter results for the Company in 2022,” said James C. Hagan, President and Chief Executive Officer. “Notwithstanding a challenging economic and interest rate environment resulting in part from the ongoing global pandemic and geopolitical uncertainty, we remain optimistic about the Company’s growth opportunities in 2022.
As a result of utilizing excess cash from our successful increase in core deposits, the Company continues to show strong loan growth in key loan categories. We are pleased to report that our total loan portfolio increased $80.8 million during the first quarter, or 4.4%, excluding $19.3 million in Paycheck Protection Program (“PPP”) loans that were forgiven by the Small Business Administration (“SBA”). During the first quarter, we have seen the strongest growth from our commercial real estate lending portfolio. Additionally, during the first quarter, commercial real estate loans increased $59.5 million, or 6.1%, as we continued to add new customer relationships throughout New England and in key strategic lending areas. Despite customers continuing to use their accumulated cash to fund their operations, commercial and industrial loans continue to be added to our loan portfolio and remain a strategic priority. We continue to be mindful of economic conditions, such as inflation, supply chain issues that may affect some of our business customers, as well as the anticipated Federal Reserve interest rate increases, but remain optimistic about our loan portfolio growth.
We believe the balance sheet management steps we took in 2021 have directly resulted in an increase in net interest income and the net interest margin, which increased from 3.10% in the fourth quarter of 2021 to 3.20% in the first quarter of 2022. We are well positioned for the long awaited increase in interest rates with a strong low-cost core deposit base. Our asset quality continues to remain extremely solid with historical lows for nonperforming loans to total loans of 0.21% and our capital position continues to remain strong.”
Hagan concluded, “Lastly, we would like to thank the West Hartford community for naming Westfield Bank the “2021 Best of West Hartford – Best Bank/Financial Institution” for the second year in a row. I would also like to thank our customers, employees, Board of Directors and shareholders for their support as we continue our efforts to grow the Company in new markets now and in the future.”
COVID-19 Response and Actions:
As a Preferred Lender with the SBA, the Company was in a position to react immediately to the PPP component of the March 27, 2020 stimulus bill known as the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) launched by the U.S Department of the Treasury and the SBA. As of December 31, 2021, the Company had received funding approval from the SBA for 2,146 applications totaling $302.2 million. As of March 31, 2022, the Company processed 2,093 PPP loan forgiveness applications totaling $296.1 million. Total PPP loans decreased $19.3 million, or 76.3%, from $25.3 million at December 31, 2021 to $6.1 million at March 31, 2022.
During the three months ended March 31, 2022, the Company recognized $562,000 in PPP loan origination fee income and PPP interest income (“PPP income”), compared to $2.4 million during the three months ended March 31, 2021. As of March 31, 2022, the Company had $255,000 in remaining deferred PPP loan processing fees.
The table below breaks out the PPP income recognized for the periods noted:
For the Three Months Ended | |||||||||||
March 31, 2022 | December 31, 2021 | September 30, 2021 | June 30, 2021 | March 31, 2021 | |||||||
($ in thousands) | |||||||||||
PPP origination fee income | $ 526 | $ 868 | $ 1,556 | $ 1,240 | $ 1,999 | ||||||
PPP interest income | 36 | 105 | 201 | 387 | 412 | ||||||
Total PPP Income | $ 562 | $ 973 | $ 1,757 | $ 1,627 | $ 2,411 | ||||||
In addition to participating in the PPP, the Company implemented a modification deferral program under the CARES Act, which allowed residential, commercial and consumer borrowers who were adversely affected by the COVID-19 pandemic, to defer loan payments for a set period of time. As of March 31, 2022, the Company had two remaining commercial real estate loans, with an outstanding principal balance of $12.1 million, under CARES Act modification. The two borrowers were granted a principal deferral under the Company’s modification deferral program, but continue to make their interest and real estate tax payments. There were no outstanding deferrals related to residential and consumer loans under CARES modification as of March 31, 2022.
Key Highlights:
Loans and Deposits
At March 31, 2022, total loans were $1.9 billion, an increase of $61.6 million, or 3.3%, from December 31, 2021. Excluding PPP loans, total loans increased $80.8 million, or 4.4%, from December 31, 2021, primarily due to a $59.5 million, or 6.1%, increase in commercial real estate loans from December 31, 2021 to March 31, 2022.
At March 31, 2022, total deposits were $2.3 billion, an increase of $21.3 million, or 0.9%, from December 31, 2021. Core deposits, which include non-interest bearing demand accounts, increased $44.2 million, or 2.4%, from $1.9 billion, or 82.2% of total deposits, at December 31, 2021, to $1.9 billion, or 83.4% of total deposits at March 31, 2022. The loan to deposit ratio increased from 82.6% at December 31, 2021 to 84.6% at March 31, 2022 due to the increase in loans during the same period.
Allowance for Loan Losses and Credit Quality
At March 31, 2022, the allowance for loan losses as a percentage of total loans and as a percentage of non-performing loans was 1.00% and 484.2%, respectively. At March 31, 2022, non-performing loans totaled $4.0 million, or 0.21% of total loans, compared to $5.0 million, or 0.27% of total loans, at December 31, 2021. Total delinquency increased $667,000, or 31.2%, from 0.11% of total loans at December 31, 2021 to 0.15% of total loans at March 31, 2022.
Net Interest Margin
The net interest margin was 3.18% for the three months ended March 31, 2022 compared to 3.08% for the three months ended December 31, 2021. The net interest margin, on a tax-equivalent basis, was 3.20% for the three months ended March 31, 2022, compared to 3.10% for the three months ended December 31, 2021.
Repurchases
On April 27, 2021, the Board of Directors authorized a stock repurchase plan (the “2021 Plan”) under which the Company is authorized to repurchase up to 2.4 million shares, or 10% of its outstanding common stock. During the three months ended March 31, 2022, the Company repurchased 112,674 shares of common stock under the 2021 Plan. At March 31, 2022, there were 564,645 shares available for repurchase under the 2021 Plan.
The shares repurchased under the 2021 Plan will be purchased from time to time at prevailing market prices, through open market or privately negotiated transactions, or otherwise, depending upon market conditions. There is no guarantee as to the exact number, or value, of shares that will be repurchased by the Company, and the Company may discontinue repurchases at any time that management determines additional repurchases are not warranted. The timing and amount of additional share repurchases under the 2021 Plan will depend on a number of factors, including the Company’s stock price performance, ongoing capital planning considerations, general market conditions, and applicable legal requirements.
Capital Management
Book value per share was $9.63 at March 31, 2022, compared to $9.87 at December 31, 2021, while tangible book value per share (non-GAAP) decreased $0.24, or 2.6%, from $9.21 at December 31, 2021 to $8.97 at March 31, 2022. Accumulated other comprehensive income/loss (“AOCI”) reduced the tangible book value per common share by $0.37 as of March 31, 2022, primarily due to the impact of higher interest rates on the fair value of available-for-sale securities. As of March 31, 2022, the Company’s and the Bank’s regulatory capital ratios continued to exceed the levels required to be considered “well-capitalized” under federal banking regulations.
