WNEB - Western New England Bancorp Inc. Reports Results for Three and Nine Months Ended September 30 2019 and Declares Quarterly Cash Dividend
WESTFIELD, Mass., Oct. 22, 2019 (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, 2019. For the three months ended September 30, 2019, the Company reported net income of $3.2 million, or $0.12 diluted earnings per share, compared to net income of $3.9 million, or $0.14 diluted earnings per share, for the three months ended September 30, 2018. On a linked quarter basis, net income was $3.2 million, or $0.12 diluted earnings per share, as compared to net income of $3.3 million, or $0.12 diluted earnings per share, for the three months ended June 30, 2019. For the nine months ended September 30, 2019, net income was $9.9 million, or $0.38 diluted earnings per share, compared to net income of $12.6 million, or $0.43 diluted earnings per share, for the nine months ended September 30, 2018.
The Company also announced that the Board of Directors declared a quarterly cash dividend of $0.05 per share, payable on or about November 20, 2019 to shareholders of record on November 6, 2019.
“We are pleased to report continued strong loan growth and core deposit growth during the third quarter of 2019,” stated James Hagan, President and CEO. “Growing and managing our balance sheet in this interest rate environment is a driving factor to our success, and we continue to make investments to promote long-term franchise value for the Company and our shareholders. The net interest margin was under pressure during the first nine months of 2019, however, our balance sheet is positioned to take advantage of an expected decrease in short-term interest rates as we go into the last quarter of 2019,” Mr. Hagan added.
Mr. Hagan concluded, “We continue to believe our repurchase of 1.9 million shares during the first nine months of 2019 and our ongoing quarterly dividend enhances shareholder value. We are also working to further enhance our profitability through continued prudent loan and core deposit growth along with our previously announced strategic expansion in the Connecticut marketplace.”
Key Highlights:
- Loans: Total loans as of September 30, 2019 were $1.8 billion, an increase of $54.7 million, or 3.2%, from December 31, 2018. Average loans increased $50.7 million, or 3.0%, from the three months ended June 30, 2019 to the three months ended September 30, 2019.
- Deposits: Total deposits increased $73.5 million, or 4.6%, from December 31, 2018 to September 30, 2019.
- Core Deposits: Core deposits increased $46.7 million, or 4.8%, from June 30, 2019, and increased $77.4 million, or 8.3%, from December 31, 2018. At September 30, 2019, non-interest bearing deposit accounts represented 23% of total deposits. Although there is seasonal fluctuation typically experienced in the third quarter of each year, average core deposits increased $12.9 million, or 1.3%, from the three months ended June 30, 2019 to the three months ended September 30, 2019, after increasing $22.3 million, or 2.4%, from the three months ended March 31, 2019 to the three months ended June 30, 2019. The loan-to-deposit ratio decreased from 106.3% at December 31, 2018 to 104.9% at September 30, 2019.
- Allowance for Loan Losses and Credit Quality: Allowance for loan losses as a percentage of total loans was 0.76% and 0.71% at September 30, 2019 and December 31, 2018, respectively. Non-performing loans decreased from $13.5 million, or 0.79% of total loans, at December 31, 2018 to $11.1 million, or 0.63% of total loans, at September 30, 2019.
- Net Interest Margin: The net interest margin was 2.88% for the three months ended September 30, 2019, compared to 2.89% for the three months ended June 30, 2019. The net interest margin, on a tax-equivalent basis, was 2.91% for the three months ended September 30, 2019, compared to 2.92% for the three months ended June 30, 2019. Consistent with the rest of the banking industry, we continue to address funding cost headwinds and are focused on acquiring the most cost effective funding sources to fund our loan growth momentum. In order to address the margin compression, we intend to continue focusing on attracting lower cost core deposits, which typically also generate fee income for the Company.
- Non-interest Expense: Non-interest expense decreased $400,000, or 3.3%, from the three months ended June 30, 2019 to the three months ended September 30, 2019 and represented 2.18% of average assets as of September 30, 2019. Non-interest expense has remained relatively flat over the last three quarters. We have maintained these levels as we continue to invest in our Company in order to generate and handle the significant growth in loans and deposits realized over the last two quarters.
- Repurchases: During the nine months ended September 30, 2019, the Company repurchased approximately 1.9 million shares under its previously approved repurchase plan. As of September 30, 2019, there were 1,126,866 shares available to repurchase under the plan.
- Capital Management: Book value per share was $8.73 at September 30, 2019, compared to $8.35 at December 31, 2018, while tangible book value per share increased $0.36, or 4.6%, from $7.78 at December 31, 2018 to $8.14 at September 30, 2019. As of September 30, 2019, 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 September 30, 2019 Compared to the Three Months Ended June 30, 2019
The Company reported net income of $3.2 million, or $0.12 diluted earnings per share, for the three months ended September 30, 2019, compared to net income of $3.3 million, or $0.12 diluted earnings per share, for the three months ended June 30, 2019. Return on average assets and return on average equity were 0.60% and 5.53% respectively, for the three months ended September 30, 2019, as compared to 0.62% and 5.76%, respectively, for the three months ended June 30, 2019.
Net Interest Income and Net Interest Margin
On a sequential quarter basis, net interest income increased $327,000, or 2.3%, to $14.5 million for the three months ended September 30, 2019, from $14.2 million for the three months ended June 30, 2019. The increase in net interest income was due to an increase in interest and dividend income of $589,000, or 2.9%, partially offset by an increase in interest expense of $262,000, or 4.4%. The increase in interest expense was due to an increase in interest expense on Federal Home Loan Bank (“FHLB”) borrowings of $175,000, or 10.6%, and an increase in interest expense on deposits of $87,000, or 2.0%.
The net interest margin was 2.88% for the three months ended September 30, 2019, compared to 2.89% for the three months ended June 30, 2019. The net interest margin, on a tax-equivalent basis, was 2.91% for the three months ended September 30, 2019, compared to 2.92% for the three months ended June 30, 2019. The amortization of purchase accounting adjustments related to the merger with Chicopee Bancorp, Inc. (“Chicopee”) increased net interest income by $154,000 during the three months ended September 30, 2019, compared to a decrease in net interest income of $79,000 during the three months ended June 30, 2019. Excluding purchase accounting adjustments, the net interest margin was 2.85% for the three months ended September 30, 2019 and 2.91% for the three months ended June 30, 2019.
The average yield on interest-earning assets remained unchanged at 4.15% for the three months ended September 30, 2019 and the three months ended June 30, 2019. Excluding purchase accounting adjustments, the average yield on interest-earning assets decreased five basis point from 4.17% for the three months ended June 30, 2019 to 4.12% for the three months ended September 30, 2019.
The average cost of funds increased two basis points from 1.62% for the three months ended June 30, 2019 to 1.64% for the three months ended September 30, 2019. The average cost of core deposits, including non-interest bearing demand deposits, increased one basis point to 32 basis points for the three months ended September 30, 2019, from 31 basis points for the three months ended June 30, 2019. The average cost of time deposits increased four basis points from 2.14% for the three months ended June 30, 2019 to 2.18% for the three months ended September 30, 2019. The average cost of borrowings decreased 12 basis points from 3.02% for the three months ended June 30, 2019 to 2.90% for the three months ended September 30, 2019. Average demand deposits, an interest-free source of funds, increased $5.3 million, or 1.5%, from $363.3 million, or 22.2% of total average deposits, for the three months ended June 30, 2019, to $368.6 million, or 22.5% of total average deposits, for the three months ended September 30, 2019.
