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Western New England Bancorp, Inc. Reports Results for Three and Nine Months Ended September 30, 2021 and Declares Quarterly Cash Dividend
来源: Nasdaq GlobeNewswire / 26 10月 2021 16:05:01 America/New_York
WESTFIELD, Mass., Oct. 26, 2021 (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 and nine months ended September 30, 2021. For the three months ended September 30, 2021, the Company reported net income of $6.0 million, or $0.27 per diluted share, compared to net income of $2.1 million, or $0.08 per diluted share, for the three months ended September 30, 2020. On a linked quarter basis, net income was $6.0 million, or $0.27 per diluted share, for the three months ended September 30, 2021 as compared to net income of $5.7 million, or $0.24 per diluted share, for the three months ended June 30, 2021. For the nine months ended September 30, 2021, net income was $17.5 million, or $0.74 per diluted share, compared to net income of $6.2 million, or $0.25 per diluted share, for the nine months ended September 30, 2020.
The Company also announced that the Board of Directors declared a quarterly cash dividend of $0.05 per share, payable on or about November 24, 2021 to shareholders of record on November 10, 2021.
“We are pleased with our third quarter results which highlight sound balance sheet management and continued net interest margin stabilization,” said James C. Hagan, President and Chief Executive Officer. “The composition of our deposits remain favorable with increases in our low cost core deposit categories. As a result, interest expense decreased 65.7% year-over-year, which contributed to a $9.0 million, or 20%, increase in net interest income, for the nine months ended September 30, 2021, compared to the previous year.”
“The business environment continues to gradually improve across our markets. We are encouraged by the continued strength and overall quality of the Company's loan portfolio, which supported a lower loan loss provision in the third quarter of 2021 compared with the third quarter of 2020. Commercial real estate activity has been positive as we continue to add new customer relationships and have grown the CRE portfolio by 10% since year-end. Residential mortgage originations, which have been a strong driver of new customer relationships and non-interest income through gains on the sale of loans to the secondary market, have enabled us to participate in the residential housing market while reducing our reliance on long-term, low-interest rate loans. The Company reported $1.1 million in non-interest income from mortgage banking activities during the nine months ended September 30, 2021.”
“During the nine months ended September 30, 2021, we repurchased 2.6 million shares of our common stock at an average price per share of $8.29. The Company’s stock repurchase plan remains a solid investment for our shareholders and provides us with the opportunity to leverage our capital.”
Mr. Hagan concluded, “After weathering disruption and uncertainty in 2020 related to the ongoing global COVID-19 pandemic, we remain encouraged that we are well-positioned for the more positive banking environment and growth we’ve seen in 2021.”
COVID-19 Response and Actions:
As a Preferred Lender with the Small Business Administration (“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. The Company received funding approval from the SBA for 2,146 applications totaling $302.2 million. The table below breaks out the Company’s PPP loans as of September 30, 2021:
Original Loan Amount Original # of Loans Balance Outstanding # of Loans Remaining ($ in millions) Round 1 and 2 $ 223.1 1,386 $ 14.6 31 Round 3 79.1 760 44.3 317 Total $ 302.2 2,146 $ 58.9 348 As of September 30, 2021, the Company had processed 1,798 PPP loan forgiveness applications totaling $243.3 million. Total PPP loans decreased $108.4 million, or 64.8%, from $167.3 million at December 31, 2020 to $58.9 million at September 30, 2021.
As PPP loans are forgiven, the Company is accelerating the recognition of PPP loan origination fees that were being amortized over the original lives of the loans. We anticipate that by the end of 2021, the majority of the PPP loan portfolio will be repaid through forgiveness and earnings will continue to be favorably impacted by the additional PPP origination fee income through the end of 2021. During the nine months ended September 30, 2021, the Company recognized $5.8 million of PPP loan origination fee income and interest income (“PPP income”), compared to $2.6 million during the nine months ended September 30, 2020. As of September 30, 2021, the Company had $1.6 million in remaining deferred PPP loan processing fees.
The table below breaks out the PPP income recognized for the periods noted:
For the Three Months Ended September 30, 2021 June 30,
2021March 31, 2021 December 31, 2020
September 30, 2020($ in thousands) PPP origination fee income $ 1,556 $ 1,240 $ 1,999 $ 1,760 $ 741 PPP interest income 201 387 412 512 568 Total PPP Income $ 1,757 $ 1,627 $ 2,411 $ 2,272 $ 1,309 In addition to participating in the PPP, the Company granted deferred loan payments for impacted commercial, residential and consumer borrowers who experienced financial hardship due to COVID-19. As of September 30, 2021, modifications granted under the CARES Act declined to eleven loans in the amount of $42.8 million, or 2.4% of total loans, excluding PPP loans. As of September 30, 2021, of the $42.8 million in remaining modifications granted under the CARES Act, eight loans in the amount of $33.5 million, or 78.3% of the remaining modifications, were granted to the hotel industry, one loan in the amount of $9.0 million was granted to an assisted living facility, and two loans totaling $276,000 were granted to residential borrowers. Of the $42.8 million in remaining outstanding modifications, $33.5 million (7 loans), or 78.3%, have resumed interest only payments.
The table below breaks out the remaining modifications granted under the CARES Act at September 30, 2021:
Remaining CARES Act Modifications Loan Segment(1)(2) Total Loan Segment Balance at September 30, 2021 % of Total Loans Modification Balance # of Loans Modified % of Loan Segment
Balance($ in millions) Commercial real estate(3) $ 917.6 51.4 % $ 41.9 7 4.6 % Commercial and industrial 200.5 11.2 % 0.6 2 0.3 % Residential real estate 663.6 37.2 % 0.3 2 0.0 % Consumer 4.4 0.2 % - - - Total $ 1,786.1 100.0 % $ 42.8 11 2.4 % ___________________________
- Excludes PPP loans of $58.9 million and deferred fees.
- Residential includes home equity loans and lines of credit.
- One commercial real estate loan is on full deferral with regular payments to resume in December of 2021. The remaining modifications are making their interest only payments and resuming regular payments in January of 2022.
The Company continues to monitor COVID-19’s impact on its business and customers, however, the extent to which COVID-19 will impact its results and operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures.
Key Highlights:
Loans and Deposits
At September 30, 2021, total loans were $1.8 billion, a decrease of $81.2 million, or 4.2%, from December 31, 2020. Excluding PPP loans of $58.9 million at September 30, 2021 and $167.3 million at December 31, 2020, total loans increased $27.1 million, or 1.5%, from December 31, 2020. Total deposits increased $186.7 million, or 9.2%, from $2.0 billion at December 31, 2020 to $2.2 billion at September 30, 2021. Specifically, core deposits, which include non-interest bearing demand accounts, increased $358.2 million, or 24.7%, from $1.4 billion, or 71.0% of total deposits, at December 31, 2020, to $1.8 billion, or 81.2% of total deposits at September 30, 2021.
