• Western New England Bancorp, Inc. Reports Results for Three Months Ended March 31, 2023 and Declares Quarterly Cash Dividend

    Source: Nasdaq GlobeNewswire / 25 Apr 2023 16:05:39   America/New_York

    WESTFIELD, Mass., April 25, 2023 (GLOBE NEWSWIRE) -- Western New England Bancorp, Inc. (the “Company” or “WNEB”) (NasdaqGS: WNEB), the holding company for Westfield Bank (the “Bank”), announced today the unaudited results of operations for the three months ended March 31, 2023. The Company reported net income of $5.3 million, or $0.24 per diluted share, for the three months ended March 31, 2023, consistent with net income of $5.3 million, or $0.24 per diluted share, for the three months ended March 31, 2022. On a linked quarter basis, net income was $5.3 million, or $0.24 per diluted share, as compared to net income of $9.0 million, or $0.42 per diluted share, for the three months ended December 31, 2022.

    The Company also announced today that the Board of Directors declared a quarterly cash dividend of $0.07 per share on the Company’s common stock. The dividend will be payable on or about May 24, 2023 to shareholders of record on May 10, 2023.

    James Hagan, President and Chief Executive Officer, commented, “We are very pleased with the relative stability of our core deposit relationships and the continued support of our long-term customer base despite recent national banking concerns. Our capital position now, as in the past, continues to be strong. We maintain solid relationships with the local community, our bank regulators and our depositors and borrowers. We will continue to strive to provide consistency for all customers and shareholders now and in the future.”

    Hagan concluded, “The Company continues to focus on our loan and deposit growth initiatives and retention of our customer and borrower base which has been reflected in our record income and growth over the last few years. We are grateful for the positive response from our customers. Despite our atypical first quarter results, we saw growth in our loan portfolio and will strive to continue to grow. As a result of local market disruptions, we are working to onboard new talent and new depositor and borrowing relationships, both of which will assist us in our growth. We continue to remain positive about the future growth of the Company.”

    Key Highlights:

    Loans and Deposits

    At March 31, 2023, total loans of $2.0 billion increased $15.1 million, or 0.8%, from December 31, 2022. During the same period, total deposits decreased $72.3 million, or 3.2%, to $2.2 billion at March 31, 2023. Core deposits, which are defined, by the Company, as all deposits except for time deposits, decreased $118.4 million, or 6.5%, from $1.8 billion, or 81.5% of total deposits, at December 31, 2022, to $1.7 billion, or 78.8% of total deposits at March 31, 2023. Time deposits increased $46.0 million, or 11.2%, from $411.7 million at December 31, 2022 to $457.7 million at March 31, 2023. The loan-to-deposit ratio increased from 89.3% at December 31, 2022 to 93.0% at March 31, 2023.

    Liquidity

    The Company’s liquidity position is benefited from borrowing capacity from various funding sources. Specifically, the Company continues to have significant borrowing capacity with the Federal Home Loan Bank of Boston (the “FHLB”) and other wholesale sources. At March 31, 2023, the Company had $281.6 million in available borrowing capacity with the FHLB. Additionally, the Company can increase its borrowing capacity with the FHLB by pledging additional investment securities or additional loans. The Company also has a borrowing relationship with the Federal Reserve Bank of Boston (the “FRB”) through its primary credit program offered through its discount window with a borrowing capacity up to $53.4 million. In addition, the Company also has $71.5 million in available borrowing capacity with the FRB under the Bank Term Funding Program (the “BTFP”). At March 31, 2023, the Company did not have any outstanding balances under the FRB’s discount window credit program or the BTFP. In addition, the Company has borrowing capacity with two correspondent banks with unsecured lines of credit up to $65.0 million. At March 31, 2023, we did not have an outstanding balance under either of these two lines of credit. Lastly, the Company has agreements with approved broker-dealers to participate in the brokered deposit market to support liquidity. At March 31, 2023, the Company did not have any brokered deposits outstanding.

    Allowance for Credit Losses and Credit Quality

    At March 31, 2023, the allowance for credit losses was $19.0 million, or 0.95% of total loans and 328.5% of nonperforming loans, compared to $19.9 million, or 1.00% of total loans and 350.0% of nonperforming loans at December 31, 2022. At March 31, 2023, nonperforming loans totaled $5.8 million, or 0.29% of total loans, compared to $5.7 million, or 0.29% of total loans, at December 31, 2022. Total delinquent loans decreased $1.4 million, or 31.8%, from $4.5 million, or 0.22% of total loans, at December 31, 2022 to $3.1 million, or 0.15% of total loans, at March 31, 2023.

    Current Expected Credit Loss

    On January 1, 2023, the Company implemented the accounting rules for the measurement of Credit Losses on Financial Instruments (“CECL”). The January 1, 2023, or “Day 1” tax-effected transitional impact to retained earnings was $9,000 due to the following: a decrease in the pooled credit reserve of $931,000 and the establishment of a reserve liability for unfunded commitments of $918,000. Additionally, the allowance for credit losses includes $2.1 million in reserves related to purchase credit deteriorated (“PCD”) loans. For PCD loans, the allowance for credit losses recorded is recognized through a gross-up that increases the amortized cost basis of loans with a corresponding increase to the allowance for credit losses, and therefore results in no impact to shareholders' equity.

    Net Interest Margin

    The net interest margin was 3.14% for the three months ended March 31, 2023 compared to 3.44% for the three months ended December 31, 2022. The net interest margin, on a tax-equivalent basis, was 3.16% for the three months ended March 31, 2023, compared to 3.47% for the three months ended December 31, 2022.

    Stock Repurchase Program

    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, representing approximately 5.0% of the Company’s outstanding common stock as of the time the 2022 Plan was announced. During the three months ended March 31, 2023, the Company repurchased 125,000 shares of common stock under the 2022 Plan, with an average price per share of $9.31. As of March 31, 2023, there were 931,344 shares of common stock available for repurchase under the 2022 Plan.

    The repurchase of shares under the stock repurchase program is administered through an independent broker. 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.

    Book Value and Tangible Book Value

    The Company’s book value per share was $10.50 at March 31, 2023 compared to $10.27 at December 31, 2022, while tangible book value per share, a non-GAAP financial measure, increased $0.23, or 2.4%, from $9.61 at December 31, 2022 to $9.84 at March 31, 2023. Tangible book value is a non-GAAP measure. See pages 16-18 for the related tangible book value calculation and a reconciliation of GAAP to non-GAAP financial measures.

