UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 23, 2019
WESTERN NEW ENGLAND BANCORP, INC.
(Exact name of registrant as specified in its charter)
| Massachusetts (State or other jurisdiction of incorporation or organization) |
001-16767 (Commission File Number) |
73-1627673 (I.R.S. Employer Identification No.) |
141 Elm Street
Westfield,
Massachusetts 01085
(Address of principal executive offices, zip code)
Registrant's telephone number, including area code: (413) 568-1911
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02. | Results of Operations and Financial Condition |
On April 23, 2019, Western New England Bancorp, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ended March 31, 2019. The press release also announced the declaration of a regular cash dividend of $0.05 per share. A copy of the press release is furnished as Exhibit 99.1 hereto and is hereby incorporated by reference into this Item 2.02.
The information contained in this Item 2.02, including Exhibit 99.1 attached hereto, shall not be deemed “filed” with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by the Company under the Securities Act of 1933, as amended.
| Item 9.01. | Financial Statements and Exhibits. |
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Exhibits.
The exhibits required by this item are set forth on the Exhibit Index attached hereto.
|
Exhibit Number |
Description | |
| 99.1 | Press Release, dated April 23, 2019 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| WESTERN NEW ENGLAND BANCORP, INC. | ||
| By: | /s/ Guida R. Sajdak | |
| Guida R. Sajdak | ||
| Chief Financial Officer | ||
Dated: April 23, 2019
Western New England Bancorp, Inc. 8-K
Exhibit 99.1
| 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. REPORTS RESULTS FOR THREE MONTHS ENDED
MARCH 31, 2019 AND DECLARES QUARTERLY CASH DIVIDEND
Westfield, Massachusetts, April 23, 2019: 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 months ended March 31, 2019. The Company reported net income of $3.4 million, or $0.13 per diluted share, for the three months ended March 31, 2019, as compared to net income of $3.5 million, or $0.12 per diluted share, for the three months ended March 31, 2018, and as compared to net income of $3.8 million, or $0.14 per diluted share, for the three months ended December 31, 2018. The Company also announced that the Board of Directors declared a quarterly cash dividend of $0.05 per share, payable on or about May 22, 2019 to shareholders of record on May 8, 2019.
“Growing our balance sheet is critical to our success, and we continue to make investments to promote long-term franchise value for the Company. To build our Connecticut presence, we have identified a site in West Hartford and added experienced commercial and residential lenders and cash management specialists in a disrupted market to drive growth in loans and core deposits,” said James C. Hagan, President and CEO. “In the first quarter, significant loan prepayment activity, aggressive competition and traditional seasonal trends have all impacted our growth. Add to that higher deposit costs as a result of the interest rate environment and the net interest margin was under pressure.” Mr. Hagan added, “We are pleased that for the second consecutive quarter, we repurchased a significant number of our own shares at what we believe is an attractive valuation.”
Net Income for the Three Months Ended March 31, 2019 Compared to the Three Months Ended December 31, 2018
The Company reported net income of $3.4 million, or $0.13 per diluted share, for the three months ended March 31, 2019, compared to net income of $3.8 million, or $0.14 per diluted share, for the three months ended December 31, 2018. Return on average assets and return on average equity were 0.66% and 6.05%, respectively, for the three months ended March 31, 2019, as compared to 0.72% and 6.43%, respectively, for the three months ended December 31, 2018.
Net Interest Income and Net Interest Margin
On a sequential quarter basis, net interest income decreased $494,000, or 3.3%, to $14.3 million, for the three months ended March 31, 2019, from $14.8 million for the three months ended December 31, 2018. The decrease in net interest income was due to an increase in interest expense of $365,000, or 6.8%, and a decrease in interest and dividend income of $129,000, or 0.6%. The increase in interest expense was primarily due to an increase in interest expense on deposits of $453,000, or 12.9%, partially offset by a decrease in interest expense on borrowings of $88,000, or 4.7%. The recent increases in the federal funds rate resulted in an upward pressure on deposit rates as competition for deposits continues. For the three months ended March 31, 2019, average demand deposits of $344.3 million, an interest-free source of funds, represented 21.4% of average total deposits compared to 22.5% for the three months ended December 31, 2018.
| 1 |
The net interest margin was 2.94% for the three months ended March 31, 2019, compared to 2.97% for the three months ended December 31, 2018. The net interest margin, on a tax-equivalent basis, was 2.97% for the three months ended March 31, 2019, compared to 2.99% for the three months ended December 31, 2018. The amortization of purchase accounting adjustments related to the merger with Chicopee Bancorp, Inc. (“Chicopee”) increased net interest income by $22,000 and $61,000 during the three months ended March 31, 2019 and December 31, 2018, respectively. Excluding the favorable purchase accounting amortization and $49,000 in prepayment penalties recorded during the three months ended December 31, 2018, the net interest margin was 2.96% for the three months ended March 31, 2019 and 2.97% for the three months ended December 31, 2018.
