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Western New England Bancorp, Inc. Reports Year End 2018 Results

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WESTFIELD, Mass., Jan. 29, 2019 (GLOBE NEWSWIRE) -- Western New England Bancorp, Inc. (the "Company" or "WNEB") (NASDAQ:WNEB), the holding company for Westfield Bank (the "Bank"), announced today the unaudited results of operations for the three and twelve months ended December 31, 2018.

For the three months ended December 31, 2018, the Company reported net income of $3.8 million, or $0.14 earnings per diluted share, compared to a net loss of $353,000, or $0.01 loss per diluted share, for the three months ended December 31, 2017.  On a linked quarter basis, net income of $3.8 million, or $0.14 earnings per diluted share, decreased $67,000, or 1.7%, from net income of $3.9 million, or $0.14 earnings per diluted share, for the three months ended September 30, 2018.  Net income increased $4.1 million, or 33.2%, from $12.3 million, or $0.41 earnings per diluted share, for the twelve months ended December 31, 2017 to $16.4 million, or $0.57 earnings per diluted share, for the twelve months ended December 31, 2018.

The Company announced that the Board of Directors declared an increase of $0.01, or 25%, in the quarterly cash dividend to $0.05 per share, payable on or about February 27, 2019 to shareholders of record on February 13, 2019. 

The Company also announced that the Board of Directors has authorized a stock repurchase plan (the "2019 Plan") pursuant to which the Company may repurchase up to 2.8 million shares of its common stock, or approximately 10% of the Company's outstanding shares. The 2019 Plan will commence upon the completion of the Company's existing repurchase program.  During the three months ended December 31, 2018, the Company repurchased 1,051,360 shares at an average price of $9.97 under its current plan.  As of December 31, 2018, there were 251,333 shares available to repurchase under the previously existing plan.

"We are encouraged by our year in 2018 and focused on the work we have ahead of us," said James C. Hagan, President and CEO of WNEB.  "Although Westfield Bank experienced a high level of prepayments, we nonetheless had positive loan growth in 2018 and we currently maintain a strong loan pipeline in 2019. We are also pleased with deposit growth of 6.0% on a year-to-year basis, especially considering the rising interest rate environment.  Customers in our communities continue to choose Westfield Bank for their financial services needs and we are sharply focused on quality growth in our markets in 2019." Hagan added, "While the stock market was particularly volatile in the fourth quarter, we were encouraged to repurchase a significant number of our own shares at what we believe is an attractive valuation. The newly authorized repurchase program is a testament to our continued commitment to be a purchaser of our own shares at attractive levels."

Key Highlights:

  • Loans: Total loans as of December 31, 2018 were $1.7 billion, an increase of $4.3 million, or 0.3%, from September 30, 2018, and an increase of $66.2 million, or 4.0%, from December 31, 2017.
     
  • Deposits: Total deposits decreased $13.0 million, or 0.8%, from September 30, 2018 to December 31, 2018, after increasing $57.2 million, or 3.7%, from June 30, 2018 to September 30, 2018, primarily due to seasonal activity in the third quarter. Total deposits increased $89.9 million, or 6.0%, from December 31, 2017. The loan-to-deposit ratio decreased from 108.3% at December 31, 2017 to 106.3% at December 31, 2018.
     
  • Allowance for Loan Losses and Credit Quality: Allowance for loan losses was 0.71% of total loans and 89.4% of non-performing loans at December 31, 2018. Allowance for loan losses as a percentage of loans, excluding the loans acquired from Chicopee Bancorp, Inc., ("Chicopee") was 0.98% at December 31, 2018. Non-performing loans to total loans and non-performing loans to total assets were 0.79% and 0.64%, respectively, at December 31, 2018.
     
  • Net Interest Margin: The net interest margin was 2.97% for the three months ended December 31, 2018, compared to 2.94% for the three months ended September 30, 2018.  The net interest margin, which is stated on a fully taxable equivalent basis throughout the remainder of this release, was 2.99% for the three months ended December 31, 2018, compared to 2.96% for the three months ended September 30, 2018. Excluding the purchase accounting adjustments and prepayment penalties, the adjusted net interest margin was 2.97% for the three months ended December 31, 2018 and 2.97% for the three months ended September 30, 2018. The net interest margin for the twelve months ended December 31, 2018 was 3.08% compared to 3.12% for the twelve months ended December 31, 2017. Excluding purchase accounting adjustments and prepayment penalties, the adjusted net interest margin increased from 2.99% for the twelve months ended December 31, 2017 to 3.01% for the twelve months ended December 31, 2018.         
     
