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

Forward-Looking Statements Forward-Looking Statements This section outlines potential risks and uncertainties that could cause actual results to differ materially from forward-looking statements, cautioning investors not to place undue reliance - The Company identifies forward-looking statements by words such as "believe," "expect," "anticipate," and "planned."[8] - Key risk factors mentioned include unpredictable economic or political conditions, inflation, interest rate changes, governmental legislation, operational risks like cybersecurity, and changes in key management personnel[11] - The Company does not undertake any obligation to republish revised forward-looking statements, except as required by law[10] PART I – FINANCIAL INFORMATION Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements for Western New England Bancorp, Inc., including detailed explanatory notes Consolidated Balance Sheets Total assets increased to $2.71 billion at March 31, 2025, from $2.65 billion at December 31, 2024, driven by increases in cash and cash equivalents and total loans Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $2,709,284 | $2,653,090 | | Total Loans | $2,079,561 | $2,070,189 | | Total Deposits | $2,328,593 | $2,262,647 | | Total Liabilities | $2,471,608 | $2,417,180 | | Total Shareholders' Equity | $237,676 | $235,910 | Consolidated Statements of Net Income Net income for the first quarter of 2025 was $2.3 million, a decrease from $3.0 million in the first quarter of 2024, primarily due to a provision for credit losses and higher non-interest expenses Q1 Income Statement Highlights (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Interest and Dividend Income | $15,534 | $15,346 | | Provision for (Reversal of) Credit Losses | $142 | $(550) | | Net Income | $2,303 | $2,961 | | Diluted Earnings Per Share | $0.11 | $0.14 | Consolidated Statements of Comprehensive Income (Loss) Comprehensive income was $4.9 million for Q1 2025, a significant increase from $1.1 million in Q1 2024, driven by net income and an unrealized holding gain on available-for-sale securities Q1 Comprehensive Income (in thousands) | Component | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income | $2,303 | $2,961 | | Other Comprehensive Income (Loss) | $2,585 | $(1,893) | | Comprehensive Income | $4,888 | $1,068 | Consolidated Statements of Changes in Shareholders' Equity Shareholders' equity increased from $235.9 million at year-end 2024 to $237.7 million at March 31, 2025, driven by net income and comprehensive income, partially offset by dividends and repurchases - Key activities impacting shareholders' equity in Q1 2025 included net income of $2.3 million, comprehensive income of $2.6 million, common stock repurchases of $2.0 million, and cash dividends of $1.4 million[23] Consolidated Statements of Cash Flows For Q1 2025, cash and cash equivalents increased by $44.1 million, primarily due to net cash provided by financing activities, partially offset by operating and investing outflows Q1 Cash Flow Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Cash (Used in) Provided by Operating Activities | $(1,241) | $1,172 | | Net Cash (Used in) Provided by Investing Activities | $(16,161) | $566 | | Net Cash Provided by (Used in) Financing Activities | $61,531 | $(7,965) | | Net Change in Cash and Cash Equivalents | $44,129 | $(6,227) | Notes to Consolidated Financial Statements The notes provide detailed explanations of the accounting policies and financial data presented in the statements, covering operations, portfolio details, and financial instruments - The Bank operates 25 banking offices in western Massachusetts and northern Connecticut, with primary revenue from interest on loans and investment securities[29] - The allowance for credit losses is a significant estimate susceptible to change[32] Management's Discussion and Analysis (MD&A) Management discusses the company's financial condition and results of operations, highlighting strategic focus, financial performance, and key balance sheet items - The company's strategy focuses on increasing market share, growing commercial and residential loan portfolios, expanding the deposit franchise, and investing in technology[154][156] - Net income for Q1 2025 was $2.3 million, down from $3.0 million in Q1 2024, mainly due to a $142,000 provision for credit losses in 2025 versus a $550,000 reversal in 2024[156] - Net interest income increased by 1.2% to $15.5 million in Q1 2025, as a 6.9% increase in interest income was partially offset by a 14.6% rise in interest expense[157] Comparison of Financial Condition (Mar 31, 2025 vs. Dec 31, 2024) Total assets grew by $56.2 million to $2.7 billion, driven by increases in cash and loans, while deposits and shareholders' equity also increased, and credit quality remained stable - Total assets increased by 2.1% to $2.7 billion, primarily due to a $44.1 million increase in cash