10-Q 1 wneb-10q_093024.htm QUARTERLY REPORT
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

 

or

 

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

 

Commission File Number: 001-16767

 

Western New England Bancorp, Inc.

 

(Exact name of registrant as specified in its charter)

 

Massachusetts     73-1627673
 (State or other jurisdiction of incorporation or organization)   (IRS Employer Identification Number)

 

141 Elm Street, Westfield, Massachusetts   01086
(Address of principal executive offices)   (Zip Code)

 

(413) 568-1911

(Registrant’s telephone number, including area code)

 

     

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading

Symbol(s)

 Name of each exchange on which registered
Common Stock, $0.01 par value per share WNEB NASDAQ

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  

Yes ☒     No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  

Yes ☒     No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐ Accelerated filer ☒
Non-accelerated filer ☐  Smaller reporting company ☒
  Emerging growth company ☐  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐    No ☒ 

 

At November 1, 2024 the registrant had 21,018,408 shares of common stock, $0.01 par value, issued and outstanding.

 

 

 

 

 

 

TABLE OF CONTENTS

 

    Page
       
FORWARD-LOOKING STATEMENTS i  
       
PART I – FINANCIAL INFORMATION    
       
Item 1. Financial Statements of Western New England Bancorp, Inc. and Subsidiaries (Unaudited)  1  
       
  Consolidated Balance Sheets – September 30, 2024 and December 31, 2023 1  
       
  Consolidated Statements of Net Income – Three and Nine Months Ended September 30, 2024 and 2023 2  
       
  Consolidated Statements of Comprehensive Income – Three and Nine Months Ended September 30, 2024 and 2023 3  
       
  Consolidated Statements of Changes in Shareholders’ Equity – Three and Nine Months Ended September 30, 2024 and 2023 4  
       
  Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2024 and 2023 6  
       
  Notes to Consolidated Financial Statements 7  
       
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 41  
       
Item 3. Quantitative and Qualitative Disclosures About Market Risk 64  
       
Item 4. Controls and Procedures 65  
       
PART II – OTHER INFORMATION    
       
Item 1. Legal Proceedings 65  
       
Item 1A. Risk Factors 65  
       
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 65  
       
Item 3. Defaults upon Senior Securities 66  
       
Item 4. Mine Safety Disclosures 66  
       
Item 5. Other Information 66  
       
Item 6. Exhibits 66  

 

 

 

 

FORWARD–LOOKING STATEMENTS

 

We may, from time to time, make written or oral “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to Western New England Bancorp, Inc.’s (the “Company”) 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 and political events, including the impact of the upcoming U.S. presidential election, 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;

●changes in 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.

 

Investors should consider these risks, uncertainties, and other factors in addition to the factors under the heading “Risk Factors” included in this filing and our other filings with the SEC.

 

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.

 

i

 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1: FINANCIAL STATEMENTS.

WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - UNAUDITED

(Dollars in thousands, except share data)

 

         
  

September 30,
2024

  

December 31,
2023

 
ASSETS          
Cash and due from banks  $28,612   $20,784 
Federal funds sold   12,559    2,991 
Interest-bearing deposits and other short-term investments   31,631    5,065 
Total cash and cash equivalents   72,802    28,840 
           
Securities available-for-sale, at fair value   155,889    137,115 
Securities held-to-maturity, at amortized cost (Fair value of $182,548 at September 30, 2024 and $187,692 at December 31, 2023)   213,266    223,370 
Marketable equity securities, at fair value   252    196 
Total investment securities   369,407    360,681 
Federal Home Loan Bank stock and other restricted stock, at amortized cost   7,143    3,707 
           
Total Loans   2,049,002    2,027,317 
Less: Allowance for credit losses   (19,955)   (20,267)
Net loans   2,029,047    2,007,050 
           
Premises and equipment, net
   24,249    25,575 
Accrued interest receivable   8,653    8,528 
Bank-owned life insurance   76,570    75,145 
Deferred tax asset, net   12,481    13,636 
Goodwill   12,487    12,487 
Core deposit intangible   1,531    1,813 
Other assets   26,109    27,109 
TOTAL ASSETS  $2,640,479   $2,564,571 
           
