Core Insights - Western New England Bancorp (WNEB) reported a revenue of $18.3 million for the quarter ended June 2024, which represents a decrease of 0.7% compared to the same period last year, while the EPS increased to $0.17 from $0.13 year-over-year [3] - The reported revenue exceeded the Zacks Consensus Estimate of $18.22 million by 0.45%, and the EPS surprise was notable at +54.55% against the consensus estimate of $0.11 [1] - Over the past month, WNEB shares have returned +35.7%, significantly outperforming the Zacks S&P 500 composite's +2% change, indicating strong market performance [4] Financial Metrics - The net interest margin for WNEB was reported at 2.4%, which is below the three-analyst average estimate of 2.6% [6] - The efficiency ratio was recorded at 78.2%, better than the average estimate of 81% based on three analysts [6] - Total non-interest income was reported at $3.83 million, surpassing the three-analyst average estimate of $2.72 million, while net interest income was $14.47 million, below the average estimate of $15.49 million [6]

Group 1: Earnings Performance - Western New England Bancorp reported quarterly earnings of $0.17 per share, exceeding the Zacks Consensus Estimate of $0.11 per share, and up from $0.13 per share a year ago, representing an earnings surprise of 54.55% [1] - The company posted revenues of $18.3 million for the quarter ended June 2024, surpassing the Zacks Consensus Estimate by 0.45%, although this is a slight decrease from year-ago revenues of $18.44 million [2] Group 2: Stock Performance - Shares of Western New England Bancorp have declined approximately 6.6% since the beginning of the year, contrasting with the S&P 500's gain of 16.7% [3] - The stock is currently rated Zacks Rank 3 (Hold), indicating it is expected to perform in line with the market in the near future [11] Group 3: Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.12 on revenues of $18.36 million, and for the current fiscal year, it is $0.49 on revenues of $73.46 million [5] - The estimate revisions trend for Western New England Bancorp is mixed, and future earnings expectations will depend on management's commentary during the earnings call [9][10] Group 4: Industry Context - The Banks - Foreign industry, to which Western New England Bancorp belongs, is currently in the top 20% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [12]

WESTERN NEW ENGLAND BANCORP, INC. 8-K Exhibit 99.1 For further information contact: James C. Hagan, President and CEO Guida R. Sajdak, Executive Vice President and CFO Meghan Hibner, First Vice President and Investor Relations Officer 413-568-1911 WESTERN NEW ENGLAND BANCORP, INC. REPORTS RESULTS FOR THREE AND SIX MONTHS ENDED JUNE 30, 2024 AND DECLARES QUARTERLY CASH DIVIDEND Westfield, Massachusetts, July 23, 2024: Western New England Bancorp, Inc. (the "Company" or "WNEB") (NasdaqGS: WNEB), the holding c ...

Shares of Western New England Bancorp have rallied for the fourth consecutive trading session. Encouraging inflation numbers and a rising unemployment rate are giving confidence to the Federal Reserve that prices will eventually come down toward the 2% target. So, market participants are predicting interest rate cuts as early as during the September FOMC meeting. This is a positive development for banks that have been reeling under the Fed's aggressive monetary tightening. As the rates come down, so will ba ...