During the three months ended September 30, 2019, average interest-earning assets increased $35.0 million, or 1.8%, to $2.0 billion. The increase in average interest-earning assets was primarily due to an increase in average loans of $50.7 million, or 3.0%, partially offset by a decrease in average securities of $10.1 million, or 4.1%.
Provision for Loan Losses
The provision for loan losses increased $925,000 to $1.3 million for the three months ended September 30, 2019 from $350,000 for the three months ended June 30, 2019. The Company recorded net charge-offs of $426,000 for the three months ended September 30, 2019, as compared to net recoveries of $194,000 for the three months ended June 30, 2019. Also contributing to the increase in the general reserves was an increase in total loans of $29.4 million, or 1.7%. During the three months ended September 30, 2019, the Company reported charge-offs of $470,000, offset partially by recoveries totaling $44,000.
Non-Interest Income
On a sequential quarter basis, non-interest income increased $94,000, or 3.7%, to $2.6 million for the three months ended September 30, 2019, from $2.5 million for the three months ended June 30, 2019. The increase in non-interest income was primarily due to an increase in service charges and fees of $168,000, or 9.1%. For the three months ended June 30, 2019, service charges and fees included $110,000 in non-recurring interchange fee income. In addition, non-interest income for the three months ended September 30, 2019 included approximately $180,000 in seasonal non-interest income. The increase in service charges and fees was partially offset by a decrease in other income of $151,000, or 73.3%, due to a decrease in swap fees and a decrease in income from bank-owned life insurance (“BOLI”) of $34,000, or 7.1%. During the three months ended September 30, 2019, the Company reported unrealized gains on marketable equity securities of $45,000 and realized gains on the sale of securities of $49,000, compared to unrealized gains on marketable equity securities of $79,000 and realized losses on the sale of securities of $96,000 during the three months ended June 30, 2019.
Non-Interest Expense
For the three months ended September 30, 2019, non-interest expense decreased $400,000, or 3.3%, to $11.7 million, or 2.18% of average assets, from $12.1 million, or 2.31% of average assets, for the three months ended June 30, 2019. The decrease in non-interest expense was primarily due to a decrease in Federal Deposit Insurance Corporation (“FDIC”) insurance expense of $231,000, or 97.9%, and a decrease in other non-interest expense of $101,000, or 5.2%, along with a decrease in professional fees of $61,000, or 10.0%, a decrease in occupancy expense of $23,000, or 2.3%, a decrease in advertising expense of $6,000, or 1.6%, and a decrease in furniture and equipment of $3,000, or 0.7%. The decrease in the FDIC insurance expense was due to the small bank credit applied to quarterly assessments by the FDIC in the third quarter of 2019. Small bank credits will automatically be applied each quarter that the reserve ratio is at least 1.38%, up to the full amount of a small bank's credit or assessment, whichever is less. These decreases were partially offset by an increase in salaries and benefits of $17,000, or 0.2%, and an increase in data processing of $8,000, or 1.1%. For the three months ended September 30, 2019, the efficiency ratio was 68.9%, compared to 72.5% for the three months ended June 30, 2019.
Income Tax Provision
The Company’s effective tax rate decreased to 21.8% for the three months ended September 30, 2019, from 23.0% for the three months ended June 30, 2019.
Net Income for the Three Months Ended September 30, 2019 Compared to the Three Months Ended September 30, 2018
The Company reported net income of $3.2 million, or $0.12 diluted earnings per share, for the three months ended September 30, 2019, compared to net income of $3.9 million, or $0.14 diluted earnings per share, for the three months ended September 30, 2018. Return on average assets and return on average equity were 0.60% and 5.53%, respectively, for the three months ended September 30, 2019, as compared to 0.74% and 6.42%, respectively, for the three months ended September 30, 2018.
Net Interest Income and Net Interest Margin
Net interest income decreased $77,000, or 0.5%, to $14.5 million, for the three months ended September 30, 2019, from $14.6 million for the three months ended September 30, 2018. The decrease in net interest income was due to an increase in interest expense of $1.3 million, or 25.5%, partially offset by an increase in interest and dividend income of $1.2 million, or 6.1%. The increase in interest expense was primarily due to a $1.4 million, or 44.0%, increase in interest expense on deposits, partially offset by a decrease of $84,000, or 4.4%, in interest expense on FHLB borrowings.
Net interest income for the three months ended September 30, 2018 included $62,000 in negative purchase accounting adjustments, compared to $154,000 in positive purchase accounting adjustments during the three months ended September 30, 2019. Excluding these adjustments, net interest income decreased $293,000, or 2.0%, from $14.7 million during the three months ended September 30, 2018, compared to $14.4 million during the three months ended September 30, 2019.
The net interest margin was 2.88% for the three months ended September 30, 2019, compared to 2.94% for the three months ended September 30, 2018. The net interest margin, on a tax-equivalent basis, was 2.91% for the three months ended September 30, 2019, compared to 2.96% for the three months ended September 30, 2018. The amortization of purchase accounting adjustments related to the merger with Chicopee decreased net interest income by $62,000 during the three months ended September 30, 2018, compared to an increase of $154,000 during the three months ended September 30, 2019. Excluding the purchase accounting adjustments, the net interest margin was 2.85% for the three months ended September 30, 2019 and 2.95% for the three months ended September 30, 2018.
The average yield on interest-earning assets increased 18 basis points from 3.97% for the three months ended September 30, 2018 to 4.15% for the three months ended September 30, 2019. Excluding the purchase accounting adjustments, the average yield on interest-earning assets increased 12 basis points from 4.00% for the three months ended September 30, 2018 to 4.12% for the three months ended September 30, 2019, respectively. During the three months ended September 30, 2019, the average cost of funds increased 33 basis points from 1.31% for the three months ended September 30, 2018 to 1.64% for the three months ended September 30, 2019. The average cost of core deposits, which include non-interest bearing demand accounts, increased six basis points from 0.26% for the three months ended September 30, 2018 to 0.32% for the three months ended September 30, 2019. The average cost of time deposits increased 55 basis points from 1.63% for the three months ended September 30, 2018 to 2.18% for the three months ended September 30, 2019. The average cost of FHLB borrowings increased 19 basis points during the same period. For the three months ended September 30, 2019, average demand deposits, an interest-free source of funds, increased $39.9 million, or 12.1%, to $368.6 million, or 22.5% of total average deposits, from $328.7 million, or 20.9% of total average deposits for the three months ended September 30, 2018.
During the three months ended September 30, 2019, average interest-earning assets increased $30.7 million, or 1.6%, to $2.0 billion compared to the three months ended September 30, 2018. The increase in average interest-earning assets was due to an increase in average loans of $57.2 million, or 3.4%, partially offset by a decrease in average securities of $24.4 million, or 9.3%.