The average yield on interest-earning assets increased eight basis points from 4.07% for the three months ended December 31, 2018 to 4.15% for the three months ended March 31, 2019. Excluding purchase accounting adjustments, the average yield on interest-earning assets remained unchanged at 4.07% and 4.15% for the three months ended December 31, 2018 and March 31, 2019, respectively. The average cost of funds increased twelve basis points from 1.42% for the three months ended December 31, 2018 to 1.54% for the three months ended March 31, 2019. The average cost of time deposits increased 22 basis points from 1.77% for the three months ended December 31, 2018 to 1.99% for the three months ended March 31, 2019. The average cost of borrowings increased three basis points from 2.84% for the three months ended December 31, 2018 to 2.87% for the three months ended March 31, 2019.
During the three months ended March 31, 2019, average interest-earning assets decreased $6.9 million, or 0.4%, to $2.0 billion. The decrease in average interest-earning assets was due to a decrease of $6.4 million, or 0.4%, in average loans, a decrease of $2.2 million, or 12.7%, in short-term investments, and a decrease of $1.4 million, or 8.1%, in other investments, partially offset by an increase in average securities of $3.1 million, or 1.2%.
Provision for Loan Losses
The provision for loan losses was $50,000 for the three months ended March 31, 2019, compared to $300,000 for the three months ended December 31, 2018, primarily due to a decrease in loan balances for the three months ended March 31, 2019. The Company recorded net charge-offs of $224,000 for the three months ended March 31, 2019, as compared to net charge-offs of $482,000 for the three months ended December 31, 2018.
Non-Interest Income
On a sequential quarter basis, non-interest income decreased $67,000, or 3.0%, to $2.2 million for the three months ended March 31, 2019. The decrease in non-interest income was primarily due to a decrease in service charges of $137,000, or 7.7%, and a decrease in bank-owned life insurance income of $26,000, or 5.8%. During the three months ended March 31, 2019, the Company reported a gain on the sale of securities of $35,000 and an unrealized gain of $70,000 on the Company’s marketable equity securities portfolio. During the three months ended December 31, 2018, the company reported a net loss on sales of securities of $31,000 and an unrealized gain of $48,000 on the Company’s marketable equity securities portfolio.
Non-Interest Expense
On a sequential quarter basis, non-interest expense increased $330,000, or 2.8%, to $12.0 million, or 2.31% of average assets, for the three months ended March 31, 2019, from $11.7 million, or 2.19% of average assets, for the three months ended December 31, 2018. Salaries and benefit increased $346,000, or 5.4%, primarily due to annual merit increases and related payroll taxes as well as the addition of new staff to support the Company’s business initiatives. Occupancy expense increased $176,000, or 17.7%, primarily due to an increase of $132,000 in snow removal related expenses. Professional fees increased $2,000, or 0.3%, advertising and marketing expense increased $22,000, or 6.4%, and FDIC insurance expense increased $36,000, or 25.7%. These increases were partially offset by a decrease in other expenses of $229,000, or 11.5%, a decrease in furniture and equipment expense of $7,000, or 1.7%, and a decrease in data processing expense of $16,000, or 2.3%.For the three months ended March 31, 2019, the efficiency ratio was 73.4%, compared to 68.6% for the three months ended December 31, 2018.
| 2 |
Income Tax Provision
The Company’s effective tax rate decreased to 22.5% for the three months ended March 31, 2019 from 24.1% for the three months ended December 31, 2018.
Net Income for the Three Months Ended March 31, 2019 Compared to the Three Months Ended March 31, 2018
The Company reported net income of $3.4 million, or $0.13 per diluted share, for the three months ended March 31, 2019, compared to a net income of $3.5 million, or $0.12 per diluted share, for the three months ended March 31, 2018. Net income, excluding favorable purchase accounting amortization of $22,000 during the three months ended March 31, 2019 and $235,000 during the three months ended March 31, 2018, was $3.4 million, or $0.13 per diluted share and $3.3 million, or $0.11 per diluted share, respectively. Return on average assets and return on average equity were 0.66% and 6.05%, respectively, for the three months ended March 31, 2019, as compared to 0.69% and 5.82%, respectively, for the three months ended March 31, 2018.