Net Income for the Three Months Ended March 31, 2022 Compared to the Three Months Ended December 31, 2021
The Company reported net income of $5.3 million, or $0.24 per diluted share, for the three months ended March 31, 2022, compared to net income of $6.2 million, or $0.28 per diluted share, for the three months ended December 31, 2021. Return on average assets and return on average equity were 0.85% and 9.65%, respectively, for the three months ended March 31, 2022, compared to 0.97% and 11.22%, respectively, for the three months ended December 31, 2021.
Net Interest Income and Net Interest Margin
On a sequential quarter basis, net interest income increased $116,000, or 0.6%, to $18.7 million for the three months ended March 31, 2022, from $18.6 million for the three months ended December 31, 2021. The increase in net interest income was primarily due to an increase in interest and dividend income of $17,000, or 0.1%, also improved by a decrease in interest expense of $99,000, or 7.4%.
During the three months ended March 31, 2022 and the three months ended December 31, 2021, interest and dividend income included PPP income of $562,000 and $973,000, respectively. During the three months ended March 31, 2022, the Company recorded $39,000 in positive purchase accounting adjustments, compared to negative purchase accounting adjustments of $31,000 during the three months ended December 31, 2021. Excluding PPP income and purchase accounting adjustments, net interest income increased $457,000, or 2.6%, from the three months ended December 31, 2021 to the three months ended March 31, 2022.
The net interest margin was 3.18% for the three months ended March 31, 2022 compared to 3.08% for the three months ended December 31, 2021. The net interest margin, on a tax-equivalent basis, was 3.20% for the three months ended March 31, 2022, compared to 3.10% for the three months ended December 31, 2021. Excluding PPP income, the net interest margin was 3.10% for the three months ended March 31, 2022, compared to 2.97% for the three months ended December 31, 2021. The average yield on interest-earning assets was 3.39% for the three months ended March 31, 2022, compared to 3.30% for the three months ended December 31, 2021. The average loan yield was 3.84% for the three months ended March 31, 2022, compared to 3.88% for the three months ended December 31, 2021.
During the three months ended March 31, 2022, average interest-earning assets decreased $8.5 million, or 0.4%, to $2.4 billion, primarily due to a decrease in short-term investments of $74.8 million, or 56.8%, partially offset by an increase in average securities of $21.6 million, or 5.4%, and an increase in average loans of $44.7 million, or 2.4%. Excluding PPP loans, average loans increased $71.2 million, or 3.9%, from the three months ended December 31, 2021 to the three months ended March 31, 2022.
The average cost of total funds, including non-interest bearing accounts and borrowings, decreased one basis point from 0.23% for the three months ended December 31, 2021 to 0.22% for the three months ended March 31, 2022. The average cost of core deposits, including non-interest bearing demand deposits, decreased one basis point to 14 basis points for the three months ended March 31, 2022, from 15 basis points for the three months ended December 31, 2021. The average cost of time deposits decreased four basis points from 0.39% for the three months ended December 31, 2021 to 0.35% for the three months ended March 31, 2022. The average cost of borrowings, including subordinated debt, increased 23 basis points from 4.44% for the three months ended December 31, 2021 to 4.67% for the three months ended March 31, 2022. Average FHLB borrowings decreased $649,000, or 21.6%, from $3.0 million for the three months ended December 31, 2021 to $2.3 million for the three months ended March 31, 2022. Average demand deposits, an interest-free source of funds, decreased $21.2 million, or 3.3%, from $654.3 million, or 29.0% of total average deposits, for the three months ended December 31, 2021, to $633.1 million, or 28.1% of total average deposits, for the three months ended March 31, 2022.
Provision for Loan Losses
During the three months ended March 31, 2022, the provision for loan losses decreased $725,000, from a provision for loan losses of $300,000 for the three months ended December 31, 2021, to a credit for loan losses of $425,000. The decrease in the provision reflects management’s current assessment of the impact of the COVID-19 pandemic on the Bank’s loan portfolio. Management continues to assess the exposure of the Company’s loan portfolio to the COVID-19 pandemic, economic trends and their potential effect on asset quality. The Company has deferred the adoption of the Current Expected Credit Loss allowance methodology, as permitted by its classification as a Smaller Reporting Company under Securities and Exchange Commission rules. Management will continue to closely monitor portfolio conditions and reevaluate the adequacy of the allowance.
The Company recorded net charge-offs of $54,000 for the three months ended March 31, 2022, as compared to net charge-offs of $350,000 for the three months ended December 31, 2021. At March 31, 2022, non-performing loans totaled $4.0 million, or 0.21% of total loans, and total delinquency as a percentage of total loans was 0.15%.
Non-Interest Income
On a sequential quarter basis, non-interest income decreased $1.6 million, or 39.1%, to $2.3 million for the three months ended March 31, 2022, from $3.9 million for the three months ended December 31, 2021. During the three months ended December 31, 2021, non-interest income included the recognition of $555,000 in bank-owned life insurance (“BOLI”) death benefits and also included a $352,000 gain on non-marketable equity investments. During the three months ended March 31, 2022, service charges and fees decreased $96,000, or 4.2%, from the three months ended December 31, 2021. Mortgage banking income from the sale of fixed rate residential real estate loans decreased $287,000, or 99.3%, from $289,000 for the three months ended December 31, 2021 to $2,000 for the three months ended March 31, 2022. During the three months ended March 31, 2022, the Company reported unrealized losses on marketable equity securities of $276,000, compared to unrealized losses of $96,000 during the three months ended December 31, 2021. During the three months ended March 31, 2022, the Company reported a loss of $4,000 on securities sales. Income from BOLI decreased $38,000, or 7.8%, from the three months ended December 31, 2021 to $448,000, for the three months ended March 31, 2022.
Non-Interest Expense
For the three months ended March 31, 2022, non-interest expense increased $533,000, or 3.8% to $14.5 million, from the three months ended December 31, 2021. Salaries and employee benefits increased $46,000, or 0.6%, to $8.2 million. Occupancy expense increased $219,000, or 19.1%, primarily due to $140,000 in snow removal costs. Professional fees increased $100,000, or 21.0%, advertising expense increased $137,000, or 52.3%, and FDIC insurance expense increased $84,000, or 41.6%. Furniture and equipment expenses decreased $5,000, or 0.9%, data processing decreased $3,000, or 0.4%, and other non-interest expense decreased $45,000, or 1.9%. For the three months ended March 31, 2022, the efficiency ratio was 67.8%, compared to 64.4% for the three months ended December 31, 2021. The efficiency ratio is a non-GAAP measure. See page 16 for the related ratio calculation and a reconciliation of GAAP to non-GAAP financial measures.
Income Tax Provision
Income tax expense for the three months ended March 31, 2022 was $1.7 million, or an effective tax rate of 24.2%, compared to $2.0 million, or an effective tax rate of 24.3%, for three months ended December 31, 2021.
Net Income for the Three Months Ended March 31, 2022 Compared to the Three Months Ended March 31, 2021
The Company reported net income of $5.3 million, or $0.24 per diluted share, for the three months ended March 31, 2022, compared to net income of $5.8 million, or $0.24 per diluted share, for the three months ended March 31, 2021.
