Financial Performance Overview

Winchester Savings Bank (the “Company”) reported strong financial results for the fiscal year ended June 30, 2026, with net income of $4.4 million, a significant turnaround from the $874,000 net loss recorded the prior year. This improvement was driven by margin expansion and lower provision for credit losses.

Total assets grew 15.4% to $1.1 billion, primarily due to increases in loans, deposits, investments, and cash. Loans rose 15.9% to $873.8 million, with growth across residential, commercial, and construction real estate segments. Deposits increased 19.1% to $809.2 million, led by a 116.1% surge in money market accounts. Borrowings from the Federal Home Loan Bank also grew 7.6% to $158.2 million to support the loan expansion.

On the income statement, net interest income jumped 42.5% to $25.0 million as the net interest margin expanded by 50 basis points to 2.55%. This was driven by an increase in average loan balances and yields, while the average cost of deposits declined. The provision for credit losses decreased to $789,000 from $2.1 million the prior year, reflecting lower net charge-offs. Non-interest income declined 29.2% due to a loss on the sale of securities and lower gains on equity securities.

Operating expenses rose 5.2%, with increases in salaries, data processing, and marketing costs partially offset by a decline in other expenses. The efficiency ratio improved to 75.2% from 97.2% the prior year. Income tax expense increased to $1.3 million from a $656,000 benefit in the prior period, in line with the growth in pre-tax income.

Loan and Deposit Growth

The Company’s loan portfolio expanded 15.9% to $873.8 million, with broad-based growth across major loan categories. One-to-four family residential real estate loans grew 13.3% to $403.6 million, multi-family loans increased 27.6% to $212.8 million, and construction loans rose 21.3% to $116.6 million. This reflects the Company’s strategy of maintaining a balanced mix of residential and commercial real estate lending.

The allowance for credit losses on loans remained stable at 0.55% of total loans, despite the portfolio growth. Total nonaccrual loans declined 27.3% to $1.6 million, and the ratio of the allowance to nonperforming loans improved to 300.8% from 187.6%. Net charge-offs as a percentage of average loans also decreased to -0.07% from -0.19%.

On the funding side, deposits grew 19.1% to $809.2 million, with a 116.1% surge in money market accounts to $260.6 million. This was partially offset by declines in savings accounts and certificates of deposit. The increase in money market balances was largely attributable to the Company’s new municipal deposit channel. Borrowings from the Federal Home Loan Bank increased 7.6% to $158.2 million to support loan growth.

Profitability and Efficiency

The Company’s net interest margin expanded by 50 basis points to 2.55%, driven by an increase in loan yields and a decline in the cost of deposits. Interest income on loans grew 16.7% as the average loan balance increased 12.2% and the yield rose 19 basis points to 5.38%. Meanwhile, the average cost of deposits decreased 29 basis points to 2.88%.

Non-interest income declined 29.2% to $1.3 million, primarily due to a $317,000 loss on the sale of securities and the absence of a $374,000 gain on equity securities recorded in the prior year. This was partially offset by higher customer service fees and miscellaneous income.

Operating expenses increased 5.2% to $19.8 million, with the largest increases in salaries and employee benefits, data processing, and marketing. These were partially offset by a decline in other expenses, which included a $2.3 million charitable contribution in the prior year. The efficiency ratio improved to 75.2% from 97.2%, reflecting the revenue growth and expense management.

Asset-Liability Management and Interest Rate Risk

The Company actively manages its exposure to interest rate risk through various strategies, including maintaining a mix of non-interest-bearing and interest-bearing deposits, investing in short- to medium-term securities, and diversifying the loan portfolio.

The Company’s net interest income sensitivity analysis shows that a 200 basis point increase in interest rates would result in a 17.9% decrease in net interest income over a 12-month period, while a 200 basis point decrease would lead to a 6.9% increase. The economic value of equity (EVE) analysis indicates that a 200 basis point rate increase would cause a 20.1% decline in EVE, while a 200 basis point decrease would result in a 4.8% increase.

The Company has determined that selling assets to comply with its internal policy limits on interest rate risk would result in significant losses and capital depletion, providing limited benefit during the current declining rate environment. As a result, the Company has decided to permit exceptions to its policy limits on interest rate sensitivity.

Liquidity and Capital

The Company maintains a strong liquidity position, with cash and cash equivalents of $60.0 million and the ability to borrow an additional $118.8 million from the Federal Home Loan Bank at June 30, 2026. The Company’s monthly liquidity ratio, which measures the ratio of liquid assets to investment commitments, was within the targeted 4-6% range. The quarterly primary liquidity ratio, which measures liquid assets as a percentage of total assets, also exceeded the 15% minimum.

The Company’s capital ratios remain strong, with total stockholders’ equity of $120.5 million and a stockholders’ equity to total assets ratio of 11.0% at June 30, 2026. The Bank exceeded its regulatory capital requirements and was considered “well capitalized” under applicable guidelines.

Outlook and Conclusion

Winchester Savings Bank delivered impressive financial results in fiscal year 2026, with robust loan and deposit growth, margin expansion, and improved profitability. The Company’s diversified loan portfolio, focus on commercial and residential real estate lending, and successful expansion of its municipal deposit channel have been key drivers of this performance.

While the Company’s interest rate risk management approach has resulted in exceptions to internal policy limits, management has determined that the potential capital impact of complying with these limits outweighs the benefits during the current declining rate environment. Ongoing balance sheet and liquidity management, as well as disciplined expense control, will be critical to maintaining the Company’s strong financial position going forward.

Overall, Winchester Savings Bank has demonstrated its ability to navigate a challenging interest rate environment and capitalize on growth opportunities in its core markets. The Company’s solid financial foundation and strategic initiatives position it well to continue delivering value to its shareholders.