Western New England Bancorp, Inc. Reports Results for the Quarter Ended September 30, 2016 and Declares Quarterly Dividend
Quarter Highlighted by Strong Loan and Deposit Growth; Merger with Chicopee Closed in October
WESTFIELD, Mass.--(BUSINESS WIRE)-- Western New England Bancorp, Inc. (the “Company” or “WNEB”) (NasdaqGS:WNEB), the holding company for Westfield Bank (the “Bank”), reported net income of $628,000, or $0.04 per basic and diluted share, for the quarter ended September 30, 2016, compared to $1.6 million, or $0.09 per basic and diluted share, for the quarter ended September 30, 2015. For the nine months ended September 30, 2016, net income was $3.0 million, or $0.17 per basic and diluted share, compared to $4.3 million, or $0.25 per basic and diluted share, for the same period in 2015.
The three and nine months ended September 30, 2016 were impacted by non-recurring expenses of $830,000 and $1.9 million, respectively, related to our merger with Chicopee Bancorp, Inc. (“Chicopee”), which closed on October 21, 2016. Excluding these non-recurring expenses, net income before income taxes for the quarter and nine months ended September 30, 2016 was $1.9 million and $6.4 million, respectively, compared to $2.3 million and $5.9 million, respectively, for the comparable periods in 2015.
Selected financial highlights include:
- Total loans increased $41.4 million, or 4.6%, during the third quarter of 2016. This was due to increases in residential loans of $20.9 million, commercial real estate loans of $19.0 million and commercial and industrial loans of $1.2 million.
- Total deposits increased $41.7 million, or 4.5%, to $962.6 million at September 30, 2016, compared to $920.9 million at June 30, 2016. The deposit mix was favorably impacted as well, as the growth was primarily due to increases in checking accounts of $31.7 million and money market accounts of $20.8 million. Included in the checking account growth for the third quarter 2016 is $11.5 million that is temporarily on deposit and will be used for other business purposes in the fourth quarter 2016. These increases were offset partially by decreases in term deposits of $7.1 million and regular savings accounts of $3.7 million. During the third quarter of 2016, brokered and listing service deposits decreased $15.2 million.
- Securities decreased $148.1 million, or 32.5%, to $307.8 million at September 30, 2016, compared to $455.9 million at September 30, 2015. The decrease in securities was primarily driven by sales of securities, with the proceeds used to fund loan growth and pay down Federal Home Loan Bank (“FHLB”) borrowings, both strategic initiatives to improve the balance sheet mix. On a sequential-quarter basis, securities were flat at $307.8 million at September 30, 2016.
- Short-term borrowings and long-term debt decreased a total of $36.2 million, or 12.6%, to $251.4 million at September 30, 2016 compared to $287.6 million at September 30, 2015. On a sequential-quarter basis, short-term borrowings and long-term debt increased $28.7 million, or 12.9%, from June 30, 2016.
- Net interest margin increased 12 basis points to 2.65% for the three months ended September 30, 2016 from 2.53% in the comparable 2015 period. The net interest margin increased 3 basis points to 2.65% for the quarter ended September 30, 2016, compared to 2.62% for the quarter ended June 30, 2016.
James C. Hagan, President and CEO stated, “This is a very exciting time for us as an organization. We recently closed on our previously announced merger with Chicopee after receiving all the necessary regulatory and shareholder approvals. In addition, while Chicopee’s results are not included in these amounts, we are issuing our quarter end press release for the first time as a combined company under our new corporate name, Western New England Bancorp, Inc., which reflects our combined presence and target market in Western New England.”
Hagan went on to say, “Based upon recently published deposit data as of June 30, 2016, we are ranked second in deposit market share in Hampden County as a combined organization. Our customers recognize the unique service experience that sets us apart as a community bank and we are committed to working together to enhance the combined franchise value through overall organic growth, capital management and recognizing cost savings through efficiency and scale. We continue to feel this combination will be extremely favorable for the shareholders, customers, employees and communities of both institutions.”
Additional Income Statement Discussion
Net interest and dividend income increased $1.1 million to $24.6 million for the nine months ended September 30, 2016, as compared to $23.5 million for the nine months ended September 30, 2015. The net interest margin for the nine months ended September 30, 2016 increased 10 basis points to 2.62%, as compared to 2.52% for the same period in 2015. This was a result of an increase of 10 basis points in the yield on average interest-earning assets while the cost of average interest-bearing liabilities remained stable compared to the same period. Net interest and dividend income increased $168,000 to $8.3 million for the quarter ended September 30, 2016 compared to $8.2 million for the comparable 2015 period. On a sequential-quarter basis, net interest and dividend income increased $326,000 for the quarter ended September 30, 2016.