Provision for Loan Losses
The provision for loan losses increased $925,000, from $350,000 for the three months ended September 30, 2018 to $1.3 million for the three months ended September 30, 2019. The Company recorded net charge-offs of $426,000 for the three months ended September 30, 2019, as compared to net charge-offs of $101,000 for the three months ended September 30, 2018. During the three months ended September 30, 2019, the Company recorded charge-offs of $470,000, primarily due to an existing substandard commercial loan relationship, partially offset by recoveries of $44,000.
Non-Interest Income
Non-interest income increased $315,000, or 13.7%, to $2.6 million for the three months ended September 30, 2019, from $2.3 million for the three months ended September 30, 2018, primarily due to an increase in service charges and fees of $127,000, or 6.7%, an increase in other non-interest income of $55,000 primarily related to swap fee income, and a gain on the sale of securities of $49,000. During the three months ended September 30, 2019, the Company reported $45,000 in unrealized gains on marketable equity securities, compared to unrealized losses on marketable equity securities of $43,000 for the three months ended September 30, 2018.
Non-Interest Expense
For the three months ended September 30, 2019, non-interest expense increased $168,000, or 1.5%, to $11.7 million, or 2.18% of average assets, from $11.6 million, or 2.18% of average assets, for the three months ended September 30, 2018. The increase in non-interest expense was primarily due to an increase in salaries and benefits of $442,000, or 6.9%, an increase in data processing of $68,000, or 10.6%, an increase in furniture and equipment of $24,000, or 6.0%, an increase in occupancy expense of $23,000, or 2.4%, and an increase in advertising expense of $13,000, or 3.7%. These increases were partially offset by a decrease in professional fees of $221,000, or 28.8%, and a decrease in FDIC insurance expense of $153,000, or 96.8%, due to the small bank credit applied to quarterly assessments by the FDIC in the third quarter of 2019. Small bank credits will automatically be applied each quarter that the reserve ratio is at least 1.38%, up to the full amount of a small bank's credit or assessment, whichever is less. For the three months ended September 30, 2019, the efficiency ratio was 68.9%, compared to 68.3% for the three months ended September 30, 2018.
Income Tax Provision
The Company’s effective tax rate increased from 21.5% for the three months ended September 30, 2018 to 21.8% for the three months ended September 30, 2019.
Net Income for the Nine Months Ended September 30, 2019 Compared to the Nine Months Ended September 30, 2018
For the nine months ended September 30, 2019, the Company reported net income of $9.9 million, or $0.38 diluted earnings per share, compared to $12.6 million, or $0.43 diluted earnings per share, for the nine months ended September 30, 2018. Return on average assets and return on average equity were 0.63% and 5.78% for the nine months ended September 30, 2019, compared to 0.80% and 6.95% for the nine months ended September 30, 2018, respectively. Adjusting net income for gains on BOLI of $715,000, favorable purchase accounting adjustments of $1.1 million and a prepayment penalty of $279,000 all reported during the nine months ended September 30, 2018, and adjusting for the $97,000 of positive purchase accounting adjustments and $67,000 in prepayment penalties reported during the nine months ended September 30, 2019, net income was $9.8 million, or $0.37 diluted earnings per share, for the nine months ended September 30, 2019, compared to net income of $10.9 million, or $0.37 diluted earnings per share, for the nine months ended September 30, 2018.
Net Interest Income and Net Interest Margin
During the nine months ended September 30, 2019, net interest income decreased $2.1 million, or 4.7%, to $43.1 million, compared to $45.2 million for the nine months ended September 30, 2018. The decrease in net interest income was due to an increase in interest expense of $4.4 million, or 32.4%, partially offset by an increase of $2.3 million, or 3.9%, in interest and dividend income. The increase in interest expense was primarily due to the increase in interest expense on deposits of $4.6 million, or 56.6%, primarily time deposits, while interest expense on FHLB borrowings decreased $208,000, or 3.8%. Net interest income for the nine months ended September 30, 2018 included $1.1 million in favorable purchase accounting adjustments primarily due to the full payoff of a purchase credit impaired loan from Chicopee, compared to $97,000 in positive purchase accounting adjustments for the nine months ended September 30, 2019. During the nine months ended September 30, 2018, the Company also reported a prepayment penalty fee of $279,000, compared to $67,000 during the nine months ended September 30, 2019. Excluding these adjustments, interest and dividend income increased $3.2 million, or 5.5%, offset by a $4.2 million, or 30.0%, increase in interest expense.
The net interest margin for the nine months ended September 30, 2019 was 2.90%, compared to 3.09% during the nine months ended September 30, 2018. The net interest margin, on a tax-equivalent basis, was 2.93% for the nine months ended September 30, 2019, compared to 3.11% for the nine months ended September 30, 2018.
The decrease in net interest margin was largely due to a decrease in purchase accounting adjustments from a positive adjustment of $1.1 million during the nine months ended September 30, 2018, compared to a positive adjustment of $97,000 during the nine months ended September 30, 2019. The result was a decrease of 12 basis points on the net interest margin. Prepayment penalties decreased $212,000, from $279,000 during the nine months ended September 30, 2018 to $67,000 during the nine months ended September 30, 2019, which further decreased the net interest margin by two basis points. After these adjustments, the adjusted net interest margin decreased from 3.00% during the three months ended September 30, 2018 to 2.89% during the nine months ended September 30, 2019.
The average yield on interest-earning assets increased 11 basis points from 4.04% for the nine months ended September 30, 2018 to 4.15% for the nine months ended September 30, 2019. Excluding the purchase accounting adjustments and the prepayment penalties mentioned above, the average yield on interest-earning assets increased 17 basis points from 3.98% for the nine months ended September 30, 2018 to 4.15% for the nine months ended September 30, 2019, respectively. During the nine months ended September 30, 2019, the average cost of funds increased 40 basis points from 1.20% for the nine months ended September 30, 2018 to 1.60% for the nine months ended September 30, 2019. The average cost of core deposits, including non-interest-bearing demand deposits, increased seven basis points from 0.24% for the nine months ended September 30, 2018 to 0.31% for the nine months ended September 30, 2019, while the average cost of time deposits increased 63 basis points from 1.47% for the nine months ended September 30, 2018 to 2.10% during the same period in 2019. The average cost of borrowings increased 36 basis points from 2.57% for the nine months ended September 30, 2018 to 2.93% for the nine months ended September 20, 2019. For the nine months ended September 30, 2019, average demand deposits, an interest-free source of funds, increased $41.5 million, or 13.1%, from $317.3 million, or 20.5% of total average deposits, for the nine months ended September 30, 2018 to $358.8 million, or 22.0% of total average deposits, for the nine months ended September 30, 2019. During the nine months ended September 30, 2019, average interest-earning assets increased $25.6 million, or 1.3%, to $2.0 billion. The increase in average interest-earning assets was due to an increase in average loans of $46.1 million, or 2.8%, partially offset by a decrease in average securities of $23.8 million, or 8.7%.
Provision for Loan Losses
The provision for loan losses of $1.7 million increased $75,000, or 4.7%, for the nine months ended September 30, 2019, compared to $1.6 million for the nine months ended September 30, 2018. The Company recorded net charge-offs of $456,000 for the nine months ended September 30, 2019, as compared to net charge-offs of $196,000 for the nine months ended September 30, 2018. During the nine months ended September 30, 2019, the Company recorded charge-offs of $1.4 million, compared to $653,000 during the same period in 2018. During the nine months ended September 30, 2019, the Company also recorded recoveries of $937,000, primarily due to a partial recovery of $812,000 related to a single commercial real estate loan previously charged-off in 2010.
