Westfield Financial, Inc. (the “Company”) (NasdaqGS:WFD), the holding company for Westfield Bank (the “Bank”), reported net income of $974,000, or $0.04 per diluted share, for the quarter ended June 30, 2012, compared to $2.3 million, or $0.09 per diluted share, for the three months ended March 31, 2012, and $1.6 million, or $0.06 per diluted share, for the three months ended June 30, 2011. Net income for the second quarter 2012 was negatively impacted by the redemption of bank-owned life insurance (“BOLI”) described below.
For the six months ended June 30, 2012, net income was $3.3 million, or $0.13 per diluted share, compared to $2.9 million, or $0.11 per diluted share, for the same period in 2011.
Selected financial highlights for the second quarter 2012 include:
- Net interest and dividend income increased $310,000 and the net interest margin increased 3 basis points from the first quarter 2012. This was a result of an increase in income from interest-earning assets and a decrease in the cost of interest-bearing liabilities.
- Management redeemed certain BOLI policies because of a sudden downgrade in the credit ratings of the insurance carrier and the carrier’s decision to close out its individual life policies to new sales. The redemption of BOLI resulted in an additional income tax provision of $160,000 and a charge to noninterest income of $102,000 for transferring the policies to a different carrier.
- Total loans increased by $25.6 million to $584.0 million. This was primarily the result of an increase in residential loans of $21.6 million and commercial and industrial loans of $3.7 million. While in recent quarters management has used residential loan growth to supplement the loan portfolio, the long-term strategy remains focused on commercial lending. As noted previously, the Company recently hired two experienced commercial lenders during the first half of 2012.
Income Statement Discussion and AnalysisNet interest and dividend income increased $310,000 to $7.7 million for the second quarter 2012, compared to the $7.4 million for the first quarter 2012. The net interest margin, on a tax-equivalent basis, was 2.58% for the second quarter 2012, compared to 2.55% for the first quarter 2012. This was the result of an increase in average interest-earning assets of $31.3 million for the second quarter 2012, compared to the first quarter 2012. In addition, the cost of interest-bearing liabilities decreased by 10 basis points in the second quarter to 1.30% from 1.40% in the first quarter due to decreases in deposit rates along with utilizing low cost borrowings from the Federal Home Loan Bank of Boston.