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Western New England Bancorp, Inc. Reports Results for Three and Nine Months Ended September 30, 2024 and Declares Quarterly Cash Dividend
Globe Newswire 23-Oct-2024 4:05 PM
WESTFIELD, Mass., Oct. 23, 2024 (GLOBE NEWSWIRE) -- Western New England Bancorp, Inc. (the "Company" or "WNEB") (NASDAQ:WNEB), the holding company for Westfield Bank (the "Bank"), announced today the unaudited results of operations for the three and nine months ended September 30, 2024. For the three months ended September 30, 2024, the Company reported net income of $1.9 million, or $0.09 per diluted share, compared to net income of $4.5 million, or $0.21 per diluted share, for the three months ended September 30, 2023. On a linked quarter basis, net income was $1.9 million, or $0.09 per diluted share, as compared to net income of $3.5 million, or $0.17 per diluted share, for the three months ended June 30, 2024. For the nine months ended September 30, 2024, net income was $8.4 million, or $0.40 per diluted share, compared to net income of $12.6 million, or $0.58 per diluted share, for the nine months ended September 30, 2023.
The Company also announced that the Board of Directors declared a quarterly cash dividend of $0.07 per share on the Company's common stock. The dividend will be payable on or about November 21, 2024 to shareholders of record on November 7, 2024.
James C. Hagan, President and Chief Executive Officer, commented, "We believe our Company continues to be well positioned with strong capital and access to various liquidity sources. Our financial performance has been largely impacted by the unprecedented interest rate cycle and higher funding costs in response to the sustained increase in interest rates over the last 18-24 months. While it remains unclear whether the recent decrease in interest rates represents an end to this trend, the balance sheet is positioned to benefit from this decrease and the challenge will begin to subside as our liabilities begin to reprice lower. As we continue to manage the balance sheet in this uncertain interest rate environment, we remain focused on expense management initiatives to mitigate top line pressures and improve efficiencies over the Company's long-term. The Company also continues to focus on our core business to grow loans and deposits as well as retention of our customers. Total deposits increased $80.5 million, or 3.8%, and total loans increased $21.7 million, or 1.1%, from year-end. Our asset quality remains strong, with nonperforming loans to total loans of 0.24% at September 30, 2024."
Hagan concluded, "The Company is considered to be well-capitalized as defined by the regulators and we remain disciplined in our capital management strategies. During the nine months ended September 30, 2024, we repurchased 714,282 shares of the Company's common stock at an average price per share of $7.61. We continue to believe that buying back shares represents a prudent use of the Company's capital and we are pleased to be able to continue to return value to shareholders through share repurchases. Although the banking environment has been challenged, our capital management strategies have been critical to sustaining growth in book value per share, which increased $0.44, or 4.0%, while tangible book value per share increased $0.43, or 4.2%, to $10.73. The management team remains focused and well positioned to serve our community and to enhance shareholder value over the long term."
Key Highlights:
Loans and Deposits
At September 30, 2024, total loans were $2.0 billion and increased $21.7 million, or 1.1%, from December 31, 2023. The increase in total loans was due to an increase in commercial real estate loans of $3.0 million, or 0.3%, an increase in residential real estate loans, including home equity loans, of $26.4 million, or 3.7%, partially offset by a decrease in commercial and industrial loans of $7.0 million, or 3.2%.
At September 30, 2024, total deposits were $2.2 billion and increased $80.5 million, or 3.8%, from December 31, 2023. Core deposits, which the Company defines as all deposits except time deposits, decreased $8.3 million, or 0.5%, from $1.5 billion, or 71.5% of total deposits, at December 31, 2023, to $1.5 billion, or 68.5% of total deposits at September 30, 2024. Time deposits increased $88.8 million, or 14.5%, from $611.4 million at December 31, 2023 to $700.2 million at September 30, 2024. Brokered time deposits, which are included in time deposits, totaled $1.7 million at September 30, 2024 and at December 31, 2023. The loan-to-deposit ratio decreased from 94.6% at December 31, 2023 to 92.1% at September 30, 2024.
Liquidity
The Company's liquidity position remains strong with solid core deposit relationships, cash, unencumbered securities, a diversified deposit base and access to diversified borrowing sources. At September 30, 2024, the Company had $1.1 billion in immediately available liquidity, compared to $615.0 million in uninsured deposits, or 27.7% of total deposits, representing a coverage ratio of 183%. Uninsured deposits of the Bank's customers are eligible for FDIC pass-through insurance if the customer opens an IntraFi Insured Cash Sweep ("ICS") account or a reciprocal time deposit through the Certificate of Deposit Account Registry System ("CDARS"). IntraFi allows for up to $250.0 million per customer of pass-through FDIC insurance, which would more than cover each of the Bank's deposit customers if such customer desired to have such pass-through insurance.
Allowance for Loan Losses and Credit Quality
At September 30, 2024, the allowance for credit losses was $20.0 million, or 0.97% of total loans and 409.5% of nonperforming loans, compared to $20.3 million, or 1.00% of total loans and 315.6% of nonperforming loans at December 31, 2023. At September 30, 2024, nonperforming loans totaled $4.9 million, or 0.24% of total loans, compared to $6.4 million, or 0.32% of total loans, at December 31, 2023. Total delinquent loans decreased $1.7 million, or 28.3%, from $6.0 million, or 0.30% of total loans, at December 31, 2023 to $4.3 million, or 0.21% of total loans, at September 30, 2024. At September 30, 2024 and December 31, 2023, the Company did not have any other real estate owned.
Net Interest Margin
The net interest margin was 2.40% for the three months ended September 30, 2024 compared to 2.42% for the three months ended June 30, 2024. The net interest margin, on a tax-equivalent basis, was 2.42% for the three months ended September 30, 2024, compared to 2.44% for the three months ended June 30, 2024.
Stock Repurchase Program
On June 10, 2024, the Company announced the completion of its previously authorized stock repurchase plan (the "2022 Plan") pursuant to which the Company was authorized to repurchase up to 1.1 million shares, or approximately 5% of its outstanding common stock, as of the date the 2022 Plan was adopted. On May 22, 2024, the Board of Directors authorized a new stock repurchase plan (the "2024 Plan") under which the Company may repurchase up to 1.0 million shares, or approximately 4.6%, of the Company's then-outstanding shares of common stock.
During the three months ended September 30, 2024, the Company repurchased 244,441 shares of common stock under the 2024 Plan, with an average price per share of $8.18. During the nine months ended September 30, 2024, the Company repurchased 714,282 shares of common stock with an average price per share of $7.61. As of September 30, 2024, there were 692,318 shares of common stock available for repurchase under the 2024 Plan.
The repurchase of shares under the stock repurchase program is administered through an independent broker. The shares of common stock repurchased under the 2024 Plan have been and will continue to be purchased from time to time at prevailing market prices, through open market or privately negotiated transactions, or otherwise, depending upon market conditions. There is no guarantee as to the exact number, or value, of shares that will be repurchased by the Company, and the Company may discontinue repurchases at any time that the Company's management ("Management") determines additional repurchases are not warranted. The timing and amount of additional share repurchases under the 2024 Plan will depend on a number of factors, including the Company's stock price performance, ongoing capital planning considerations, general market conditions, and applicable legal requirements.
Book Value and Tangible Book Value
The Company's book value per share was $11.40 at September 30, 2024 compared to $10.96 at December 31, 2023, while tangible book value per share, a non-GAAP financial measure, increased $0.43, or 4.2%, from $10.30 at December 31, 2023 to $10.73 at September 30, 2024. See pages 19-21 for the related tangible book value calculation and a reconciliation of GAAP to non-GAAP financial measures.
Net Income for the Three Months Ended September 30, 2024 Compared to the Three Months Ended June 30, 2024
The Company reported net income of $1.9 million, or $0.09 per diluted share, for the three months ended September 30, 2024, compared to net income of $3.5 million, or $0.17 per diluted share, for the three months ended June 30, 2024. Net interest income increased $258,000, or 1.8%, the provision for credit losses increased $1.2 million, non-interest income decreased $693,000, or 18.1%, and non-interest expense increased $92,000, or 0.6%. Return on average assets and return on average equity were 0.29% and 3.19%, respectively, for the three months ended September 30, 2024, compared to 0.55% and 6.03%, respectively, for the three months ended June 30, 2024.
