Western New England Bancorp(WNEB) - 2021 Q1 - Quarterly Report

PART I Financial Statements (Unaudited) This section presents Western New England Bancorp, Inc.'s unaudited consolidated financial statements, including balance sheets, income, comprehensive income, equity, and cash flows, with detailed notes Consolidated Balance Sheets Total assets increased to $2.46 billion by March 31, 2021, driven by cash and deposits, while shareholders' equity slightly decreased Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $132,124 | $87,444 | | Loans, net | $1,903,641 | $1,906,226 | | Total Assets | $2,463,529 | $2,365,886 | | Total deposits | $2,154,133 | $2,038,130 | | Total Liabilities | $2,240,673 | $2,139,246 | | Total Shareholders' Equity | $222,856 | $226,640 | Consolidated Statements of Net Income Net income significantly increased to $5.8 million in Q1 2021, driven by higher net interest income and a lower provision for loan losses Net Income Performance (in thousands, except per share data) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net interest and dividend income | $18,026 | $14,553 | | Provision for loan losses | $75 | $2,100 | | Non-interest income | $3,004 | $2,525 | | Non-interest expense | $13,327 | $12,314 | | Net income | $5,791 | $2,080 | | Diluted earnings per share | $0.24 | $0.08 | Consolidated Statements of Comprehensive Income Comprehensive income decreased to $2.7 million in Q1 2021, primarily due to unrealized holding losses on available-for-sale securities Comprehensive Income (in thousands) | Component | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net income | $5,791 | $2,080 | | Other comprehensive (loss) income | $(3,057) | $2,700 | | Comprehensive income | $2,734 | $4,780 | Consolidated Statements of Changes in Shareholders' Equity Shareholders' equity decreased to $222.9 million due to common stock repurchases and cash dividends, partially offset by comprehensive income - Key activities impacting shareholders' equity in Q1 2021 included net income of $5.8 million, an other comprehensive loss of $3.1 million, common stock repurchases of $5.8 million, and cash dividends of $1.2 million[22][23] Consolidated Statements of Cash Flows Cash and cash equivalents increased by $44.7 million in Q1 2021, driven by financing activities, largely from increased deposits, offsetting investing outflows Cash Flow Summary (in thousands) | Activity | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $11,002 | $12,053 | | Net cash used in investing activities | $(60,260) | $(10,741) | | Net cash provided by financing activities | $93,938 | $622 | | Net change in cash and cash equivalents | $44,680 | $1,934 | Notes to Consolidated Financial Statements Detailed notes explain accounting policies and financial data, covering loan portfolio, securities, share-based compensation, and subsequent events - The company operates 25 banking offices in Massachusetts and Connecticut, with primary revenue from interest on loans and securities[30] - The allowance for loan losses methodology was updated in March 2020 to include a qualitative factor for the "Economic Impact of COVID-19"[56] - Subsequent to the quarter end, the company completed a $20 million subordinated notes offering and authorized a new stock repurchase plan for up to 2.4 million shares[139][141] Management's Discussion and Analysis (MD&A) Management discusses Q1 2021 financial performance, highlighting increased net income driven by higher net interest income and lower loan loss provision, alongside strong financial condition - The company's growth-oriented strategy focuses on increasing commercial and residential lending, growing core deposits, and investing in technology[144][146] - As of March 31, 2021, loan modifications under the CARES Act declined 74% to $66.9 million (3.8% of total loans, ex-PPP) from a peak of $261.0 million[156] Paycheck Protection Program (PPP) Loan Status as of March 31, 2021 | Round | Original Loan Amount ($M) | Original of Loans | Balance Outstanding ($M) | of Loans Remaining | | :--- | :--- | :--- | :--- | :--- | | Round 1 and 2 | $223.1 | 1,386 | $98.5 | 340 | | Round 3 | $71.6 | 660 | $71.6 | 660 | | Total | $294.7 | 2,046 | $170.1 | 1,000 | Comparison of Financial Condition Total assets grew by $97.6 million to $2.5 billion in Q1 2021, driven by increased cash and investment securities, with deposits rising and equity slightly decreasing - Total assets increased by $97.6 million, or 4.1%, from December 31, 2020[166] - Core deposits grew by $183.5 million, or 12.7%, representing 75.7% of total deposits, up from 71.0% at year-end 2020[169] - Nonperforming loans decreased to $6.8 million (0.39% of total loans, ex-PPP) from $7.8 million (0.45% of total loans, ex-PPP) at year-end 2020[168] Comparison of Operating Results Net income significantly increased in Q1 2021, driven by higher net interest income from lower funding costs and a sharp decrease in loan loss provision - Net interest income increased by $3.5 million (23.9%) YoY, primarily due to a $3.8 million (65.6%) decrease in interest expense[183] - The provision for loan losses decreased by $2.0 million (96.4%) YoY, reflecting a more stable economic outlook[190] - The net interest margin (tax-equivalent) expanded to 3.26% from 2.89% in Q1 2020, benefiting from lower deposit costs[185] - Non-interest income increased by $479,000 (19.0%) YoY, mainly due to a gain on non-marketable equity investments and mortgage banking income[193] Liquidity and Capital Resources The company maintains a strong liquidity position with substantial borrowing capacity and regulatory capital ratios exceeding 'well-capitalized' requirements Regulatory Capital Ratios (Bank) as of March 31, 2021 | Ratio | Actual | Minimum to be Well-Capitalized | | :--- | :--- | :--- | | Total Capital (to Risk Weighted Assets) | 13.85% | 10.00% | | Tier 1 Capital (to Risk Weighted Assets) | 12.60% | 8.00% | | Common Equity Tier 1 Capital | 12.60% | 6.50% | | Tier 1 Leverage Ratio | 8.81% | 5.00% | - At March 31, 2021, the company had available borrowing capacity of $453.3 million with the FHLB, plus lines of credit with the FRB and correspondent banks[200][201] Quantitative and Qualitative Disclosures About Market Risk No material changes in the company's assessment of market risk sensitivity have occurred since its 2020 Annual Report on Form 10-K - There have been no material changes in the company's market risk profile since its 2020 Annual Report[208] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO have certified that the company's disclosure controls and procedures were effective as of March 31, 2021[209] - No material changes in internal control over financial reporting occurred during the last fiscal quarter[211] PART II – OTHER INFORMATION Legal Proceedings The company is subject to ordinary legal proceedings, but believes pending matters are covered by insurance or would not materially affect the company - The company reports no material legal proceedings that would have a significant adverse effect on its financial condition[212] Risk Factors No material changes in the company's risk factors have occurred since the filing of its 2020 Annual Report on Form 10-K - No material changes to the company's risk factors are reported for the period since December 31, 2020[213] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 711,635 common shares at an average of $8.12 per share in Q1 2021, with 326,936 shares remaining for repurchase Common Stock Repurchases in Q1 2021 | Period | Total Shares Purchased | Average Price Paid per Share ($) | | :--- | :--- | :--- | | January 2021 | 106,476 | 6.79 | | February 2021 | 52,616 | 8.13 | | March 2021 | 552,543 | 8.37 | | Total | 711,635 | 8.12 | - As of March 31, 2021, 326,936 shares were still available for repurchase under the existing plan authorized in October 2020[217] Other Information No other information required for disclosure under this item was reported for the quarter - No information was reported under this item[220] Exhibits This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL-formatted financial statements - Exhibits filed include Sarbanes-Oxley Act certifications (302 and 906) and XBRL interactive data files[221]