Western New England Bancorp(WNEB) - 2025 Q2 - Quarterly Results

Earnings Release and Highlights This section summarizes Western New England Bancorp's Q2 2025 financial results, highlighting key performance metrics and strategic priorities Second Quarter 2025 Earnings Summary Western New England Bancorp, Inc. (WNEB) reported a net income of $4.6 million, or $0.23 per diluted share, for the second quarter of 2025, significantly increasing from prior periods Quarterly and Six-Month Earnings Performance | Period | Net Income | Diluted EPS | | :--- | :--- | :--- | | Q2 2025 | $4.6 million | $0.23 | | Q1 2025 | $2.3 million | $0.11 | | Q2 2024 | $3.5 million | $0.17 | | H1 2025 | $6.9 million | $0.34 | | H1 2024 | $6.5 million | $0.31 | - The Board of Directors declared a quarterly cash dividend of $0.07 per share, payable around August 20, 2025, to shareholders of record on August 6, 2025[2] CEO Commentary and Strategic Priorities The CEO expressed satisfaction with solid Q2 2025 earnings, emphasizing strong growth in loans and core deposits, alongside disciplined capital management - Core deposits increased by $81.4 million (5.2%) since year-end, expected to lower deposit costs and reduce reliance on time deposits[3] - Growth in commercial and industrial (C&I) loans is a strategic priority, with the C&I portfolio increasing by $22.8 million (10.8%) in the first six months of 2025[3] - The net interest margin expanded by 31 basis points to 2.80% from Q1 2025 to Q2 2025, driven by loan growth and disciplined funding cost management[4] - The company repurchased 497,318 shares in the first six months of 2025 at an average price of $9.31, and announced a new repurchase plan for up to 1.0 million shares in April 2025[4] Key Financial and Operational Highlights The company highlighted key balance sheet movements and performance metrics as of June 30, 2025, including loan and deposit growth, asset quality, and capital management - Total gross loans increased by $22.1 million (1.1%) since December 31, 2024, primarily from a $29.7 million increase in residential real estate loans and a $22.8 million increase in C&I loans[5] - Core deposits (all deposits except time deposits) grew by $81.4 million (5.2%) since year-end, while time deposits decreased by $13.9 million (2.0%)[6] - The allowance for credit losses was stable at 0.94% of total loans, with nonaccrual loans remaining low at 0.27% of total loans[7] - The net interest margin increased by 31 basis points to 2.80% in Q2 2025 from 2.49% in Q1 2025[8] - The company completed its 2024 stock repurchase plan and began a new plan to repurchase up to 1.0 million shares, repurchasing 290,609 shares in Q2 2025 at an average price of $9.45[9][10] Financial Performance Analysis This section provides a detailed analysis of the company's financial performance, comparing Q2 2025 results against prior quarters and year-over-year periods Q2 2025 vs. Q1 2025 Performance (Linked Quarter) On a linked-quarter basis, net income nearly doubled, driven by significant expansion in net interest income and a reversal of the provision for credit losses Q2 2025 vs Q1 2025 Key Metrics | Metric | Q2 2025 | Q1 2025 | Change | | :--- | :--- | :--- | :--- | | Net Income | $4.6M | $2.3M | +99.3% | | Diluted EPS | $0.23 | $0.11 | +$0.12 | | Net Interest Income | $17.6M | $15.5M | +13.6% | | Provision for Credit Losses | ($0.6M) | $0.1M | -$0.8M | | Non-Interest Income | $3.4M | $2.8M | +23.6% | | Non-Interest Expense | $15.7M | $15.2M | +3.1% | Net Interest Income and Margin Net interest income increased by $2.1 million (13.6%) sequentially, reaching $17.6 million, with the net interest margin expanding by 31 basis points to 2.80% - The increase in net interest income was due to a 4.1% rise in interest income and a 7.2% fall in interest expense[15] - The average cost of time deposits decreased significantly by 42 basis points, from 4.11% in Q1 to 3.69% in Q2[18] (Reversal of) Provision for Credit Losses The company recorded a $615,000 reversal of credit losses in Q2 2025, primarily due to a significant recovery on a previously charged-off commercial relationship - The reversal of credit losses was driven by a $624,000 recovery on a previously charged-off commercial loan from the Chicopee Bancorp acquisition[20] Non-Interest