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CST: 16/10/2019 01:55:01   

Western New England Bancorp, Inc. Reports Results for Three and Six Months Ended June 30, 2019 and Declares Quarterly Cash Dividend

84 Days ago

WESTFIELD, Mass., July 23, 2019 (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 and six months ended June 30, 2019. For the three months ended June 30, 2019, the Company reported net income of $3.3 million, or $0.12 diluted earnings per share, compared to net income of $5.1 million, or $0.18 diluted earnings per share, for the three months ended June 30, 2018.  On a linked quarter basis, net income was $3.3 million, or $0.12 diluted earnings per share, as compared to net income of $3.4 million, or $0.13 diluted earnings per share, for the three months ended March 31, 2019. For the six months ended June 30, 2019, net income was $6.7 million, or $0.25 diluted earnings per share, compared to net income of $8.7 million, or $0.29 diluted earnings per share, for the six months ended June 30, 2018.

The Company also announced that the Board of Directors declared a quarterly cash dividend of $0.05 per share, payable on or about August 21, 2019 to shareholders of record on August 7, 2019.

“We are pleased to report strong loan growth and core deposit growth during the second quarter,” stated James Hagan, President and CEO. “Total loans increased $42 million from the first quarter to the second quarter of 2019, with $65 million in new loan production. Core deposits increased $18 million, primarily due to a $31 million increase in demand accounts. Growing and managing our balance sheet in this interest rate environment is critical to our success, and we continue to make investments to promote long-term franchise value for the Company and our shareholders.  Although we experienced more than average loan payoffs during the first six months of 2019, which may continue during the second half of the year, our pipeline remains strong.  The net interest margin was under pressure during the first half of 2019, but our balance sheet is positioned to take advantage of an expected decrease in short-term interest rates as we go into the second half of 2019,” Mr. Hagan added.               

Mr. Hagan concluded, “We believe our repurchase of 1.8 million shares during the first six months of 2019 and our ongoing quarterly dividend enhances shareholder value. We are also working to further enhance our profitability through continued prudent loan and core deposit growth along with our recently announced strategic expansion in the Connecticut marketplace.”  

Net Income for the Three Months Ended June 30, 2019 Compared to the Three Months Ended March 31, 2019

The Company reported net income of $3.3 million, or $0.12 diluted earnings per share, for the three months ended June 30, 2019, compared to net income of $3.4 million, or $0.13 diluted earnings per share, for the three months ended March 31, 2019. Return on average assets and return on average equity were 0.62% and 5.76%, respectively, for the three months ended June 30, 2019, as compared to 0.66% and 6.05%, respectively, for the three months ended March 31, 2019.

Net Interest Income and Net Interest Margin

On a sequential quarter basis, net interest income decreased $125,000, or 0.9%, to $14.2 million for the three months ended June 30, 2019, from $14.3 million for the three months ended March 31, 2019.  The decrease in net interest income was due to an increase in interest expense of $280,000, or 4.9%, partially offset by an increase in interest and dividend income of $155,000, or 0.8%. The increase in interest expense was primarily due to an increase in interest expense on deposits of $398,000, or 10.0%, partially offset by a decrease in interest expense on Federal Home Loan Bank (“FHLB”) borrowings of $118,000, or 6.7%.

The net interest margin was 2.89% for the three months ended June 30, 2019, compared to 2.94% for the three months ended March 31, 2019.  The net interest margin, on a tax-equivalent basis, was 2.92% for the three months ended June 30, 2019, compared to 2.97% for the three months ended March 31, 2019.  The amortization of purchase accounting adjustments related to the merger with Chicopee Bancorp, Inc. (“Chicopee”) decreased net interest income by $79,000 during the three months ended June 30, 2019, compared to an increase of $22,000 during the three months ended March 31, 2019. Excluding the purchase accounting adjustments, the net interest margin was 2.94% for the three months ended June 30, 2019 and 2.96% for the three months ended March 31, 2019.

The average yield on interest-earning assets remained unchanged at 4.15% for the three months ended June 30, 2019 and the three months ended March 31, 2019. Excluding purchase accounting adjustments, the average yield on interest-earning assets increased one basis point from 4.16% for the three months ended March 31, 2019 to 4.17% for the three months ended June 30, 2019.

The average cost of funds increased eight basis points from 1.54% for the three months ended March 31, 2019 to 1.62% for the three months ended June 30, 2019. The average cost of core deposits, including non-interest bearing demand deposits, increased two basis points to 31 basis points for the three months ended June 30, 2019, from 29 basis points for the three months ended March 31, 2019. The average cost of time deposits increased 15 basis points from 1.99% for the three months ended March 31, 2019 to 2.14% for the three months ended June 30, 2019.  The average cost of borrowings increased 15 basis points from 2.87% for the three months ended March 31, 2019 to 3.02% for the three months ended June 30, 2019. Average demand deposits, an interest-free source of funds, increased $19.1 million, or 5.5%, from $344.3 million, or 21.4% of total average deposits, for the three months ended March 31, 2019, to $363.3 million, or 22.2% of total average deposits, for the three months ended June 30, 2019.

During the three months ended June 30, 2019, average interest-earning assets decreased $6.4 million, or 0.3%, to $2.0 billion. The decrease in average interest-earning assets was due to a decrease in average securities of $10.1 million, or 3.9%, partially offset by an increase in average loans of $4.5 million, or 0.3%.

