Record Net Interest Income and Record Low Cost of Funds
John R. Buran, President and CEO Commentary
UNIONDALE, N.Y., April 26, 2022 (GLOBE NEWSWIRE) -- The Company reported first quarter 2022 GAAP EPS of $0.58, down 3.3% YoY, ROAA of 0.91%, and ROAE of 10.83%. For the first quarter, Core EPS of $0.61 increased, 13.0% YoY with ROAA of 0.94% and ROAE of 11.27%.
| “Activity in the New York City area is returning to more normal levels and this is seen in our results: 1Q22 loan closings, excluding SBA Paycheck Protection Program loans (“PPP”), up 65% YoY and average noninterest bearing deposits up 17% YoY. The Company is benefiting from the improved economic activity and merger activity as the loan pipeline is at record levels, up 77% YoY and 55% QoQ. Net loans, excluding PPP loans, were flat QoQ due to prepayment speeds remaining elevated as borrowers sought to lock in low rates before the Fed increased short-term rates. Our pricing discipline translated into pipeline yields that are at peak levels for the past 12 months. The Company is in a better position for rising rates than the previous rising rate cycle with a higher percentage of noninterest bearing deposits, lower balances of CDs and borrowings, over $400 million of funding hedges (that will effectively reprice over the next 2 years), and approximately 25% of loans will reprice within one year or 30% including loan hedges.” | |
| - John R. Buran, President and CEO |
NIM Expansion QoQ; Pipeline at Record Level; Business Loans Increase. Record net interest income of $63.5 million increased 4.2% YoY and 1.3% QoQ. NIM expanded 18 bps to 3.36% YoY and 7 bps QoQ. Core NIM increased by 25 bps to 3.31% YoY and 10 bps QoQ. The increase in the NIM QoQ was primarily due to a 7 bps improvement in the cost of funds. Period end net loans, excluding PPP, were flat QoQ, with commercial business and other loans increasing 14% annualized. Loan closings, excluding PPP, were up 65% YoY, but repayment speeds remained elevated both QoQ and YoY. With the Federal Reserve increasing short-term rates, we expect refinance volume to slow in 2022. Additionally, we continue to benefit from the merger disruption in our markets as we have hired 30 people, including 12 revenue producers, over the past year from institutions involved with mergers. Returned 84% of Earnings in 1Q22; Stable Tangible Book Value Per Share. The Company returned 84% of earning in 1Q22 through dividends and share repurchases of 360,000 shares of common stock at an average price of $23.52. Despite rising rates, book value and tangible book value per share were stable QoQ, while TCE/TA1 was 8.05% at March 31, 2022 compared to 8.22% QoQ.
| Key Financial Metrics2 | |||||||||||||||||
| 1Q22 | 4Q21 | 3Q21 | 2Q21 | 1Q21 | |||||||||||||
| GAAP: | |||||||||||||||||
| EPS | $ | 0.58 | $ | 0.58 | $ | 0.81 | $ | 0.61 | $ | 0.60 | |||||||
| ROAA (%) | 0.91 | 0.89 | 1.26 | 0.93 | 0.93 | ||||||||||||
| ROAE (%) | 10.83 | 10.77 | 15.42 | 11.95 | 12.29 | ||||||||||||
| NIM FTE3 (%) | 3.36 | 3.29 | 3.34 | 3.14 | 3.18 | ||||||||||||
| Core: | |||||||||||||||||
| EPS | $ | 0.61 | $ | 0.67 | $ | 0.88 | $ | 0.73 | $ | 0.54 | |||||||
| ROAA (%) | 0.94 | 1.04 | 1.38 | 1.11 | 0.83 | ||||||||||||
| ROAE (%) | 11.27 | 12.49 | 16.88 | 14.27 | 10.96 | ||||||||||||
| Core NIM FTE (%) | 3.31 | 3.21 | 3.27 | 3.14 | 3.06 | ||||||||||||
| Efficiency Ratio (%) | 58.9 | 58.7 | 52.3 | 53.4 | 58.6 | ||||||||||||
| Credit Quality: | |||||||||||||||||
| NPAs/Loans&REO (%) | 0.21 | 0.23 | 0.31 | 0.26 | 0.31 | ||||||||||||
| ACLs/Loans (%) | 0.57 | 0.56 | 0.55 | 0.64 | 0.67 | ||||||||||||
| ACLs/NPLs (%) | 266.12 | 248.66 | 179.86 | 242.55 | 212.87 | ||||||||||||
| NCOs/Avg Loans (%) | 0.06 | — | (0.04 | ) | 0.05 | 0.17 | |||||||||||
| Balance Sheet: | |||||||||||||||||
