THIRD QUARTER HIGHLIGHTS
- Net Income and EPS were $10.8 million and $.45, respectively, compared to
$10 .8 million and$.4 4 - ROA and ROE were 1.02% and 10.77%, respectively, compared to 1.02% and 10.83%
- Net interest margin increased 10 basis points to 2.66% from 2.56%
- Cost of interest-bearing deposits declined 75 basis points to .73% and cost of interest-bearing liabilities declined 60 basis points to .96%
- Cash Dividends Per Share increased 5.6% to $.19 from $.18
- Over 99% of COVID-19 loan forbearance agreements concluded and resumed making payments
- Completed a
$128.7 million deleverage transaction to remove inefficient leverage
NINE MONTH HIGHLIGHTS
- Net Income and EPS were $30.7 million and $1.28, respectively, compared to $32.4 million and $1.29
- ROA and ROE were .98% and 10.49%, respectively, compared to 1.03% and 11.04%
- Net interest margin was 2.64% versus 2.57%
Analysis of Earnings – Nine Months Ended September 30, 2020
Net income for the first nine months of 2020 was
The increase in net interest income is mainly attributable to a reduction in deposit rates in response to decreases in the Federal Funds Target Rate to near zero as well as significant declines in rates across the entire yield curve. The cost of savings, NOW and money market deposits declined 45 basis points to .63% and the cost of interest-bearing liabilities declined 37 basis points to 1.19%. These decreases far outpaced the 15 basis point decline in yield on securities and loans which are generally not subject to immediate repricing with changes in market interest rates. The increase in net interest income was also attributable to income from SBA Paycheck Protection Program (“PPP”) loans of
The decline in yield on securities and loans was mainly attributable to an increase in prepayment speeds and lower yields available on securities purchases and loan originations. The economic impact of the COVID-19 pandemic (“pandemic”) caused loans and the overall balance sheet to shrink during the past two quarters. The average balance of loans decreased
Net interest margin for the third quarter and first nine months of 2020 were 2.66% and 2.64%, respectively, an increase of 10 basis points and 7 basis points, respectively, over the comparable periods of 2019. The increases were mainly attributable to our ability to reduce the rates paid on interest-bearing deposits faster than interest-earning assets repriced downward as a significant portion of our municipal bond and mortgage loan portfolios have fixed rates. The PPP loan yields and acceleration of prepayments of residential mortgage loans during 2020 exert downward pressure on net interest income and margin.
The provision for credit losses was
The increase in noninterest income, before securities gains, of
The increase in noninterest expense, before debt extinguishment costs, of
In late
The decrease in income tax expense of
Analysis of Earnings – Third Quarter 2020 Versus Third Quarter 2019
Net income for the third quarter of 2020 of
Analysis of Earnings – Third Quarter Versus Second Quarter 2020
Net income for the third quarter was essentially unchanged from
Asset Quality
The Bank’s allowance for credit losses to total loans (reserve coverage ratio) on a CECL basis was 1.01% at
COVID-19 Loan Modifications
During the second quarter, the Bank provided payment deferrals in the form of loan modifications to borrowers experiencing financial disruption and economic hardship as a result of the pandemic. As of
Capital
The Corporation’s balance sheet remains positioned for lending and growth with a Leverage Ratio of approximately 9.6% at
Key Initiatives, Customer Service and Challenges We Face
Our strategy is focused on increasing shareholder value through loan and deposit growth, the maintenance of strong credit quality, a strong efficiency ratio and an optimal amount of capital. Key strategic initiatives include building on our relationship banking business, growing fee income, enhancing our brand, highlighting our digital offerings and refining our branch strategy.
We are also focused on serving customers through our personalized approach to banking and continue to offer a wide range of loan and deposit products to customers and the communities we serve. The Bank’s strong capital and liquidity, branch network, lending and deposit platforms and focus on internal controls and cybersecurity provide a solid foundation for serving customers during these challenging times. We provide customers with ready access through our branch network, ATMs and digital offerings.