Provision for Loan Losses

For the three months ended June 30, 2019, the provision for loan losses increased $300,000 to $350,000 for the three months ended June 30, 2019, from $50,000 for the three months ended March 31, 2019. The Company recorded net recoveries of $194,000 for the three months ended June 30, 2019, as compared to net charge-offs of $224,000 for the three months ended March 31, 2019. Contributing to the increase in the general reserves was an increase in commercial real estate loans and commercial and industrial loans of $32.0 million, or 4.2%, and $9.2 million, or 4.0%, respectively. During the three months ended June 30, 2019, the Company reported recoveries of $823,000, primarily due to a previously charged-off loan from 2010. The recovery was partially offset by charge-offs totaling $629,000, primarily due to a partial charge-off of $440,000 related to a commercial and industrial loan relationship previously reported as substandard.

Non-Interest Income

On a sequential quarter basis, non-interest income increased $346,000, or 15.9%, to $2.5 million for the three months ended June 30, 2019, from $2.2 million for the three months ended March 31, 2019. The increase in non-interest income was primarily due to an increase in service charges and fees of $217,000, or 13.3%, an increase in other income of $198,000 due to an increase in swap fees and an increase in income from bank-owned life insurance of $53,000, or 12.5%.  The increase in service charges and fees included $110,000 in non-recurring interchange fee income.  During the three months ended June 30, 2019, the Company reported unrealized gains on marketable equity securities of $79,000 and realized losses on the sale of securities of $96,000, compared to unrealized gains on marketable equity securities of $70,000 and realized gains on the sale of securities of $35,000 during the three months ended March 31, 2019.

Non-Interest Expense

For the three months ended June 30, 2019, non-interest expense increased $117,000, or 1.0%, to $12.1 million, or 2.31% of average assets, from $12.0 million, or 2.31% of average assets, for the three months ended March 31, 2019.  The increase in non-interest expense was primarily due to an increase in salaries and benefits of $96,000, or 1.4%, an increase in other expenses of $167,000, or 9.5%, an increase in data processing of $37,000, or 5.6%, an increase in furniture and equipment of $22,000, or 5.4%, an increase in FDIC insurance expense of $60,000, or 34.1%, and an increase in advertising related expenses of $6,000, or 1.6%. These expenses were partially offset by decreases in occupancy expense of $173,000, or 14.8%, due to a decrease in snow removal-related expenses and a decrease in professional fees of $98,000, or 13.9%. For the three months ended June 30, 2019, the efficiency ratio was 72.5%, compared to 73.4% for the three months ended March 31, 2019.

Income Tax Provision

The Company’s effective tax rate increased from 22.5% for the three months ended March 31, 2019 to 23.0% for the three months ended June 30, 2019.

Net Income for the Three Months Ended June 30, 2019 Compared to the Three Months Ended June 30, 2018

The Company reported net income of $3.3 million, or $0.12 diluted earnings per share, for the three months ended June 30, 2019, compared to net income of $5.1 million, or $0.18 diluted earnings per share, for the three months ended June 30, 2018. Return on average assets and return on average equity were 0.62% and 5.76%, respectively, for the three months ended June 30, 2019, as compared to 0.98% and 8.63%, respectively, for the three months ended June 30, 2018. Adjusting net income for gains on bank-owned life insurance (“BOLI”) of $715,000, favorable purchase accounting adjustments of $909,000 and a prepayment penalty on a commercial payoff of $269,000, all reported during the three months ended June 30, 2018, and adjusting for the $79,000 negative purchase accounting adjustments and $21,000 in prepayment penalties reported during the three months ended June 30, 2019, net income was $3.3 million, or $0.13 diluted earnings per share, for the three months ended June 30, 2019 compared to net income of $3.2 million, or $0.11 diluted earnings per share, for the three months ended June 30, 2018.

Net Interest Income and Net Interest Margin

Net interest income decreased $1.7 million, or 10.5%, to $14.2 million, for the three months ended June 30, 2019, from $15.9 million for the three months ended June 30, 2018.  The decrease in net interest income was due to an increase in interest expense of $1.4 million, or 30.8%, and a decrease in interest and dividend income of $249,000, or 1.2%. The increase in interest expense was primarily due to a $1.6 million, or 60.7%, increase in interest expense on deposits, partially offset by a decrease of $234,000, or 12.4%, in interest expense on FHLB borrowings.

Net interest income for the three months ended June 30, 2018 included $909,000 in favorable purchase accounting adjustments and a prepayment penalty of $269,000, compared to $79,000 in negative purchase accounting adjustments and $21,000 in prepayment penalties reported during the three months ended June 30, 2019. Excluding these adjustments, net interest income decreased $428,000, or 2.9%, from $14.7 million during the three months ended June 30, 2018, compared to $14.3 million during the three months ended June 30, 2019. Interest and dividend income increased $887,000, or 4.6%, for the three months ended June 30, 2019, offset by an increase in interest expense of $1.3 million, or 27.8%.

The net interest margin was 2.89% for the three months ended June 30, 2019, compared to 3.24% for the three months ended June 30, 2018.  The net interest margin, on a tax-equivalent basis, was 2.92% for the three months ended June 30, 2019, compared to 3.27% for the three months ended June 30, 2018.

The decrease in the net interest margin was largely due to a decrease of $988,000 in purchase accounting adjustments from a favorable adjustment of $909,000 recorded during the three months ended June 30, 2018, compared to a negative adjustment of $79,000 recorded during the three months ended June 30, 2019. The decrease in purchase accounting adjustments reduced the net interest margin by 21 basis points. Prepayment penalties decreased $248,000 during the three months ended June 30, 2019, which further decreased the net interest margin by six basis points. After these adjustments, the adjusted net interest margin decreased from 3.00% during the three months ended June 30, 2018 to 2.91% during the three months ended June 30, 2019.

