Western New England's CRE Charge-Off Cuts Net Income

The Tip Desk · October 27, 2026 · 4 min read

A $1.8 million participation-loan write-off took net income to $3.6 million, or $0.18 a share, even as the net interest margin reached 3.00%.

Western New England Bancorp (WNEB), the holding company for Westfield Bank, recorded a $1.8 million partial charge-off on a non-owner-occupied commercial real estate participation loan after the borrower filed for Chapter 11 bankruptcy on June 4, 2026, lifting the provision for credit losses to $1.6 million from $75,000 in the prior quarter and taking net income to $3.6 million, or $0.18 a share, from $4.8 million, or $0.24 a share.

The write-off was the quarter’s defining credit event. Immediately before the bankruptcy notice, the company’s 40% share of the participation loan had a carrying value of $3.4 million and the borrower was current on scheduled payments. The bank downgraded the loan to substandard, placed it on nonaccrual, and recognized the $1.8 million charge-off; remaining carrying value was $1.6 million. The company said it does not have additional exposure to the borrower or guarantor and currently expects full recovery of the remaining balance through an anticipated sale of the underlying collateral.

Net charge-offs were $1.8 million, or 0.33% of average loans annualized, versus $55,000, or 0.01%, in the first quarter. Nonaccrual loans rose to $7.8 million, or 0.35% of total loans, from $4.7 million, or 0.21%, at March 31. Total delinquency was 0.21% of loans, with 95.1% of past-due loans in residential real estate. The allowance for credit losses was $20.2 million, or 0.92% of loans, and 260.2% of nonaccrual loans.

Net interest income, the franchise’s primary revenue driver, increased $496,000, or 2.6%, to $19.3 million. The net interest margin expanded 5 basis points to 3.00% (3.02% tax-equivalent), after a 4 basis-point expansion to 2.95% in the first quarter. Average loan yield rose 3 basis points to 5.12% and the average yield on interest-earning assets rose 3 basis points to 4.77%. Average loans increased $3.3 million, or 0.2%. Interest and dividend income rose $500,000, or 1.7%, on higher loan interest; interest expense on deposits rose 3.8% and interest expense on borrowings fell 25.4%.

Funding costs stayed contained. The average cost of core deposits ticked up 1 basis point to 1.03%. The average cost of time deposits fell 3 basis points to 3.38%. The average cost of borrowings, including subordinated debt, rose 40 basis points to 5.15%. The average cost of total funds, including non-interest-bearing accounts and borrowings, decreased 2 basis points to 1.86%. Average demand deposits increased $4.6 million, or 0.8%, to $593.1 million, or 24.9% of total average deposits. At June 30, core deposits and non-interest-bearing deposits represented 69.4% and 25.0% of total deposits, respectively, and the average cost of deposits was 1.74%.

Non-interest income of $3.4 million fell $39,000, or 1.1%, versus the first quarter, which included $449,000 of bank-owned life insurance death benefits. Excluding those benefits, non-interest income rose $409,000, or 13.7%. Service charges and fees on deposits increased $291,000, or 13.7%, to $2.4 million. Wealth management income was $389,000, while assets under management rose to $256.6 million from $235.6 million.

Non-interest expense increased $347,000, or 2.2%, to $16.4 million. The efficiency ratio was 72.0%. The adjusted efficiency ratio improved to 72.2% from 73.4%. Return on average assets was 0.53% and return on average equity 5.84%.

At June 30, total loans were $2.2 billion, or 80.2% of total assets, up $9.9 million, or 0.5%, from December 31, 2025. Residential real estate loans, including home equity, rose $31.7 million, or 3.7%, and commercial and industrial loans rose $12.5 million, or 5.6%, offset by a $33.7 million, or 3.1%, decline in commercial real estate. Total deposits of $2.4 billion increased $40.5 million, or 1.7%, led by a $45.8 million, or 6.6%, increase in time deposits.

The company repurchased 195,000 shares in the quarter at an average $13.80; 491,465 shares remained available under the 2025 plan. Book value per share was $12.39 and tangible book value $11.72. The board declared a quarterly cash dividend of $0.07 a share. On July 10, 2026, the company sold two Chicopee buildings to the city for $2.4 million in gross cash, with a preliminary estimated gain of about $717,000 to be recognized in the third quarter.