Non-Interest Income
For the nine months ended September 30, 2019, non-interest income of $7.3 million increased $305,000, or 4.4%, compared to $7.0 million for the nine months ended September 30, 2018. Service charges and fees increased $334,000, or 6.5%, and other income increased $139,000, or 106.1%, primarily due to swap fees on commercial real estate loans. During the nine months ended September 30, 2019, service charges and fees included $110,000 in non-recurring interchange fee income. During the nine months ended September 30, 2019, the Company reported unrealized gains on marketable equity securities of $194,000, compared to unrealized losses of $190,000 during the nine months ended September 30, 2018 as well as a decrease in realized losses on the sale of securities of $238,000, or 95.2%, during the same period. During the nine months ended September 30, 2018, the Company reported a $48,000 gain on the sale of other real estate owned (“OREO”) and a $715,000 net gain on BOLI. Excluding the net gain on BOLI, OREO and the realized and unrealized security losses discussed above, non-interest income increased $446,000, or 6.7%, for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018.
Non-Interest Expense
For the nine months ended September 30, 2019, non-interest expense increased $1.4 million, or 3.9%, to $35.9 million, or 2.27% of average assets, compared to $34.5 million, or 2.21% of average assets for the nine months ended September 30, 2018. The increase in non-interest expense was primarily due to an increase in salaries and benefits of $1.0 million, or 5.1%, an increase in other non-interest expenses of $216,000, or 4.1%, an increase in occupancy expense of $165,000, or 5.5%, an increase in data processing of $120,000, or 6.1%, an increase in an increase in furniture and equipment of $107,000, or 9.3%, and an increase in advertising expense of $45,000, or 4.3%. These increases were partially offset by a decrease in FDIC insurance expense of $46,000, or 9.9%, and a decrease in professional fees of $249,000, or 11.8%. For the nine months ended September 30, 2019, the efficiency ratio was 71.6%, compared to 66.6% for the nine months ended September 30, 2018. The adjusted efficiency ratio, excluding purchase account adjustments and prepayment penalties, was 71.8% for the nine months ended September 30, 2019, compared to 68.4% for the nine months ended September 30, 2018.
Income Tax Provision
The effective tax rate for the nine months ended September 30, 2019 and September 30, 2018 was 22.4% and 21.7%, respectively.
Balance Sheet
At September 30, 2019, total assets were $2.2 billion, an increase of $54.9 million, or 2.6%, from December 31, 2018. During the same period, total loans increased $54.7 million, or 3.2%, securities available-for-sale and marketable equity securities available-for-sale decreased $22.2 million, or 8.5%, and cash and cash equivalents decreased $18.6 million, or 69.5%.
Loans
Total loans increased $54.7 million, or 3.2%, from December 31, 2018, primarily due to an increase in commercial real estate loans of $52.4 million, or 6.8%, an increase in residential real estate loans of $3.7 million, or 0.6%, and an increase in consumer loans of $467,000, or 9.0%, partially offset by a decrease in commercial and industrial loans of $1.8 million, or 0.7%. In order to reduce interest rate risk, the Company currently services $50.7 million in residential loans sold to the secondary market. The servicing rights will continue to be retained on all loans sold. For the three months ended September 30, 2019, the loan portfolio represents 86.8% of average interest-earning assets and is comprised of 60.7% commercial related credits.
The following table is a summary of our outstanding loan balances as of the periods indicated:
| September 30, 2019 |
| December 31, 2018 |
| (Dollars in thousands) |
| Commercial real estate loans |
| $ |
| 821,321 |
| $ |
| 768,881 |
| Commercial and industrial loans |
| 241,732 |
| 243,493 |
| Residential real estate loans |
| 678,601 |
| 674,879 |
| Consumer loans |
| 5,670 |
| 5,203 |
| Total gross loans |
| 1,747,324 |
| 1,692,456 |
| Unamortized premiums and net deferred loans fees and costs |
| 4,258 |
| 4,401 |
| Total loans |
| $ |
| 1,751,582 |
| $ |
| 1,696,857 |
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 and reduce nonperforming loans. At September 30, 2019, nonperforming loans totaled $11.1 million, or 0.63% of total loans, compared to $13.5 million, or 0.79% of total loans at December 31, 2018. There were no loans 90 or more days past due and still accruing interest at September 30, 2019. Nonperforming assets to total assets was 0.51% and 0.64% at September 30, 2019 and December 31, 2018, respectively. The allowance for loan losses as a percentage of total loans was 0.76% at September 30, 2019, compared to 0.71% at December 31, 2018. At September 30, 2019, the allowance for loan losses as a percentage of nonperforming loans was 120.0%, compared to 89.4% at December 31, 2018. The allowance for loan losses as a percentage of total loans, excluding loans acquired from Chicopee, which were recorded at fair value with no related allowance for loan losses, was 0.99% at September 30, 2019 and 0.98% at December 31, 2018.
Total delinquent loans past due 30-89 days increased $2.0 million, or 28.1%, to $9.2 million, or 0.52% of total loans, at September 30, 2019, from $7.2 million, or 0.42% of total loans, at December 31, 2018. The increase in the 30-89 days past due category was primarily due to an existing $3.0 million substandard non-accrual commercial loan relationship that was in the process of workout at September 30, 2019 and was subsequently resolved during the month of October 2019.
Deposits
At September 30, 2019, total deposits were $1.7 billion, an increase of $73.5 million, or 4.6%, from December 31, 2018. Core deposits, which the Company defines as all deposits except time deposits, increased $77.4 million, or 8.3%, from $935.9 million, or 58.6% of total deposits, at December 31, 2018, to $1.0 billion, or 60.7% of total deposits, at September 30, 2019. Non-interest-bearing deposits increased $27.1 million, or 7.6%, to $382.5 million, interest-bearing checking accounts increased $18.7 million, or 29.4%, to $82.3 million, savings accounts increased $6.5 million, or 5.4%, to $125.0 million, and money market accounts increased $25.2 million, or 6.3%, to $423.5 million. The increase in these core deposits is a result of management’s continued sales efforts along with customer preferences for competitively priced short-term deposits. Time deposits, which include brokered deposits, represented 39.3% of total deposits, and decreased $3.8 million, or 0.6%, from $660.0 million at December 31, 2018 to $656.2 million at September 30, 2019. Brokered deposits, decreased $2.6 million, or 10.9% to $21.2 million at September 30, 2019, from $23.8 million at December 31, 2018.
FHLB Advances
FHLB advances decreased $26.6 million, or 10.0%, from $267.3 million at December 31, 2018, to $240.7 million at September 30, 2019. The Company utilized the increase in deposit balances during the year to pay down FHLB borrowings and to fund loan growth.