The interest rate and economic environment continues to exert substantial pressure on net interest income, net interest margin, earnings, profitability metrics, loans outstanding and the Bank’s ability to grow. These items could be negatively impacted by yield curve inversion, low yields available on loans and securities and potential credit losses arising from current economic conditions. Among other things, very low interest rates have caused an acceleration of residential mortgage loan repayments and repricings which are expected to continue in the fourth quarter. The weighted average reduction in yield for refinancings completed or in process at quarter end was 75 basis points which will reduce quarterly net interest income by approximately
The pandemic continues to present substantial challenges for the Bank and its customers. While business activity in the NYC metropolitan area has started to improve, the pace of the recovery is slow and remains uncertain. An elevated level of unemployment and the significant business disruption experienced in the spring and summer cast doubt on the extent of economic recovery possible in the near term and the ability of some businesses to continue.
Forward Looking Information
This earnings release contains various “forward-looking statements” within the meaning of that term as set forth in Rule 175 of the Securities Act of 1933 and Rule 3b-6 of the Securities Exchange Act of 1934. Such statements are generally contained in sentences including the words “may” or “expect” or “could” or “should” or “would” or “believe” or “anticipate”. The Corporation cautions that these forward-looking statements are subject to numerous assumptions, risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. Factors that could cause future results to vary from current management expectations include, but are not limited to, changing economic conditions; legislative and regulatory changes; monetary and fiscal policies of the federal government; changes in interest rates; deposit flows and the cost of funds; demand for loan products; competition; changes in management’s business strategies; changes in accounting principles, policies or guidelines; changes in real estate values; and other factors discussed in the “risk factors” section of the Corporation’s filings with the
For more detailed financial information please see the Corporation’s quarterly report on Form 10-Q for the quarter ended
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(dollars in thousands) | |||||||
Assets: | |||||||
Cash and cash equivalents | $ | 163,852 | $ | 38,968 | |||
Investment securities available-for-sale, at fair value | 646,106 | 697,544 | |||||
Loans: | |||||||
Commercial and industrial | 102,405 | 103,879 | |||||
SBA Paycheck Protection Program | 166,405 | — | |||||
Secured by real estate: | |||||||
Commercial mortgages | 1,331,890 | 1,401,289 | |||||
Residential mortgages | 1,379,181 | 1,621,419 | |||||
Home equity lines | 55,070 | 59,231 | |||||
Consumer and other | 1,167 | 2,431 | |||||
3,036,118 | 3,188,249 | ||||||
Allowance for credit losses | (32,792 | ) | (29,289 | ) | |||
3,003,326 | 3,158,960 | ||||||
Restricted stock, at cost | 22,029 | 30,899 | |||||
Bank premises and equipment, net | 38,691 | 40,017 | |||||
Right of use asset - operating leases | 12,387 | 14,343 | |||||
Bank-owned life insurance | 84,850 | 83,119 | |||||
Pension plan assets, net | 18,472 | 18,275 | |||||