Net Interest Income and Net Interest Margin
Net interest income decreased $396,000, or 2.7%, to $14.3 million, for the three months ended March 31, 2019, from $14.7 million, for the three months ended March 31, 2018. The decrease in net interest income was due to an increase of $1.7 million, or 43.0%, in interest expense, partially offset by an increase in interest and dividend income of $1.3 million, or 7.1%. Net interest income included $22,000 and $235,000 in favorable purchase accounting adjustments for the three months ended March 31, 2019 and 2018, respectively. The increase in interest expense was primarily due to an increase of $1.6 million, or 68.5%, in interest expense on deposits and an increase of $110,000, or 6.6%, in interest expense on borrowings. The overall average cost of interest-bearing liabilities increased 45 basis points. The recent increases in the federal funds rate resulted in an upward pressure on deposit rates as competition for deposits continues.
The net interest margin was 2.94% for the three months ended March 31, 2019, compared to 3.09% for the three months ended March 31, 2018. The net interest margin, on a tax-equivalent basis, was 2.97% for the three months ended March 31, 2019, compared to 3.12% for the three months ended March 31, 2018. The amortization of purchase accounting adjustments related to the merger increased net interest income by $22,000 and $235,000 during the three months ended March 31, 2019 and March 31, 2018, respectively. Excluding the favorable purchase accounting amortization, the net interest margin was 2.96% for the three months ended March 31, 2019 and 3.07% for the three months ended March 31, 2018.
The average yield on interest-earning assets increased 19 basis points to 4.15% for the three months ended March 31, 2019, from 3.96% for the three months ended March 31, 2018. During the three months ended March 31, 2019, the average cost of funds increased 45 basis points to 1.54%, from 1.09% for the three months ended March 31, 2018. The average cost of time deposits increased 68 basis points to 1.99% for the three months ended March 31, 2019, from 1.31% for the three months ended March 31, 2018. The average cost of borrowings increased 50 basis points to 2.87% for the three months ended March 31, 2019 from 2.37% for the three months ended March 31, 2018.
Average interest-earning assets increased $42.0 million, or 2.2%, to $2.0 billion for the three months ended March 31, 2019 from $1.9 billion for the three months ended March 31, 2018. The increase in average interest-earning assets was due to an increase in average loans of $57.4 million, or 3.5%, and an increase in short-term investments of $9.2 million, partially offset by a decrease in average securities of $23.4 million, or 8.3%.
| 3 |
Provision for Loan Losses
The provision for loan losses was $50,000 for the three months ended March 31, 2019, compared to $500,000 for the three months ended March 31, 2018, primarily due to a decrease in loan balances during the three months ended March 31, 2019. The Company recorded net charge-offs of $224,000 for the three months ended March 31, 2019, as compared to net recoveries of $39,000 for the three months ended March 31, 2018.
Non-Interest Income
Non-interest income increased $405,000, or 22.9%, to $2.2 million for the three months ended March 31, 2019, from $1.8 million for the three months ended March 31, 2018. During the three months ended March 31, 2018, the Company recognized $201,000 in previously unamortized premiums on a bond which was paid in full prior to its final maturity and $106,000 in unrealized losses on the Company’s marketable equity securities portfolio.
Non-Interest Expense
Non-interest expense increased $597,000, or 5.2%, to $12.0 million, or 2.31% of average assets, for the three months ended March 31, 2019, from $11.4 million, or 2.24% of average assets, for the three months ended March 31, 2018. Salaries and benefits increased $247,000, or 3.8%, primarily due to annual merit increases as well as the addition of new staff to support the Company’s business initiatives. Occupancy expense increased $111,000, or 10.5%, data processing expense increased $28,000, or 4.4%, FDIC insurance expense increased $18,000, or 11.4%, advertising expense increased $17,000, or 4.9%, professional fees increased $46,000, or 7.0%, and other non-interest expense increased $92,000, or 5.5%. For the three months ended March 31, 2019, the efficiency ratio was 73.4%, compared to 68.2% for the three months ended March 31, 2018.
Income Tax Provision
The Company’s effective tax rate was 22.5% and 22.9% for the three months ended March 31, 2019 and 2018, respectively.
Balance Sheet
At March 31, 2019, total assets were $2.1 billion, a decrease of $3.1 million, or 0.2%, from December 31, 2018. During the same period, total loans decreased $16.2 million, or 1.0%, and securities decreased $8.9 million, or 3.5%, partially offset by an increase in cash and cash equivalents of $17.7 million or 66.1%.