The average yield on interest-earning assets decreased six basis points from 4.21% for the three months ended June 30, 2018 to 4.15% for the three months ended June 30, 2019. Excluding the purchase accounting adjustments and the prepayment penalties mentioned above, the average yield on interest-earning assets increased 17 basis points from 3.99% for the three months ended June 30, 2018 to 4.17% for the three months ended June 30, 2019, respectively. During the three months ended June 30, 2019, the average cost of funds increased 41 basis points from 1.21% for the three months ended June 30, 2018 to 1.62% for the three months ended June 30, 2019. The average cost of core deposits, which include non-interest bearing demand accounts, increased six basis points from 0.25% for the three months ended June 30, 2018 to 0.31% for the three months ended June 30, 2019. The average cost of time deposits increased 68 basis points from 1.46% for the three months ended June 30, 2018 to 2.14% for the three months ended June 30, 2019. The average cost of FHLB borrowings increased 40 basis points during the same period. For the three months ended June 30, 2019, average demand deposits, an interest-free source of funds, increased $50.6 million, or 16.2%, to $363.3 million, or 22.2% of total average deposits, from $312.8 million, or 20.2% of total average deposits for the three months ended June 30, 2018.

During the three months ended June 30, 2019, average interest-earning assets increased $4.2 million, or 0.2%, to $2.0 billion compared to the three months ended June 30, 2018. The increase in average interest-earning assets was due to an increase in average loans of $23.7 million, or 1.4%, partially offset by a decrease in average securities of $23.7 million, or 8.7%.

Provision for Loan Losses

The provision for loan losses decreased $400,000, or 53.3%, from $750,000 for the three months ended June 30, 2018 to $350,000 for the three months ended June 30, 2019. The Company recorded net recoveries of $194,000 for the three months ended June 30, 2019, as compared to net charge-offs of $134,000 for the three months ended June 30, 2018.  During the three months ended June 30, 2019, the Company recorded charge-offs of $629,000, primarily due to an existing substandard commercial loan relationship, partially offset by recoveries of $823,000. The recovery was primarily due to a previously charged-off loan from 2010.

Non-Interest Income

Non-interest income decreased $416,000, or 14.2%, to $2.5 million for the three months ended June 30, 2019, from $2.9 million for the three months ended June 30, 2018. During the three months ended June 30, 2018, non-interest income included $715,000 in gains on BOLI. Excluding the gains on BOLI, non-interest income increased $299,000, or 13.5%, for the three months ended June 30, 2019 primarily due to an increase in service charges and fees of $157,000, or 9.3%, an increase in other non-interest income of $75,000, or 57.3%, primarily related to swap fee income, and $79,000 in unrealized gains on marketable equity securities for the three months ended June 30, 2019, as compared to $41,000 in unrealized losses on marketable equity securities for the three months ended June 30, 2018, partially offset by a $47,000 increase in realized losses on securities.  During the three months ended June 30, 2019, service charges and fees included $110,000 in non-recurring interchange fee income.

Non-Interest Expense

For the three months ended June 30, 2019, non-interest expense increased $594,000, or 5.1%, to $12.1 million, or 2.31% of average assets, from $11.5 million, or 2.21% of average assets, for the three months ended June 30, 2018.  The increase in non-interest expense was primarily due to an increase in salaries and benefits of $312,000, or 4.8%, an increase in other expense of $152,000, or 8.6%, an increase in FDIC insurance expense of $89,000, or 60.5%, an increase in furniture and equipment of $45,000, or 11.8%, an increase in data processing of $24,000, or 3.5%, an increase in advertising expense of $15,000, or 4.2%, and an increase in occupancy expense of $31,000, or 3.2%. These increases were partially offset by a decrease in professional fees of $74,000, or 10.9%. For the three months ended June 30, 2019, the efficiency ratio was 72.5%, compared to 63.5% for the three months ended June 30, 2018.

Income Tax Provision

The Company’s effective tax rate increased from 21.0% for the three months ended June 30, 2018 to 23.0% for the three months ended June 30, 2019. The lower tax rate for the three months ended June 30, 2018 was primarily due to a gain on BOLI recognized during the period.

Net Income for the Six Months Ended June 30, 2019 Compared to the Six Months Ended June 30, 2018

For the six months ended June 30, 2019, the Company reported net income of $6.7 million, or $0.25 diluted earnings per share, compared to $8.7 million, or $0.29 diluted earnings per share, for the six months ended June 30, 2018. Return on average assets and return on average equity were 0.64% and 5.90% for the six months ended June 30, 2019, compared to 0.84% and 7.21% for the six months ended June 30, 2018, respectively. Adjusting net income for gains on BOLI of $715,000, favorable purchase accounting adjustments of $1.1 million and a prepayment penalty of $269,000 all reported during the six months ended June 30, 2018, and adjusting for the $58,000 of negative purchase accounting adjustments and $23,000 in prepayment penalties reported during the six months ended June 30, 2019, net income was $6.7 million, or $0.25 diluted earnings per share, for the six months ended June 30, 2019, compared to net income of $7.0 million, or $0.24 diluted earnings per share, for the six months ended June 30, 2018.

Net Interest Income and Net Interest Margin

During the six months ended June 30, 2019, net interest income decreased $2.1 million, or 6.7%, to $28.5 million, compared to $30.6 million for the six months ended June 30, 2018. The decrease in net interest income was due to a $3.1 million, or 36.5%, increase in interest expense, partially offset by a $1.1 million, or 2.8%, increase in interest and dividend income. The increase in interest expense was primarily due to a $3.3 million, or 64.3%, increase in interest expense on deposits, primarily time deposits, while interest expense on FHLB borrowings decreased $124,000, or 3.5%. Net interest income for the six months ended June 30, 2018 included $1.1 million in favorable purchase accounting adjustments primarily due to the full payoff of a purchase credit impaired loan from Chicopee, compared to $58,000 in negative purchase accounting adjustments for the six months ended June 30, 2019. During the six months ended June 30, 2018, the Company also reported a prepayment penalty fee of $269,000, compared to $23,000 during the six months ended June 30, 2019. Excluding these adjustments, interest and dividend income increased $2.3 million, or 6.1%, offset by a $2.9 million, or 33.1%, increase in interest expense.