Financial Performance - Net income for the three months ended March 31, 2024, was $3.0 million, or $0.14 per diluted share, down from $5.3 million, or $0.24 per diluted share for the same period in 2023[140]. - Net income for the three months ended March 31, 2024, was $3.0 million, or $0.14 per diluted share, down from $5.3 million, or $0.24 per diluted share for the same period in 2023, reflecting a decrease of 43.4%[161]. - Non-interest income decreased by $305,000, or 10.2%, to $2.7 million for the three months ended March 31, 2024, from $3.0 million in the same period of 2023[178]. - Non-interest expense decreased by $114,000, or 0.8%, to $14.8 million for the three months ended March 31, 2024, compared to $14.9 million for the same period in 2023[180]. - Income tax expense for the three months ended March 31, 2024, was $827,000, with an effective tax rate of 21.8%, compared to $1.7 million and 24.0% for the same period in 2023[182]. Interest Income and Expenses - Net interest income decreased by $3.2 million, or 17.1%, to $15.3 million for the three months ended March 31, 2024, compared to $18.5 million for the same period in 2023[141]. - The average yield on interest-earning assets increased by 44 basis points from 4.01% for the three months ended March 31, 2023, to 4.45% for the same period in 2024[172]. - The net interest margin was 2.57% for the three months ended March 31, 2024, down from 3.14% for the same period in 2023, indicating a decline in profitability[171]. - The average cost of funds increased by 106 basis points from 0.91% for the three months ended March 31, 2023, to 1.97% for the same period in 2024[173]. - Interest expense increased by $6.1 million, or 119.3%, while interest and dividend income rose by $3.0 million, or 12.5%, highlighting a significant rise in funding costs[170]. - The average cost of time deposits surged by 241 basis points from 1.71% for the three months ended March 31, 2023, to 4.12% for the same period in 2024[173]. Asset and Loan Management - Total assets as of March 31, 2024, were $2.6 billion, a decrease of $7.3 million, or 0.3%, from December 31, 2023[145]. - Total loans decreased by $1.8 million, or 0.1%, to $2.0 billion as of March 31, 2024, with commercial and industrial loans down by $10.1 million, or 4.7%[151]. - The allowance for credit losses as a percentage of total loans was 0.98% as of March 31, 2024, compared to 1.00% at December 31, 2023[153]. - Nonperforming loans totaled $5.8 million, or 0.29% of total loans, down from $6.4 million, or 0.32% of total loans, at December 31, 2023[152]. - The Company recorded a reversal of credit losses of $550,000 for the three months ended March 31, 2024, compared to a reversal of $388,000 for the same period in 2023[140]. - Net recoveries were $67,000 for the three months ended March 31, 2024, a significant improvement from net charge-offs of $1.9 million in the same period of 2023[176]. Capital and Equity - As of March 31, 2024, shareholders' equity was $235.8 million, representing 9.2% of total assets, a slight decrease from $237.4 million or 9.3% at December 31, 2023[159]. - The Bank's Total Risk-Based Capital Ratio remained strong at 14.7% as of March 31, 2024, consistent with the previous quarter[160]. - Total Capital to Risk Weighted Assets ratio for the Bank was 13.96% as of March 31, 2024, exceeding the minimum requirement of 8.00%[205]. - Tier 1 Capital to Risk Weighted Assets ratio for the Bank was 12.92% as of March 31, 2024, above the minimum requirement of 6.00%[205]. - Common Equity Tier 1 Capital to Risk Weighted Assets ratio for the Bank was 12.92% as of March 31, 2024, surpassing the minimum requirement of 4.50%[205]. - Tier 1 Leverage Ratio for the Bank was 9.77% as of March 31, 2024, exceeding the minimum requirement of 4.00%[205]. - The Company exceeded all applicable regulatory capital requirements as of March 31, 2024, categorized as "well-capitalized" under the regulatory framework[202]. Strategic Initiatives - The Company plans to grow its commercial loan portfolio and increase deposit relationships to enhance profitability and efficiency[140]. - The Company is considering growth through acquisitions to expand its market presence and product offerings[140]. - The Company does not anticipate any material capital expenditures during the calendar year 2024, except for strategic initiatives[201]. - The Company has significant commitments to extend credit and provide financial guarantees, subject to strict credit control assessments[205]. Market Risk and Sensitivity - There have been no material changes in the Company's assessment of sensitivity to market risk since the 2023 Annual Report[207]. - There are no off-balance sheet arrangements that could materially affect the Company's financial condition[206]. Borrowing and Commitments - At March 31, 2024, the company had $517.7 million in available borrowing capacity with the FHLB, down from $40.6 million in outstanding borrowings[190]. - The company had approximately $95.9 million in loan commitments and letters of credit to borrowers as of March 31, 2024[197]. - The Company completed an offering of $20 million in aggregate principal amount of its 4.875% Notes, with $19.7 million outstanding as of March 31, 2024[200].

WESTERN NEW ENGLAND BANCORP, INC. 8-K EXHIBIT 99.1 For further information contact: James C. Hagan, President and CEO Guida R. Sajdak, Executive Vice President and CFO Meghan Hibner, First Vice President and Investor Relations Officer 413-568-1911 WESTERN NEW ENGLAND BANCORP, INC. REPORTS RESULTS FOR THREE MONTHS ENDED MARCH 31, 2024 AND DECLARES QUARTERLY CASH DIVIDEND Westfield, Massachusetts, April 23, 2024: Western New England Bancorp, Inc. (the "Company" or "WNEB") (NasdaqGS: WNEB), the holding company ...