Loans
Total loans of $1.7 billion decreased $16.2 million, or 1.0%, from December 31, 2018 due to a decrease in commercial and industrial loans of $14.8 million, or 6.1%, and a decrease in residential loans, including home equity loans, of $3.3 million, or 0.5%. During the same period, commercial real estate loans increased $1.9 million, or 0.3%. The decrease in total loans at March 31, 2019 was a combination of payoffs in the commercial and industrial loan portfolio as well as seasonal factors. Total loan originations during the first quarter of 2019 were strong despite elevated levels of loan payoffs, particularly in the commercial and industrial loan portfolio. During the first quarter of 2019, the Company originated $57.9 million in new loans, which included $21.2 million in commercial and industrial loans, $22.2 million in commercial real estate loans and $14.5 million in residential real estate loans.
| 4 |
The following table is a summary of our outstanding loan balances as of the periods indicated:
| March 31, 2019 | December 31, 2018 | |||||||
| (Dollars in thousands) | ||||||||
| Commercial real estate loans | $ | 770,776 | $ | 768,881 | ||||
| Commercial and industrial loans | 228,709 | 243,493 | ||||||
| Residential real estate loans | 671,558 | 674,879 | ||||||
| Consumer loans | 5,270 | 5,203 | ||||||
| Total gross loans | 1,676,313 | 1,692,456 | ||||||
| Unamortized premiums and net deferred loans fees and costs | 4,353 | 4,401 | ||||||
| Total loans | $ | 1,680,666 | $ | 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 March 31, 2019, non-performing loans increased $1.8 million, or 13.3%, to $15.3 million, or 0.91% 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. At March 31, 2019, non-performing assets to total assets was 0.72%, an increase of eight basis points from 0.64% at December 31, 2018. The allowance for loan losses as a percentage of total loans was 0.71% at both March 31, 2019 and December 31, 2018. At March 31, 2019, the allowance for loan losses as a percentage of non-performing loans was 77.6%, compared to 89.4% at December 31, 2018. The allowance for loan losses as a percentage of total loans, excluding loans acquired, which were recorded at fair value with no related allowance for loan losses, was 0.96% at March 31, 2019 and 0.98% at December 31, 2018.
Deposits
At March 31, 2019, total deposits were $1.6 billion, an increase of $33.8 million, or 2.1%, from December 31, 2018. Core deposits, which the Company defines as all deposits except time deposits, increased $11.0 million, or 1.2%, from $935.9 million, or 58.6% of total deposits, at December 31, 2018, to $946.9 million, or 58.1% of total deposits, at March 31, 2019. Non-interest bearing deposits decreased $10.3 million, or 2.9%, to $345.1 million, money market accounts remained relatively unchanged at $398.2 million, interest-bearing checking accounts increased $16.6 million, or 26.1%, to $80.2 million, and savings accounts increased $4.9 million, or 4.1%, to $123.4 million compared to December 31, 2018. Time deposits increased $23.0 million, or 3.5%, from $660.0 million at December 31, 2018 to $683.0 million at March 31, 2019. Brokered deposits, which are included within time deposits, increased $4.3 million to $28.1 million at March 31, 2019, from $23.8 million at December 31, 2018.
Federal Home Loan Bank (“FHLB”) Advances
FHLB advances decreased $36.3 million, or 13.6%, from $267.3 million at December 31, 2018, to $231.0 million at March 31, 2019. The Company utilized the increase in deposit balances during the quarter to pay down FHLB borrowings.
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Capital
At March 31, 2019, shareholders’ equity was $227.3 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 during the three months ended March 31, 2019 reflects $15.4 million for the repurchase of the Company’s shares during the quarter and the payment of regular cash dividends of $1.4 million partially offset by net income of $3.4 million and a decrease of $3.2 million in accumulated other comprehensive loss. Total shares outstanding as of March 31, 2019 were 26,953,429.
The Company’s book value per share increased by $0.08, or 1.0%, to $8.43 at March 31, 2019, from $8.35 at December 31, 2018. The Company’s tangible book value per share increased by $0.06, or 0.8%, to $7.84 at March 31, 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 March 31, 2019, the Company repurchased 251,333 shares under the 2017 Plan and 1,295,647 under the 2019 Plan. As of March 31, 2019, there were 1,518,553 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 located in Agawam, Chicopee, East Longmeadow, Feeding Hills, Holyoke, Ludlow, South Hadley, 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, 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.
