Press Release

Western New England Bancorp, Inc. Reports Results for the Quarter Ended September 30, 2016 and Declares Quarterly Dividend

Company Release - 10/26/2016 10:08 AM ET

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.

Credit Quality

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,
  2016     2016     2015  
(In thousands)
 
Balance, beginning of period $ 9,570 $ 8,855 $ 8,295
Provision 375 625 150
Charge-offs (86 ) (18 ) (85 )
Recoveries   68     108     12  
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.

Forward-Looking Statements

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)

(Unaudited)

 
Three Months Ended   Nine Months Ended
September 30,   June 30,   March 31,   December 31,   September 30, September 30,
  2016       2016       2016       2015       2015       2016       2015  
INTEREST AND DIVIDEND INCOME:  
Loans $ 9,138 $ 8,639 $ 8,250 $ 8,072 $ 7,849 $ 26,027 $ 22,449
Securities 1,695 1,750 2,554 2,609 2,997 5,999 8,931
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  
 
INTEREST EXPENSE:
Deposits 1,582 1,535 1,472 1,436 1,414 4,589 4,135
Long-term debt 446 461 842 889 1,083 1,749 3,244
Short-term borrowings   621       556       404       342       317       1,580       748  
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  
 
NONINTEREST INCOME:
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  
 
NONINTEREST EXPENSE:
Salaries and employees benefits 4,114 3,910 3,871 3,822 3,903 11,895 11,588
Occupancy 796 804 801 795 784 2,401 2,443
Data processing 667 626 621 582 636 1,916 1,779
Professional fees 656 545 516 568 596 1,715 1,555
FDIC insurance 214 190 190 208 212 594 592
Merger related expenses 830 929 154 55 - 1,913 -
Other   948       994       919       960       736       2,861       2,486  
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  
NET INCOME $ 628     $ 389     $ 1,964     $ 1,401     $ 1,611     $ 2,981     $ 4,313  
 
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
 
Other Data:
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 %

(1) Annualized.
(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)

(Unaudited)

 
September 30, June 30, March 31, December 31, September 30,
  2016     2016     2016     2015     2015  
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
 
Loans 947,620 906,212 826,963 818,213 806,893
Allowance for loan losses   9,927     9,570     8,855     8,840     8,372  
Net loans 937,693 896,642 818,108 809,373 798,521
 
Bank-owned life insurance 51,363 50,994 50,591 50,230 49,852
Other assets   30,150     29,570     28,747     30,741     30,942  
TOTAL ASSETS $ 1,377,780   $ 1,306,305   $ 1,368,944   $ 1,339,930   $ 1,357,215  
 
Total deposits $ 962,558 $ 920,912 $ 928,124 $ 900,363 $ 909,041
Short-term borrowings 180,273 144,707 158,593 128,407 121,222
Long-term debt 71,165 78,032 90,943 153,358 166,407
Trades pending settlement - - 30,570 - -
Other liabilities   18,561     18,085     17,719     18,336     20,937  
TOTAL LIABILITIES 1,232,557 1,161,736 1,225,949 1,200,464 1,217,607
 
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
 
Other Data:
30- 89 day delinquent loans $ 1,391 $ 2,547 $ 1,358 $ 2,876 $ 5,882
Nonperforming loans 7,275 8,043 8,288 8,080 7,347
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/
Balance Interest Cost Balance Interest Cost Balance Interest Cost
(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans(1)(2) $ 932,140 $ 9,168 3.93 % $ 869,877 $ 8,672 3.99 % $ 788,637 $ 7,879 4.00 %
Securities(2) 296,406 1,709 2.31 297,797 1,764 2.37 481,360 3,068 2.55
Other investments - at cost 12,728 130 4.09 15,349 136 3.54 16,963 126 2.97
Short-term investments(3)   17,380   14   0.32   54,892   29   0.21   7,704   2   0.10
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
 
Total assets $ 1,337,686 $ 1,311,286 $ 1,371,278
 
LIABILITIES AND EQUITY:
Interest-bearing liabilities
Interest-bearing accounts $ 31,194 24 0.31 $ 32,337 21 0.26 $ 34,725 20 0.23
Savings accounts 75,566 20 0.11 76,627 23 0.12 75,943 20 0.11
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
Interest-bearing liabilities   998,023   2,649   1.06   1,000,432   2,552   1.02   1,068,730   2,814   1.05
Noninterest-bearing deposits 177,802 161,639 149,626
Other noninterest-bearing liabilities   16,261   11,611   16,755
Total noninterest-bearing liabilities   194,063   173,250   166,381
 
Total liabilities 1,192,086 1,173,682 1,235,111
Total equity   145,601   137,604   136,167
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,
2016   2015
Average         Avg Yield/ Average     Avg Yield/
Balance Interest Cost Balance Interest Cost
(Dollars in thousands)
ASSETS:            
Interest-earning assets
Loans(1)(2) $ 875,325 $ 26,118 3.98 % $ 753,077 $ 22,542 3.99 %
Securities(2) 334,938 6,062 2.41 487,122 9,177 2.51
Other investments - at cost 14,703 398 3.61 16,555 263 2.12
Short-term investments(3)   33,457   67   0.27 11,531 13   0.15
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 liabilities
Interest-bearing checking $ 31,353 64 0.27 $ 36,240 61 0.22
Savings accounts 76,381 63 0.11 75,780 59 0.10
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

763,881 4,589 734,206 4,135
Short-term borrowings and long-term debt   250,462   3,329   1.77 312,373 3,992   1.70
Interest-bearing liabilities   1,014,343   7,918   1.04 1,046,579 8,127   1.04
Noninterest-bearing deposits 165,156 142,671
Other noninterest-bearing liabilities   15,273 17,797
Total noninterest-bearing liabilities   180,429 160,468
 
Total liabilities 1,194,772 1,207,047
Total equity   141,277 139,526
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
or
Leo R. Sagan, Jr., 413-568-1911
CFO
or
Meghan Hibner, 413-568-1911
VP Investor Relations Officer

Source: Western New England Bancorp, Inc.