Allowance for Loan Losses and Credit Quality
At September 30, 2021, excluding PPP loans of $58.9 million, the allowance for loan losses as a percentage of total loans and as a percentage of nonperforming loans was 1.11% and 352.2%, respectively. At September 30, 2021, nonperforming loans totaled $5.6 million, or 0.32% of total loans, excluding PPP loans, compared to $9.2 million, or 0.53% of total loans, excluding PPP loans, at September 30, 2020, and $7.8 million, or 0.45% of total loans, excluding PPP loans, at December 31, 2020. Total delinquency decreased $10.5 million, or 77.3%, from 0.77% of total loans, excluding PPP loans, at December 31, 2020 to 0.17% of total loans, excluding PPP loans, at September 30, 2021.
Net Interest Margin
The net interest margin was 3.18% for the three months ended September 30, 2021 compared to 3.06% for the three months ended June 30, 2021. The net interest margin, on a tax-equivalent basis, was 3.20% for the three months ended September 30, 2021, compared to 3.08% for the three months ended June 30, 2021. Excluding PPP income of $1.8 million and $1.6 million, the net interest margin was 2.99% and 2.98% for the three months ended September 30, 2021 and June 30, 2021, respectively.
Repurchases
On October 27, 2020, the Company announced that the Board of Directors authorized a stock repurchase plan (the “2020 Plan”) under which the Company was authorized to purchase up to 1.3 million shares, or 5% of its outstanding common stock. On May 20, 2021, the Company announced the completion of the 2020 Plan. On April 27, 2021, the Company announced that 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 September 30, 2021, the Company repurchased 1,221,618 shares of common stock under the 2021 Plan. During the nine months ended September 30, 2021, the Company repurchased 2,565,973 shares at an average price of $8.29. At September 30, 2021, there were 869,397 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 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.
Net Income for the Three Months Ended September 30, 2021 Compared to the Three Months Ended June 30, 2021
The Company reported net income of $6.0 million, or $0.27 per diluted share, for the three months ended September 30, 2021, compared to net income of $5.7 million, or $0.24 per diluted share, for the three months ended June 30, 2021. Return on average assets and return on average equity were 0.96% and 10.85%, respectively, for the three months ended September 30, 2021, as compared to 0.92% and 10.16%, respectively, for the three months ended June 30, 2021.
Net Interest Income and Net Interest Margin
On a sequential quarter basis, net interest income increased $961,000, or 5.4%, to $18.8 million for the three months ended September 30, 2021, from $17.8 million for the three months ended June 30, 2021. The increase in net interest income was primarily due to an increase in interest and dividend income of $586,000, or 3.0%, and a decrease of $375,000, or 20.3%, in interest expense. The decrease in interest expense was primarily due to a decrease of $249,000, or 17.0%, in interest expense on deposits and a decrease of $185,000 in interest expense on Federal Home Loan Bank (“FHLB”) borrowings, partially offset by an increase in interest expense on subordinated debt of $59,000, or 29.9%.
As PPP loans are forgiven, the Company is accelerating the recognition of PPP loan origination fees that were being amortized over the original lives of the loans. During the three months ended September 30, 2021 and the three months ended June 30, 2021, interest and dividend income included PPP income of $1.8 million and $1.6 million, respectively. During the three months ended September 30, 2021, the Company recorded $56,000 in positive purchase accounting adjustments, compared to negative purchase accounting adjustments of $33,000 during the three months ended June 30, 2021. In addition, during the three months ended September 30, 2021, interest and dividend income included prepayment penalties from commercial loan payoffs of $8,000, compared to $117,000 during the three months ended June 30, 2021. Excluding PPP income, prepayment penalties and purchase accounting adjustments, net interest income increased $852,000, or 5.3%, from the three months ended June 30, 2021 to the three months ended September 30, 2021.
The net interest margin was 3.18% for the three months ended September 30, 2021, compared to 3.06% for the three months ended June 30, 2021. The net interest margin, on a tax-equivalent basis, was 3.20% for the three months ended September 30, 2021, compared to 3.08% for the three months ended June 30, 2021. Excluding PPP income, the net interest margin was 2.99% for the three months ended September 30, 2021, compared to 2.98% for the three months ended June 30, 2021. Excluding prepayment penalties and purchase accounting adjustments discussed above, the net interest margin was 2.98% for the three months ended September 30, 2021, compared to 2.97% for the three months ended June 30, 2021.
The average yield on interest-earning assets was 3.45% for the three months ended September 30, 2021, compared to 3.40% for the three months ended June 30, 2021. The average loan yield was 3.99% for the three months ended September 30, 2021, compared to 3.87% for the three months ended June 30, 2021. Excluding the adjustments discussed above, the average yield on interest-earning assets decreased seven basis points from 3.33% for the three months ended June 30, 2021 to 3.26% for the three months ended September 30, 2021, while the average loan yield decreased six basis points from 3.82% for the three months ended June 30, 2021 to 3.76% for the three months ended September 30, 2021. The decreases in average yields were primarily due to the repricing of variable rate loans and lower average yields on new loan originations as well as increases in cash. Total average loans were 79.9% of total average interest-earning assets for the three months ended September 30, 2021, compared to 82.0% for the three months ended June 30, 2021. Average PPP loans decreased $75.2 million, or 48.3%, from $155.6 million for the three months ended June 30, 2021 to $80.4 million for the three months ended September 30, 2021.
During the three months ended September 30, 2021, average interest-earning assets increased $7.4. million, or 0.3%, to $2.3 billion, primarily due to an increase in average securities of $59.7 million, or 20.3%, partially offset by a decrease in average loans of $43.6 million, or 2.3%, and a decrease in average short-term investments of $9.2 million, or 8.0%. Excluding average PPP loans of $80.4 million during the three months ended September 30, 2021 and $155.6 million during the three months ended June 30, 2021, average loans increased $31.7 million, or 1.8%, from the three months ended June 30, 2021 to the three months ended September 30, 2021.
The average cost of funds, including non-interest bearing accounts and borrowings, decreased seven basis points from 0.33% for the three months ended June 30, 2021 to 0.26% for the three months ended September 30, 2021. The average cost of core deposits, including non-interest bearing demand deposits, decreased three basis points from 0.19% for the three months ended June 30, 2021, to 0.16% for the three months ended September 30, 2021. The average cost of time deposits decreased nine basis points from 0.56% for the three months ended June 30, 2021 to 0.47% for the three months ended September 30, 2021. The average cost of borrowings increased 142 basis points from 2.81% for the three months ended June 30, 2021 to 4.23% for the three months ended September 30, 2021, due to the issuance of $20.0 million in subordinated debt. Average FHLB borrowings decreased $34.6 million, or 88.9%, from $38.9 million for the three months ended June 30, 2021 to $4.3 million for the three months ended September 30, 2021. Average demand deposits, an interest-free source of funds, increased $12.2 million, or 2.0%, from $603.3 million, or 27.9% of total average deposits, for the three months ended June 30, 2021 to $615.5 million, or 28.0% of total average deposits, for the three months ended September 30, 2021.