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WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations and Other Data
(Dollars in thousands, except per share data)
(Unaudited)
| Three Months Ended | ||||||||||||||||||||
| March 31, 2019 | December 31, 2018 | September 30, 2018 | June 30, 2018 | March 31, 2018 |
||||||||||||||||
| INTEREST AND DIVIDEND INCOME: | ||||||||||||||||||||
| Loans | $ | 18,058 | $ | 18,111 | $ | 17,577 | $ | 18,405 | $ | 16,702 | ||||||||||
| Securities | 1,690 | 1,754 | 1,766 | 1,829 | 1,808 | |||||||||||||||
| Other investments | 236 | 232 | 228 | 202 | 201 | |||||||||||||||
| Short-term investments | 76 | 92 | 34 | 28 | 21 | |||||||||||||||
| Total interest and dividend income | 20,060 | 20,189 | 19,605 | 20,464 | 18,732 | |||||||||||||||
| INTEREST EXPENSE: | ||||||||||||||||||||
| Deposits | 3,969 | 3,516 | 3,094 | 2,718 | 2,355 | |||||||||||||||
| Long-term debt | 1,139 | 1,202 | 1,193 | 1,130 | 855 | |||||||||||||||
| Short-term borrowings | 626 | 651 | 713 | 751 | 800 | |||||||||||||||
| Total interest expense | 5,734 | 5,369 | 5,000 | 4,599 | 4,010 | |||||||||||||||
| Net interest and dividend income | 14,326 | 14,820 | 14,605 | 15,865 | 14,722 | |||||||||||||||
| PROVISION FOR LOAN LOSSES | 50 | 300 | 350 | 750 | 500 | |||||||||||||||
| Net interest and dividend income after provision for loan losses | 14,276 | 14,520 | 14,255 | 15,115 | 14,222 | |||||||||||||||
| NON-INTEREST INCOME: | ||||||||||||||||||||
| Service charges and fees | 1,633 | 1,770 | 1,891 | 1,693 | 1,583 | |||||||||||||||
| Income from bank-owned life insurance | 425 | 451 | 448 | 484 | 442 | |||||||||||||||
| Gain on bank-owned life insurance | — | — | — | 715 | — | |||||||||||||||
| Gain (loss) on securities available-for-sale, net | 35 | (31 | ) | — | (49 | ) | (201 | ) | ||||||||||||
| Gain on sale of OREO | — | — | — | — | 48 | |||||||||||||||
| Unrealized gain (losses) on marketable equity securities | 70 | 48 | (43 | ) | (41 | ) | (106 | ) | ||||||||||||
| Other income | 8 | — | — | 131 | — | |||||||||||||||
| Total non-interest income | 2,171 | 2,238 | 2,296 | 2,933 | 1,766 | |||||||||||||||
| NON-INTEREST EXPENSE: | ||||||||||||||||||||
| Salaries and employees benefits | 6,780 | 6,434 | 6,451 | 6,564 | 6,533 | |||||||||||||||
| Occupancy | 1,171 | 995 | 952 | 967 | 1,060 | |||||||||||||||
| Furniture and equipment | 405 | 412 | 400 | 382 | 367 | |||||||||||||||
| Data processing | 665 | 681 | 642 | 678 | 637 | |||||||||||||||
| Professional fees | 705 | 703 | 767 | 681 | 659 | |||||||||||||||
| FDIC insurance | 176 | 140 | 158 | 147 | 158 | |||||||||||||||
| Advertising expense | 364 | 342 | 351 | 355 | 347 | |||||||||||||||
| Other | 1,757 | 1,986 | 1,851 | 1,772 | 1,665 | |||||||||||||||
| Total non-interest expense | 12,023 | 11,693 | 11,572 | 11,546 | 11,426 | |||||||||||||||
| INCOME BEFORE INCOME TAXES | 4,424 | 5,065 | 4,979 | 6,502 | 4,562 | |||||||||||||||
| INCOME TAX PROVISION | 994 | 1,223 | 1,070 | 1,364 | 1,043 | |||||||||||||||
| NET INCOME | $ | 3,430 | $ | 3,842 | $ | 3,909 | $ | 5,138 | $ | 3,519 | ||||||||||
| Basic earnings per share | $ | 0.13 | $ | 0.14 | $ | 0.14 | $ | 0.18 | $ | 0.12 | ||||||||||
| Weighted average shares outstanding | 27,037,520 | 28,252,383 | 28,789,132 | 29,035,895 | 29,484,824 | |||||||||||||||
| Diluted earnings per share | $ | 0.13 | $ | 0.14 | $ | 0.14 | $ | 0.18 | $ | 0.12 | ||||||||||
| Weighted average diluted shares outstanding | 27,153,160 | 28,395,964 | 28,937,038 | 29,178,264 | 29,620,929 | |||||||||||||||
| Other Data: | ||||||||||||||||||||
| Return on average assets (1) | 0.66 | % | 0.72 | % | 0.74 | % | 0.98 | % | 0.69 | % | ||||||||||
| Return on average assets, exclusive of tax benefits (1)(3) | 0.66 | % | 0.72 | % | 0.74 | % | 0.95 | % | 0.69 | % | ||||||||||
| Return on average equity (1) | 6.05 | % | 6.43 | % | 6.42 | % | 8.63 | % | 5.82 | % | ||||||||||
| Return on average equity, exclusive of tax benefits (1)(3) | 6.01 | % | 6.43 | % | 6.42 | % | 8.38 | % | 5.79 | % | ||||||||||
| Efficiency ratio (2)(3) | 73.35 | % | 68.62 | % | 68.30 | % | 63.53 | % | 68.23 | % | ||||||||||
| Net interest margin, on a fully tax-equivalent basis | 2.97 | % | 2.99 | % | 2.96 | % | 3.27 | % | 3.12 | % | ||||||||||
| (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 12 for further details. |
