Wellesley Bancorp, Inc. Reports Results for the Three and Nine Months Ended September 30, 2016

WELLESLEY, Mass., Oct. 27, 2016

Thomas J. Fontaine, President and Chief Executive Officer, said, "We are pleased with our strong growth in loans and core deposits, as well as noninterest income, which has led to increases in revenue and earnings."

Third Quarter Earnings
Net income increased $55 thousand, or 7.9%, for the quarter ended September 30, 2016 compared to the quarter ended September 30, 2015, as net interest income and noninterest income increased, partially offset by an increase in  noninterest expenses.  Net interest income increased $418 thousand, or 8.9%, to $5.1 million for the quarter ended September 30, 2016, as compared to the quarter ended September 30, 2015.  This increase was driven primarily by the growth of our loan portfolio, partially offset by higher interest expense from the growth of borrowings and deposits. The yield on earning assets for the third quarter ended September 30, 2016 was 3.96%, a decrease of four basis points from the comparable quarter in 2015.  Deposit and borrowing costs were 0.95% for the third quarter 2016, compared to 0.83% for the third quarter ended 2015 as we absorbed the cost of the subordinated debentures issued in December 2015.  The net interest margin was 3.19% for the 2016 quarter, compared to 3.31% for the 2015 quarter, reflecting the decrease in earning asset yields and the increase in deposit and borrowing costs between the two periods.  Noninterest income totaled $415 thousand for the quarter ended September 30, 2016, an increase of $125 thousand, or 43.1%, compared to the prior year period. Wealth management fees increased $130 thousand compared to the quarter ended September 30, 2015, primarily due to an increase in assets under management, while income from mortgage banking activities increased $36 thousand, due to increased volume, when compared to the prior year period.    Total noninterest expenses increased $485 thousand to $4.2 million for the quarter ended September 30, 2016. Salaries and employee benefits increased $313 thousand from the prior period. Occupancy and equipment costs increased $67 thousand from the prior year period. Both salary and benefits and occupancy increases primarily reflect costs associated with the spring 2016 opening of our Newton Centre office.  Professional fees increased $62 thousand as we incurred one-time charges for consultants to facilitate certain staffing searches on our behalf during 2016.

Year to Date Earnings
Net income for the nine months ended September 30, 2016 increased $470 thousand compared to net income for the nine months ended September 30, 2015 due to increased net interest income and noninterest income, partially offset by higher noninterest expenses.  Net interest income increased $1.3 million or 9.8%, to $14.8 million for the nine months ended September 30, 2016, as compared to $13.4 million in the comparable 2015 period.  The increase was largely due to increased loan income resulting from growth in our portfolio.  Our earning asset yield remained stable at 3.98% in the nine month period ended September 30, 2016 as compared to 2015 period.  Deposit and borrowing costs increased 17 basis points to 0.96% in the current period from 0.79% for the 2015 period, primarily due to the expenses related to the subordinated debt. Our net interest margin was 3.19% for the 2016 nine month period, compared to 3.33% for the 2015 period.  Noninterest income totaled $1.3 million, an increase of $474 thousand, as income from wealth management fees in 2016 increased $370 thousand compared to 2015 due to an increase in assets under management. Income from mortgage banking activities increased $78 thousand as compared to the comparable 2015 period due to increased volume.  For the nine months ended September 30, 2016, noninterest expenses increased $1.0 million to $12.1 million, as compared to $11.1 million in 2015.  Salaries and employee benefits were $7.1 million for the nine months ended September 30, 2016, as compared to $6.6 million in 2015. Occupancy and equipment expense increased $221 thousand to $2.2 million for the nine months ended September 30, 2016, as compared to $2.0 million in 2015.  Both salary and benefits and occupancy increases primarily reflect costs associated with the spring opening of our Newton Centre office.

Balance Sheet Growth
Total assets were $666.3 million at September 30, 2016, representing an increase of $45.1 million compared to $621.2 million at December 31, 2015.  The increase was primarily related to growth in the loan portfolio and an increase in the level of securities available for sale.  On the liability side, deposits increased $32.1 million, and long-term debt and short-term borrowings increased $9.5 million, as compared to December 31, 2015.   

Gross loans totaled $553.8 million at September 30, 2016, an increase of $41.4 million, as compared to December 31, 2015. Our portfolios of commercial real estate and commercial and industrial loans increased $9.7 million and $14.0 million, respectively, as we focus on growing those portions of our portfolio.  Construction loans increased $8.4 million to $103.3 million at September 30, 2016, compared to $94.9 million at December 31, 2015. Residential mortgage loans increased $10.5 million to $266.9 million at September 30, 2016, primarily due to growth in our adjustable-rate mortgage portfolio.  Securities available for sale increased $5.0 million as excess liquidity during the period was reinvested.

Deposits increased $32.1 million to $495.8 million at September 30, 2016.  The increase was primarily attributable to an increase in NOW and demand deposit accounts of $23.8 million and an increase of $9.8 million in money market accounts. Certificate of deposits remained relatively unchanged when compared to December 31, 2015 balances.   We have emphasized commercial deposit accounts in our business development efforts which contributed to much of the deposit growth during the quarter.  Long-term debt and short-term borrowings, consisting entirely of advances from the FHLB, increased $9.5 million as compared to December 31, 2015.