For the three months ended March 31, 2022, return on average assets and return on average equity were 0.85% and 9.65%, respectively, compared to 0.98% and 10.35%, respectively, for the three months ended March 31, 2021. The decrease in net income of $472,000, or 8.2%, was primarily due to a decrease in PPP income of $1.8 million, or 76.7%, from $2.4 million for the three months ended March 31, 2021 to $562,000 for the three months ended March 31, 2022.
Net Interest Income and Net Interest Margin
Net interest income increased $672,000, or 3.7%, to $18.7 million for the three months ended March 31, 2022, from $18.0 million for the three months ended March 31, 2021. The increase in net interest income was due to a decrease in interest expense of $762,000, or 38.0%, primary due to a $742,000, or 42.8%, decrease in interest expense on deposits. During the same period, interest and dividend income decreased $90,000, or 0.4%, primarily due to a $1.8 million, or 76.7%, decrease in PPP income.
Net interest income for the three months ended March 31, 2022 included PPP income of $562,000, compared to $2.4 million for the three months ended March 31, 2021. During the three months ended March 31, 2022 interest income included $39,000 in positive purchase accounting adjustments, compared to $45,000 in negative purchase accounting adjustments during the three months ended March 31, 2021. Excluding the adjustments above, net interest income increased $2.4 million, or 15.6%, from $15.7 million during the three months ended March 31, 2021, to $18.1 million during the three months ended March 31, 2022.
The net interest margin was 3.18% for the three months ended March 31, 2022, compared to 3.24%, for the three months ended March 31, 2021. The net interest margin, on a tax-equivalent basis, was 3.20% for the three months ended March 31, 2022, compared to 3.26% for the three months ended March 31, 2021. Excluding the adjustments discussed above, the net interest margin increased six basis points from 3.04% for the three months ended March 31, 2021 to 3.10% for the three months ended March 31, 2022. The Company’s net interest margin was positively impacted by higher average balances for loans and securities and a decrease in lower yielding interest-earning assets.
The loan yield decreased 19 basis points from 4.03% for the three months ended March 31, 2021 to 3.84% for the three months ended March 31, 2022. Excluding PPP loans and purchase accounting adjustments, the average loan yield decreased 13 basis points from 3.87% for the three months ended March 31, 2021 to 3.74% for the three months ended March 31, 2022. The average yield on interest-earning assets decreased 21 basis points from 3.60% for the three months ended March 31, 2021 to 3.39% for the three months ended March 31, 2022.
During the three months ended March 31, 2022, average interest-earning assets increased $130.5 million, or 5.8%, to $2.4 billion compared to the three months ended March 31, 2021. The increase was primarily due to an increase in average securities of $197.0 million, or 83.1%. Excluding average PPP loans, average loans increased $122.9 million, or 7.0%, from the three months ended March 31, 2021 to the three months ended March 31, 2022. Total average loans, excluding average PPP loans, were 78.8% of total average interest-earning assets for the three months ended March 31, 2022, compared to 77.9% for the three months ended March 31, 2021.
During the three months ended March 31, 2022, the average cost of funds, including non-interest bearing demand accounts and borrowings, decreased 16 basis points, from 0.38% for the three months ended March 31, 2021 to 0.22% for the three months ended March 31, 2022. The average cost of core deposits, including non-interest bearing demand deposits, decreased 7 basis points from 0.21% for the three months ended March 31, 2021 to 0.14% for the three months ended March 31, 2022. The average cost of time deposits decreased 32 basis points from 0.67% for the three months ended March 31, 2021 to 0.35% for the three months ended March 31, 2022, while the average cost of borrowings increased from 2.10% for the three months ended March 31, 2021 to 4.67% for the three months ended March 31, 2022. Average demand deposits, an interest-free source of funds, increased $71.5 million, or 12.7%, from $561.6 million, or 27.0% of total average deposits, for the three months ended March 31, 2021 to $633.1 million, or 28.1%, of total average deposits, for the three months ended March 31, 2022.
Provision for Loan Losses
The provision for loan losses decreased $500,000, from a provision for loan losses of $75,000 for the three months ended March 31, 2021 to a credit for loan losses of $425,000 for the three months ended March 31, 2022. The Company recorded net charge-offs of $54,000 for the three months ended March 31, 2022, as compared to net charge-offs of $5,000 for the three months ended March 31, 2021. The decrease in the provision versus comparative periods reflected management’s current assessment of the impact of the COVID-19 pandemic on the Bank’s loan portfolio. Management continues to assess the exposure of the Company’s loan portfolio to the COVID-19 pandemic, economic trends and their potential effect on asset quality.
Non-Interest Income
Non-interest income decreased $656,000, or 21.8%, to $2.3 million for the three months ended March 31, 2022, from $3.0 million for the three months ended March 31, 2021. The three months ended March 31, 2021, included a gain on non-marketable equity investments of $546,000. Service charges and fees on deposits increased $291,000, or 15.5%, and income from bank-owned life insurance increased $7,000, or 1.6%, from $441,000 for the three months ended March 31, 2021 to $448,000, for the three months ended March 31, 2022. Income from mortgage banking activities decreased $225,000, or 99.1%, and other income decreased $54,000. During the three months ended March 31, 2022, unrealized losses on marketable equity securities were $276,000, compared to unrealized losses of $89,000 during the three months ended March 31, 2021. During the three months ended March 31, 2022, the Company reported realized losses on the sale of securities of $4,000, compared to realized losses of $62,000 during the three months ended March 31, 2021.
Non-Interest Expense
For the three months ended March 31, 2022, non-interest expense increased $1.1 million, or 8.5%, to $14.5 million from $13.3 million, for the three months ended March 31, 2021. Salaries and employee benefits expense increased $638,000, or 8.4%, to $8.2 million, primarily due to annual merit increases and benefit costs. Other non-interest expense increased $280,000, or 13.7%, occupancy expense increased $74,000, or 5.7%, furniture and equipment increased $53,000, or 10.8%, professional fees increased $33,000, or 6.1%, advertising expenses increased $61,000, or 18.0%, and data processing related expenses increased $2,000, or 0.3%. FDIC insurance expense decreased $12,000, or 4.0%. The efficiency ratio was 67.8% for the three months ended March 31, 2022, compared to 64.6% for the three months ended March 31, 2021. The efficiency ratio is a non-GAAP measure. See page 16 for the related ratio calculation and a reconciliation of GAAP to non-GAAP financial measures.
Income Tax Provision
Income tax expense for the three months ended March 31, 2022 was $1.7 million, or an effective tax rate of 24.2%, compared to $1.8 million, or an effective tax rate of 24.1%, for three months ended March 31, 2021.
Balance Sheet
At March 31, 2022, total assets were $2.6 billion, an increase of $17.0 million, or 0.7%, from December 31, 2021. During the three months ended March 31, 2022, cash and cash equivalents decreased $40.6 million, or 39.2%, to $62.9 million, investment securities decreased $5.4 million, or 1.3%, to $423.1 million and total loans, excluding PPP loans, increased $80.8 million, or 4.4%, to $1.9 billion.
