Chicopee Bancorp, Inc. (the “Company”) (NASDAQ - CBNK), the holding company for Chicopee Savings Bank (the “Bank”), announced the results of operations for the three months ended March 31, 2011.

The Company reported net income for the three months ended March 31, 2011 of $43,000, or $0.01 earnings per share, as compared to a net loss of $50,000, or $0.01 loss per share, for the same period in 2010. The increase in net income for the three months ended March 31, 2011 compared to the three months ended March 31, 2010, was primarily due to an increase in net interest income of $214,000, or 5.2%, an increase in non-interest income of $54,000, or 8.9%, and a decrease in the provision for loan losses of $40,000, or 14.7%, partially offset by an increase in non-interest expense of $210,000, or 4.6%.

Net interest income increased $214,000, or 5.2%, from $4.2 million at March 31, 2010 to $4.4 million at March 31, 2011. The increase in net interest income was primarily due to a $210,000, or 10.3%, decrease in interest expense.

The net interest margin increased 3 basis points from 3.43%, for the three months ended March 31, 2010, to 3.46% for the three months ended March 31, 2011. The interest rate spread increased by 9 basis points from 3.05% at March 31, 2010 to 3.14% at March 31, 2011. The average cost of funds declined 30 basis points due to the continuation of low market interest rates, which allowed the Company to renew or replace maturing time deposits at lower costs. The average balance of demand deposits, an interest free source of funds, increased $8.7 million, or 22.2%, for the three months ended March 31, 2011 compared to the three months ended March 31, 2010.

Non-interest income for the three months ended March 31, 2011, increased $54,000, or 8.9%, from $607,000 at March 31, 2010 to $661,000 at March 31, 2011. Income from net loan sales and servicing increased $65,000, or 78.3%, and customer service fees and commissions increased $36,000, or 8.4%. These improvements were partially offset by a $63,000 loss on the sale of other real estate owned and a $9,000, or 8.4%, decrease in income from bank owned life insurance.

Non-interest expense increased $210,000, or 4.6%, for the three months ended March 31, 2011 compared to the three months ended March 31, 2010. Non-interest expense increased primarily due to the increase in salaries and benefits of $303,000, or 11.9%, as a result of higher benefit costs, normal raises for existing employees and the acceleration of restricted stock awards held by Mrs. Alzira Costa, Senior Vice President, upon her retirement on March 31, 2011, along with additional retirement benefits. The increase of $130,000 related to Mrs. Costa’s retirement is a non-recurring expense. Other general and administrative expenses, decreased by $93,000, or 4.7%, due to various business reasons, including a decrease of $119,000, or 53.8%, in FDIC insurance, offset by an $18,000, or 4.2%, increase in occupancy expense due to the larger amount of snowfall in the first quarter of 2011. Comparing the three months ended March 31, 2011 to the three months ended March 31, 2010, snow removal expense totaled $73,000, and increased by $41,000.

Average interest earning assets for the three months ended March 31, 2011, increased $28.1 million, or 5.6%, from the same period in 2010. The yield on assets decreased 21 basis points, primarily due to the 25 basis point decrease in loan yields, offset by the 74 basis point increase in the investment yield, specifically, tax-exempt industrial revenue bonds. While interest-bearing liabilities increased $22.3 million, or 5.4%, the average cost of funds decreased 30 basis points and was driven primarily by the 29 basis point decrease in the cost of interest-bearing deposits and by the 29 basis point decrease in the cost of borrowings.

Total assets increased $8.0 million, or 1.4%, from $573.7 million at December 31, 2010 to $581.7 million at March 31, 2011. The increase was primarily due to an increase in net loans of $12.3 million, or 2.9%, from $430.3 million at December 31, 2010 to $442.6 million at March 31, 2011, and an increase in cash and cash equivalents of $1.4 million, or 3.9%, offset by a decrease in held-to-maturity investments of $4.7 million, or 6.7%, from $69.7 million at December 31, 2010 to $65.0 million at March 31, 2011.