Provision for Loan Losses
The Company recorded a credit for loan losses of $100,000 for the three months ended September 30, 2021, compared to a credit for loan losses of $1.2 million for the three months ended June 30, 2021. The changes in the credit for loan losses was primarily driven by changes in the qualitative factors related to the impact of the COVID-19 pandemic and other economic trends used in the Company’s allowance calculation. 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 by the Securities and Exchange Commission. For a breakout of the Company’s credit concentration, please see the “Credit Quality” section in this release. Management will continue to closely monitor portfolio conditions and reevaluate the adequacy of the allowance.
The Company recorded net recoveries of $67,000 for the three months ended September 30, 2021, as compared to net charge-offs of $157,000 for the three months ended June 30, 2021. At September 30, 2021, nonperforming loans totaled $5.6 million, or 0.31% of total loans, and total delinquency as a percentage of total loans was 0.17%. Excluding PPP loans of $58.9 million at September 30, 2021, nonperforming loans to total loans was 0.32%, and total delinquency as a percentage of total loans was 0.17%. As of September 30, 2021, the Company’s delinquency and nonperforming assets have not been materially impacted by the COVID-19 pandemic.
Non-Interest Income
On a sequential quarter basis, non-interest income increased $886,000, or 36.8%, to $3.3 million for the three months ended September 30, 2021, from $2.4 million for the three months ended June 30, 2021. During the three months ended September 30, 2021, service charges and fees on deposits increased $57,000, or 2.7%, and mortgage banking income from the sale of fixed rate residential real estate loans increased $423,000, or 174.8%, from $242,000 for the three months ended June 30, 2021 to $665,000 for the three months ended September 30, 2021. Income from bank-owned life insurance decreased $15,000, or 3.0%.
During the three months ended September 30, 2021, the Company reported unrealized gains on marketable equity securities of $11,000, compared to $6,000 during the three months ended June 30, 2021. The Company also reported realized gains on the sale of securities of $2,000 during the three months ended September 30, 2021, compared to realized losses of $12,000 for the three months ended June 30, 2021. Gains and losses from the investment portfolio vary from quarter to quarter based on market conditions, as well as the related yield curve and valuation changes.
During the three months ended June 30, 2021, the Company recognized a loss on interest rate swap termination of $402,000 representing the unamortized portion of a $3.4 million loss associated with the previous termination of a $32.5 million interest rate swap on March 16, 2016. The unamortized portion of the loss was previously reported in accumulated other comprehensive income and amortized through interest expense, however, as the previously hedged item was discontinued, the Company accelerated the remaining unamortized loss.
Non-Interest Expense
For the three months ended September 30, 2021, non-interest expense increased $344,000, or 2.5%, to $14.0 million, from $13.7 million, for the three months ended June 30, 2021. Salaries and employee benefits increased $121,000, or 1.5%, to $8.2 million. Other non-interest expense increased $251,000, or 12.3%, FDIC insurance expense increased $48,000, or 21.3%, occupancy expense increased $25,000, or 2.3%, and furniture and equipment expenses increased $20,000, or 3.9%. Data processing decreased $60,000, or 7.9%, professional fees decreased $14,000, or 2.4%, and advertising expense decreased $2,000, or 0.6%. During the three months ended June 30, 2021, the Company prepaid $32.5 million of FHLB borrowings, which resulted in a loss of $45,000. For the three months ended September 30, 2021, the efficiency ratio was 63.6%, compared to 66.1% for the three months ended June 30, 2021.
Income Tax Provision
Income tax expense for the three months ended September 30, 2021 was $2.1 million, representing an effective tax rate of 25.9%, compared to $2.1 million, representing an effective tax rate of 27.0%, for three months ended June 30, 2021. The change in the effective tax rate reflects projected pre-tax income for the year ending December 31, 2021.
Net Income for the Three Months Ended September 30, 2021 Compared to the Three Months Ended September 30, 2020
The Company reported net income of $6.0 million, or $0.27 per diluted share, for the three months ended September 30, 2021, compared to net income of $2.1 million, or $0.08 per diluted share, for the three months ended September 30, 2020. Return on average assets and return on average equity was 0.96% and 10.85%, respectively, for the three months ended September 30, 2021, as compared to 0.35% and 3.61%, respectively, for the three months ended September 30, 2020. The increase in net income of $3.9 million, or 187.3%, was due to a decrease in the provision for loan losses of $2.8 million, or 103.7%, an increase in net interest income of $2.8 million, or 17.4%, and an increase in non-interest income of $1.1 million, or 51.4%, partially offset by an increase in non-interest expense of $1.2 million, or 9.1%.
Net Interest Income and Net Interest Margin
Net interest income increased $2.8 million, or 17.4%, to $18.8 million, for the three months ended September 30, 2021, from $16.0 million for the three months ended September 30, 2020. The increase in net interest income was due to a decrease in interest expense of $3.0 million, or 67.0%, partially offset by a decrease of $209,000, or 1.0%, in interest and dividend income. Interest expense on deposits decreased $2.0 million, or 61.8%, and interest expense on borrowings decreased $1.3 million, both partially offset by an increase in interest expense on subordinated debt of $256,000. For the three months ended September 30, 2021, net interest income included $1.8 million in PPP income, compared to $1.3 million for the three months ended September 30, 2020. Excluding PPP income, net interest income increased $2.3 million, or 15.9%, primarily due to a decrease in interest expense of $3.0 million, or 67.0%. During the three months ended September 30, 2021, the Company recorded $56,000 in positive purchase accounting adjustments, compared to positive purchase accounting adjustments of $19,000 during the three months ended September 30, 2020. In addition, during the three months ended September 30, 2021, interest and dividend income included prepayment penalties from commercial loan payoffs of $8,000, compared to $262,000 during the three months ended September 30, 2020. Excluding PPP income, prepayment penalties and purchase accounting adjustments, net interest income increased $2.5 million, or 17.7%, from the three months ended September 30, 2020 to the three months ended September 30, 2021.
The net interest margin was 3.18% for the three months ended September 30, 2021, compared to 2.81% for the three months ended September 30, 2020. The net interest margin, on a tax-equivalent basis, was 3.20% for the three months ended September 30, 2021, compared to 2.83% for the three months ended September 30, 2020. Excluding PPP income, the net interest margin was 2.99% for the three months ended September 30, 2021, compared to 2.86% for the three months ended September 30, 2020. Excluding the prepayment penalties and purchase accounting adjustments discussed above, the net interest margin increased from 2.80% for the three months ended September 30, 2020 to 2.98%, for the three months ended September 30, 2021.