Net Interest Income and Net Interest Margin
On a sequential quarter basis, net interest income, our primary driver of revenues, increased $258,000, or 1.8%, to $14.7 million for the three months ended September 30, 2024, from $14.5 million for the three months ended June 30, 2024. The increase in net interest income was primarily due to an increase in interest income of $1.0 million, or 3.9%, partially offset by an increase in interest expense of $780,000, or 6.3%.
The net interest margin was 2.40% for the three months ended September 30, 2024, compared to 2.42% for the three months ended June 30, 2024. The net interest margin, on a tax-equivalent basis, was 2.42% for the three months ended September 30, 2024, compared to 2.44% for the three months ended June 30, 2024. The decrease in the net interest margin was primarily due to an increase in the average cost of interest-bearing liabilities, which was partially offset by an increase in the average yield on interest-earning assets. During the three months ended September 30, 2024 and the three months ended June 30, 2024, the Company had a fair value hedge which contributed to an increase in the net interest margin of seven basis points. Excluding the interest income attributed to the fair value hedge, the net interest margin was 2.33% and 2.35%, for the three months ended September 30, 2024 and the three months ended June 30, 2024, respectively. The fair value hedge is scheduled to mature in October of 2024.
The average yield on interest-earning assets, without the impact of tax-equivalent adjustments, was 4.54% for the three months ended September 30, 2024, compared to 4.49% for the three months ended June 30, 2024. The average loan yield, without the impact of tax-equivalent adjustments, was 4.90% for the three months ended September 30, 2024, compared to 4.85% for the three months ended June 30, 2024. During the three months ended September 30, 2024, average interest-earning assets increased $40.6 million, or 1.7% to $2.4 billion, primarily due to an increase in average loans of $21.5 million, or 1.1%, an increase in average short-term investments, consisting of cash and cash equivalents, $17.7 million, or 123.6%, and an increase in average other investments of $1.6 million, or 11.0%.
The average cost of total funds, including non-interest bearing accounts and borrowings, increased eight basis points from 2.16% for the three months ended June 30, 2024 to 2.24% for the three months ended September 30, 2024. The average cost of core deposits, which the Company defines as all deposits except time deposits, increased six basis points to 0.93% for the three months ended September 30, 2024, from 0.87% for the three months ended June 30, 2024. The average cost of time deposits increased five basis points from 4.39% for the three months ended June 30, 2024 to 4.44% for the three months ended September 30, 2024. The average cost of borrowings, including subordinated debt, increased five basis points from 5.00% for the three months ended June 30, 2024 to 5.05% for the three months ended September 30, 2024. Average demand deposits, an interest-free source of funds, increased $10.4 million, or 1.9%, from $548.8 million, or 25.7% of total average deposits, for the three months ended June 30, 2024, to $559.2 million, or 25.7% of total average deposits, for the three months ended September 30, 2024.
Provision for (Reversal of) Credit Losses
During the three months ended September 30, 2024, the Company recorded a provision for credit losses of $941,000, compared to a reversal for credit losses of $294,000 during the three months ended June 30, 2024. The provision for credit losses includes a provision for credit losses on loans of $609,000 and a reserve on unfunded loan commitments of $332,000. The increase in the provision for credit losses on loans was due to changes in the economic environment and related adjustments to the quantitative components of the CECL methodology as well as growth in the loan portfolio. The provision for credit losses was determined by a number of factors: the continued strong credit performance of the Company's loan portfolio, changes in the loan portfolio mix and Management's consideration of existing economic conditions and the economic outlook from the Federal Reserve's actions to control inflation. The increase in reserves on unfunded loan commitments was due to an increase in commercial real estate unfunded loan commitments of $33.5 million, or 20.7%, from $161.8 million at June 30, 2024 to $195.3 million at September 30, 2024. Management continues to monitor macroeconomic variables related to increasing interest rates, inflation and the concerns of an economic downturn, and believes it is appropriately reserved for the current economic environment.
During the three months ended September 30, 2024, the Company recorded net charge-offs of $98,000, compared to net charge-offs of $10,000 for the three months ended June 30, 2024.
Non-Interest Income
On a sequential quarter basis, non-interest income decreased $693,000, or 18.1%, to $3.1 million for the three months ended September 30, 2024, from $3.8 million for the three months ended June 30, 2024. Service charges and fees on deposits were $2.3 million for the three months ended September 30, 2024 and the three months ended June 30, 2024. Income from bank-owned life insurance ("BOLI") decreased $32,000, or 6.4%, from the three months ended June 30, 2024 to $470,000, for the three months ended September 30, 2024. During the three months ended September 30, 2024, the Company reported $74,000 in other income from loan-level swap fees on commercial loans and did not have comparable income during the three months ended June 30, 2024. During the three months ended September 30, 2024, the Company sold $20.1 million in fixed rate residential loans to the secondary market and reported income from mortgage banking activities of $246,000 and did not have comparable income during the three months ended June 30, 2024. During the three months ended September 30, 2024 and the three months ended June 30, 2024, the Company reported unrealized gains on marketable equity securities of $10,000 and $4,000, respectively. During the three months ended June 30, 2024, the Company reported a gain on non-marketable equity investments of $987,000 and did not have comparable gains or losses from non-marketable equity investments during the three months ended September 30, 2024.
Non-Interest Expense
For the three months ended September 30, 2024, non-interest expense increased $92,000, or 0.6%, to $14.4 million from $14.3 million for the three months ended June 30, 2024. Salaries and employee benefits increased $211,000, or 2.7%, to $8.1 million, software expenses increased $46,000, or 8.1%, data processing expense increased $23,000, or 2.7%, FDIC insurance expense increased $15,000, or 4.6%, and debit card and ATM processing fees increased $6,000, or 0.9%. During the same period, these increases were partially offset by a decrease in professional fees of $41,000, or 7.1%, a decrease in advertising expense of $68,000, or 20.1%, a decrease in occupancy expense of $1,000, or 0.1%, and a decrease in other non-interest expense of $99,000, or 7.0%.
For the three months ended September 30, 2024, the efficiency ratio was 80.6%, compared to 78.2% for the three months ended June 30, 2024. For the three months ended September 30, 2024, the adjusted efficiency ratio, a non-GAAP financial measure, was 80.7% compared to 82.7% for the three months ended June 30, 2024. The increases in the efficiency ratio and the adjusted efficiency ratio were driven by lower revenues, defined as the sum of net interest income and non-interest income, during the three months ended September 30, 2024. See pages 19-21 for the related adjusted efficiency ratio calculation and a reconciliation of GAAP to non-GAAP financial measures.
Income Tax Provision
Income tax expense for the three months ended September 30, 2024 was $618,000, or an effective tax rate of 24.5%, compared to $771,000, or an effective tax rate of 18.0%, for the three months ended June 30, 2024. The increase in the effective tax rate for the three months ended September 30, 2024 was driven by the Company's projections of pre-tax income for the year ending December 31, 2024.
Net Income for the Three Months Ended September 30, 2024 Compared to the Three Months Ended September 30, 2023.
The Company reported net income of $1.9 million, or $0.09 per diluted share, for the three months ended September 30, 2024, compared to net income of $4.5 million, or $0.21 per diluted share, for the three months ended September 30, 2023. Net interest income decreased $1.7 million, or 10.1%, provision for credit losses increased $587,000, non-interest income decreased $471,000, or 13.0%, and non-interest expense increased $288,000, or 2.0%, during the same period. Return on average assets and return on average equity were 0.29% and 3.19%, respectively, for the three months ended September 30, 2024, compared to 0.70% and 7.60%, respectively, for the three months ended September 30, 2023.
Net Interest Income and Net Interest Margin
Net interest income decreased $1.7 million, or 10.1%, to $14.7 million, for the three months ended September 30, 2024, from $16.4 million for the three months ended September 30, 2023. The decrease in net interest income was due to an increase in interest expense of $3.6 million, or 37.8%, partially offset by an increase in interest and dividend income of $1.9 million, or 7.5%. Interest expense on deposits increased $3.5 million, or 44.9%, and interest expense on borrowings increased $133,000, or 7.3%. The increase in interest expense was a result of competitive pricing on deposits due to the continued higher interest rate environment and the unfavorable shift in the deposit mix from low cost core deposits to high cost time deposits.
