Western New England Bancorp, Inc. - FORM 8-K - EX-99.1 - PRESS RELEASE

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8-K - CURRENT REPORT - Western New England Bancorp, Inc.	wneb-8k_102616.htm

Western New England Bancorp, Inc. 8-K

Exhibit 99.1

	For further information contact:
	James C. Hagan, President and CEO
	Leo R. Sagan, Jr., CFO
	Meghan Hibner, VP Investor Relations Officer
	413-568-1911

WESTERN NEW ENGLAND BANCORP, INC. REPORTS RESULTS FOR THE QUARTER ENDED SEPTEMBER 30, 2016 AND DECLARES QUARTERLY DIVIDEND

Quarter Highlighted by Strong Loan and Deposit Growth; Merger with Chicopee Closed in October

Westfield, Massachusetts, October 26, 2016: Western New England Bancorp, Inc. (the “Company” or “WNEB”) (NasdaqGS:WNEB), the holding company for Westfield Bank (the “Bank”), reported net income of $628,000, or $0.04 per basic and diluted share, for the quarter ended September 30, 2016, compared to $1.6 million, or $0.09 per basic and diluted share, for the quarter ended September 30, 2015. For the nine months ended September 30, 2016, net income was $3.0 million, or $0.17 per basic and diluted share, compared to $4.3 million, or $0.25 per basic and diluted share, for the same period in 2015.

The three and nine months ended September 30, 2016 were impacted by non-recurring expenses of $830,000 and $1.9 million, respectively, related to our merger with Chicopee Bancorp, Inc. (“Chicopee”), which closed on October 21, 2016. Excluding these non-recurring expenses, net income before income taxes for the quarter and nine months ended September 30, 2016 was $1.9 million and $6.4 million, respectively, compared to $2.3 million and $5.9 million, respectively, for the comparable periods in 2015.

Selected financial highlights include:

Total loans increased $41.4 million, or 4.6%, during the third quarter of 2016. This was due to increases in residential loans of $20.9 million, commercial real estate loans of $19.0 million and commercial and industrial loans of $1.2 million.

Total deposits increased $41.7 million, or 4.5%, to $962.6 million at September 30, 2016, compared to $920.9 million at June 30, 2016. The deposit mix was favorably impacted as well, as the growth was primarily due to increases in checking accounts of $31.7 million and money market accounts of $20.8 million. Included in the checking account growth for the third quarter 2016 is $11.5 million that is temporarily on deposit and will be used for other business purposes in the fourth quarter 2016. These increases were offset partially by decreases in term deposits of $7.1 million and regular savings accounts of $3.7 million. During the third quarter of 2016, brokered and listing service deposits decreased $15.2 million.

Securities decreased $148.1 million, or 32.5%, to $307.8 million at September 30, 2016, compared to $455.9 million at September 30, 2015. The decrease in securities was primarily driven by sales of securities, with the proceeds used to fund loan growth and pay down Federal Home Loan Bank (“FHLB”) borrowings, both strategic initiatives to improve the balance sheet mix. On a sequential-quarter basis, securities were flat at $307.8 million at September 30, 2016.

Short-term borrowings and long-term debt decreased a total of $36.2 million, or 12.6%, to $251.4 million at September 30, 2016 compared to $287.6 million at September 30, 2015. On a sequential-quarter basis, short-term borrowings and long-term debt increased $28.7 million, or 12.9%, from June 30, 2016.

Net interest margin increased 12 basis points to 2.65% for the three months ended September 30, 2016 from 2.53% in the comparable 2015 period. The net interest margin increased 3 basis points to 2.65% for the quarter ended September 30, 2016, compared to 2.62% for the quarter ended June 30, 2016.

James C. Hagan, President and CEO stated, “This is a very exciting time for us as an organization. We recently closed on our previously announced merger with Chicopee after receiving all the necessary regulatory and shareholder approvals. In addition, while Chicopee’s results are not included in these amounts, we are issuing our quarter end press release for the first time as a combined company under our new corporate name, Western New England Bancorp, Inc., which reflects our combined presence and target market in Western New England.”

Hagan went on to say, “Based upon recently published deposit data as of June 30, 2016, we are ranked second in deposit market share in Hampden County as a combined organization. Our customers recognize the unique service experience that sets us apart as a community bank and we are committed to working together to enhance the combined franchise value through overall organic growth, capital management and recognizing cost savings through efficiency and scale. We continue to feel this combination will be extremely favorable for the shareholders, customers, employees and communities of both institutions.”