The average yield on interest-earning assets decreased 16 basis points from 3.61% for the three months ended September 30, 2020 to 3.45% for the three months ended September 30, 2021. During the three months ended September 30, 2021, the average cost of funds, including non-interest-bearing demand accounts and borrowings, decreased 57 basis points from 0.83% for the three months ended September 30, 2020 to 0.26% for the three months ended September 30, 2021. The average cost of core deposits, which include non-interest-bearing demand accounts, decreased nine basis points from 0.25% for the three months ended September 30, 2020 to 0.16% for the three months ended September 30, 2021. The average cost of time deposits decreased 103 basis points from 1.50% for the three months ended September 30, 2020 to 0.47% for the three months ended September 30, 2021. The average cost of borrowings, including subordinated debt, increased 165 basis points during the same period. For the three months ended September 30, 2021, average demand deposits, an interest-free source of funds, increased $86.2 million, or 16.3%, to $615.5 million, or 28.0% of total average deposits, from $529.2 million, or 27.1% of total average deposits, for the three months ended September 30, 2020.
During the three months ended September 30, 2021, average interest-earning assets increased $71.3 million, or 3.1%, to $2.3 billion compared to the three months ended September 30, 2020, primarily due to an increase in average securities of $135.8 million, or 62.3%, and an increase in short-term investments of $66.2 million, or 167.2%. These increases were partially offset by a decrease of $126.3 million, or 6.3%, in average loans and a decrease in average other investments of $4.3 million, or 29.2%. Excluding average PPP loans, average interest-earning assets increased $213.7 million, or 10.5%, and average loans increased $16.1 million, or 0.9%, from the three months ended September 30, 2020 to the three months ended September 30, 2021.
Provision for Loan Losses
The Company recorded a credit for loan losses of $100,000 for three months ended September 30, 2021, compared to a provision for loan losses of $2.7 million for the three months ended September 30, 2020. The Company recorded net recoveries of $67,000 for the three months ended September 30, 2021, as compared to net charge-offs of $286,000 for the three months ended September 30, 2020. The decrease in the provision for loan losses during the three months ended September 30, 2021 was primarily due to an improvement in economic forecasts for the quarter, compared to the same quarter in 2020. Management continues to assess the exposure of the Company’s loan portfolio to the COVID-19 pandemic related factors, economic trends and their potential effect on asset quality.
Non-Interest Income
Non-interest income increased $1.1 million, or 51.4%, to $3.3 million for the three months ended September 30, 2021, from $2.2 million for the three months ended September 30, 2020. Service charges and fees increased $368,000, or 20.9%, income from bank-owned life insurance increased $41,000, or 9.2%, and mortgage banking income from the sale of fixed rate residential real estate loans to the secondary market totaled $665,000. During the three months ended September 30, 2021, the Company sold $22.4 million in loans to the secondary market. The Company did not sell loans to the secondary market during the three months ended September 30, 2020.
During the three months ended September 30, 2021, the Company reported unrealized gains on marketable equity securities of $11,000, compared to unrealized losses of $4,000 for the three months ended September 30, 2020. In addition, during the three months ended September 30, 2021, the Company reported gains on the sale of securities of $2,000, compared to realized gains on the sale of securities of $1.9 million for the three months ended September 30, 2020. During the three months ended September 30, 2020, the Company also incurred a non-recurring loss of $2.4 million on a terminated interest rate swap.
Non-Interest Expense
For the three months ended September 30, 2021, non-interest expense increased $1.2 million, or 9.1%, to $14.0 million from $12.9 million, for the three months ended September 30, 2020. The increase in non-interest expense was primarily due to an increase in salaries and benefits of $971,000, or 13.5%. The increase was primarily due to production and incentive accruals as well as lower deferred loan origination expenses associated with PPP loans. The deferred loan origination expense decreased $461,000, or 59.2%, from the three months ended September 30, 2020 to the three months ended September 30, 2021. Other non-interest expense increased $189,000, or 9.0%, furniture and equipment increased $112,000, or 26.6%, advertising expense increased $19,000, or 5.8%, and occupancy expense increased $4,000, or 0.4%. These increases were partially offset by a decrease in FDIC insurance expense of $20,000, or 6.8%, a decrease in professional fees of $40,000, or 6.5%, and a decrease in data processing of $70,000, or 9.1%. For the three months ended September 30, 2021, the efficiency ratio was 63.6%, compared to 69.1% for the three months ended September 30, 2020.
Income Tax Provision
Income tax expense for the three months ended September 30, 2021 was $2.1 million, representing an effective tax rate of 25.9%, compared to $488,000, representing an effective tax rate of 18.8%, for three months ended September 30, 2020. The increase in the effective tax rate is a result of higher pre-tax projected income for the fiscal year ending December 31, 2021.
Net Income for the Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September 30, 2020
For the nine months ended September 30, 2021, the Company reported net income of $17.5 million, or $0.74 per diluted share, compared to $6.2 million, or $0.25 per diluted share, for the nine months ended September 30, 2020. Return on average assets and return on average equity were 0.95% and 10.45% for the nine months ended September 30, 2021, respectively, compared to 0.36% and 3.59% for the nine months ended September 30, 2020, respectively.
Net Interest Income and Net Interest Margin
During the nine months ended September 30, 2021, net interest income increased $9.0 million, or 19.6%, to $54.6 million, compared to $45.6 million for the nine months ended September 30, 2020. The increase in net interest income was due to a decrease of $10.2 million, or 65.7%, in interest expense, partially offset by a decrease in interest and dividend income of $1.2 million, or 2.0%. The decrease in interest expense was primarily due to a decrease of $6.8 million, or 60.7%, in interest expense on deposits and a decrease in interest expense on borrowings, including subordinated debt, of $3.4 million, or 78.8%. For the nine months ended September 30, 2021, interest and dividend income included $5.8 million in PPP income, compared to $2.6 million during the nine months ended September 30, 2020. Excluding PPP income, net interest income increased $5.7 million, or 13.3%.
The net interest margin for the nine months ended September 30, 2021 was 3.16%, compared to 2.80% for the nine months ended September 30, 2020. The net interest margin, on a tax-equivalent basis, was 3.18% for the nine months ended September 30, 2021, compared to 2.82% for the nine months ended September 30, 2020. Excluding the PPP income, the net interest margin increased from 2.81% for the nine months ended September 30, 2020 to 3.00% for the nine months ended September 30, 2021. The increase in the net interest margin was due to the continuing trend of market interest rates falling to historically low levels, allowing the Company to reprice interest-bearing liabilities.