Income Non-interest income rose by $652,000 (23.6%) to $3.4 million in Q2, driven by broad-based increases across service charges, equity investment gains, and new swap fees - Key drivers of the increase were higher service charges (+$244k), gains on non-marketable equity investments (+$243k), and new loan-level swap fee income (+$95k)[22][23] Non-Interest Expense Non-interest expense increased by a modest $472,000 (3.1%) to $15.7 million, primarily due to higher salaries and benefits, partially offset by lower occupancy costs - Salaries and benefits increased by $418,000 (5.0%), while occupancy expense decreased by $147,000 (10.4%)[24] - The efficiency ratio improved to 74.4% from 83.0% in the prior quarter, driven by higher revenues[25] Q2 2025 vs. Q2 2024 Performance (Year-over-Year) Compared to Q2 2024, net income grew by $1.1 million (30.7%) to $4.6 million, fueled by a strong increase in net interest income despite declines in non-interest income and rising expenses Q2 2025 vs Q2 2024 Key Metrics | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income | $4.6M | $3.5M | +30.7% | | Diluted EPS | $0.23 | $0.17 | +$0.06 | | Net Interest Income | $17.6M | $14.5M | +21.9% | | Non-Interest Income | $3.4M | $3.8M | -11.0% | | Non-Interest Expense | $15.7M | $14.3M | +9.4% | Net Interest Income and Margin Net interest income increased by $3.2 million (21.9%) year-over-year, with the net interest margin expanding by 38 basis points to 2.80%, driven by improved asset yields and lower funding costs - The net interest margin increased 38 bps YoY to 2.80%, primarily due to higher asset yields and lower liability costs[30] - The average cost of time deposits fell from 4.39% in Q2 2024 to 3.69% in Q2 2025[32] Non-Interest Income Non-interest income decreased by $423,000 (11.0%) to $3.4 million, primarily due to a significantly smaller gain on non-marketable equity investments compared to the prior year - The primary reason for the decrease was a lower gain on non-marketable equity investments ($243k in Q2'25 vs. $987k in Q2'24)[37] Non-Interest Expense Non-interest expense rose by $1.3 million (9.4%) to $15.7 million year-over-year, mainly driven by increased salaries and benefits, along with higher advertising and data processing costs - The main driver of the expense increase was a $930,000 (11.8%) rise in salaries and benefits[38] Six Months Ended June 30, 2025 vs. 2024 Performance For the first six months of 2025, net income increased by 6.5% to $6.9 million, driven by a significant rise in net interest income that offset other expense increases H1 2025 vs H1 2024 Key Metrics | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income | $6.9M | $6.5M | +6.5% | | Diluted EPS | $0.34 | $0.31 | +$0.03 | | Net Interest Income | $33.2M | $29.8M | +11.3% | | Non-Interest Income | $6.2M | $6.5M | -5.2% | | Non-Interest Expense | $30.8M | $29.1M | +6.0% | Net Interest Income and Margin Net interest income for the six-month period grew by $3.4 million (11.3%) to $33.2 million, with the net interest margin expanding by 14 basis points to 2.64% - The net interest margin increased by 14 bps to 2.64% for the six-month period[43] - The average cost of time deposits decreased 36 basis points to 3.90%, while the average cost of core deposits increased 23 basis points to 1.05%[45] Reversal of Credit Losses The company recorded a reversal of credit losses of $473,000 for the first six months of 2025, supported by a significant recovery on a previously charged-off commercial loan - Net recoveries totaled $556,000 for H1 2025, compared to net recoveries of $57,000 in H1 2024, largely due to a single $624,000 recovery[47] Non-Interest Income Non-interest income for the six-month period decreased by $338,000 (5.2%) to $6.2 million, primarily due to a significantly smaller gain on non-marketable equity investments - The decrease was mainly driven by a lower gain on non-marketable equity investments, which fell by $744,000 year-over-year[48] Non-Interest Expense Non-interest expense increased by $1.7 million (6.0%) to $30.8 million for the first half of 2025, primarily driven by a rise in salaries and employee benefits - Salaries and employee benefits rose by $1.1 million, accounting for the majority of the total expense increase[49] - The