Investments
At March 31, 2022, the Company’s available-for-sale securities portfolio decreased $20.4 million, or 10.5%, from $194.4 million at December 31, 2021 to $173.9 million at March 31, 2022. The held-to-maturity securities portfolio, recorded at amortized cost, increased $15.3 million, or 6.9%, from $222.3 million at December 31, 2021 to $237.6 million at March 31, 2022. The Company allocated a portion of its excess liquidity to the investment portfolio as an alternative to cash and cash equivalents. This shift from overnight investments to held-to-maturity securities will assist the Company with managing the yield on interest-earning assets in the low interest rate environment that we are experiencing while providing ongoing cash flows from payments and pay downs. The primary objective of the investment portfolio is to provide liquidity and maximize income while preserving the safety of principal.
Total Loans
At March 31, 2022, total loans were $1.9 billion, an increase of $61.6 million, or 3.3%, from December 31, 2021. Excluding PPP loans, total loans increased $80.8 million, or 4.4%, driven by an increase in commercial real estate loans of $59.5 million, or 6.1%, partially offset by a decrease in total commercial and industrial loans of $10.7 million, or 4.7%. Excluding a decrease of $19.3 million in PPP loans from December 31, 2021, commercial and industrial loans increased $8.6 million, or 4.2%, at March 31, 2022. Residential real estate loans, which include home equity loans, increased $12.4 million, or 1.9%. In accordance with the Company’s asset/liability management strategy, during the three months ended March 31, 2022, the Company sold $277,000 of fixed rate, low coupon residential real estate loans to the secondary market. As of March 31, 2022, the Company serviced $85.5 million in loans sold to the secondary market, compared to $88.2 million at December 31, 2021. Servicing rights will continue to be retained on all loans written and sold to the secondary market.
The following table is a summary of our outstanding loan balances for the periods indicated:
March 31, 2022 | December 31, 2021 | ||||||
(Dollars in thousands) | |||||||
Commercial real estate loans | $ | 1,039,487 | $ | 979,969 | |||
Residential real estate loans: | |||||||
Residential | 564,339 | 552,332 | |||||
Home equity | 100,165 | 99,759 | |||||
Total residential real estate loans | 664,504 | 652,091 | |||||
Commercial and industrial loans: | |||||||
PPP loans | 6,052 | 25,329 | |||||
Commercial and industrial loans | 209,890 | 201,340 | |||||
Total commercial and industrial loans | 215,942 | 226,669 | |||||
Consumer loans | 4,252 | 4,250 | |||||
Total gross loans | 1,924,185 | 1,862,979 | |||||
Unamortized PPP loan fees | (255 | ) | (781 | ) | |||
Unamortized premiums and net deferred loans fees and costs | 2,355 | 2,518 | |||||
Total loans | $ | 1,926,285 | $ | 1,864,716 | |||
Credit Quality
Management continues to remain attentive to any signs of deterioration in borrowers’ financial conditions and is proactive in taking the appropriate steps to mitigate risk. At March 31, 2022, nonperforming loans totaled $4.0 million, or 0.21% of total loans, compared to $5.0 million, or 0.27% of total loans, at December 31, 2021. At March 31, 2022, there were no loans 90 or more days past due and still accruing interest. Nonperforming assets to total assets, was 0.16% at March 31, 2022, compared to 0.20% at December 31, 2021. The allowance for loan losses as a percentage of total loans, was 1.00% at March 31, 2022, compared to 1.06% at December 31, 2021. At March 31, 2022, the allowance for loan losses as a percentage of nonperforming loans was 484.2%, compared to 398.6%, at December 31, 2021.
Deposits
At March 31, 2022, total deposits were $2.3 billion, an increase of $21.3 million, or 0.9%, from December 31, 2021, primarily due to an increase in core deposits of $44.2 million, or 2.4%. Core deposits, which the Company defines as all deposits except time deposits, increased from $1.9 billion, or 82.2% of total deposits, at December 31, 2021, to $1.9 billion, or 83.4% of total deposits, at March 31, 2022. Non-interest-bearing deposits decreased $11.1 million, or 1.7%, to $630.2 million, interest-bearing checking accounts decreased $6.4 million, or 4.4%, to $139.3 million, savings accounts increased $7.0 million, or 3.2%, to $224.6 million, and money market accounts increased $54.7 million, or 6.4%, to $905.1 million.
Time deposits decreased $23.0 million, or 5.7%, from $402.0 million at December 31, 2021 to $379.0 million at March 31, 2022. The Company did not have any brokered deposits at March 31, 2022 or December 31, 2021.
FHLB and Subordinated Debt
At March 31, 2022, total borrowings decreased $1.0 million, or 4.5%, from $22.3 million at December 31, 2021, to $21.3 million. FHLB advances decreased $1.0 million, or 36.5%, to $1.7 million and subordinated debt outstanding totaled $19.6 million at March 31, 2022 and at December 31, 2021.
Capital
At March 31, 2022, shareholders’ equity was $219.1 million, or 8.6% of total assets, compared to $223.7 million, or 8.8% of total assets, at December 31, 2021. The decrease in shareholders’ equity reflects $1.2 million for the repurchase of the Company’s common stock, the payment of regular cash dividends of $1.3 million and an increase in accumulated other comprehensive loss of $8.4 million, partially offset by net income of $5.3 million. Total shares outstanding as of March 31, 2022 were 22,742,189.
Capital Management
The Company’s book value per share was $9.63 at March 31, 2022 compared to $9.87 at December 31, 2021, while tangible book value per share (non-GAAP) decreased $0.24, or 2.6%, from $9.21 at December 31, 2021 to $8.97 at March 31, 2022. AOCI reduced the tangible book value per common share by $0.37 as of March 31, 2022, primarily due to the impact of higher interest rates on the fair value of available-for-sale securities.
The Company’s regulatory capital ratios remain in compliance with regulatory “well capitalized” requirements and internal target minimal levels. At March 31, 2022, the Company’s Tier 1 leverage, common equity tier 1 capital, and total risk-based capital ratios were 8.9%, 11.9%, and 14.0%, respectively, and the Bank’s Tier 1 leverage, common equity tier 1 capital, and total risk-based capital ratios were 9.1%, 12.1%, and 13.1%, respectively, compared with regulatory “well capitalized” minimums of 5.00%, 6.5%, and 10.00%, respectively.
Dividends
Although the Company has historically paid quarterly dividends on its common stock and currently intends to continue to pay such dividends, the Company’s ability to pay such dividends depends on a number of factors, including restrictions under federal laws and regulations on the Company’s ability to pay dividends, and as a result, there can be no assurance that dividends will continue to be paid in the future.
About Western New England Bancorp, Inc.
Western New England Bancorp, Inc. is a Massachusetts-chartered stock holding company and the parent company of Westfield Bank, CSB Colts, Inc., Elm Street Securities Corporation, WFD Securities, Inc. and WB Real Estate Holdings, LLC. Western New England Bancorp, Inc. and its subsidiaries are headquartered in Westfield, Massachusetts and operate 25 banking offices throughout western Massachusetts and northern Connecticut. To learn more, visit our website at www.westfieldbank.com.