The average yield on interest-earning assets decreased 29 basis points from 3.78% for the nine months ended September 30, 2020 to 3.49% for the nine months ended September 30, 2021. During the nine months ended September 30, 2021, the average cost of funds, including non-interest-bearing demand accounts and borrowings, decreased 69 basis points from 1.01% for the nine months ended September 30, 2020 to 0.32% for the nine months ended September 30, 2021. For the nine months ended September 30, 2021, the average cost of core deposits, including non-interest-bearing demand deposits, decreased ten basis points from 0.28% for the nine months ended September 30, 2020 to 0.18% for the nine months ended September 30, 2021. The average cost of time deposits decreased 125 basis points from 1.82% for the nine months ended September 30, 2020 to 0.57% during the same period in 2021. The average cost of borrowings, which include FHLB advances and subordinated debt, increased 13 basis points from 2.66% for the nine months ended September 30, 2020 to 2.79% for the nine months ended September 30, 2021. For the nine months ended September 30, 2021, average demand deposits, an interest-free source of funds, increased $119.2 million, or 25.1%, from $474.4 million, or 25.8% of total average deposits, for the nine months ended September 30, 2020 to $593.6 million, or 27.6% of total average deposits, for the nine months ended September 30, 2021.
During the nine months ended September 30, 2021, average interest-earning assets increased $132.6 million, or 6.1%, to $2.3 billion. The increase in average interest-earning assets was due to an increase in average securities of $71.6 million, or 32.5%, an increase in average short-term investments of $78.4 million, or 292.3%, partially offset by a decrease in average other investments of $5.7 million, or 36.0%, and a decrease in average loans of $11.8 million, or 0.6%. Excluding average PPP loans, average interest-earning assets increased $124.3 million, or 6.1%, and average loans decreased $20.0 million, or 1.1%.
Provision for Loan Losses
For the nine months ended September 30, 2021, the provision for loan losses decreased $8.5 million, or 116.8%, from $7.3 million for the nine months ended September 30, 2020 to a credit for loan losses of $1.2 million for the nine months ended September 30, 2021. The decrease in the provision for loan losses was primarily driven by changes in the qualitative factors related to the impact of the COVID-19 pandemic and other economic trends used in the Company’s allowance calculation.
The Company recorded net charge-offs of $95,000 for the nine months ended September 30, 2021, as compared to net charge-offs of $685,000 for the nine months ended September 30, 2020. During the nine months ended September 30, 2021, the Company recorded charge-offs of $262,000, compared to $882,000 during the same period in 2020.
Non-Interest Income
For the nine months ended September 30, 2021, non-interest income increased of $1.9 million, or 28.3%, to $8.7 million, compared to $6.8 million for the nine months ended September 30, 2020. Service charges and fees increased $993,000, or 19.5%, primarily due to an increase of $692,000, or 31.3%, in ATM debit card interchange income due to increased card-based transaction usage across our checking account base. Mortgage banking income was $1.1 million for the nine months ended September 30, 2021, due to the sale of fixed rate residential real estate loans to the secondary market. During the nine months ended September 30, 2021, the Company sold $40.0 million in loans to the secondary market. The Company did not sell any fixed rate residential real estate loans during the nine months ended September 30, 2020. Income from bank-owned life insurance increased $61,000, or 4.5%, and other income from loan-level swap fees on commercial loans decreased $524,000, or 90.0%.
During the nine months ended September 30, 2021, the Company reported unrealized losses on marketable equity securities of $72,000, compared to unrealized gains of $133,000 during the nine months ended September 30, 2020. In addition, during the nine months ended September 30, 2021, the Company reported realized losses on the sale of securities of $72,000 and a gain of $546,000 on non-marketable equity securities, compared to realized gains of $2.0 million during the nine months ended September 30, 2020. During the three months ended September 30, 2021, the Company reported a loss on derivatives of $402,000, compared to a loss on derivatives of $2.4 million during the nine months ended September 30, 2020.
Non-Interest Expense
For the nine months ended September 30, 2021, non-interest expense increased $3.6 million, or 9.6%, to $41.0 million, compared to $37.4 million for the nine months ended September 30, 2020. The increase in non-interest expense was primarily due to an increase in salaries and employee benefits of $2.4 million, or 11.0%, due to normal annual salary increases as well as higher production and incentive accruals. Other non-interest expense increased $539,000, or 9.3%, furniture and equipment increased $361,000, or 30.7%, occupancy expense increased $153,000, or 4.6%, advertising expense increased $233,000, or 29.2%, and FDIC insurance expense increased $64,000, or 8.7%. These increases were partially offset by a decrease in professional fees of $143,000, or 7.7%, and a decrease in data processing expenses of $13,000, or 0.6%,
For the nine months ended September 30, 2021, the efficiency ratio was 64.7%, compared to 71.0% for the nine months ended September 30, 2020.
Income Tax Provision
Income tax expense for the nine months ended September 30, 2021 was $6.0 million, representing an effective tax rate of 25.6%, compared to $1.5 million, representing an effective tax rate of 19.8%, for nine months ended September 30, 2020. The increase in the Company’s effective tax rate was primarily due to the effect of higher projected pre-tax income for the fiscal year ending December 31, 2021.
Balance Sheet
At September 30, 2021, total assets were $2.5 billion, an increase of $144.9 million, or 6.1%, from December 31, 2020. During the nine months ended September 30, 2021, cash and cash equivalents increased $61.1 million, or 69.8%, to $148.5 million, investment securities increased $160.6 million, or 79.5%, to $362.4 million and net loans, excluding PPP loans of $58.9 million, increased $27.1 million, or 1.5%, to $1.8 billion. The high level of cash and cash equivalents is due to an increase in core deposits as well as PPP loan payoffs.
Investments
At September 30, 2021, the Company’s available-for-sale securities portfolio increased $6.2 million, or 3.1%, from $201.9 million at December 31, 2020 to $208.0 million at September 30, 2021. The held-to-maturity securities portfolio, recorded at amortized cost, totaled $154.4 million at September 30, 2021. The Company allocated some 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.
Loans
Total loans were $1.8 billion as of September 30, 2021, a decrease of $81.2 million, or 4.2%, from December 31, 2020, primarily due to a decrease in PPP loans of $108.4 million, or 64.8%. Excluding PPP loans, total loans increased $27.1 million, or 1.5%, driven by an increase in commercial real estate loans of $83.7 million, or 10.0%, partially offset by a decrease in commercial and industrial loans of $11.3 million, or 5.3%. Residential real estate loans, which include home equity loans, decreased $45.0 million, or 6.3%, as we continue to sell low coupon, fixed rate residential loans to the secondary market in order to diversify our loan mix and reduce our interest rate risk.