LIABILITIES AND SHAREHOLDERS’ EQUITY          
Deposits:          
Non-interest-bearing deposits  $568,685   $579,594 
Interest-bearing deposits   1,655,521    1,564,150 
Total deposits   2,224,206    2,143,744 
           
Borrowings:          
Short-term borrowings   4,390    16,100 
Long-term debt   128,277    120,646 
Subordinated debt   19,741    19,712 
Total borrowings   152,408    156,458 
           
Other liabilities   23,210    26,960 
TOTAL LIABILITIES   2,399,824    2,327,162 
SHAREHOLDERS’ EQUITY:          
Preferred stock - $0.01 par value, 5,000,000 shares authorized, none outstanding at September 30, 2024 and December 31, 2023   —    — 
Common stock - $0.01 par value, 75,000,000 shares authorized, 21,113,408 shares issued and outstanding at September 30, 2024; 21,666,807 shares issued and outstanding at December 31, 2023   211    217 
Additional paid-in capital   121,428    125,448 
Unearned compensation – Employee Stock Ownership Plan (“ESOP”)   (2,028)   (2,394)
Unearned compensation - Equity Incentive Plan   (1,513)   (1,111)
Retained earnings   140,902    136,993 
Accumulated other comprehensive loss   (18,345)   (21,744)
TOTAL SHAREHOLDERS’ EQUITY   240,655    237,409 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY  $2,640,479   $2,564,571 

 

See accompanying notes to unaudited consolidated financial statements.

 

1

 

 

WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF NET INCOME – UNAUDITED

(Dollars in thousands, except per share data)

 

                         
   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2024   2023   2024   2023 
Interest and dividend income:                    
Residential and commercial real estate loans  $21,719   $20,084   $63,622   $57,439 
Commercial and industrial loans   3,334    3,279    9,849    9,545 
Consumer loans   81    88    244    246 
Total interest income from loans   25,134    23,451    73,715    67,230 
                     
Investment securities, taxable   2,119    2,031    6,371    6,151 
Investment securities, tax-exempt   1    2    3    6 
Marketable equity securities   1    —    2    119 
Total interest and dividend income from investment securities   2,121    2,033    6,376    6,276 
                     
Other investments   189    166    473    418 
Short-term investments   396    251    682    424 
Total interest income from cash and cash equivalents   585    417    1,155    842 
Total interest and dividend income   27,840    25,901    81,246    74,348 
                     
Interest expense:                    
Deposits   11,165    7,704    30,793    17,876 
Short-term borrowings   71    117    540    1,466 
Long-term debt   1,622    1,444    4,607    2,513 
Subordinated debt   254    253    762    760 
Total interest expense   13,112    9,518    36,702    22,615 
Net interest and dividend income   14,728    16,383    44,544    51,733 
                     
Provision for credit losses   941    354    97    386 
Net interest and dividend income after provision for credit losses   13,787    16,029    44,447    51,347 
                     
Non-interest income:                    
Service charges and fees   2,341    2,145    6,901    6,573 
Income from bank-owned life insurance   470    454    1,425    1,388 
Net unrealized gain on marketable equity securities   10    —    22    — 
Gain on sale of mortgages   246    —    246    — 
Loss on sale of premises and equipment   —    (3)   (6)   (3)
Gain on non-marketable equity investments   —    238    987    590 
Gain on bank-owned life insurance death benefit   —    778    —    778 
Loss on defined benefit plan termination   —    —    —    (1,143)
Other income   74    —    74    — 
Total non-interest income   3,141    3,612    9,649    8,183 
                     
Non-interest expense:                    
Salaries and employees benefits   8,112    7,955    24,257    24,475 
Occupancy   1,217    1,159    3,798    3,710 
Furniture and equipment   483    482    1,450    1,460 
Data processing   869    824    2,577    2,369 
Software   612    529    1,877    1,568 
Debit card and ATM processing expense   649    562    1,844    1,580 
Professional fees   540    643    1,690    2,203 
FDIC insurance assessment   338    341    1,071    983 
Advertising   271    362    959    1,118 
Other expenses   1,315    1,261    3,979    4,099 
Total non-interest expense   14,406    14,118    43,502    43,565 
Income before income taxes   2,522    5,523    10,594    15,965 
Income tax provision   618    1,033    2,216    3,408 
Net income  $1,904   $4,490   $8,378   $12,557 
                     
Earnings per common share:                    
Basic earnings per share  $0.09   $0.21   $0.40   $0.58 
Weighted average basic shares outstanding   20,804,162    21,560,940    21,013,003    21,631,067 
Diluted earnings per share  $0.09   $0.21   $0.40   $0.58 
Weighted average diluted shares outstanding   20,933,833    21,680,113    21,122,208    21,681,251 
Dividends per share  $0.07   $0.07   $0.21   $0.21 

 

See accompanying notes to unaudited consolidated financial statements.

