Wellesley Bancorp, Inc. (Nasdaq Capital Market: WEBK) (the “Company”), the holding company for Wellesley Bank (the “Bank”) reported net income of $516 thousand and $1.3 million for the three and nine months ended September 30, 2014, respectively, compared to net income of $607 thousand and $1.8 million for the three and nine months ended September 30, 2013, respectively. Diluted earnings per share were $0.22 and $0.58 for the quarter and nine months ended September 30, 2014, respectively, compared to $0.27 and $0.78 for the three and nine months ended September 30, 2013, respectively. Total assets were $505.6 million at September 30, 2014, an increase of $47.1 million or 10.3% from December 31, 2013 due to a $48.5 million increase in net loans supported primarily by a $31.9 million increase in deposits.
Thomas J. Fontaine, President and Chief Executive Officer, said, “The Company has reached a significant milestone this quarter as we surpassed $500 million in total assets as of September 30, 2014. I am very pleased with the efforts of all our employees as we continue to execute within our strategic plan. We have been able to achieve our growth objectives while delivering solid earnings during the quarter and year-to-date periods, while making significant investments in key personnel, products and facilities targeted at positioning ourselves to better serve our target markets.”
Third Quarter Earnings
Net
income decreased $91 thousand, or 15.0%, for the quarter ended September
30, 2014 compared to the quarter ended September 30, 2013, as
noninterest expenses increased, offset by increases in net interest
income. Net interest income increased $555 thousand, or 15.6%, to $4.1
million for the quarter ended September 30, 2014, as compared to $3.6
million for the quarter ended September 30, 2013. This increase was
primarily due to increased interest income due to an increase in the
average balance of our loan portfolio, partially offset by higher
interest expense as the average balance of deposits also increased. The
yield on earning assets for the quarter ended September 30, 2014 was
4.13%, a decrease of 20 basis points from the prior year level. Deposit
and borrowing costs remained at 0.88% for the quarters ended September
30, 2014 and 2013. The net interest margin was 3.41% for the 2014
quarter, compared to 3.62% for the 2013 quarter, reflecting the drop in
earning asset yields between the two periods. We recorded a provision
for loan losses of $180 thousand for the quarter ended September 30,
2014, an increase of $30 thousand over the prior year, primarily
reflecting increases in loan balances as compared to the prior year.
Noninterest income totaled $244 thousand for the quarter ended September
30, 2014, an increase of $19 thousand, or 8.4% from the prior year.
Wealth management fees increased $16 thousand compared to 2013, while
mortgage banking income increased $22 thousand compared to the prior
year. Total noninterest expenses increased $689 thousand to $3.3 million
for the quarter ended September 30, 2014, as compared to $2.6 million
for the quarter ended September 30, 2013. The increase in operating
expenses was the result of additional staffing to support our commercial
and residential lending operations, additions to our wealth management
personnel, one-time charges of $95 thousand for consultants to
facilitate certain contract negotiations on our behalf, and the
additional costs related to the operation of our most recent
full-service office opened in Boston in November 2013. Offsetting these
costs was a reduction in advertising expense as costs incurred in
conjunction with the November 2013 office opening were not repeated in
2014.
Year to Date Earnings
Net
income for the nine month period ended September 30, 2014 decreased $445
thousand compared to net income for the nine month period ended
September 30, 2013 due to increased noninterest expenses and an
increased provision for loan losses, partially offset by increased net
interest income. Net interest income increased $1.8 million, or 17.4%,
to $11.9 million for the nine month period ended September 30, 2014, as
compared to $10.1 million in the comparable 2013 period. The increase
was largely due to increased loan income resulting from the growth in
our portfolio. Our earning asset yield decreased 22 basis points to
4.10% in the nine month period ended September 30, 2014 from 4.32% in
the comparable 2013 period as stronger growth in lower-yielding
residential loans results in a declining earning asset yield. Deposit
and borrowing costs decreased two basis points to 0.87% in the current
period. Our net interest margin was 3.38% for the 2014 nine month
period, compared to 3.60% for the 2013 period. The provision for loan
losses increased to $580 thousand for the nine month period ended
September 30, 2014, as compared to $350 thousand in 2013, primarily due
to loan growth. For the nine months ended September 30, 2014,
noninterest expenses increased $2.3 million to $9.8 million, as compared
to $7.5 million in 2013. Salaries and employee benefits were $5.9
million for the nine months ended September 30, 2014, as compared to
$4.5 million in 2013, reflecting staff additions associated with our
newest office as well as additional wealth management and lending
personnel. Occupancy and equipment expense increased $463 thousand to
$1.5 million for the nine month period ended September 30, 2014, as
compared to $1.1 million in 2013. These increases primarily reflect the
costs associated with our most recent office opened in Boston in
November 2013. Professional service fees increased $234 thousand as we
incurred one-time charges of $180 thousand for consultants to facilitate
certain staffing and contract negotiations on our behalf during 2014.
