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 twelve months ended December 31, 2022. For the three
months ended December 31, 2022, the Company reported net income of
$9.0 million, or $0.42 per diluted share, compared to net income of
$6.2 million, or $0.28 per diluted share, for the three months
ended December 31, 2021. On a linked quarter basis, net income was
$9.0 million, or $0.42 per diluted share, as compared to net income
of $6.0 million, or $0.28 per diluted share, for the three months
ended September 30, 2022. For the twelve months ended December 31,
2022, net income was $25.9 million, or $1.18 per diluted share,
compared to net income of $23.7 million, or $1.02 per diluted
share, for the twelve months ended December 31, 2021.
The Company also announced today that the Board
of Directors declared a quarterly cash dividend of $0.07 per share
on its common stock, representing an increase of $0.01 per share,
or 17%, as compared to the prior quarter. The dividend will be
payable on or about February 22, 2023 to shareholders of record on
February 8, 2023.
James Hagan, President and Chief Executive
Officer, commented, “We are very pleased to report that the Company
delivered record earnings for the fourth quarter along with
concrete earnings for 2022, with an increasing net interest margin,
strong revenue and a lower efficiency ratio derived from solid loan
growth across all loan segments. As a Company, we have continued to
focus on expanding and attracting new loan and core deposit
relationships in our existing and expanded markets, which resulted
in loan growth coming in ahead of internal targets on a quarterly
and annual basis. As a result of these continuing efforts, for the
year-ended December 31, 2022, average non-interest bearing demand
deposits represented 28.6% of total average deposits. With our
strong balance sheet, combined with rising interest rates, and with
the deployment of excess liquidity to fund our loan growth, we are
pleased to report a higher net interest margin of 3.44% for the
fourth quarter 2022 as compared to September 30, 2022. As the
Paycheck Protection Program (“PPP”) comes to an end, the Company
generated year-over-year net interest income growth of 8.3%,
overcoming a $6.0 million, or 89.2%, decrease in PPP interest and
fee income, by increasing total loans, excluding PPP loans, by
$149.7 million, or 8.1%, from December 31, 2021.”
Hagan concluded, “We continue to see
opportunities to add to our earnings and remain committed to
continued growth while managing the risks associated with
inflationary pressures and potential disruption in financial
markets. We will continue to remain focused on increasing
efficiencies, maintaining our strong asset quality, prudently
growing our loan portfolio and managing funding costs in a
competitive environment.
This was a remarkable year for our Company as we
once again continued to achieve solid annual earnings, net interest
income expansion and increasing loan growth. We could not be more
proud of our team who executed and delivered to achieve these
excellent 2022 results. We remain optimistic about the Company’s
future as we enter 2023.”
Key Highlights:
Loans and Deposits. At December
31, 2022, total loans of $2.0 billion increased $126.7 million, or
6.8%, from December 31, 2021. During the same period, excluding PPP
loans, total loans increased $149.7 million, or 8.1%, from $1.9
billion at December 31, 2021. The increase in total loans was due
to an increase in commercial real estate loans of $89.4 million, or
9.1%, an increase in commercial and industrial loans of $16.2
million, or 8.1%, and an increase in residential real estate loans,
including home equity loans, of $43.0 million, or 6.6%.
At December 31, 2022, total deposits were $2.2
billion, a decrease of $27.5 million, or 1.2%, from December 31,
2021. Core deposits, which the Company defines as all deposits
except time deposits, decreased $37.1 million, or 2.0%, from $1.9
billion, or 82.2% of total deposits, at December 31, 2021, to $1.8
billion, or 81.5% of total deposits at December 31, 2022. The loan
to deposit ratio increased from 82.6% at December 31, 2021 to 89.3%
at December 31, 2022.
Allowance for Loan Losses and Credit
Quality. At December 31, 2022, the allowance for loan
losses as a percentage of total loans and as a percentage of
nonperforming loans was 1.00% and 350.0%, respectively. At December
31, 2022, nonperforming loans totaled $5.7 million, or 0.29% of
total loans, compared to $5.0 million, or 0.27% of total loans, at
December 31, 2021. Total delinquency increased $2.3 million, or
108.8%, from $2.1 million, or 0.11% of total loans, at December 31,
2021 to $4.5 million, or 0.22% of total loans, at December 31,
2022.
Net Interest Margin. The net
interest margin was 3.44% for the three months ended December 31,
2022 compared to 3.08% for the three months ended December 31, 2021
and 3.35% for the three months ended September 30, 2022. The net
interest margin, on a tax-equivalent basis, was 3.47% for the three
months ended December 31, 2022, compared to 3.10% for the three
months ended December 31, 2021 and 3.37% for the three months ended
September 30, 2022.
Repurchases. On October 13,
2022, the Company announced the completion of its previously
authorized stock repurchase plan (the “2021 Plan”) pursuant to
which the Company was authorized to repurchase up to 2.4 million
shares, or 10% of its outstanding common stock, as of the date the
2021 Plan was adopted. On July 26, 2022, the Board of Directors
authorized a new stock repurchase plan (the “2022 Plan”), pursuant
to which the Company is authorized to repurchase up to 1.1 million
shares, which is approximately 5.0% of the Company’s outstanding
common stock as of the date the 2022 Plan was adopted. During the
three months ended December 31, 2022, the Company repurchased
78,826 shares of common stock under the 2022 Plan and during the
twelve months ended December 31, 2022, the Company repurchased
720,975 shares of common stock under both the 2021 and 2022 Plans.
As of December 31, 2022, there were 1,056,344 shares of common
stock available for repurchase under the 2022 Plan.
The shares of common stock repurchased under the
2022 Plan will be purchased from time to time at prevailing market
prices, through open market or privately negotiated transactions,
or otherwise, depending upon market conditions. There is no
guarantee as to the exact number, or value, of shares that will be
repurchased by the Company, and the Company may discontinue
repurchases at any time that management determines additional
repurchases are not warranted. The timing and amount of additional
share repurchases under the 2022 Plan will depend on a number of
factors, including the Company’s stock price performance, ongoing
capital planning considerations, general market conditions, and
applicable legal requirements.
Capital Management. The
Company’s book value per share was $10.27 at December 31, 2022
compared to $9.87 at December 31, 2021, while tangible book value
per share, a non-GAAP financial measure, increased $0.40, or 4.3%,
from $9.21 at December 31, 2021 to $9.61 at December 31, 2022.
Reflected in the book value and tangible book value changes during
the year ended December 31, 2022 are the Federal Reserve’s 425
basis points interest rate increases, which resulted in significant
changes in unrealized gains and losses on investment securities.
Such unrealized gains and losses are generally due to changes in
interest rates and represent the difference, net of applicable
income tax effect, between the estimated fair value and amortized
cost of investment securities classified as available-for-sale. The
Company had no other-than-temporary impairment charges in its
investment portfolio in 2022 or 2021. Tangible book value is a
non-GAAP measure. See below for the related tangible book
value calculation and a reconciliation of GAAP to non-GAAP
financial measures.
Pension Plan. On October 31,
2022, the Board of Director’s previously approved termination of
the Westfield Bank Defined Benefit Pension Plan (“DB Plan”) became
effective, subject to regulatory approvals. Once the Company has
received regulatory approval to terminate the DB Plan, which is
expected in the first quarter of 2023, the Company will make an
additional cash contribution during the second quarter of 2023, if
necessary, in order to fully fund the DB Plan on a plan termination
basis, followed by the purchase of annuity contracts to transfer
its remaining liabilities under the DB Plan, for those participants
who do not opt for a one-time lump sum payment. The actual amount
of this cash contribution, if any, will depend upon the nature and
timing of participant settlements, as well as prevailing market
conditions. At December 31, 2022, the Company reversed $7.3 million
in net unrealized losses recorded in accumulated other
comprehensive income attributed to both the DB plan curtailment
resulting from the termination of the DB Plan as well as changes in
discount rates. In addition, the Company recorded a gain on
curtailment of $2.8 million through non-interest income. The
improvement in book value and tangible book value for the three
months ended December 31, 2022 were primarily related to the
termination of the DB Plan.
Net Income for the Three Months Ended
December 31, 2022 Compared to the Three Months Ended September 30,
2022.
The Company reported net income of $9.0 million,
or $0.42 per diluted share, for the three months ended December 31,
2022, compared to net income of $6.0 million, or $0.28 per diluted
share, for the three months ended September 30, 2022. Net interest
income increased $566,000, or 2.8%, non-interest income increased
$3.1 million, or 118.3%, and non-interest expense decreased
$340,000, or 2.4%, while the provision for loan losses decreased
$525,000, or 77.8%, during the same period. Return on average
assets and return on average equity were 1.40% and 16.67%,
respectively, for the three months ended December 31, 2022,
compared to 0.93% and 10.90%, respectively, for the three months
ended September 30, 2022.
Net Interest Income and Net Interest
Margin
On a sequential quarter basis, net interest
income increased $566,000, or 2.8%, to $20.9 million for the three
months ended December 31, 2022, from $20.3 million for the three
months ended September 30, 2022. The increase in net interest
income was primarily due to an increase in interest and dividend
income of $1.8 million, or 8.4%, partially offset by an increase in
interest expense of $1.3 million, or 86.3%. During the three months
ended December 31, 2022 and the three months ended September 30,
2022, interest and dividend income included PPP interest and fee
income (“PPP income”) of $18,000 and $19,000, respectively. During
the three months ended December 31, 2022 and the three months ended
September 30, 2022, the Company recognized prepayment penalties of
$134,000 and $99,000, respectively. During the three months ended
December 31, 2022, the Company also recorded $87,000 in positive
purchase accounting adjustments, compared to $16,000 in negative
purchase accounting adjustments during the three months ended
September 30, 2022.
The net interest margin was 3.44% for the three
months ended December 31, 2022 compared to 3.35% for the three
months ended September 30, 2022. The net interest margin, on a
tax-equivalent basis, was 3.47% for the three months ended December
31, 2022, compared to 3.37% for the three months ended September
30, 2022. The average yield on interest-earning assets was 3.90%
for the three months ended December 31, 2022, compared to 3.59% for
the three months ended September 30, 2022. The average loan yield
was 4.23% for the three months ended December 31, 2022, compared to
3.93% for the three months ended September 30, 2022.
During the three months ended December 31, 2022,
average interest-earning assets increased $143,000 to $2.4 billion,
primarily due to an increase in average loans of $21.3 million, or
1.1%, partially offset by a decrease in short-term investments of
$6.3 million, or 45.3%, and a decrease in average securities of
$15.5 million, or 3.8%.