efficiency ratio improved to 78.4% from 80.1% in H1 2024, due to stronger revenue growth relative to expense growth[50] Balance Sheet Analysis This section provides an in-depth analysis of the company's balance sheet, detailing asset composition, loan portfolio quality, funding sources, and capital adequacy Overall Balance Sheet Position As of June 30, 2025, total assets stood at $2.7 billion, marking a $58.1 million (2.2%) increase from December 31, 2024, primarily fueled by growth in loans, cash, and investment securities - Total assets increased by $58.1 million, or 2.2%, to $2.7 billion at June 30, 2025, compared to year-end 2024[52] Investment Securities The investment securities portfolio totaled $376.9 million (13.9% of total assets) at June 30, 2025, with improved unrealized losses attributed to interest rate fluctuations - The available-for-sale portfolio increased by $18.1 million to $178.8 million, while the held-to-maturity portfolio decreased by $7.4 million to $197.7 million since year-end 2024[53] - Unrealized losses on the available-for-sale portfolio improved to $26.6 million from $31.2 million at year-end, attributed to interest rate changes, not credit impairment[54][56] Loan Portfolio and Credit Quality Total gross loans increased by $22.1 million (1.1%) to $2.1 billion since year-end 2024, with robust credit quality reflected in low delinquency and a decrease in criticized loans Loan Portfolio Composition (in thousands) | Loan Type | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Commercial real estate | $1,046,205 | $1,075,732 | | Residential real estate | $805,359 | $775,659 | | Commercial and industrial | $234,505 | $211,656 | | Consumer | $3,512 | $4,391 | | Total gross loans | $2,089,581 | $2,067,438 | Key Credit Quality Metrics | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Delinquency | 0.18% | 0.24% | | Nonaccrual Loans | 0.27% | 0.26% | | Allowance for Credit Losses | 0.94% | 0.94% | | Criticized Loans | $26.1M | $38.4M | Deposits and Funding Total deposits increased by $67.5 million (3.0%) to $2.3 billion, driven by strong growth in core deposits, which now represent 70.4% of total deposits Deposit Composition (in thousands) | Deposit Type | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Core Deposits | $1,640,432 | $1,559,064 | | Time Deposits | $689,681 | $703,583 | | Total Deposits | $2,330,113 | $2,262,647 | - Non-interest-bearing deposits grew by $29.6 million (5.2%) and represent 25.5% of total deposits[65] - The company had no brokered time deposits at June 30, 2025, down from $1.7 million at year-end 2024[66] - The company has significant additional liquidity, with $452.7 million in borrowing capacity at the FHLB and $383.8 million at the FRB Discount Window[69] Capital Shareholders' equity increased to $239.4 million at June 30, 2025, with regulatory capital ratios remaining strong and well in excess of 'well-capitalized' requirements Regulatory Capital Ratios (Company) | Ratio | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Capital (to RWA) | 14.42% | 14.38% | | Tier 1 Capital (to RWA) | 12.40% | 12.37% | | CET1 Capital (to RWA) | 12.40% | 12.37% | | Tier 1 Leverage Ratio | 9.10% | 9.14% | - The change in shareholders' equity was primarily driven by net income of $6.9 million, offset by share repurchases ($4.7 million), dividends ($2.9 million), and a positive change in accumulated other comprehensive income ($3.5 million)[70] Other Information This section provides additional context regarding the company's dividend policy, corporate profile, and a cautionary note on forward-looking statements Dividends The company has a history of paying quarterly dividends and intends to continue this practice, though future payments are not guaranteed and depend on various factors - While the company intends to continue paying quarterly dividends, there is no assurance that dividends will be paid in the future[72] About Western New England Bancorp, Inc. Western New England Bancorp, Inc. is a Massachusetts-chartered stock holding company and the parent of Westfield Bank, operating 25 banking offices across western Massachusetts and northern Connecticut - The company is the parent of Westfield Bank and operates 25 banking offices in western Massachusetts and northern