The net interest margin was 2.40% for the three months ended September 30, 2024, compared to 2.70% for the three months ended September 30, 2023. The net interest margin, on a tax-equivalent basis, was 2.42% for the three months ended September 30, 2024, compared to 2.72% for the three months ended September 30, 2023. The decrease in the net interest margin was primarily due to an increase in the average cost of interest-bearing liabilities and the unfavorable shift in the deposit mix from low cost core deposits to high cost time deposits, which was partially offset by an increase in the average yield on interest-earning assets. During the three months ended September 30, 2024 and the three months ended September 30, 2023, the Company had a fair value hedge which contributed to an increase in the net interest margin of seven basis points. Excluding the interest income from the fair value hedge, the net interest margin was 2.33% and 2.64%, for the three months ended September 30, 2024 and three months ended September 30, 2023, respectively. The fair value hedge is scheduled to mature in October of 2024.
The average yield on interest-earning assets, without the impact of tax-equivalent adjustments, was 4.54% for the three months ended September 30, 2024, compared to 4.28% for the three months ended September 30, 2023. The average loan yield, without the impact of tax-equivalent adjustments, was 4.90% for the three months ended September 30, 2024, compared to 4.64% for the three months ended September 30, 2023. During the three months ended September 30, 2024, average interest-earning assets increased $38.2 million, or 1.6% to $2.4 billion, primarily due to an increase in average loans of $31.3 million, or 1.6%, an increase in average short-term investments, consisting of cash and cash equivalents, of $9.7 million, or 43.4%, an increase in average other investments of $3.7 million, or 30.8%, partially offset by a decrease in average securities of $6.5 million, or 1.8%.
The average cost of total funds, including non-interest bearing accounts and borrowings, increased 60 basis points from 1.64% for the three months ended September 30, 2023 to 2.24% for the three months ended September 30, 2024. The average cost of core deposits, which the Company defines as all deposits except time deposits, increased 23 basis points to 0.93% for the three months ended September 30, 2024, from 0.70% for the three months ended September 30, 2023. The average cost of time deposits increased 98 basis points from 3.46% for the three months ended September 30, 2023 to 4.44% for the three months ended September 30, 2024. The average cost of borrowings, including subordinated debt, increased 24 basis points from 4.81% for the three months ended September 30, 2023 to 5.05% for the three months ended September 30, 2024. Average demand deposits, an interest-free source of funds, decreased $32.7 million, or 5.5%, from $591.9 million, or 27.5% of total average deposits, for the three months ended September 30, 2023, to $559.2 million, or 25.7% of total average deposits, for the three months ended September 30, 2024.
Provision for Credit Losses
During the three months ended September 30, 2024, the Company recorded a provision for credit losses of $941,000, compared to a provision for credit losses of $354,000, during the three months ended September 30, 2023. The increase was primarily due to an increase in the loan portfolio, specifically unfunded commercial real estate loan commitments, as well as changes in the economic environment and related adjustments to the quantitative components of the CECL methodology. The provision for credit losses was determined by a number of factors: the continued strong credit performance of the Company's loan portfolio, changes in the loan portfolio mix and Management's consideration of existing economic conditions and the economic outlook from the Federal Reserve's actions to control inflation. Management continues to monitor macroeconomic variables related to increasing interest rates, inflation and the concerns of an economic downturn, and believes it is appropriately reserved for the current economic environment.
The Company recorded net charge-offs of $98,000 for the three months ended September 30, 2024, as compared to net charge-offs of $78,000 for the three months ended September 30, 2023.
Non-Interest Income
Non-interest income decreased $471,000, or 13.0%, from $3.6 million for the three months ended September 30, 2023 to $3.1 million for the three months ended September 30, 2024. Service charges and fees on deposits increased $196,000, or 9.1%, and income from BOLI increased $16,000, or 3.5%, from the three months ended September 30, 2023 to the three months ended September 30, 2024. During the three months ended September 30, 2024, the Company reported $74,000 in other income from loan-level swap fees on commercial loans and did not have comparable income during the three months ended September 30, 2023. During the three months ended September 30, 2024, the Company reported income of $246,000 in mortgage banking activities due to the sale of fixed rate residential loans and did not have comparable income during the three months ended September 30, 2023. During the three months ended September 30, 2024, the Company reported $10,000 in unrealized gains of marketable equity securities and did not have comparable income during the three months ended September 30, 2023. During the three months ended September 30, 2023, the Company reported a gain on non-marketable equity investments of $238,000 and did not have comparable non-interest income during the three months ended September 30, 2024. During the three months ended September 30, 2023, non-interest income included a non-taxable gain of $778,000 on BOLI death benefits. The Company did not have comparable income during the three months ended September 30, 2024. During the three months ended September 30, 2023, the Company reported a loss on the sales of premises and equipment of $3,000 and did not have comparable expense during the three months ended September 30, 2024.
Non-Interest Expense
For the three months ended September 30, 2024, non-interest expense increased $288,000, or 2.0%, to $14.4 million from $14.1 million, for the three months ended September 30, 2023. Salaries and employee benefits increased $157,000, or 2.0%, to $8.1 million, debit card and ATM processing fees increased $87,000, or 15.5%, software expenses increased $83,000, or 15.7%, occupancy expense increased $58,000, or 5.0%, data processing expense increased $45,000, or 5.5%, other non-interest income increased $54,000, or 4.3%, and furniture and equipment related expenses increased $1,000, or 0.2%. These increases were partially offset by a decrease in professional fees of $103,000, or 16.0%, a decrease in advertising expense of $91,000, or 25.1%, and a decrease in FDIC insurance expense of $3,000, or 0.9%.
For the three months ended September 30, 2024, the efficiency ratio was 80.6%, compared to 70.6% for the three months ended September 30, 2023. For the three months ended September 30, 2024, the adjusted efficiency ratio, a non-GAAP financial measure, was 80.7% compared to 74.4% for the three months ended September 30, 2023. The increases in the efficiency ratio and the non-GAAP adjusted efficiency ratio were driven by lower revenues during the three months ended September 30, 2024, compared to the three months ended September 30, 2023. See pages 19-21 for the related adjusted efficiency ratio calculation and a reconciliation of GAAP to non-GAAP financial measures.
Income Tax Provision
Income tax expense for the three months ended September 30, 2024 was $618,000, or an effective tax rate of 24.5%, compared to $1.0 million, or an effective tax rate of 18.7%, for the three months ended September 30, 2023. The effective tax rate for the three months ended September 30, 2023 included $778,000 in non-taxable BOLI death benefits.
Net Income for the Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023
For the nine months ended September 30, 2024, the Company reported net income of $8.4 million, or $0.40 per diluted share, compared to $12.6 million, or $0.58 per diluted share, for the nine months ended September 30, 2023. Return on average assets and return on average equity were 0.44% and 4.74% for the nine months ended September 30, 2024, respectively, compared to 0.66% and 7.19% for the nine months ended September 30, 2023, respectively.
Net Interest Income and Net Interest Margin
During the nine months ended September 30, 2024, net interest income decreased $7.2 million, or 13.9%, to $44.5 million, compared to $51.7 million for the nine months ended September 30, 2023. The decrease in net interest income was due to an increase in interest expense of $14.1 million, or 62.3%, partially offset by an increase in interest and dividend income of $6.9 million, or 9.3%. The $14.1 million increase in interest expense was primarily due to an increase of $12.9 million, or 72.3%, in interest expense on deposits as a result of competitive pricing and an unfavorable shift in the deposit mix from low cost core deposits to high cost time deposits.
The net interest margin for the nine months ended September 30, 2024 was 2.46%, compared to 2.88% during the nine months ended September 30, 2023. The net interest margin, on a tax-equivalent basis, was 2.48% for the nine months ended September 30, 2024, compared to 2.90% for the nine months ended September 30, 2023. The decrease in the net interest margin was primarily due to an increase in the average cost of interest-bearing liabilities and the unfavorable shift in the deposit mix from low cost core to high cost time deposits, which was partially offset by an increase in the average yield on interest-earning assets. During the nine months ended September 30, 2024 and the nine months ended September 30, 2023, the Company had a fair value hedge which contributed to an increase in the net interest margin of seven and three basis points, respectively. Excluding the interest income from the fair value hedge, the net interest margin was 2.39% and 2.85%, for the nine months ended September 30, 2024 and the nine months ended September 30, 2023, respectively. The fair value hedge is scheduled to mature in October of 2024.