The average cost of total funds, including
non-interest bearing accounts and borrowings, increased 22 basis
points from 0.25% for the three months ended September 30, 2022 to
0.47% for the three months ended December 31, 2022. The average
cost of core deposits, including non-interest bearing demand
deposits, increased 15 basis point to 0.34% for the three months
ended December 31, 2022, from 0.19% for the three months ended
September 30, 2022. The average cost of time deposits increased 35
basis points from 0.30% for the three months ended September 30,
2022 to 0.65% for the three months ended December 31, 2022. The
rising interest rate environment has affected costs for both money
market accounts and time deposits.
The average cost of borrowings, including
subordinated debt, increased 17 basis points from 4.12% for the
three months ended September 30, 2022 to 4.29% for the three months
ended December 31, 2022. Average demand deposits, an interest-free
source of funds, increased $5.0 million, or 0.8%, from $658.9
million, or 29.0% of total average deposits, for the three months
ended September 30, 2022, to $663.8 million, or 29.4% of total
average deposits, for the three months ended December 31, 2022.
Provision for Loan Losses
During the three months ended December 31, 2022,
the provision for loan losses decreased $525,000, or 77.8%, from
the three months ended September 30, 2022. 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 adoption of the Current Expected Credit Loss allowance
methodology became effective for the Company on January 1, 2023.
Management will continue to closely monitor portfolio conditions
and re-evaluate the adequacy of the allowance.
The Company recorded net charge-offs of $426,000
for the three months ended December 31, 2022, as compared to net
charge-offs of $27,000 for the three months ended September 30,
2022. At December 31, 2022, nonperforming loans totaled $5.7
million, or 0.29% of total loans, and total delinquency as a
percentage of total loans was 0.22%.
Non-Interest Income
On a sequential quarter basis, non-interest
income increased $3.1 million, or 118.3%, to $5.7 million for the
three months ended December 31, 2022, from $2.6 million for the
three months ended September 30, 2022. Service charges and fees
increased $106,000, or 4.8%, from the three months ended September
30, 2022 to $2.3 million for the three months ended December 31,
2022. Income from bank-owned life insurance increased $37,000, or
9.5%, from the three months ended September 30, 2022 to $428,000
for the three months ended December 31, 2022.
The termination of the DB Plan became effective
October 31, 2022, subject to regulatory approvals, with final
settlement occurring in the second quarter of 2023. During the
three months ended December 31, 2022, the Company recorded a
curtailment gain related to the DB Plan termination of $2.8 million
through non-interest income. During the three months ended December
31, 2022, the Company reported unrealized gains on marketable
equity securities of $19,000, compared to unrealized losses of
$235,000 for the three months ended September 30, 2022. During the
three months ended December 31, 2022, the Company also reported a
gain of $70,000 on non-marketable equity investments, compared to a
gain of $211,000 during the three months ended September 30, 2022.
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.
Non-Interest Expense
For the three months ended December 31, 2022,
non-interest expense decreased $340,000, or 2.4%, to $14.0 million
from the three months ended September 30, 2022. Salaries and
employee benefits increased $172,000, or 2.1%, to $8.2 million,
primarily related to higher incentive compensation accruals, data
processing expense increased $17,000, or 2.4%, and furniture and
equipment expense increased $14,000, or 3.0%. These increases were
partially offset by a decrease in advertising expense of $241,000,
or 57.5%, a decrease in professional fees of $186,000, or 23.2%, a
decrease in FDIC insurance expense of $18,000, or 6.6%, a decrease
in occupancy expense of $8,000, or 0.7%, and a decrease in other
non-interest expense of $90,000, or 3.7%. For the three months
ended December 31, 2022, the efficiency ratio was 52.8%, compared
to 62.7% for September 30, 2022. For the three months ended
December 31, 2022, the adjusted efficiency ratio, a non-GAAP
financial measure, was 59.3%, compared to 62.6% for the three
months ended September 30, 2022. See below for the related
ratio calculation and a reconciliation of GAAP to non-GAAP
financial measures.
Income Tax Provision
Income tax expense for the three months ended
December 31, 2022 was $3.3 million, or an effective tax rate of
26.9%, compared to $1.9 million, or an effective tax rate of 23.7%,
for the three months ended September 30, 2022.
Net Income for the Three Months Ended
December 31, 2022 Compared to the Three Months Ended December 31,
2021.
The Company reported net income of $9.0 million,
or $0.42 per diluted share, for the three months ended December 31,
2022, compared to net income of $6.2 million, or $0.28 per diluted
share, for the three months ended December 31, 2021. Return on
average assets and return on average equity were 1.40% and 16.67%,
respectively, for the three months ended December 31, 2022, as
compared to 0.97% and 11.22%, respectively, for the three months
ended December 31, 2021.
Net Interest Income and Net Interest
Margin
Net interest income increased $2.3 million, or
12.2%, to $20.9 million, for the three months ended December 31,
2022, from $18.6 million for the three months ended December 31,
2021. The increase in net interest income was due to an increase in
interest and dividend income of $3.7 million, or 18.4%, partially
offset by an increase in interest expense of $1.4 million, or
103.2%. Interest expense on deposits increased $1.1 million, or
102.2%, and interest expense on borrowings increased $272,000. Net
interest income for the three months ended December 31, 2022
includes PPP income of $18,000, compared to $973,000 during the
three months ended December 31, 2021. During the same period,
excluding PPP income, net interest income increased $3.2 million,
or 18.3%. During the three months ended December 31, 2022 and the
three months ended December 31, 2021, the Company recognized
prepayment penalties of $134,000 and $21,000, respectively. In
addition, interest income for the three months ended December 31,
2022 includes $87,000 in positive purchase accounting adjustments,
compared to $31,000 in negative accounting adjustments for the
three months ended December 31, 2021.
The net interest margin was 3.44% for the three
months ended December 31, 2022, compared to 3.08%, for the three
months ended December 31, 2021. The net interest margin, on a
tax-equivalent basis, was 3.47% for the three months ended December
31, 2022, compared to 3.10% for the three months ended December 31,
2021. The increase in the net interest margin was due to an
increase in average loans outstanding of $144.7 million, or 7.8%, a
decrease in average securities of $13.3 million, or 3.3%, and a
decrease in average short-term investments, consisting of cash and
cash equivalents, of $124.1 million, or 94.2%, from the three
months ended December 31, 2021, compared to the three months ended
December 31, 2022.
The average yield on interest-earning assets
increased 60 basis points from 3.30% for the three months ended
December 31, 2021 to 3.90% for the three months ended December 31,
2022. During the three months ended December 31, 2022, the average
cost of funds, including non-interest-bearing demand accounts and
borrowings, increased 24 basis points, from 0.23% for the three
months ended December 31, 2021 to 0.47% for the three months ended
December 31, 2022. The average cost of core deposits, which include
non-interest-bearing demand accounts, increased 19 basis points,
from 0.15% for the three months ended December 31, 2021 to 0.34%
for the three months ended December 31, 2022. The average cost of
time deposits increased 26 basis points from 0.39% for the three
months ended December 31, 2021 to 0.65% for the three months ended
December 31, 2022. The average cost of borrowings, including
subordinated debt, decreased 15 basis points from 4.44% for the
three months ended December 31, 2021 to 4.29% for the three months
ended December 31, 2022. For the three months ended December 31,
2022, average demand deposits, an interest-free source of funds,
increased $9.5 million, or 1.4%, to $663.8 million, or 29.4% of
total average deposits, from $654.3 million, or 29.0% of total
average deposits for the three months ended December 31, 2021.
During the three months ended December 31, 2022,
average interest-earning assets increased $7.3 million, or 0.3%, to
$2.4 billion compared to the three months ended December 31, 2021,
primarily due to an increase in average loans of $144.7 million, or
7.8%, offset by a decrease in average short-term investments,
consisting of cash and cash equivalents, of $124.1 million, or
94.2%, and a decrease in average securities of $13.3 million, or
3.3%. Excluding average PPP loans, average interest-earning assets
increased $48.8 million, or 2.1%, and average loans increased
$183.9 million, or 10.2%, from the three months ended December 31,
2021 to the three months ended December 31, 2022.
Provision for Loan Losses
The Company recorded a provision for loan losses
of $150,000 for three months ended December 31, 2022, compared to a
provision for loan losses of $300,000 for the three months ended
December 31, 2021. The decrease in the provision for loan losses
was primarily due to a reduction of qualitative adjustment factors
that had previously been increased in the allowance for credit
losses related to the COVID-19 pandemic and the uncertainty in the
economic environment. The Company recorded net charge-offs of
$426,000 for the three months ended December 31, 2022, as compared
to net charge-offs of $350,000 for the three months ended December
31, 2021. 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 $1.8 million, or
46.6%, to $5.7 million for the three months ended December 31,
2022, from $3.9 million for the three months ended December 31,
2021. During the three months ended December 31, 2021, non-interest
income included the recognition of $555,000 in bank-owned life
insurance (“BOLI”) death benefits. During the three months ended
December 31, 2022, service charges and fees on deposits increased
$59,000, or 2.6%, and income from BOLI decreased $58,000, or 11.9%,
from $486,000 for the three months ended December 31, 2021 to
$428,000 for the three months ended December 31, 2022. During the
three months ended December 31, 2021, the Company reported $289,000
in mortgage banking income from the sale of fixed rate residential
real estate loans. The Company did not sell any loans to the
secondary market during the three months ended December 31,
2022.
On October 31, 2022, the termination of the DB
Plan became effective, subject to regulatory approvals, with final
settlement occurring in the second quarter of 2023. During the
three months ended December 31, 2022, the Company recorded a
curtailment gain related to the DB Plan termination of $2.8 million
through non-interest income. Excluding the DB Plan termination
curtailment gain and BOLI death benefits, non-interest income
decreased $455,000, or 13.8%. During the three months ended
December 31, 2022, the Company reported a gain on non-marketable
equity investments of $70,000, compared to a gain of $352,000
during the three months ended December 31, 2021. In addition, the
Company reported an unrealized gain on marketable equity securities
of $19,000 during the three months ended December 31, 2022,
compared to an unrealized loss on marketable equity securities of
$96,000 during the three months ended December 31, 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.
Non-Interest Expense
For the three months ended December 31, 2022,
non-interest expense increased $80,000, or 0.6%, to $14.0 million,
from $13.9 million for the three months ended December 31, 2021.