The significant components of the loan increases were a $10.7 million, or 7.7%, increase in commercial real estate loans and a $6.6 million, or 9.2%, increase in commercial and industrial loans, partially offset by a $1.9 million, or 5.7%, decrease in construction loans and a $2.4 million, or 1.6%, decrease in one- to four-family residential loans. The decrease in one- to four-family residential loans was primarily due to prepayments and refinancing activity attributed to the decline in interest rates to historically low levels. The construction portfolio decreased as borrowers completed construction projects and the demand for construction loans decreased due to the economy. In accordance with the Company’s asset/liability management strategy and in an effort to reduce interest rate risk, the Company continues to sell fixed rate, low coupon residential real estate loans to the secondary market. The Company currently services $77.6 million in loans sold to the secondary market. Servicing rights will continue to be retained on all loans written and sold in the secondary market.

The allowance for loan losses of $4.4 million remained substantially unchanged from December 31, 2010 to March 31, 2011 but decreased as a percentage of total loans from 1.02% and 1.00%, respectively. The allowance for loan losses as a percentage of non-performing loans was 83.6% at March 31, 2011 and 68.5% at December 31, 2010. Management reviews the level of the allowance for loan losses on a monthly basis and establishes the provision for loan losses based on loan volume, types of lending, delinquency levels, loss experience, estimated collateral values, current economic conditions and other related factors.

Asset quality continues to be the top focus for management in 2011 and we continue to work aggressively to maintain our asset quality and resolve problem loans as they arise. Non-performing assets decreased from $6.8 million, or 1.18% of total assets, at December 31, 2010, to $5.8 million, or 0.99%, of total assets at March 31, 2011.

The investment securities portfolio, including held-to-maturity and available-for-sale securities, decreased $4.7 million, or 6.7%, to $65.4 million as of March 31, 2011 from $70.1 million as of December 31, 2010. The decrease in investments was primarily due to the decrease in U. S. Treasury securities of $6.7 million, or 21.8%, partially offset by the $2.7 million, or 23.3%, increase in certificates of deposit.

Total deposits increased $12.2 million, or 3.1%, from $391.9 million at December 31, 2010 to $404.1 million at March 31, 2011. Money market accounts increased $9.9 million, or 15.0%, to $76.1 million, regular savings accounts increased $3.0 million, or 6.7%, to $47.2 million, demand accounts increased $1.8 million, or 3.7%, to $50.1 million, and NOW accounts increased $1.3 million, or 8.6%. These increases were offset by a decrease in certificates of deposit of $3.8 million, or 1.7%, to $214.9 million.

Borrowings decreased $4.2 million, or 4.7%, from $89.6 million at December 31, 2010 to $85.4 million at March 31, 2011 and consisted of repurchase agreements of $17.0 million and Federal Home Loan Bank (“FHLB”) advances of $68.4 million at March 31, 2011.

Total stockholders’ equity at March 31, 2011 was $92.0 million compared to $91.9 million at December 31, 2010. The increase was primarily attributed to the stock-based compensation of $381,000, an increase in additional paid in capital of $118,000, net income of $43,000, offset by the purchase of 32,100 shares of the Company’s stock through the stock repurchase plan, at a cost of $419,000, or $13.04 per share. At March 31, 2011, the Company’s balance sheet continues to be strong and regulatory capital ratios continue to exceed the levels required to be considered “well-capitalized” under applicable federal banking regulations. Our capital management strategies allowed us to increase our book value per share by $0.11, or 0.7%, to $15.39 at March 31, 2011 compared to $15.28 at December 31, 2010.

On November 19, 2010, the Company announced that its Board of Directors approved a fifth stock repurchase program (the “Repurchase Program”). Under the Repurchase Program, the Company intends to repurchase up to 303,004 shares, or approximately 5%, of the Company’s outstanding shares of common stock.

As we have stated in previous releases, the Company’s net income has been challenged by exceptionally low short-term interest rates. We continue to sacrifice short-term results to protect earnings when interest rates rise and have positioned the balance sheet to benefit from the increase in interest rates.

Despite the low interest rate environment, net interest income, the primary source of revenues for the Company, increased $214,000, or 5.2%, for the quarter ended March 31, 2011 compared to the same period in 2010. This was accomplished by managing the cost of funds to offset the decrease in the asset yield. The net interest margin increased from 3.43% at March 31, 2010 to 3.46% at March 31, 2011.