The average yield on interest-earning assets, without the impact of tax-equivalent adjustments, was 4.49% for the nine months ended September 30, 2024, compared to 4.14% for the nine months ended September 30, 2023. The average loan yield, without the impact of tax-equivalent adjustments, was 4.86% for the nine months ended September 30, 2024, compared to 4.49% for the nine months ended September 30, 2023. During the nine months ended September 30, 2024, average interest-earning assets increased $14.5 million, or 0.6%, to $2.4 billion, from the same period in 2023. The increase was primarily due to an increase in average loans of $23.4 million, or 1.2%, an increase in average short-term investments, consisting of cash and cash equivalents, of $5.7 million, or 44.2%, and an increase in other interest-earning assets of $1.7 million, or 13.7%, partially offset by a decrease in average securities of $16.3 million, or 4.4%.
The average cost of total funds, including non-interest bearing accounts and borrowings, increased 80 basis points from 1.32% for the nine months ended September 30, 2023 to 2.12% for the nine months ended September 30, 2024. The average cost of core deposits, which the Company defines as all deposits except time deposits, increased 24 basis points to 0.86% for the nine months ended September 30, 2024, from 0.62% for the nine months ended September 30, 2023. The average cost of time deposits increased 160 basis points from 2.72% for the nine months ended September 30, 2023 to 4.32% for the nine months ended September 30, 2024. The average cost of borrowings, including subordinated debt, increased 15 basis points from 4.84% for the nine months ended September 30, 2023 to 4.99% for the nine months ended September 30, 2024. Average demand deposits, an interest-free source of funds, decreased $52.1 million, or 8.6%, from $607.3 million, or 28.0% of total average deposits, for the nine months ended September 30, 2023, to $555.3 million, or 25.8% of total average deposits, for the nine months ended September 30, 2024.
Provision for Credit Losses
During the nine months ended September 30, 2024, the Company recorded a provision for credit losses of $97,000, compared to a provision for credit losses of $386,000 during the nine months ended September 30, 2023. The decrease was primarily due to changes in the loan mix as well as economic environment and related adjustments to the quantitative components of the CECL methodology. The provision for credit losses was determined by a number of factors: the continued strong credit performance of the Company's loan portfolio, changes in the loan portfolio mix and Management's consideration of existing economic conditions and the economic outlook from the Federal Reserve's actions to control inflation. Management continues to monitor macroeconomic variables related to increasing interest rates, inflation and the concerns of an economic downturn, and believes it is appropriately reserved for the current economic environment.
During the nine months ended September 30, 2024, the Company recorded net charge-offs of $41,000 compared to net charge-offs of $1.9 million for the nine months ended September 30, 2023. The charge-offs during the nine months ended September 30, 2023 were related to one commercial relationship acquired in October 2016 from Chicopee Bancorp, Inc. The Company recorded a $1.9 million charge-off on the relationship, which represented the non-accretable credit mark that was required to be grossed-up to the loan's amortized cost basis with a corresponding increase to the allowance for credit losses under the CECL implementation.
Non-Interest Income
For the nine months ended September 30, 2024, non-interest income increased $1.5 million, or 17.9%, from $8.2 million during the nine months ended September 30, 2023 to $9.6 million. Service charges and fees on deposits increased $328,000, or 5.0%, and income from BOLI increased $37,000, or 2.7%.
During the nine months ended September 30, 2024, the Company reported a gain of $987,000 on non-marketable equity investments, compared to a gain of $590,000 during the nine months ended September 30, 2023. During the nine months ended September 30, 2024, the Company reported income of $246,000 from mortgage banking activities due to the sale of fixed rate residential real estate loans and did not have comparable income during the nine months ended September 30, 2023. During the nine months ended September 30, 2024, the Company reported $74,000 in other income from loan-level swap fees on commercial loans and did not have comparable income during the nine months ended September 30, 2023. During the nine months ended September 30, 2024, the Company reported $22,000 in unrealized gains of marketable equity securities and did not have comparable income during the nine months ended September 30, 2023. Gains and losses from the investment portfolio vary from quarter to quarter based on market conditions, as well as the related yield curve and valuation changes. During the nine months ended September 30, 2024, the Company reported a loss on the sales of premises and equipment of $6,000 compared to $3,000 during the nine months ended September 30, 2023. During the nine months ended September 30, 2023, the Company recorded a $1.1 million final termination expense related to the defined benefit pension plan (the "DB Plan") termination. The Company did not have comparable income or expense during the nine months ended September 30, 2024. During the nine months ended September 30, 2023, non-interest income included a non-taxable gain of $778,000 on BOLI death benefits. The Company did not have comparable income during the nine months ended September 30, 2024.
Non-Interest Expense
For the nine months ended September 30, 2024, non-interest expense decreased $63,000, or 0.1%, to $43.5 million, compared to $43.6 million for the nine months ended September 30, 2023. The decrease in non-interest expense was primarily due to a decrease in professional fees of $513,000, or 23.3%, a decrease in salaries and employee benefits of $218,000, or 0.9%, a decrease in advertising expense of $159,000, or 14.2%, a decrease in other non-interest expense of $120,000, or 2.9%, and a decrease in furniture and equipment related expense of $10,000, or 0.7%. These decreases were partially offset by an increase in software related expenses of $309,000, or 19.7%, an increase in debit card and ATM processing fees of $264,000, or 16.7%, an increase in data processing of $208,000, or 8.8%, an increase in FDIC insurance expense of $88,000, or 9.0%, and an increase in occupancy expense of $88,000, or 2.4%.
For the nine months ended September 30, 2024, the efficiency ratio was 80.3%, compared to 72.7% for the nine months ended September 30, 2023. For the nine months ended September 30, 2024, the adjusted efficiency ratio, a non-GAAP financial measure, was 81.8% compared to 73.0% for the nine months ended September 30, 2023. The increases in the efficiency ratio and the non-GAAP adjusted efficiency ratio were driven by lower revenues during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. See pages 19-21 for the related adjusted efficiency ratio calculation and a reconciliation of GAAP to non-GAAP financial measures.
Income Tax Provision
Income tax expense for the nine months ended September 30, 2024 was $2.2 million, representing an effective tax rate of 20.9%, compared to $3.4 million, representing an effective tax rate of 21.3%, for nine months ended September 30, 2023.
Balance Sheet
At September 30, 2024, total assets were $2.6 billion, an increase of $75.9 million, or 3.0%, from December 31, 2023. The increase in total assets was primarily due to an increase in cash and cash equivalents of $44.0 million, or 152.4%, an increase in total loans of $21.7 million, or 1.1%, and an increase in investment securities of $8.7 million, or 2.4%.
Investments
At September 30, 2024, the investment securities portfolio totaled $369.4 million, or 14.0% of total assets, compared to $360.7 million, or 14.1%, of total assets, at December 31, 2023. At September 30, 2024, the Company's available-for-sale ("AFS") securities portfolio, recorded at fair market value, increased $18.8 million, or 13.7%, from $137.1 million at December 31, 2023 to $155.9 million. The held-to-maturity ("HTM") securities portfolio, recorded at amortized cost, decreased $10.1 million, or 4.5%, from $223.4 million at December 31, 2023 to $213.3 million at September 30, 2024.
At September 30, 2024, the Company reported unrealized losses on the AFS securities portfolio of $24.6 million, or 13.6% of the amortized cost basis of the AFS securities portfolio, compared to unrealized losses of $29.2 million, or 17.5% of the amortized cost basis of the AFS securities at December 31, 2023. At September 30, 2024, the Company reported unrealized losses on the HTM securities portfolio of $30.7 million, or 14.4%, of the amortized cost basis of the HTM securities portfolio, compared to $35.7 million, or 16.0% of the amortized cost basis of the HTM securities portfolio at December 31, 2023.