The increase in non-interest expense was due to an increase in
salaries and benefits expense of $4,000, an increase in
professional fees of $140,000, or 29.4%, an increase in occupancy
expense of $74,000, or 6.5%, and an increase in FDIC insurance
expense of $53,000, or 26.2%. These increases were partially offset
by a decrease in advertising expense of $84,000, or 32.1%, a
decrease in furniture and equipment expense of $69,000, or 12.6%, a
decrease in data processing expense of $2,000, or 0.3%, and a
decrease in other non-interest expense of $36,000, or 1.5%.
For the three months ended December 31, 2022,
the efficiency ratio was 52.8%, compared to 62.1% for the three
months ended December 31, 2021. For the three months ended December
31, 2022, the adjusted efficiency ratio, a non-GAAP financial
measure, was 59.3%, compared to 64.4% for the three months ended
December 31, 2021. See below for the related efficiency ratio
calculation and a reconciliation of GAAP to non-GAAP financial
measures.
Income Tax Provision
Income tax expense for the three months ended
December 31, 2022 was $3.3 million, representing an effective tax
rate of 26.9%, compared to $2.0 million, representing an effective
tax rate of 24.3%, for three months ended December 31, 2021.
Net Income for the Twelve Months Ended
December 31, 2022 Compared to the Twelve Months Ended December 31,
2021
For the twelve months ended December 31, 2022,
the Company reported net income of $25.9 million, or $1.18 per
diluted share, compared to $23.7 million, or $1.02 per diluted
share, for the twelve months ended December 31, 2021. Return on
average assets and return on average equity were 1.02% and 11.85%
for the twelve months ended December 31, 2022, respectively,
compared to 0.96% and 10.64% for the twelve months ended December
31, 2021, respectively. Excluding PPP income and the gain on
defined benefit curtailment as a result of the termination of the
DB Plan, income before provision and taxes increased $7.8 million,
or 32.5%, from $24.0 million for the twelve months ended December
31, 2021 to $31.8 million for the twelve months ended December 31,
2022.
Net Interest Income and Net Interest
Margin
During the twelve months ended December 31,
2022, net interest income increased $6.0 million, or 8.3%, to $79.2
million, compared to $73.2 million for the twelve months ended
December 31, 2021. The increase in net interest income was due to
an increase in interest and dividend income of $6.1 million, or
7.6%, partially offset by an increase in interest expense of
$24,000, or 0.4%. For the twelve months ended December 31, 2022,
the Company generated net interest income growth of 8.3%,
overcoming a $6.0 million, or 89.2%, decrease in PPP income as the
PPP program comes to a close. Excluding PPP income of $728,000 and
$6.8 million for the twelve months ended December 31, 2022 and the
twelve months ended December 31, 2021, respectively, net interest
income increased $12.1 million, or 18.2% for the same period.
The net interest margin for the twelve months
ended December 31, 2022 was 3.31%, compared to 3.14% during the
twelve months ended December 31, 2021. The net interest margin, on
a tax-equivalent basis, was 3.33% for the twelve months ended
December 31, 2022, compared to 3.16% for the twelve months ended
December 31, 2021. Excluding the PPP income, the net interest
margin increased 29 basis points from 2.99% for the twelve months
ended December 31, 2021 to 3.28% for the twelve months ended
December 31, 2022.
The average yield on interest-earning assets
increased 15 basis point from 3.43% for the twelve months ended
December 31, 2021 to 3.58% for the twelve months ended December 31,
2022. During the twelve months ended December 31, 2022, the average
cost of funds, including non-interest-bearing demand accounts and
borrowings, decreased one basis point from 0.30% for the twelve
months ended December 31, 2021 to 0.29% for the twelve months ended
December 31, 2022. For the twelve months ended December 31, 2022,
the average cost of core deposits, including non-interest-bearing
demand deposits, increased three basis points from 0.17% for the
twelve months ended December 31, 2021 to 0.20% for the twelve
months ended December 31, 2022. The average cost of time deposits
decreased 12 basis points from 0.53% for the twelve months ended
December 31, 2021 to 0.41% during the same period in 2022. The
average cost of borrowings, which include FHLB advances and
subordinated debt, increased 122 basis points from 3.04% for the
twelve months ended December 31, 2021 to 4.26% for the twelve
months ended December 31, 2022, due to the issuance of $20.0
million in subordinated debt in April 2021.
For the twelve months ended December 31, 2022,
average demand deposits, an interest-free source of funds,
increased $39.0 million, or 6.4%, from $609.0 million, or 28.0% of
total average deposits, for the twelve months ended December 31,
2021, to $648.0 million, or 28.6% of total average deposits, for
the twelve months ended December 31, 2022.
During the twelve months ended December 31,
2022, average interest-earning assets increased $67.1 million, or
2.9%, to $2.4 billion. The increase in average interest-earning
assets was due to an increase in average loans of $65.6 million, or
3.5%, as well as an increase in average securities of $87.7
million, or 27.4%, partially offset by a decrease of $86.2 million,
or 77.0%, in short-term investments, which consists of cash and
cash equivalents. Excluding average PPP loans, average loans
increased $170.5 million, or 9.6%, and average interest-earnings
assets increased $172.0 million, or 7.7%.
Provision for Loan Losses
For the twelve months ended December 31, 2022,
the provision for loan losses was $700,000, compared to a credit
for loan losses of $925,000 for the twelve months ended December
31, 2021. The Company recorded net charge-offs of $556,000 for the
twelve months ended December 31, 2022, as compared to net
charge-offs of $445,000 for the twelve months ended December 31,
2021.
Non-Interest Income
For the twelve months ended December 31, 2022,
non-interest income increased $768,000, or 6.1%, from $12.6 million
for the twelve months ended December 31, 2021 to $13.3 million for
the twelve months ended December 31, 2022. During the twelve months
ended December 31, 2021, non-interest income included the
recognition of $555,000 in BOLI death benefits. During the twelve
months ended December 31, 2022, service charges and fees increased
$712,000, or 8.5%, and mortgage banking income decreased $1.4
million from the twelve months ended December 31, 2021 to the
twelve months ended December 31, 2022. In 2021, the Company sold
$59.7 million in fixed rate residential real estate loans to the
secondary market, compared to $277,000 in sales during the twelve
months ended December 31, 2022. Other income from loan-level swap
fees on commercial loans decreased $33,000, or 56.9%, and income
from BOLI decreased $187,000, or 9.8%.
On October 31, 2022, the termination of the DB
Plan became effective, subject to regulatory approvals, with final
settlement occurring in the second quarter of 2023. During the
twelve months ended December 31, 2022, the Company recorded a
curtailment gain related to the DB Plan termination of $2.8 million
through non-interest income. Excluding the defined benefit
curtailment gain as a result of the termination of the DB Plan and
BOLI death benefits, non-interest income decreased $1.5 million, or
12.5%. During the twelve months ended December 31, 2022, the
Company reported unrealized losses on marketable equity securities
of $717,000, compared to unrealized losses of $168,000 during the
twelve months ended December 31, 2021. During the twelve months
ended December 31, 2022, the Company also reported realized losses
on the sale of securities of $4,000, compared to realized losses on
the sale of securities of $72,000 during the twelve months ended
December 31, 2021. In addition, the Company reported a gain of
$422,000 on non-marketable equity investments during the twelve
months ended December 31, 2022, compared to $898,000 during the
twelve months ended December 31, 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 twelve months ended December 31, 2021, the
Company also 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.
Non-Interest Expense
For the twelve months ended December 31, 2022,
non-interest expense increased $2.3 million, or 4.2%, to $57.2
million, compared to $54.9 million for the twelve months ended
December 31, 2021. The increase in non-interest expense was
primarily due to an increase in salaries and employee benefits
expense of $511,000, or 1.6%, due to normal annual salary increases
as well as higher incentive compensation costs. Other non-interest
expense increased $878,000, or 10.2%, professional fees increased
$531,000, or 24.3%, which is comprised of legal fees, audit and
compliance fees, as well as other professional fees. Occupancy
expense increased $328,000, or 7.0%, advertising expense increased
$116,000, or 9.0%, and FDIC insurance expense increased $50,000, or
5.0%. These increases were partially offset by a decrease in
furniture and equipment expense of $58,000, or 2.8%, and a decrease
in data processing expense of $18,000, or 0.6%. During the twelve
months ended December 31, 2021, the Company prepaid $32.5 million
of FHLB borrowings resulting in a loss of $45,000. For the twelve
months ended December 31, 2022, the efficiency ratio was 61.8%,
compared to 64.1% for the twelve months ended December 31, 2021.
For the twelve months ended December 31, 2022, the adjusted
efficiency ratio, a non-GAAP financial measure, was 63.6%, compared
to 64.6% for the twelve months ended December 31, 2021. See
below for the related efficiency ratio calculation and a
reconciliation of GAAP to non-GAAP financial measures.
Income Tax Provision
Income tax expense for the twelve months ended
December 31, 2022 was $8.7 million, representing an effective tax
rate of 25.2%, compared to $8.0 million, representing an effective
tax rate of 25.3%, for twelve months ended December 31, 2021.
Balance Sheet
At December 31, 2022, total assets were $2.6
billion, an increase of $14.7 million, or 0.6%, from December 31,
2021. During the twelve months ended December 31, 2022, cash and
cash equivalents decreased $73.1 million, or 70.7%, to $30.3
million, investment securities decreased $45.1 million, or 10.5%,
to $383.4 million and total loans increased $126.7 million, or
6.8%, to $2.0 billion.
Investments
At December 31, 2022, the Company’s
available-for-sale securities portfolio decreased $47.4 million, or
24.4%, from $194.4 million at December 31, 2021 to $147.0 million
at December 31, 2022. The held-to-maturity securities portfolio,
recorded at amortized cost, increased $7.9 million, or 3.6%, from
$222.3 million at December 31, 2021 to $230.2 million at December
31, 2022. The marketable equity securities portfolio decreased $5.7
million, or 47.6%, from $11.9 million at December 31, 2021 to $6.2
million at December 31, 2022. The decreases were due to principal
pay downs and redemptions, as well as an increase in unrealized
loss on securities available-for-sale. The primary objective of the
investment portfolio is to provide liquidity and maximize income
while preserving the safety of principal.