Non-interest income increased $175,000 to $1.3 million for the quarter ended September 30, 2016, compared to $1.1 million for the quarter ended September 30, 2015. For the nine months ended September 30, 2016, non-interest income was relatively flat at $3.6 million compared to the same period in 2015.
Non-interest expense increased $1.3 million to $8.2 million from $6.9 million for the quarter ended September 30, 2016, compared to the same period in 2015. Non-interest expense increased $2.9 million to $23.3 million from $20.4 million for the nine months ended September 30, 2016, compared to the same period in 2015. The increases for both periods were primarily due to merger related expenses of $830,000 and $1.9 million, respectively. The efficiency ratio, which excludes the merger-related charges mentioned above, was 75.3% and 75.9% for the nine months ended September 30, 2016 and 2015, respectively.
Additional Balance Sheet Discussion
Total loans increased $140.7 million to $947.6 million at September 30, 2016 compared to $806.9 million at September 30, 2015, due to increases in residential loans of $80.9 million and commercial real estate loans of $62.0 million, partially offset by a decrease in commercial and industrial loans of $3.3 million. Total deposits increased $53.6 million to $962.6 million at September 30, 2016, compared to $909.0 million at September 30, 2015. This was primarily due to increases in money market accounts of $51.0 million and checking accounts of $40.8 million, offset partially by a decrease in term accounts of $35.3 million and regular savings accounts of $3.0 million. The decrease in term accounts from September 30, 2015 was primarily due to a reduction of $39.9 million in brokered and listing service deposits.
Shareholders’ equity was $145.2 million at September 30, 2016 and $144.6 million at June 30, 2016, which represented 10.5% and 11.1% of total assets at September 30 and June 30, 2016, respectively. The increase in shareholders’ equity during the quarter reflects net income of $628,000 and an increase in accumulated other comprehensive income of $318,000, both partially offset by the payment of regular dividends of $521,000 for the quarter ended September 30, 2016.
On March 13, 2014, the Company announced a repurchase program under which it may repurchase up to 1,970,000 shares, or 10% of its outstanding common stock. At September 30, 2016, there were 484,668 shares remaining under this repurchase program.
The allowance for loan losses was $9.9 million, $9.6 million and $8.4 million at September 30, 2016, June 30, 2016 and September 30, 2015, representing 1.05%, 1.06% and 1.04% of total loans, respectively. This represents 136.5%, 119.0% and 114.0% of nonperforming loans, respectively.
An analysis of the changes in the allowance for loan losses is as follows:
|Three Months Ended|
|September 30,||June 30,||September 30,|
|Balance, beginning of period||$||9,570||$||8,855||$||8,295|
|Balance, end of period||$||9,927||$||9,570||$||8,372|
Nonperforming loans were $7.3 million and $8.0 million, representing 0.77% and 0.89% of total loans at September 30, 2016 and June 30, 2016, respectively. Loans delinquent 30 – 89 days decreased $1.1 million to $1.4 million at September 30, 2016 from $2.5 million at June 30, 2016. There are no loans 90 or more days past due and still accruing interest.
Declaration of Quarterly Dividend
The Board of Directors approved the declaration of a quarterly cash dividend of $0.03 per share. The dividend is payable on November 23, 2016 to all shareholders of record on November 9, 2016.
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, 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 through 21 banking offices located in Agawam, Chicopee, East Longmeadow, Feeding Hills, Holyoke, Ludlow, Southwick, Springfield, Ware, West Springfield and Westfield, Massachusetts, and Granby and Enfield, Connecticut. To learn more, visit our website at www.westfieldbank.com.