Capital
At September 30, 2019, shareholders’ equity was $232.0 million, or 10.7% of total assets, compared to $237.0 million, or 11.2% of total assets, at December 31, 2018. The decrease in shareholders’ equity reflects $19.1 million for the repurchase of the Company’s shares and the payment of regular cash dividends of $4.0 million, both partially offset by net income of $9.9 million and a decrease in accumulated other comprehensive loss of $6.9 million. Total shares outstanding as of September 30, 2019 were 26,561,742.
The Company’s book value per share increased by $0.38, or 4.6%, to $8.73 at September 30, 2019, from $8.35 at December 31, 2018. The Company’s tangible book value per share increased by $0.36, or 4.6%, to $8.14 at September 30, 2019 from $7.78 at December 31, 2018. As of September 30, 2019, 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.
Share Repurchase
On March 1, 2019, the Company announced the completion of its 2017 Repurchase Plan (the “2017 Plan”), under which the Company repurchased a total of 3,047,000 shares. On January 29, 2019, the Board of Directors authorized the 2019 Repurchase Plan (the “2019 Plan”) under which the Company may purchase up to 2,814,200 shares, or 10% of its outstanding common stock. The 2019 Plan commenced upon the completion of the 2017 Plan. During the three months ended September 30, 2019, the Company repurchased 141,726 shares under the 2019 Plan. For the nine months ended September 30, 2019, the Company repurchased 1,938,667 shares under both the 2017 Plan and the 2019 Plan. As of September 30, 2019, there were 1,126,866 shares remaining under the 2019 Plan.
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 22 banking offices throughout western Massachusetts and northern Connecticut. To learn more, visit our website at www.westfieldbank.com.
Forward-Looking Statements
The Company wishes to caution readers not to place undue reliance on any such forward-looking statements contained in this press release, which speak only as of the date made. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors discussed under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018. The Company and the Bank do not undertake and specifically decline any obligation to publicly release the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
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 |
| Nine Months Ended |
| September 30, |
| June 30, |
| March 31, |
| December 31, |
| September 30, |
| September 30, |
| 2019 |
| 2019 |
| 2019 |
| 2018 |
| 2018 |
| 2019 |
| 2018 |
| INTEREST AND DIVIDEND INCOME: |
| Loans |
| $ |
| 19,111 |
| $ |
| 18,302 |
| $ |
| 18,058 |
| $ |
| 18,111 |
| $ |
| 17,577 |
| $ |
| 55,471 |
| $ |
| 52,684 |
| Securities |
| 1,465 |
| 1,630 |
| 1,690 |
| 1,754 |
| 1,766 |
| 4,785 |
| 5,403 |
| Other investments |
| 192 |
| 210 |
| 236 |
| 232 |
| 228 |
| 638 |
| 631 |
| Short-term investments |
| 36 |
| 73 |
| 76 |
| 92 |
| 34 |
| 185 |
| 83 |
| Total interest and dividend income |
| 20,804 |
| 20,215 |
| 20,060 |
| 20,189 |
| 19,605 |
| 61,079 |
| 58,801 |
| INTEREST EXPENSE: |
| Deposits |
| 4,454 |
| 4,367 |
| 3,969 |
| 3,516 |
| 3,094 |
| 12,790 |
| 8,167 |
| Long-term debt |
| 1,102 |
| 1,051 |
| 1,139 |
| 1,202 |
| 1,193 |
| 3,292 |
| 3,178 |
| Short-term borrowings |
| 720 |
| 596 |
| 626 |
| 651 |
| 713 |
| 1,942 |
| 2,264 |
| Total interest expense |
| 6,276 |
| 6,014 |
| 5,734 |
| 5,369 |
| 5,000 |
| 18,024 |
| 13,609 |
| Net interest and dividend income |
| 14,528 |
| 14,201 |
| 14,326 |
| 14,820 |
| 14,605 |
| 43,055 |
| 45,192 |
| PROVISION FOR LOAN LOSSES |
| 1,275 |
| 350 |
| 50 |
| 300 |
| 350 |
| 1,675 |
| 1,600 |
| Net interest and dividend income after provision for loan losses |
| 13,253 |
| 13,851 |
| 14,276 |
| 14,520 |
| 14,255 |
| 41,380 |
| 43,592 |
| NON-INTEREST INCOME: |
| Service charges and fees |
| 2,018 |
| 1,850 |
| 1,633 |
| 1,770 |
| 1,891 |
| 5,501 |
| 5,167 |
| Income from bank-owned life insurance |
| 444 |
| 478 |
| 425 |
| 451 |
| 448 |
| 1,347 |
| 1,374 |
| Gain on bank-owned life insurance death benefit |
| - |
| - |
| - |
| - |
| - |
| - |
| 715 |
| Gain (loss) on sales of securities, net |
| 49 |
| (96 |
| ) |
| 35 |
| (31 |
| ) |
| - |
| (12 |
| ) |
| (250 |
| ) |
| Gain on sale of OREO |
| - |
| - |
| - |
| - |
| - |
| - |
| 48 |
| Unrealized gain (loss) on equity securities |
| 45 |
| 79 |
| 70 |
| 48 |
| (43 |
| ) |
| 194 |
| (190 |
| ) |
| Other income |
| 55 |
| 206 |
| 8 |
| - |
| - |
| 270 |
| 131 |
| Total non-interest income |
| 2,611 |
| 2,517 |
| 2,171 |
| 2,238 |
| 2,296 |
| 7,300 |
| 6,995 |
| NON-INTEREST EXPENSE: |
| Salaries and employees benefits |
| 6,893 |
| 6,876 |
| 6,780 |
| 6,434 |
| 6,451 |
| 20,549 |
| 19,548 |
| Occupancy |
| 975 |
| 998 |
| 1,171 |
| 995 |
| 952 |
| 3,144 |
| 2,979 |
| Furniture and equipment |
| 424 |
| 427 |
| 405 |
| 412 |
| 400 |
| 1,256 |
| 1,149 |
| Data processing |
| 710 |
| 702 |
| 665 |
| 681 |
| 642 |
| 2,077 |
| 1,957 |
| Professional fees |
| 546 |
| 607 |
| 705 |
| 703 |
| 767 |
| 1,858 |
| 2,107 |
| FDIC insurance |
| 5 |
| 236 |
| 176 |
| 140 |
| 158 |
| 417 |
| 463 |
| Advertising expense |
| 364 |
| 370 |
| 364 |
| 342 |
| 351 |
| 1,098 |
| 1,053 |
| Other |
| 1,823 |
| 1,924 |
| 1,757 |
| 1,986 |
| 1,851 |
| 5,504 |
| 5,288 |
| Total non-interest expense |
| 11,740 |
| 12,140 |
| 12,023 |
| 11,693 |
| 11,572 |
| 35,903 |
| 34,544 |
| INCOME BEFORE INCOME TAXES |
| 4,124 |
| 4,228 |
| 4,424 |
| 5,065 |
| 4,979 |
| 12,777 |
| 16,043 |
| INCOME TAX PROVISION |
| 899 |
| 971 |
| 994 |
| 1,223 |
| 1,070 |
| 2,864 |
| 3,476 |
| NET INCOME |
| $ |
| 3,225 |
| $ |
| 3,257 |
| $ |
| 3,430 |
| $ |
| 3,842 |
| $ |
| 3,909 |
| $ |
| 9,913 |
| $ |
| 12,567 |
| Basic earnings per share |
| $ |
| 0.12 |
| $ |
| 0.13 |
| $ |
| 0.13 |
| $ |
| 0.14 |
| $ |
| 0.14 |
| $ |
| 0.38 |
| $ |
| 0.43 |