The net interest margin for the six months ended June 30, 2019 was 2.92%, compared to 3.17% during the six months ended June 30, 2018. The net interest margin, on a tax-equivalent basis, was 2.95% for the six months ended June 30, 2019, compared to 3.19% for the six months ended June 30, 2018.

The decrease in net interest margin was largely due to a decrease in purchase accounting adjustments from a favorable adjustment of $1.1 million during the six months ended June 30, 2018, compared to a negative adjustment of $58,000 during the six months ended June 30, 2019. The result was a decrease of 12 basis points on the net interest margin. Prepayment penalties decreased $246,000, from $269,000 during the six months ended June 30, 2018 to $23,000 during the six months ended June 30, 2019, which further decreased the net interest margin by three basis points. After these adjustments, the adjusted net interest margin decreased from 3.05% during the three months ended June 30, 2018 to 2.92% during the six months ended June 30, 2019.

The average yield on interest-earning assets increased seven basis points from 4.08% for the six months ended June 30, 2018 to 4.15% for the six months ended June 30, 2019. Excluding the purchase accounting adjustments and the prepayment penalties mentioned above, the average yield on interest-earning assets increased 19 basis points from 3.97% for the six months ended June 30, 2018 to 4.16% for the six months ended June 30, 2019, respectively. During the six months ended June 30, 2019, the average cost of funds increased 43 basis points from 1.15% for the six months ended June 30, 2018 to 1.58%. The average cost of core deposits, including noninterest-bearing demand deposits, increased six basis points from 0.24% for the six months ended June 30, 2018 to 0.30% for the six months ended June 30, 2019, while the average cost of time deposits increased 67 basis points from 1.39% for the six months ended June 30, 2018 to 2.06% during the same period in 2019. The average cost of borrowings increased 45 basis points from 2.50% for the six months ended June 30, 2018 to 2.95% for the six months ended June 20, 2019. For the six months ended June 30, 2019, average demand deposits, an interest-free source of funds, increased $42.4 million, or 13.6%, from $311.5 million, or 20.2% of total average deposits, for the six months ended June 30, 2018 to $353.9 million, or 21.8% of total average deposits, for the six months ended June 30, 2019. During the six months ended June 30, 2019, average interest-earning assets increased $23.0 million, or 1.2%, to $2.0 billion. The increase in average interest-earning assets was due to an increase in average loans of $40.4 million, or 2.5%, partially offset by a decrease in average securities of $23.5 million, or 8.5%.

Provision for Loan Losses

The provision for loan losses of $400,000 decreased $850,000, or 68.0%, for the six months ended June 30, 2019, compared to $1.3 million for the six months ended June 30, 2018. The Company recorded net charge-offs of $95,000 for the six months ended June 30, 2018, as compared to net charge-offs of $30,000 for the six months ended June 30, 2019.  During the six months ended June 30, 2019, the Company recorded charge-offs of $923,000, compared to $190,000 during the same period in 2018. The charge-offs recorded during the six months ended June 30, 2019 were primarily due to a partial charge-off of $440,000 related to one commercial and industrial loan relationship that was previously reported as substandard. During the six months ended June 30, 2019, the Company also recorded recoveries of $893,000, primarily due to a partial recovery of $812,000 related to a single commercial real estate loan previously charged-off in 2010.

Non-Interest Income

For the six months ended June 30, 2019, non-interest income of $4.7 million decreased $11,000, or 0.2%, compared to $4.7 million for the six months ended June 30, 2018. Service charges and fees increased $207,000, or 6.3%, and other income increased $83,000, or 63.4%. During the six months ended June 30, 2019, service charges and fees included $110,000 in non-recurring interchange fee income. During the six months ended June 30, 2019, the Company reported unrealized gains on marketable equity securities of $149,000, compared to unrealized losses of $147,000 during the six months ended June 30, 2018 as well as a decrease in realized losses on securities of $189,000, or 75.6%, during the same period. During the six months ended June 30, 2018, the Company reported a $48,000 gain on the sale of OREO and a $715,000 net gain on BOLI. Excluding the net gain on BOLI and the realized and unrealized security losses discussed above, non-interest income increased $267,000, or 6.2%, for the six months ended June 30, 2019 compared to the six months ended June 30, 2018.

Non-Interest Expense

For the six months ended June 30, 2019, non-interest expense increased $1.2 million, or 5.2%, to $24.2 million, or 2.31% of average assets, compared to $23.0 million, or 2.22% of average assets for the six months ended June 30, 2018. The increase in non-interest expense was primarily due to the increase in salaries and benefits of $559,000, or 4.3%, an increase in other non-interest expenses of $244,000, or 7.1%, an increase in occupancy expense of $142,000, or 7.0%, an increase in FDIC insurance expense of $107,000, or 35.1%, an increase in furniture and equipment of $83,000, or 11.1%, an increase of data processing of $52,000, or 4.0%, an increase in advertising expense of $32,000, or 4.6%, and a decrease in professional fees of $28,000, or 2.1%. For the six months ended June 30, 2019, the efficiency ratio was 72.9%, compared to 65.8% for the six months ended June 30, 2018. The adjusted efficiency ratio, excluding purchase account adjustments and prepayment penalties, was 72.9% for the six months ended June 30, 2019, compared to 68.7% for the six months ended June 30, 2018.