The Company wishes to caution readers not to place undue reliance on any such forward-looking statements contained in this press release, which speak only as of the date made. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors discussed under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015, as amended by Amendment No. 1 to our Annual Report on Form 10-K for the year ended December 31, 2015, and in subsequent filings with the Securities and Exchange Commission. The Company and the Bank do not undertake and specifically decline any obligation to publicly release the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Income and Other Data
(Dollars in thousands, except share and per share data)
|Three Months Ended||Nine Months Ended|
|September 30,||June 30,||March 31,||December 31,||September 30,||September 30,|
|INTEREST AND DIVIDEND INCOME:|
|Other investments - at cost||130||136||132||133||126||398||263|
|Federal funds sold, interest-bearing deposits and other short-term investments||14||29||25||6||2||67||13|
|Total interest and dividend income||10,977||10,554||10,961||10,820||10,974||32,491||31,656|
|Total interest expense||2,649||2,552||2,718||2,667||2,814||7,918||8,127|
|Net interest and dividend income||8,328||8,002||8,243||8,153||8,160||24,573||23,529|
|PROVISION (CREDIT) FOR LOAN LOSSES||375||625||(600||)||475||150||400||800|
|Net interest and dividend income after provision (credit) for loan losses||7,953||7,377||8,843||7,678||8,010||24,173||22,729|
|Service charges and fees||953||859||884||865||789||2,696||2,266|
|Income from bank-owned life insurance||369||403||361||378||374||1,133||1,149|
|Loss on prepayment of borrowings||-||-||(915||)||-||(429||)||(915||)||(1,300||)|
|Gain (loss) on sales of securities, net||1||(2||)||685||(1||)||414||684||1,507|
|Total noninterest income||1,323||1,260||1,015||1,242||1,148||3,598||3,622|
|Salaries and employees benefits||4,114||3,910||3,871||3,822||3,903||11,895||11,588|
|Merger related expenses||830||929||154||55||-||1,913||-|
|Total noninterest expense||8,225||7,998||7,072||6,990||6,867||23,295||20,443|
|INCOME BEFORE INCOME TAXES||1,051||639||2,786||1,930||2,291||4,476||5,908|
|INCOME TAX PROVISION||423||250||822||529||680||1,495||1,595|
|Basic earnings per share||$||0.04||$||0.02||$||0.11||$||0.08||$||0.09||$||0.17||$||0.25|
|Weighted average shares outstanding||17,377,844||17,337,955||17,304,088||17,329,248||17,461,472||17,340,101||17,554,361|
|Diluted earnings per share||$||0.04||$||0.02||$||0.11||$||0.08||$||0.09||$||0.17||$||0.25|
|Weighted average diluted shares outstanding||17,377,844||17,337,955||17,304,088||17,329,248||17,461,472||17,340,101||17,554,361|
|Return on average assets (1)||0.19||%||0.12||%||0.58||%||0.41||%||0.47||%||0.30||%||0.43||%|
|Return on average equity (1)||1.72||%||1.14||%||5.61||%||3.99||%||4.69||%||2.82||%||4.13||%|
|Efficiency ratio (2)||85.23||%||86.33||%||74.54||%||74.39||%||73.66||%||82.02||%||75.87||%|
|Net interest margin||2.65||%||2.62||%||2.61||%||2.58||%||2.53||%||2.62||%||2.52||%|
(2) The efficiency ratio represents the ratio of operating expenses divided by the sum of net interest and dividend income and noninterest income, excluding gain and loss on sale of securities, gain on bank-owned life insurance death benefit and loss on prepayment of borrowings.
WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets and Other Data
(Dollars in thousands, except per share data)
|September 30,||June 30,||March 31,||December 31,||September 30,|
|Cash and cash equivalents||$||50,803||$||21,267||$||155,194||$||13,703||$||21,980|
|Securities available for sale, at fair value||295,577||296,565||302,224||182,590||191,324|
|Securities held to maturity, at cost||-||-||-||238,219||248,757|
|Federal Home Loan Bank of Boston and other restricted stock - at cost||12,194||11,267||14,080||15,074||15,839|
|Allowance for loan losses||9,927||9,570||8,855||8,840||8,372|
|Bank-owned life insurance||51,363||50,994||50,591||50,230||49,852|
|Trades pending settlement||-||-||30,570||-||-|
|TOTAL SHAREHOLDERS' EQUITY||145,223||144,569||142,995||139,466||139,608|
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY||$||1,377,780||$||1,306,305||$||1,368,944||$||1,339,930||$||1,357,215|
|Book value per share||$||7.92||$||7.89||$||7.83||$||7.63||$||7.59|
|30- 89 day delinquent loans||$||1,391||$||2,547||$||1,358||$||2,876||$||5,882|
|Nonperforming loans as a percentage of total loans||0.77||%||0.89||%||1.00||%||0.99||%||0.91||%|
|Nonperforming assets as a percentage of total assets||0.53||%||0.62||%||0.61||%||0.60||%||0.54||%|
|Allowance for loan losses as a percentage of nonperforming loans||136.45||%||118.99||%||106.84||%||109.41||%||113.95||%|
|Allowance for loan losses as a percentage of total loans||1.05||%||1.06||%||1.07||%||1.08||%||1.04||%|
The following tables set forth the information relating to our average balances and net interest income for the three months ended September 30, 2016, June 30, 2016, and September 30, 2015, and the nine months ended September 30, 2016 and 2015, and reflect the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated.