    Westfield Bank Defined Benefit Pension Plan

    The Board of Directors previously announced the termination of the Westfield Bank Defined Benefit Pension Plan (the “DB Plan”) on October 31, 2022, subject to required regulatory approval. 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, during the three months ended December 31, 2022, the Company recorded a gain on curtailment of $2.8 million through non-interest income. The Company expects to receive regulatory approval to terminate the DB Plan in the second quarter of 2023. On April 11, 2023, the Company made an additional cash contribution of $1.3 million in order to fully fund the DB Plan on a plan termination basis, and on April 14, 2023, the DB Plan funded a $6.3 million premium to purchase 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.

    Net Income for the Three Months Ended March 31, 2023 Compared to the Three Months Ended December 31, 2022.

    The Company reported net income of $5.3 million, or $0.24 per diluted share, for the three months ended March 31, 2023, compared to net income of $9.0 million, or $0.42 per diluted share, for the three months ended December 31, 2022. Net interest income decreased $2.4 million, or 11.3%, non-interest income decreased $2.7 million, or 47.3%, and non-interest expense increased $893,000, or 6.4%. Partially offsetting these negative factors was a decrease in the provision for credit losses of $538,000, or 358.7%, during the same period. Return on average assets and return on average equity were 0.84% and 9.31%, respectively, for the three months ended March 31, 2023, compared to 1.40% and 16.67%, respectively, for the three months ended December 31, 2022.

    Net Interest Income and Net Interest Margin

    On a sequential quarter basis, net interest income, our primary driver of revenues, decreased $2.4 million, or 11.3%, to $18.5 million for the three months ended March 31, 2023, from $20.9 million for the three months ended December 31, 2022. The decrease in net interest income was primarily due to an increase in interest expense of $2.4 million, or 88.0%. During the three months ended March 31, 2023, interest income included $62,000 in negative purchase accounting adjustments. During the three months ended December 31, 2022, interest income included $87,000 in positive purchase accounting adjustments and prepayment penalties of $134,000. Excluding the adjustments above, net interest income decreased $2.0 million, or 10.0%, from $20.6 million during the three months ended December 31, 2022, to $18.6 million during the three months ended March 31, 2023.

    The net interest margin was 3.14% for the three months ended March 31, 2023 compared to 3.44% for the three months ended December 31, 2022. The net interest margin, on a tax-equivalent basis, was 3.16% for the three months ended March 31, 2023, compared to 3.47% for the three months ended December 31, 2022. During the three months ended March 31, 2023, the Company’s net interest margin was negatively impacted by higher deposit costs as well as a shift in the deposit mix from low-cost deposits to high-cost time deposit accounts.

    The average yield on interest-earning assets was 4.01% for the three months ended March 31, 2023, compared to 3.90% for the three months ended December 31, 2022. The average loan yield was 4.34% for the three months ended March 31, 2023, compared to 4.23% for the three months ended December 31, 2022. During the three months ended March 31, 2023, average interest-earning assets decreased $8.2 million, or 0.3% to $2.4 billion, primarily due to a decrease in average securities of $6.2 million, or 1.6%, a decrease in average loans of $1.8 million, or 0.1%, and a decrease in short-term investments, consisting of cash and cash equivalents, of $1.7 million, or 22.6%, partially offset by an increase of $1.5 million, or 13.7%, in average other investments.

    The average cost of total funds, including non-interest bearing accounts and borrowings, increased 44 basis points from 0.47% for the three months ended December 31, 2022 to 0.91% for the three months ended March 31, 2023. The average cost of core deposits, including non-interest bearing demand deposits, increased 19 basis point to 0.53% for the three months ended March 31, 2023, from 0.34% for the three months ended December 31, 2022. The average cost of time deposits increased 106 basis points from 0.65% for the three months ended December 31, 2022 to 1.71% for the three months ended March 31, 2023. The average cost of borrowings, including subordinated debt, increased 55 basis points from 4.29% for the three months ended December 31, 2022 to 4.84% for the three months ended March 31, 2023. Average demand deposits, an interest-free source of funds, decreased $24.7 million, or 3.7%, from $663.8 million, or 29.4% of total average deposits, for the three months ended December 31, 2022, to $639.2 million, or 29.0% of total average deposits, for the three months ended March 31, 2023.

    During the first quarter of 2023, the Company experienced intense competition for deposits due to the increase in the Federal Funds rate, which drove interest expense higher and pressured the net interest margin. In addition to the increase in interest rates paid on deposit accounts, the Company also experienced an unfavorable shift in deposit mix from low-cost core deposits to high-cost time deposits as customers migrated to higher yields. The Company not only experienced deposit competition from local competitors, but also from money market funds and Treasury notes that were offering higher returns.

    Provision for (Reversal of) Credit Losses

    During the three months ended March 31, 2023, the Company recorded a reversal of credit losses of $388,000, compared to a provision for credit losses of $150,000 during the three months ended December 31, 2022. The reversal was primarily due to lower loan growth and changes in the economic environment and related adjustments to the quantitative components of the CECL methodology and the continued stable asset quality.

    During the three months ended March 31, 2023, the Company recorded net charge-offs of $1.9 million, compared to net charge-offs of $426,000 for the three months ended December 31, 2022. The charge-offs during the three months ended March 31, 2023 were related to one commercial relationship acquired on October 21, 2016 from Chicopee Bancorp, Inc., which was recently placed on nonaccrual status. At March 31, 2023, the Company recorded a $1.9 million charge-off on the relationship, which represented the non-accretable credit mark that was required to be grossed-up to the loan’s amortized cost basis with a corresponding increase to the allowance for credit losses under the CECL implementation. At March 31, 2023, the Company has charged-off 61% of the total relationship and the remaining exposure of $1.3 million is projected to be collateralized at this time.

    Non-Interest Income

    On a sequential quarter basis, non-interest income decreased $2.7 million, or 47.3%, to $3.0 million for the three months ended March 31, 2023, from $5.7 million for the three months ended December 31, 2022. During the three months ended December 31, 2022, the Company recorded a $2.8 million curtailment gain related to the DB Plan termination, which took effect on October 31, 2022. Excluding the curtailment gain, non-interest income increased $133,000, or 4.7%. Service charges and fees on deposits decreased $142,000, or 6.1%, from the three months ended December 31, 2022 to $2.2 million for the three months ended March 31, 2023 primarily due to changes in the Company’s overdraft program. Income from bank-owned life insurance (“BOLI”) increased $12,000, or 2.8%, from the three months ended December 31, 2022 to $440,000 for the three months ended March 31, 2023.