Branch and ATM Operations - As of December 31, 2023, Westfield Bank had 25 branches and 10 freestanding ATMs, serving Hampden and Hampshire Counties in Massachusetts and Hartford and Tolland Counties in Connecticut[18]. - As of December 31, 2023, Westfield Bank operates 25 branches and 10 freestanding ATMs, serving Hampden and Hampshire Counties in Massachusetts and Hartford and Tolland Counties in Connecticut[18]. Employee Demographics and Development - As of December 31, 2023, the total number of employees was 348, with an average employee tenure of 7.9 years[32]. - Approximately 64% of employees were women and 24% were ethnic minorities, veterans, or persons with disabilities as of December 31, 2023[29]. - In 2023, 27 employees successfully completed the Corporate Leadership Development Program aimed at enhancing leadership capabilities[34]. - The Company is committed to fostering a culture of diversity, equity, and inclusion, with initiatives such as the establishment of the Diversity Committee in 2023[30]. - By December 31, 2023, approximately 64% of the company's employees were women, and 24% were ethnic minorities, veterans, or persons with disabilities, reflecting its commitment to diversity[29]. - In 2023, the company established the Westfield Bank Culture and Diversity Committee to promote inclusivity and connection among employees[30]. Financial Performance and Loan Portfolio - Interest income on loans represented 90.2% of total interest income in 2023, up from 89.9% in 2022[39]. - The Bank's loan portfolio totaled $2.0 billion, accounting for 79.1% of total assets as of December 31, 2023, compared to 78.0% in 2022[39]. - Commercial real estate loans amounted to $1.1 billion, or 53.3% of total loans, as of December 31, 2023, down from 53.8% in 2022[45]. - The total commercial and industrial loan portfolio was $217.4 million, or 10.7% of total loans, as of December 31, 2023, compared to 11.0% in 2022[48]. - Home equity loans totaled $109.8 million, or 5.4% of total loans, as of December 31, 2023, slightly up from 5.3% in 2022[55]. - The residential real estate loan portfolio was $612.3 million, or 30.3% of total loans, as of December 31, 2023, compared to 29.6% in 2022[52]. - PPP loans decreased to $756,000 as of December 31, 2023, down from $2.3 million in 2022[49]. - The largest lending exposure was a $24.9 million commercial lending relationship, with $9.9 million outstanding as of December 31, 2023[44]. - The allowance for credit losses was $20.3 million as of December 31, 2023, compared to $19.9 million in 2022[58]. - Total gross loans increased to $2.024 billion as of December 31, 2023, from $1.989 billion in 2022[58]. - As of December 31, 2023, total loans amounted to $2,024,824,000, with net loans at $2,007,050,000 after accounting for deferred loan origination fees and credit losses[60]. - Criticized loans totaled $39.5 million, or 1.9% of total loans, down from $64.0 million, or 3.2% at the end of 2022[73]. - Classified loans were $33.7 million, or 1.7% of total loans, compared to $42.3 million, or 2.1% at the end of 2022[73]. - Nonaccrual loans stood at $6.4 million, or 0.32% of total loans, an increase from $5.7 million, or 0.29% at the end of 2022[76]. - The allowance for credit losses was $20,267,000, representing 1.00% of total loans outstanding, consistent with the previous year[79]. - Total impaired loans were $29.7 million, or 1.5% of total loans, as of December 31, 2023[74]. - The company reported net charge-offs of $2,039,000 for the year, with total loan charge-offs to daily average loans outstanding at 0.10%[79]. - The company recorded a provision for credit losses of $872,000 for the year ended December 31, 2023, primarily due to changes in the economic environment, with off-balance sheet unfunded commitment exposures decreasing by $46.8 million[95]. - The total allowance for credit losses allocated by loan category as of December 31, 2023, included $1,079,751 for commercial real estate loans, $612,315 for residential one-to-four family loans, and $217,447 for commercial and industrial loans[97]. - The Company has implemented a discounted cash flow method to estimate expected credit losses, utilizing a forward-looking macroeconomic forecast[89]. - The Company believes it is appropriately provisioned for the current economic environment as of December 31, 2023[95]. Securities and Deposits - As of December 31, 2023, the Company held $137.1 million in available-for-sale (AFS) securities and $223.4 million in held-to-maturity (HTM) securities[108]. - The Company reported unrealized losses on the AFS securities portfolio of $29.2 million, or 17.5% of the amortized cost basis, compared to $32.2 million, or 18.0% at December 31, 2022[109]. - The Company reported unrealized losses on the HTM securities portfolio of $35.7 million, or 16.0% of the amortized cost basis, compared to $39.2 