Income Tax Provision

The effective tax rate for the six months ended June 30, 2019 and June 30, 2018 was 22.7% and 21.8%, respectively.

Balance Sheet

At June 30, 2019, total assets were $2.1 billion, an increase of $8.3 million, or 0.4%, from December 31, 2018. During the same period, total loans increased $25.4 million, or 1.5%, securities available-for-sale decreased $18.7 million, or 7.4%, and cash and cash equivalents decreased $1.1 million, or 4.1%.

Loans

Total loans increased $25.4 million, or 1.5%, primarily due to an increase in commercial real estate loans of $33.9 million, or 4.4%, partially offset by a decrease in residential real estate loans, which include home equity loans, of $3.0 million, or 0.4%, and a decrease in commercial and industrial loans of $5.7 million, or 2.3%. In order to reduce interest rate risk, the Company currently services $53.3 million in residential loans sold to the secondary market. The servicing rights will continue to be retained on all loans sold.

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

               

  June 30, 2019   December 31, 2018
  (Dollars in thousands)
   
Commercial real estate loans $ 802,765   $ 768,881
Commercial and industrial loans   237,928     243,493
Residential real estate loans   671,838     674,879
Consumer loans   5,337     5,203
Total gross loans   1,717,868     1,692,456
Unamortized premiums and net deferred loans fees and costs   4,293     4,401
Total loans $ 1,722,161   $ 1,696,857

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 June 30, 2019, nonperforming loans totaled $14.9 million, or 0.87% of total loans, compared to $13.5 million, or 0.79% of total loans at December 31, 2018.  There were no loans 90 or more days past due and still accruing interest. Nonperforming assets to total assets was 0.70% and 0.64% at June 30, 2019 and December 31, 2018, respectively. The allowance for loan losses as a percentage of total loans was 0.72% at June 30, 2019, compared to 0.71% at December 31, 2018. At June 30, 2019, the allowance for loan losses as a percentage of nonperforming loans was 83.3%, compared to 89.4% at December 31, 2018. The allowance for loan losses as a percentage of total loans, excluding loans acquired from Chicopee, which were recorded at fair value with no related allowance for loan losses, was 0.96% at June 30, 2019 and 0.98% at December 31, 2018.

Deposits

At June 30, 2019, total deposits were $1.6 billion, an increase of $48.6 million, or 3.0%, from December 31, 2018. Core deposits, which the Company defines as all deposits except time deposits, increased $30.8 million, or 3.3%, from $935.9 million, or 58.6% of total deposits, at December 31, 2018, to $966.7 million, or 58.8% of total deposits, at June 30, 2019. Non-interest-bearing deposits increased $20.1 million, or 5.7%, to $375.5, interest-bearing checking accounts increased $6.3 million, or 9.9%, to $69.9 million, savings accounts increased $5.8 million, or 4.9%, to $124.3 million, while money market accounts decreased $1.4 million, or 0.3%, to $397.0 million. Time deposits increased $17.8 million, or 2.7%, from $660.0 million at December 31, 2018 to $677.8 million at June 30, 2019.  Brokered deposits, which are included within time deposits, increased $4.3 million, or 18.1% to $28.1 million at June 30, 2019, from $23.8 million at December 31, 2018.

FHLB Advances

FHLB advances decreased $41.6 million, or 15.6%, from $267.3 million at December 31, 2018, to $225.7 million at June 30, 2019. The Company utilized the increase in deposit balances during the year to pay down FHLB borrowings.

Capital

At June 30, 2019, shareholders’ equity was $229.7 million, or 10.8% of total assets, compared to $237.0 million, or 11.2% of total assets, at December 31, 2018. The decrease in shareholders’ equity reflects $17.8 million for the repurchase of the Company’s shares and the payment of regular cash dividends of $2.7 million, both partially offset by net income of $6.7 million and a decrease in accumulated other comprehensive loss of $5.7 million. Total shares outstanding as of June 30, 2019 were 26,703,468. 

The Company’s book value per share increased by $0.25, or 3.0%, to $8.60 at June 30, 2019, from $8.35 at December 31, 2018.  The Company’s tangible book value per share increased by $0.22, or 2.8%, to $8.00 at June 30, 2019 from $7.78 at December 31, 2018. The Bank’s regulatory capital ratios continued to exceed the levels required to be considered “well-capitalized” under federal banking regulations. 

Share Repurchase

On March 1, 2019, the Company announced the completion of its 2017 Repurchase Plan (the “2017 Plan”), under which the Company repurchased a total of 3,047,000 shares. On January 29, 2019, the Board of Directors authorized the 2019 Repurchase Plan (the “2019 Plan”) under which the Company may purchase up to 2,814,200 shares, or 10% of its outstanding common stock.  The 2019 Plan commenced upon the completion of the 2017 Plan.  During the three months ended June 30, 2019, the Company repurchased 249,961 shares under the 2019 Plan. For the six months ended June 30, 2019, the Company repurchased 1,796,941 shares under both the 2017 Plan and the 2019 Plan. As of June 30, 2019, there were 1,268,592 shares remaining under the 2019 Plan.

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 22 banking offices throughout western Massachusetts and northern 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, 2018.  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.