 

2

 

 

WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME – UNAUDITED

(Dollars in thousands)

 

                         
   Three Months Ended
September 30,		   Nine Months Ended
September 30,		 
   2024   2023   2024   2023 
                 
Net income  $1,904   $4,490   $8,378   $12,557 
                     
Other comprehensive income (loss):                    
Securities available-for-sale:                    
Unrealized gain (loss)   7,103    (7,314)   4,554    (6,329)
Tax effect   (1,811)   1,852    (1,155)   1,605 
Net-of-tax amount   5,292    (5,462)   3,399    (4,724)
                     
Defined benefit pension plan:                    
Gain arising during the period   —    —    —    358 
Reclassification adjustment:                    
Defined benefit plan termination loss realized in income (1)   —    —    —    1,143 
Unrealized actuarial gain on defined benefit plan   —    —    —    1,501 
Tax effect   —    —    —    (421)
Net-of-tax amount   —    —    —    1,080 
                     
Other comprehensive gain (loss)   5,292    (5,462)   3,399    (3,644)
                     
Comprehensive income (loss)  $7,196   $(972)  $11,777   $8,913 

 

(1)Realized losses on defined benefit plan termination are recognized as a component of non-interest income in the consolidated statements of net income.  The tax effects associated with the reclassification adjustment were $321,000 for the nine months ended September 30, 2023.

 

See accompanying notes to unaudited consolidated financial statements.

 

3

 

 

WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY - UNAUDITED

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

(Dollars in thousands, except share data)

 

                                     
   Common Stock           Unearned       Accumulated     
           Additional   Unearned   Compensation-       Other     
       Par   Paid-in   Compensation-   Equity Incentive   Retained   Comprehensive     
   Shares   Value   Capital   ESOP   Plan   Earnings   Loss   Total 
                                         
BALANCE AT DECEMBER 31, 2023   21,666,807   $217   $125,448   $(2,394)  $(1,111)  $136,993   $(21,744)  $237,409 
Net income   —    —    —    —    —    2,961    —    2,961 
Comprehensive loss   —    —    —    —    —    —    (1,893)   (1,893)
Common stock held by ESOP committed to be released (71,240 shares)   —    —    30    122    —    —    —    152 
Share-based compensation - equity incentive plan   —    —    —    —    505    —    —    505 
Forfeited equity incentive plan shares reissued in connection with 2021 LTI performance share grant (4,219 shares)   —    —    35    —    (35)   —    —    — 
Repurchase of common stock   (221,947)   (3)   (1,831)   —    —    —    —    (1,834)
Issuance of common stock in connection with equity incentive plan   182,830    2    1,531    —    (1,533)   —    —    — 
Cash dividends declared and paid on common stock ($0.07 per share)   —    —    —    —    —    (1,504)   —    (1,504)
BALANCE AT MARCH 31, 2024   21,627,690   $216   $125,213   $(2,272)  $(2,174)  $138,450   $(23,637)  $235,796 
Net income   —    —    —    —    —    3,513    —    3,513 
Comprehensive income   —    —    —    —    —    —    —    — 
Common stock held by ESOP committed to be released (71,240 shares)   —    —    9    122    —    —    —    131 
Share-based compensation - equity incentive plan   —    —    —    —    318    —    —    318 
Repurchase of common stock   (269,841)   (2)   (1,785)   —    —    —    —    (1,787)
Forfeited equity incentive plan shares (2,384 shares)   —    —    (20)   —    20    —    —    — 
Cash dividends declared and paid on common stock ($0.07 per share)   —    —    —    —    —    (1,494)   —    (1,494)
BALANCE AT JUNE 30, 2024   21,357,849   $214   $123,417   $(2,150)  $(1,836)  $140,469   $(23,637)  $236,477 
Net income   —    —    —    —    —    1,904    —    1,904 
Comprehensive income   —    —    —    —    —    —    5,292    5,292 
Common stock held by ESOP committed to be released (71,240 shares)   —    —    8    122    —    —    —    130 
Share-based compensation - equity incentive plan   —    —    —    —    323    —    —    323 
Repurchase of common stock   (244,441)   (3)   (1,997)   —    —    —    —    (2,000)
Cash dividends declared and paid on common stock ($0.07 per share)   —    —    —    —    —    (1,471)   —    (1,471)
BALANCE AT SEPTEMBER 30, 2024   21,113,408   $211   $121,428   $(2,028)  $(1,513)  $140,902   $(18,345)  $240,655 