million, or 17.0% at December 31, 2022[109]. - At December 31, 2023, uninsured deposits were 27% of total deposits, down from 31% at December 31, 2022[112]. - Core deposits represented 71.5% of total deposits at December 31, 2023, compared to 81.5% at December 31, 2022[113]. - The Company had $1.7 million in brokered deposits on the balance sheet at December 31, 2023, with no brokered deposits reported at December 31, 2022[111]. - Time deposits with remaining terms to maturity of less than one year amounted to $596.3 million at December 31, 2023[113]. - The Company participates in the IntraFi Network, providing depositors with FDIC pass-through insurance, with $28.7 million in CDARS deposits reported at December 31, 2023[115]. - Total deposits decreased to $2,169,459 thousand in 2023 from $2,264,252 thousand in 2022, reflecting a decline of 4.2%[116]. - Core deposits accounted for 75.8% of total deposits in 2023, down from 84.0% in 2022, indicating a shift in deposit composition[116]. - Time deposits increased significantly to $524,827 thousand in 2023, up from $363,258 thousand in 2022, representing a growth of 44.5%[116]. - The weighted average rate for total deposits rose to 1.23% in 2023 from 0.24% in 2022, marking a substantial increase[116]. Borrowings and Capital - Long-term borrowings surged to $120.6 million in 2023, up from $1.2 million in 2022, reflecting a 10,050% increase to replace deposit attrition[127]. - Total borrowings increased by $94.1 million, or 221.6%, from $42.6 million in 2022 to $136.7 million in 2023[127]. - The Company had immediate availability at the FHLB to borrow an additional $535.6 million based on qualified collateral as of December 31, 2023[128]. - The weighted average rate for short-term borrowings increased to 5.47% in 2023 from 4.37% in 2022[128]. - Total core deposits decreased to $449,522 thousand in 2023 from $590,224 thousand in 2022, a decline of 23.8%[118]. - The Company participated in the Bank Term Funding Program (BTFP) during 2023, allowing it to pay off higher rate FHLB advances[126]. Regulatory Compliance and Capital Requirements - Western New England Bancorp is a Massachusetts-chartered stock holding company and is subject to supervision by the Federal Reserve Board[139]. - The Bank's deposits are insured by the FDIC up to applicable limits, ensuring depositor protection[140]. - The minimum capital ratios under the Capital Rules require a Common Equity Tier 1 (CET1) ratio of at least 4.5% to risk-weighted assets[151]. - As of December 31, 2023, both the Company and the Bank are in compliance with the targeted capital ratios under the Capital Rules[156]. - The Capital Rules mandate a capital conservation buffer of 2.5% of CET1, resulting in minimum ratios of 7% CET1 to risk-weighted assets[151]. - The Company and the Bank evaluated the simplified Capital Rules and decided not to opt into the community bank leverage ratio framework[157]. - The Company is subject to extensive regulation under federal and state laws, which could materially affect its results[138]. - The OCC requires prior approval for capital distributions exceeding the Bank's net income for the year-to-date plus retained net income for the previous two years[146]. - The HOLA restricts business activities of savings and loan holding companies to those permitted for financial holding companies[142]. - The Company must act as a source of financial strength to its subsidiary savings associations, as mandated by the Dodd-Frank Act[145]. - As of December 31, 2023, the Bank was classified as "well-capitalized" under the PCA framework, meeting all required capital ratios[159]. - The Bank complied with the limitations on loans to one borrower, which is capped at 15% of unimpaired capital and surplus, with an additional 10% allowed if secured by readily marketable collateral[161]. - The Bank met the Qualified Thrift Lender test, maintaining at least 65% of its portfolio assets in qualified thrift investments over the past twelve months[166]. - The Bank received an "Outstanding" rating on its most recent Community Reinvestment Act examination, indicating strong performance in meeting credit needs[167]. - The Bank is subject to federal laws for consumer protection, including the Dodd-Frank Act, which centralizes responsibility for consumer financial protection[168]. - The Bank is a member of the Federal Home Loan Bank System and was in compliance with the requirement to hold shares of capital stock in the FHLB as of December 31, 2023[177]. - The FDIC's deposit insurance limit is $250,000 per depositor, per insured bank, ensuring protection for depositors[175]. - The Bank has implemented a Bank Secrecy Act and Patriot Act compliance program to combat money laundering and ensure regulatory compliance[182]. - The Bank's required reserves can be satisfied in the form of vault cash, with the current reserve requirement