Forward-Looking Statements
This press release contains “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, with respect to the Company’s financial condition, liquidity, results of operations, future performance, business, measures being taken in response to the COVID-19 pandemic and the impact of the COVID-19 impact on the Company’s business. Forward-looking statements may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” and “potential.” Examples of forward-looking statements include, but are not limited to, estimates with respect to our financial condition, results of operations and business that are subject to various factors which could cause actual results to differ materially from these estimates. These factors include, but are not limited to:
the duration and scope of the COVID-19 pandemic and the local, national and global impact of COVID-19;
actions governments, businesses and individuals take in response to the COVID-19 pandemic;
the speed and effectiveness of vaccine and treatment developments and their deployment, including public adoption rates of COVID-19 vaccines;
the emergence of new COVID-19 variants, such as the Omicron variant, and the response thereto;
the pace of recovery when the COVID-19 pandemic subsides;
changes in the interest rate environment that reduce margins;
the effect on our operations of governmental legislation and regulation, including changes in accounting regulation or standards, the nature and timing of the adoption and effectiveness of new requirements under the Dodd-Frank Act Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”), Basel guidelines, capital requirements and other applicable laws and regulations;
the highly competitive industry and market area in which we operate;
general economic conditions, either nationally or regionally, resulting in, among other things, a deterioration in credit quality;
changes in business conditions and inflation;
changes in credit market conditions;
the inability to realize expected cost savings or achieve other anticipated benefits in connection with business combinations and other acquisitions;
changes in the securities markets which affect investment management revenues;
increases in Federal Deposit Insurance Corporation deposit insurance premiums and assessments;
changes in technology used in the banking business;
the soundness of other financial services institutions which may adversely affect our credit risk;
certain of our intangible assets may become impaired in the future;
our controls and procedures may fail or be circumvented;
new lines of business or new products and services, which may subject us to additional risks;
changes in key management personnel which may adversely impact our operations;
severe weather, natural disasters, acts of war or terrorism and other external events which could significantly impact our business; and
other factors detailed from time to time in our SEC filings.
Although we believe that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from the results discussed in these forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We do not undertake any obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except to the extent required by law.
For further information contact:
James C. Hagan, President and CEO
Guida R. Sajdak, Executive Vice President and CFO
Meghan Hibner, Vice President and Investor Relations Officer
413-568-1911
WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Net Income and Other Data
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended | |||||||||||||||
March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||
2022 | 2021 | 2021 | 2021 | 2021 | |||||||||||
INTEREST AND DIVIDEND INCOME: | |||||||||||||||
Loans | $ | 17,947 | $ | 18,089 | $ | 18,670 | $ | 18,321 | $ | 19,120 | |||||
Securities | 1,950 | 1,763 | 1,500 | 1,277 | 854 | ||||||||||
Other investments | 25 | 25 | 28 | 28 | 35 | ||||||||||
Short-term investments | 21 | 49 | 40 | 26 | 24 | ||||||||||
Total interest and dividend income | 19,943 | 19,926 | 20,238 | 19,652 | 20,033 | ||||||||||
INTEREST EXPENSE: | |||||||||||||||
Deposits | 992 | 1,091 | 1,217 | 1,466 | 1,734 | ||||||||||
Long-term debt | - | - | - | 185 | 273 | ||||||||||
Subordinated debt | 253 | 253 | 256 | 197 | - | ||||||||||
Total interest expense | 1,245 | 1,344 | 1,473 | 1,848 | 2,007 | ||||||||||
Net interest and dividend income | 18,698 | 18,582 | 18,765 | 17,804 | 18,026 | ||||||||||
(CREDIT ) PROVISION FOR LOAN LOSSES | (425 | ) | 300 | (100 | ) | (1,200 | ) | 75 | |||||||
Net interest and dividend income after (credit) provision for loan losses | 19,123 | 18,282 | 18,865 | 19,004 | 17,951 | ||||||||||
NON-INTEREST INCOME: | |||||||||||||||
Service charges and fees | 2,174 | 2,270 | 2,132 | 2,075 | 1,883 | ||||||||||
Income from bank-owned life insurance | 448 | 486 | 485 | 500 | 441 | ||||||||||
Bank-owned life insurance death benefit | - | 555 | - | - | - | ||||||||||
(Loss) gain on sales of securities, net | (4 | ) | - | 2 | (12 | ) | (62 | ) | |||||||
Unrealized (losses) gains on marketable equity securities | (276 | ) | (96 | ) | 11 | 6 | (89 | ) | |||||||
Gain on sale of mortgages | 2 | 289 | 665 | 242 | 227 | ||||||||||
Gain on non-marketable equity investments | - | 352 | - | - | 546 | ||||||||||
Loss on interest rate swap termination | - | - | - | (402 | ) | - | |||||||||
Other income | 4 | - | - | - | 58 | ||||||||||
Total non-interest income | 2,348 | 3,856 | 3,295 | 2,409 | 3,004 | ||||||||||
NON-INTEREST EXPENSE: | |||||||||||||||
Salaries and employee benefits | 8,239 | 8,193 | 8,094 | 7,973 | 7,601 | ||||||||||
Occupancy | 1,363 | 1,144 | 1,124 | 1,099 | 1,289 | ||||||||||
Furniture and equipment | 543 | 548 | 533 | 513 | 490 | ||||||||||
Data processing | 723 | 726 | 698 | 758 | 721 | ||||||||||
Professional fees | 577 | 477 | 575 | 589 | 544 | ||||||||||
FDIC insurance | 286 | 202 | 273 | 225 | 298 | ||||||||||
Advertising | 399 | 262 | 345 | 347 | 338 | ||||||||||
Loss on prepayment of borrowings | - | - | - | 45 | - | ||||||||||
Other | 2,326 | 2,371 | 2,376 | 2,125 | 2,046 | ||||||||||
Total non-interest expense | 14,456 | 13,923 | 14,018 | 13,674 | 13,327 | ||||||||||
INCOME BEFORE INCOME TAXES | 7,015 | 8,215 | 8,142 | 7,739 | 7,628 | ||||||||||
INCOME TAX PROVISION | 1,696 | 1,995 | 2,106 | 2,087 | 1,837 | ||||||||||
NET INCOME | $ | 5,319 | $ | 6,220 | $ | 6,036 | $ | 5,652 | $ | 5,791 | |||||
Basic earnings per share | $ | 0.24 | $ | 0.28 | $ | 0.27 | $ | 0.24 | $ | 0.24 | |||||
Weighted average shares outstanding | 22,100,076 | 22,097,968 | 22,620,387 | 23,722,903 | 24,486,146 | ||||||||||
Diluted earnings per share | $ | 0.24 | $ | 0.28 | $ | 0.27 | $ | 0.24 | $ | 0.24 | |||||
Weighted average diluted shares outstanding | 22,172,909 | 22,203,876 | 22,714,429 | 23,773,562 | 24,543,554 | ||||||||||