Additional Income Statement Discussion

Net interest and dividend income increased $1.1 million to $24.6 million for the nine months ended September 30, 2016, as compared to $23.5 million for the nine months ended September 30, 2015. The net interest margin for the nine months ended September 30, 2016 increased 10 basis points to 2.62%, as compared to 2.52% for the same period in 2015. This was a result of an increase of 10 basis points in the yield on average interest-earning assets while the cost of average interest-bearing liabilities remained stable compared to the same period. Net interest and dividend income increased $168,000 to $8.3 million for the quarter ended September 30, 2016 compared to $8.2 million for the comparable 2015 period. On a sequential-quarter basis, net interest and dividend income increased $326,000 for the quarter ended September 30, 2016.

Non-interest income increased $175,000 to $1.3 million for the quarter ended September 30, 2016, compared to $1.1 million for the quarter ended September 30, 2015. For the nine months ended September 30, 2016, non-interest income was relatively flat at $3.6 million compared to the same period in 2015.

Non-interest expense increased $1.3 million to $8.2 million from $6.9 million for the quarter ended September 30, 2016, compared to the same period in 2015. Non-interest expense increased $2.9 million to $23.3 million from $20.4 million for the nine months ended September 30, 2016, compared to the same period in 2015. The increases for both periods were primarily due to merger related expenses of $830,000 and $1.9 million, respectively. The efficiency ratio, which excludes the merger-related charges mentioned above, was 75.3% and 75.9% for the nine months ended September 30, 2016 and 2015, respectively.

Additional Balance Sheet Discussion

Total loans increased $140.7 million to $947.6 million at September 30, 2016 compared to $806.9 million at September 30, 2015, due to increases in residential loans of $80.9 million and commercial real estate loans of $62.0 million, partially offset by a decrease in commercial and industrial loans of $3.3 million. Total deposits increased $53.6 million to $962.6 million at September 30, 2016, compared to $909.0 million at September 30, 2015. This was primarily due to increases in money market accounts of $51.0 million and checking accounts of $40.8 million, offset partially by a decrease in term accounts of $35.3 million and regular savings accounts of $3.0 million. The decrease in term accounts from September 30, 2015 was primarily due to a reduction of $39.9 million in brokered and listing service deposits.

Shareholders’ equity was $145.2 million at September 30, 2016 and $144.6 million at June 30, 2016, which represented 10.5% and 11.1% of total assets at September 30 and June 30, 2016, respectively. The increase in shareholders’ equity during the quarter reflects net income of $628,000 and an increase in accumulated other comprehensive income of $318,000, both partially offset by the payment of regular dividends of $521,000 for the quarter ended September 30, 2016.

On March 13, 2014, the Company announced a repurchase program under which it may repurchase up to 1,970,000 shares, or 10% of its outstanding common stock. At September 30, 2016, there were 484,668 shares remaining under this repurchase program.

Credit Quality

The allowance for loan losses was $9.9 million, $9.6 million and $8.4 million at September 30, 2016, June 30, 2016 and September 30, 2015, representing 1.05%, 1.06% and 1.04% of total loans, respectively. This represents 136.5%, 119.0% and 114.0% of nonperforming loans, respectively.

An analysis of the changes in the allowance for loan losses is as follows:

	Three Months Ended
	September 30,			June 30,			September 30,
	2016			2016			2015
	(In thousands)

Balance, beginning of period	$	9,570		$	8,855		$	8,295
Provision		375			625			150
Charge-offs		(86	)		(18	)		(85	)
Recoveries		68			108			12
Balance, end of period	$	9,927		$	9,570		$	8,372

Nonperforming loans were $7.3 million and $8.0 million, representing 0.77% and 0.89% of total loans at September 30, 2016 and June 30, 2016, respectively. Loans delinquent 30 – 89 days decreased $1.1 million to $1.4 million at September 30, 2016 from $2.5 million at June 30, 2016. There are no loans 90 or more days past due and still accruing interest.

Declaration of Quarterly Dividend

The Board of Directors approved the declaration of a quarterly cash dividend of $0.03 per share. The dividend is payable on November 23, 2016 to all shareholders of record on November 9, 2016.

About Western New England Bancorp, Inc.