set to zero percent[178]. - The Bank is required to notify customers of security breaches under the Gramm-Leach Bliley Act, ensuring consumer data protection[181]. Competitive Environment - The Company expects increased competition in the financial services industry due to legislative, regulatory, and technological changes[26]. - The Company operates in a highly competitive environment, facing competition from local, regional, and national financial institutions, as well as credit unions[25]. - The Springfield Metropolitan area, where the company operates, is the sixth largest metropolitan area in New England, benefiting from a diverse economy[23]. - The company faces significant competition from local, regional, and national financial institutions, as well as credit unions and non-depository institutions[25]. - Legislative and regulatory initiatives may change the operating environment of the company, potentially increasing or decreasing the cost of doing business[190]. Acquisitions - The Company acquired Chicopee Bancorp, Inc. on October 21, 2016, which was a tax-free reorganization for federal income tax purposes[19]. - The company has loans acquired with evidence of credit deterioration from Chicopee Bancorp, Inc., which are now accounted for as purchased credit deteriorated loans under the new CECL framework[93]. Accounting and Financial Reporting - The Company adopted ASU 2016-13 on January 1, 2023, affecting the allowance for credit losses calculation[79]. - The Company adopted the CECL methodology on January 1, 2023, resulting in a $1.2 million increase to the allowance for credit losses and a $918,000 allowance for off-balance sheet credit exposures[81][82]. - As of December 31, 2023, the allowance for credit losses for loans held for investment was adjusted by a credit loss expense, with accrued interest receivable on loans held for investment at $7.5 million[83]. - The transition to ASC 326 resulted in a net increase to retained earnings of $9,000, including a net deferred tax liability of $4,000[82].

Financial Performance - Net income for Q3 2023 was $4.5 million, or $0.21 per diluted share, down from $6.0 million, or $0.28 per diluted share in Q3 2022, representing a decrease of 25%[158] - The Company reported net income of $4.5 million, or $0.21 per diluted share, for the three months ended September 30, 2023, compared to $6.0 million, or $0.28 per diluted share, for the same period in 2022[181] - Net income for the nine months ended September 30, 2023, was $12.6 million, or $0.58 per diluted share, down from $16.9 million, or $0.77 per diluted share, for the same period in 2022[203] Interest Income and Expenses - Net interest income decreased by $3.9 million, or 19.2%, to $16.4 million in Q3 2023, primarily due to an increase in interest expense of $8.1 million[158] - Net interest income decreased by $3.9 million, or 19.2%, to $16.4 million for the three months ended September 30, 2023, compared to $20.3 million for the same period in 2022[190] - For the nine months ended September 30, 2023, net interest income decreased by $6.7 million, or 11.4%, to $51.7 million compared to $58.4 million for the same period in 2022[213] - Interest expense increased by $18.7 million, or 470.4%, primarily due to a $14.7 million increase in interest expense on deposits, and a $3.9 million increase on borrowings[213] Asset and Loan Growth - Total assets increased by $31.8 million, or 1.3%, to $2.6 billion as of September 30, 2023, driven by a $23.4 million increase in total loans[164] - Total loans increased by $23.4 million, or 1.2%, to $2.0 billion, with residential real estate loans rising by $18.7 million, or 2.7%[169] - Average interest-earning assets increased by $5.2 million, or 0.2%, to $2.4 billion for the nine months ended September 30, 2023[214] Deposits and Borrowings - Total deposits decreased by $53.1 million, or 2.4%, to $2.2 billion, with core deposits declining by $224.0 million, or 12.3%[171] - Total borrowings increased by $87.6 million, or 140.8%, from $62.2 million at December 31, 2022, to $149.8 million[174] - As of September 30, 2023, total deposits were $2,176,303 thousand, a slight increase from $2,157,974 thousand in June 2023[172] Credit Quality - The allowance for credit losses as a percentage of total loans was 0.99% at September 30, 2023, compared to 1.00% at December 31, 2022[170] - Nonperforming loans totaled $6.3 million, or 0.31% of total loans, an increase from $5.7 million, or 0.29% at December 31, 2022[170] - The Company recorded net charge-offs of $1.9 million for the nine months ended September 30, 2023, compared to $129,000 for the same period in 2022[159] Efficiency and Ratios - The efficiency ratio increased to 70.6% for the three months ended September 30, 2023, compared to 62.7% for the same period in 2022[201] - The efficiency ratio for the nine months ended September 