The securities in which the Company may invest are limited by regulation. Federally chartered savings banks have authority to invest in various types of assets, including U.S. Treasury obligations, securities of various government-sponsored enterprises, mortgage-backed securities, certain certificates of deposit of insured financial institutions, repurchase agreements, overnight and short-term loans to other banks, corporate debt instruments and marketable equity securities. The securities, with the exception of $4.6 million in corporate bonds, are issued by the United States government or government-sponsored enterprises and are therefore either explicitly or implicitly guaranteed as to the timely payment of contractual principal and interest. These positions are deemed to have no credit impairment, therefore, the disclosed unrealized losses with the securities portfolio relate primarily to changes in prevailing interest rates. In all cases, price improvement in future periods will be realized as the issuances approach maturity.
Management regularly reviews the portfolio for securities in an unrealized loss position. At September 30, 2024 and December 31, 2023, the Company did not record any credit impairment charges on its securities portfolio and attributed the unrealized losses primarily due to fluctuations in general interest rates or changes in expected prepayments and not due to credit quality. The primary objective of the Company's investment portfolio is to provide liquidity and to secure municipal deposit accounts while preserving the safety of principal. The Company expects to strategically redeploy available cash flows from the securities portfolio to fund loan growth and deposit outflows.
Total Loans
Total loans increased $21.7 million, or 1.1%, from December 31, 2023, to $2.0 billion at September 30, 2024. The increase in total loans was due to an increase in commercial real estate loans of $3.0 million, or 0.3%, an increase in residential real estate loans, including home equity loans, of $26.4 million, or 3.7%, partially offset by a decrease in commercial and industrial loans of $7.0 million, or 3.2%. During the three months ended September 30, 2024, the Company sold $20.1 million in fixed rate residential loans to the secondary market with servicing retained.
The following table presents the summary of the loan portfolio by the major classification of the loan at the periods indicated:
September 30, 2024
December 31, 2023
(Dollars in thousands)
Commercial real estate loans:
Non-owner occupied
$
878,265
$
881,643
Owner-occupied
204,524
198,108
Total commercial real estate loans
1,082,789
1,079,751
Residential real estate loans:
Residential
631,649
612,315
Home equity
116,923
109,839
Total residential real estate loans
748,572
722,154
Commercial and industrial loans
210,390
217,447
Consumer loans
4,631
5,472
Total gross loans
2,046,382
2,024,824
Unamortized premiums and net deferred loans fees and costs
2,620
2,493
Total loans
$
2,049,002
$
2,027,317
Credit Quality
Management continues to closely monitor the loan portfolio for any signs of deterioration in borrowers' financial condition and also in light of speculation that commercial real estate values may deteriorate as the market continues to adjust to higher vacancies and interest rates. We continue to proactively take steps to mitigate risk in our loan portfolio.
Total delinquency was $4.3 million, or 0.21% of total loans, at September 30, 2024, compared to $6.0 million, or 0.30% of total loans at December 31, 2023. At September 30, 2024, nonperforming loans totaled $4.9 million, or 0.24% of total loans, compared to $6.4 million, or 0.32% of total loans, at December 31, 2023. Total nonperforming assets totaled $4.9 million, or 0.18% of total assets, at September 30, 2024, compared to $6.4 million, or 0.25% of total assets, at December 31, 2023. At September 30, 2024 and December 31, 2023, there were no loans 90 or more days past due and still accruing interest. At September 30, 2024 and December 31, 2023, the Company did not have any other real estate owned.
At September 30, 2024, the allowance for credit losses as a percentage of total loans was 0.97% as compared to 1.00% at December 31, 2023. At September 30, 2024, the allowance for credit losses as a percentage of nonperforming loans was 409.5% as compared to 315.6% at December 31, 2023.
Total classified loans, defined as special mention and substandard loans, increased $3.7 million, or 9.4%, from $39.5 million, or 1.9% of total loans, at December 31, 2023 to $43.2 million, or 2.1%, of total loans at September 30, 2024. We continue to maintain diversity among property types and within our geographic footprint. More details on the diversification of the loan portfolio are available in the supplementary earnings presentation.
Deposits
Total deposits increased $80.5 million, or 3.8%, from $2.1 billion at December 31, 2023 to $2.2 billion at September 30, 2024. Core deposits, which the Company defines as all deposits except time deposits, decreased $8.3 million, or 0.5%, from $1.5 billion, or 71.5% of total deposits, at December 31, 2023, to $1.5 billion, or 68.5% of total deposits, at September 30, 2024. Non-interest-bearing deposits decreased $10.9 million, or 1.9%, to $568.7 million, money market accounts increased $1.5 million, or 0.2%, to $635.8 million, savings accounts decreased $8.2 million, or 4.4%, to $179.2 million and interest-bearing checking accounts increased $9.3 million, or 7.1%, to $140.3 million. Time deposits increased $88.8 million, or 14.5%, from $611.4 million at December 31, 2023 to $700.2 million at September 30, 2024. Brokered time deposits, which are included in time deposits, totaled $1.7 million at September 30, 2024 and at December 31, 2023.
The table below is a summary of our deposit balances for the periods noted:
September 30, 2024
June 30, 2024
December 31, 2023
(Dollars in thousands)
Core Deposits:
Demand accounts
$
568,685
$
553,329
$
579,595
Interest-bearing accounts
140,332
149,100
131,031
Savings accounts
179,214
186,171
187,405
Money market accounts
635,824
611,501
634,361
Total Core Deposits
$
1,524,055
$
1,500,101
$
1,532,392
Time Deposits:
700,151
671,708
611,352
Total Deposits:
$
2,224,206
$
2,171,809
$
2,143,744
During the nine months ended September 30, 2024, the Company continued to experience an unfavorable shift in deposit mix from low cost core deposits to high cost time deposits as customers continue to migrate to higher deposit rates. The Company continues to focus on the maintenance, development, and expansion of its core deposit base to meet funding requirements and liquidity needs, with an emphasis on retaining a long-term customer relationship base by competing for and retaining deposits in our local market. At September 30, 2024, the Bank's uninsured deposits represented 27.7% of total deposits, compared to 26.8% at December 31, 2023.
FHLB and Subordinated Debt
At September 30, 2024, total borrowings decreased $4.1 million, or 2.6%, from $156.5 million at December 31, 2023 to $152.4 million. Short-term borrowings decreased $11.7 million, or 72.7%, to $4.4 million, compared to $16.1 million at December 31, 2023. Long-term borrowings increased $7.6 million, or 6.3%, from $120.6 million at December 31, 2023 to $128.3 million at September 30, 2024. At September 30, 2024 and December 31, 2023, borrowings also consisted of $19.7 million in fixed-to-floating rate subordinated notes.
The Company utilized the Bank Term Funding Program ("BTFP"), which was created in March 2023 to enhance banking system liquidity by allowing institutions to pledge certain securities at par value and borrow at a rate of ten basis points over the one-year overnight index swap rate. The BTFP was available to federally insured depository institutions in the U.S., with advances having a term of up to one year with no prepayment penalties. The BTFP ceased extending new advances in March 2024. At December 31, 2023, the Company's outstanding balance under the BTFP was $90.0 million. There were no outstanding balance under the BTFP at September 30, 2024.
As of September 30, 2024, the Company had $452.0 million of additional borrowing capacity at the Federal Home Loan Bank, $404.9 million of additional borrowing capacity under the Federal Reserve Bank Discount Window and $25.0 million of other unsecured lines of credit with correspondent banks.
Capital
At September 30, 2024, shareholders' equity was $240.7 million, or 9.1% of total assets, compared to $237.4 million, or 9.3% of total assets, at December 31, 2023. The change was primarily attributable to a decrease in accumulated other comprehensive loss of $3.4 million, cash dividends paid of $4.5 million, repurchase of shares at a cost of $5.6 million, partially offset by net income of $8.4 million. At September 30, 2024, total shares outstanding were 21,113,408.
The Company's regulatory capital ratios continue to be strong and in excess of regulatory minimum requirements to be considered well-capitalized as defined by regulators and internal Company targets. Total Risk-Based Capital Ratio was 14.4% at September 30, 2024 and 14.7% at December 31, 2023. The Bank's Tier 1 Leverage Ratio to adjusted average assets was 9.61% at September 30, 2024 and 9.62% at December 31, 2023.
Dividends
Although the Company has historically paid quarterly dividends on its common stock and currently intends to continue to pay such dividends, the Company's ability to pay such dividends depends on a number of factors, including restrictions under federal laws and regulations on the Company's ability to pay dividends, and as a result, there can be no assurance that dividends will continue to be paid in the future.