    During the three months ended March 31, 2023, the Company reported a gain on non-marketable equity investments of $352,000, compared to a gain of $70,000 during the three months ended December 31, 2022. During the three months ended December 31, 2022, the Company reported unrealized gains on marketable equity securities of $19,000. 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 March 31, 2023, non-interest expense increased $893,000, or 6.4%, to $14.9 million from the three months ended December 31, 2022. Salaries and employee benefits expense increased $234,000, or 2.9%, to $8.4 million, primarily due to annual merit increases and an increase in benefit costs. Advertising expense increased $239,000, or 134.3%, from $178,000 for the three months ended December 31, 2022 to $417,000 for the three months ended March 31, 2023. Professional fees increased $140,000, or 22.7%, occupancy expense increased $130,000, or 10.7%, due to an increase in snow removal costs of $115,000 during the three months ended March 31, 2023. FDIC insurance expense increased $97,000, or 38.0%, data processing expense increased $29,000, or 4.0%, other non-interest expense increased $17,000, or 0.7%, and furniture and equipment expense increased $7,000, or 1.5%.

    For the three months ended March 31, 2023, the efficiency ratio was 69.3%, compared to 52.8% for December 31, 2022. For the three months ended March 31, 2023, the adjusted efficiency ratio, a non-GAAP financial measure, was 70.5% compared to 59.3% for the three months ended December 31, 2022. The efficiency ratio increase was driven by lower net interest income and higher non-interest expenses during the three months ended March 31, 2023 compared to the three months ended December 31, 2022. See pages 16-18 for the related ratio calculation and a reconciliation of GAAP to non-GAAP financial measures.

    Income Tax Provision

    Income tax expense for the three months ended March 31, 2023 was $1.7 million, or an effective tax rate of 24.0%, compared to $3.3 million, or an effective tax rate of 26.9%, for the three months ended December 31, 2022 due to lower projected pre-tax income for the twelve months ended December 31, 2023.

    Net Income for the Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022.

    The Company reported net income of $5.3 million, or $0.24 per diluted share, for the three months ended March 31, 2023, consistent with net income of $5.3 million, or $0.24 per diluted share, for the three months ended March 31, 2022. Net interest income decreased $194,000, or 1.0%, non-interest income increased $631,000, or 26.9%, and non-interest expense increased $440,000, or 3.0%. For the three months ended March 31, 2023, return on average assets and return on average equity were 0.84% and 9.31%, respectively, compared to 0.85% and 9.65%, respectively, for the three months ended March 31, 2022.

    Net Interest Income and Net Interest Margin

    Net interest income, our primary driver of revenues, decreased $194,000, or 1.0%, to $18.5 million for the three months ended March 31, 2023, from $18.7 million for the three months ended March 31, 2022. The decrease in net interest income was due to an increase in total interest expense of $3.9 million, or 312.4%, primary due to an increase in interest expense on deposits of $3.1 million, or 313.6%, and an increase in interest expense on borrowings of $778,000, or 307.5%. During the same period, interest and dividend income increased $3.7 million, or 18.5%. Excluding Paycheck Protection Program (“PPP income”) of $15,000 and $562,000 during the three months ended March 31, 2023 and March 31, 2022, respectively, net interest income increased $353,000, or 1.9%. During the three months ended March 31, 2023, interest income included $62,000 in negative purchase accounting adjustments, compared to $39,000 in positive purchase accounting adjustments during the three months ended March 31, 2022. Excluding the adjustments above, net interest income increased $454,000, or 2.5%, from $18.1 million during the three months ended March 31, 2022, to $18.6 million during the three months ended March 31, 2023.

    The net interest margin was 3.14% for the three months ended March 31, 2023, compared to 3.18%, for the three months ended March 31, 2022. The net interest margin, on a tax-equivalent basis, was 3.16% for the three months ended March 31, 2023, compared to 3.20% for the three months ended March 31, 2022. Excluding the adjustments discussed above, the net interest margin increased five basis points from 3.10% for the three months ended March 31, 2022 to 3.15% for the three months ended March 31, 2023. The Company’s net interest margin, during the three months ended March 31, 2023, was negatively impacted by higher deposit costs as well as a shift in the deposit mix from low-cost deposits to high-cost deposits.

    The average yield on interest-earning assets increased 62 basis points from 3.39% for the three months ended March 31, 2022 to 4.01% for the three months ended March 31, 2023. During the three months ended March 31, 2023, the average cost of funds, including non-interest-bearing demand accounts and borrowings, increased 69 basis points, from 0.22% for the three months ended March 31, 2022 to 0.91% for the three months ended March 31, 2023. The average cost of core deposits, which include non-interest-bearing demand accounts, increased 37 basis points, from 0.16% for the three months ended March 31, 2022 to 0.53% for the three months ended March 31, 2023. The average cost of time deposits increased 136 basis points from 0.35% for the three months ended March 31, 2022 to 1.71% for the three months ended March 31, 2023. The average cost of borrowings, including subordinated debt, increased 17 basis points from 4.67% for the three months ended March 31, 2022 to 4.84% for the three months ended March 31, 2023. For the three months ended March 31, 2023, average demand deposits, an interest-free source of funds, increased $6.1 million, or 1.0%, to $639.2 million, or 29.0% of total average deposits, from $633.1 million, or 28.1% of total average deposits for the three months ended March 31, 2022.

    During the three months ended March 31, 2023, average interest-earning assets increased $7.6 million, or 0.3%, to $2.4 billion compared to the three months ended March 31, 2022, primarily due to an increase in average loans of $98.3 million, or 5.2%, and an increase in average other investments of $1.5 million, or 14.2%, offset by a decrease in average short-term investments, consisting of cash and cash equivalents, of $51.1 million, or 89.6%, and a decrease in average securities of $41.1 million, or 9.7%.

    Provision for (Reversal of) Credit Losses

    During the three months ended March 31, 2023, the Company recorded a reversal of credit losses of $388,000, compared to a reversal of credit losses of $425,000 during the three months ended March 31, 2022. The Company recorded net charge-offs of $1.9 million for the three months ended March 31, 2023, as compared to net charge-offs of $54,000 for the three months ended March 31, 2022.