  • Capital Management: The Company's book value per share increased $0.24, or 2.9%, from $8.11 at December 31, 2017 to $8.35 at December 31, 2018.  Tangible book value per share increased $0.21, or 2.8%, from $7.57 at December 31, 2017 to $7.78 at December 31, 2018. The Company's and the Bank's regulatory capital ratios continued to exceed the levels required to be considered "well-capitalized" under federal banking regulations.

Net Income for the Three Months Ended December 31, 2018 Compared to the Three Months Ended September 30, 2018
The Company reported net income of $3.8 million, or $0.14 earnings per diluted share, for the three months ended December 31, 2018, compared to net income of $3.9 million, or $0.14 earnings per diluted share, for the three months ended September 30, 2018. Return on average assets and return on average equity were 0.72% and 6.43%, respectively, for the three months ended December 31, 2018, as compared to 0.74% and 6.42%, respectively, for the three months ended September 30, 2018.

Net Interest Income and Net Interest Margin
On a sequential quarter basis, net interest income increased $215,000, or 1.5%, to $14.8 million for the three months ended December 31, 2018 from $14.6 million for the three months ended September 30, 2018.  The increase in net interest income was due to an increase in interest income of $584,000, or 3.0%, partially offset by an increase in interest expense of $369,000, or 7.4%. The increase in interest expense was primarily due to a $422,000, or 13.6%, increase in interest expense on deposits, while interest expense on borrowings decreased $53,000, or 2.8%. Net interest income for the three months ended December 31, 2018 included $61,000 in favorable purchase accounting adjustments, compared to $62,000 in negative purchase accounting adjustments for the three months ended September 30, 2018.

The net interest margin for the three months ended December 31, 2018 was 2.99%, compared to 2.96% for the three months ended September 30, 2018. Excluding the purchase accounting adjustments of $61,000 and prepayment penalties of $49,000 reported during the three months ended December 31, 2018, the net interest margin was 2.97%, which was unchanged from the three months ended September 30, 2018.

The fully tax equivalent average yield on interest-earning assets increased 10 basis points from 4.00% for the three months ended September 30, 2018 to 4.10% for the three months ended December 31, 2018. Excluding the purchase accounting adjustments and prepayment penalties, the average yield on interest-earning assets increased seven basis points from 4.03% for the three months ended September 30, 2018 to 4.10% for the three months ended December 31, 2018. During the three months ended December 31, 2018, the average cost of funds increased 11 basis points from 1.32% for the three months ended September 30, 2018 to 1.43% for the three months ended December 31, 2018. The average cost of deposits increased 13 basis points from 1.00% for the three months ended September 30, 2018 to 1.13% for the three months ended December 31, 2018, primarily due to a 14 basis point increase in the average cost of time deposits, while the average cost of borrowings increased 13 basis points during the same period. For the three months ended December 31, 2018, average demand deposits of $359.2 million, an interest-free source of funds, represented 22.5% of average total deposits, and increased $30.5 million, or 9.3%, from the three months ended September 30, 2018. During the three months ended December 31, 2018, average interest-earning assets increased $9.0 million, or 0.5%, to $2.0 billion. The increase in average interest-earning assets was due to an increase of $8.5 million, or 0.5%, in average loans and an increase of $8.2 million, or 90.1%, in average short-term investments, partially offset by a decrease of $7.3 million, or 2.8%, in average securities.

Provision for Loan Losses
The provision for loan losses decreased $50,000, or 14.3%, from $350,000 for the three months ended September 30, 2018, to $300,000 for the three months ended December 31, 2018. The Company recorded net charge-offs of $482,000 for the three months ended December 31, 2018, as compared to net charge-offs of $101,000 for the three months ended September 30, 2018.

Non-Interest Income
On a sequential quarter basis, non-interest income decreased $58,000, or 2.5%, to $2.2 million for the three months ended December 31, 2018, from $2.3 million for the three months ended September 30, 2018. The decrease in non-interest income was primarily due to a decrease in service charges and fees of $121,000, or 6.4%. As reported last quarter, the third quarter typically includes seasonal non-interest income which was approximately $200,000 during the three months ended September 30, 2018. During the three months ended December 31, 2018, the Company reported a $31,000 loss on the early redemption of a bond and $48,000 in unrealized gains on the Company's marketable equity securities portfolio due to the adoption of Accounting Standards Board ("ASU") 2016-01, compared to $43,000 in unrealized losses during the three months ended September 30, 2018.