The high unemployment rate continues to be a concern for management and a burden on our customers. We closely monitor loan delinquency and are proactively working through problem loans. Asset quality remains favorable at March 31, 2011 as reflected in the ratio of non-performing loans as a percentage of total loans of 1.19% and non-performing assets as a percentage of total assets of 0.99%. Total delinquency as a percentage of total loans was 1.42% at March 31, 2011 compared to 1.77% at March 31, 2010, indicating that management is effectively managing asset quality. In the fourth quarter of 2010, we restructured a $1.4 million participation loan. Although the loan continues to be reported on nonaccrual, we are pleased to report that the loan has been performing as agreed.

Despite the challenging interest rate environment and the high unemployment rate, the current economic environment continues to present many opportunities for “well-capitalized” banks. We were able to increase total assets by $8.0 million, or 1.4%, from $573.7 million at December 31, 2010 to $581.7 million at March 31, 2011. Specifically, net loans, our highest yielding assets, increased by $12.3 million, or 2.9%.

We continue to take steps to protect our strong capital position, preserve liquidity and improve the net interest margin in a historically low interest rate environment. We believe that Chicopee Savings Bank is well-positioned and well-capitalized for a strong performance as the economy continues to improve. Our capital management strategies have allowed us to increase our book value per share to $15.39. Our strong capital position gives us the flexibility to repurchase shares when opportunities arise and provides us with an additional capital management strategy to continue our commitment to maximize shareholder value.

Chicopee Bancorp, Inc. is a publicly owned bank holding company and the parent corporation of Chicopee Savings Bank, a Massachusetts stock savings bank headquartered at 70 Center Street, Chicopee, MA 01013. Chicopee Savings Bank provides a wide variety of financial products and services through its main office, seven branch offices located in Chicopee, Ludlow, West Springfield, South Hadley, and Ware in Western Massachusetts, and lending and operations center. Chicopee Savings Bank offers customers the latest and most technically advanced internet banking, including on-line banking and bill payment services. The Bank's deposits are insured by the Federal Deposit Insurance Corporation and the Depositors Insurance Fund of Massachusetts. For more information regarding the Bank’s products and services, please visit our web site at www.chicopeesavings.com.

This news release contains forward-looking statements, which can be identified by the use of words such as "believes," "expects," "anticipates," "estimates" or similar expressions. Such forward-looking statements and all other statements that are not historic facts are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors. These factors include, but are not limited to, general economic conditions, changes in the interest rate environment, legislative or regulatory changes that may adversely affect our business, changes in accounting policies and practices, changes in competition and demand for financial services, adverse changes in the securities markets, changes in deposit flows and changes in the quality or composition of the Company's loan or investment portfolios. Additionally, other risks and uncertainties may be described in the Company's quarterly reports on Form 10-Q and its annual report on Form 10-K, each filed with the Securities and Exchange Commission, which are available through the SEC's website at www.sec.gov. Should one or more of these risks materialize, actual results may vary from those anticipated, estimated or projected. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company assumes no obligation to update any forward-looking statements, except as required by law.

 
CHICOPEE BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars In Thousands)
   
 
March 31, December 31,
Assets 2011 2010
(Unaudited)
 
Cash and due from banks $ 9,396 $ 6,903
Short-term investments -
Federal funds sold   27,884     28,970  
Total cash and cash equivalents 37,280 35,873
 
Securities available-for-sale, at fair value 352 362
Securities held-to-maturity, at cost (fair value $65,155 and $69,912 at
March 31, 2011 and December 31, 2010, respectively) 65,017 69,713
Federal Home Loan Bank stock, at cost 4,489 4,489
Loans, net of allowance for loan losses ($4,442 at
March 31, 2011 and $4,431 at December 31, 2010) 442,635 430,307
Loans held for sale 111 1,888
Other real estate owned 438 286
Mortgage servicing rights 386 306
Bank owned life insurance 13,130 13,032
Premises and equipment, net 10,208 10,340
Accrued interest and dividends receivable 1,743 1,897
Deferred income tax asset 2,471 2,469
FDIC prepaid insurance 1,258 1,361
Other assets   2,190     1,381  
Total assets $ 581,708   $ 573,704  
 
Liabilities and Stockholders' Equity
 
Deposits
Non-interest-bearing $ 50,102 $ 48,302
Interest-bearing   353,995     343,635  
Total deposits 404,097 391,937
 