| 7 |
WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands)
(Unaudited)
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||
| 2019 | 2018 | 2018 | 2018 | 2018 | ||||||||||||||||
| Cash and cash equivalents | $ | 44,482 | $ | 26,789 | $ | 61,999 | $ | 22,925 | $ | 29,438 | ||||||||||
| Securities available-for-sale, at fair value | 244,878 | 253,748 | 252,984 | 259,689 | 266,963 | |||||||||||||||
| Marketable equity securities, at fair value | 6,518 | 6,408 | 6,319 | 6,324 | 6,327 | |||||||||||||||
| Federal Home Loan Bank of Boston and other restricted stock - at cost | 12,407 | 14,695 | 15,480 | 15,584 | 14,685 | |||||||||||||||
| Loans | 1,680,666 | 1,696,857 | 1,692,568 | 1,668,875 | 1,646,990 | |||||||||||||||
| Allowance for loan losses | (11,879 | ) | (12,053 | ) | (12,235 | ) | (11,986 | ) | (11,370 | ) | ||||||||||
| Net loans | 1,668,787 | 1,684,804 | 1,680,333 | 1,656,889 | 1,635,620 | |||||||||||||||
| Bank-owned life insurance | 69,677 | 69,252 | 68,801 | 68,353 | 69,204 | |||||||||||||||
| Goodwill | 12,487 | 12,487 | 12,487 | 12,487 | 12,487 | |||||||||||||||
| Core deposit intangible | 3,594 | 3,688 | 3,781 | 3,875 | 3,969 | |||||||||||||||
| Other assets | 52,867 | 46,951 | 48,341 | 49,470 | 46,838 | |||||||||||||||
| TOTAL ASSETS | $ | 2,115,697 | $ | 2,118,822 | $ | 2,150,525 | $ | 2,095,596 | $ | 2,085,531 | ||||||||||
| Total deposits | $ | 1,629,834 | $ | 1,595,993 | $ | 1,609,019 | $ | 1,551,804 | $ | 1,553,727 | ||||||||||
| Short-term borrowings | 35,000 | 59,250 | 55,000 | 66,000 | 55,000 | |||||||||||||||
| Long-term debt | 196,039 | 208,018 | 224,306 | 214,672 | 212,730 | |||||||||||||||
| Other liabilities | 27,507 | 18,532 | 20,915 | 21,047 | 21,451 | |||||||||||||||
| TOTAL LIABILITIES | 1,888,380 | 1,881,793 | 1,909,240 | 1,853,523 | 1,842,908 | |||||||||||||||
| TOTAL SHAREHOLDERS' EQUITY | 227,317 | 237,029 | 241,285 | 242,073 | 242,623 | |||||||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 2,115,697 | $ | 2,118,822 | $ | 2,150,525 | $ | 2,095,596 | $ | 2,085,531 | ||||||||||
| 8 |
WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES
Other Data
(Dollars in thousands, except per share data)
(Unaudited)
| March 31, | December 31, | September 30, | June 30, | March 31, | ||||||||||||||||
| 2019 | 2018 | 2018 | 2018 | 2018 | ||||||||||||||||
| Other Data: | ||||||||||||||||||||
| Shares outstanding at end of period | 26,953,429 | 28,393,348 | 29,453,808 | 29,746,707 | 30,138,083 | |||||||||||||||
| Book value per share | $ | 8.43 | $ | 8.35 | $ | 8.19 | $ | 8.14 | $ | 8.05 | ||||||||||
| Tangible book value per share | 7.84 | 7.78 | 7.64 | 7.59 | 7.50 | |||||||||||||||
| 30-89 day delinquent loans | 8,513 | 7,183 | 8,153 | 9,413 | 7,519 | |||||||||||||||
| 30-89 day delinquent loans acquired, net of purchase accounting adjustments | 2,751 | 2,763 | 3,328 | 3,285 | 3,229 | |||||||||||||||
| Total delinquent loans | 15,103 | 12,495 | 10,960 | 11,917 | 9,837 | |||||||||||||||
| Total delinquent loans as a percentage of total loans | 0.90 | % | 0.74 | % | 0.65 | % | 0.71 | % | 0.60 | % | ||||||||||
| Nonperforming loans | 15,312 | 13,484 | 12,782 | 13,010 | 12,100 | |||||||||||||||
| Nonperforming loans acquired, net of purchase accounting adjustments | 4,032 | 4,894 | 5,035 | 5,101 | 5,883 | |||||||||||||||
| Nonperforming loans as a percentage of total loans | 0.91 | % | 0.79 | % | 0.76 | % | 0.78 | % | 0.73 | % | ||||||||||
| Nonperforming assets as a percentage of total assets | 0.72 | % | 0.64 | % | 0.59 | % | 0.62 | % | 0.58 | % | ||||||||||
| Allowance for loan losses as a percentage of nonperforming loans | 77.58 | % | 89.39 | % | 95.72 | % | 92.13 | % | 93.97 | % | ||||||||||
| Allowance for loan losses as a percentage of total loans | 0.71 | % | 0.71 | % | 0.72 | % | 0.72 | % | 0.69 | % | ||||||||||
| Allowance for loan losses as a percentage of total loans, excluding loans acquired recorded at fair value with no corresponding allowance | 0.96 | % | 0.98 | % | 1.01 | % | 1.03 | % | 1.02 | % | ||||||||||
| 9 |
The following tables set forth the information relating to our average balances and net interest income for the three months ended March 31, 2019, December 31, 2018 and March 31, 2018 and reflects the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated.