In accordance with the Company’s asset/liability management strategy, during the nine months ended September 30, 2021, the Company sold $40.0 million of fixed rate, low coupon residential real estate loans to the secondary market. There were no loans sold during 2020. As of September 30, 2021, the Company serviced $71.0 million in loans sold to the secondary market, compared to $38.1 million at December 31, 2020. 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:
September 30, 2021 December 31, 2020 (Dollars in thousands) Commercial real estate loans $ 917,630 $ 833,949 Residential real estate loans: Residential 565,912 604,719 Home equity 97,734 103,905 Total residential real estate loans 663,646 708,624 Commercial and industrial loans PPP loans 58,904 167,258 Commercial and industrial loans 200,526 211,823 Total commercial and industrial loans 259,430 379,081 Consumer loans 4,414 5,192 Total gross loans 1,845,120 1,926,846 Unamortized PPP loan fees (1,623 ) (3,050 ) Unamortized premiums and net deferred loans fees and costs 2,653 3,587 Total loans $ 1,846,150 $ 1,927,383 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 September 30, 2021, nonperforming loans totaled $5.6 million, or 0.32% of total loans, excluding PPP loans, compared to $7.8 million, or 0.45% of total loans, excluding PPP loans, at December 31, 2020. At September 30, 2021, there were no loans 90 or more days past due and still accruing interest. Nonperforming assets to total assets, excluding PPP loans, was 0.23% at September 30, 2021, compared to 0.36% at December 31, 2020. The allowance for loan losses as a percentage of total loans, excluding PPP loans which do not require an allowance for loan losses, was 1.11% at September 30, 2021, compared to 1.20% at December 31, 2020. At September 30, 2021, the allowance for loan losses as a percentage of nonperforming loans was 352.2%, compared to 269.8% at December 31, 2020.
Deposits
At September 30, 2021, total deposits were $2.2 billion, an increase of $186.7 million, or 9.2%, from December 31, 2020, primarily due to an increase in core deposits of $358.2 million, or 24.7%. Core deposits, which the Company defines as all deposits except time deposits, increased from $1.4 billion, or 71.0% of total deposits, at December 31, 2020, to $1.8 billion, or 81.2% of total deposits, at September 30, 2021. Non-interest-bearing deposits increased $85.3 million, or 15.7%, to $627.1 million, interest-bearing checking accounts increased $37.8 million, or 39.8%, to $132.7 million, savings accounts increased $39.8 million, or 23.4%, to $210.1 million, and money market accounts increased $195.4 million, or 30.5%, to $836.2 million. The increase in core deposits can be attributed to the government stimulus, lower consumer spending, PPP loan proceeds deposited into borrower checking accounts, as well as the three new branches opened in 2020. We anticipate that some of the deposit growth from PPP will be temporary as customers look to make capital improvements and diversify investments as risk from the COVID-19 pandemic eases over time.
Time deposits decreased $171.5 million, or 29.1%, from $590.3 million at December 31, 2020 to $418.8 million at September 30, 2021. Brokered deposits, which are included within time deposits, were $5.3 million at September 30, 2021 and $55.3 million at December 31, 2020.
FHLB and Subordinated Debt
At September 30, 2021, total borrowings decreased $34.4 million, or 59.5%, from $57.9 million at December 31, 2020, to $23.5 million. FHLB advances decreased $54.1 million, or 93.4%, to $3.8 million.
Capital
At September 30, 2021, shareholders’ equity was $218.3 million, or 8.7% of total assets, compared to $226.6 million, or 9.6% of total assets, at December 31, 2020. The decrease in shareholders’ equity reflects $21.3 million for the repurchase of the Company’s common stock, the payment of regular cash dividends of $3.6 million and an increase in accumulated other comprehensive loss of $2.5 million, partially offset by net income of $17.5 million. Total shares outstanding as of September 30, 2021 were 22,848,781.
Capital Management
The Company’s book value per share was $9.56 at September 30, 2021 compared to $8.97 at December 31, 2020, while tangible book value per share increased $0.53, or 6.4%, from $8.36 at December 31, 2020 to $8.89 at September 30, 2021. As of September 30, 2021, 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.
The Company’s regulatory capital ratios remain in compliance with regulatory “well capitalized” requirements and internal target minimal levels. At September 30, 2021, the Company’s Tier 1 leverage, common equity tier 1 capital, and total risk-based capital ratios were 8.8%, 12.4%, and 14.6%, respectively, and the Bank’s Tier 1 leverage, common equity tier 1 capital, and total risk-based capital ratios were 8.9%, 12.5%, and 13.6%, 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 pandemic 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;
- variations of COVID-19, such as the Delta 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.
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 Nine Months Ended September 30, June 30, March 31, December 31, September 30, September 30, 2021 2021 2021 2020 2020 2021 2020 INTEREST AND DIVIDEND INCOME: Loans $ 18,670 $ 18,321 $ 19,120 $ 20,727 $ 19,364 $ 56,111 $ 57,110 Securities 1,500 1,277 854 825 953 3,631 3,517 Other investments 28 28 35 130 118 91 457 Short-term investments 40 26 24 26 12 90 83 Total interest and dividend income 20,238 19,652 20,033 21,708 20,447 59,923 61,167 INTEREST EXPENSE: Deposits 1,217 1,466 1,734 2,257 3,190 4,417 11,243 Long-term debt - 185 273 656 789 458 2,677 Subordinated debt 256 197 - - - 453 - Short-term borrowings - - - - 478 - 1,612 Total interest expense 1,473 1,848 2,007 2,913 4,457 5,328 15,532 Net interest and dividend income 18,765 17,804 18,026 18,795 15,990 54,595 45,635 (CREDIT) PROVISION FOR LOAN LOSSES (100 ) (1,200 ) 75 500 2,725 (1,225 ) 7,275 Net interest and dividend income after (credit) provision for loan losses 18,865 19,004 17,951 18,295 13,265 55,820 38,360 NON-INTEREST INCOME: Service charges and fees 2,132 2,075 1,883 1,970 1,764 6,090 5,097 Income from bank-owned life insurance 485 500 441 444 444 1,426 1,365 Gain (loss) on sales of securities, net 2 (12 ) (62 ) - 1,929 (72 ) 1,965 Unrealized gain (loss) on