Other Data: | |||||||||||||||
Return on average assets (1) | 0.85 | % | 0.97 | % | 0.96 | % | 0.92 | % | 0.98 | % | |||||
Return on average equity (1) | 9.65 | % | 11.22 | % | 10.85 | % | 10.16 | % | 10.35 | % | |||||
Efficiency ratio (2) | 67.79 | % | 64.38 | % | 63.58 | % | 66.09 | % | 64.58 | % | |||||
Net interest margin, on a fully tax-equivalent basis | 3.20 | % | 3.10 | % | 3.20 | % | 3.08 | % | 3.26 | % | |||||
(1) Annualized. | |||||||||||||||
(2) The efficiency ratio represents the ratio of operating expenses divided by the sum of net interest and dividend income and non-interest income, excluding realized and unrealized gains and losses on securities, gain on non-marketable equity investments, bank-owned life insurance death benefit, loss on interest rate swap termination and loss on prepayment of borrowings. | |||||||||||||||
WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)
March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||||||
2022 | 2021 | 2021 | 2021 | 2021 | |||||||||||||||
Cash and cash equivalents | $ | 62,898 | $ | 103,456 | $ | 148,496 | $ | 105,494 | $ | 132,124 | |||||||||
Available-for-sale securities, at fair value | 173,910 | 194,352 | 208,030 | 231,166 | 195,454 | ||||||||||||||
Held to maturity securities, at amortized cost | 237,575 | 222,272 | 154,403 | 107,783 | 63,960 | ||||||||||||||
Marketable equity securities, at fair value | 11,643 | 11,896 | 11,970 | 11,936 | 11,906 | ||||||||||||||
Federal Home Loan Bank of Boston and other restricted stock - at cost | 2,594 | 2,594 | 2,698 | 4,036 | 4,492 | ||||||||||||||
Loans | 1,926,285 | 1,864,716 | 1,846,150 | 1,876,988 | 1,924,868 | ||||||||||||||
Allowance for loan losses | (19,308 | ) | (19,787 | ) | (19,837 | ) | (19,870 | ) | (21,227 | ) | |||||||||
Net loans | 1,906,977 | 1,844,929 | 1,826,313 | 1,857,118 | 1,903,641 | ||||||||||||||
Bank-owned life insurance | 73,343 | 72,895 | 74,286 | 73,801 | 73,301 | ||||||||||||||
Goodwill | 12,487 | 12,487 | 12,487 | 12,487 | 12,487 | ||||||||||||||
Core deposit intangible | 2,469 | 2,563 | 2,656 | 2,750 | 2,844 | ||||||||||||||
Other assets | 71,542 | 70,981 | 69,459 | 70,035 | 63,320 | ||||||||||||||
TOTAL ASSETS | $ | 2,555,438 | $ | 2,538,425 | $ | 2,510,798 | $ | 2,476,606 | $ | 2,463,529 | |||||||||
Total deposits | $ | 2,278,164 | $ | 2,256,898 | $ | 2,230,884 | $ | 2,186,459 | $ | 2,159,506 | |||||||||
Long-term debt | 1,686 | 2,653 | 3,829 | 4,990 | 42,676 | ||||||||||||||
Subordinated debt | 19,643 | 19,633 | 19,623 | 19,614 | - | ||||||||||||||
Securities pending settlement | 146 | - | - | 461 | 152 | ||||||||||||||
Other liabilities | 36,736 | 35,553 | 38,120 | 41,411 | 38,339 | ||||||||||||||
TOTAL LIABILITIES | 2,336,375 | 2,314,737 | 2,292,456 | 2,252,935 | 2,240,673 | ||||||||||||||
TOTAL SHAREHOLDERS' EQUITY | 219,063 | 223,688 | 218,342 | 223,671 | 222,856 | ||||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 2,555,438 | $ | 2,538,425 | $ | 2,510,798 | $ | 2,476,606 | $ | 2,463,529 | |||||||||
WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES
Other Data
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended | |||||||||||||||
March 31, | December 31, | September 30, | June 30, | March 31, | |||||||||||
2022 | 2021 | 2021 | 2021 | 2021 | |||||||||||
Shares outstanding at end of period | 22,742,189 | 22,656,515 | 22,848,781 | 24,070,399 | 24,583,958 | ||||||||||
Operating results: | |||||||||||||||
Net interest income | $ | 18,698 | $ | 18,582 | $ | 18,765 | $ | 17,804 | $ | 18,026 | |||||
(Credit) provision for loan losses | (425) | 300 | (100) | (1,200) | 75 | ||||||||||
Non-interest income | 2,348 | 3,856 | 3,295 | 2,409 | 3,004 | ||||||||||
Non-interest expense | 14,456 | 13,923 | 14,018 | 13,674 | 13,327 | ||||||||||
Income before income provision for income taxes | 7,015 | 8,215 | 8,142 | 7,739 | 7,628 | ||||||||||
Income tax provision | 1,696 | 1,995 | 2,106 | 2,087 | 1,837 | ||||||||||
Net income | 5,319 | 6,220 | 6,036 | 5,652 | 5,791 | ||||||||||
Performance Ratios: | |||||||||||||||
Net interest margin, on a fully tax-equivalent basis | 3.20% | 3.10% | 3.20% | 3.08% | 3.26% | ||||||||||
Interest rate spread, on a fully tax-equivalent basis | 3.10% | 2.99% | 3.09% | 2.94% | 3.10% | ||||||||||
Return on average assets | 0.85% | 0.97% | 0.96% | 0.92% | 0.98% | ||||||||||
Return on average equity | 9.65% | 11.22% | 10.85% | 10.16% | 10.35% | ||||||||||
Efficiency ratio | 67.79% | 64.38% | 63.58% | 66.09% | 64.58% | ||||||||||
Per Common Share Data: | |||||||||||||||
Basic earnings per share | $ | 0.24 | $ | 0.28 | $ | 0.27 | $ | 0.24 | $ | 0.24 | |||||
Per diluted share | 0.24 | 0.28 | 0.27 | 0.24 | 0.24 | ||||||||||
Cash dividend declared | 0.06 | 0.05 | 0.05 | 0.05 | 0.05 | ||||||||||
Book value per share | 9.63 | 9.87 | 9.56 | 9.29 | 9.07 | ||||||||||
Tangible book value per share | 8.97 | 9.21 | 8.89 | 8.66 | 8.44 | ||||||||||
Asset Quality: | |||||||||||||||
30-89 day delinquent loans | $ | 1,407 | $ | 1,102 | $ | 1,619 | $ | 2,607 | $ | 7,216 | |||||
90 days or more delinquent loans | 1,401 | 1,039 | 1,446 | 1,808 | 2,058 | ||||||||||
Total delinquent loans | 2,808 | 2,141 | 3,065 | 4,415 | 9,274 | ||||||||||
Total delinquent loans as a percentage of total loans | 0.15% | 0.11% | 0.17% | 0.24% | 0.48% | ||||||||||
Total delinquent loans as a percentage of total loans, excluding PPP | 0.15% | 0.12% | 0.17% | 0.25% | 0.53% | ||||||||||
Nonperforming loans | $ | 3,988 | $ | 4,964 | $ | 5,632 | $ | 5,989 | $ | 6,782 | |||||
Nonperforming loans as a percentage of total loans | 0.21% | 0.27% | 0.31% | 0.32% | 0.35% | ||||||||||
Nonperforming loans as a percentage of total loans, excluding PPP | 0.21% | 0.27% | 0.32% | 0.34% | 0.39% | ||||||||||
Nonperforming assets as a percentage of total assets | 0.16% | 0.20% | 0.22% | 0.24% | 0.28% | ||||||||||
Nonperforming assets as a percentage of total assets, excluding PPP | 0.16% | 0.20% | 0.23% | 0.25% | 0.30% | ||||||||||
Allowance for loan losses as a percentage of nonperforming loans | 484.15% | 398.61% | 352.22% | 331.77% | 312.99% | ||||||||||
Allowance for loan losses as a percentage of total loans | 1.00% | 1.06% | 1.07% | 1.06% | 1.10% | ||||||||||
Allowance for loan losses as a percentage of total loans, excluding PPP | 1.01% | 1.08% | 1.11% | 1.12% | 1.21% | ||||||||||
Net loan charge-offs (recoveries) | $ | 54 | $ | 350 | $ | (67) | $ | 157 | $ | 5 | |||||
Net loan charge-offs as a percentage of average assets | 0.00% | 0.01% | 0.00% | 0.01% | 0.00% | ||||||||||
The following table sets forth the information relating to our average balances and net interest income for the three months ended March 31, 2022, December 31, 2021 and March 31, 2021 and reflects the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated.