 

See accompanying notes to unaudited consolidated financial statements.

 

4

 

 

WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY - UNAUDITED

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023

(Dollars in thousands, except share data)

 

                                     
   Common Stock           Unearned       Accumulated     
           Additional   Unearned   Compensation-       Other     
       Par   Paid-in   Compensation-   Equity Incentive   Retained   Comprehensive     
   Shares   Value   Capital   ESOP   Plan   Earnings   Loss   Total 
BALANCE AT DECEMBER 31, 2022   22,216,789   $222   $128,899   $(2,906)  $(1,012)  $127,982   $(25,042)  $228,143 
Cumulative effect accounting adjustment(1)   —    —    —    —    —    9    —    9 
Net income   —    —    —    —    —    5,304    —    5,304 
Comprehensive income   —    —    —    —    —    —    1,941    1,941 
Common stock held by ESOP committed to be released (74,993 shares)   —    —    52    128    —    —    —    180 
Share-based compensation - equity incentive plan   —    —    —    —    529    —    —    529 
Forfeited equity incentive plan shares reissued in connection with 2020 LTI performance share grant (19,761 shares)   —    —    180    —    (180)   —    —    — 
Repurchase of common stock   (143,896)   (1)   (1,350)   —    —    —    —    (1,351)
Issuance of common stock in connection with equity incentive plan   136,454    1    1,348    —    (1,349)   —    —    — 
Forfeited equity incentive plan shares reissued in connection with 2023 LTI grant (2,742 shares)   —    —    27    —    (27)   —    —    — 
Cash dividends declared and paid on common stock ($0.07 per share)   —    —    —    —    —    (1,533)   —    (1,533)
BALANCE AT MARCH 31, 2023   22,209,347   $222   $129,156   $(2,778)  $(2,039)  $131,762   $(23,101)  $233,222 
Net income   —    —    —    —    —    2,763    —    2,763 
Comprehensive loss   —    —    —    —    —    —    (123)   (123)
Common stock held by ESOP committed to be released (74,993 shares)   —    —    22    128    —    —    —    150 
Share-based compensation - equity incentive plan   —    —    —    —    300    —    —    300 
Repurchase of common stock   (126,944)   (1)   (785)   —    —    —    —    (786)
Cash dividends declared and paid on common stock ($0.07 per share)   —    —    —    —    —    (1,528)   —    (1,528)
BALANCE AT JUNE 30, 2023   22,082,403   $221   $128,393   $(2,650)  $(1,739)  $132,997   $(23,224)  $233,998 
Net income   —    —    —    —    —    4,490    —    4,490 
Comprehensive loss   —    —    —    —    —    —    (5,462)   (5,462)
Common stock held by ESOP committed to be released (74,993 shares)   —    —    (10)   128    —    —    —    118 
Share-based compensation - equity incentive plan   —    —    —    —    300    —    —    300 
Repurchase of common stock   (155,161)   (2)   (1,007)   —    —    —    —    (1,009)
Cash dividends declared and paid on common stock ($0.07 per share)   —    —    —    —    —    (1,521)   —    (1,521)
BALANCE AT SEPTEMBER 30, 2023   21,927,242   $219   $127,376   $(2,522)  $(1,439)  $135,966   $(28,686)  $230,914 

 

 

(1)Represents gross transition adjustment amount of $13,000, net of taxes of $4,000, to reflect the cumulative impact on retained earnings pursuant to the Company’s adoption of Accounting Standards Update (“ASU”) 2016-13 Financial Instruments-Credit Losses on Financial Instruments and relevant amendments.