| Weighted average shares outstanding |
| 25,854,040 |
| 26,047,187 |
| 27,037,520 |
| 28,252,383 |
| 28,789,132 |
| 26,308,580 |
| 29,100,735 |
| Diluted earnings per share |
| $ |
| 0.12 |
| $ |
| 0.12 |
| $ |
| 0.13 |
| $ |
| 0.14 |
| $ |
| 0.14 |
| $ |
| 0.38 |
| $ |
| 0.43 |
| Weighted average diluted shares outstanding |
| 25,969,365 |
| 26,160,169 |
| 27,153,160 |
| 28,395,964 |
| 28,937,038 |
| 26,423,229 |
| 29,242,862 |
| Other Data: |
| Return on average assets (1) |
| 0.60 |
| % |
| 0.62 |
| % |
| 0.66 |
| % |
| 0.72 |
| % |
| 0.74 |
| % |
| 0.63 |
| % |
| 0.80 |
| % |
| Return on average assets, exclusive of tax benefits (1)(3) |
| 0.60 |
| % |
| 0.62 |
| % |
| 0.66 |
| % |
| 0.72 |
| % |
| 0.74 |
| % |
| 0.63 |
| % |
| 0.79 |
| % |
| Return on average equity (1) |
| 5.53 |
| % |
| 5.76 |
| % |
| 6.05 |
| % |
| 6.43 |
| % |
| 6.42 |
| % |
| 5.78 |
| % |
| 6.95 |
| % |
| Return on average equity, exclusive of tax benefits (1)(3) |
| 5.53 |
| % |
| 5.76 |
| % |
| 6.01 |
| % |
| 6.43 |
| % |
| 6.42 |
| % |
| 5.78 |
| % |
| 6.85 |
| % |
| Efficiency ratio (2)(3) |
| 68.88 |
| % |
| 72.54 |
| % |
| 73.35 |
| % |
| 68.62 |
| % |
| 68.30 |
| % |
| 71.56 |
| % |
| 66.60 |
| % |
| Net interest margin, on a fully tax-equivalent basis |
| 2.91 |
| % |
| 2.92 |
| % |
| 2.97 |
| % |
| 2.99 |
| % |
| 2.96 |
| % |
| 2.93 |
| % |
| 3.11 |
| % |
| (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 and OREO and gain on bank-owned life insurance. |
| (3) Please refer to the “Reconciliation of non-GAAP to GAAP Financial Measures” on page 16 for further details. |
WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)
| September 30, |
| June 30, |
| March 31, |
| December 31, |
| September 30, |
| 2019 |
| 2019 |
| 2019 |
| 2018 |
| 2018 |
| Cash and cash equivalents |
| $ |
| 45,399 |
| $ |
| 25,688 |
| $ |
| 44,482 |
| $ |
| 26,789 |
| $ |
| 61,999 |
| Securities available-for-sale, at fair value |
| 231,258 |
| 234,999 |
| 244,878 |
| 253,748 |
| 252,984 |
| Marketable equity securities, at fair value |
| 6,726 |
| 6,639 |
| 6,518 |
| 6,408 |
| 6,319 |
| Federal Home Loan Bank of Boston and other restricted stock - at cost |
| 13,064 |
| 11,756 |
| 12,407 |
| 14,695 |
| 15,480 |
| Loans |
| 1,751,582 |
| 1,722,161 |
| 1,680,666 |
| 1,696,857 |
| 1,692,568 |
| Allowance for loan losses |
| (13,272 |
| ) |
| (12,423 |
| ) |
| (11,879 |
| ) |
| (12,053 |
| ) |
| (12,235 |
| ) |
| Net loans |
| 1,738,310 |
| 1,709,738 |
| 1,668,787 |
| 1,684,804 |
| 1,680,333 |
| Bank-owned life insurance |
| 70,599 |
| 70,155 |
| 69,677 |
| 69,252 |
| 68,801 |
| Goodwill |
| 12,487 |
| 12,487 |
| 12,487 |
| 12,487 |
| 12,487 |
| Core deposit intangible |
| 3,406 |
| 3,500 |
| 3,594 |
| 3,688 |
| 3,781 |
| Other assets |
| 52,435 |
| 52,182 |
| 52,867 |
| 46,951 |
| 48,341 |
| TOTAL ASSETS |
| $ |
| 2,173,684 |
| $ |
| 2,127,144 |
| $ |
| 2,115,697 |
| $ |
| 2,118,822 |
| $ |
| 2,150,525 |
| Total deposits |
| $ |
| 1,669,515 |
| $ |
| 1,644,551 |
| $ |
| 1,629,834 |
| $ |
| 1,595,993 |
| $ |
| 1,609,019 |
| Short-term borrowings |
| 35,000 |
| 50,000 |
| 35,000 |
| 59,250 |
| 55,000 |
| Long-term debt |
| 205,681 |
| 175,683 |
| 196,039 |
| 208,018 |
| 224,306 |
| Other liabilities |
| 31,507 |
| 27,194 |
| 27,507 |
| 18,532 |
| 20,915 |
| TOTAL LIABILITIES |
| 1,941,703 |
| 1,897,428 |
| 1,888,380 |
| 1,881,793 |
| 1,909,240 |
| TOTAL SHAREHOLDERS' EQUITY |
| 231,981 |
| 229,716 |
| 227,317 |
| 237,029 |
| 241,285 |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
| $ |
| 2,173,684 |
| $ |
| 2,127,144 |
| $ |
| 2,115,697 |
| $ |
| 2,118,822 |
| $ |
| 2,150,525 |
WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES
Other Data
(Dollars in thousands, except per share data)
(Unaudited)
| September 30, |
| June 30, |
| March 31, |
| December 31, |
| September 30, |
| 2019 |
| 2019 |
| 2019 |
| 2018 |
| 2018 |
| Other Data: |
| Shares outstanding at end of period |
| 26,561,742 |
| 26,703,468 |
| 26,953,429 |
| 28,393,348 |
| 29,453,808 |
| Book value per share |
| $ |
| 8.73 |
| $ |
| 8.60 |
| $ |
| 8.43 |
| $ |
| 8.35 |
| $ |
| 8.19 |
| Tangible book value per share |
| 8.14 |
| 8.00 |
| 7.84 |
| 7.78 |
| 7.64 |
| 30-89 day delinquent loans |
| 9,176 |
| 7,165 |
| 8,513 |
| 7,183 |
| 8,153 |
| 30-89 day delinquent loans acquired from Chicopee, net of purchase accounting adjustments |
| 3,270 |
| 3,160 |
| 2,751 |
| 2,763 |
| 3,328 |
| Total delinquent loans |
| 13,435 |
| 14,712 |
| 15,103 |
| 12,495 |
| 10,960 |
| Total delinquent loans as a percentage of total loans |
| 0.77 |
| % |
| 0.85 |
| % |
| 0.90 |
| % |
| 0.74 |
| % |
| 0.65 |
| % |
| Nonperforming loans |
| 11,058 |
| 14,920 |
| 15,312 |
| 13,484 |
| 12,782 |
| Nonperforming loans acquired from Chicopee, net of purchase accounting adjustments |
| 4,122 |
| 3,938 |
| 4,032 |
| 4,894 |
| 5,035 |
| Nonperforming loans as a percentage of total loans |
| 0.63 |
| % |
| 0.87 |
| % |
| 0.91 |
| % |
| 0.79 |
| % |
| 0.76 |
| % |
| Nonperforming assets as a percentage of total assets |
| 0.51 |
| % |
| 0.70 |
| % |
| 0.72 |
| % |
| 0.64 |
| % |
| 0.59 |
| % |
| Allowance for loan losses as a percentage of nonperforming loans |
| 120.02 |
| % |
| 83.26 |
| % |
| 77.58 |
| % |
| 89.39 |
| % |
| 95.72 |
| % |
| Allowance for loan losses as a percentage of total loans |
| 0.76 |
| % |
| 0.72 |
| % |
| 0.71 |
| % |
| 0.71 |
| % |
| 0.72 |
| % |
| Allowance for loan losses as a percentage of total loans, excluding loans acquired from Chicopee recorded at fair value with no corresponding allowance |
| 0.99 |
| % |
| 0.96 |
| % |
| 0.96 |
| % |
| 0.98 |
| % |
| 1.01 |
| % |
The following tables set forth the information relating to our average balances and net interest income for the three months ended September 30, 2019, June 30, 2019, and September 30, 2018 and reflects the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated.