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

 


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 Six Months Ended
  June 30, March 31, December 31, September 30, June 30, June 30,
    2019     2019     2018     2018     2018     2019     2018  
INTEREST AND DIVIDEND INCOME:              
Loans $ 18,302   $ 18,058   $ 18,111   $ 17,577   $ 18,405   $ 36,360   $ 35,107  
Securities   1,630     1,690     1,754     1,766     1,829     3,320     3,637  
Other investments   210     236     232     228     202     446     403  
Short-term investments   73     76     92     34     28     149     49  
Total interest and dividend income   20,215     20,060     20,189     19,605     20,464     40,275     39,196  
               
INTEREST EXPENSE:              
Deposits   4,367     3,969     3,516     3,094     2,718     8,336     5,073  
Long-term debt   1,051     1,139     1,202     1,193     1,130     2,190     1,985  
Short-term borrowings   596     626     651     713     751     1,222     1,551  
Total interest expense   6,014     5,734     5,369     5,000     4,599     11,748     8,609  
               
Net interest and dividend income   14,201     14,326     14,820     14,605     15,865     28,527     30,587  
               
PROVISION FOR LOAN LOSSES   350     50     300     350     750     400     1,250  
               
Net interest and dividend income after provision for loan losses   13,851     14,276     14,520     14,255     15,115     28,127     29,337  
               
NON-INTEREST INCOME:              
Service charges and fees   1,850     1,633     1,770     1,891     1,693     3,483     3,276  
Income from bank-owned life insurance   478     425     451     448     484     903     926  
Gain on bank-owned life insurance death benefit   -     -     -     -     715     -     715  
(Loss) gain on sales of securities, net   (96 )   35     (31 )   -     (49 )   (61 )   (250 )
Gain on sale of OREO   -     -     -     -     -     -     48  
Unrealized gain (loss) on equity securities   79     70     48     (43 )   (41 )   149     (147 )
Other income   206     8     -     -     131     214     131  
Total non-interest income   2,517     2,171     2,238     2,296     2,933     4,688     4,699  
               
NON-INTEREST EXPENSE:              
Salaries and employees benefits   6,876     6,780     6,434     6,451     6,564     13,656     13,097  
Occupancy   998     1,171     995     952     967     2,169     2,027  
Furniture and equipment   427     405     412     400     382     832     749  
Data processing   702     665     681     642     678     1,367     1,315  
Professional fees   607     705     703     767     681     1,312     1,340  
FDIC insurance   236     176     140     158     147     412     305  
Advertising expense   370     364     342     351     355     734     702  
Other   1,924     1,757     1,986     1,851     1,772     3,681     3,437  
Total non-interest expense   12,140     12,023     11,693     11,572     11,546     24,163     22,972  
               
INCOME BEFORE INCOME TAXES   4,228     4,424     5,065     4,979     6,502     8,652     11,064  
               
INCOME TAX PROVISION   971     994     1,223     1,070     1,364     1,965     2,407  
NET INCOME $ 3,257   $ 3,430   $ 3,842   $ 3,909   $ 5,138   $ 6,687   $ 8,657  
               
Basic earnings per share $ 0.13   $ 0.13   $ 0.14   $ 0.14   $ 0.18   $ 0.25   $ 0.30  
Weighted average shares outstanding   26,047,187     27,037,520     28,252,383     28,789,132     29,035,895     26,539,618     29,259,119  
Diluted earnings per share $ 0.12   $ 0.13   $ 0.14   $ 0.14   $ 0.18   $ 0.25   $ 0.29  
Weighted average diluted shares outstanding   26,160,169     27,153,160     28,395,964     28,937,038     29,178,264     26,653,929     29,398,356  
               
Other Data:              
Return on average assets (1)   0.62 %   0.66 %   0.72 %   0.74 %   0.98 %   0.64 %   0.84 %
Return on average assets, exclusive of tax benefits (1)(3)   0.62 %   0.66 %   0.72 %   0.74 %   0.95 %   0.64 %   0.82 %
Return on average equity (1)   5.76 %   6.05 %   6.43 %   6.42 %   8.63 %   5.90 %   7.21 %
Return on average equity, exclusive of tax benefits (1)(3)   5.76 %   6.01 %   6.43 %   6.42 %   8.38 %   5.88 %   7.07 %
Efficiency ratio (2)(3)   72.54 %   73.35 %   68.62 %   68.30 %   63.53 %   72.94 %   65.78 %
Net interest margin, on a fully tax-equivalent basis   2.92 %   2.97 %   2.99 %   2.96 %   3.27 %   2.95 %   3.19 %
(1) Annualized.          
(2) The efficiency ratio 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 and OREO and gain on bank-owned life insurance.
(3) Please refer to the “Reconciliation of non-GAAP to GAAP Financial Measures” on page 15 for further details.


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

  June 30,   March 31,   December 31,   September 30,   June 30,
    2019       2019       2018       2018       2018  
Cash and cash equivalents $ 25,688     $ 44,482     $ 26,789     $ 61,999     $ 22,925  
Securities available-for-sale, at fair value   234,999       244,878       253,748       252,984       259,689  
Marketable equity securities, at fair value   6,639       6,518       6,408       6,319       6,324  
Federal Home Loan Bank of Boston and other  restricted stock - at cost   11,756       12,407       14,695       15,480       15,584  
                   
Loans   1,722,161       1,680,666       1,696,857       1,692,568       1,668,875  
Allowance for loan losses   (12,423 )     (11,879 )     (12,053 )     (12,235 )     (11,986 )
Net loans   1,709,738       1,668,787       1,684,804       1,680,333       1,656,889  
                   
Bank-owned life insurance   70,155       69,677       69,252       68,801       68,353  
Goodwill   12,487       12,487       12,487       12,487       12,487  
Core deposit intangible   3,500       3,594       3,688       3,781       3,875  
Other assets   52,182       52,867       46,951       48,341       49,470  
TOTAL ASSETS $ 2,127,144     $ 2,115,697     $ 2,118,822     $ 2,150,525     $ 2,095,596  
                   