 

See accompanying notes to unaudited consolidated financial statements.

 

5

 

 

WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED

(Dollars in thousands)

 

             
   Nine Months Ended
September 30,		 
   2024   2023 
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net income  $8,378   $12,557 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:          
Provision for credit losses   97    386 
Depreciation and amortization of premises and equipment   1,659    1,645 
(Accretion) amortization of purchase accounting adjustments, net   (34)   88 
Amortization of core deposit intangible   282    282 
Net amortization of premiums and discounts on securities and mortgage loans   877    962 
Net amortization of deferred costs on mortgage loans   343    367 
Net amortization of premiums on subordinated debt   29    29 
Share-based compensation expense   1,146    1,129 
ESOP expense   413    448 
Gain on sale of portfolio mortgages   (246)   — 
Net change in unrealized gains on marketable equity securities   (22)   — 
Loss on disposal of premises and equipment, net   6    3 
Gain on bank-owned life insurance death benefit   —    (778)
Income from bank-owned life insurance   (1,425)   (1,388)
Net change in:          
Accrued interest receivable   (125)   (141)
Other assets   504    (4,293)
Other liabilities   (5,767)   (5,385)
Net cash provided by operating activities   6,115    5,911 
           

CASH FLOWS FROM INVESTING ACTIVITIES:

          
Purchases of securities held-to-maturity   (1,100)   (3,643)
Proceeds from calls, maturities, and principal collections of securities held-to-maturity   10,896    10,692 
Purchases of securities available-for-sale   (23,843)   — 
Proceeds from calls, maturities, and principal collections of securities available-for-sale   11,542    9,326 
Proceeds from redemption and sales of marketable equity securities   —    6,237 
Loan originations and principal payments, net   (42,469)   (24,190)
Proceeds from sale of portfolio residential real estate loans   20,333    — 
(Purchase) redemption of Federal Home Loan Bank of Boston stock   (3,436)   289 
Purchases of premises and equipment   (381)   (1,509)
Proceeds from sale of premises & equipment   12    18 
Proceeds from payout on bank-owned life insurance   —    2,079 
Net cash used in investing activities   (28,446)   (701)
           

CASH FLOWS FROM FINANCING ACTIVITIES:

          
Net increase (decrease) in deposits   80,462    (53,140)
Decrease in short-term borrowings   (11,710)   (32,460)
Repayment of long-term debt   (90,369)   — 
Proceeds from issuance of long-term debt   98,000    120,000 
Cash dividends paid   (4,469)   (4,582)
Repurchase of common stock   (5,621)   (3,103)
Net cash provided by financing activities   66,293    26,715 
           
NET CHANGE IN CASH AND CASH EQUIVALENTS:   43,962    31,925 
Beginning of period   28,840    30,342 
End of period  $72,802   $62,267 
           
Supplemental cash flow information:          
Net change in cash due to broker for common stock repurchased  $2,513   $2,253 
Interest paid   39,051    20,671 
Taxes paid   2,599    3,717 

 

See the accompanying notes to unaudited consolidated financial statements.

 

6

 

 

WESTERN NEW ENGLAND BANCORP, INC. AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

SEPTEMBER 30, 2024

 

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Nature of Operations and Basis of Presentation. Western New England Bancorp, Inc. (“WNEB,” “Company,” “we,” or “us”) is a Massachusetts-chartered stock holding company for Westfield Bank, a federally-chartered savings bank (“Bank”).

 

The Bank operates 25 banking offices in Hampden County and Hampshire County in western Massachusetts and Hartford County and Tolland County in northern Connecticut, and its primary sources of revenue are interest income from loans as well as interest income from investment securities. The West Hartford Financial Services Center serves as the Company’s Connecticut hub, housing Commercial Lending, Cash Management and a Mortgage Loan Officer. The Bank’s deposits are insured up to the maximum Federal Deposit Insurance Corporation (“FDIC”) coverage limits.

 

Wholly-owned Subsidiaries. Elm Street Securities Corporation, WFD Securities, Inc. and CSB Colts, Inc., are Massachusetts-chartered securities corporations, formed for the primary purpose of holding qualified securities. WB Real Estate Holdings, LLC is a Massachusetts-chartered limited liability company that holds real property acquired as security for debts previously contracted by the Bank.