About Western New England Bancorp, Inc.
Western New England Bancorp, Inc. is a Massachusetts-chartered stock holding company and the parent company of Westfield Bank, CSB Colts, Inc., Elm Street Securities Corporation, WFD Securities, Inc. and WB Real Estate Holdings, LLC. Western New England Bancorp, Inc. and its subsidiaries are headquartered in Westfield, Massachusetts and operate 25 banking offices throughout western Massachusetts and northern Connecticut. To learn more, visit our website at www.westfieldbank.com.
Forward-Looking Statements
This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to the Company's financial condition, liquidity, results of operations, future performance, and business. Forward-looking statements may be identified by the use of such words as "believe," "expect," "anticipate," "should," "planned," "estimated," and "potential." Examples of forward-looking statements include, but are not limited to, estimates with respect to our financial condition, results of operations and business that are subject to various factors which could cause actual results to differ materially from these estimates. These factors include, but are not limited to:
unpredictable changes in general economic conditions, financial markets, fiscal, monetary and regulatory policies, including actual or potential stress in the banking industry;
the duration and scope of potential pandemics, including the emergence of new variants and the response thereto;
unstable political and economic conditions which could materially impact credit quality trends and the ability to generate loans and gather deposits;
inflation and governmental responses to inflation, including recent sustained increases and potential future increases in interest rates that reduce margins;
the effect on our operations of governmental legislation and regulation, including changes in accounting regulation or standards, the nature and timing of the adoption and effectiveness of new requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, Basel guidelines, capital requirements and other applicable laws and regulations;
significant changes in accounting, tax or regulatory practices or requirements;
new legal obligations or liabilities or unfavorable resolutions of litigation;
disruptive technologies in payment systems and other services traditionally provided by banks;
the highly competitive industry and market area in which we operate;
changes in business conditions and inflation;
operational risks or risk management failures by us or critical third parties, including without limitation with respect to data processing, information systems, cybersecurity, technological changes, vendor issues, business interruption, and fraud risks;
failure or circumvention of our internal controls or procedures;
changes in the securities markets which affect investment management revenues;
increases in Federal Deposit Insurance Corporation deposit insurance premiums and assessments;
the soundness of other financial services institutions which may adversely affect our credit risk;
certain of our intangible assets may become impaired in the future;
new lines of business or new products and services, which may subject us to additional risks;
changes in key management personnel which may adversely impact our operations;
severe weather, natural disasters, acts of war or terrorism and other external events which could significantly impact our business; and
other risk factors detailed from time to time in our SEC filings.
Although we believe that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from the results discussed in these forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We do not undertake any obligation to republish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except to the extent required by law.
WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES Consolidated Statements of Net Income and Other Data (Dollars in thousands, except per share data) Unaudited)
Three Months Ended
Nine Months Ended
September 30,
June 30,
March 31,
December 31,
September 30,
September 30,
2024
2024
2024
2023
2023
2024
2023
INTEREST AND DIVIDEND INCOME:
Loans
$
25,134
$
24,340
$
24,241
$
23,939
$
23,451
$
73,715
$
67,230
Securities
2,121
2,141
2,114
2,094
2,033
6,376
6,276
Other investments
189
148
136
140
166
473
418
Short-term investments
396
173
113
597
251
682
424
Total interest and dividend income
27,840
26,802
26,604
26,770
25,901
81,246
74,348
INTEREST EXPENSE:
Deposits
11,165
10,335
9,293
8,773
7,704
30,793
17,876
Short-term borrowings
71
186
283
123
117
540
1,466
Long-term debt
1,622
1,557
1,428
1,444
1,444
4,607
2,513
Subordinated debt
254
254
254
254
253
762
760
Total interest expense
13,112
12,332
11,258
10,594
9,518
36,702
22,615
Net interest and dividend income
14,728
14,470
15,346
16,176
16,383
44,544
51,733
PROVISION FOR (REVERSAL OF) CREDIT LOSSES
941
(294
)
(550
)
486
354
97
386
Net interest and dividend income after provision for (reversal of) credit losses
13,787
14,764
15,896
15,690
16,029
44,447
51,347
NON-INTEREST INCOME:
Service charges and fees on deposits
2,341
2,341
2,219
2,283
2,145
6,901
6,573
Income from bank-owned life insurance
470
502
453
432
454
1,425
1,388
Unrealized gain (loss) on marketable equity securities
10
4
8
(1
)
-
22
-
Gain on sale of mortgages
246
-
-
-
-
246
-
Gain on non-marketable equity investments
-
987
-
-
238
987
590
Loss on disposal of premises and equipment
-
-
(6
)
-
(3
)
(6
)
(3
)
Loss on defined benefit plan termination
-
-
-
-
-
-
(1,143
)
Gain on bank-owned life insurance death benefit
-
-
-
-
778
-
778
Other income
74
-
-
-
-
74
-
Total non-interest income
3,141
3,834
2,674
2,714
3,612
9,649
8,183
NON-INTEREST EXPENSE:
Salaries and employees benefits
8,112
7,901
8,244
7,739
7,955
24,257
24,475
Occupancy
1,217
1,218
1,363
1,198
1,159
3,798
3,710
Furniture and equipment
483
483
484
494
482
1,450
1,460
Data processing
869
846
862
788
824
2,577
2,369
Software
612
566
699
598
529
1,877
1,568
Debit/ATM card processing expense
649
643
552
559
562
1,844
1,580
Professional fees
540
581
569
674
643
1,690
2,203
FDIC insurance
338
323
410
338
341
1,071
983
Advertising
271
339
349
377
362
959
1,118
Other
1,315
1,414
1,250
2,020
1,261
3,979
4,099
Total non-interest expense
14,406
14,314
14,782
14,785
14,118
43,502
43,565
INCOME BEFORE INCOME TAXES
2,522
4,284
3,788
3,619
5,523
10,594
15,965
INCOME TAX PROVISION
618
771
827
1,108
1,033
2,216
3,408
NET INCOME
$
1,904
$
3,513
$
2,961
$
2,511
$
4,490
$
8,378
$
12,557
Basic earnings per share
$
0.09
$
0.17
$
0.14
$
0.12
$
0.21
$
0.40
$
0.58
Weighted average shares outstanding
20,804,162
21,056,173
21,180,968
21,253,452
21,560,940
21,013,003
21,631,067
Diluted earnings per share
$
0.09
$
0.17
$
0.14
$
0.12
$
0.21
$
0.40
$
0.58
Weighted average diluted shares outstanding
20,933,833
21,163,762
21,271,323
21,400,664
21,680,113
21,122,208
21,681,251
Other Data:
Return on average assets (1)
0.29
%
0.55
%
0.47
%
0.39
%
0.70
%
0.44
%
0.66
%
Return on average equity (1)
3.19
%
6.03
%
5.04
%
4.31
%
7.60
%
4.74
%
7.19
%
Efficiency ratio
80.62
%
78.20
%
82.03
%
78.27
%
70.61
%
80.27
%
72.71
%
Adjusted efficiency ratio (2)
80.67
%
82.68
%
82.04
%
78.26
%
74.38
%
81.79
%
72.98
%
Net interest margin
2.40
%
2.42
%
2.57
%
2.64
%
2.70
%
2.46
%
2.88
%
Net interest margin, on a fully tax-equivalent basis
2.42
%
2.44
%
2.59
%
2.66
%
2.72
%
2.48
%
2.90
%
(1) Annualized.
(2) The adjusted efficiency ratio (non-GAAP) represents the ratio of operating expenses divided by the sum of net interest and dividend income and non-interest income, excluding realized and unrealized gains and losses on securities, gain on non-marketable equity investments, loss on disposal of premises and equipment, loss on defined benefit plan termination and gain on bank-owned life insurance death benefit.
WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Dollars in thousands) (Unaudited)
September 30,
June 30,
March 31,
December 31,
September 30,
2024
2024
2024
2023
2023
Cash and cash equivalents
$
72,802
$
53,458
$
22,613
$
28,840
$
62,267
Securities available-for-sale, at fair value
155,889
135,089
138,362
137,115
130,709
Securities held to maturity, at amortized cost
213,266
217,632
221,242
223,370
225,020
Marketable equity securities, at fair value
252
233
222
196
-
Federal Home Loan Bank of Boston and other restricted stock - at cost
7,143
7,143
3,105
3,707
3,063
Loans
2,049,002
2,026,226
2,025,566
2,027,317
2,014,820
Allowance for credit losses
(19,955
)
(19,444
)
(19,884
)
(20,267
)
(19,978
)
Net loans
2,029,047
2,006,782
2,005,682
2,007,050
1,994,842
Bank-owned life insurance
76,570
76,100
75,598
75,145
74,713
Goodwill
12,487
12,487
12,487
12,487
12,487
Core deposit intangible
1,531
1,625
1,719
1,813
1,906
Other assets
71,492
75,521
76,206
74,848
79,998
TOTAL ASSETS
$
2,640,479
$
2,586,070
$
2,557,236
$
2,564,571
$
2,585,005
Total deposits
$
2,224,206
$
2,171,809
$
2,143,747
$
2,143,744
$
2,176,303
Short-term borrowings
4,390
6,570
11,470
16,100
8,890
Long-term debt
128,277
128,277
120,646
120,646
121,178
Subordinated debt
19,741
19,731
19,722
19,712
19,702
Securities pending settlement
2,513
102
-
-
2,253
Other liabilities
20,697
23,104
25,855
26,960
25,765
TOTAL LIABILITIES
2,399,824
2,349,593
2,321,440
2,327,162
2,354,091
TOTAL SHAREHOLDERS' EQUITY
240,655
236,477
235,796
237,409
230,914
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
2,640,479
$
2,586,070
$
2,557,236
$
2,564,571
$
2,585,005
WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES Other Data (Dollars in thousands, except per share data) (Unaudited)
Three Months Ended
September 30, 2024
June 30, 2024
March 31, 2024
December 31, 2023
September 30, 2023
Shares outstanding at end of period
21,113,408
21,357,849
21,627,690
21,666,807
21,927,242
Operating results:
Net interest income
$
14,728
$
14,470
$
15,346
$
16,176
$
16,383
Provision for (reversal of) credit losses
941
(294
)
(550
)
486
354
Non-interest income
3,141
3,834
2,674
2,714
3,612
Non-interest expense
14,406
14,314
14,782
14,785
14,118
Income before income provision for income taxes
2,522
4,284
3,788
3,619
5,523
Income tax provision
618
771
827
1,108
1,033
Net income
1,904
3,513
2,961
2,511
4,490
Performance Ratios:
Net interest margin
2.40
%
2.42
%
2.57
%
2.64
%
2.70
%
Net interest margin, on a fully tax-equivalent basis
2.42
%
2.44
%
2.59
%
2.66
%
2.72
%
Interest rate spread
1.60
%
1.66
%
1.85
%
1.96
%
2.07
%
Interest rate spread, on a fully tax-equivalent basis
1.62
%
1.67
%
1.86
%
1.98
%
2.09
%
Return on average assets
0.29
%
0.55
%
0.47
%
0.39
%
0.70
%
Return on average equity
3.19
%
6.03
%
5.04
%
4.31
%
7.60
%
Efficiency ratio (GAAP)
80.62
%
78.20
%
82.03
%
78.27
%
70.61
%
Adjusted efficiency ratio (non-GAAP) (1)
80.67
%
82.68
%
82.04
%
78.26
%
74.38
%
Per Common Share Data:
Basic earnings per share
$
0.09
$
0.17
$
0.14
$
0.12
$
0.21
Earnings per diluted share
0.09
0.17
0.14
0.12
0.21
Cash dividend declared
0.07
0.07
0.07
0.07
0.07
Book value per share
11.40
11.07
10.90
10.96
10.53
Tangible book value per share (non-GAAP) (2)
10.73
10.41
10.25
10.30
9.87
Asset Quality:
30-89 day delinquent loans
$
3,059
$
3,270
$
3,000
$
4,605
$
4,097
90 days or more delinquent loans
1,253
2,280
1,716
1,394
1,527
Total delinquent loans
4,312
5,550
4,716
5,999
5,624
Total delinquent loans as a percentage of total loans
0.21
%
0.27
%
0.23
%
0.30
%
0.28
%
Nonperforming loans
$
4,873
$
5,845
$
5,837
$
6,421
$
6,290
Nonperforming loans as a percentage of total loans
0.24
%
0.29
%
0.29
%
0.32
%
0.31
%
Nonperforming assets as a percentage of total assets
0.18
%
0.23
%
0.23
%
0.25
%
0.24
%
Allowance for credit losses as a percentage of nonperforming loans
409.50
%
332.66
%
340.65
%
315.64
%
317.62
%
Allowance for credit losses as a percentage of total loans
0.97
%
0.96
%
0.98
%
1.00
%
0.99
%
Net loan charge-offs (recoveries)
$
98
$
10
$
(67
)
$
136
$
78
Net loan charge-offs (recoveries) as a percentage of average loans
0.00
%
0.00
%
0.00
%
0.01
%
0.00
%
____________________________ (1) The adjusted efficiency ratio (non-GAAP) represents the ratio of operating expenses divided by the sum of net interest and dividend income and non-interest income, excluding realized and unrealized gains and losses on securities, gain on non-marketable equity investments, loss on disposal of premises and equipment, loss on defined benefit plan termination and gain on bank-owned life insurance death benefit. (2) Tangible book value per share (non-GAAP) represents the value of the Company's tangible assets divided by its current outstanding shares.
The following table sets forth the information relating to our average balances and net interest income for the three months ended September 30, 2024, June 30, 2024 and September 30, 2023 and reflects the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated.
Three Months Ended
September 30, 2024
June 30, 2024
September 30, 2023
Average
Average Yield/
Average
Average Yield/
Average
Average Yield/
Balance
Interest
Cost(8)
Balance
Interest
Cost(8)
Balance
Interest
Cost(8)
(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans(1)(2)
$
2,038,593
$
25,253
4.93
%
$
2,017,127
$
24,454
4.88
%
$
2,007,267
$
23,568
4.66
%
Securities(2)
354,696
2,121
2.38
354,850
2,141
2.43
361,216
2,033
2.23
Other investments
15,904
189
4.73
14,328
148
4.15
12,155
166
5.42
Short-term investments(3)
32,043
396
4.92
14,328
173
4.86
22,349
251
4.46
Total interest-earning assets
2,441,236
27,959
4.56
2,400,633
26,916
4.51
2,402,987
26,018
4.30
Total non-interest-earning assets
153,585
156,701
156,503
Total assets
$
2,594,821
$
2,557,334
$
2,559,490
LIABILITIES AND EQUITY:
Interest-bearing liabilities
Interest-bearing checking accounts
$
131,133
271
0.82
$
131,449
253
0.77
$
144,792
269
0.74
Savings accounts
179,844
38
0.08
185,690
51
0.11
195,020
41
0.08
Money market accounts
621,340
3,172
2.03
622,062
2,930
1.89
656,066
2,488
1.50
Time deposit accounts
688,797
7,684
4.44
650,054
7,101
4.39
563,135
4,906
3.46
Total interest-bearing deposits
1,621,114
11,165
2.74
1,589,255
10,335
2.62
1,559,013
7,704
1.96
Borrowings
153,317
1,947
5.05
160,484
1,997
5.00
149,507
1,814
4.81
Interest-bearing liabilities
1,774,431
13,112
2.94
1,749,739
12,332
2.83
1,708,520
9,518
2.21
Non-interest-bearing deposits
559,224
548,781
591,933
Other non-interest-bearing liabilities
23,466
24,453
24,504
Total non-interest-bearing liabilities
582,690
573,234
616,437
Total liabilities
2,357,121
2,322,973
2,324,957
Total equity
237,700
234,361
234,533
Total liabilities and equity
$
2,594,821
$
2,557,334
$
2,559,490
Less: Tax-equivalent adjustment(2)
(119
)
(114
)
(117
)
Net interest and dividend income
$
14,728
$
14,470
$
16,383
Net interest rate spread(4)
1.60
%
1.66
%
2.07
%
Net interest rate spread, on a tax-equivalent basis(5)
1.62
%
1.67
%
2.09
%
Net interest margin(6)
2.40
%
2.42
%
2.70
%
Net interest margin, on a tax-equivalent basis(7)
2.42
%
2.44
%
2.72
%
Ratio of average interest-earning assets to average interest-bearing liabilities
137.58
%
137.20
%
140.65
%
The following tables set forth the information relating to our average balances and net interest income for the nine months ended September 30, 2024 and 2023 and reflect the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated.