and a $9.3 million increase in gross loans[161] - Total deposits increased by 2.9% to $2.3 billion, with core deposits (all deposits except time deposits) increasing by 4.5%[193] - The allowance for credit losses was $19.7 million, or 0.95% of total loans, compared to $19.5 million, or 0.94% of total loans, at year-end 2024[168] Commercial Real Estate (CRE) Concentrations The company holds a significant concentration in CRE loans, with non-owner occupied CRE loans exceeding regulatory guidance, managed through robust underwriting and risk management practices - Total CRE loans were $1.07 billion, representing 396.6% of total bank risk-based capital as of March 31, 2025[176] - Non-owner occupied CRE loans, the focus of regulatory guidance, stood at $881.1 million, representing 325.8% of total bank risk-based capital[177] - The office-related CRE portfolio totaled $198.0 million, or 73.2% of total bank risk-based capital, with 95.5% of these loans rated as 'Pass'[186][191] Comparison of Operating Results (Q1 2025 vs. Q1 2024) Net income decreased to $2.3 million in Q1 2025 from $3.0 million in Q1 2024, primarily due to a provision for credit losses and higher non-interest expenses, despite a rise in net interest income Q1 Operating Results Comparison | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income | $2.3M | $3.0M | | Diluted EPS | $0.11 | $0.14 | | Net Interest Income | $15.5M | $15.3M | | Net Interest Margin | 2.49% | 2.57% | | Provision for (Reversal of) Credit Losses | $142k | $(550k) | - The increase in provision for credit losses was primarily due to changes in the macroeconomic forecast[209] - Non-interest expense increased by $402,000 (2.7%), driven by higher salaries, advertising, and occupancy costs[212] Liquidity and Capital Resources The company maintains a strong liquidity and capital position, with significant available borrowing capacity and all regulatory capital ratios exceeding 'well-capitalized' thresholds - Primary liquidity sources are deposits, loan/security amortization, and FHLB borrowings[217] - As of March 31, 2025, the company had available borrowing capacity of $447.5 million from the FHLB and $378.5 million from the FRB Discount Window[219][220] Bank Capital Ratios as of March 31, 2025 | Ratio | Actual | Minimum to be Well-Capitalized | | :--- | :--- | :--- | | Total Capital (to Risk Weighted Assets) | 13.56% | 10.00% | | Tier 1 Capital (to Risk Weighted Assets) | 12.55% | 8.00% | | Common Equity Tier 1 Capital | 12.55% | 6.50% | | Tier 1 Leverage Ratio | 9.26% | 5.00% | Quantitative and Qualitative Disclosures About Market Risk The company states that there have been no material changes in its assessment of sensitivity to market risk since the disclosures made in its 2024 Annual Report on Form 10-K - There have been no material changes in the Company's market risk sensitivity since the 2024 Annual Report[234] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2025, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the period covered by the report[236] - No changes in internal control over financial reporting occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls[237] PART II – OTHER INFORMATION Legal Proceedings The company was not involved in any material pending legal proceedings, other than routine legal matters occurring in the ordinary course of business - The Company is not involved in any material pending legal proceedings outside of the ordinary course of business[238] Risk Factors There have been no additional material changes in the risk factors relevant to the company's operations since December 31, 2024, as detailed in the 2024 Annual Report - There are no additional material changes in risk factors since the 2024 Annual Report[239] Unregistered Sales of Equity Securities and Use of Proceeds During the first quarter of 2025, the company repurchased a total of 217,218 shares of its common stock at an average price of $9.13 per share, leaving 265,609 shares available for repurchase Q1 2025 Share Repurchases | Period | Total Shares Purchased | Average Price Paid ($) | | :--- | :--- | :--- | | January 2025 | 100,000 | 8.85 | | February 2025 | 27,215 | 9.51 | | March 2025 | 90,003 | 9.32 | | Total | 217,218 | 9.13 | - As of March 31, 2025, 265,609 shares remained available for repurchase under the 2024 stock repurchase plan[241] Defaults Upon Senior Securities None reported - None[243] Mine Safety Disclosures Not applicable - Not applicable[244] Other Information No director or officer of the company adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements during the quarter ended March 31, 2025 - No director or officer adopted or terminated Rule 10b5-1 trading arrangements during the quarter[245] Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO pursuant to the Sarbanes-Oxley Act of 2002 and the financial statements formatted in Inline XBRL - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and Inline XBRL financial data (101, 104)[246]