    Non-Interest Income

    Non-interest income increased $631,000, or 26.9%, to $3.0 million for the three months ended March 31, 2023, from $2.3 million for the three months ended March 31, 2022. During the three months ended March 31, 2023, service charges and fees on deposits increased $13,000, or 0.6%, and income from BOLI decreased $8,000, or 1.8%, from $448,000 for the three months ended March 31, 2022 to $440,000 for the three months ended March 31, 2023. During the three months ended March 31, 2023, the Company reported a gain on non-marketable equity investments of $352,000 and during the three months ended March 31, 2022, the Company reported an unrealized loss on marketable equity securities of $276,000. 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 March 31, 2023, non-interest expense increased $440,000, or 3.0%, to $14.9 million, from $14.5 million for the three months ended March 31, 2022. Salaries and employee benefits expense increased $192,000, or 2.3%, professional fees increased $180,000, or 31.2%, FDIC insurance expense increased $66,000, or 23.1%, data processing expense increased $30,000, or 4.1%, advertising expense increased $18,000, or 4.5%, and other non-interest expense increased $26,000, or 1.1%. These increases were partially offset by a decrease in furniture and equipment expense of $57,000, or 10.5%, and a decrease in occupancy expense of $15,000, or 1.1%.

    For the three months ended March 31, 2023, the efficiency ratio was 69.3%, compared to 68.7% for March 31, 2022. For the three months ended March 31, 2023, the adjusted efficiency ratio, a non-GAAP financial measure, was 70.5% compared to 67.8% for the three months ended March 31, 2022. See pages 16-18 for the related ratio calculation and a reconciliation of GAAP to non-GAAP financial measures.

    Income Tax Provision

    Income tax expense for the three months ended March 31, 2023 was $1.7 million, or an effective tax rate of 24.0%, compared to $1.7 million, or an effective tax rate of 24.2%, for three months ended March 31, 2022.

    Balance Sheet

    At March 31, 2023, total assets were $2.6 billion, an increase of $8.9 million, or 0.4%, from December 31, 2022. During the three months ended March 31, 2023, cash and cash equivalents decreased $7.1 million, or 23.4%, to $23.2 million, investment securities decreased $3.7 million, or 1.0%, to $379.7 million and total loans increased $15.1 million, or 0.8%, to $2.0 billion.

    Investments

    At March 31, 2023, the available-for-sale and held-to-maturity securities portfolio represented 14.6% of total assets, compared to 14.8% at December 31, 2022. At March 31, 2023, the Company’s available-for-sale securities portfolio, recorded at fair market value, decreased $624,000, or 0.4%, from $147.0 million at December 31, 2022 to $146.4 million. The held-to-maturity securities portfolio, recorded at amortized cost, decreased $3.2 million, or 1.4%, from $230.2 million at December 31, 2022 to $227.0 million at March 31, 2023. The marketable equity securities portfolio increased $72,000, or 1.2%, from $6.2 million at December 31, 2022 to $6.3 million at March 31, 2023.

    At March 31, 2023, the Company reported unrealized losses on the available-for-sale securities portfolio of $29.5 million, or 16.8% of the amortized cost basis of the available-for-sale securities portfolio, compared to unrealized losses of $32.2 million, or 18.0% of the amortized cost basis of the available-for-sale securities at December 31, 2022. At March 31, 2023, the Company reported unrealized losses on the held-to-maturity securities portfolio of $35.9 million, or 15.8%, of the amortized cost basis of all held-to-maturity securities, compared to $39.2 million, or 17.0% of the amortized cost basis of all held-to-maturity securities at December 31, 2022.

    The securities in which the Company may invest are limited by regulation. Federally chartered savings banks have authority to invest in various types of assets, including U.S. Treasury obligations, securities of various government-sponsored enterprises, mortgage-backed securities, certain certificates of deposit of insured financial institutions, repurchase agreements, overnight and short-term loans to other banks, corporate debt instruments and marketable equity securities. The securities, with the exception of $7.5 million in corporate bonds, are issued by the United States government or government-sponsored enterprises and are therefore either explicitly or implicitly guaranteed as to the timely payment of contractual principal and interest. These positions are deemed to have no credit impairment, therefore, the disclosed unrealized losses with the securities portfolio relate primarily to changes in prevailing interest rates. In all cases, price improvement in future periods will be realized as the issuances approach maturity.

    Management regularly reviews the portfolio for securities in an unrealized loss position. At March 31, 2023 and December 31, 2022, the Company did not record any impairment charges on its securities portfolio and attributed the unrealized losses primarily due to fluctuations in general interest rates or changes in expected prepayments and not due to credit quality.

    The primary objective of the Company’s investment portfolio is to provide liquidity and to secure municipal deposit accounts while preserving the safety of principal. The Company expects to strategically redeploy available cash flows from the securities portfolio to fund loan growth and deposit outflows.

    Total Loans

    Total gross loans increased $15.1 million, or 0.8%, to $2.0 billion from December 31, 2022 to March 31, 2023. Commercial real estate loans increased $10.3 million, or 1.0%, residential real estate loans, including home equity loans, increased $5.8 million, or 0.8%, while commercial and industrial loans, including PPP loans, decreased $1.7 million, or 0.8%.

    The following table is a summary of our outstanding loan balances for the periods indicated:

     March 31, 2023 December 31, 2022
     (Dollars in thousands)
      
    Commercial real estate loans$1,079,664  $1,069,323 
        
    Residential real estate loans:   
    Residential 595,097   589,503 
    Home equity 105,801   105,557 
    Total residential real estate loans 700,898   695,060 
        
    Commercial and industrial loans:   
    PPP loans 2,129   2,274 
    Commercial and industrial loans 215,971   217,574 
    Total commercial and industrial loans 218,100   219,848 
    Consumer loans 5,667   5,045 
    Total gross loans 2,004,329   1,989,276 
    Unamortized PPP loan fees (99)  (109)
    Unamortized premiums and net deferred loans fees and costs 2,269   2,233 
    Total loans$2,006,499  $1,991,400 


    Credit Quality

    Management continues to remain attentive to any signs of deterioration in borrowers’ financial conditions and is proactive in taking the appropriate steps to mitigate risk. At March 31, 2023, nonperforming loans totaled $5.8 million, or 0.29% of total loans, compared to $5.7 million, or 0.29% of total loans, at December 31, 2022. At March 31, 2023, there were no loans 90 or more days past due and still accruing interest. Nonperforming assets to total assets, was 0.23% at March 31, 2023, compared to 0.22% at December 31, 2022. The allowance for credit losses as a percentage of total loans was 0.95% at March 31, 2023, compared to 1.00% at December 31, 2022. At March 31, 2023, the allowance for credit losses as a percentage of nonperforming loans was 328.5%, compared to 350.0% at December 31, 2022.