| Three Months Ended |
| September 30, 2019 |
| June 30, 2019 |
| September 30, 2018 |
| Average |
| Average Yield/ |
| Average |
| Average Yield/ |
| Average |
| Average Yield/ |
| Balance |
| Interest(8) |
| Cost |
| Balance |
| Interest(8) |
| Cost |
| Balance |
| Interest(8) |
| Cost |
| (Dollars in thousands) |
| ASSETS: |
| Interest-earning assets |
| Loans(1)(2) |
| $ |
| 1,739,266 |
| $ |
| 19,244 |
| 4.39 |
| % |
| $ |
| 1,688,553 |
| $ |
| 18,434 |
| 4.38 |
| % |
| $ |
| 1,682,034 |
| $ |
| 17,690 |
| 4.17 |
| % |
| Securities(2) |
| 238,961 |
| 1,470 |
| 2.44 |
| 249,110 |
| 1,635 |
| 2.63 |
| 263,378 |
| 1,772 |
| 2.67 |
| Other investments |
| 16,354 |
| 192 |
| 4.66 |
| 15,131 |
| 210 |
| 5.57 |
| 17,747 |
| 228 |
| 5.10 |
| Short-term investments(3) |
| 8,330 |
| 36 |
| 1.71 |
| 15,134 |
| 73 |
| 1.93 |
| 9,083 |
| 34 |
| 1.49 |
| Total interest-earning assets |
| 2,002,911 |
| 20,942 |
| 4.15 |
| 1,967,928 |
| 20,352 |
| 4.15 |
| 1,972,242 |
| 19,724 |
| 3.97 |
| Total non-interest-earning assets |
| 138,543 |
| 137,749 |
| 134,708 |
| Total assets |
| $ |
| 2,141,454 |
| $ |
| 2,105,677 |
| $ |
| 2,106,950 |
| LIABILITIES AND EQUITY: |
| Interest-bearing liabilities |
| Interest-bearing checking accounts |
| $ |
| 70,719 |
| 105 |
| 0.59 |
| $ |
| 70,619 |
| 94 |
| 0.53 |
| $ |
| 86,615 |
| 94 |
| 0.43 |
| Savings accounts |
| 128,133 |
| 36 |
| 0.11 |
| 126,855 |
| 42 |
| 0.13 |
| 138,112 |
| 40 |
| 0.11 |
| Money market accounts |
| 402,716 |
| 641 |
| 0.63 |
| 396,555 |
| 601 |
| 0.61 |
| 415,416 |
| 489 |
| 0.47 |
| Time deposit accounts |
| 666,792 |
| 3,672 |
| 2.18 |
| 679,909 |
| 3,630 |
| 2.14 |
| 600,333 |
| 2,471 |
| 1.63 |
| Total interest-bearing deposits |
| 1,268,360 |
| 4,454 |
| 1.39 |
| 1,273,938 |
| 4,367 |
| 1.37 |
| 1,240,476 |
| 3,094 |
| 0.99 |
| Short-term borrowings and long-term debt |
| 249,109 |
| 1,822 |
| 2.90 |
| 218,419 |
| 1,647 |
| 3.02 |
| 279,181 |
| 1,906 |
| 2.71 |
| Total interest-bearing liabilities |
| 1,517,469 |
| 6,276 |
| 1.64 |
| 1,492,357 |
| 6,014 |
| 1.62 |
| 1,519,657 |
| 5,000 |
| 1.31 |
| Non-interest-bearing deposits |
| 368,647 |
| 363,329 |
| 328,735 |
| Other non-interest-bearing liabilities |
| 24,099 |
| 23,210 |
| 16,917 |
| Total non-interest-bearing liabilities |
| 392,746 |
| 386,539 |
| 345,652 |
| Total liabilities |
| 1,910,215 |
| 1,878,896 |
| 1,865,309 |
| Total equity |
| 231,239 |
| 226,781 |
| 241,641 |
| Total liabilities and equity |
| $ |
| 2,141,454 |
| $ |
| 2,105,677 |
| $ |
| 2,106,950 |
| Less: Tax-equivalent adjustment(2) |
| (138 |
| ) |
| (137 |
| ) |
| (119 |
| ) |
| Net interest and dividend income |
| $ |
| 14,528 |
| $ |
| 14,201 |
| $ |
| 14,605 |
| Net interest rate spread(4) |
| 2.48 |
| % |
| 2.50 |
| % |
| 2.64 |
| % |
| Net interest rate spread, on a tax-equivalent basis(5) |
| 2.51 |
| % |
| 2.53 |
| % |
| 2.66 |
| % |
| Net interest margin(6) |
| 2.88 |
| % |
| 2.89 |
| % |
| 2.94 |
| % |
| Net interest margin, on a tax-equivalent basis(7) |
| 2.91 |
| % |
| 2.92 |
| % |
| 2.96 |
| % |
| Ratio of average interest-earning |
| assets to average interest-bearing liabilities |
| 131.99 |
| % |
| 131.87 |
| % |
| 129.78 |
| % |
The following tables set forth the information relating to our average balances and net interest income for the nine months ended September 30, 2019 and 2018 and reflects the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated.