| Avg Loans ($B) | $ | 6.6 | $ | 6.6 | $ | 6.6 | $ | 6.7 | $ | 6.7 | |||||||
| Avg Dep ($B) | $ | 6.4 | $ | 6.5 | $ | 6.4 | $ | 6.5 | $ | 6.3 | |||||||
| Book Value/Share | $ | 22.26 | $ | 22.26 | $ | 21.78 | $ | 21.16 | $ | 20.65 | |||||||
| Tangible BV/Share | $ | 21.61 | $ | 21.61 | $ | 21.13 | $ | 20.51 | $ | 19.99 | |||||||
| TCE/TA (%) | 8.05 | 8.22 | 8.04 | 7.80 | 7.60 | ||||||||||||
| 1 Tangible Common Equity (“TCE”)/Total Assets (“TA”) 2 See “Reconciliation of GAAP Earnings and Core Earnings” and “Reconciliation of GAAP Net Interest Margin to Core and Base Net Interest Income and Net Interest Margin.” 3 Net Interest Margin (“NIM”) Fully Taxable Equivalent (“FTE”) | |||||||||||||||||
| 1Q22 Highlights |
- Net interest income increased 1.3% QoQ (as funding costs declined 7 bps), and 4.2% YoY to a record $63.5 million; core net interest income expanded 2.4% QoQ and 6.8% YoY to a record $62.6 million
- Net interest margin FTE increased 7 bps QoQ and 18 bps YoY to 3.36%, and core net interest margin FTE increased 10 bps QoQ, and 25 bps YoY to 3.31%; Core NIM expansion QoQ was primarily driven by lower cost of funds
- Period end net loans, excluding PPP, were flat QoQ and up 1.2% YoY; loan closings were $329.3 million in 1Q22, down 9.2% QoQ, but up 2.0% YoY (up 64.9% excluding PPP)
- Average deposits, including mortgage escrow, decreased 0.8% QoQ, but increased 2.0% YoY to $6.4 billion, with core deposits comprising 86.1% of total average deposits; record average noninterest bearing deposits, up 17.0% YoY
- Loan pipeline increased 76.6% YoY to $663.7 million
- Provision for credit losses was $1.4 million in 1Q22 exceeding net charge-offs of $0.9 million
- NPAs decreased 5.8% QoQ and 33.7% YoY to $14.1 million; criticized and classified loans were up 3.3% QoQ to $59.5 million, representing 0.90% of loans
- Tangible Common Equity to Tangible Assets was 8.05% down from 8.22% in 4Q21; the change in AOCI impacted this ratio by 11 bps in 1Q22
- Repurchased 360,000 shares at an average price of $23.52; dividends and share repurchases were 84% of net income in 1Q22
| Income Statement Highlights | ||||||||||||||||||||||||||||
| YoY | QoQ | |||||||||||||||||||||||||||
| ($000s, except EPS) | 1Q22 | 4Q21 | 3Q21 | 2Q21 | 1Q21 | Change | Change | |||||||||||||||||||||
| Net Interest Income | $ | 63,479 | $ | 62,674 | $ | 63,364 | $ | 61,039 | $ | 60,892 | 4.2 | % | 1.3 | % | ||||||||||||||
| Provision (Benefit) for Credit Losses | 1,358 | 761 | (6,927 | ) | (1,598 | ) | 2,820 | (51.8 | ) | 78.4 | ||||||||||||||||||
| Noninterest Income (Loss) | 1,313 | (280 | ) | 866 | (3,210 | ) | 6,311 | (79.2 | ) | (568.9 | ) | |||||||||||||||||
| Noninterest Expense | 38,794 | 38,807 | 36,345 | 34,011 | 38,159 | 1.7 | (0.0 | ) | ||||||||||||||||||||
| Income Before Income Taxes | 24,640 | 22,826 | 34,812 | 25,416 | 26,224 | (6.0 | ) | 7.9 | ||||||||||||||||||||
| Provision for Income Taxes | 6,421 | 4,743 | 9,399 | 6,158 | 7,185 | (10.6 | ) | 35.4 | ||||||||||||||||||||
| Net Income | $ | 18,219 | $ | 18,083 | $ | 25,413 | $ | 19,258 | $ | 19,039 | (4.3 | ) | 0.8 | |||||||||||||||
| Diluted EPS | $ | 0.58 | $ | 0.58 | $ | 0.81 | $ | 0.61 | $ | 0.60 | (3.3 | ) | - | |||||||||||||||
| Avg. Diluted Shares (000s) | 31,254 | 31,353 | 31,567 | 31,677 | 31,604 | (1.1 | ) | (0.3 | ) | |||||||||||||||||||
| Core Net Income1 | $ | 18,969 | $ | 20,968 | $ | 27,829 | $ | 22,994 | $ | 16,973 | 11.8 | (9.5 | ) | |||||||||||||||
| Core EPS1 | $ | 0.61 | $ | 0.67 | $ | 0.88 | $ | 0.73 | $ | 0.54 | 13.0 | (9.0 | ) | |||||||||||||||
| 1 See Reconciliation of GAAP Earnings and Core Earnings | ||||||||||||||||||||||||||||
Net interest income totaled $63.5 million in 1Q22 (an increase of 4.2% YoY, and 1.3% QoQ), compared to $62.7 million in 4Q21, $63.4 million in 3Q21, $61.0 million in 2Q21, and $60.9 million in 1Q21.