marketable equity securities 11 6 (89 ) (24 ) (4 ) (72 ) 133 Gain on sale of mortgages 665 242 227 - - 1,134 - Gain on non-marketable equity investments - - 546 - - 546 - Loss on interest rate swap terminations - (402 ) - - (2,353 ) (402 ) (2,353 ) Other income - - 58 72 397 58 582 Total non-interest income 3,295 2,409 3,004 2,462 2,177 8,708 6,789 NON-INTEREST EXPENSE: Salaries and employees benefits 8,175 8,054 7,682 7,806 7,204 23,911 21,543 Occupancy 1,124 1,099 1,289 1,161 1,120 3,512 3,359 Furniture and equipment 533 513 490 362 421 1,536 1,175 Data processing 698 758 721 711 768 2,177 2,190 Professional fees 575 589 544 521 615 1,708 1,851 FDIC insurance 273 225 298 300 293 796 732 Advertising 345 347 338 309 326 1,030 797 Loss on prepayment of borrowings - 45 - 987 - 45 - Other 2,295 2,044 1,965 2,181 2,106 6,304 5,765 Total non-interest expense 14,018 13,674 13,327 14,338 12,853 41,019 37,412 INCOME BEFORE INCOME TAXES 8,142 7,739 7,628 6,419 2,589 23,509 7,737 INCOME TAX PROVISION 2,106 2,087 1,837 1,406 488 6,030 1,535 NET INCOME $ 6,036 $ 5,652 $ 5,791 $ 5,013 $ 2,101 $ 17,479 $ 6,202 Basic earnings per share $ 0.27 $ 0.24 $ 0.24 $ 0.20 $ 0.08 $ 0.74 $ 0.25 Weighted average shares outstanding 22,620,387 23,722,903 24,486,146 24,754,681 24,945,670 23,602,978 25,145,411 Diluted earnings per share $ 0.27 $ 0.24 $ 0.24 $ 0.20 $ 0.08 $ 0.74 $ 0.25 Weighted average diluted shares outstanding 22,714,429 23,773,562 24,543,554 24,763,022 24,945,670 23,670,347 25,163,005 Other Data: Return on average assets (1) 0.96 % 0.92 % 0.98 % 0.83 % 0.35 % 0.95 % 0.36 % Return on average equity (1) 10.85 % 10.16 % 10.35 % 8.62 % 3.61 % 10.45 % 3.59 % Efficiency ratio (2) 63.58 % 66.09 % 64.58 % 62.74 % 69.12 % 64.73 % 71.02 % Net interest margin, on a fully tax-equivalent basis 3.20 % 3.08 % 3.26 % 3.32 % 2.83 % 3.18 % 2.82 % (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, 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)September 30, June 30, March 31, December 31, September 30, 2021 2021 2021 2020 2020 Cash and cash equivalents $ 148,496 $ 105,494 $ 132,124 $ 87,444 $ 172,112 Securities available-for-sale, at fair value 208,030 231,166 195,454 201,880 191,569 Securities held to maturity, at amortized cost 154,403 107,783 63,960 - - Marketable equity securities, at fair value 11,970 11,936 11,906 11,968 6,965 Federal Home Loan Bank of Boston and other restricted stock - at cost 2,698 4,036 4,492 5,160 9,252 Loans 1,846,150 1,876,988 1,924,868 1,927,383 1,974,387 Allowance for loan losses (19,837 ) (19,870 ) (21,227 ) (21,157 ) (20,692 ) Net loans 1,826,313 1,857,118 1,903,641 1,906,226 1,953,695 Bank-owned life insurance 74,286 73,801 73,301 72,860 72,416 Goodwill 12,487 12,487 12,487 12,487 12,487 Core deposit intangible 2,656 2,750 2,844 2,937 3,031 Other assets 69,459 70,035 63,320 64,924 65,261 TOTAL ASSETS $ 2,510,798 $ 2,476,606 $ 2,463,529 $ 2,365,886 $ 2,486,788 Total deposits $ 2,224,842 $ 2,180,648 $ 2,154,133 $ 2,038,130 $ 2,011,291 Long-term debt 3,829 4,990 42,676 57,850 151,258 Subordinated debt 19,623 19,614 - - - Securities pending settlement - 461 152 160 57,226 Other liabilities 44,162 47,222 43,712 43,106 36,792 TOTAL LIABILITIES 2,292,456 2,252,935 2,240,673 2,139,246 2,256,567 TOTAL SHAREHOLDERS' EQUITY 218,342 223,671 222,856 226,640 230,221 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,510,798 $ 2,476,606 $ 2,463,529 $ 2,365,886 $ 2,486,788
WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES
Other Data
(Dollars in thousands, except per share data)
(Unaudited)Three Months Ended September 30, June 30, March 31, December 31, September 30, 2021 2021 2021 2020 2020 Shares outstanding at end of period 22,848,781 24,070,399 24,583,958 25,276,193 25,595,557 Operating results: Net interest income $ 18,765 $ 17,804 $ 18,026 $ 18,795 $ 15,990 (Credit) provision for loan losses (100 ) (1,200 ) 75 500 2,725 Non-interest income 3,295 2,409 3,004 2,462 2,177 Non-interest expense 14,018 13,674 13,327 14,338 12,853 Income before income provision for income taxes 8,142 7,739 7,628 6,419 2,589 Income tax provision 2,106 2,087 1,837 1,406 488 Net income 6,036 5,652 5,791 5,013 2,101 Performance Ratios: Net interest margin, on a fully tax-equivalent basis 3.20 % 3.08 % 3.26 % 3.32 % 2.83 % Interest rate spread, on a fully tax-equivalent basis 3.09 % 2.94 % 3.10 % 3.11 % 2.51 % Return on average assets 0.96 % 0.92 % 0.98 % 0.83 % 0.35 % Return on average equity 10.85 % 10.16 % 10.35 % 8.62 % 3.61 % Efficiency Ratio 63.58 % 66.09 % 64.58 % 62.74 % 69.12 % Per Common Share Data: Basic earnings per share $ 0.27 $ 0.24 $ 0.24 $ 0.20 $ 0.08 Diluted earnings per share 0.27 0.24 0.24 0.20 0.08 Cash dividend declared 0.05 0.05 0.05 0.05 0.05 Book value per share 9.56 9.29 9.07 8.97 8.99 Tangible book value per share 8.89 8.66 8.44 8.36 8.39 Asset Quality: 30-89 day delinquent loans $ 1,619 $ 2,607 $ 7,216 $ 11,403 $ 3,754 90 days or more delinquent loans 1,446 1,808 2,058 2,119 2,924 Total delinquent loans 3,065 4,415 9,274 13,522 6,678 Total delinquent loans as a percentage of total loans 0.17 % 0.24 % 0.48 % 0.70 % 0.34 % Total delinquent loans as a percentage of total loans, excluding PPP 0.17 % 0.25 % 0.53 % 0.77 % 0.38 % Nonperforming loans $ 5,632 $ 5,989 $ 6,782 $ 7,841 $ 9,208 Nonperforming loans as a percentage of total loans 0.31 % 0.32 % 0.35 % 0.41 % 0.47 % Nonperforming loans as a percentage of total loans, excluding PPP 0.32 % 0.34 % 0.39 % 0.45 % 0.53 % Nonperforming assets as a percentage of total assets 0.22 % 0.24 % 0.28 % 0.33 % 0.37 % Nonperforming assets as a percentage of total assets, excluding PPP 0.23 % 0.25 % 0.30 % 0.36 % 0.41 % Allowance for loan losses as a percentage of nonperforming loans 351.91 % 331.77 % 312.99 % 269.83 % 224.72 % Allowance for loan losses as a percentage of total loans 1.07 % 1.06 % 1.10 % 1.10 % 1.05 % Allowance for loan losses as a percentage of total loans, excluding PPP 1.11 % 1.12 % 1.21 % 1.20 % 1.18 % Net loan (recoveries) charge-offs $ (67 ) $ 157 $ 5 $ 35 $ 286 Net loan charge-offs as a percentage of average assets 0.00 % 0.01 % 0.00 % 0.00 % 0.02 %
The following tables set forth the information relating to our average balances and net interest income for the three months ended September 30, 2021, June 30, 2021, and September 30, 2020 and reflect the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated.