Nine Months Ended September 30,
2024
2023
Average Balance
Interest
Average Yield/ Cost(8)
Average Balance
Interest
Average Yield/ Cost(8)
(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans(1)(2)
$
2,025,858
$
74,058
4.88
%
$
2,002,485
$
67,586
4.51
%
Securities(2)
356,340
6,376
2.39
372,623
6,276
2.25
Other investments
14,248
473
4.43
12,528
418
4.46
Short-term investments(3)
18,634
682
4.89
12,922
424
4.39
Total interest-earning assets
2,415,080
81,589
4.51
2,400,558
74,704
4.16
Total non-interest-earning assets
154,894
154,525
Total assets
$
2,569,974
$
2,555,083
LIABILITIES AND EQUITY:
Interest-bearing liabilities
Interest-bearing checking accounts
$
132,708
759
0.76
%
$
142,716
780
0.73
%
Savings accounts
183,872
128
0.09
207,513
142
0.09
Money market accounts
623,216
8,689
1.86
711,173
6,813
1.28
Time deposit accounts
655,700
21,217
4.32
498,193
10,141
2.72
Total interest-bearing deposits
1,595,496
30,793
2.58
1,559,595
17,876
1.53
Short-term borrowings and long-term debt
158,183
5,909
4.99
130,796
4,739
4.84
Total interest-bearing liabilities
1,753,679
36,702
2.80
1,690,391
22,615
1.79
Non-interest-bearing deposits
555,253
607,338
Other non-interest-bearing liabilities
24,931
23,886
Total non-interest-bearing liabilities
580,184
631,224
Total liabilities
2,333,863
2,321,615
Total equity
236,111
233,468
Total liabilities and equity
$
2,569,974
$
2,555,083
Less: Tax-equivalent adjustment (2)
(343
)
(356
)
Net interest and dividend income
$
44,544
$
51,733
Net interest rate spread (4)
1.70
%
2.35
%
Net interest rate spread, on a tax-equivalent basis (5)
1.71
%
2.37
%
Net interest margin (6)
2.46
%
2.88
%
Net interest margin, on a tax-equivalent basis (7)
2.48
%
2.90
%
Ratio of average interest-earning assets to average interest-bearing liabilities
137.72
%
142.01
%
(1) Loans, including nonaccrual loans, are net of deferred loan origination costs and unadvanced funds. (2) Loan and securities income are presented on a tax-equivalent basis using a tax rate of 21%. The tax-equivalent adjustment is deducted from tax-equivalent net interest and dividend income to agree to the amount reported on the consolidated statements of net income. (3) Short-term investments include federal funds sold. (4) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities. (5) Net interest rate spread, on a tax-equivalent basis, represents the difference between the tax-equivalent weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities. (6) Net interest margin represents net interest and dividend income as a percentage of average interest-earning assets. (7) Net interest margin, on a tax-equivalent basis, represents tax-equivalent net interest and dividend income as a percentage of average interest-earning assets. (8) Annualized.
Reconciliation of Non-GAAP to GAAP Financial Measures
The Company believes that certain non-GAAP financial measures provide information to investors that is useful in understanding its results of operations and financial condition. Because not all companies use the same calculation, this presentation may not be comparable to other similarly titled measures calculated by other companies. A reconciliation of these non-GAAP financial measures is provided below.
For the quarter ended
9/30/2024
6/30/2024
3/31/2024
12/31/2023
9/30/2023
(Dollars in thousands)
Loan interest (no tax adjustment)
$
25,134
$
24,340
$
24,241
$
23,939
$
23,451
Tax-equivalent adjustment
119
114
110
113
117
Loan interest (tax-equivalent basis)
$
25,253
$
24,454
$
24,351
$
24,052
$
23,568
Net interest income (no tax adjustment)
$
14,728
$
14,470
$
15,346
$
16,176
$
16,383
Tax equivalent adjustment
119
114
110
113
117
Net interest income (tax-equivalent basis)
$
14,847
$
14,584
$
15,456
$
16,289
$
16,500
Average interest-earning assets
$
2,441,236
$
2,400,633
$
2,403,086
$
2,427,112
$
2,402,987
Net interest margin (no tax adjustment)
2.40
%
2.42
%
2.57
%
2.64
%
2.70
%
Net interest margin, tax-equivalent
2.42
%
2.44
%
2.59
%
2.66
%
2.72
%
Book Value per Share (GAAP)
$
11.40
$
11.07
$
10.90
$
10.96
$
10.53
Non-GAAP adjustments:
Goodwill
(0.59
)
(0.58
)
(0.58
)
(0.58
)
(0.57
)
Core deposit intangible
(0.08
)
(0.08
)
(0.07
)
(0.08
)
(0.09
)
Tangible Book Value per Share (non-GAAP)
$
10.73
$
10.41
$
10.25
$
10.30
$
9.87
For the quarter ended
9/30/2024
6/30/2024
3/31/2024
12/31/2023
9/30/2023
(Dollars in thousands)
Efficiency Ratio:
Non-interest Expense (GAAP)
$
14,406
$
14,314
$
14,782
$
14,785
$
14,118
Net Interest Income (GAAP)
$
14,728
$
14,470
$
15,346
$
16,176
$
16,383
Non-interest Income (GAAP)
$
3,141
$
3,834
$
2,674
$
2,714
$
3,612
Non-GAAP adjustments:
Unrealized (gains) losses on marketable equity securities
(10
)
(4
)
(8
)
1
-
Gain on non-marketable equity investments
-
(987
)
-
-
(238
)
Loss on disposal of premises and equipment
-
-
6
-
3
Gain on bank-owned life insurance death benefit
-
-
-
-
(778
)
Non-interest Income for Adjusted Efficiency Ratio (non-GAAP)
$
3,131
$
2,843
$
2,672
$
2,715
$
2,599
Total Revenue for Adjusted Efficiency Ratio (non-GAAP)
$
17,859
$
17,313
$
18,018
$
18,891
$
18,982
Efficiency Ratio (GAAP)
80.62
%
78.20
%
82.03
%
78.27
%
70.61
%
Adjusted Efficiency Ratio (Non-interest Expense (GAAP)/Total Revenue for Adjusted Efficiency Ratio (non-GAAP))
80.67
%
82.68
%
82.04
%
78.26
%
74.38
%
For the nine months ended
9/30/2024
9/30/2023
(Dollars in thousands)
Loan income (no tax adjustment)
$
73,715
$
67,230
Tax-equivalent adjustment
343
356
Loan income (tax-equivalent basis)
$
74,058
$
67,586
Net interest income (no tax adjustment)
$
44,544
$
51,733
Tax equivalent adjustment
343
356
Net interest income (tax-equivalent basis)
$
44,887
$
52,089
Average interest-earning assets
$
2,415,080
$
2,400,558
Net interest margin (no tax adjustment)
2.46
%
2.88
%
Net interest margin, tax-equivalent
2.48
%
2.90
%
Adjusted Efficiency Ratio:
Non-interest Expense (GAAP)
$
43,502
$
43,565
Net Interest Income (GAAP)
$
44,544
$
51,733
Non-interest Income (GAAP)
$
9,649
$
8,183
Non-GAAP adjustments:
Unrealized gains on marketable equity securities
(22
)
-
Loss on disposal of premises and equipment, net
6
3
Gain on bank-owned life insurance
-
(778
)
Gain on non-marketable equity investments
(987
)
(590
)
Loss on defined benefit plan curtailment
-
1,143
Non-interest Income for Adjusted Efficiency Ratio (non-GAAP)
$
8,646
$
7,961
Total Revenue for Adjusted Efficiency Ratio (non-GAAP)
$
53,190
$
59,694
Efficiency Ratio (GAAP)
80.27
%
72.71
%
Adjusted Efficiency Ratio (Non-interest Expense (GAAP)/Total Revenue for Adjusted Efficiency Ratio (non-GAAP))
81.79
%
72.98
%
For further information contact: James C. Hagan, President and CEO Guida R. Sajdak, Executive Vice President and CFO Meghan Hibner, First Vice President and Investor Relations Officer 413-568-1911