Non-Interest Expense
For the three months ended December 31, 2018, non-interest expense increased $121,000, or 1.0%, to $11.7 million from $11.6 million for the three months ended September 30, 2018.  The increase in non-interest expense was primarily due to an increase in occupancy expense of $43,000, or 4.5%, an increase in data processing of $39,000, or 6.1%, an increase in furniture and equipment of $12,000, or 3.0%, and an increase in other non-interest expense of $135,000, or 7.3%. These increases were partially offset by a decrease in professional fees of $64,000, or 8.3%, a decrease in FDIC insurance expense of $18,000, or 11.4%, a decrease in salaries and benefits of $17,000, or 0.3%, and a decrease in advertising expense of $9,000, or 2.6%. For the three months ended December 31, 2018, the efficiency ratio was 68.6%, compared to 68.3% for the three months ended September 30, 2018.

Income Tax Provision
The Company's effective tax rate was 24.1% for the three months ended December 31, 2018, compared to 21.5% for the three months ended September 30, 2018 primarily due to a true-up of the tax impact on unrealized gains and losses on the marketable equity securities portfolio marked to market under ASU 2016-01.

Net Income for the Three Months Ended December 31, 2018 Compared to the Three Months Ended December 31, 2017
The Company reported net income of $3.8 million, or $0.14 earnings per diluted share, for the three months ended December 31, 2018, compared to a net loss of $353,000, or $0.01 net loss per diluted share, for the three months ended December 31, 2017. The results for the three months ended December 31, 2017 includes a one-time, non-cash write-down in the amount of $4.0 million as a result of a deferred tax asset revaluation related to the enactment of the Tax Cuts and Jobs Act (the "Tax Act"). Excluding the $4.0 million write-down, core net income was $3.6 million, or $0.12 per diluted share, for the three months ended December 31, 2017, compared to $3.8 million, or $0.14 per diluted share, for the three months ended December 31, 2018. Core net income is a non-GAAP financial measure.  Management believes core net income more accurately reflects the Company's results of operations in the overall evaluation of its performance.  A reconciliation of core net income is included in the accompanying financial tables. Net income, excluding favorable purchase accounting amortization of $953,000 during the three months ended December 31, 2017 and $61,000 during the three months ended December 31, 2018, was $2.7 million, or $0.09 per diluted share and $3.8 million, or $0.14 per diluted share, respectively.

Return on average assets and return on average equity were 0.72% and 6.43%, respectively, for the three months ended December 31, 2018, as compared to (0.07%) and (0.56%), respectively, for the three months ended December 31, 2017.

Net Interest Income and Net Interest Margin
Net interest income decreased $532,000, or 3.5%, to $14.8 million for the three months ended December 31, 2018, from $15.4 million for the three months ended December 31, 2017. Interest income increased $950,000, or 4.9%, from the three months ended December 31, 2017 to the three months ended December 31, 2018, while interest expense increased $1.5 million, or 38.1%, during the same period. Purchase accounting amortization decreased $892,000, or 93.6%, from $953,000 for the three months ended December 31, 2017 to $61,000 for the three months ended December 31, 2018. Excluding these adjustments, net interest income increased $360,000, or 2.5%.

The fully tax equivalent net interest margin for the three months ended December 31, 2018 was 2.99%, compared to 3.19% during the three months ended December 31, 2017. The decrease in net interest margin was largely due to a decrease of $892,000, or 93.6%, in purchase accounting adjustments from $953,000 for the three months ended December 31, 2017 to $61,000 for the three month ended December 31, 2018, which negatively impacted the net interest margin by 19 basis points. Excluding the purchase accounting adjustments and prepayment penalties, the net interest margin was 2.97% for the three months ended December 31, 2018, compared to 3.00%, for the three months ended December 31, 2017. The reduction in the statutory federal income tax rate from 35% for the three months ended December 31, 2017 to 21% for three months ended December 31, 2018 negatively impacted the net interest margin and resulted in a two basis point decline in the fully tax equivalent net interest margin over the same period.