Total Loans
At December 31, 2022, total loans were $2.0
billion, an increase of $126.7 million, or 6.8%, from December 31,
2021. Excluding PPP loans, total loans increased $149.7 million, or
8.1%, driven by an increase in commercial real estate loans of
$89.4 million, or 9.1%, an increase in total commercial and
industrial loans of $16.2 million, or 8.1%, an increase in
residential real estate loans, which include home equity loans, of
$43.0 million, or 6.6%, and a decrease in PPP loans of $23.1
million, or 91.0%, from December 31, 2021.
The following table is a summary of our
outstanding loan balances for the periods indicated:
|
December 31, 2022 |
|
December 31, 2021 |
|
(Dollars in thousands) |
|
|
Commercial real estate loans |
$ |
1,069,323 |
|
|
$ |
979,969 |
|
|
|
|
|
Residential real estate loans: |
|
|
|
Residential |
|
589,503 |
|
|
|
552,332 |
|
Home equity |
|
105,557 |
|
|
|
99,759 |
|
Total residential real estate loans |
|
695,060 |
|
|
|
652,091 |
|
|
|
|
|
Commercial and industrial loans: |
|
|
|
PPP loans |
|
2,274 |
|
|
|
25,329 |
|
Commercial and industrial loans |
|
217,574 |
|
|
|
201,340 |
|
Total commercial and industrial loans |
|
219,848 |
|
|
|
226,669 |
|
|
|
|
|
Consumer loans |
|
5,045 |
|
|
|
4,250 |
|
Total gross loans |
|
1,989,276 |
|
|
|
1,862,979 |
|
Unamortized PPP loan fees |
|
(109 |
) |
|
|
(781 |
) |
Unamortized premiums and net deferred loans fees and costs |
|
2,233 |
|
|
|
2,518 |
|
Total loans |
$ |
1,991,400 |
|
|
$ |
1,864,716 |
|
|
|
|
|
Credit Quality
Management continues to remain attentive to any
signs of deterioration in borrowers’ financial conditions and is
proactive in taking the appropriate steps to mitigate risk. At
December 31, 2022, nonperforming loans totaled $5.7 million, or
0.29% of total loans, compared to $5.0 million, or 0.27% of total
loans, at December 31, 2021. At December 31, 2022, there were no
loans 90 or more days past due and still accruing interest.
Nonperforming assets to total assets, was 0.22% at December 31,
2022, compared to 0.20% at December 31, 2021. The allowance for
loan losses as a percentage of total loans was 1.00% at December
31, 2022, compared to 1.06% at December 31, 2021. At December 31,
2022, the allowance for loan losses as a percentage of
nonperforming loans was 350.0%, compared to 398.6%, at December 31,
2021.
Deposits
At December 31, 2022, total deposits were $2.2
billion, a decrease of $27.5 million, or 1.2%, from December 31,
2021, primarily due to a decrease in core deposits of $37.1
million, or 2.0%. Core deposits, which the Company defines as all
deposits except time deposits, decreased from $1.9 billion, or
82.2% of total deposits, at December 31, 2021, to $1.8 billion, or
81.5% of total deposits, at December 31, 2022. Non-interest-bearing
deposits increased $4.2 million, or 0.7%, to $645.5 million,
interest-bearing checking accounts increased $3.0 million, or 2.1%,
to $148.7 million, savings accounts increased $4.8 million, or
2.2%, to $222.4 million, and money market accounts decreased $49.3
million, or 5.8%, to $801.1 million. Time deposits increased $9.7
million, or 2.4%, from $402.0 million at December 31, 2021 to
$411.7 million at December 31, 2022.
Borrowings and Subordinated
Debt
At December 31, 2022, total borrowings increased
$39.9 million, or 178.9%, from $22.3 million at December 31, 2021,
to $62.2 million. Short-term borrowings and long-term debt
increased $39.9 million to $42.5 million and subordinated debt
outstanding totaled $19.7 million at December 31, 2022 and $19.6
million at December 31, 2021.
Capital
At December 31, 2022, shareholders’ equity was
$228.1 million, or 8.9% of total assets, compared to $223.7
million, or 8.8% of total assets, at December 31, 2021. The
increase in shareholders’ equity reflects net income of $25.9
million, partially offset by $6.4 million for the repurchase of the
Company’s common stock, the payment of regular cash dividends of
$5.3 million and an increase in accumulated other comprehensive
loss of $12.7 million. Total shares outstanding as of December 31,
2022 were 22,216,789.
Capital Management
The Company’s book value per share was $10.27 at
December 31, 2022 compared to $9.87 at December 31, 2021, while
tangible book value per share, a non-GAAP financial measure,
increased $0.40, or 4.3%, from $9.21 at December 31, 2021 to $9.61
at December 31, 2022. Reflected in the book value and tangible book
value changes during the year ended December 31, 2022 are the
Federal Reserve’s 425 basis points interest rate increases, which
resulted in significant changes in unrealized gains and losses on
investment securities. Such unrealized gains and losses are
generally due to changes in interest rates and represent the
difference, net of applicable income tax effect, between the
estimated fair value and amortized cost of investment securities
classified as available-for-sale. The Company had no
other-than-temporary impairment charges in its investment portfolio
in 2022 or 2021. Tangible book value is a non-GAAP measure.
See below for the related tangible book value calculation and
a reconciliation of GAAP to non-GAAP financial measures.
The Company’s regulatory capital ratios remain
in compliance with regulatory “well capitalized” requirements and
internal target minimal levels. At December 31, 2022, the Company’s
Tier 1 leverage, common equity tier 1 capital, and total risk-based
capital ratios were 9.3%, 12.2%, and 14.2%, respectively, and the
Bank’s Tier 1 leverage, common equity tier 1 capital, and total
risk-based capital ratios were 9.5%, 12.5%, and 13.5%,
respectively, compared with regulatory “well capitalized” minimums
of 5.00%, 6.50%, and 10.00%, respectively.
Dividends
Although the Company has historically paid
quarterly dividends on its common stock and currently intends to
continue to pay such dividends, the Company’s ability to pay such
dividends depends on a number of factors, including restrictions
under federal laws and regulations on the Company’s ability to pay
dividends, and as a result, there can be no assurance that
dividends will continue to be paid in the future.
About Western New England Bancorp,
Inc.
Western New England Bancorp, Inc. is a
Massachusetts-chartered stock holding company and the parent
company of Westfield Bank, CSB Colts, Inc., Elm Street Securities
Corporation, WFD Securities, Inc. and WB Real Estate Holdings, LLC.
Western New England Bancorp, Inc. and its subsidiaries are
headquartered in Westfield, Massachusetts and operate 25 banking
offices throughout western Massachusetts and northern Connecticut.
To learn more, visit our website at www.westfieldbank.com.
Forward-Looking Statements
This press release contains “forward-looking
statements” within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended, with respect to the Company’s financial
condition, liquidity, results of operations, future performance,
business, measures being taken in response to the COVID-19 pandemic
and the impact of the COVID-19 impact on the Company’s business.
Forward-looking statements may be identified by the use of such
words as “believe,” “expect,” “anticipate,” “should,” “planned,”
“estimated,” and “potential.” Examples of forward-looking
statements include, but are not limited to, estimates with respect
to our financial condition, results of operations and business that
are subject to various factors which could cause actual results to
differ materially from these estimates. These factors
include, but are not limited to:
- the duration and scope of the COVID-19 pandemic and the local,
national and global impact of COVID-19;
- the emergence of new COVID-19 variants and the response
thereto;
- 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, 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 |
Twelve Months Ended |
|
December 31, |
September 30, |
June 30, |
March 31, |
December 31, |
December 31, |
|
|
2022 |
|
|
2022 |
|
|
2022 |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
INTEREST AND DIVIDEND INCOME: |
|
|
|
|
|
|
|
Loans |
$ |
21,274 |
|
$ |
19,543 |
|
$ |
18,500 |
|
$ |
17,947 |
|
$ |
18,089 |
|
$ |
77,264 |
|
$ |
74,200 |
|
Securities |
|
2,174 |
|
|
2,104 |
|
|
2,068 |
|
|
1,950 |
|
|
1,763 |
|
|
8,296 |
|
|
5,394 |
|
Other investments |
|
75 |
|
|
47 |
|
|
30 |
|
|
25 |
|
|
25 |
|
|
