Western New England Bancorp(US:WNEB)2023-03-10 21:20Loan Portfolio and Asset Quality - The company's loan portfolio totaled $2.0 billion, representing 78.0% of total assets as of December 31, 2022, compared to $1.9 billion or 73.5% of total assets as of December 31, 2021[36]. - As of December 31, 2022, the total loan portfolio amounted to $1.99 billion, an increase from $1.86 billion in 2021[57]. - Commercial real estate loans reached $1.1 billion, representing 53.8% of total loans, up from $980 million or 52.6% in 2021[41]. - The commercial and industrial loan portfolio totaled $219.8 million, accounting for 11.0% of total loans, a decrease from 12.2% in 2021[45]. - Home equity loans stood at $105.6 million, or 5.3% of total loans, compared to $99.8 million, or 5.4% in 2021[54]. - At December 31, 2022, the residential real estate loan portfolio totaled $589.5 million, maintaining 29.6% of total loans[51]. - Total loans outstanding as of December 31, 2022, amounted to $1,991.4 million, an increase from $1,864.7 million in 2021[73]. - Criticized loans totaled $64.0 million, or 3.2% of total loans, down from $82.6 million, or 4.4% of total loans, at December 31, 2021[66]. - Adversely classified loans were $42.3 million, or 2.1% of total loans, compared to $31.1 million, or 1.7% in 2021[67]. - Nonaccrual loans stood at $5.7 million, or 0.29% of total loans, slightly up from $5.0 million, or 0.27% in 2021[70]. - The allowance for loan losses was $19.9 million, representing 1.00% of total loans outstanding, compared to 1.06% in 2021[73]. - Total impaired loans were $18.4 million, or 0.9% of total loans, down from $20.5 million, or 1.1% in 2021[68]. - The company reported net charge-offs of $556,000 for the period, with total loan charge-offs to daily average loans outstanding at 0.03%[73]. - The company plans to adopt the Current Expected Credit Loss (CECL) methodology effective January 1, 2023, using a Discounted Cash Flow (DCF) model for estimating potential loan losses[74]. - The company maintains a high level of asset quality, with ongoing monitoring of the loan portfolio and independent credit analyses for loans above a specific threshold[62]. - Management believes the allowance for loan losses is adequate to absorb probable losses as of December 31, 2022[83]. Employee and Diversity Statistics - The company employed 337 total employees as of December 31, 2022, with 289 employed full-time and 48 part-time[32]. - Approximately 66% of the company's employees were women, and 18% were ethnic minorities, veterans, or persons with disabilities as of December 31, 2022[30]. - The company has a comprehensive employee benefit program, including group medical, dental, and vision insurance, a 401(k) Safe Harbor Plan, and an employee stock ownership plan[34]. - The company has successfully attracted and retained qualified staff, employing a total of 337 individuals as of December 31, 2022[32]. Market Position and Competition - As of June 30, 2022, the company held approximately 13.7% of the deposits in Hampden County, making it the second largest market share out of 16 banks and thrifts in the area[29]. - The company expects increased competition in the financial services industry due to legislative, regulatory, and technological changes[28]. - The largest commercial lending relationship was $32.2 million, secured by business assets and real estate, performing according to original terms[46]. - The largest concentration of commercial loans was to hotels and accommodation, comprising approximately 6.9% of the commercial loan portfolio[46]. Regulatory Environment and Compliance - The company is subject to extensive regulation under federal and state laws, impacting its operational and financial strategies[119]. - The Capital Rules established a new capital framework for U.S. banking organizations, which the company is subject to as a savings and loan holding company[132]. - The minimum capital ratios required under the Capital Rules include a CET1 to risk-weighted assets ratio of at least 7%, Tier 1 capital to risk-weighted assets ratio of at least 8.5%, and Total capital to risk-weighted assets ratio of at least 10.5%[136]. - As of December 31, 2022, the Company and the Bank were in compliance with the targeted capital ratios under the Capital Rules[140]. - The Bank was categorized as "well-capitalized" under the Prompt Corrective Action framework, meeting the total risk-based capital ratio of at least 10% and CET1 risk-based capital ratio of at least 6.5%[143]. - The Company and the Bank decided not to opt into the community bank leverage ratio framework despite being eligible, maintaining a leverage ratio of greater than 9%[141]. - The Bank met the Qualified Thrift Lender test in each of the prior 12 months, ensuring compliance with federal regulations[150]. - The Bank received an "Outstanding" rating on its most recent Community Reinvestment Act examination, indicating strong performance in meeting credit needs[151]. - The FDIC's deposit insurance limit is $250,000 per depositor, per insured bank, ensuring protection for customer deposits[159]. - The Company and the Bank are subject to a risk-based assessment system for deposit insurance premiums, which considers capital levels and supervisory ratings[159]. - The Capital Rules mandate a capital conservation buffer of 2.5% of CET1, which is designed to absorb losses during economic stress[136]. - The implementation of the Capital Rules did not have a material impact on the Company's or the Bank's consolidated capital levels[139]. - The Federal Reserve Board has reduced the reserve requirement to zero percent, impacting the Bank's required reserves[163]. - The Bank is compliant with the Federal Home Loan Bank System's capital stock requirements as of December 31, 2022[162]. Financial Performance and Deposits - Total deposits increased to $2,264,252 thousand in 2022, up from $2,177,770 thousand in 2021, reflecting a growth of approximately 4.0%[102]. - Core deposits represented 81.5% of total deposits as of December 31, 2022, down from 82.2% in 2021[100]. - Demand deposits increased to $647,971 thousand in 2022, representing 28.6% of total deposits, compared to $608,936 thousand and 28.0% in 2021[102]. - The total amount of time deposit accounts was $363,258 thousand in 2022, down from $477,067 thousand in 2021[102]. - The average rate for interest-bearing checking accounts was 0.38% in 2022, slightly up from 0.36% in 2021[102]. - The total core deposit accounts decreased to $590,224 thousand in 2022 from $686,212 thousand in 2021[104]. - The weighted average rate for time deposits was 0.41% in 2022, down from 0.53% in 2021[102]. - Time deposits of $250,000 or more totaled $131,737 thousand with a weighted average rate of 2.54% as of December 31, 2022, compared to $65,860 thousand and 0.47% in 2021[108]. Lending Programs and Initiatives - The Company offered PPP loans totaling $2.3 million, or 0.1% of total loans, at December 31, 2022[47]. - PPP loans had an interest rate of 1.0% and a two-year loan term, extended to five years for loans granted after June 5, 2020[47]. - The SBA guarantees 100% of the PPP loans made to eligible borrowers, with forgiveness available if employee and compensation levels are maintained[47]. - Eligible businesses could apply for PPP loans up to the lesser of 2.5 times their average monthly payroll costs or $10.0 million[47]. - Principal and interest payments on PPP loans were deferred from six months to ten months from the date of disbursement[47]. - 60% of the loan proceeds must be used for payroll expenses, with the remaining 40% for other qualifying expenses to qualify for forgiveness[47].