Wellesley Bancorp posted declines in its net income during the second quarter, as costs associated with its new office in Boston and growth in its lending and wealth management functions ate into the company’s bottom line.
The holding company for Wellesley Bank posted a $152,000, or 26.1 percent, year-over-year decline in net income, which totaled $431,000 in the quarter ended June 30, compared with $583,000 in the year-ago period.
But Wellesley also posted significant increases in its net income as it grew its balance sheet.
“We are pleased to report solid results in terms of earnings and asset growth during these periods as we successfully execute our strategic goals,” President and CEO Thomas J. Fontaine said in a statement. “We have been able to deliver solid earnings while making significant investments in people, technology and delivery systems which we believe will provide the foundation for delivering premier banking services to all our clients. Our asset growth reflects the growing acceptance of our premier brand and our ability to deliver superior service within all our lines of business.”
Net interest income increased $732,000, or 22.3 percent, to $4 million in the quarter as the average balance of the company’s loan portfolio increased. That increase was partially offset by higher interest expenses as the average balance of deposits also increased.
To keep up with increasing loan balances, Wellesley also increased its provision for loan losses to $220,000 in the second quarter, a $120,000 increase over last year. In a statement, the bank said that specific reserves have been increased on two impaired loans.
Noninterest income declined $30,000, or 11.4 percent, to $233,000. While wealth management fees increased $31,000 over the year-ago period, the company saw a $103,000 drop in net securities gains as Wellesley did not record any securities sales in this quarter.
In the comparable period last year, the company recorded a $93,000 loss on the early extinguishment of $2 million in long-term FHLB advances. The company posted no similar transaction in this year’s second quarter.
Noninterest expenses increased $830,000 to $3.3 million over $2.5 million in the year-ago period, largely due to additional staffing in the bank’s commercial and residential lending functions, additions to its wealth management personnel, a one-time $95,000 consultant fee, and other costs associated with the opening of Wellesley’s newest Boston location last fall.
Total assets were $494.3 million at June 30, representing an increase of $35.8 million from year-end 2013. Net loans increased $33 million to $416.7 million over that same period. Residential mortgage loans increased $22.8 million to $204.5 million, and construction loans increased $8.7 million to $88.8 million, with loans to individual homeowners representing $24 million, up from $22.8 million at year-end 2013.
Deposits increased $29.5 million to $387 million in the second quarter, primarily attributable to a $15.6 million increase in savings deposits, a $10.8 million increase in certificates of deposit and a $3.7 million increase in demand deposits. Longer-term FHLB advances increased $10 million to $53.5 million as the company funded a portion of its loan growth with lower cost, long-term advances. Short-term borrowings, which consist entirely of advances from the FHLB, totaled $4 million at June 30, down $5 million from year-end 2013 as retail and commercial deposit growth provided funds for short-term liquidity needs.