Western New England Bancorp, Inc. is a Massachusetts-chartered stock holding company and the parent company of Westfield Bank, Elm Street Securities Corporation, WFD Securities, Inc. and WB Real Estate Holdings, LLC. Western New England Bancorp, Inc. and its subsidiaries are headquartered in Westfield, Massachusetts and operate through 21 banking offices located in Agawam, Chicopee, East Longmeadow, Feeding Hills, Holyoke, Ludlow, Southwick, Springfield, Ware, West Springfield and Westfield, Massachusetts, and Granby and Enfield, Connecticut. To learn more, visit our website at www.westfieldbank.com.

Forward-Looking Statements

The Company wishes to caution readers not to place undue reliance on any such forward-looking statements contained in this press release, which speak only as of the date made. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors discussed under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015, as amended by Amendment No. 1 to our Annual Report on Form 10-K for the year ended December 31, 2015, and in subsequent filings with the Securities and Exchange Commission. The Company and the Bank do not undertake and specifically decline any obligation to publicly release the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.

WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES

Consolidated Statements of Income and Other Data

(Dollars in thousands, except share and per share data)

(Unaudited)

	Three Months Ended															Nine Months Ended
	September 30,			June 30,			March 31,			December 31,			September 30,			September 30,
	2016			2016			2016			2015			2015			2016			2015
INTEREST AND DIVIDEND INCOME:
Loans	$	9,138		$	8,639		$	8,250		$	8,072		$	7,849		$	26,027		$	22,449
Securities		1,695			1,750			2,554			2,609			2,997			5,999			8,931
Other investments - at cost		130			136			132			133			126			398			263
Federal funds sold, interest-bearing deposits and other short-term investments		14			29			25			6			2			67			13
Total interest and dividend income		10,977			10,554			10,961			10,820			10,974			32,491			31,656

INTEREST EXPENSE:
Deposits		1,582			1,535			1,472			1,436			1,414			4,589			4,135
Long-term debt		446			461			842			889			1,083			1,749			3,244
Short-term borrowings		621			556			404			342			317			1,580			748
Total interest expense		2,649			2,552			2,718			2,667			2,814			7,918			8,127

Net interest and dividend income		8,328			8,002			8,243			8,153			8,160			24,573			23,529

PROVISION (CREDIT) FOR LOAN LOSSES		375			625			(600	)		475			150			400			800

Net interest and dividend income after provision (credit) for loan losses		7,953			7,377			8,843			7,678			8,010			24,173			22,729

NONINTEREST INCOME:
Service charges and fees		953			859			884			865			789			2,696			2,266
Income from bank-owned life insurance		369			403			361			378			374			1,133			1,149
Loss on prepayment of borrowings		—			—			(915	)		—			(429	)		(915	)		(1,300	)
Gain (loss) on sales of securities, net		1			(2	)		685			(1	)		414			684			1,507
Total noninterest income		1,323			1,260			1,015			1,242			1,148			3,598			3,622

NONINTEREST EXPENSE:
Salaries and employees benefits		4,114			3,910			3,871			3,822			3,903			11,895			11,588
Occupancy		796			804			801			795			784			2,401			2,443
Data processing		667			626			621			582			636			1,916			1,779
Professional fees		656			545			516			568			596			1,715			1,555
FDIC insurance		214			190			190			208			212			594			592
Merger related expenses		830			929			154			55			—			1,913			—
Other		948			994			919			960			736			2,861			2,486
Total noninterest expense		8,225			7,998			7,072			6,990			6,867			23,295			20,443

INCOME BEFORE INCOME TAXES		1,051			639			2,786			1,930			2,291			4,476			5,908

INCOME TAX PROVISION		423			250			822			529			680			1,495			1,595
NET INCOME	$	628		$	389		$	1,964		$	1,401		$	1,611		$	2,981		$	4,313

Basic earnings per share	$	0.04		$	0.02		$	0.11		$	0.08		$	0.09		$	0.17		$	0.25
Weighted average shares outstanding		17,377,844			17,337,955			17,304,088			17,329,248			17,461,472			17,340,101			17,554,361
Diluted earnings per share	$	0.04		$	0.02		$	0.11		$	0.08		$	0.09		$	0.17		$	0.25
Weighted average diluted shares outstanding		17,377,844			17,337,955			17,304,088			17,329,248			17,461,472			17,340,101			17,554,361

Other Data:
Return on average assets (1)		0.19	%		0.12	%		0.58	%		0.41	%		0.47	%		0.30	%		0.43	%
Return on average equity (1)		1.72	%		1.14	%		5.61	%		3.99	%		4.69	%		2.82	%		4.13	%
Efficiency ratio (2)		85.23	%		86.33	%		74.54	%		74.39	%		73.66	%		82.02	%		75.87	%
Net interest margin		2.65	%		2.62	%		2.61	%		2.58	%		2.53	%		2.62	%		2.52	%

___________

(1) Annualized.