177 |
|
|
116 |
|
Short-term investments |
|
62 |
|
|
60 |
|
|
48 |
|
|
21 |
|
|
49 |
|
|
191 |
|
|
139 |
|
Total interest and dividend income |
|
23,585 |
|
|
21,754 |
|
|
20,646 |
|
|
19,943 |
|
|
19,926 |
|
|
85,928 |
|
|
79,849 |
|
|
|
|
|
|
|
|
|
INTEREST EXPENSE: |
|
|
|
|
|
|
|
Deposits |
|
2,206 |
|
|
1,164 |
|
|
990 |
|
|
992 |
|
|
1,091 |
|
|
5,352 |
|
|
5,508 |
|
Short-term borrowings |
|
272 |
|
|
48 |
|
|
10 |
|
|
- |
|
|
- |
|
|
330 |
|
|
- |
|
Long-term debt |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
458 |
|
Subordinated debt |
|
253 |
|
|
254 |
|
|
254 |
|
|
253 |
|
|
253 |
|
|
1,014 |
|
|
706 |
|
Total interest expense |
|
2,731 |
|
|
1,466 |
|
|
1,254 |
|
|
1,245 |
|
|
1,344 |
|
|
6,696 |
|
|
6,672 |
|
|
|
|
|
|
|
|
|
Net interest and dividend income |
|
20,854 |
|
|
20,288 |
|
|
19,392 |
|
|
18,698 |
|
|
18,582 |
|
|
79,232 |
|
|
73,177 |
|
|
|
|
|
|
|
|
|
PROVISION (CREDIT) FOR LOAN LOSSES |
|
150 |
|
|
675 |
|
|
300 |
|
|
(425 |
) |
|
300 |
|
|
700 |
|
|
(925 |
) |
|
|
|
|
|
|
|
|
Net interest and dividend income after provision (credit) for loan
losses |
|
20,704 |
|
|
19,613 |
|
|
19,092 |
|
|
19,123 |
|
|
18,282 |
|
|
78,532 |
|
|
74,102 |
|
|
|
|
|
|
|
|
|
NON-INTEREST INCOME: |
|
|
|
|
|
|
|
Service charges and fees |
|
2,329 |
|
|
2,223 |
|
|
2,346 |
|
|
2,174 |
|
|
2,270 |
|
|
9,072 |
|
|
8,360 |
|
Income from bank-owned life insurance |
|
428 |
|
|
391 |
|
|
458 |
|
|
448 |
|
|
486 |
|
|
1,725 |
|
|
1,912 |
|
Bank-owned life insurance death benefits |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
555 |
|
|
- |
|
|
555 |
|
Loss on sales of securities, net |
|
- |
|
|
- |
|
|
- |
|
|
(4 |
) |
|
- |
|
|
(4 |
) |
|
(72 |
) |
Unrealized gain (loss) on marketable equity securities |
|
19 |
|
|
(235 |
) |
|
(225 |
) |
|
(276 |
) |
|
(96 |
) |
|
(717 |
) |
|
(168 |
) |
Gain on sale of mortgages |
|
- |
|
|
- |
|
|
- |
|
|
2 |
|
|
289 |
|
|
2 |
|
|
1,423 |
|
Gain on non-marketable equity investments |
|
70 |
|
|
211 |
|
|
141 |
|
|
- |
|
|
352 |
|
|
422 |
|
|
898 |
|
Loss on interest rate swap terminations |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
(402 |
) |
Gain on defined benefit plan curtailment |
|
2,807 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
2,807 |
|
|
- |
|
Other income |
|
- |
|
|
- |
|
|
21 |
|
|
4 |
|
|
- |
|
|
25 |
|
|
58 |
|
Total non-interest income |
|
5,653 |
|
|
2,590 |
|
|
2,741 |
|
|
2,348 |
|
|
3,856 |
|
|
13,332 |
|
|
12,564 |
|
|
|
|
|
|
|
|
|
NON-INTEREST EXPENSE: |
|
|
|
|
|
|
|
Salaries and employees benefits |
|
8,197 |
|
|
8,025 |
|
|
8,236 |
|
|
8,239 |
|
|
8,193 |
|
|
32,697 |
|
|
32,186 |
|
Occupancy |
|
1,218 |
|
|
1,226 |
|
|
1,177 |
|
|
1,363 |
|
|
1,144 |
|
|
4,984 |
|
|
4,656 |
|
Furniture and equipment |
|
479 |
|
|
465 |
|
|
539 |
|
|
543 |
|
|
548 |
|
|
2,026 |
|
|
2,084 |
|
Data processing |
|
724 |
|
|
707 |
|
|
731 |
|
|
723 |
|
|
726 |
|
|
2,885 |
|
|
2,903 |
|
Professional fees |
|
617 |
|
|
803 |
|
|
719 |
|
|
577 |
|
|
477 |
|
|
2,716 |
|
|
2,185 |
|
FDIC insurance |
|
255 |
|
|
273 |
|
|
234 |
|
|
286 |
|
|
202 |
|
|
1,048 |
|
|
998 |
|
Advertising |
|
178 |
|
|
419 |
|
|
412 |
|
|
399 |
|
|
262 |
|
|
1,408 |
|
|
1,292 |
|
Loss on prepayment of borrowings |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
45 |
|
Other |
|
2,335 |
|
|
2,425 |
|
|
2,385 |
|
|
2,326 |
|
|
2,371 |
|
|
9,471 |
|
|
8,593 |
|
Total non-interest expense |
|
14,003 |
|
|
14,343 |
|
|
14,433 |
|
|
14,456 |
|
|
13,923 |
|
|
57,235 |
|
|
54,942 |
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES |
|
12,354 |
|
|
7,860 |
|
|
7,400 |
|
|
7,015 |
|
|
8,215 |
|
|
34,629 |
|
|
31,724 |
|
|
|
|
|
|
|
|
|
INCOME TAX PROVISION |
|
3,320 |
|
|
1,861 |
|
|
1,865 |
|
|
1,696 |
|
|
1,995 |
|
|
8,742 |
|
|
8,025 |
|
NET INCOME |
$ |
9,034 |
|
$ |
5,999 |
|
$ |
5,535 |
|
$ |
5,319 |
|
$ |
6,220 |
|
$ |
25,887 |
|
$ |
23,699 |
|
|
|
|
|
|
|
|
|
Basic earnings per share |
$ |
0.42 |
|
$ |
0.28 |
|
$ |
0.25 |
|
$ |
0.24 |
|
$ |
0.28 |
|
$ |
1.18 |
|
$ |
1.02 |
|
Weighted average shares outstanding |
|
21,676,892 |
|
|
21,757,027 |
|
|
21,991,383 |
|
|
22,100,076 |
|
|
22,097,968 |
|
|
21,879,657 |
|
|
23,223,633 |
|
Diluted earnings per share |
$ |
0.42 |
|
$ |
0.28 |
|
$ |
0.25 |
|
$ |
0.24 |
|
$ |
0.28 |
|
$ |
1.18 |
|
$ |
1.02 |
|
Weighted average diluted shares outstanding |
|
21,751,409 |
|
|
21,810,036 |
|
|
22,025,687 |
|
|
22,172,909 |
|
|
22,203,876 |
|
|
21,938,323 |
|
|
23,300,637 |
|
|
|
|
|
|
|
|
|
Other Data: |
|
|
|
|
|
|
|
Return on average assets (1) |
|
1.40 |
% |
|
0.93 |
% |
|
0.87 |
% |
|
0.85 |
% |
|
0.97 |
% |
|
1.02 |
% |
|
0.96 |
% |
Return on average equity (1) |
|
16.67 |
% |
|
10.90 |
% |
|
10.22 |
% |
|
9.65 |
% |
|
11.22 |
% |
|
11.85 |
% |
|
10.64 |
% |
Efficiency ratio |
|
52.83 |
% |
|
62.69 |
% |
|
65.21 |
% |
|
68.69 |
% |
|
62.05 |
% |
|
61.83 |
% |
|
64.08 |
% |
Adjusted efficiency ratio (2) |
|
59.31 |
% |
|
62.63 |
% |
|
64.96 |
% |
|
67.79 |
% |
|
64.38 |
% |
|
63.55 |
% |
|
64.64 |
% |
Net interest margin |
|
3.44 |
% |
|
3.35 |
% |
|
3.24 |
% |
|
3.18 |
% |
|
3.08 |
% |
|
3.31 |
% |
|
3.14 |
% |
Net interest margin, on a fully tax-equivalent basis |
|
3.47 |
% |
|
3.37 |
% |
|
3.26 |
% |
|
3.20 |
% |
|
3.10 |
% |
|
3.33 |
% |
|
3.16 |
% |
(1) Annualized. |
|
|
|
|
|
(2) The adjusted efficiency ratio (non-GAAP) represents the ratio
of operating expenses, excluding loss on prepayment of borrowings,
divided by the sum of net interest and dividend income and
non-interest income, excluding bank-owned life insurance death
benefits, realized and unrealized gains and losses on securities,
gain on non-marketable equity investments, loss on interest rate
swap termination, and gain on defined benefit plan
curtailment. |
WESTERN NEW ENGLAND BANCORP, INC. AND
SUBSIDIARIES Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
|
2022 |
|
|
|
2022 |
|
|
|
2022 |
|
|
|
2022 |
|
|
|
2021 |
|
Cash and cash equivalents |
$ |
30,342 |
|
|
$ |
27,113 |
|
|
$ |
47,513 |
|
|
$ |
62,898 |
|
|
$ |
103,456 |
|
Available-for-sale securities, at fair value |
|
146,997 |
|
|
|
148,716 |
|
|
|
160,925 |
|
|
|
173,910 |
|
|
|
194,352 |
|
Held to maturity securities, at amortized cost |
|
230,168 |
|
|
|
234,387 |
|
|
|
233,803 |
|
|
|
237,575 |
|
|
|
222,272 |
|
Marketable equity securities, at fair value |
|
6,237 |
|
|
|
11,280 |
|
|
|
11,453 |
|
|
|
11,643 |
|
|
|
11,896 |
|
Federal Home Loan Bank of Boston and other restricted stock - at
cost |
|
3,352 |
|
|
|
2,234 |
|
|
|
1,882 |
|
|
|
2,594 |
|
|
|
2,594 |
|
|
|
|
|
|
|
|
|
|
|
Loans |
|
1,991,400 |
|
|
|
2,007,672 |
|
|
|
1,975,700 |
|
|
|
1,926,285 |
|
|
|
1,864,716 |
|
Allowance for loan losses |
|
(19,931 |
) |
|
|
(20,208 |
) |
|
|
(19,560 |
) |
|
|
(19,308 |
) |
|
|
(19,787 |
) |
Net loans |
|
1,971,469 |
|
|
|
1,987,464 |
|
|
|
1,956,140 |
|
|
|
1,906,977 |
|
|
|
1,844,929 |
|
|
|
|
|
|
|
|
|
|
|
Bank-owned life insurance |
|
74,620 |
|
|
|
74,192 |
|
|
|
73,801 |
|
|
|
73,343 |
|
|
|
72,895 |
|
Goodwill |
|
12,487 |
|
|
|
12,487 |
|
|
|
12,487 |
|
|
|
12,487 |
|
|
|
12,487 |
|
Core deposit intangible |
|
2,188 |
|
|
|
2,281 |
|
|
|
2,375 |
|
|
|
2,469 |
|
|
|
2,563 |
|
Other assets |
|
75,290 |
|
|
|
78,671 |
|
|
|
76,978 |
|
|
|
71,542 |
|
|
|
70,981 |
|
TOTAL ASSETS |
$ |
2,553,150 |
|
|
$ |
2,578,825 |
|
|
$ |
2,577,357 |
|
|
$ |
2,555,438 |
|
|
$ |
2,538,425 |
|
|
|
|
|
|
|
|
|
|
|
Total deposits |
$ |
2,229,443 |
|
|
$ |
2,287,754 |
|
|
$ |
2,301,972 |
|
|
$ |
2,278,164 |
|
|
$ |
2,256,898 |
|
Short-term borrowings |
|
41,350 |
|
|
|
21,500 |
|
|
|
4,790 |
|
|
|
- |
|
|
|
- |
|
Long-term debt |
|
1,178 |
|
|
|
1,178 |
|
|
|
1,360 |
|
|
|
1,686 |
|
|
|
2,653 |
|
Subordinated debt |
|
19,673 |
|
|
|
19,663 |
|
|
|
19,653 |
|
|
|
19,643 |
|
|
|
19,633 |
|
Securities pending settlement |
|
133 |
|
|
|
9 |
|
|
|
- |
|
|
|
146 |
|
|
|
- |
|
Other liabilities |
|
33,230 |
|
|
|
37,021 |
|
|
|
34,252 |
|
|
|
36,736 |
|
|
|
35,553 |
|
TOTAL LIABILITIES |
|
2,325,007 |
|
|
|
2,367,125 |
|
|
|
2,362,027 |
|
|
|
2,336,375 |
|
|
|
2,314,737 |
|
|
|
|
|
|
|
|
|
|
|
TOTAL SHAREHOLDERS' EQUITY |
|
228,143 |
|
|
|
211,700 |
|
|
|
215,330 |
|
|
|
219,063 |
|
|
|
223,688 |
|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
$ |
2,553,150 |
|
|
$ |
2,578,825 |
|
|
$ |
2,577,357 |
|
|
$ |
2,555,438 |
|
|
$ |
2,538,425 |
|