Three Months Ended | ||||||||||||||||||||||||||||||
March 31, 2022 | December 31, 2021 | March 31, 2021 | ||||||||||||||||||||||||||||
Average | Average Yield/ | Average | Average Yield/ | Average | Average Yield/ | |||||||||||||||||||||||||
Balance | Interest(8) | Cost(9) | Balance | Interest(8) | Cost(9) | Balance | Interest(8) | Cost(9) | ||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||
ASSETS: | ||||||||||||||||||||||||||||||
Interest-earning assets | ||||||||||||||||||||||||||||||
Loans(1)(2) | $ | 1,894,870 | $ | 18,067 | 3.87 | % | $ | 1,850,162 | $ | 18,197 | 3.90 | % | $ | 1,923,477 | $ | 19,220 | 4.05 | % | ||||||||||||
Securities(2) | 423,437 | 1,950 | 1.87 | 401,811 | 1,764 | 1.74 | 227,330 | 854 | 1.52 | |||||||||||||||||||||
Other investments | 10,595 | 25 | 0.96 | 10,654 | 25 | 0.93 | 9,663 | 35 | 1.47 | |||||||||||||||||||||
Short-term investments(3) | 57,030 | 21 | 0.15 | 131,770 | 49 | 0.15 | 95,004 | 24 | 0.10 | |||||||||||||||||||||
Total interest-earning assets | 2,385,932 | 20,063 | 3.41 | 2,394,397 | 20,035 | 3.32 | 2,255,474 | 20,133 | 3.62 | |||||||||||||||||||||
Total non-interest-earning assets | 143,635 | 149,151 | 144,588 | |||||||||||||||||||||||||||
Total assets | $ | 2,529,567 | $ | 2,543,548 | $ | 2,400,062 | ||||||||||||||||||||||||
LIABILITIES AND EQUITY: | ||||||||||||||||||||||||||||||
Interest-bearing liabilities | ||||||||||||||||||||||||||||||
Interest-bearing checking accounts | $ | 132,192 | 95 | 0.29 | $ | 132,028 | 106 | 0.32 | $ | 90,503 | 105 | 0.47 | ||||||||||||||||||
Savings accounts | 218,448 | 36 | 0.07 | 214,961 | 36 | 0.07 | 187,217 | 37 | 0.08 | |||||||||||||||||||||
Money market accounts | 878,393 | 521 | 0.24 | 849,023 | 546 | 0.26 | 675,662 | 653 | 0.39 | |||||||||||||||||||||
Time deposit accounts | 389,063 | 340 | 0.35 | 410,149 | 403 | 0.39 | 567,102 | 939 | 0.67 | |||||||||||||||||||||
Total interest-bearing deposits | 1,618,096 | 992 | 0.25 | 1,606,161 | 1,091 | 0.27 | 1,520,484 | 1,734 | 0.46 | |||||||||||||||||||||
Short-term borrowings and long-term debt | 21,975 | 253 | 4.67 | 22,614 | 253 | 4.44 | 52,670 | 273 | 2.10 | |||||||||||||||||||||
Interest-bearing liabilities | 1,640,071 | 1,245 | 0.31 | 1,628,775 | 1,344 | 0.33 | 1,573,154 | 2,007 | 0.52 | |||||||||||||||||||||
Non-interest-bearing deposits | 633,082 | 654,334 | 561,581 | |||||||||||||||||||||||||||
Other non-interest-bearing liabilities | 32,857 | 40,428 | 38,360 | |||||||||||||||||||||||||||
Total non-interest-bearing liabilities | 665,939 | 694,762 | 599,941 | |||||||||||||||||||||||||||
Total liabilities | 2,306,010 | 2,323,537 | 2,173,095 | |||||||||||||||||||||||||||
Total equity | 223,557 | 220,011 | 226,967 | |||||||||||||||||||||||||||
Total liabilities and equity | $ | 2,529,567 | $ | 2,543,548 | $ | 2,400,062 | ||||||||||||||||||||||||
Less: Tax-equivalent adjustment(2) | (120 | ) | (109 | ) | (100 | ) | ||||||||||||||||||||||||
Net interest and dividend income | $ | 18,698 | $ | 18,582 | $ | 18,026 | ||||||||||||||||||||||||
Net interest rate spread(4) | 3.08 | % | 2.97 | % | 3.08 | % | ||||||||||||||||||||||||
Net interest rate spread, on a tax-equivalent basis(5) | 3.10 | % | 2.99 | % | 3.10 | % | ||||||||||||||||||||||||
Net interest margin(6) | 3.18 | % | 3.08 | % | 3.24 | % | ||||||||||||||||||||||||
Net interest margin, on a tax-equivalent basis(7) | 3.20 | % | 3.10 | % | 3.26 | % | ||||||||||||||||||||||||
Ratio of average interest-earning | ||||||||||||||||||||||||||||||
assets to average interest-bearing liabilities | 145.48 | % | 147.01 | % | 143.37 | % | ||||||||||||||||||||||||
__________________________________________________
(1) Loans, including nonaccrual loans, are net of deferred loan origination costs and unadvanced funds.
(2) Loan and securities income are presented on a tax-equivalent basis using a tax rate of 21%. The tax-equivalent adjustment is deducted from tax-equivalent net interest and dividend income to agree to the amount reported on the consolidated statements of net income.
(3) Short-term investments include federal funds sold.
(4) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
(5) Net interest rate spread, on a tax-equivalent basis, represents the difference between the tax-equivalent weighted average yield on interest-earning assets and the tax-equivalent weighted average cost of interest-bearing liabilities.
(6) Net interest margin represents net interest and dividend income as a percentage of average interest-earning assets.
(7) Net interest margin, on a tax-equivalent basis, represents tax-equivalent net interest and dividend income as a percentage of average interest-earning assets.
(8) Acquired loans, time deposits and borrowings are recorded at fair value at the time of acquisition. The fair value marks on the loans, time deposits and borrowings acquired accrete and amortize into net interest income over time. For the three months ended March 31, 2022, December 31, 2021, and March 31, 2021, the loan accretion income and interest expense reduction on time deposits and borrowings increased (decreased) net interest income $39,000, $(31,000) and $(45,000), respectively. Excluding these items, net interest margin, on a tax-equivalent basis, for the three months ended March 31, 2022, December 31, 2021, and March 31, 2021 was 3.19%, 3.10% and 3.27%, respectively.