(2) The efficiency ratio represents the ratio of operating expenses divided by the sum of net interest and dividend income and noninterest income, excluding gain and loss on sale of securities, gain on bank-owned life insurance death benefit and loss on prepayment of borrowings.

WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES

Consolidated Balance Sheets and Other Data

(Dollars in thousands, except per share data)

(Unaudited)

	September 30,			June 30,			March 31,			December 31,			September 30,
	2016			2016			2016			2015			2015
Cash and cash equivalents	$	50,803		$	21,267		$	155,194		$	13,703		$	21,980
Securities available for sale, at fair value		295,577			296,565			302,224			182,590			191,324
Securities held to maturity, at cost		—			—			—			238,219			248,757
Federal Home Loan Bank of Boston and other restricted stock - at cost		12,194			11,267			14,080			15,074			15,839

Loans		947,620			906,212			826,963			818,213			806,893
Allowance for loan losses		9,927			9,570			8,855			8,840			8,372
Net loans		937,693			896,642			818,108			809,373			798,521

Bank-owned life insurance		51,363			50,994			50,591			50,230			49,852
Other assets		30,150			29,570			28,747			30,741			30,942
TOTAL ASSETS	$	1,377,780		$	1,306,305		$	1,368,944		$	1,339,930		$	1,357,215

Total deposits	$	962,558		$	920,912		$	928,124		$	900,363		$	909,041
Short-term borrowings		180,273			144,707			158,593			128,407			121,222
Long-term debt		71,165			78,032			90,943			153,358			166,407
Trades pending settlement		—			—			30,570			—			—
Other liabilities		18,561			18,085			17,719			18,336			20,937
TOTAL LIABILITIES		1,232,557			1,161,736			1,225,949			1,200,464			1,217,607

TOTAL SHAREHOLDERS' EQUITY		145,223			144,569			142,995			139,466			139,608

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,377,780		$	1,306,305		$	1,368,944		$	1,339,930		$	1,357,215

Book value per share	$	7.92		$	7.89		$	7.83		$	7.63		$	7.59

Other Data:
30- 89 day delinquent loans	$	1,391		$	2,547		$	1,358		$	2,876		$	5,882
Nonperforming loans		7,275			8,043			8,288			8,080			7,347
Nonperforming loans as a percentage of total loans		0.77	%		0.89	%		1.00	%		0.99	%		0.91	%
Nonperforming assets as a percentage of total assets		0.53	%		0.62	%		0.61	%		0.60	%		0.54	%
Allowance for loan losses as a percentage of nonperforming loans		136.45	%		118.99	%		106.84	%		109.41	%		113.95	%
Allowance for loan losses as a percentage of total loans		1.05	%		1.06	%		1.07	%		1.08	%		1.04	%

The following tables set forth the information relating to our average balances and net interest income for the three months ended September 30, 2016, June 30, 2016, and September 30, 2015, and the nine months ended September 30, 2016 and 2015, and reflect the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated.

	Three Months Ended
	September 30, 2016								June 30, 2016								September 30, 2015
	Average					Avg Yield/			Average					Avg Yield/			Average					Avg Yield/
	Balance		Interest			Cost			Balance		Interest			Cost			Balance		Interest			Cost
	(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans(1)(2)	$	932,140	$	9,168			3.93	%	$	869,877	$	8,672			3.99	%	$	788,637	$	7,879			4.00	%
Securities(2)		296,406		1,709			2.31			297,797		1,764			2.37			481,360		3,068			2.55
Other investments - at cost		12,728		130			4.09			15,349		136			3.54			16,963		126			2.97
Short-term investments(3)		17,380		14			0.32			54,892		29			0.21			7,704		2			0.10
Total interest-earning assets		1,258,654		11,021			3.50			1,237,915		10,601			3.43			1,294,664		11,075			3.42
Total noninterest-earning assets		79,032								73,371								76,614