Deferred income tax benefit | 3,395 | 317 | |||||
Other assets | 18,200 | 15,401 | |||||
$ | 4,011,308 | $ | 4,097,843 | ||||
Liabilities: | |||||||
Deposits: | |||||||
Checking | $ | 1,165,065 | $ | 911,978 | |||
Savings, NOW and money market | 1,638,980 | 1,720,599 | |||||
Time, | 196,989 | 242,359 | |||||
Time, other | 247,812 | 269,080 | |||||
3,248,846 | 3,144,016 | ||||||
Short-term borrowings | 57,708 | 190,710 | |||||
Long-term debt | 273,002 | 337,472 | |||||
Operating lease liability | 13,230 | 15,220 | |||||
Accrued expenses and other liabilities | 20,788 | 21,317 | |||||
3,613,574 | 3,708,735 | ||||||
Stockholders' Equity: | |||||||
Common stock, par value | |||||||
Authorized, 80,000,000 shares; | |||||||
Issued and outstanding, 23,864,840 and 23,934,632 shares | 2,386 | 2,393 | |||||
Surplus | 106,595 | 111,744 | |||||
Retained earnings | 289,612 | 274,376 | |||||
398,593 | 388,513 | ||||||
Accumulated other comprehensive income (loss), net of tax | (859 | ) | 595 | ||||
397,734 | 389,108 | ||||||
$ | 4,011,308 | $ | 4,097,843 |
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Nine Months Ended | Three Months Ended | |||||||||||
(dollars in thousands) | ||||||||||||
Interest and dividend income: | ||||||||||||
Loans | $ | 83,349 | $ | 88,382 | $ | 26,461 | $ | 29,353 | ||||
Investment securities: | ||||||||||||
Taxable | 9,972 | 11,726 | 3,223 | 3,758 | ||||||||
Nontaxable | 7,520 | 8,819 | 2,454 | 2,773 | ||||||||
100,841 | 108,927 | 32,138 | 35,884 | |||||||||
Interest expense: | ||||||||||||
Savings, NOW and money market deposits | 7,946 | 13,856 | 1,307 | 5,015 | ||||||||
Time deposits | 8,487 | 11,361 | 2,559 | 4,030 | ||||||||
Short-term borrowings | 1,219 | 2,569 | 334 | 62 | ||||||||
Long-term debt | 6,177 | 5,558 | 2,020 | 1,883 | ||||||||
23,829 | 33,344 | 6,220 | 10,990 | |||||||||
Net interest income | 77,012 | 75,583 | 25,918 | 24,894 | ||||||||
Provision for credit losses | 2,450 | 279 | — | 314 | ||||||||
Net interest income after provision for credit losses | 74,562 | 75,304 | 25,918 | 24,580 | ||||||||
Noninterest income: | ||||||||||||
1,620 | 1,502 | 553 | 504 | |||||||||
Service charges on deposit accounts | 2,267 | 2,321 | 661 | 836 | ||||||||
Net gains on sales of securities | 2,556 | — | 2,556 | — | ||||||||
Other | 4,502 | 4,058 | 1,586 | 1,380 | ||||||||
10,945 | 7,881 | 5,356 | 2,720 | |||||||||
Noninterest expense: | ||||||||||||
Salaries and employee benefits | 28,278 | 26,536 | 9,365 | 8,555 | ||||||||
Occupancy and equipment | 9,324 | 8,712 | 3,191 | 2,872 | ||||||||
Debt extinguishment | 2,559 | — | 2,559 | — | ||||||||
Other | 8,496 | 8,993 | 3,024 | 2,903 | ||||||||
48,657 | 44,241 | 18,139 | 14,330 | |||||||||
Income before income taxes | 36,850 | 38,944 | 13,135 | 12,970 | ||||||||
Income tax expense | 6,176 | 6,576 | 2,368 | 2,187 | ||||||||
Net income | $ | 30,674 | $ | 32,368 | $ | 10,767 | $ | 10,783 | ||||
Share and Per Share Data: | ||||||||||||
Weighted Average Common Shares | 23,867,726 | 24,855,562 | 23,860,764 | 24,470,249 | ||||||||
Dilutive stock options and restricted stock units | 38,678 | 177,072 | 37,773 | 192,860 | ||||||||
23,906,404 | 25,032,634 | 23,898,537 | 24,663,109 | |||||||||
Basic EPS | ||||||||||||
Diluted EPS | 1.28 | 1.29 | 0.45 | 0.44 | ||||||||
Cash Dividends Declared per share | 0.55 | 0.52 | 0.19 | 0.18 | ||||||||
FINANCIAL RATIOS | ||||||||||||
(Unaudited) | ||||||||||||
