Western New England Bancorp(WNEB) - 2025 Q1 - Quarterly Results

Financial Highlights and Corporate Actions First Quarter 2025 Financial Results Western New England Bancorp, Inc. reported a net income of $2.3 million, or $0.11 per diluted share, for the first quarter of 2025, a decrease from prior quarters Q1 2025 Earnings Summary | Metric | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Net Income | $2.3M | $3.3M | $3.0M | | Diluted EPS | $0.11 | $0.16 | $0.14 | Dividend Declaration The Board of Directors declared a quarterly cash dividend of $0.07 per share, payable on or about May 21, 2025, to shareholders of record on May 7, 2025 - A quarterly cash dividend of $0.07 per share was declared[2] Share Repurchase Plan The Company announced a new stock repurchase plan for 2025, authorizing the repurchase of up to 1.0 million shares, commencing after the existing 2024 plan's completion - The Board of Directors authorized a new stock repurchase plan (the "2025 Plan") to repurchase up to 1.0 million shares, representing approximately 4.8% of outstanding common stock[3][14] - The 2025 Plan will begin after the current 2024 Plan is completed. As of March 31, 2025, 265,609 shares were still available for repurchase under the 2024 Plan[3][13] - During Q1 2025, the Company repurchased 206,709 shares under the 2024 Plan at an average price of $9.12 per share[13] Management Commentary and Strategic Highlights CEO Commentary CEO James C. Hagan highlighted the third consecutive quarterly increase in net interest income, driven by disciplined funding costs and strong core deposit growth, while maintaining robust asset quality and a well-capitalized position - Net interest income increased for the third consecutive quarter, with the net interest margin rising by 8 basis points to 2.49% compared to the previous quarter[4] - Core deposits grew by $70.2 million (4.5%) in Q1, now representing 70.0% of total deposits, while the loan-to-deposit ratio fell to 89.3%[4] - Asset quality remains strong, with nonaccrual loans at 0.29% of total loans as of March 31, 2025[5] - The Company is considered well-capitalized and views share buybacks as a valuable use of capital, leading to the announcement of the new 2025 repurchase plan[6] Key Operational Highlights In Q1 2025, total gross loans and deposits increased, strengthening the balance sheet, while the company maintained a strong liquidity position and stable credit quality - Total gross loans increased by $9.3 million (0.4%) to $2.1 billion, driven by residential real estate and commercial/industrial loans[7] - Total deposits increased by $66.0 million (2.9%) to $2.3 billion, with core deposits growing by $70.2 million[8] - The company has a strong liquidity position with $1.1 billion in immediately available liquidity, which is 1.7 times the amount of its uninsured deposits ($665.6 million)[9] - The allowance for credit losses was $19.7 million, or 0.95% of total loans, with nonaccrual loans at 0.29% of total loans[11] Detailed Financial Performance Analysis Q1 2025 vs. Q4 2024 (Linked Quarter) On a linked-quarter basis, net income decreased by 30.0% to $2.3 million, primarily due to increased provision for credit losses, decreased non-interest income, and higher non-interest expense, partially offset by increased net interest income Q1 2025 vs Q4 2024 Performance | Metric | Q1 2025 | Q4 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income | $2.3M | $3.3M | -$1.0M (-30.0%) | | Diluted EPS | $0.11 | $0.16 | -$0.05 | | Net Interest Income | $15.5M | $15.3M | +$0.26M (+1.7%) | | Provision for Credit Losses | $142K | ($762K) | +$904K | | Non-Interest Income | $2.8M | $3.3M | -$0.5M (-15.2%) | | Non-Interest Expense | $15.2M | $14.9M | +$0.26M (+1.7%) | Net Interest Income and Margin Net interest income rose by $261,000 (1.7%) to $15.5 million, driven by a decrease in interest expense, and the net interest margin expanded by 8 basis points to 2.49% - Net interest income increased by $261,000, primarily due to a decrease in interest expense[18] - The net interest margin increased by 8 basis points to 2.49% (2.51% on a tax-equivalent basis)[19] - The average cost of total funds decreased by 4 basis points to 2.16%, mainly due to a 20 basis point drop in the average cost of time deposits to 4.11%[21] Provision for Credit Losses The company recorded a provision for credit losses of $142,000 in Q1 2025, a significant shift from the $762,000 reversal in Q4 2024, primarily due to macroeconomic forecast adjustments - A provision of $142,000 was recorded in Q1 2025, compared to a reversal of $762,000 in Q4 2024, mainly due to changes in the macroeconomic forecast[22] - The quarter saw net charge-offs of $29,000, compared to net recoveries of $128,000 in the prior quarter[23] Non-Interest Income Non-interest