WESTERN NEW ENGLAND BANCORP, INC. AND
SUBSIDIARIES Other Data (Dollars
in thousands, except per share data)
(Unaudited)
|
Three Months Ended |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|
December 31, |
|
2022 |
|
2022 |
|
2022 |
|
2022 |
|
2021 |
Shares outstanding at end of period |
22,216,789 |
|
22,246,545 |
|
22,465,991 |
|
22,742,189 |
|
22,656,515 |
|
|
|
|
|
|
|
|
|
|
Operating results: |
|
|
|
|
|
|
|
|
|
Net interest income |
$ 20,854 |
|
$ 20,288 |
|
$ 19,392 |
|
$ 18,698 |
|
$ 18,582 |
Provision (credit) for loan losses |
150 |
|
675 |
|
300 |
|
(425) |
|
300 |
Non-interest income |
5,653 |
|
2,590 |
|
2,741 |
|
2,348 |
|
3,856 |
Non-interest expense |
14,003 |
|
14,343 |
|
14,433 |
|
14,456 |
|
13,923 |
Income before income provision for income taxes |
12,354 |
|
7,860 |
|
7,400 |
|
7,015 |
|
8,215 |
Income tax provision |
3,320 |
|
1,861 |
|
1,865 |
|
1,696 |
|
1,995 |
Net income |
9,034 |
|
5,999 |
|
5,535 |
|
5,319 |
|
6,220 |
|
|
|
|
|
|
|
|
|
|
Performance Ratios: |
|
|
|
|
|
|
|
|
|
Net interest margin, on a fully tax-equivalent basis |
3.47% |
|
3.37% |
|
3.26% |
|
3.20% |
|
3.10% |
Interest rate spread, on a fully tax-equivalent basis |
3.26% |
|
3.26% |
|
3.17% |
|
3.10% |
|
2.99% |
Return on average assets |
1.40% |
|
0.93% |
|
0.87% |
|
0.85% |
|
0.97% |
Return on average equity |
16.67% |
|
10.90% |
|
10.22% |
|
9.65% |
|
11.22% |
Adjusted efficiency ratio (non-GAAP) (1) |
59.31% |
|
62.63% |
|
64.96% |
|
67.79% |
|
64.38% |
|
|
|
|
|
|
|
|
|
|
Per Common Share Data: |
|
|
|
|
|
|
|
|
|
Basic earnings per share |
$ 0.42 |
|
$ 0.28 |
|
$ 0.25 |
|
$ 0.24 |
|
$ 0.28 |
Per diluted share |
0.42 |
|
0.28 |
|
0.25 |
|
0.24 |
|
0.28 |
Cash dividend declared |
0.06 |
|
0.06 |
|
0.06 |
|
0.06 |
|
0.05 |
Book value per share |
10.27 |
|
9.52 |
|
9.58 |
|
9.63 |
|
9.87 |
Tangible book value per share (non-GAAP) |
9.61 |
|
8.85 |
|
8.92 |
|
8.97 |
|
9.21 |
|
|
|
|
|
|
|
|
|
|
Asset Quality: |
|
|
|
|
|
|
|
|
|
30-89 day delinquent loans |
$ 2,578 |
|
$ 2,630 |
|
$ 1,063 |
|
$ 1,407 |
|
$ 1,102 |
90 days or more delinquent loans |
1,891 |
|
669 |
|
1,149 |
|
1,401 |
|
1,039 |
Total delinquent loans |
4,469 |
|
3,299 |
|
2,212 |
|
2,808 |
|
2,141 |
Total delinquent loans as a percentage of total loans |
0.22% |
|
0.16% |
|
0.11% |
|
0.15% |
|
0.11% |
Total delinquent loans as a percentage of total loans, excluding
PPP |
0.22% |
|
0.16% |
|
0.11% |
|
0.15% |
|
0.12% |
Nonperforming loans |
$ 5,694 |
|
$ 4,432 |
|
$ 4,105 |
|
$ 3,988 |
|
$ 4,964 |
Nonperforming loans as a percentage of total loans |
0.29% |
|
0.22% |
|
0.21% |
|
0.21% |
|
0.27% |
Nonperforming loans as a percentage of total loans, excluding
PPP |
0.29% |
|
0.22% |
|
0.21% |
|
0.21% |
|
0.27% |
Nonperforming assets as a percentage of total assets |
0.22% |
|
0.17% |
|
0.16% |
|
0.16% |
|
0.20% |
Nonperforming assets as a percentage of total assets, excluding
PPP |
0.22% |
|
0.17% |
|
0.16% |
|
0.16% |
|
0.20% |
Allowance for loan losses as a percentage of nonperforming
loans |
350.04% |
|
455.96% |
|
476.49% |
|
484.15% |
|
398.61% |
Allowance for loan losses as a percentage of total loans |
1.00% |
|
1.01% |
|
0.99% |
|
1.00% |
|
1.06% |
Allowance for loan losses as a percentage of total loans, excluding
PPP |
1.00% |
|
1.01% |
|
0.99% |
|
1.01% |
|
1.08% |
Net loan charge-offs |
$ 426 |
|
$ 27 |
|
$ 48 |
|
$ 54 |
|
$ 350 |
Net loan charge-offs as a percentage of average loans |
0.02% |
|
0.00% |
|
0.00% |
|
0.00% |
|
0.02% |
____________________________
(1) The adjusted efficiency ratio (non-GAAP) represents the
ratio of operating expenses, excluding loss on prepayment of
borrowings, divided by the sum of net interest and dividend income
and non-interest income, excluding bank-owned life insurance death
benefits, realized and unrealized gains and losses on securities,
gain on non-marketable equity investments, loss on interest rate
swap termination, and gain on defined benefit plan curtailment.
The following tables set forth the information
relating to our average balances and net interest income for the
three months ended December 31, 2022, September 30, 2022, and
December 31, 2021 and reflect the average yield on interest-earning
assets and average cost of interest-bearing liabilities for the
periods indicated.
|
Three Months Ended |
|
December 31, 2022 |
|
September 30, 2022 |
|
December 31, 2021 |
|
Average |
|
|
|
Average Yield/ |
|
Average |
|
|
|
Average Yield/ |
|
Average |
|
|
|
Average Yield/ |
|
Balance |
|
Interest |
|
Cost(8) |
|
Balance |
|
Interest |
|
Cost(8) |
|
Balance |
|
Interest |
|
Cost(8) |
|
(Dollars in thousands) |
ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans(1)(2) |
$ |
1,994,874 |
|
$ |
21,403 |
|
|
4.26 |
% |
|
$ |
1,973,580 |
|
$ |
19,665 |
|
|
3.95 |
% |
|
$ |
1,850,162 |
|
$ |
18,197 |
|
|
3.90 |
% |
Securities(2) |
|
388,529 |
|
|
2,175 |
|
|
2.22 |
|
|
|
404,005 |
|
|
2,105 |
|
|
2.07 |
|
|
|
401,811 |
|
|
1,764 |
|
|
1.74 |
|
Other investments |
|
10,638 |
|
|
75 |
|
|
2.80 |
|
|
|
10,037 |
|
|
47 |
|
|
1.86 |
|
|
|
10,654 |
|
|
25 |
|
|
0.93 |
|
Short-term investments(3) |
|
7,635 |
|
|
62 |
|
|
3.22 |
|
|
|
13,911 |
|
|
60 |
|
|
1.71 |
|
|
|
131,770 |
|
|
49 |
|
|
0.15 |
|
Total interest-earning assets |
|
2,401,676 |
|
|
23,715 |
|
|
3.92 |
|
|
|
2,401,533 |
|
|
21,877 |
|
|
3.61 |
|
|
|
2,394,397 |
|
|
20,035 |
|
|
3.32 |
|
Total non-interest-earning assets |
|
159,042 |
|
|
|
|
|
|
|
154,955 |
|
|
|
|
|
|
|
149,151 |
|
|
|
|
|
Total assets |
$ |
2,560,718 |
|
|
|
|
|
|
$ |
2,556,488 |
|
|
|
|
|
|
$ |
2,543,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing checking accounts |
$ |
149,928 |
|
|
206 |
|
|
0.55 |
% |
|
$ |
139,678 |
|
|
123 |
|
|
0.35 |
% |
|
$ |
132,028 |
|
|
106 |
|
|
0.32 |
% |
Savings accounts |
|
221,964 |
|
|
39 |
|
|
0.07 |
|
|
|
224,112 |
|
|
38 |
|
|
0.07 |
|
|
|
214,961 |
|
|
36 |
|
|
0.07 |
|
Money market accounts |
|
862,523 |
|
|
1,375 |
|
|
0.63 |
|
|
|
911,282 |
|
|
743 |
|
|
0.32 |
|
|
|
849,023 |
|
|
546 |
|
|
0.26 |
|
Time deposit accounts |
|
359,555 |
|
|
586 |
|
|
0.65 |
|
|
|
339,614 |
|
|
260 |
|
|
0.30 |
|
|
|
410,149 |
|
|
403 |
|
|
0.39 |
|
Total interest-bearing deposits |
|
1,593,970 |
|
|
2,206 |
|
|
0.55 |
|
|
|
1,614,686 |
|
|
1,164 |
|
|
0.29 |
|
|
|
1,606,161 |
|
|
1,091 |
|
|
0.27 |
|
Short-term borrowings and long-term debt |
|
48,579 |
|
|
525 |
|
|
4.29 |
|
|
|
29,076 |
|
|
302 |
|
|
4.12 |
|
|
|
22,614 |
|
|
253 |
|
|
4.44 |
|
Total interest-bearing liabilities |
|
1,642,549 |
|
|
2,731 |
|
|
0.66 |
|
|
|
1,643,762 |
|
|
1,466 |
|
|
0.35 |
|
|
|
1,628,775 |
|
|
1,344 |
|
|
0.33 |
|
Non-interest-bearing deposits |
|
663,814 |
|
|
|
|
|
|
|
658,853 |
|
|
|
|
|
|
|
654,334 |
|
|
|
|
|
Other non-interest-bearing liabilities |
|
39,399 |
|
|
|
|
|
|
|
35,558 |
|
|
|
|
|
|
|
40,428 |
|
|
|
|
|
Total non-interest-bearing liabilities |
|
703,213 |
|
|
|
|
|
|
|
694,411 |
|
|
|
|
|
|
|
694,762 |
|
|
|
|
|
Total liabilities |
|
2,345,762 |
|
|
|
|
|
|
|
2,338,173 |
|
|
|
|
|
|
|
2,323,537 |
|
|
|
|
|
Total equity |
|
214,956 |
|
|
|
|
|
|
|
218,315 |
|
|
|
|
|
|
|
220,011 |
|
|
|
|
|
Total liabilities and equity |
$ |
2,560,718 |
|
|
|
|
|
|
$ |
2,556,488 |
|
|
|
|
|
|
$ |
2,543,548 |
|
|
|
|
|
Less: Tax-equivalent adjustment (2) |
|
|
|
(130 |
) |
|
|
|
|
|
|
|
(123 |
) |
|
|
|
|
|
|
|
(109 |
) |
|
|
|
Net interest and dividend income |
|
|
$ |
20,854 |
|
|
|
|
|
|
|
$ |
20,288 |
|
|
|
|
|
|
|
$ |
18,582 |
|
|
|
|
Net interest rate spread (4) |
|
|
|
|
3.24 |
% |
|
|
|
|
|
3.24 |
% |
|
|
|
|
|
2.97 |
% |
Net interest rate spread, on a tax-equivalent basis (5) |
|
|
|
|
3.26 |
% |
|
|
|
|
|
3.26 |
% |
|
|
|
|
|
2.99 |
% |
Net interest margin (6) |
|
|
|
|
3.44 |
% |
|
|
|
|
|
3.35 |
% |
|
|
|
|
|
3.08 |
% |
Net interest margin, on a tax-equivalent basis (7) |
|
|
|
|
3.47 |
% |
|
|
|
|
|
3.37 |
% |
|
|
|
|
|
3.10 |
% |
Ratio of average interest-earning |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
assets to average interest-bearing liabilities |
|
|
|
|
146.22 |
% |
|
|
|
|
|
146.10 |
% |
|
|
|
|
|
147.01 |
% |
The following tables set forth the information
relating to our average balances and net interest income for the
twelve months ended December 31, 2022 and 2021 and reflect the
average yield on interest-earning assets and average cost of
interest-bearing liabilities for the periods indicated.