Balance Sheet Growth
Total
assets were $505.6 million at September 30, 2014, representing an
increase of $47.1 million compared to $458.5 million at December 31,
2013. The increase was primarily related to loan growth during the year,
supported primarily by growth in deposits.
Net loans totaled $432.2 million at September 30, 2014, an increase of $48.5 million, as compared to December 31, 2013. Residential mortgage loans increased $43.6 million to $225.3 million at September 30, 2014, primarily due to growth in our adjustable-rate mortgage portfolio, as we continue to emphasize residential loan growth within our marketplace. Construction loans increased $3.2 million to $83.3 million at September 30, 2014, compared to $80.1 million at December 31, 2013, as loans to developers represented $65.0 million at September 30, 2014 and $57.2 million of the total at year end 2013.
Deposits increased $31.9 million to $389.4 million at September 30, 2014. The increase was primarily attributable to an increase in savings deposits of $19.5 million, an increase of $5.3 million in money market deposits, and an increase of $5.8 million in demand deposits. Longer-term FHLB advances increased $20.0 million to $63.5 million as we funded a portion of our loan growth with lower cost, long-term advances. Short-term borrowings, which consist entirely of advances from the FHLB, totaled $2.0 million at September 30, 2014, a reduction of $7.0 million from December 31, 2013 as retail and commercial deposit growth provided funds for short-term liquidity needs.
Stockholders’ equity increased $1.9 million to $48.7 million, primarily due to earnings, the impact of stock compensation plans, and an increase in accumulated other comprehensive income during the nine month period. At September 30, 2014 the Company’s ratio of stockholders’ equity to total assets was 9.63% as compared to 10.20% at December 31, 2013.
About Wellesley Bancorp
The
Company is the holding company for Wellesley Bank, a community-oriented
financial institution, which provides comprehensive premier banking and
wealth management service to successful people, families, businesses and
nonprofit organizations. The Company’s team of highly experienced and
knowledgeable bankers and investment professionals provides exceptional
personalized services and trusted advice to its clients. Wellesley Bank
was established in 1911 as a Massachusetts-chartered cooperative bank.
Forward Looking Statements
This
press release contains certain forward-looking statements about the
Company and the Bank. Forward-looking statements include statements
regarding anticipated future events and can be identified by the fact
that they do not relate strictly to historical or current facts. They
often include words such as “believe,” “expect,” “anticipate,”
“estimate,” and “intend” or future or conditional verbs such as “will,”
“would,” “should,” “could,” or “may.” Forward-looking statements, by
their nature, are subject to risks and uncertainties. Certain factors
that could cause actual results to differ materially from expected
results include increased competitive pressures, changes in the interest
rate environment, general economic conditions or conditions within the
securities markets, and legislative and regulatory changes that could
adversely affect the business in which the Company and the Bank are
engaged.