Three Months Ended September 30, 2021 June 30, 2021 September 30, 2020 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) $ 1,867,769 $ 18,776 3.99 % $ 1,911,323 $ 18,425 3.87 % $ 1,994,072 $ 19,469 3.88 % Securities(2) 353,690 1,501 1.68 293,991 1,278 1.74 217,911 958 1.75 Other investments 10,525 28 1.06 10,114 28 1.11 14,862 118 3.16 Short-term investments(3) 105,733 40 0.15 114,883 26 0.09 39,576 12 0.12 Total interest-earning assets 2,337,717 20,345 3.45 2,330,311 19,757 3.40 2,266,421 20,557 3.61 Total non-interest-earning assets 148,383 147,545 144,387 Total assets $ 2,486,100 $ 2,477,856 $ 2,410,808 LIABILITIES AND EQUITY: Interest-bearing liabilities Interest-bearing checking accounts $ 115,091 96 0.33 % $ 100,455 92 0.37 % $ 92,603 108 0.46 % Savings accounts 212,711 35 0.07 206,302 47 0.09 161,801 32 0.08 Money market accounts 813,528 562 0.27 766,378 650 0.34 541,923 700 0.51 Time deposit accounts 445,379 524 0.47 487,712 677 0.56 624,717 2,350 1.50 Total interest-bearing deposits 1,586,709 1,217 0.30 1,560,847 1,466 0.38 1,421,044 3,190 0.89 Short-term borrowings and long-term debt 23,920 256 4.25 54,459 382 2.81 194,021 1,267 2.60 Total interest-bearing liabilities 1,610,629 1,473 0.36 1,615,306 1,848 0.46 1,615,065 4,457 1.10 Non-interest-bearing deposits 615,468 603,270 529,229 Other non-interest-bearing liabilities 39,381 36,043 34,930 Total non-interest-bearing liabilities 654,849 639,313 564,159 Total liabilities 2,265,478 2,254,619 2,179,224 Total equity 220,622 223,237 231,584 Total liabilities and equity $ 2,486,100 $ 2,477,856 $ 2,410,808 Less: Tax-equivalent adjustment (2) (107 ) (105 ) (110 ) Net interest and dividend income $ 18,765 $ 17,804 $ 15,990 Net interest rate spread (4) 3.07 % 2.92 % 2.49 % Net interest rate spread, on a tax-equivalent basis (5) 3.09 % 2.94 % 2.51 % Net interest margin (6) 3.18 % 3.06 % 2.81 % Net interest margin, on a tax-equivalent basis (7) 3.20 % 3.08 % 2.83 % Ratio of average interest-earning assets to average interest-bearing liabilities 145.14 % 144.26 % 140.33 % The following tables set forth the information relating to our average balances and net interest income for the nine months ended September 30, 2021 and 2020 and reflect the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated.
Nine Months Ended September 30, 2021 2020 Average
BalanceInterest (8) Average Yield/
Cost(9)Average
BalanceInterest (8) Average Yield/
Cost(9)(Dollars in thousands) ASSETS: Interest-earning assets Loans(1)(2) $ 1,900,652 $ 56,423 3.97 % $ 1,912,420 $ 57,452 4.01 % Securities(2) 292,133 3,633 1.66 220,544 3,533 2.14 Other investments 10,104 91 1.20 15,781 457 3.87 Short-term investments(3) 105,246 90 0.11 26,826 83 0.41 Total interest-earning assets 2,308,135 60,237 3.49 2,175,571 61,525 3.78 Total non-interest-earning assets 146,180 140,279 Total assets $ 2,454,315 $ 2,315,850 LIABILITIES AND EQUITY: Interest-bearing liabilities Interest-bearing checking accounts $ 102,106 293 0.38 % $ 82,091 269 0.44 % Savings accounts 202,170 119 0.08 147,464 103 0.09 Money market accounts 752,361 1,865 0.33 494,973 2,173 0.59 Time deposit accounts 499,618 2,140 0.57 638,705 8,698 1.82 Total interest-bearing deposits 1,556,255 4,417 0.38 1,363,233 11,243 1.10 Short-term borrowings and long-term debt 43,578 911 2.79 215,610 4,289 2.66 Total interest-bearing liabilities 1,599,833 5,328 0.45 1,578,843 15,532 1.31 Non-interest-bearing deposits 593,637 474,436 Other non-interest-bearing liabilities 37,259 31,881 Total non-interest-bearing liabilities 630,896 506,317 Total liabilities 2,230,729 2,085,160 Total equity 223,586 230,690 Total liabilities and equity $ 2,454,315 $ 2,315,850 Less: Tax-equivalent adjustment (2) (314 ) (358 ) Net interest and dividend income $ 54,595 $ 45,635 Net interest rate spread (4) 3.03 % 2.44 % Net interest rate spread, on a tax-equivalent basis (5) 3.04 % 2.46 % Net interest margin (6) 3.16 % 2.80 % Net interest margin, on a tax-equivalent basis (7) 3.18 % 2.82 % Ratio of average interest-earning assets to average interest-bearing liabilities 144.27 % 137.80 % ____________________________________________________
(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 September 30, 2021, June 30, 2021 and September 30, 2020, the loan accretion income and interest expense reduction on time deposits and borrowings increased (decreased) net interest income $56,000, ($33,000) and $18,000, respectively, and for the nine months ended September 30, 2021 and September 30, 2020, the loan accretion income and interest expense reduction on time deposits and borrowings (decreased) increased net interest income ($23,000) and $47,000, respectively. Excluding these items, net interest margin, on a tax-equivalent basis, for the three months ended September 30, 2021, June 30, 2021 and September 30, 2020 was 3.19%, 3.09% and 2.82%, respectively, and the net interest margin, on a tax-equivalent basis, for the nine months ended September 30, 2021 and September 30, 2020 was 3.18% and 2.82%, respectively.
(9) Annualized.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