|
Twelve Months Ended December 31, |
|
2022 |
|
2021 |
|
Average Balance |
|
Interest |
|
Average Yield/ Cost |
|
Average Balance |
|
Interest |
|
Average Yield/ Cost |
|
|
(Dollars in thousands) |
ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans(1)(2) |
$ |
1,953,527 |
|
$ |
77,758 |
|
|
3.98 |
% |
|
$ |
1,887,926 |
|
$ |
74,620 |
|
|
3.95 |
% |
Securities(2) |
|
407,444 |
|
|
8,299 |
|
|
2.04 |
|
|
|
319,778 |
|
|
5,398 |
|
|
1.69 |
|
Other investments |
|
10,289 |
|
|
177 |
|
|
1.72 |
|
|
|
10,242 |
|
|
115 |
|
|
1.12 |
|
Short-term investments(3) |
|
25,712 |
|
|
191 |
|
|
0.74 |
|
|
|
111,931 |
|
|
139 |
|
|
0.12 |
|
Total interest-earning assets |
|
2,396,972 |
|
|
86,425 |
|
|
3.61 |
|
|
|
2,329,877 |
|
|
80,272 |
|
|
3.45 |
|
Total non-interest-earning assets |
|
152,941 |
|
|
|
|
|
|
|
147,980 |
|
|
|
|
|
Total assets |
$ |
2,549,913 |
|
|
|
|
|
|
$ |
2,477,857 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing checking accounts |
$ |
139,993 |
|
|
530 |
|
|
0.38 |
% |
|
$ |
109,648 |
|
|
399 |
|
|
0.36 |
% |
Savings accounts |
|
222,267 |
|
|
161 |
|
|
0.07 |
|
|
|
205,394 |
|
|
154 |
|
|
0.07 |
|
Money market accounts |
|
890,763 |
|
|
3,187 |
|
|
0.36 |
|
|
|
776,725 |
|
|
2,412 |
|
|
0.31 |
|
Time deposit accounts |
|
363,258 |
|
|
1,474 |
|
|
0.41 |
|
|
|
477,067 |
|
|
2,543 |
|
|
0.53 |
|
Total interest-bearing deposits |
|
1,616,281 |
|
|
5,352 |
|
|
0.33 |
|
|
|
1,568,834 |
|
|
5,508 |
|
|
0.35 |
|
Short-term borrowings and long-term debt |
|
31,556 |
|
|
1,344 |
|
|
4.26 |
|
|
|
38,294 |
|
|
1,164 |
|
|
3.04 |
|
Total interest-bearing liabilities |
|
1,647,837 |
|
|
6,696 |
|
|
0.41 |
|
|
|
1,607,128 |
|
|
6,672 |
|
|
0.42 |
|
Non-interest-bearing deposits |
|
647,971 |
|
|
|
|
|
|
|
608,936 |
|
|
|
|
|
Other non-interest-bearing liabilities |
|
35,615 |
|
|
|
|
|
|
|
39,108 |
|
|
|
|
|
Total non-interest-bearing liabilities |
|
683,586 |
|
|
|
|
|
|
|
648,044 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
2,331,423 |
|
|
|
|
|
|
|
2,255,172 |
|
|
|
|
|
Total equity |
|
218,490 |
|
|
|
|
|
|
|
222,685 |
|
|
|
|
|
Total liabilities and equity |
$ |
2,549,913 |
|
|
|
|
|
|
$ |
2,477,857 |
|
|
|
|
|
Less: Tax-equivalent adjustment (2) |
|
|
|
(497 |
) |
|
|
|
|
|
|
|
(423 |
) |
|
|
|
Net interest and dividend income |
|
|
$ |
79,232 |
|
|
|
|
|
|
|
$ |
73,177 |
|
|
|
|
Net interest rate spread (4) |
|
|
|
|
3.18 |
% |
|
|
|
|
|
3.01 |
% |
Net interest rate spread, on a tax-equivalent basis (5) |
|
|
|
|
3.20 |
% |
|
|
|
|
|
3.03 |
% |
Net interest margin (6) |
|
|
|
|
3.31 |
% |
|
|
|
|
|
3.14 |
% |
Net interest margin, on a tax-equivalent basis (7) |
|
|
|
|
3.33 |
% |
|
|
|
|
|
3.16 |
% |
Ratio of average interest-earning |
|
|
|
|
|
|
|
|
|
|
|
|
|
assets to average interest-bearing liabilities |
|
|
|
145.46 |
% |
|
|
|
|
|
144.97 |
% |
____________________________________________________
|
(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) |
Annualized. |
|
|
|
Reconciliation of Non-GAAP to GAAP
Financial Measures
The Company believes that certain non-GAAP
financial measures provide information to investors that is useful
in understanding its financial condition. Because not all
companies use the same calculation, this presentation may not be
comparable to other similarly titled measures calculated by other
companies. A reconciliation of these non-GAAP financial measures is
provided below.