    Deposits

    Total deposits decreased $72.3 million, or 3.2%, from December 31, 2022 to $2.2 billion at March 31, 2023. Core deposits, which the Company defines as all deposits except time deposits, decreased $118.4 million, or 6.5%, from $1.8 billion, or 81.5% of total deposits, at December 31, 2022, to $1.7 billion, or 78.8% of total deposits, at March 31, 2023. Non-interest-bearing deposits decreased $19.9 million, or 3.1%, to $625.7 million, interest-bearing checking accounts decreased $15.0 million, or 10.1%, to $133.7 million, savings accounts decreased $3.6 million, or 1.6%, to $218.8 million, and money market accounts decreased $79.9 million, or 10.0%, to $721.2 million. Time deposits increased $46.0 million, or 11.2%, from $411.7 million at December 31, 2022 to $457.7 million at March 31, 2023.

    The table below is a summary of our deposit balances for the periods noted:

     March 31, 2022 June 30, 2022 September 30, 2022 December 31, 2022 January 31, 2023 February 28, 2023 March 31, 2023
     (Dollars in thousands)
      
    Core deposits$1,899,141 $1,951,564  $1,944,476  $1,817,753  $1,784,606  $1,786,179  $1,699,402 
    Time deposits 379,023  350,408   343,278   411,690   421,246   427,922   457,726 
    Total Deposits$ 2,278,164 $ 2,301,972  $ 2,287,754  $ 2,229,443  $ 2,205,852  $ 2,214,101  $ 2,157,128 
    Change from prior period:             
    Dollars ($)  $23,808  $(14,218) $(58,311) $(23,591) $8,249  $(56,973)
    Percent (%)   1.0%   (0.6)%   (2.5)%   (1.1)%   0.4%   (2.6)% 


    Total deposits decreased $15.3 million, or 0.7%, from December 31, 2022 to $2.2 billion at February 28, 2023. Total deposits decreased $57.0 million, or 2.6%, from February 28, 2023 to $2.2 billion at March 31, 2023. Of the $57.0 million, 58% of the deposit decrease was due to the reduction of a single deposit relationship that was seeking a higher rate and moved the funds to a treasury investment outside the bank. During the first quarter of 2023, the Company experienced a higher level of competition not only from local competitors but also from money market funds and Treasury notes that were offering higher returns. In addition, the Company also saw an unfavorable shift in deposit mix from low-cost core deposits to high-cost time deposits as customers migrated to higher yields.

    The Company continues to focus on the maintenance, development, and expansion of its core deposit base to meet funding requirements and liquidity needs, with an emphasis to retain a long-term customer relationship base and to efficiently compete for and retain deposits in our local market. At March 31, 2023, the banks uninsured deposits represented 28.6% of total deposits, compared to 30.8% at December 31, 2022 and the average account size was approximately $22,000. The Company’s deposit based was 65% retail, 25% business, 5% municipal and 4% non-profit.

    FHLB and Subordinated Debt

    At March 31, 2023, short-term borrowings increased $57.6 million, or 139.4%, to $99.0 million, compared to $41.4 million at December 31, 2022. Long-term borrowings with the FHLB increased $30.0 million from $1.2 million at December 31, 2022, to $31.2 million at March 31, 2023. Subordinated debt of $19.7 million remained unchanged at March 31, 2023 and December 31, 2022.

    Capital

    At March 31, 2023, shareholders’ equity was $233.2 million, or 9.1% of total assets, compared to $228.1 million, or 8.9% of total assets, at December 31, 2022. The increase was primarily attributable to net income of $5.3 million and a decrease in accumulated other comprehensive loss of $1.9 million reflecting the after-tax increase in the fair value of the available-for-sale securities portfolio primarily due to changes in market interest rates. These increases were partially offset by cash dividends paid of $1.5 million. At March 31, 2023, the unrealized losses are not realized in our consolidated statements of net income since the Company has both the intent and ability to hold these available-for-sale securities until maturity or the price recovers. At March 31, 2023, total shares outstanding were 22,209,347.

    The Company’s regulatory capital ratios continue to be strong and in excess of regulatory minimum requirements to be considered well-capitalized as defined by the regulators as well as internal targets. Total Risk-Based Capital Ratio at March 31, 2023 and December 31, 2022 was 14.2%.  The Bank’s Tier 1 Leverage Ratio to adjusted average assets was 9.68% at March 31, 2023 and 9.49% at December 31, 2022. The Bank’s tangible common equity ("TCE") to tangible assets ratio, a non-GAAP financial measure, was 8.78% at March 31, 2023, compared to 8.52% at December 31, 2022.  Fluctuations in the TCE ratio were driven by the changes in the unrealized loss on available-for-sale securities. TCE is a non-GAAP measure. See pages 16-18 for the related ratio calculation and a reconciliation of GAAP to non-GAAP financial measures.

    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 coronavirus disease 2019 (“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:

    • unpredictable changes in general economic conditions, financial markets, fiscal, monetary and regulatory policies, including actual or potential stress in the banking industry;
    • the duration and scope of the continuing COVID-19 pandemic , including the emergence of new COVID-19 variants and the response thereto;
    • changes in economic conditions which could materially impact credit quality trends and the ability to generate loans and gather deposits;
    • inflation and governmental responses to inflation, including increasing interest rates 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;
    • significant changes in accounting, tax or regulatory practices or requirements;
    • new legal obligations or liabilities or unfavorable resolutions of litigation;
    • disruptive technologies in payment systems and other services traditionally provided by banks;
    • the highly competitive industry and market area in which we operate;
    • uncertainty about the discontinued use of LIBOR and the transition to an alternative rate;
    • changes in business conditions and inflation;
    • operational risks or risk management failures by us or critical third parties, including without limitation with respect to data processing, information systems, cybersecurity, technological changes, vendor issues, business interruption, and fraud risks;
    • failure or circumvention of our internal controls or procedures;
    • changes in the securities markets which affect investment management revenues;
    • increases in Federal Deposit Insurance Corporation deposit insurance premiums and assessments;
    • 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;
    • 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 risk 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
     March 31,December 31,September 30,June 30,March 31,
      2023  2022  2022  2022  2022 
    INTEREST AND DIVIDEND INCOME:     
    Loans$21,329 $21,274 $19,543 $18,500 $17,947 
    Securities 2,149  2,174  2,104  2,068  1,950 
    Other investments 106  75  47  30  25 
    Short-term investments 54  62  60  48  21 
    Total interest and dividend income 23,638  23,585  21,754  20,646  19,943 
          