- Net interest margin, FTE (“NIM”) of 3.36% increased 18 bps YoY and 7 bps QoQ; PPP loans caused a 3 bps, 3 bps, and 2 bps positive impact on the NIM in 1Q22, 4Q21, and 3Q21, respectively, neutral impact in 2Q21, and a drag of 4 bps in 1Q21
- Prepayment penalty income from loans and securities, net reversals and recoveries of interest from nonaccrual loans, net gains and losses from fair value adjustments on qualifying hedges, and purchase accounting accretion totaled $2.6 million (14 bps to the NIM) in 1Q22 compared to $3.1 million (16 bps) in 4Q21, $3.4 million (19 bps) in 3Q21, $1.9 million (10 bps) in 2Q21, and $3.3 million (17 bps) in 1Q21
- Excluding the items in the previous bullet, net interest margin was 3.22% in 1Q22 compared to 3.13% in 4Q21, 3.15% in 3Q21, 3.04% in 2Q21, and 3.01% in 1Q21, or an increase of 21 bps YoY and 9 bps QoQ
- Net PPP loan fees were $0.9 million in 1Q22, $1.2 million in 4Q21, $1.3 million in 3Q21, $1.2 million in 2Q21, and $0.5 million in 1Q21
The Company recorded a provision for credit losses of $1.4 million in 1Q22, $0.8 million in 4Q21, and $2.8 million in 1Q21 compared to a benefit for credit losses of $6.9 million in 3Q21 and $1.6 million in 2Q21.
- 1Q22 provision for credit losses exceed net charge-offs by $0.4 million
- Net charge-offs (recoveries) were $0.9 million in 1Q22 (6 bps of average loans), $(29) thousand in 4Q21 (negligible as compared to average loans), $(0.6) million in 3Q21 ((4) bps), $0.9 million in 2Q21 (5 bps), and $2.9 million in 1Q21 (17 bps)
Noninterest income (loss) was $1.3 million in 1Q22, $(0.3) million in 4Q21, $0.9 million in 3Q21, $(3.2) million in 2Q21, and $6.3 million in 1Q21.
- Noninterest income included net gains (losses) from fair value adjustments of $(1.8) million in 1Q22 or $(0.04) per share, net of tax, $(5.1) million in 4Q21 or $(0.13) per share, net of tax, $(2.3) million in 3Q21 or $(0.05) per share, net of tax, $(6.5) million or $(0.15) per share, net of tax in 2Q21, and $1.0 million or $0.02 per share, net of tax in 1Q21
- Absent all above items and other immaterial adjustments, core noninterest income was $3.1 million in 1Q22, down 33.7% YoY, and 35.8% QoQ
- Included in 4Q21 core noninterest income was a one-time $2.0 million ($0.05 per share, net of tax) dividend received on retirement plan investments
Noninterest expense totaled $38.8 million in 1Q22 (an increase of 1.7% YoY and flat QoQ) compared to $38.8 million in 4Q21, $36.3 million in 3Q21, $34.0 million in 2Q21, and $38.2 million in 1Q21.
- Noninterest expense includes no pre-tax merger benefits or costs for 1Q22 compared to $17 thousand pre-tax merger benefit (