(9) Annualized.
Reconciliation of Non-GAAP to GAAP Financial Measures
The Company believes that certain non-GAAP financial measures provide information to investors that is useful in understanding its financial condition. Because not all companies use the same calculation, this presentation may not be comparable to other similarly titled measures calculated by other companies. A reconciliation of these non-GAAP financial measures is provided below.
For the quarter ended | |||||||||||||||||||
3/31/2022 | 12/31/2021 | 9/30/2021 | 6/30/2021 | 3/31/2021 | |||||||||||||||
(In thousands) | |||||||||||||||||||
Loans (no tax adjustment) | $ | 17,947 | $ | 18,089 | $ | 18,670 | $ | 18,321 | $ | 19,120 | |||||||||
Tax-equivalent adjustment | 120 | 108 | 106 | 104 | 100 | ||||||||||||||
Loans (tax-equivalent basis) | $ | 18,067 | $ | 18,197 | $ | 18,776 | $ | 18,425 | $ | 19,220 | |||||||||
Securities (no tax adjustment) | $ | 1,950 | $ | 1,763 | $ | 1,500 | $ | 1,277 | $ | 854 | |||||||||
Tax-equivalent adjustment | - | 1 | 1 | 1 | - | ||||||||||||||
Securities (tax-equivalent basis) | $ | 1,950 | $ | 1,764 | $ | 1,501 | $ | 1,278 | $ | 854 | |||||||||
Net interest income (no tax adjustment) | $ | 18,698 | $ | 18,582 | $ | 18,765 | $ | 17,804 | $ | 18,026 | |||||||||
Tax equivalent adjustment | 120 | 109 | 107 | 105 | 100 | ||||||||||||||
Net interest income (tax-equivalent basis) | $ | 18,818 | $ | 18,691 | $ | 18,872 | $ | 17,909 | $ | 18,126 | |||||||||
Net interest income (no tax adjustment) | $ | 18,698 | $ | 18,582 | $ | 18,765 | $ | 17,804 | $ | 18,026 | |||||||||
Less: | |||||||||||||||||||
Purchase accounting adjustments | 39 | (31 | ) | 56 | (33 | ) | (45 | ) | |||||||||||
Prepayment penalties and fees | 21 | 21 | 8 | 117 | 35 | ||||||||||||||
PPP fee income | 562 | 973 | 1,757 | 1,627 | 2,411 | ||||||||||||||
Adjusted net interest income (non-GAAP) | $ | 18,076 | $ | 17,619 | $ | 16,944 | $ | 16,093 | $ | 15,625 | |||||||||
Average interest-earning assets | $ | 2,385,932 | $ | 2,394,397 | $ | 2,337,717 | $ | 2,330,311 | $ | 2,255,474 | |||||||||
Average interest-earnings asset, excluding average PPP loans | $ | 2,370,852 | $ | 2,352,858 | $ | 2,257,346 | $ | 2,174,716 | $ | 2,088,910 | |||||||||
Net interest margin (no tax adjustment) | 3.18 | % | 3.08 | % | 3.18 | % | 3.06 | % | 3.24 | % | |||||||||
Net interest margin, tax-equivalent | 3.20 | % | 3.10 | % | 3.20 | % | 3.08 | % | 3.26 | % | |||||||||
Adjusted net interest margin, excluding purchase accounting adjustments, PPP fee income and prepayment penalties (non-GAAP) | 3.10 | % | 2.97 | % | 2.98 | % | 2.97 | % | 3.03 | % | |||||||||
For the quarter ended | |||||||||||||||||||
3/31/2022 | 12/31/2021 | 9/30/2021 | 6/30/2021 | 3/31/2021 | |||||||||||||||
(In thousands) | |||||||||||||||||||
Book Value per Share (GAAP) | $ | 9.63 | $ | 9.87 | $ | 9.56 | $ | 9.29 | $ | 9.07 | |||||||||
Non-GAAP adjustments: | |||||||||||||||||||
Goodwill | (0.55 | ) | (0.55 | ) | (0.55 | ) | (0.52 | ) | (0.51 | ) | |||||||||
Core deposit intangible | (0.11 | ) | (0.11 | ) | (0.12 | ) | (0.11 | ) | (0.12 | ) | |||||||||
Tangible Book Value per Share (non-GAAP) | $ | 8.97 | $ | 9.21 | $ | 8.89 | $ | 8.66 | $ | 8.44 | |||||||||
Income Before Income Taxes (GAAP) | $ | 7,015 | $ | 8,215 | $ | 8,142 | $ | 7,739 | $ | 7,628 | |||||||||
(Credit) provision for loan losses | (425 | ) | 300 | (100 | ) | (1,200 | ) | 75 | |||||||||||
Income Before Taxes and Provision (non-GAAP) | $ | 6,590 | $ | 8,515 | $ | 8,042 | $ | 6,539 | $ | 7,703 | |||||||||
Efficiency Ratio: | |||||||||||||||||||
Non-interest Expense (GAAP) | $ | 14,456 | $ | 13,923 | $ | 14,018 | $ | 13,674 | $ | 13,327 | |||||||||
Non-GAAP adjustments: | |||||||||||||||||||
Loss on prepayment of borrowings | - | - | - | (45 | ) | - | |||||||||||||
Non-interest Expense for Efficiency Ratio (non-GAAP) | $ | 14,456 | $ | 13,923 | $ | 14,018 | $ | 13,629 | $ | 13,327 | |||||||||
Net Interest Income (GAAP) | $ | 18,698 | $ | 18,582 | $ | 18,765 | $ | 17,804 | $ | 18,026 | |||||||||
Non-interest Income (GAAP) | $ | 2,348 | $ | 3,856 | $ | 3,295 | $ | 2,409 | $ | 3,004 | |||||||||
Non-GAAP adjustments: | |||||||||||||||||||
Bank-owned life insurance death benefit | - | (555 | ) | - | - | - | |||||||||||||
Loss (gain) on securities, net | 4 | - | (2 | ) | 12 | 62 | |||||||||||||
Unrealized losses (gains) on marketable equity securities | 276 | 96 | (11 | ) | (6 | ) | 89 | ||||||||||||
Loss on interest rate swap termination | - | - | - | 402 | - | ||||||||||||||
Gain on non-marketable equity investments | - | (352 | ) | - | - | (546 | ) | ||||||||||||
Non-interest Income for Efficiency Ratio (non-GAAP)_ | $ | 2,628 | $ | 3,045 | $ | 3,282 | $ | 2,817 | $ | 2,609 | |||||||||
Total Revenue for Efficiency Ratio (non-GAAP) | $ | 21,326 | $ | 21,627 | $ | 22,047 | $ | 20,621 | $ | 20,635 | |||||||||
Efficiency Ratio (GAAP) | 68.69 | % | 62.05 | % | 63.54 | % | 67.65 | % | 63.37 | % | |||||||||
Efficiency Ratio (Non-interest Expense for Efficiency Ratio (non-GAAP)/Total Revenue for Efficiency Ratio (non-GAAP)) | 67.79 | % | 64.38 | % | 63.58 | % | 66.09 | % | 64.58 | % | |||||||||