    INTEREST EXPENSE:     
    Deposits 4,103  2,206  1,164  990  992 
    Short-term borrowings 703  272  48  10  - 
    Long-term debt 74  -  -  -  - 
    Subordinated debt 254  253  254  254  253 
    Total interest expense 5,134  2,731  1,466  1,254  1,245 
          
    Net interest and dividend income 18,504  20,854  20,288  19,392  18,698 
          
    (REVERSAL OF) PROVISION FOR CREDIT LOSSES (388) 150  675  300  (425)
          
    Net interest and dividend income after (reversal of) provision for credit losses 18,892  20,704  19,613  19,092  19,123 
          
    NON-INTEREST INCOME:     
    Service charges and fees 2,187  2,329  2,223  2,346  2,174 
    Income from bank-owned life insurance 440  428  391  458  448 
    Loss gain on sales of securities, net -  -  -  -  (4)
    Unrealized gains (losses) on marketable equity securities -  19  (235) (225) (276)
    Gain on sale of mortgages -  -  -  -  2 
    Gain on non-marketable equity investments 352  70  211  141  - 
    Gain on defined benefit plan curtailment -  2,807  -  -  - 
    Other income -  -  -  21  4 
    Total non-interest income 2,979  5,653  2,590  2,741  2,348 
          
    NON-INTEREST EXPENSE:     
    Salaries and employee benefits 8,431  8,197  8,025  8,236  8,239 
    Occupancy 1,348  1,218  1,226  1,177  1,363 
    Furniture and equipment 486  479  465  539  543 
    Data processing 753  724  707  731  723 
    Professional fees 757  617  803  719  577 
    FDIC insurance 352  255  273  234  286 
    Advertising 417  178  419  412  399 
    Other 2,352  2,335  2,425  2,385  2,326 
    Total non-interest expense 14,896  14,003  14,343  14,433  14,456 
          
    INCOME BEFORE INCOME TAXES 6,975  12,354  7,860  7,400  7,015 
          
    INCOME TAX PROVISION 1,671  3,320  1,861  1,865  1,696 
    NET INCOME$5,304 $9,034 $5,999 $5,535 $5,319 
          
    Basic earnings per share$0.24 $0.42 $0.28 $0.25 $0.24 
    Weighted average shares outstanding 21,699,042  21,676,892  21,757,027  21,991,383  22,100,076 
    Diluted earnings per share$0.24 $0.42 $0.28 $0.25 $0.24 
    Weighted average diluted shares outstanding 21,716,869  21,751,409  21,810,036  22,025,687  22,172,909 
          
    Other Data:     
    Return on average assets (1) 0.84%  1.40%  0.93%  0.87%  0.85% 
    Return on average equity (1) 9.31%  16.67%  10.90%  10.22%  9.65% 
    Efficiency ratio 69.34%  52.83%  62.69%  65.21%  68.69% 
    Adjusted efficiency ratio (2) 70.49%  59.31%  62.63%  64.96%  67.79% 
    Net interest margin 3.14%  3.44%  3.35%  3.24%  3.18% 
    Net interest margin, on a fully tax-equivalent basis 3.16%  3.47%  3.37%  3.26%  3.20% 


    ______________________
    (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 realized and unrealized gains and losses on securities, gain on non-marketable equity investments and gain on defined benefit plan curtailment.



    WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES
    Consolidated Balance Sheets
    (Dollars in thousands)
    (Unaudited)

     March 31, December 31, September 30, June 30, March 31,
      2023   2022   2022   2022   2022 
    Cash and cash equivalents$23,230  $30,342  $27,113  $47,513  $62,898 
    Available-for-sale securities, at fair value 146,373   146,997   148,716   160,925   173,910 
    Held to maturity securities, at amortized cost 226,996   230,168   234,387   233,803   237,575 
    Marketable equity securities, at fair value 6,309   6,237   11,280   11,453   11,643 
    Federal Home Loan Bank of Boston and other restricted stock - at cost 7,173   3,352   2,234   1,882   2,594 
              
    Loans 2,006,499   1,991,400   2,007,672   1,975,700   1,926,285 
    Allowance for credit losses (1) (19,031)  (19,931)  (20,208)  (19,560)  (19,308)
    Net loans 1,987,468   1,971,469   1,987,464   1,956,140   1,906,977 
              
    Bank-owned life insurance 75,060   74,620   74,192   73,801   73,343 
    Goodwill 12,487   12,487   12,487   12,487   12,487 
    Core deposit intangible 2,094   2,188   2,281   2,375   2,469 
    Other assets 74,825   75,290   78,671   76,978   71,542 
    TOTAL ASSETS$2,562,015  $2,553,150  $2,578,825  $2,577,357  $2,555,438 
              
    Total deposits$2,157,128  $2,229,443  $2,287,754  $2,301,972  $2,278,164 
    Short-term borrowings 98,990   41,350   21,500   4,790   - 
    Long-term debt 31,178   1,178   1,178   1,360   1,686 
    Subordinated debt 19,682   19,673   19,663   19,653   19,643 
    Securities pending settlement -   133   9   -   146 
    Other liabilities 21,815   33,230   37,021   34,252   36,736 
    TOTAL LIABILITIES 2,328,793   2,325,007   2,367,125   2,362,027   2,336,375 
              
    TOTAL SHAREHOLDERS' EQUITY 233,222   228,143   211,700   215,330   219,063 
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$2,562,015  $2,553,150  $2,578,825  $2,577,357  $2,555,438 


    ______________________
    (1)The Company adopted ASU 2016-13 on January 1, 2023 with a modified retrospective approach. Accordingly, at March 31, 2023, the allowance for credit losses was determined in accordance with ASC 326, “Financial Instruments-Credit Losses.”


    WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES
    Other Data
    (Dollars in thousands, except per share data)
    (Unaudited)

     Three Months Ended
      March 31, December 31, September 30, June 30, March 31,
     2023 2022 2022 2022 2022
    Shares outstanding at end of period22,209,347 22,216,789 22,246,545 22,465,991 22,742,189
              
    Operating results:         
    Net interest income$ 18,504 $ 20,854 $ 20,288 $ 19,392 $ 18,698
    (Reversal of) provision for credit losses(388) 150 675 300 (425)
    Non-interest income2,979 5,653 2,590 2,741 2,348
    Non-interest expense14,896 14,003 14,343 14,433 14,456
    Income before income provision for income taxes6,975 12,354 7,860 7,400 7,015
    Income tax provision1,671 3,320 1,861 1,865 1,696
    Net income5,304 9,034 5,999 5,535 5,319
              
    Performance Ratios:         
    Net interest margin, on a fully tax-equivalent basis3.16% 3.47% 3.37% 3.26% 3.20%
    Interest rate spread, on a fully tax-equivalent basis2.76% 3.26% 3.26% 3.17% 3.10%
    Return on average assets0.84% 1.40% 0.93% 0.87% 0.85%
    Return on average equity9.31% 16.67% 10.90% 10.22% 9.65%
    Adjusted efficiency ratio (non-GAAP) (1)70.49% 59.31% 62.63% 64.96% 67.79%
              
    Per Common Share Data:         
    Basic earnings per share$ 0.24 $ 0.42 $ 0.28 $ 0.25 $ 0.24
    Per diluted share0.24 0.42 0.28 0.25 0.24
    Cash dividend declared0.07 0.06 0.06 0.06 0.06
    Book value per share10.50 10.27 9.52 9.58 9.63
    Tangible book value per share (non-GAAP)9.84 9.61 8.85 8.92 8.97
              
    Asset Quality:         
    30-89 day delinquent loans$ 1,669 $ 2,578 $ 2,630 $ 1,063 $ 1,407
    90 days or more delinquent loans1,377 1,891 669 1,149 1,401
    Total delinquent loans3,046 4,469 3,299 2,212 2,808
    Total delinquent loans as a percentage of total loans0.15% 0.22% 0.16% 0.11% 0.15%
    Total delinquent loans as a percentage of total loans, excluding PPP0.15% 0.22% 0.16% 0.11% 0.15%
    Nonperforming loans$ 5,794 $ 5,694 $ 4,432 $ 4,105 $ 3,988
    Nonperforming loans as a percentage of total loans0.29% 0.29% 0.22% 0.21% 0.21%
    Nonperforming loans as a percentage of total loans, excluding PPP0.29% 0.29% 0.22% 0.21% 0.21%
    Nonperforming assets as a percentage of total assets0.23% 0.22% 0.17% 0.16% 0.16%
    Nonperforming assets as a percentage of total assets, excluding PPP0.23% 0.22% 0.17% 0.16% 0.16%
    Allowance for credit losses as a percentage of nonperforming loans328.46% 350.04% 455.96% 476.49% 484.15%
    Allowance for credit losses as a percentage of total loans0.95% 1.00% 1.01% 0.99% 1.00%
    Allowance for credit losses as a percentage of total loans, excluding PPP0.95% 1.00% 1.01% 0.99% 1.01%
    Net loan charge-offs$ 1,850 $ 426 $ 27 $ 48 $ 54
    Net loan charge-offs as a percentage of average loans0.09% 0.02% 0.00% 0.00% 0.00%


    ______________________
    (1)The adjusted efficiency ratio (non-GAAP) represents the ratio of operating expenses divided by the sum of net interest and dividend income and non-interest income, excluding realized and unrealized gains and losses on securities, gain on non-marketable equity investments and gain on defined benefit plan curtailment.


    The following table sets forth the information relating to our average balances and net interest income for the three months ended March 31, 2023, December 31, 2022 and March 31, 2022 and reflects the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated.

     Three Months Ended
     March 31, 2023 December 31, 2022 March 31, 2022
     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)$1,993,124 $21,449  4.36% $1,994,874 $21,403  4.26% $1,894,870 $18,067  3.87%
    Securities(2) 382,373  2,149  2.28   388,529  2,175  2.22   423,437  1,950  1.87 
    Other investments 12,098  106  3.55   10,638  75  2.80   10,595  25  0.96 
    Short-term investments(3) 5,909  54  3.71   7,635  62  3.22   57,030  21  0.15 
    Total interest-earning assets 2,393,504  23,758  4.03   2,401,676  23,715  3.92   2,385,932  20,063  3.41 
    Total non-interest-earning assets 152,539       159,042       143,635     
    Total assets$2,546,043      $2,560,718      $2,529,567     
                         
    LIABILITIES AND EQUITY:                    
    Interest-bearing liabilities                    
    Interest-bearing checking accounts$139,755  263  0.76  $149,928  206  0.55  $132,192  95  0.29 
    Savings accounts 218,797  45  0.08   221,964  39  0.07   218,448  36  0.07 
    Money market accounts 777,673  1,995  1.04   862,523  1,375  0.63   878,393  521  0.24 
    Time deposit accounts 427,895  1,800  1.71   359,555  586  0.65   389,063  340  0.35 
    Total interest-bearing deposits 1,564,120  4,103  1.06   1,593,970  2,206  0.55   1,618,096  992  0.25 
    Short-term borrowings and long-term debt 86,360  1,031  4.84   48,579  525  4.29   21,975  253  4.67 
    Interest-bearing liabilities 1,650,480  5,134  1.26   1,642,549  2,731  0.66   1,640,071  1,245  0.31 
    Non-interest-bearing deposits 639,162       663,814       633,082     
    Other non-interest-bearing liabilities 25,331       39,399       32,857     
    Total non-interest-bearing liabilities 664,493       703,213       665,939     
    Total liabilities 2,314,973       2,345,762       2,306,010     
    Total equity 231,070       214,956       223,557     
    Total liabilities and equity$2,546,043      $2,560,718      $2,529,567     
    Less: Tax-equivalent adjustment(2)   (120)       (130)       (120)   
    Net interest and dividend income  $18,504       $20,854       $18,698    
    Net interest rate spread(4)    2.74%     3.24%     3.08%
    Net interest rate spread, on a tax-equivalent basis(5)    2.76%     3.26%     3.10%
    Net interest margin(6)    3.14%     3.44%     3.18%
    Net interest margin, on a tax-equivalent basis(7)    3.16%     3.47%     3.20%
    Ratio of average interest-earning assets to average interest-bearing liabilities    145.02%     146.22%     145.48%


    ______________________ 
    (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 results of operations and financial condition.  Because not all companies use the same calculation, this presentation may not be comparable to other similarly titled measures calculated by other companies.  A reconciliation of these non-GAAP financial measures is provided below.