Total deposits $ 1,644,551     $ 1,629,834     $ 1,595,993     $ 1,609,019     $ 1,551,804  
Short-term borrowings   50,000       35,000       59,250       55,000       66,000  
Long-term debt   175,683       196,039       208,018       224,306       214,672  
Other liabilities   27,194       27,507       18,532       20,915       21,047  
TOTAL LIABILITIES   1,897,428       1,888,380       1,881,793       1,909,240       1,853,523  
                   
TOTAL SHAREHOLDERS' EQUITY   229,716       227,317       237,029       241,285       242,073  
                   
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,127,144     $ 2,115,697     $ 2,118,822     $ 2,150,525     $ 2,095,596  
                   


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

  June 30,   March 31,   December 31,   September 30,   June 30,
    2019       2019       2018       2018       2018  
                   
Other Data:                  
                   
Shares outstanding at end of period   26,703,468       26,953,429       28,393,348       29,453,808       29,746,707  
                   
Book value per share $ 8.60     $ 8.43     $ 8.35     $ 8.19     $ 8.14  
Tangible book value per share   8.00       7.84       7.78       7.64       7.59  
30-89 day delinquent loans   7,165       8,513       7,183       8,153       9,413  
30-89 day delinquent loans acquired from Chicopee, net of purchase accounting adjustments   3,160       2,751       2,763       3,328       3,285  
Total delinquent loans   14,712       15,103       12,495       10,960       11,917  
Total delinquent loans as a percentage of total loans   0.85 %     0.90 %     0.74 %     0.65 %     0.71 %
Nonperforming loans   14,920       15,312       13,484       12,782       13,010  
Nonperforming loans acquired from Chicopee, net of purchase accounting adjustments   3,938       4,032       4,894       5,035       5,101  
Nonperforming loans as a percentage of total loans   0.87 %     0.91 %     0.79 %     0.76 %     0.78 %
Nonperforming assets as a percentage of total assets   0.70 %     0.72 %     0.64 %     0.59 %     0.62 %
Allowance for loan losses as a percentage of nonperforming loans   83.26 %     77.58 %     89.39 %     95.72 %     92.13 %
Allowance for loan losses as a percentage of total loans   0.72 %     0.71 %     0.71 %     0.72 %     0.72 %
Allowance for loan losses as a percentage of total loans, excluding loans acquired from Chicopee recorded at fair value with no corresponding allowance   0.96 %     0.96 %     0.98 %     1.01 %     1.03 %

The following tables set forth the information relating to our average balances and net interest income for the three months ended June 30, 2019, March 31, 2019, and June 30, 2018 and reflects the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated.

  Three Months Ended
  June 30, 2019   March 31, 2019   June 30, 2018
  Average       Average Yield/   Average       Average Yield/   Average       Average  Yield/
  Balance   Interest (8)   Cost   Balance   Interest (8)   Cost   Balance   Interest (8)   Cost
  (Dollars in thousands)
ASSETS:                                        
Interest-earning assets                                        
Loans(1)(2) $ 1,688,553   $ 18,434     4.38 %   $ 1,684,094   $ 18,179     4.38 %   $ 1,664,903   $ 18,531     4.46 %
Securities(2)   249,110     1,635     2.63       259,179     1,695     2.65       272,809     1,835     2.70  
Other investments   15,131     210     5.57       15,942     236     6.00       17,601     202     4.60  
Short-term investments(3)   15,134     73     1.93       15,112     76     2.04       8,386     28     1.34  
Total interest-earning assets   1,967,928     20,352     4.15       1,974,327     20,186     4.15       1,963,699     20,596     4.21  
Total non-interest-earning assets   137,749               133,870               132,467          
Total assets $ 2,105,677             $ 2,108,197             $ 2,096,166          
                                         
LIABILITIES AND EQUITY:                                        
Interest-bearing liabilities                                        
Interest-bearing checking accounts $ 70,619     94     0.53     $ 72,934     81     0.45     $ 98,493     87     0.35  
Savings accounts   126,855     42     0.13       122,608     33     0.11       142,991     48     0.13  
Money market accounts   396,555     601     0.61       395,215     556     0.57       419,604     476     0.46  
Time deposit accounts   679,909     3,630     2.14       673,852     3,299     1.99       578,860     2,107     1.46  
Total interest-bearing deposits   1,273,938     4,367     1.37       1,264,609     3,969     1.27       1,239,948     2,718     0.88  
Short-term borrowings and long-term debt   218,419     1,647     3.02       248,982     1,765     2.87       288,054     1,881     2.62  
Interest-bearing liabilities   1,492,357     6,014     1.62       1,513,591     5,734     1.54       1,528,002     4,599     1.21  
Non-interest-bearing deposits   363,329               344,273               312,754          
Other non-interest-bearing liabilities   23,210               20,370               16,566          
Total non-interest-bearing liabilities   386,539               364,643               329,320          
Total liabilities   1,878,896               1,878,234               1,857,322          
Total equity   226,781               229,963               238,844          
Total liabilities and equity $ 2,105,677             $ 2,108,197             $ 2,096,166          
Less: Tax-equivalent adjustment(2)       (137 )               (126 )               (132 )      
Net interest and dividend income     $ 14,201               $ 14,326               $ 15,865        
Net interest rate spread(4)         2.50 %           2.58 %           2.97 %
Net interest rate spread, on a tax-equivalent basis(5)         2.53 %           2.61 %           3.00 %
Net interest margin(6)         2.89 %           2.94 %           3.24 %
Net interest margin, on a tax-equivalent basis(7)         2.92 %           2.97 %           3.27 %
Ratio of average interest-earning                                        
assets to average interest-bearing liabilities         131.87 %           130.44 %           128.51 %

The following tables set forth the information relating to our average balances and net interest income for the six months ended June 30, 2019 and 2018 and reflects the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated.