30, 2023, was 72.7%, up from 65.5% for the same period in 2022[220] - The Company's total Risk-Based Capital Ratio was 14.4% at September 30, 2023, compared to 14.2% at December 31, 2022, indicating strong capital levels[180] Strategic Initiatives - The Company plans to grow its commercial loan portfolio and expand retail banking deposit relationships as part of its growth strategy[158] - The Company is considering growth through acquisitions to enhance its product offerings and shareholder value[158] Market Sensitivity and Risk - The Company executed a $200 million fair value hedge on fixed-rate assets to reduce sensitivity to interest rates[178] - There have been no material changes in the Company's assessment of sensitivity to market risk since the last report[244] Other Financial Metrics - The average yield on interest-earning assets increased to 4.28% for the three months ended September 30, 2023, compared to 3.59% for the same period in 2022[192] - The average cost of total funds increased by 139 basis points to 1.64% for the three months ended September 30, 2023, from 0.25% for the same period in 2022[193] - Book value per share (GAAP) increased to $10.53 as of September 30, 2023, from $9.52 in the same period of 2022[226]

[PART I – FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This section presents the unaudited consolidated financial statements, management's discussion and analysis, market risk disclosures, and internal controls for the reporting period [Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20of%20Western%20New%20England%20Bancorp%2C%20Inc.%20and%20Subsidiaries%20%28Unaudited%29) This section presents the unaudited consolidated financial statements, highlighting the adoption of CECL and a decrease in net income due to interest margin compression [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets%20%E2%80%93%20June%2030%2C%202023%20and%20December%2031%2C%202022) Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Assets** | **$2,562.3** | **$2,553.2** | | Cash and cash equivalents | $31.7 | $30.3 | | Loans, net | $1,995.9 | $1,971.5 | | Total Investment Securities (AFS & HTM) | $364.4 | $377.2 | | Goodwill | $12.5 | $12.5 | | **Total Liabilities** | **$2,328.3** | **$2,325.0** | | Total deposits | $2,158.0 | $2,229.4 | | Long-term debt | $121.2 | $1.2 | | **Total Shareholders' Equity** | **$234.0** | **$228.1** | - Total assets slightly increased to **$2.56 billion**, driven by a **$24.5 million** increase in net loans, while total deposits decreased by **$71.5 million**[16](index=16&type=chunk) [Consolidated Statements of Net Income](index=6&type=section&id=Consolidated%20Statements%20of%20Net%20Income%20%E2%80%93%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202023%20and%202022) Net Income Performance (in millions, except per share data) | Metric | Q2 2023 | Q2 2022 | Six Months 2023 | Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $16.8 | $19.4 | $35.4 | $38.1 | | Provision for credit losses | $0.4 | $0.3 | $0.03 | ($0.1) | | Non-interest Income | $1.6 | $2.7 | $4.6 | $5.1 | | Non-interest Expense | $14.6 | $14.4 | $29.4 | $28.9 | | **Net Income** | **$2.8** | **$5.5** | **$8.1** | **$10.9** | | **Diluted EPS** | **$0.13** | **$0.25** | **$0.37** | **$0.49** | - Net income for Q2 2023 was **$2.8 million**, a **49.9% decrease** from **$5.5 million** in Q2 2022. The decline was primarily driven by a **$2.6 million** decrease in net interest income, as interest expense on deposits rose sharply from **$990 thousand** to **$6.1 million** year-over-year[18](index=18&type=chunk) - For the six months ended June 30, 2023, net income was **$8.1 million**, down **25.7%** from **$10.9 million** in the prior-year period, reflecting sustained pressure on net interest income[18](index=18&type=chunk) [Consolidated Statements of Comprehensive Income](index=8&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%E2%80%93%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202023%20and%202022) Comprehensive Income (Loss) (in millions) | Metric | Q2 2023 | Q2 2022 | Six Months 2023 | Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $2.8 | $5.5 | $8.1 | $10.9 | | Other Comprehensive Income (Loss) | ($0.1) | ($6.0) | $1.8 | ($14.4) | | **Comprehensive Income (Loss)** | **$2.6** | **($0.5)** | **$9.9** | **($3.6)** | - For the six months ended June 30, 2023, Other Comprehensive Income was positive **$1.8 million**, a significant improvement from a loss of **$14.4 million** in the same period of 2022. This was mainly due to smaller unrealized losses on available-for-sale securities and gains related to the defined benefit pension plan termination[21](index=21&type=chunk) [Consolidated Statements of Changes in Shareholders' Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity%20%E2%80%93%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202023%20and%202022) - Total