Securities sold under agreements to repurchase 16,953 17,972
Federal Home Loan Bank of Boston advances 68,432 71,615
Accrued expenses and other liabilities   225     298  
Total liabilities   489,707     481,822  
 
 
Stockholders' equity
Common stock (no par value, 20,000,000 shares authorized, 7,439,368
shares issued at March 31, 2011 and December 31, 2010) 72,479 72,479
Treasury stock, at cost (1,459,490 shares at March 31, 2011
and 1,427,390 shares at December 31, 2010) (18,714 ) (18,295 )
Additional paid-in-capital 2,373 2,255
Unearned compensation (restricted stock awards) (1,124 ) (1,431 )
Unearned compensation (Employee Stock Ownership Plan) (4,389 ) (4,463 )
Retained earnings 41,351 41,308
Accumulated other comprehensive income   25     29  
Total stockholders' equity   92,001     91,882  
Total liabilities and stockholders' equity $ 581,708   $ 573,704  

   

CHICOPEE BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except for Number of Shares and Per Share Amounts)

(Unaudited)
 
Three Months Ended
March 31,
2011 2010
 
Interest and dividend income:
Loans, including fees $ 5,809 $ 5,918
Interest and dividends on securities 332 261
Other interest-earning assets   47     5  
Total interest and dividend income   6,188     6,184  
 
Interest expense:
Deposits 1,374 1,487
Securities sold under agreements to repurchase 10 27
Other borrowed funds   438     518  
Total interest expense   1,822     2,032  
 
Net interest income 4,366 4,152
Provision for loan losses   233     273  
 
Net interest income after provision for loan losses   4,133     3,879  
 
Non-interest income:
Service charges, fees and commissions 466 430
Loan sales and servicing, net 148 83
Net gain on sales of securities available-for-sale 12 -
Loss on sales of other than temporarily impaired securities - -
Loss on sale of other real estate owned (63 ) -
Other than temporary impairment charge - (13 )
Income from bank owned life insurance   98     107  
Total non-interest income   661     607  
 
Non-interest expenses:
Salaries and employee benefits 2,839 2,536
 
Occupancy expenses 447 429
Furniture and equipment 250 268
FDIC insurance assessment 102 221
Data processing 293 279
Professional fees 142 125
Advertising 126 125
Stationery, supplies and postage 83 89
Other non-interest expense 464 464
  1,907     2,000  
Total non-interest expense   4,746     4,536  
 
Income (loss) before income taxes 48 (50 )
Income tax loss   5     -  
Net income (loss) $ 43   $ (50 )
 
Earnings (loss) per share: (1)
Basic $ 0.01 ($0.01 )
Diluted $ 0.01 ($0.01 )
 
Adjusted weighted average shares outstanding:
Basic

5,454,160
5,726,836
Diluted

5,454,160
5,726,836

(1) Common stock equivalents are excluded from the computation of diluted net loss per share for the three months ended March 31, 2011, since the inclusion of such equivalents would be anti-dilutive.

 
CHICOPEE BANCORP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA AND RATIOS
(Unaudited)
   
Three Months Ended
March 31,
2011 2010
Performance Ratios:
 
Return on Average Assets 0.03 % -0.04 %
Return on Average Equity 0.19 % -0.21 %
Interest Rate Spread 3.14 % 3.05 %
Net Interest Margin 3.47 % 3.43 %
Non-Interest Expense to Average Assets 3.36 % 3.37 %
Efficiency Ratio 94.41 % 95.31 %
Average Interest-Earning Assets to

Average Interest-Bearing Liabilities
123.20 % 123.05 %
Average Equity to Average Assets 16.11 % 17.43 %
 
 
At March 31, At December 31,
2011 2010
Asset Quality Ratios:
 
Allowance for loan losses as a percent of
total loans 1.00 % 1.02 %
Allowance for loan losses as a percent of
total nonperforming loans 83.62 % 68.49 %
Net charge-offs to average
outstanding loans during the period 0.05 % 0.20 %
Nonperforming loans as a percent
of total loans 1.19 % 1.49 %
 
Other Data:
 
Number of Offices 9 9
 

(1) Efficiency Ratio includes total non-interest expenses divided by the sum of net interest income plus total non-interest income.

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