| Three Months Ended | ||||||||||||||||||||||||||||||||||||
| March 31, 2019 | December 31, 2018 | March 31, 2018 | ||||||||||||||||||||||||||||||||||
| Average Balance | Interest(6) | Average Yield/Cost | Average Balance | Interest(6) | Average Yield/Cost | Average Balance | Interest(6) | Average Yield/Cost | ||||||||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||||||
| ASSETS: | ||||||||||||||||||||||||||||||||||||
| Interest-earning assets | ||||||||||||||||||||||||||||||||||||
| Loans(1)(2) | $ | 1,684,094 | $ | 18,179 | 4.38 | % | $ | 1,690,515 | $ | 18,236 | 4.28 | % | $ | 1,626,738 | $ | 16,827 | 4.20 | % | ||||||||||||||||||
| Securities(2) | 259,179 | 1,695 | 2.65 | 256,063 | 1,760 | 2.73 | 282,556 | 1,814 | 2.60 | |||||||||||||||||||||||||||
| Other investments | 15,942 | 236 | 6.00 | 17,345 | 232 | 5.31 | 17,111 | 201 | 4.76 | |||||||||||||||||||||||||||
| Short-term investments(3) | 15,112 | 76 | 2.04 | 17,326 | 92 | 2.11 | 5,946 | 21 | 1.43 | |||||||||||||||||||||||||||
| Total interest-earning assets | 1,974,327 | 20,186 | 4.15 | 1,981,249 | 20,320 | 4.07 | 1,932,351 | 18,863 | 3.96 | |||||||||||||||||||||||||||
| Total non-interest-earning assets | 133,870 | 132,547 | 137,017 | |||||||||||||||||||||||||||||||||
| Total assets | $ | 2,108,197 | $ | 2,113,796 | $ | 2,069,368 | ||||||||||||||||||||||||||||||
| LIABILITIES AND EQUITY: | ||||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities | ||||||||||||||||||||||||||||||||||||
| Interest-bearing checking accounts | $ | 72,934 | 81 | 0.45 | $ | 70,319 | 79 | 0.45 | $ | 93,117 | 80 | 0.35 | ||||||||||||||||||||||||
| Savings accounts | 122,608 | 33 | 0.11 | 121,932 | 33 | 0.11 | 142,890 | 40 | 0.11 | |||||||||||||||||||||||||||
| Money market accounts | 395,215 | 556 | 0.57 | 405,668 | 528 | 0.52 | 418,183 | 419 | 0.41 | |||||||||||||||||||||||||||
| Time deposit accounts | 673,852 | 3,299 | 1.99 | 643,478 | 2,876 | 1.77 | 561,106 | 1,816 | 1.31 | |||||||||||||||||||||||||||
| Total interest-bearing deposits | 1,264,609 | 3,969 | 1.27 | 1,241,397 | 3,516 | 1.12 | 1,215,296 | 2,355 | 0.79 | |||||||||||||||||||||||||||
| Short-term borrowings and long-term debt | 248,982 | 1,765 | 2.87 | 258,900 | 1,853 | 2.84 | 282,710 | 1,655 | 2.37 | |||||||||||||||||||||||||||
| Interest-bearing liabilities | 1,513,591 | 5,734 | 1.54 | 1,500,297 | 5,369 | 1.42 | 1,498,006 | 4,010 | 1.09 | |||||||||||||||||||||||||||
| Non-interest-bearing deposits | 344,273 | 359,244 | 310,193 | |||||||||||||||||||||||||||||||||
| Other non-interest-bearing liabilities | 20,370 | 17,224 | 15,886 | |||||||||||||||||||||||||||||||||
| Total non-interest-bearing liabilities | 364,643 | 376,468 | 326,079 | |||||||||||||||||||||||||||||||||
| Total liabilities | 1,878,234 | 1,876,765 | 1,824,085 | |||||||||||||||||||||||||||||||||
| Total equity | 229,963 | 237,031 | 245,283 | |||||||||||||||||||||||||||||||||
| Total liabilities and equity | $ | 2,108,197 | $ | 2,113,796 | $ | 2,069,368 | ||||||||||||||||||||||||||||||
| Less: Tax-equivalent adjustment(2) | (126 | ) | (131 | ) | (131 | ) | ||||||||||||||||||||||||||||||
| Net interest and dividend income | $ | 14,326 | $ | 14,820 | $ | 14,722 | ||||||||||||||||||||||||||||||