|
For the quarter ended |
|
12/31/2022 |
|
9/30/2022 |
|
6/30/2022 |
|
3/31/2022 |
|
12/31/2021 |
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans (no tax adjustment) |
$ |
21,274 |
|
|
$ |
19,543 |
|
|
$ |
18,500 |
|
|
$ |
17,947 |
|
|
$ |
18,089 |
|
Tax-equivalent adjustment |
|
129 |
|
|
|
122 |
|
|
|
124 |
|
|
|
120 |
|
|
|
108 |
|
Loans (tax-equivalent basis) |
$ |
21,403 |
|
|
$ |
19,665 |
|
|
$ |
18,624 |
|
|
$ |
18,067 |
|
|
$ |
18,197 |
|
|
|
|
|
|
|
|
|
|
|
Securities (no tax adjustment) |
$ |
2,174 |
|
|
$ |
2,104 |
|
|
$ |
2,068 |
|
|
$ |
1,950 |
|
|
$ |
1,763 |
|
Tax-equivalent adjustment |
|
1 |
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
1 |
|
Securities (tax-equivalent basis) |
$ |
2,175 |
|
|
$ |
2,105 |
|
|
$ |
2,068 |
|
|
$ |
1,950 |
|
|
$ |
1,764 |
|
|
|
|
|
|
|
|
|
|
|
Net interest income (no tax adjustment) |
$ |
20,854 |
|
|
$ |
20,288 |
|
|
$ |
19,392 |
|
|
$ |
18,698 |
|
|
$ |
18,582 |
|
Tax equivalent adjustment |
|
130 |
|
|
|
123 |
|
|
|
124 |
|
|
|
120 |
|
|
|
109 |
|
Net interest income (tax-equivalent basis) |
$ |
20,984 |
|
|
$ |
20,411 |
|
|
$ |
19,516 |
|
|
$ |
18,818 |
|
|
$ |
18,691 |
|
|
|
|
|
|
|
|
|
|
|
Net interest income (no tax adjustment) |
$ |
20,854 |
|
|
$ |
20,288 |
|
|
$ |
19,392 |
|
|
$ |
18,698 |
|
|
$ |
18,582 |
|
Less: |
|
|
|
|
|
|
|
|
|
Purchase accounting adjustments |
|
87 |
|
|
|
(16 |
) |
|
|
64 |
|
|
|
39 |
|
|
|
(31 |
) |
Prepayment penalties and fees |
|
134 |
|
|
|
99 |
|
|
|
26 |
|
|
|
21 |
|
|
|
21 |
|
PPP fee income |
|
18 |
|
|
|
19 |
|
|
|
129 |
|
|
|
562 |
|
|
|
973 |
|
Adjusted net interest income (non-GAAP) |
$ |
20,615 |
|
|
$ |
20,186 |
|
|
$ |
19,173 |
|
|
$ |
18,076 |
|
|
$ |
17,619 |
|
|
|
|
|
|
|
|
|
|
|
Average interest-earning assets |
$ |
2,401,676 |
|
|
$ |
2,401,533 |
|
|
$ |
2,398,526 |
|
|
$ |
2,385,932 |
|
|
$ |
2,394,397 |
|
Average interest-earning assets, excluding average PPP loans |
$ |
2,399,297 |
|
|
$ |
2,398,998 |
|
|
$ |
2,395,463 |
|
|
$ |
2,370,852 |
|
|
$ |
2,352,858 |
|
Net interest margin (no tax adjustment) |
|
3.44% |
|
|
|
3.35% |
|
|
|
3.24% |
|
|
|
3.18% |
|
|
|
3.08% |
|
Net interest margin, tax-equivalent |
|
3.47% |
|
|
|
3.37% |
|
|
|
3.26% |
|
|
|
3.20% |
|
|
|
3.10% |
|
Adjusted net interest margin, excluding purchase accounting
adjustments, PPP fee income and prepayment penalties
(non-GAAP) |
|
3.41% |
|
|
|
3.34% |
|
|
|
3.21% |
|
|
|
3.10% |
|
|
|
2.97% |
|
|
For the quarter ended |
|
12/31/2022 |
|
9/30/2022 |
|
6/30/2022 |
|
3/31/2022 |
|
12/31/2021 |
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book Value per Share (GAAP) |
$ |
10.27 |
|
|
$ |
9.52 |
|
|
$ |
9.58 |
|
|
$ |
9.63 |
|
|
$ |
9.87 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
Goodwill |
|
(0.56 |
) |
|
|
(0.56 |
) |
|
|
(0.55 |
) |
|
|
(0.55 |
) |
|
|
(0.55 |
) |
Core deposit intangible |
|
(0.10 |
) |
|
|
(0.11 |
) |
|
|
(0.11 |
) |
|
|
(0.11 |
) |
|
|
(0.11 |
) |
Tangible Book Value per Share (non-GAAP) |
$ |
9.61 |
|
|
$ |
8.85 |
|
|
$ |
8.92 |
|
|
$ |
8.97 |
|
|
$ |
9.21 |
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes (GAAP) |
$ |
12,354 |
|
|
$ |
7,860 |
|
|
$ |
7,400 |
|
|
$ |
7,015 |
|
|
$ |
8,215 |
|
Provision (credit) for loan losses |
|
150 |
|
|
|
675 |
|
|
|
300 |
|
|
|
(425 |
) |
|
|
300 |
|
PPP income |
|
(18 |
) |
|
|
(19 |
) |
|
|
(129 |
) |
|
|
(562 |
) |
|
|
(973 |
) |
Gain on defined benefit plan curtailment |
|
(2,807 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Income Before Taxes, Provision, PPP Income and Defined Benefit
Curtailment (non-GAAP) |
$ |
9,679 |
|
|
$ |
8,516 |
|
|
$ |
7,571 |
|
|
$ |
6,028 |
|
|
$ |
7,542 |
|
|
|
|
|
|
|
|
|
|
|
Efficiency Ratio: |
|
|
|
|
|
|
|
|
|
Non-interest Expense (GAAP) |
$ |
14,003 |
|
|
$ |
14,343 |
|
|
$ |
14,433 |
|
|
$ |
14,456 |
|
|
$ |
13,923 |
|
Non-interest Expense for Adjusted Efficiency Ratio |
$ |
14,003 |
|
|
$ |
14,343 |
|
|
$ |
14,433 |
|
|
$ |
14,456 |
|
|
$ |
13,923 |
|
|
|
|
|
|
|
|
|
|
|
Net Interest Income (GAAP) |
$ |
20,854 |
|
|
$ |
20,288 |
|
|
$ |
19,392 |
|
|
$ |
18,698 |
|
|
$ |
18,582 |
|
|
|
|
|
|
|
|
|
|
|
Non-interest Income (GAAP) |
$ |
5,653 |
|
|
$ |
2,590 |
|
|
$ |
2,741 |
|
|
$ |
2,348 |
|
|
$ |
3,856 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
Bank-owned life insurance death benefit |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(555 |
) |
Loss (gain) on securities, net |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4 |
|
|
|
- |
|
Unrealized (gains) losses on marketable equity securities |
|
(19 |
) |
|
|
235 |
|
|
|
225 |
|
|
|
276 |
|
|
|
96 |
|
Gain on non-marketable equity investments |
|
(70 |
) |
|
|
(211 |
) |
|
|
(141 |
) |
|
|
- |
|
|
|
(352 |
) |
Gain on defined benefit plan curtailment |
|
(2,807 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Non-interest Income for Adjusted Efficiency Ratio (non-GAAP) |
$ |
2,757 |
|
|
$ |
2,614 |
|
|
$ |
2,825 |
|
|
$ |
2,628 |
|
|
$ |
3,045 |
|
Total Revenue for Adjusted Efficiency Ratio (non-GAAP) |
$ |
23,611 |
|
|
$ |
22,902 |
|
|
$ |
22,217 |
|
|
$ |
21,326 |
|
|
$ |
21,627 |
|
|
|
|
|
|
|
|
|
|
|
Efficiency Ratio (GAAP) |
|
52.83 |
% |
|
|
62.69 |
% |
|
|
65.21 |
% |
|
|
68.69 |
% |
|
|
62.05 |
% |
|
|
|
|
|
|
|
|
|
|
Adjusted Efficiency Ratio (Non-interest Expense for Efficiency
Ratio (non-GAAP)/Total Revenue for Efficiency Ratio
(non-GAAP)) |
|
59.31 |
% |
|
|
62.63 |
% |
|
|
64.96 |
% |
|
|
67.79 |
% |
|
|
64.38 |
% |
|
For the twelve months ended |
|
12/31/2022 |
|
12/31/2021 |
|
(In thousands) |
|
|
|
|
Loans (no tax adjustment) |
$ |
77,264 |
|
|
$ |
74,200 |
|
Tax-equivalent adjustment |
|
494 |
|
|
|
420 |
|
Loans (tax-equivalent basis) |
$ |
77,758 |
|
|
$ |
74,620 |
|
|
|
|
|
Securities (no tax adjustment) |
$ |
8,296 |
|
|
$ |
5,394 |
|
Tax-equivalent adjustment |
|
3 |
|
|
|
4 |
|
Securities (tax-equivalent basis) |
$ |
8,299 |
|
|
$ |
5,398 |
|
|
|
|
|
Net interest income (no tax adjustment) |
$ |
79,232 |
|
|
$ |
73,177 |
|
Tax equivalent adjustment |
|
497 |
|
|
|
424 |
|
Net interest income (tax-equivalent basis) |
$ |
79,729 |
|
|
$ |
73,601 |
|
|
|
|
|
Net interest income (no tax adjustment) |
$ |
79,232 |
|
|
$ |
73,177 |
|
Less: |
|
|
|
Purchase accounting adjustments |
|
175 |
|
|
|
(55 |
) |
Prepayment penalties and fees |
|
281 |
|
|
|
181 |
|
PPP fee income |
|
728 |
|
|
|
6,769 |
|
Adjusted net interest income (non-GAAP) |
$ |
78,048 |
|
|
$ |
66,282 |
|
|
|
|
|
Average interest-earning assets |
$ |
2,396,972 |
|
|
$ |
2,329,877 |
|
Average interest-earnings asset, excluding average PPP loans |
$ |
2,391,252 |
|
|
$ |
2,219,286 |
|
Net interest margin (no tax adjustment) |
|
3.31% |
|
|
|
3.14% |
|
Net interest margin, tax-equivalent |
|
3.33% |
|
|
|
3.16% |
|
Adjusted net interest margin, excluding purchase accounting
adjustments, PPP fee income and prepayment penalties
(non-GAAP) |
|
3.26% |
|
|
|
2.99% |
|
|
For the twelve months ended |
|
12/31/2022 |
|
12/31/2021 |
|
(In thousands) |
|
|
|
|
Income Before Income Taxes (GAAP) |
$ |
34,629 |
|
|
$ |
31,724 |
|
Provision (credit) for loan losses |
|
700 |
|
|
|
(925 |
) |
PPP income |
|
(728 |
) |
|
|
(6,769 |
) |
Gain on defined benefit plan curtailment |
|
(2,807 |
) |
|
|
- |
|
Income Before Taxes, Provision, PPP Income and Defined Benefit
Curtailment (non-GAAP) |
$ |
31,794 |
|
|
$ |
24,030 |
|
|
|
|
|
Adjusted Efficiency Ratio: |
|
|
|
Non-interest Expense (GAAP) |
$ |
57,235 |
|
|
$ |
54,942 |
|
Non-GAAP adjustments: |
|
|
|
Loss on prepayment of borrowings |
|
- |
|
|
|
(45 |
) |
Non-interest Expense for Adjusted Efficiency Ratio (non-GAAP) |
$ |
57,235 |
|
|
$ |
54,897 |
|
|
|
|
|
Net Interest Income (GAAP) |
$ |
79,232 |
|
|
$ |
73,177 |
|
|
|
|
|
Non-interest Income (GAAP) |
$ |
13,332 |
|
|
$ |
12,564 |
|
Non-GAAP adjustments: |
|
|
|
Loss on securities, net |
|
4 |
|
|
|
72 |
|
Unrealized losses on marketable equity securities |
|
717 |
|
|
|
168 |
|
Loss on interest rate swap termination |
|
- |
|
|
|
402 |
|
Gain on non-marketable equity investments |
|
(422 |
) |
|
|
(898 |
) |
Gain on defined benefit plan curtailment |
|
(2,807 |
) |
|
|
- |
|
Non-interest Income for Adjusted Efficiency Ratio (non-GAAP) |
$ |
10,824 |
|
|
$ |
12,308 |
|
Total Revenue for Adjusted Efficiency Ratio (non-GAAP) |
$ |
90,056 |
|
|
$ |
85,485 |
|
|
|
|
|
Efficiency Ratio (GAAP) |
|
61.83% |
|
|
|
64.08% |
|
|
|
|
|
Adjusted Efficiency Ratio (Non-interest Expense for Efficiency
Ratio (non-GAAP)/Total Revenue for Efficiency Ratio
(non-GAAP)) |
|
63.55% |
|
|
|
64.64% |
|
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 Banc... (NASDAQ:WNEB)
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