shareholders' equity increased from **$228.1 million** at December 31, 2022, to **$234.0 million** at June 30, 2023. The increase was driven by comprehensive income of **$9.9 million**, partially offset by common stock repurchases (**$2.1 million**) and cash dividends paid (**$3.1 million**)[25](index=25&type=chunk)[26](index=26&type=chunk) - The company repurchased **270,840 shares** of common stock for approximately **$2.1 million** during the first six months of 2023[25](index=25&type=chunk)[26](index=26&type=chunk) [Consolidated Statements of Cash Flows](index=13&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20%E2%80%93%20Six%20Months%20Ended%20June%2030%2C%202023%20and%202022) Cash Flow Summary (in millions) | Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($1.7) | $8.5 | | Net cash used in investing activities | ($6.1) | ($107.3) | | Net cash provided by financing activities | $9.2 | $42.9 | | **Net Change in Cash and Cash Equivalents** | **$1.3** | **($55.9)** | - Financing activities provided **$9.2 million** in cash, primarily from the issuance of **$120.0 million** in long-term debt, which offset a net decrease in deposits of **$71.5 million**[32](index=32&type=chunk) - Investing activities used **$6.1 million** in cash, a significant reduction from the **$107.3 million** used in the prior-year period, mainly due to a large decrease in net loan originations[32](index=32&type=chunk) [Notes to Consolidated Financial Statements](index=15&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) - On January 1, 2023, the Company adopted the CECL accounting standard (ASU 2016-13), which replaced the incurred loss methodology with an expected loss methodology for financial assets. This resulted in a net increase to retained earnings of **$9 thousand**, including a **$1.2 million** increase to the allowance for credit losses on loans and a new **$918 thousand** allowance for off-balance sheet exposures[41](index=41&type=chunk)[65](index=65&type=chunk)[66](index=66&type=chunk) [Management's Discussion and Analysis (MD&A)](index=48&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition and operating results, noting decreased net income and margin due to rising interest expenses, stable assets, and increased borrowings [Overview and Strategy](index=48&type=section&id=Overview%20and%20Strategy) - The company's growth-oriented strategy focuses on increasing commercial and residential lending, expanding its retail deposit franchise, and investing in technology to enhance customer experience and efficiency[158](index=158&type=chunk)[160](index=160&type=chunk) - Key strategic goals include growing revenues, increasing book value, paying competitive dividends, and utilizing stock repurchases to enhance shareholder value. The company also considers growth through strategic acquisitions[160](index=160&type=chunk) [Comparison of Financial Condition (June 30, 2023 vs. Dec 31, 2022)](index=49&type=section&id=Comparison%20of%20Financial%20Condition) - Total assets increased by **$9.1 million** (**0.4%**) to **$2.6 billion**, primarily due to a **$24.1 million** (**1.2%**) increase in total gross loans[166](index=166&type=chunk)[173](index=173&type=chunk) - Total deposits decreased by **$71.5 million** (**3.2%**), with core deposits falling by **$194.6 million**, while time deposits grew by **$123.1 million**, indicating a shift to higher-cost funding[176](index=176&type=chunk) - Total borrowings increased significantly by **$85.9 million** (**138.1%**) to **$148.1 million**, mainly through a **$120.0 million** increase in long-term borrowings to replace deposit outflows[179](index=179&type=chunk) - The allowance for credit losses as a percentage of total loans was **0.97%** at June 30, 2023, compared to **1.00%** at December 31, 2022[174](index=174&type=chunk) - Shareholders' equity increased by **$5.9 million** to **$234.0 million**, driven by net income and a decrease in accumulated other comprehensive loss[181](index=181&type=chunk) [Comparison of Operating Results (Q2 2023 vs. Q2 2022)](index=52&type=section&id=Comparison%20of%20Operating%20Results%20for%20the%20Three%20Months%20Ended%20June%2030%2C%202023%20and%202022) Q2 Operating Results Highlights | Metric | Q2 2023 | Q2 2022 | Change | | :--- | :--- | :--- | :--- | | Net Income | $2.8M | $5.5M | -49.9% | | Diluted EPS | $0.13 | $0.25 | -48.0% | | Net Interest Income | $16.8M | $19.4M | -13.1% | | Net Interest Margin | 2.81% | 3.24% | -43 bps | | Non-interest Income | $1.6M | $2.7M | -41.9% | - The decrease in net interest income was driven by a **535.0%** increase in interest expense, primarily from higher deposit costs, which outpaced the **20.2%** growth in interest and dividend income[192](index=192&type=chunk) - Non-interest income decreased by **$1.1 million**, mainly due to a **$1.1 million** final termination expense for the Defined Benefit Pension