     For the quarter ended
     3/31/2023 12/31/2022 9/30/2022 6/30/2022 3/31/2022
         (In thousands)   
              
    Loans (no tax adjustment)$21,329  $21,274  $19,543  $18,500  $17,947 
    Tax-equivalent adjustment 120   129   122   124   120 
    Loans (tax-equivalent basis)$21,449  $21,403  $19,665  $18,624  $18,067 
              
    Securities (no tax adjustment)$2,149  $2,174  $2,104  $2,068  $1,950 
    Tax-equivalent adjustment -   1   1   -   - 
    Securities (tax-equivalent basis)$2,149  $2,175  $2,105  $2,068  $1,950 
              
    Net interest income (no tax adjustment)$18,504  $20,854  $20,288  $19,392  $18,698 
    Tax equivalent adjustment 120   130   123   124   120 
    Net interest income (tax-equivalent basis)$18,624  $20,984  $20,411  $19,516  $18,818 
              
    Net interest income (no tax adjustment)$18,504  $20,854  $20,288  $19,392  $18,698 
    Less:         
    Purchase accounting adjustments (62)  87   (16)  64   39 
    Prepayment penalties and fees -   134   99   26   21 
    PPP income 15   18   19   129   562 
    Adjusted net interest income (non-GAAP)$18,551  $20,615  $20,186  $19,173  $18,076 
              
    Average interest-earning assets$2,393,504  $2,401,676  $2,401,533  $2,398,526  $2,385,932 
    Average interest-earning assets, excluding average PPP loans$2,391,305  $2,399,297  $2,398,998  $2,395,463  $2,370,852 
    Net interest margin (no tax adjustment) 3.14%   3.44%   3.35%   3.24%   3.18% 
    Net interest margin, tax-equivalent 3.16%   3.47%   3.37%   3.26%   3.20% 
    Adjusted net interest margin, excluding purchase accounting adjustments, PPP fee income and prepayment penalties (non-GAAP) 3.15%   3.41%   3.34%   3.21%   3.10% 



     For the quarter ended
     3/31/2023 12/31/2022 9/30/2022 6/30/2022 3/31/2022
         (In thousands)    
              
    Book Value per Share (GAAP)$10.50  $10.27  $9.52  $9.58  $9.63 
    Non-GAAP adjustments:         
    Goodwill (0.56)  (0.56)  (0.56)  (0.55)  (0.55)
    Core deposit intangible (0.10)  (0.10)  (0.11)  (0.11)  (0.11)
    Tangible Book Value per Share (non-GAAP)$9.84  $9.61  $8.85  $8.92  $8.97 
              
              
    Total Bank Equity (GAAP)$238,887  $233,882  $217,787  $220,605  $221,866 
    Non-GAAP adjustments:         
    Goodwill (12,487)  (12,487)  (12,487)  (12,487)  (12,487)
    Core deposit intangible net of associated deferred tax liabilities (1,505)  (1,573)  (1,640)  (1,707)  (1,775)
    Tangible Capital (non-GAAP)$224,895  $219,822  $203,660  $206,411  $207,604 
              
    Tangible Capital (non-GAAP)$224,895  $219,822  $203,660  $206,411  $207,604 
    Unrealized losses on HTM securities net of tax (25,825)  (28,194)  (29,670)  (20,857)  (12,434)
    Adjusted Tangible Capital for Impact of Unrealized Losses on HTM Securities Net of Tax (non-GAAP)$199,070  $191,628  $173,990  $185,554  $195,170 
              
    Common Equity Tier (CET) 1 Capital$247,996  $244,864  $237,345  $233,147  $228,335 
    Unrealized losses on HTM securities net of tax (25,825)  (28,194)  (29,670)  (20,857)  (12,434)
    Unrealized losses on defined benefit plan net of tax (1,079)  (1,079)  (8,447)  (8,561)  (8,675)
    Adjusted CET 1 Capital for Impact of Net AFS Securities Losses (non-GAAP)$221,092  $215,591  $199,228  $203,729  $207,226 
              
    Total Assets for Leverage Ratio (non-GAAP)$2,560,973  $2,579,141  $2,562,808  $2,554,552  $2,518,001 
              
    Tier 1 Leverage Ratio 9.68%   9.49%   9.26%   9.13%   9.07% 
              
    Tangible Common Equity (non-GAAP) = Tangible Capital (non-GAAP)/Total Assets for Leverage Ratio (non-GAAP) 8.78%   8.52%   7.95%   8.08%   8.24% 
              
    Adjusted Tangible Common Equity for AFS Impact (non-GAAP) = Adjusted CET 1 Capital for Impact of Net AFS Securities Losses (non-GAAP)/Total Assets for Leverage Ratio (non-GAAP) 8.63%   8.36%   7.77%   7.98%   8.23% 
              
    Adjusted Tangible Common Equity for HTM Impact (non-GAAP) = Adjusted Tangible Capital for Impact of Unrealized Losses on HTM Securities Net of Tax (non-GAAP)/Total Assets for Leverage Ratio (non-GAAP) 7.77%   7.43%   6.79%   7.26%   7.75% 
              



     For the quarter ended
     3/31/2023 12/31/2022 9/30/2022 6/30/2022 3/31/2022
     (In thousands)
              
    Income Before Income Taxes (GAAP)$6,975  $12,354  $7,860  $7,400  $7,015 
    (Reversal of) provision for credit losses (388)  150   675   300   (425)
    PPP income (15)  (18)  (19)  (129)  (562)
    Gain on defined benefit plan curtailment -   (2,807)  -   -   - 
    Income Before Taxes, Provision, PPP Income and Defined Benefit Curtailment (non-GAAP)$6,572  $9,679  $8,516  $7,571  $6,028 
              
    Efficiency Ratio:          
    Non-interest Expense (GAAP)$14,896  $14,003  $14,343  $14,433  $14,456 
    Non-interest Expense for Adjusted Efficiency Ratio$14,896  $14,003  $14,343  $14,433  $14,456 
              
    Net Interest Income (GAAP)$18,504  $20,854  $20,288  $19,392  $18,698 
              
    Non-interest Income (GAAP)$2,979  $5,653  $2,590  $2,741  $2,348 
    Non-GAAP adjustments:         
    Loss (gain) on securities, net -   -   -   -   4 
    Unrealized (gains) losses on marketable equity securities -   (19)  235   225   276 
    Gain on non-marketable equity investments (352)  (70)  (211)  (141)  - 
    Gain on defined benefit plan curtailment -   (2,807)  -   -   - 
    Non-interest Income for Adjusted Efficiency Ratio (non-GAAP)$2,627  $2,757  $2,614  $2,825  $2,628 
    Total Revenue for Adjusted Efficiency Ratio (non-GAAP)$21,131  $23,611  $22,902  $22,217  $21,326 
              
    Efficiency Ratio (GAAP) 69.34%   52.83%   62.69%   65.21%   68.69% 
              
    Adjusted Efficiency Ratio (Non-interest Expense for Efficiency Ratio (non-GAAP)/Total Revenue for Efficiency Ratio (non-GAAP)) 70.49%   59.31%   62.63%   64.96%   67.79% 
              


    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


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