The Company’s summary income statements and other data follow:
Wellesley Bancorp, Inc. and Subsidiary Consolidated Statements of Net Income (Dollars in thousands, except per share data) (Unaudited) | ||||||||||||||||
Three Months Ended |
Nine Months Ended | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Interest and dividend income: | ||||||||||||||||
Interest and fees on loans | $ | 4,724 | $ | 4,085 | $ | 13,696 | $ | 11,600 | ||||||||
Other interest and dividend income | 270 | 173 | 730 | 572 | ||||||||||||
Total interest and dividend income | 4,994 | 4,258 | 14,426 | 12,172 | ||||||||||||
Interest expense | 878 | 697 | 2,525 | 2,031 | ||||||||||||
Net interest income | 4,116 | 3,561 | 11,901 | 10,141 | ||||||||||||
Provision for loan losses | 180 | 150 | 580 | 350 | ||||||||||||
Net interest income, after provision for loan losses | 3,936 | 3,411 | 11,321 | 9,791 | ||||||||||||
Total noninterest income | 244 | 225 | 730 | 697 | ||||||||||||
Noninterest expenses: | ||||||||||||||||
Salaries and employee benefits | 2,017 | 1,553 | 5,881 | 4,505 | ||||||||||||
Occupancy and equipment | 530 | 354 | 1,513 | 1,050 | ||||||||||||
Professional fees | 138 | 68 | 566 | 332 | ||||||||||||
Other general and administrative | 640 | 661 | 1,874 | 1,660 | ||||||||||||
Total noninterest expenses | 3,325 | 2,636 | 9,834 | 7,547 | ||||||||||||
Income before income taxes | 855 | 1,000 | 2,217 | 2,941 | ||||||||||||
Provision for income taxes | 339 | 393 | 876 | 1,155 | ||||||||||||
Net income | $ | 516 | $ | 607 | $ | 1,341 | $ | 1,786 | ||||||||
Other Data: | ||||||||||||||||
Return on average assets (1) | 0.42 | % | 0.60 | % | 0.37 | % | 0.61 | % | ||||||||
Return on average equity (1) | 4.28 | % | 5.76 | % | 3.74 | % | 5.55 | % | ||||||||
Net interest margin (1) | 3.41 | % | 3.62 | % | 3.38 | % | 3.60 | % | ||||||||
Earnings per common share: | ||||||||||||||||
Basic | $ | 0.23 | $ | 0.27 | $ | 0.59 | $ | 0.78 | ||||||||
Diluted | $ | 0.22 | $ | 0.27 | $ | 0.58 | $ | 0.78 | ||||||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 2,291,824 | 2,288,752 | 2,290,510 | 2,290,402 | ||||||||||||
Diluted | 2,301,067 | 2,288,752 | 2,295,322 | 2,290,402 | ||||||||||||
Stockholders’ equity to total assets at end of period | 9.63 | % | 11.01 | % | 9.63 | % | 11.01 | % | ||||||||
Book value per common share at end of period | $ | 19.89 | $ | 18.85 | $ | 19.89 | $ | 18.85 | ||||||||
(1) Annualized
The Company’s summary balance sheets follow:
Wellesley Bancorp, Inc. and Subsidiary Consolidated Balance Sheets (In thousands) (Unaudited) | ||||||||
September 30, 2014 |
December 31, | |||||||
Assets | ||||||||
Cash and cash equivalents | $ | 11,494 | $ | 19,067 | ||||
Certificates of deposit | 100 | 100 | ||||||
Securities available for sale, at fair value | 42,233 | 36,672 | ||||||
Federal Home Loan Bank of Boston stock, at cost | 3,660 | 3,176 | ||||||
Loans held for sale | 944 | 825 | ||||||
Loans | 436,860 | 387,931 | ||||||
Less allowance for loan losses | (4,682 | ) | (4,213 | ) | ||||
Loans, net | 432,178 | 383,718 | ||||||
Bank-owned life insurance | 6,782 | 6,607 | ||||||
Premises and equipment, net | 3,631 | 3,805 | ||||||
Other assets | 4,615 | 4,550 | ||||||
Total assets | $ | 505,637 | $ | 458,520 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Deposits: | ||||||||
Noninterest-bearing | $ | 50,042 | $ | 44,864 | ||||
Interest-bearing | 339,364 | 312,654 | ||||||
389,406 | 357,518 | |||||||
Short-term borrowings | 2,000 | 9,000 | ||||||
Long-term debt | 63,500 | 43,500 | ||||||
Accrued expenses and other liabilities | 2,045 | 1,713 | ||||||
Total liabilities | 456,951 | 411,731 | ||||||
Stockholders’ equity | 48,686 | 46,789 | ||||||
Total liabilities and stockholders’ equity | $ | 505,637 | $ | 458,520 |