  Six Months Ended June 30,
    2019     2018
  Average       Average Yield/   Average       Average Yield/
  Balance   Interest (8)   Cost   Balance   Interest (8)   Cost
  (Dollars in thousands)
ASSETS:                          
Interest-earning assets                          
Loans(1)(2) $ 1,686,336   $ 36,613     4.38 %   $ 1,645,926   $ 35,358     4.33 %
Securities(2)   254,116     3,330     2.64       277,656     3,649     2.65  
Other investments   15,535     446     5.79       17,357     403     4.68  
Short-term investments(3)   15,123     149     1.99       7,173     49     1.38  
Total interest-earning assets   1,971,110     40,538     4.15       1,948,112     39,459     4.08  
Total non-interest-earning assets   135,820               134,729          
Total assets $ 2,106,930             $ 2,082,841          
                           
LIABILITIES AND EQUITY:                          
Interest-bearing liabilities                          
Interest-bearing checking accounts $ 71,770     175     0.49     $ 95,820     167     0.35  
Savings accounts   124,743     75     0.12       142,941     89     0.13  
Money market accounts   395,889     1,157     0.59       418,897     894     0.43  
Time deposit accounts   676,898     6,929     2.06       570,032     3,923     1.39  
Total interest-bearing deposits   1,269,300     8,336     1.32       1,227,690     5,073     0.83  
Short-term borrowings and long-term debt   233,615     3,412     2.95       285,397     3,536     2.50  
Interest-bearing liabilities   1,502,915     11,748     1.58       1,513,087     8,609     1.15  
Non-interest-bearing deposits   353,854               311,480          
Other non-interest-bearing liabilities   21,798               16,228          
Total non-interest-bearing liabilities   375,652               327,708          
Total liabilities   1,878,567               1,840,795          
Total equity   228,363               242,046          
Total liabilities and equity $ 2,106,930             $ 2,082,841          
Less: Tax-equivalent adjustment(2)       (263 )               (263 )      
Net interest and dividend income     $ 28,527               $ 30,587        
Net interest rate spread(4)         2.54 %           2.91 %
Net interest rate spread, on a tax-equivalent basis(5)         2.57 %           2.93 %
Net interest margin(6)         2.92 %           3.17 %
Net interest margin, on a tax-equivalent basis(7)         2.95 %           3.19 %
Ratio of average interest-earning                          
assets to average interest-bearing liabilities       131.15 %           128.75 %

____________________________________________________

(1) Loans, including non-accrual 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 weighted average yield on interest-earning assets and the 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) Acquired loans, time deposits and borrowings are recorded at fair value at the time of acquisition.  The fair value marks on the loans, time deposits and borrowings acquired accrete and amortize into net interest income over time.  For the three months ended June 30, 2019, March 31, 2019 and June 30, 2018, the loan accretion income and interest expense reduction on time deposits and borrowings (decreased) increased net interest income $(79,000), $22,000 and $909,000, respectively, and for the six months ended June 30, 2019 and June 30, 2018, the loan accretion income and interest expense reduction on time deposits and borrowings (decreased) increased net interest income $(58,000) and $1.1 million, respectively. Excluding these items, net interest margin for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018 was 2.94%, 2.96% and 3.08% and the net interest margin for the six months ended June 30, 2019 and June 30, 2018 was 2.95% and 3.08%, respectively.

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 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.

  Three Months Ended   Six Months Ended
  June 30,   March 31,
December 31,
September 30,
June 30,
June 30,
    2019     2019
2018
  2018
2018
2019
2018
  (Dollars in thousands, except per share data)  
     
Net Income:                          
Net income, as presented $ 3,257     $ 3,430     $ 3,842     $ 3,909     $ 5,138     $ 6,687     $ 8,657  
Tax benefit impact (1)   -       (24 )     -       -       (150 )     (24 )     (165 )
Core net income, exclusive of tax benefits impact $ 3,257     $ 3,406     $ 3,842     $ 3,909     $ 4,988     $ 6,663     $ 8,492  
                           
Diluted EPS:                          
Diluted earnings per share, as presented $ 0.12     $ 0.13     $ 0.14     $ 0.14     $ 0.18     $ 0.25     $ 0.29  
Tax benefits impact (1)   -       -       -       -       (0.01 )     -       -  
Core diluted EPS, exclusive of tax benefits impact $ 0.12     $ 0.13     $ 0.14     $ 0.14     $ 0.17     $ 0.25     $ 0.29  
     
Return on Average Assets:                          
Return on average assets, as presented   0.62 %     0.66 %     0.72 %     0.74 %     0.98 %     0.64 %     0.84 %
Tax benefit impact (1)   -       -       -       -       (0.03 )     -       (0.02 )
Core return on average assets, exclusive of tax benefits impact   0.62 %     0.66 %     0.72 %     0.74 %     0.95 %     0.64 %     0.82 %
                           
Return on Average Equity:                          
Return on average equity, as presented   5.76 %     6.05 %     6.43 %     6.42 %     8.63 %     5.90 %     7.21 %
Tax benefits impact (1)   -       (0.04 )     -       -       (0.25 )     (0.02 )     (0.14 )
Core return on average equity, exclusive of tax benefits impact   5.76 %     6.01 %     6.43 %     6.42 %     8.38 %     5.88 %     7.07 %


(1) Impact of stock option exercises and bank-owned life insurance death benefits.

 

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