ROA | .98 | % | 1.03 | % | 1.02 | % | 1.02 | % | ||||
ROE | 10.49 | % | 11.04 | % | 10.77 | % | 10.83 | % | ||||
Net Interest Margin | 2.64 | % | 2.57 | % | 2.66 | % | 2.56 | % | ||||
Dividend Payout Ratio | 42.97 | % | 40.31 | % | 42.22 | % | 40.91 | % |
PROBLEM AND POTENTIAL PROBLEM LOANS AND ASSETS
(Unaudited)
(dollars in thousands) | |||||||
Loans, excluding troubled debt restructurings: | |||||||
Past due 30 through 89 days | $ | 982 | $ | 2,928 | |||
Past due 90 days or more and still accruing | — | — | |||||
Nonaccrual | 2,154 | 423 | |||||
3,136 | 3,351 | ||||||
Troubled debt restructurings: | |||||||
Performing according to their modified terms | 1,329 | 1,070 | |||||
Past due 30 through 89 days | — | — | |||||
Past due 90 days or more and still accruing | — | — | |||||
Nonaccrual | — | 465 | |||||
1,329 | 1,535 | ||||||
Total past due, nonaccrual and restructured loans: | |||||||
Restructured and performing according to their modified terms | 1,329 | 1,070 | |||||
Past due 30 through 89 days | 982 | 2,928 | |||||
Past due 90 days or more and still accruing | — | — | |||||
Nonaccrual | 2,154 | 888 | |||||
4,465 | 4,886 | ||||||
Other real estate owned | — | — | |||||
$ | 4,465 | $ | 4,886 | ||||
Allowance for credit losses | $ | 32,792 | $ | 29,289 | |||
Allowance for credit losses as a percentage of total loans | 1.08 | % | .92 | % | |||
Allowance for credit losses as a multiple of nonaccrual loans | 15.2 | x | 33.0 | x |
AVERAGE BALANCE SHEET, INTEREST RATES AND INTEREST DIFFERENTIAL
(Unaudited)
Nine Months Ended | ||||||||||||||||||||
2020 | 2019 | |||||||||||||||||||
Average | Interest/ | Average | Average | Interest/ | Average | |||||||||||||||
(dollars in thousands) | Balance | Dividends | Rate | Balance | Dividends | Rate | ||||||||||||||
Assets: | ||||||||||||||||||||
Interest-earning bank balances | $ | 111,979 | $ | 159 | .19 | % | $ | 30,617 | $ | 530 | 2.31 | % | ||||||||
Investment securities: | ||||||||||||||||||||
Taxable | 356,512 | 9,813 | 3.67 | 369,525 | 11,196 | 4.04 | ||||||||||||||
Nontaxable (1) | 375,570 | 9,519 | 3.38 | 411,354 | 11,163 | 3.62 | ||||||||||||||
Loans (1) | 3,146,738 | 83,353 | 3.53 | 3,231,573 | 88,388 | 3.65 | ||||||||||||||
Total interest-earning assets | 3,990,799 | 102,844 | 3.44 | 4,043,069 | 111,277 | 3.67 | ||||||||||||||
Allowance for credit losses | (33,286 | ) | (30,203 | ) | ||||||||||||||||
Net interest-earning assets | 3,957,513 | 4,012,866 | ||||||||||||||||||
Cash and due from banks | 33,144 | 37,104 | ||||||||||||||||||
Premises and equipment, net | 39,588 | 41,064 | ||||||||||||||||||
Other assets | 135,351 | 127,565 | ||||||||||||||||||
$ | 4,165,596 | $ | 4,218,599 | |||||||||||||||||
Liabilities and Stockholders' Equity: | ||||||||||||||||||||
Savings, NOW & money market deposits | $ | 1,687,377 | 7,946 | .63 | $ | 1,710,985 | 13,856 | 1.08 | ||||||||||||
Time deposits | 486,181 | 8,487 | 2.33 | 645,596 | 11,361 | 2.35 | ||||||||||||||
Total interest-bearing deposits | 2,173,558 | 16,433 | 1.01 | 2,356,581 | 25,217 | 1.43 | ||||||||||||||
Short-term borrowings | 81,509 | 1,219 | 2.00 | 137,100 | 2,569 | 2.51 | ||||||||||||||
Long-term debt | 420,255 | 6,177 | 1.96 | 361,791 | 5,558 | 2.05 | ||||||||||||||
Total interest-bearing liabilities | 2,675,322 | 23,829 | 1.19 | 2,855,472 | 33,344 | 1.56 | ||||||||||||||
Checking deposits | 1,067,839 | 940,717 | ||||||||||||||||||
Other liabilities | 31,878 | 30,554 | ||||||||||||||||||