Total assets	$	1,337,686							$	1,311,286							$	1,371,278

LIABILITIES AND EQUITY:
Interest-bearing liabilities
Interest-bearing accounts	$	31,194		24			0.31		$	32,337		21			0.26		$	34,725		20			0.23
Savings accounts		75,566		20			0.11			76,627		23			0.12			75,943		20			0.11
Money market accounts		278,257		293			0.42			266,056		265			0.40			239,112		198			0.33
Time certificates of deposit		383,288		1,245			1.30			393,585		1,226			1.25			398,238		1,176			1.18
Total interest-bearing deposits		768,305		1,582						768,605		1,535						748,018		1,414
Short-term borrowings and long-term debt		229,718		1,067			1.86			231,827		1,017			1.75			320,712		1,400			1.75
Interest-bearing liabilities		998,023		2,649			1.06			1,000,432		2,552			1.02			1,068,730		2,814			1.05
Noninterest-bearing deposits		177,802								161,639								149,626
Other noninterest-bearing liabilities		16,261								11,611								16,755
Total noninterest-bearing liabilities		194,063								173,250								166,381

Total liabilities		1,192,086								1,173,682								1,235,111
Total equity		145,601								137,604								136,167
Total liabilities and equity	$	1,337,687							$	1,311,286							$	1,371,278
Less: Tax-equivalent adjustment(2)				(44	)							(47	)							(101	)
Net interest and dividend income			$	8,328							$	8,002							$	8,160
Net interest rate spread(4)							2.44	%							2.41	%							2.37	%
Net interest margin(5)							2.65	%							2.62	%							2.53	%
Ratio of average interest-earning assets to average interest-bearing liabilities							126.11								123.74								121.14

	Nine Months Ended September 30,
	2016								2015
	Average					Avg Yield/			Average					Avg Yield/
	Balance		Interest			Cost			Balance		Interest			Cost
	(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans(1)(2)	$	875,325	$	26,118			3.98	%	$	753,077	$	22,542			3.99	%
Securities(2)		334,938		6,062			2.41			487,122		9,177			2.51
Other investments - at cost		14,703		398			3.61			16,555		263			2.12
Short-term investments(3)		33,457		67			0.27			11,531		13			0.15
Total interest-earning assets		1,258,423		32,645			3.46			1,268,285		31,995			3.36
Total noninterest-earning assets		77,626								78,288

Total assets	$	1,336,049							$	1,346,573

LIABILITIES AND EQUITY:
Interest-bearing liabilities
Interest-bearing checking	$	31,353		64			0.27		$	36,240		61			0.22
Savings accounts		76,381		63			0.11			75,780		59			0.10
Money market accounts		264,354		785			0.40			236,305		627			0.35
Time certificates of deposit		391,793		3,677			1.25			385,881		3,388			1.17
Total interest-bearing deposits		763,881		4,589						734,206		4,135
Short-term borrowings and long-term debt		250,462		3,329			1.77			312,373		3,992			1.70
Interest-bearing liabilities		1,014,343		7,918			1.04			1,046,579		8,127			1.04
Noninterest-bearing deposits		165,156								142,671
Other noninterest-bearing liabilities		15,273								17,797
Total noninterest-bearing liabilities		180,429								160,468

Total liabilities		1,194,772								1,207,047
Total equity		141,277								139,526
Total liabilities and equity	$	1,336,049							$	1,346,573
Less: Tax-equivalent adjustment(2)				(154	)							(339	)
Net interest and dividend income			$	24,573							$	23,529
Net interest rate spread(4)							2.42	%							2.32	%
Net interest margin(5)							2.62	%							2.52	%
Ratio of average interest-earning
assets to average interest-bearing liabilities							124.06								121.18

___________

(1)

Loans, including non-accrual loans, are net of deferred loan origination costs and unadvanced funds.

(2)

Securities, loan income and net interest income are presented on a tax-equivalent basis using a tax rate of 34%. The tax-equivalent adjustment is deducted from tax-equivalent net interest and dividend income to agree to the amount reported on the statements of income.

(3)

Short-term investments include federal funds sold.

(4)

Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.

(5)

Net interest margin represents tax-equivalent net interest and dividend income as a percentage of average interest-earning assets.

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