The fully taxable equivalent average yield on interest-earning assets increased 8 basis points from 4.02% for the three months ended December 31, 2017 to 4.10% for the three months ended December 31, 2018. Excluding the purchase accounting adjustments and prepayment penalties in both periods, the average yield on interest-earning assets increased 23 basis points from 3.87% for the three months ended December 31, 2017 to 4.10% for the three months ended December 31, 2018, respectively. During the three months ended December 31, 2018, the average cost of funds increased 39 basis points from 1.04% for the three months ended December 31, 2017 to 1.43% for the three months ended December 31, 2018. The average cost of time deposits increased 56 basis points from 1.23% for the three months ended December 31, 2017 to 1.79% for the three months ended December 31, 2018. The average cost of deposits increased 38 basis points from 0.75% for the three months ended December 31, 2017 to 1.13% for the three months ended December 31, 2018, while the average cost of borrowings increased 68 basis points during the same period. For the three months ended December 31, 2018, average demand deposits of $359.2 million, an interest-free source of funds, represented 22.5% of average total deposits and increased $49.9 million, or 16.1%, from the three months ended December 31, 2017.

During the three months ended December 31, 2018, average interest-earning assets increased $42.7 million, or 2.2%, to $2.0 billion, from $1.9 billion for the three months ended December 31, 2017. The increase in average interest-earning assets was due to an increase in average loans of $68.6 million, or 4.2%, and an increase in average short-term investments of $12.2 million, partially offset by a decrease in average securities of $37.6 million, or 12.8%.

Average Federal Home Loan Bank ("FHLB") borrowings decreased $22.5 million, or 8.0%, from $281.4 million for the three months ended December 31, 2017 to $258.9 million for the three months ended December 31, 2018. In order to manage interest rate risk, average long-term FHLB borrowings increased $75.0 million, or 53.7%, from $139.6 million during the three months ended December 31, 2017 to $214.6 million during the three months ended December 31, 2018, while short-term borrowings decreased $97.5 million, or 68.8%, during the same period. Long-term borrowings were used to replace a portion of our short-term borrowings that matured during the quarter in order to manage funding costs in a rising rate environment.

Provision for Loan Losses
The provision for loan losses decreased $210,000, or 41.2%, from $510,000 for the three months ended December 31, 2017 to $300,000 for the three months ended December 31, 2018. The Company recorded net charge-offs of $482,000 for the three months ended December 31, 2018 and $197,000 for the same period in 2017. 

Non-Interest Income
Non-interest income increased $241,000, or 12.1%, to $2.2 million for the three months ended December 31, 2018, from $2.0 million for the three months ended December 31, 2017. The increase was primarily due to an increase in service charges and fees of $170,000, or 10.6%, a decrease of $58,000 on the loss on sale of other real estate owned ("OREO"), and unrealized gains of $48,000 on the Company's marketable equity securities portfolio due to the adoption of ASU 2016-01, partially offset by a $31,000 loss on the early redemption of a bond.

Non-Interest Expense
For the three months ended December 31, 2018, non-interest expense increased $329,000, or 2.9%, to $11.7 million, or 2.19% of average assets, from $11.4 million, or 2.17% of average assets, for the three months ended December 31, 2017.  The increase in non-interest expense was primarily due to an increase in other non-interest expense of $203,000, or 11.4%, an increase in professional fees of $63,000, or 9.8%, an increase in occupancy expense of $36,000, or 3.8%, an increase in furniture and equipment of $28,000, or 7.3%, and an increase in advertising expenses of $7,000, or 2.1%. These increases were partially offset by a decrease in salaries and benefits of $43,000, or 0.7%, and a decrease in FDIC insurance of $14,000, or 9.1%. For the three months ended December 31, 2018, the efficiency ratio was 68.6%, compared to 65.3% for the three months ended December 31, 2017.

Income Tax Provision
The Company's effective tax rate decreased from 106.4% for the three months ended December 31, 2017 to 24.1% for the three months ended December 31, 2018. The effective tax rate for the three months ended December 31, 2017 was a result of the previously mentioned $4.0 million reduction in the value of the Company's net deferred tax assets ("DTA") as a result of the Tax Act.  Excluding this one-time charge, the effective tax rate for the three months ended December 31, 2017 was 33.4%.

