Western New England Bancorp(US:WNEB)2024-03-08 21:44Branch 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].