Plan[202](index=202&type=chunk) - The provision for credit losses was **$0.4 million**, an increase from **$0.3 million** in the prior-year quarter, reflecting changes in the economic environment under the new CECL model[199](index=199&type=chunk) [Comparison of Operating Results (Six Months 2023 vs. Six Months 2022)](index=58&type=section&id=Comparison%20of%20Operating%20Results%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202023%20and%202022) Six-Month Operating Results Highlights | Metric | H1 2023 | H1 2022 | Change | | :--- | :--- | :--- | :--- | | Net Income | $8.1M | $10.9M | -25.7% | | Diluted EPS | $0.37 | $0.49 | -24.5% | | Net Interest Income | $35.4M | $38.1M | -7.2% | | Net Interest Margin | 2.97% | 3.21% | -24 bps | - The decrease in net interest income was due to a **424.1%** increase in interest expense, which overshadowed the **19.4%** increase in interest and dividend income[214](index=214&type=chunk) - A provision for credit losses of **$32 thousand** was recorded, compared to a reversal of **$125 thousand** in the prior-year period. Net charge-offs were **$1.8 million**, primarily related to a single acquired commercial loan relationship, with no impact to earnings due to CECL implementation adjustments[218](index=218&type=chunk)[219](index=219&type=chunk) - Non-interest expense increased by **$0.6 million** (**1.9%**), driven by higher professional fees, FDIC insurance, and data processing costs[222](index=222&type=chunk) [Liquidity and Capital Resources](index=65&type=section&id=Liquidity%20and%20Capital%20Resources) - Primary liquidity sources include deposits, loan and security repayments, and FHLB/FRB borrowings. The company actively manages liquidity to fund loan originations and deposit withdrawals[230](index=230&type=chunk) - As of June 30, 2023, the company had significant available borrowing capacity, including **$380.1 million** from the FHLB and **$27.4 million** from the FRB's Bank Term Funding Program (BTFP)[231](index=231&type=chunk) - Material cash commitments include **$9.5 million** for its core processing vendor and **$10.6 million** in undiscounted lease liabilities[239](index=239&type=chunk) Regulatory Capital Ratios (Bank Level) - June 30, 2023 | Ratio | Actual | Minimum To Be Well-Capitalized | | :--- | :--- | :--- | | Total Risk-Based Capital | 13.49% | 10.00% | | Tier 1 Risk-Based Capital | 12.49% | 8.00% | | Common Equity Tier 1 Capital | 12.49% | 6.50% | | Tier 1 Leverage Ratio | 9.69% | 5.00% | [Quantitative and Qualitative Disclosures About Market Risk](index=68&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk, with simulations showing net interest income sensitivity to rate changes, potentially mitigated by derivatives Net Interest Income Sensitivity Analysis (at June 30, 2023) | Interest Rate Change | Estimated Change in Net Interest Income (1-12 Months) | | :--- | :--- | | +200 basis points | -1.6% | | -200 basis points | +0.8% | - The company's earnings are currently asset-sensitive in a falling rate environment and liability-sensitive in a rising rate environment, as indicated by the simulation results[253](index=253&type=chunk) [Controls and Procedures](index=70&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2023[256](index=256&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[257](index=257&type=chunk) [PART II – OTHER INFORMATION](index=71&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This section provides information on legal proceedings, risk factors, and details of the company's common stock repurchase program [Legal Proceedings](index=71&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to ordinary legal actions but does not anticipate any material adverse effects on its financial condition - The company states that it is not involved in any material legal proceedings that would have a significant adverse impact[258](index=258&type=chunk) [Risk Factors](index=71&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's risk factors were reported since the previous filings - No material changes in risk factors were reported for the quarter[259](index=259&type=chunk) [Share Repurchases](index=71&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 126,944 shares of common stock in Q2 2023, with 806,600 shares remaining under the authorized plan Common Stock Repurchases (Q2 2023) | Period | Total Shares Purchased | Average Price Paid per Share ($) | | :--- | :--- | :--- | | April 2023 | — | — | | May 2023 | 82,795 | $6.26 | | June 2023 | 44,149 | $6.09 | | **Total** | **126,944** | **$6.20** | - The Board of Directors authorized a stock repurchase plan (the "2022 Plan") on July 26, 2022, for up to **1.1 million** shares[261](index=261&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission File Number: 001-16767 Western New England Bancorp, Inc. (Exact name of registrant as specified in its charter) Massachusetts 73-16 ...