Connecticut[73] Forward-Looking Statements This press release contains forward-looking statements subject to various risks and uncertainties, including economic conditions, regulatory changes, and competition, which could cause actual results to differ materially - The report includes forward-looking statements that are subject to risks such as changes in economic conditions, interest rates, regulatory policies, and competition[74][76] Consolidated Financial Statements This section presents the company's detailed consolidated financial statements, including income statements, balance sheets, and supplementary financial data Consolidated Statements of Net Income and Other Data This section provides a detailed breakdown of the company's income statement for the three and six months ended June 30, 2025, with comparative data for prior periods Consolidated Net Income (in thousands) | Line Item | Q2 2025 | Q1 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | :--- | | Net interest income | $17,642 | $15,534 | $14,470 | $33,176 | $29,816 | | (Reversal of) Provision | ($615) | $142 | ($294) | ($473) | ($844) | | Non-interest income | $3,411 | $2,759 | $3,834 | $6,170 | $6,508 | | Non-interest expense | $15,656 | $15,184 | $14,314 | $30,840 | $29,096 | | Net Income | $4,590 | $2,303 | $3,513 | $6,893 | $6,474 | Consolidated Balance Sheets This table presents the company's consolidated balance sheets as of June 30, 2025, with comparative data for the preceding four quarters, detailing assets, liabilities, and shareholders' equity Consolidated Balance Sheet Highlights (in thousands) | Line Item | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Assets | $2,711,149 | $2,653,090 | | Net Loans | $2,072,898 | $2,050,660 | | Total Deposits | $2,330,113 | $2,262,647 | | Total Liabilities | $2,471,721 | $2,417,180 | | Total Shareholders' Equity | $239,428 | $235,910 | Other Data This section provides supplementary data including per-share information, key performance ratios, and detailed asset quality metrics for the last five quarters Per Common Share Data (Q2 2025) | Metric | Value | | :--- | :--- | | Basic EPS | $0.23 | | Diluted EPS | $0.23 | | Cash Dividend Declared | $0.07 | | Book Value per Share | $11.68 | | Tangible Book Value per Share | $11.01 | Asset Quality Ratios (Q2 2025) | Metric | Value | | :--- | :--- | | Delinquent Loans / Total Loans | 0.18% | | Nonaccrual Loans / Total Loans | 0.27% | | Allowance / Total Loans | 0.94% | | Allowance / Nonaccrual Loans | 343.06% | Average Balances and Net Interest Income Analysis These tables provide a detailed analysis of net interest income components for the three and six months ended June 30, 2025 and 2024, breaking down average balances, interest, yields, and costs Net Interest Margin Analysis (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Avg. Yield on Earning Assets | 4.71% | 4.51% | | Avg. Cost of Bearing Liabilities | 2.59% | 2.83% | | Net Interest Rate Spread | 2.10% | 1.66% | | Net Interest Margin | 2.80% | 2.42% | Net Interest Margin Analysis (H1 2025 vs H1 2024) | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Avg. Yield on Earning Assets | 4.65% | 4.49% | | Avg. Cost of Bearing Liabilities | 2.70% | 2.72% | | Net Interest Rate Spread | 1.92% | 1.75% | | Net Interest Margin | 2.64% | 2.50% | Reconciliation of Non-GAAP to GAAP Financial Measures This section provides reconciliations for non-GAAP financial measures, bridging the gap between reported GAAP figures and adjusted non-GAAP metrics by detailing specific adjustments Non-GAAP Reconciliations This section provides reconciliations for non-GAAP financial measures used in the report, including tangible book value per share, adjusted net interest income, and the adjusted efficiency ratio - Tangible book value per share (a non-GAAP measure) was $11.01 at June 30, 2025, calculated by subtracting goodwill and core deposit intangibles from the GAAP book value per share of $11.68[99] - The adjusted efficiency ratio for Q2 2025 was 75.32%, calculated by dividing non-interest expense by total revenue, after excluding certain items from non-interest income[100] - The net interest margin for Q2 2025, excluding $425,000 in prepayment penalties, was 2.73%, compared to the GAAP net interest margin of 2.80%[99]