| Net interest rate spread | 2.58 | % | 2.62 | % | 2.85 | % | ||||||||||||||||||||||||||||||
| Net interest rate spread, on a tax-equivalent basis(4) | 2.61 | % | 2.65 | % | 2.87 | % | ||||||||||||||||||||||||||||||
| Net interest margin | 2.94 | % | 2.97 | % | 3.09 | % | ||||||||||||||||||||||||||||||
| Net interest margin, on a tax-equivalent basis(5) | 2.97 | % | 2.99 | % | 3.12 | % | ||||||||||||||||||||||||||||||
| Ratio of average interest-earning assets to average interest-bearing liabilities | 130.44 | % | 132.06 | % | 128.99 | % | ||||||||||||||||||||||||||||||
| (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 operations. |
| (3) | Short-term investments include federal funds sold. |
| (4) | 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. |
| (5) | Net interest margin, on a tax-equivalent basis, represents tax-equivalent net interest and dividend income as a percentage of average interest-earning assets. |
| (6) | Accounting for acquired loans, time deposits and borrowings are recorded at fair value. 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 March 31, 2019, December 31, 2018 and March 31, 2018, the loan accretion income and interest expense reduction on time deposits and borrowings increased net interest income $22,000, $61,000 and $235,000, respectively. Excluding these items, net interest margin for the three months ended March 31, 2019, December 31, 2018 and March 31, 2018 was 2.96%, 2.97% and 3.07%, respectively. |
| 10 |
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 | ||||||||||||||||||||
| March
31, 2019 | December
31, 2018 | September
30, 2018 | June
30, 2018 | March 31, 2018 |
||||||||||||||||
| Net Income: | ||||||||||||||||||||
| Net income, as presented | $ | 3,430 | $ | 3,842 | $ | 3,909 | $ | 5,138 | $ | 3,519 | ||||||||||
| Tax benefits impact (1) | (24 | ) | — | — | (150 | ) | (15 | ) | ||||||||||||
| Core net income, exclusive of tax benefits impact | $ | 3,406 | $ | 3,842 | $ | 3,909 | $ | 4,988 | $ | 3,504 | ||||||||||
| Diluted EPS: | ||||||||||||||||||||
| Diluted earnings per share, as presented | $ | 0.13 | $ | 0.14 | $ | 0.14 | $ | 0.18 | $ | 0.12 | ||||||||||
| Tax benefits impact (1) | — | — | — | (0.01 | ) | — | ||||||||||||||
| Core diluted EPS, exclusive of tax benefits impact | $ | 0.13 | $ | 0.14 | $ | 0.14 | $ | 0.17 | $ | 0.12 | ||||||||||
| Return on Average Assets: | ||||||||||||||||||||
| Return on average assets, as presented | 0.66 | % | 0.72 | % | 0.74 | % | 0.98 | % | 0.69 | % | ||||||||||
| Tax benefits impact (1) | — | — | — | (0.03 | ) | — | ||||||||||||||
| Core return on average assets, exclusive of tax benefits impact | 0.66 | % | 0.72 | % | 0.74 | % | 0.95 | % | 0.69 | % | ||||||||||
| Return on Average Equity: | ||||||||||||||||||||
| Return on average equity, as presented | 6.05 | % | 6.43 | % | 6.42 | % | 8.63 | % | 5.82 | % | ||||||||||
| Tax benefits impact (1) | (0.04 | ) | — | — | (0.25 | ) | (0.03 | ) | ||||||||||||
| Core return on average equity, exclusive of tax benefits impact | 6.01 | % | 6.43 | % | 6.42 | % | 8.38 | % | 5.79 | % | ||||||||||
| (1) | Tax benefit impact of stock option exercises and share vesting during period presented. |
| 11 |