income fell by $495,000 (15.2%) to $2.8 million, largely due to the absence of gains on non-marketable equity investments and loan-level swap fees present in Q4 2024 - Non-interest income decreased by $495,000, primarily because Q4 2024 included a $300,000 gain on non-marketable equity investments and $187,000 in loan-level swap fees, which did not recur in Q1 2025[24] Non-Interest Expense Non-interest expense increased by $258,000 (1.7%) to $15.2 million, driven by higher occupancy costs, advertising, and professional fees, leading to a worsened efficiency ratio - Non-interest expense rose by $258,000, with notable increases in occupancy expense (+$156,000), advertising (+$119,000), and professional fees (+$75,000)[25] - The efficiency ratio worsened to 83.0% from 80.6% in the prior quarter, driven by higher expenses and lower non-interest income[26] Income Tax Provision Income tax expense for Q1 2025 was $664,000, with an effective tax rate of 22.4%, lower than the $1.1 million expense and 24.6% effective tax rate in Q4 2024 - The effective tax rate decreased to 22.4% in Q1 2025 from 24.6% in Q4 2024[27] Q1 2025 vs. Q1 2024 (Year-over-Year) Compared to Q1 2024, net income decreased by $700,000 to $2.3 million, as increased provision for credit losses and non-interest expense more than offset growth in net interest income Q1 2025 vs Q1 2024 Performance | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income | $2.3M | $3.0M | -$0.7M (-23.3%) | | Diluted EPS | $0.11 | $0.14 | -$0.03 | | Net Interest Income | $15.5M | $15.3M | +$0.2M (+1.2%) | | Provision for Credit Losses | $142K | ($550K) | +$692K | | Non-Interest Income | $2.8M | $2.7M | +$85K (+3.2%) | | Non-Interest Expense | $15.2M | $14.8M | +$0.4M (+2.7%) | Net Interest Income and Margin Net interest income increased by $188,000 (1.2%) year-over-year, but the net interest margin compressed by 8 basis points to 2.49% due to a faster rise in funding costs than asset yields - Net interest income grew by $188,000 YoY, but the net interest margin decreased from 2.57% to 2.49%[29] - The average cost of total funds increased by 19 basis points to 2.16% YoY, while the average yield on interest-earning assets increased by only 11 basis points to 4.56%[30][31] Provision for Credit Losses The company recorded a provision for credit losses of $142,000 in Q1 2025, a significant change from the $550,000 reversal in Q1 2024, primarily due to macroeconomic forecast updates - A provision of $142,000 was recorded in Q1 2025, a significant change from the $550,000 reversal in Q1 2024, mainly due to macroeconomic forecast updates[32] - The quarter saw net charge-offs of $29,000, compared to net recoveries of $67,000 in the prior-year period[33] Non-Interest Income Non-interest income increased by $85,000 (3.2%) to $2.8 million year-over-year, driven by higher service charges and fees and income from bank-owned life insurance (BOLI) - Non-interest income grew by $85,000 YoY, driven by higher service charges and BOLI income[34] Non-Interest Expense Non-interest expense rose by $402,000 (2.7%) to $15.2 million compared to the prior year, primarily due to increases in salaries and benefits, advertising, and other expenses - Non-interest expense increased by $402,000 YoY, with salaries and benefits being the largest contributor to the rise[35] - The efficiency ratio increased to 83.0% from 82.0% in the prior year, driven by higher expenses[36] Income Tax Provision Income tax expense for Q1 2025 was $664,000, with an effective tax rate of 22.4%, compared to an expense of $827,000 and an effective tax rate of 21.8% in Q1 2024 - The effective tax rate was 22.4% in Q1 2025, compared to 21.8% in Q1 2024[37] Balance Sheet Analysis Balance Sheet Overview As of March 31, 2025, total assets increased by $56.2 million (2.1%) from year-end 2024 to reach $2.7 billion, driven by increases in cash and total gross loans - Total assets grew to $2.7 billion, an increase of $56.2 million since December 31, 2024[38] Loan Portfolio Total gross loans increased by $9.3 million (0.4%) to $2.1 billion in Q1 2025, primarily driven by residential real estate and commercial/industrial loans, partially offset by a decrease in commercial real estate loans Loan Portfolio Composition (in thousands) | Loan Category | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Commercial real estate | $1,072,687 | $1,075,732 | | Residential real estate | $783,788 | $775,659 | | Commercial and industrial | $216,368 | $211,656 | | Consumer | $3,865 | $4,391 | | Total gross loans | $2,076,708 | $2,067,438 | Credit Quality Credit quality remains strong and stable, with total delinquent loans decreasing, nonaccrual loans slightly increasing, and the allowance for credit losses providing robust coverage Key Credit Quality Metrics | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Delinquent Loans | $4.5M (0.22%) | $5.0M (0.24%) | | Nonaccrual Loans | $6.0M (0.29%) | $5.4M (0.26%) | | Allowance for Credit Losses | $19.7M (0.95%) | $19.5M (0.94%) | | Allowance / Nonaccrual Loans | 327.1% | 362.9% | - Total criticized loans (special mention and substandard) decreased by $2.1 million to $36.3 million, or 1.7% of total loans[48] Deposits Total deposits increased by $66.0 million (2.9%) to $2.3 billion in Q1 2025, driven by core deposit growth, which now comprises 70.0% of total deposits Deposit Composition (in thousands) | Deposit Category | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Core Deposits | $1,629,316 | $1,559,064 | | Time Deposits | $699,277 | $703,583 | | Total Deposits | $2,328,593 | $2,262,647 | - Uninsured deposits totaled $665.6 million, or 28.6% of total deposits, at March 31, 2025[51] Investments The investment securities portfolio totaled $369.8 million at quarter-end, with unrealized losses primarily attributed to interest rate changes rather than credit quality, as the portfolio consists mainly of high-quality government securities - The investment securities portfolio totaled $369.8 million, or 13.6% of total assets[39] - Unrealized losses on the available-for-sale portfolio were $27.8 million, and on the held-to-maturity portfolio were $35.8 million[40] - Management has not recorded any credit impairment, attributing the unrealized losses to interest rate fluctuations, and expects price improvement as securities approach maturity[41][42] Borrowings and Liquidity Total borrowings decreased slightly to $122.3 million, while the company maintains significant additional borrowing capacity from the FHLB and Federal Reserve Bank Discount Window, underscoring its strong liquidity position - Total borrowings stood at $122.3 million as of March 31, 2025, a slight decrease from the prior quarter[53] - The Company has substantial additional borrowing capacity, including $447.5 million at the FHLB and $378.5 million at the Federal Reserve Bank Discount Window[54] Capital Position Shareholders' equity increased to $237.7 million, with improvements in book value and tangible book value per share, and the Company's regulatory capital ratios remain strong and exceed well-capitalized levels Book Value Per Share | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Book Value Per Share | $11.44 | $11.30 | | Tangible Book Value Per Share (Non-GAAP) | $10.78 | $10.63 | Regulatory Capital Ratios (Company) | Ratio | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Capital (to Risk Weighted Assets) | 14.28% | 14.38% | | Tier 1 Capital (to Risk Weighted Assets) | 12.27% | 12.37% | | Tier 1 Leverage Ratio | 9.06% | 9.14% | - Shareholders' equity increased by $1.8 million to $237.7 million during the quarter[55] Financial Statements and Reconciliations Consolidated Statements of Net Income This section provides the unaudited Consolidated Statements of Net Income for the three months ended March 31, 2025, and the four preceding quarters, detailing revenues, expenses, and net income - The report includes detailed Consolidated Statements of Net Income for the last five quarters[63][64] Consolidated Balance Sheets This section presents the unaudited Consolidated Balance Sheets as of March 31, 2025, and for the four preceding quarter-ends, outlining assets, liabilities, and shareholders' equity - The report includes detailed Consolidated Balance Sheets for the last five quarter-ends[68][69] Other Data and Performance Ratios This section provides a summary of other key data and performance ratios, including per-share data, profitability ratios (NIM, ROA, ROE), efficiency ratios, and asset quality metrics for the last five quarters - The report includes a table summarizing key performance ratios and asset quality metrics for the last five quarters[70][71] Average Balances and Net Interest Income Analysis This section contains a detailed table analyzing average asset and liability balances, interest income/expense, and the corresponding yields and costs, which form the basis for the net interest margin calculation for Q1 2025, Q4 2024, and Q1 2024 - The report provides a detailed breakdown of average balances, interest, and yields/costs for interest-earning assets and interest-bearing liabilities[73][74] Reconciliation of Non-GAAP to GAAP Financial Measures This section provides reconciliations for non-GAAP financial measures used in the report, including tax-equivalent net interest margin, tangible book value per share, and the adjusted efficiency ratio, to their most directly comparable GAAP measures - The report includes tables reconciling non-GAAP measures such as tangible book value per share and adjusted efficiency ratio to their GAAP counterparts[76][78][79]