Net Income for the Twelve Months Ended December 31, 2018 Compared to the Twelve Months Ended December 31, 2017
For the twelve months ended December 31, 2018, the Company reported net income of $16.4 million, or $0.57 per diluted share, compared to $12.3 million, or $0.41 per diluted share, for the twelve months ended December 31, 2017. For the twelve months ended December 31, 2018, core net income of $16.2 million, or $0.56 per diluted share, increased $1.3 million, or 8.7%, from $14.9 million, or $0.50 per diluted share for the twelve months ended December 31, 2017.  Core net income of $16.2 million for the twelve months ended December 31, 2018 excludes $165,000 of tax benefits recorded on Bank Owned Life Insurance ("BOLI") death benefits and option exercises. For the twelve months ended December 31, 2017, core net income of $14.9 million excludes $379,000, net of tax, of merger related expenses, $1.8 million in tax benefits recorded in connection with the reversal of a deferred tax valuation allowance and the exercises of stock options, and the $4.0 million one-time, non-cash write-down of the Company's DTA.  Adjusting for favorable purchase accounting amortization of $1.1 million for the twelve months ended December 31, 2018 and $2.4 million for the twelve months ended December 31, 2017, respectively, net income was $15.1 million and $12.5 million, respectively.

Return on average assets and return on average equity were 0.78% and 6.82% for the twelve months ended December 31, 2018, respectively, compared to 0.59% and 4.94% for the twelve months ended December 31, 2017, respectively. Excluding tax benefits and merger related expenses, net of tax, return on average assets and return on average equity were 0.77% and 6.75% for the twelve months ended December 31, 2018, respectively, compared to 0.72% and 5.97% for the twelve months ended December 31, 2017, respectively.

Net Interest Income and Net Interest Margin
Net interest income increased $618,000, or 1.0%, from $59.4 million for the twelve months ended December 31, 2017 to $60.0 million for the twelve months ended December 31, 2018. The increase in net interest income was primarily due to an increase in interest and dividend income of $5.0 million, or 6.7%, partially offset by an increase in interest expense of $4.3 million, or 29.6%, from the twelve months ended December 31, 2017. The increase in interest expense was due to an increase in interest expense on deposits of $3.2 million, or 38.3%, and an increase in interest expense on borrowings of $1.1 million, or 17.7%, for the twelve months ended December 31, 2018.  Excluding favorable purchase accounting adjustments of $1.1 million and prepayment penalties of $328,000 during the twelve months ended December 31, 2018 and $2.4 million in favorable purchase accounting adjustments during the twelve months ended December 31, 2017, net interest income increased $1.6 million, or 2.8%.

The fully taxable equivalent net interest margin decreased four basis points from 3.12% for the twelve months ended December 31, 2017 to 3.08% for the twelve months ended December 31, 2018. During the twelve months ended December 31, 2018 and December 31, 2017, favorable purchase accounting adjustments related to the Chicopee acquisition increased net interest income by $1.1 million and $2.4 million, respectively. The twelve months ended December 31, 2018 also included prepayment penalties of $328,000. Excluding these items, the adjusted net interest margin for the twelve months ended December 31, 2018 was 3.01% compared to 2.99% for the twelve months ended December 31, 2017. The reduction in the statutory federal income tax rate from 35% for the twelve months ended December 31, 2017 to 21% for twelve months ended December 31, 2018 negatively impacted the net interest margin and resulted in a three basis point decline in the fully tax equivalent net interest margin over the same period.

The average asset yield increased 17 basis points from 3.88% for the twelve months ended December 31, 2017 to 4.05% for the twelve months ended December 31, 2018. The average cost of funds increased 29 basis points from 0.97% for the twelve months ended December 31, 2017 to 1.26% for the twelve months ended December 31, 2018. The average cost of time deposits increased 43 basis points from 1.12% for the twelve months ended December 31, 2017 to 1.55% for the twelve months ended December 31, 2018. Excluding the favorable purchase account adjustments on time deposits of $278,000 and $892,000 during the twelve months ended December 31, 2018 and December 31, 2017, respectively, the cost of deposits increased 19 basis points from 0.78% during the twelve months ended December 31, 2017 to 0.97% during the twelve months ended December 31, 2018, respectively. The average cost of borrowings increased 57 basis points from 2.06% for the twelve months ended December 31, 2017 to 2.63% for the twelve months ended December 31, 2018.

Average interest-earning assets increased $25.7 million, or 1.3%, to $2.0 billion for the twelve months ended December 31, 2018. The increase in average interest-earning assets was due to an increase in average loans of $68.7 million, or 4.3%, partially offset by the decrease in average investments of $33.6 million, or 11.1%, and a decrease in short-term investments of $9.0 million, or 46.9%.

Average FHLB borrowings decreased $9.2 million, or 3.3%, from $282.7 million for the twelve months ended December 31, 2017 to $273.5 million for the twelve months ended December 31, 2018. In order to manage interest rate risk, during the twelve months ended December 31, 2018, average long-term FHLB borrowings of $207.5 million increased $82.0 million, or 65.3%, from $125.5 million for the twelve months ended December 31, 2017, as short-term borrowings decreased $91.1 million, or 58.0%, during the same period. New long-term borrowings were used to replace a portion of our short-term borrowings that matured over the twelve month period ending December 31, 2018 in order to manage funding costs in a rising rate environment.