|Three Months Ended|
|September 30, 2016||June 30, 2016||September 30, 2015|
|Average||Avg Yield/||Average||Avg Yield/||Average||Avg Yield/|
|(Dollars in thousands)|
|Other investments - at cost||12,728||130||4.09||15,349||136||3.54||16,963||126||2.97|
|Total interest-earning assets||1,258,654||11,021||3.50||1,237,915||10,601||3.43||1,294,664||11,075||3.42|
|Total noninterest-earning assets||79,032||73,371||76,614|
|LIABILITIES AND EQUITY:|
|Money market accounts||278,257||293||0.42||266,056||265||0.40||239,112||198||0.33|
|Time certificates of deposit||383,288||1,245||1.30||393,585||1,226||1.25||398,238||1,176||1.18|
|Total interest-bearing deposits||768,305||1,582||768,605||1,535||748,018||1,414|
|Short-term borrowings and long-term debt||229,718||1,067||1.86||231,827||1,017||1.75||320,712||1,400||1.75|
|Other noninterest-bearing liabilities||16,261||11,611||16,755|
|Total noninterest-bearing liabilities||194,063||173,250||166,381|
|Total liabilities and equity||$||1,337,687||$||1,311,286||$||1,371,278|
|Less: Tax-equivalent adjustment(2)||(44||)||(47||)||(101||)|
|Net interest and dividend income||$||8,328||$||8,002||$||8,160|
|Net interest rate spread(4)||2.44||%||2.41||%||2.37||%|
|Net interest margin(5)||2.65||%||2.62||%||2.53||%|
|Ratio of average interest-earning|
|assets to average interest-bearing liabilities||126.11||123.74||121.14|
|Nine Months Ended September 30,|
|Average||Avg Yield/||Average||Avg Yield/|
|(Dollars in thousands)|
|Loans(1)(2)||$||875,325||$||26,118||3.98||%||$ 753,077||$ 22,542||3.99||%|
|Other investments - at cost||14,703||398||3.61||16,555||263||2.12|
|Total interest-earning assets||1,258,423||32,645||3.46||1,268,285||31,995||3.36|
|Total noninterest-earning assets||77,626||78,288|
|Total assets||$||1,336,049||$ 1,346,573|
|LIABILITIES AND EQUITY:|
|Interest-bearing checking||$||31,353||64||0.27||$ 36,240||61||0.22|
|Money market accounts||264,354||785||0.40||236,305||627||0.35|
|Time certificates of deposit||391,793||3,677||1.25||385,881||3,388||1.17|
Total interest-bearing deposits
|Short-term borrowings and long-term debt||250,462||3,329||1.77||312,373||3,992||1.70|
|Other noninterest-bearing liabilities||15,273||17,797|
|Total noninterest-bearing liabilities||180,429||160,468|
|Total liabilities and equity||$||1,336,049||$ 1,346,573|
|Less: Tax-equivalent adjustment(2)||(154||)||(339||)|
|Net interest and dividend income||$||24,573||$ 23,529|
|Net interest rate spread(4)||2.42||%||2.32||%|
|Net interest margin(5)||2.62||%||2.52||%|
|Ratio of average interest-earning|
|assets to average interest-bearing liabilities||124.06||121.18|
(1) Loans, including non-accrual loans, are net of deferred loan
origination costs and unadvanced funds.
(2) Securities, loan income and net interest income are presented on a tax-equivalent basis using a tax rate of 34%. The tax-equivalent adjustment is deducted from tax-equivalent net interest and dividend income to agree to the amount reported on the statements of 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 margin represents tax-equivalent net interest and dividend income as a percentage of average interest-earning assets.
Western New England Bancorp, Inc.
James C. Hagan, 413-568-1911
President and CEO
Leo R. Sagan, Jr., 413-568-1911
Meghan Hibner, 413-568-1911
VP Investor Relations Officer
Source: Western New England Bancorp, Inc.