3,775,039 | 3,826,743 | |||||||||||||||||||
Stockholders' equity | 390,557 | 391,856 | ||||||||||||||||||
$ | 4,165,596 | $ | 4,218,599 | |||||||||||||||||
Net interest income (1) | $ | 79,015 | $ | 77,933 | ||||||||||||||||
Net interest spread (1) | 2.25 | % | 2.11 | % | ||||||||||||||||
Net interest margin (1) | 2.64 | % | 2.57 | % |
(1) Tax-equivalent basis. Interest income on a tax-equivalent basis includes the additional amount of interest income that would have been earned if the Corporation's investment in tax-exempt loans and investment securities had been made in loans and investment securities subject to federal income taxes yielding the same after-tax income. The tax-equivalent amount of
AVERAGE BALANCE SHEET, INTEREST RATES AND INTEREST DIFFERENTIAL
(Unaudited)
Three Months Ended | ||||||||||||||||||||
2020 | 2019 | |||||||||||||||||||
(dollars in thousands) | Average Balance | Interest/ Dividends | Average Rate | Average Balance | Interest/ Dividends | Average Rate | ||||||||||||||
Assets: | ||||||||||||||||||||
Interest-earning bank balances | $ | 151,857 | $ | 39 | .10 | % | $ | 41,171 | $ | 230 | 2.22 | % | ||||||||
Investment securities: | ||||||||||||||||||||
Taxable | 379,422 | 3,184 | 3.36 | 371,400 | 3,528 | 3.80 | ||||||||||||||
Nontaxable (1) | 376,053 | 3,107 | 3.30 | 402,201 | 3,510 | 3.49 | ||||||||||||||
Loans (1) | 3,099,830 | 26,462 | 3.41 | 3,198,832 | 29,355 | 3.67 | ||||||||||||||
Total interest-earning assets | 4,007,162 | 32,792 | 3.27 | 4,013,604 | 36,623 | 3.65 | ||||||||||||||
Allowance for credit losses | (33,624 | ) | (29,618 | ) | ||||||||||||||||
Net interest-earning assets | 3,973,538 | 3,983,986 | ||||||||||||||||||
Cash and due from banks | 33,578 | 38,782 | ||||||||||||||||||
Premises and equipment, net | 39,141 | 40,765 | ||||||||||||||||||
Other assets | 137,190 | 126,397 | ||||||||||||||||||
$ | 4,183,447 | $ | 4,189,930 | |||||||||||||||||
Liabilities and Stockholders' Equity: | ||||||||||||||||||||
Savings, NOW & money market deposits | $ | 1,653,535 | 1,307 | .31 | $ | 1,761,190 | 5,015 | 1.13 | ||||||||||||
Time deposits | 452,188 | 2,559 | 2.25 | 661,269 | 4,030 | 2.42 | ||||||||||||||
Total interest-bearing deposits | 2,105,723 | 3,866 | .73 | 2,422,459 | 9,045 | 1.48 | ||||||||||||||
Short-term borrowings | 60,291 | 334 | 2.20 | 20,272 | 62 | 1.21 | ||||||||||||||
Long-term debt | 413,153 | 2,020 | 1.95 | 360,472 | 1,883 | 2.07 | ||||||||||||||
Total interest-bearing liabilities | 2,579,167 | 6,220 | .96 | 2,803,203 | 10,990 | 1.56 | ||||||||||||||
Checking deposits | 1,174,680 | 957,980 | ||||||||||||||||||
Other liabilities | 31,991 | 33,814 | ||||||||||||||||||
3,785,838 | 3,794,997 | |||||||||||||||||||
Stockholders' equity | 397,609 | 394,933 | ||||||||||||||||||
$ | 4,183,447 | $ | 4,189,930 | |||||||||||||||||
Net interest income (1) | $ | 26,572 | $ | 25,633 | ||||||||||||||||
Net interest spread (1) | 2.31 | % | 2.09 | % | ||||||||||||||||
Net interest margin (1) | 2.66 | % | 2.56 | % |
(1) Tax-equivalent basis. Interest income on a tax-equivalent basis includes the additional amount of interest income that would have been earned if the Corporation's investment in tax-exempt loans and investment securities had been made in loans and investment securities subject to federal income taxes yielding the same after-tax income. The tax-equivalent amount of
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