Provision for Loan Losses
The provision for loan losses of $1.9 million increased $540,000, or 39.7%, for the twelve months ended December 31, 2018 compared to $1.4 million for the twelve months ended December 31, 2017. The Company recorded net charge-offs of $678,000 for the twelve months ended December 31, 2018, as compared to net charge-offs of $597,000 for the twelve months ended December 31, 2017. Contributing to the increase in the general reserves was an increase in commercial real estate loans of $36.3 million, or 5.0%, from $732.6 million at December 31, 2017 to $768.9 million at December 31, 2018.

Non-Interest Income
For the twelve months ended December 31, 2018, non-interest income of $9.2 million increased $732,000, or 8.6%, compared to $8.5 million for the twelve months ended December 31, 2017. During the twelve months ended December 31, 2018, non-interest income included the recognition of $715,000 in BOLI death benefits. Excluding the BOLI death benefits, non-interest income increased of $17,000, or 0.2%. The increase was primarily due to an increase in service charges and fees of $548,000, or 8.6%, and an increase of $39,000 on the gain on the sale of OREO, partially offset by $333,000 in realized securities losses primarily due to the amortization of the remaining premium on a bond which was paid in full prior to its final maturity, $142,000 in unrealized losses on the Company's marketable equity securities portfolio due to the adoption of ASU 2016-01 in 2018, and a decrease in other income of $96,000, or 42.3%.

Non-Interest Expense
For the twelve months ended December 31, 2018, non-interest expense increased $1.5 million, or 3.2%, to $46.2 million, or 2.21% of average assets, compared to $44.8 million, or 2.16% of average assets for the twelve months ended December 31, 2017. Excluding merger-related expenses of $526,000, non-interest expense increased $1.9 million, or 4.3%, from $44.3 million for the twelve months ended December 31, 2017 to $46.2 million for the twelve months ended December 31, 2018. The increase in non-interest expense was primarily due to an increase in salaries and benefits of $551,000, or 2.2%, an increase in data processing of $266,000, or 11.2%, an increase in professional fees of $251,000, or 9.8%, an increase in occupancy expense of $200,000, or 5.3%, an increase in advertising expense of $99,000, or 7.6%, an increase in furniture and equipment of $28,000, or 1.8%, and an increase in other expenses of $598,000, or 9.0%. The increase in professional fees of $251,000, or 9.8%, was primarily due to $309,000 in legal fees associated with a previously charged-off loan from 2010 which resulted in the recovery of $300,000 during the twelve months ended December 31, 2018. The Company intends to continue to pursue legal remedies against the principals for recovery, but there can be no assurance that these efforts will result in significant recoveries.

For the twelve months ended December 31, 2018, the efficiency ratio was 67.1%, compared to 65.3% for the twelve months ended December 31, 2017.

Income Tax Provision
The effective tax rate for the twelve months ended December 31, 2018 and December 31, 2017 was 22.3% and 43.4%, respectively. The higher effective tax rate for the twelve months ended December 31, 2017 was primarily due to a one-time, non-cash DTA write-down of $4.0 million due to the Tax Act, partially offset by tax benefits of $1.8 million in connection with a reversal of a deferred tax valuation allowance and the exercise of stock options recorded during the twelve months ended December 31, 2017. Excluding the one-time charge of $4.0 million, the effective tax rate for the twelve months ended December 31, 2017 was 25.0%.

Balance Sheet
At December 31, 2018, total assets were $2.1 billion, an increase of $35.8 million, or 1.7%, from December 31, 2017, primarily due to an increase in loans of $66.2 million, or 4.0%, partially offset by a decrease in securities available-for-sale and marketable equity securities of $28.3 million, or 9.8%.

Loans
Total loans increased $66.2 million, or 4.0%, due to an increase in commercial real estate loans of $36.3 million, or 5.0%, an increase in residential real estate loans of $24.5 million, or 3.8%, and an increase in commercial and industrial loans of $5.0 million, or 2.1%. In order to reduce interest rate risk, the Company currently services $56.6 million in residential loans sold to the secondary market. The servicing rights will continue to be retained on all loans sold. The following table is a summary of our outstanding loan balances as of the periods indicated:         

  December 31,
2018
  December 31,
2017
 
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