 

Principles of Consolidation. The consolidated financial statements include the accounts of Western New England Bancorp, Inc., the Bank, CSB Colts, Inc., Elm Street Securities Corporation, WB Real Estate Holdings, LLC and WFD Securities, Inc. All material intercompany balances and transactions have been eliminated in consolidation.

 

Estimates. The accompanying consolidated financial statements and related disclosures have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates, assumptions and judgements that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses for the periods then ended. Actual results could differ from those estimates. Estimates that are particularly susceptible to significant change in the near-term relate to the determination of the allowance for credit losses and goodwill impairment.

 

Basis of Presentation. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of our financial condition as of September 30, 2024, and the results of operations, changes in shareholders’ equity and cash flows for the interim periods presented. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results of operations for the year ending December 31, 2024. Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission.

 

These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2023, included in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report”).

 

Reclassifications. Amounts in the prior period financial statements are reclassified when necessary to conform to the current year presentation.

 

 

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2. EARNINGS PER SHARE

 

Basic earnings per share represents income available to common shareholders divided by the weighted-average number of common shares outstanding during the period. If rights to dividends on unvested awards are non-forfeitable, these unvested awards are considered outstanding in the computation of basic earnings per share. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be issued by us relate to stock options and certain performance-based restricted stock awards and are determined using the treasury stock method. Unallocated ESOP shares are not deemed outstanding for earnings per share calculations. There were no anti-dilutive shares outstanding during the three and nine months ended September 30, 2024 and 2023, respectively.

 

Earnings per common share for the three and nine months ended September 30, 2024 and 2023 have been computed based on the following:

 

                 
  

Three Months Ended

September 30,

  

Nine Months Ended

September 30,

 
   2024   2023   2024   2023 
   (In thousands, except per share data) 
                 
Net income applicable to common stock  $1,904   $4,490   $8,378   $12,557 
                     
Average number of common shares issued   21,246    22,055    21,466    22,140 
Less: Average unallocated ESOP Shares   (256)   (329)   (273)   (347)
Less: Average unvested performance-based equity incentive plan shares   (186)   (165)   (180)   (162)
                     
Average number of common shares outstanding used to calculate basic earnings per common share   20,804    21,561    21,013    21,631 
                     
Effect of dilutive performance-based equity incentive plan   130    119    109    50 
                     
Average number of common shares outstanding used to calculate diluted earnings per common share   20,934    21,680    21,122    21,681 
                     
Net income per common share:                    
Basic earnings per common share  $0.09   $0.21   $0.40   $0.58 
Diluted earnings per common share  $0.09   $0.21   $0.40   $0.58 

 

 

8

 

 

3. COMPREHENSIVE INCOME (LOSS)

 

Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income (loss).

 

The components of accumulated other comprehensive loss included in shareholders’ equity are as follows:

 

   September 30, 2024   December 31, 2023 
   (Dollars in thousands) 
     
Net unrealized losses on securities available-for-sale  $(24,612)  $(29,166)
Tax effect   6,267    7,422 
Net-of-tax amount   (18,345)   (21,744)
           
Accumulated other comprehensive loss  $(18,345)  $(21,744)

 

 

4.       INVESTMENT SECURITIES

 

The following tables summarize the amortized cost and fair value of securities available-for-sale and held-to-maturity at September 30, 2024 and December 31, 2023, and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive loss on securities available-for-sale. The Company did not record an allowance for credit losses on its securities held-to-maturity portfolio as of September 30, 2024 and December 31, 2023.

 

   September 30, 2024 
   Amortized Cost   Gross Unrealized Gains   Gross Unrealized Losses   Fair Value 
   (Dollars in thousands) 
Securities available-for-sale:                    
Debt securities:                    
Government-sponsored enterprise obligations  $17,459   $4   $(2,477)  $14,986 
Corporate bonds   5,000    —    (419)   4,581 
Total debt securities   22,459    4    (2,896)   19,567 
                     
Mortgage-backed securities:                    
Government-sponsored mortgage-backed securities   151,735    156    (20,758)   131,133 
U.S. government guaranteed mortgage-backed securities   6,307    —    (1,118)   5,189 
Total mortgage-backed securities   158,042    156    (21,876)   136,322 
                     
Total securities available-for-sale   180,501