| Nine Months Ended September 30, |
| 2019 |
| 2018 |
| Average |
| Average Yield/ |
| Average |
| Average Yield/ |
| Balance |
| Interest (8) |
| Cost |
| Balance |
| Interest (8) |
| Cost |
| (Dollars in thousands) |
| ASSETS: |
| Interest-earning assets |
| Loans(1)(2) |
| $ |
| 1,704,173 |
| $ |
| 55,857 |
| 4.38 |
| % |
| $ |
| 1,658,094 |
| $ |
| 53,047 |
| 4.28 |
| % |
| Securities(2) |
| 249,009 |
| 4,801 |
| 2.58 |
| 272,844 |
| 5,422 |
| 2.66 |
| Other investments |
| 15,811 |
| 638 |
| 5.40 |
| 17,489 |
| 631 |
| 4.82 |
| Short-term investments(3) |
| 12,834 |
| 185 |
| 1.93 |
| 7,817 |
| 83 |
| 1.42 |
| Total interest-earning assets |
| 1,981,827 |
| 61,481 |
| 4.15 |
| 1,956,244 |
| 59,183 |
| 4.04 |
| Total non-interest-earning assets |
| 136,738 |
| 134,722 |
| Total assets |
| $ |
| 2,118,565 |
| $ |
| 2,090,966 |
| LIABILITIES AND EQUITY: |
| Interest-bearing liabilities |
| Interest-bearing checking accounts |
| $ |
| 71,416 |
| 280 |
| 0.52 |
| $ |
| 92,718 |
| 261 |
| 0.38 |
| Savings accounts |
| 125,886 |
| 111 |
| 0.12 |
| 141,314 |
| 129 |
| 0.12 |
| Money market accounts |
| 398,189 |
| 1,798 |
| 0.60 |
| 417,724 |
| 1,383 |
| 0.44 |
| Time deposit accounts |
| 673,492 |
| 10,601 |
| 2.10 |
| 580,243 |
| 6,394 |
| 1.47 |
| Total interest-bearing deposits |
| 1,268,983 |
| 12,790 |
| 1.35 |
| 1,231,999 |
| 8,167 |
| 0.89 |
| Short-term borrowings and long-term debt |
| 238,837 |
| 5,234 |
| 2.93 |
| 283,302 |
| 5,442 |
| 2.57 |
| Total interest-bearing liabilities |
| 1,507,820 |
| 18,024 |
| 1.60 |
| 1,515,301 |
| 13,609 |
| 1.20 |
| Non-interest-bearing deposits |
| 358,839 |
| 317,296 |
| Other non-interest-bearing liabilities |
| 22,574 |
| 16,460 |
| Total non-interest-bearing liabilities |
| 381,413 |
| 333,756 |
| Total liabilities |
| 1,889,233 |
| 1,849,057 |
| Total equity |
| 229,332 |
| 241,909 |
| Total liabilities and equity |
| $ |
| 2,118,565 |
| $ |
| 2,090,966 |
| Less: Tax-equivalent adjustment(2) |
| (402 |
| ) |
| (382 |
| ) |
| Net interest and dividend income |
| $ |
| 43,055 |
| $ |
| 45,192 |
| Net interest rate spread(4) |
| 2.52 |
| % |
| 2.82 |
| % |
| Net interest rate spread, on a tax-equivalent basis(5) |
| 2.55 |
| % |
| 2.84 |
| % |
| Net interest margin(6) |
| 2.90 |
| % |
| 3.09 |
| % |
| Net interest margin, on a tax-equivalent basis(7) |
| 2.93 |
| % |
| 3.11 |
| % |
| Ratio of average interest-earning |
| assets to average interest-bearing liabilities |
| 131.44 |
| % |
| 129.10 |
| % |
____________________________________________________
(1) Loans, including non-accrual 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 weighted average yield on interest-earning assets and the 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, 2019, June 30, 2019 and September 30, 2018, the loan accretion income and interest expense reduction on time deposits and borrowings increased (decreased) net interest income $154,000, $(79,000) and $62,000, respectively, and for the nine months ended September 30, 2019 and 2018, the loan accretion income and interest expense reduction on time deposits and borrowings increased net interest income $97,000 and $1.1 million, respectively. Excluding these items, net interest margin, on a tax-equivalent basis, for the three months ended September 30, 2019, June 30, 2019 and September 30, 2018 was 2.88%, 2.94% and 2.97% and the net interest margin, on a tax-equivalent basis, for the nine months ended September 30, 2019 and 2018 was 2.92% and 3.04%, respectively.
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.
| Three Months Ended |
| Nine Months Ended |
| September 30, |
| June 30, |
| March 31, |
| December 31, |
| September 30, |
| September 30, |
| 2019 |
| 2019 |
| 2019 |
| 2018 |
| 2018 |
| 2019 |
| 2018 |
| (Dollars in thousands, except per share data) |
| Net Income: |
| Net income, as presented |
| $ |
| 3,225 |
| $ |
| 3,257 |
| $ |
| 3,430 |
| $ |
| 3,842 |
| $ |
| 3,909 |
| $ |
| 9,913 |
| $ |
| 12,567 |
| Tax benefit impact (1) |
| - |
| - |
| (24 |
| ) |
| - |
| - |
| (24 |
| ) |
| (165 |
| ) |
| Core net income, exclusive of tax benefits impact |
| $ |
| 3,225 |
| $ |
| 3,257 |
| $ |
| 3,406 |
| $ |
| 3,842 |
| $ |
| 3,909 |
| $ |
| 9,889 |
| $ |
| 12,402 |
| Diluted EPS: |
| Diluted earnings per share, as presented |
| $ |
| 0.12 |
| $ |
| 0.12 |
| $ |
| 0.13 |
| $ |
| 0.14 |
| $ |
| 0.14 |
| $ |
| 0.38 |
| $ |
| 0.43 |
| Tax benefits impact (1) |
| - |
| - |
| - |
| - |
| - |
| - |
| (0.01 |
| ) |
| Core diluted EPS, exclusive of tax benefits impact |
| $ |
| 0.12 |
| $ |
| 0.12 |
| $ |
| 0.13 |
| $ |
| 0.14 |
| $ |
| 0.14 |
| $ |
| 0.38 |
| $ |
| 0.42 |
| Return on Average Assets: |
| Return on average assets, as presented |
| 0.60 |
| % |
| 0.62 |
| % |
| 0.66 |
| % |
| 0.72 |
| % |
| 0.74 |
| % |
| 0.63 |
| % |
| 0.80 |
| % |
| Tax benefit impact (1) |
| - |
| - |
| - |
| - |
| - |
| - |
| (0.01 |
| ) |
| Core return on average assets, exclusive of tax benefits impact |
| 0.60 |
| % |
| 0.62 |
| % |
| 0.66 |
| % |
| 0.72 |
| % |
| 0.74 |
| % |
| 0.63 |
| % |
| 0.79 |
| % |
| Return on Average Equity: |
| Return on average equity, as presented |
| 5.53 |
| % |
| 5.76 |
| % |
| 6.05 |
| % |
| 6.43 |
| % |
| 6.42 |
| % |
| 5.78 |
| % |
| 6.95 |
| % |
| Tax benefits impact (1) |
| - |
| - |
| (0.04 |
| ) |
| - |
| - |
| - |
| (0.10 |
| ) |
| Core return on average equity, exclusive of tax benefits impact |
| 5.53 |
| % |
| 5.76 |
| % |
| 6.01 |
| % |
| 6.43 |
| % |
| 6.42 |
| % |
| 5.78 |
| % |
| 6.85 |
| % |
| ?(1) Impact of stock option exercises and bank-owned life insurance death benefits. |