Westfield Financial, Inc. Reports Results For The Quarter And Year Ended December 31, 2011 And Declares Regular Dividend

Westfield Financial, Inc. (the “Company”) (NasdaqGS:WFD), the holding company for Westfield Bank (the “Bank”), reported net income of $1.5 million, or $0.06 per diluted share, for the quarter ended December 31, 2011, compared to $1.3 million or $0.05 per diluted share, for the same period in 2010. For the year ended December 31, 2011, net income was $5.9 million, or $0.22 per diluted share, compared to $3.0 million, or $0.11 per diluted share, for the same period in 2010.

The increase in earnings for the year ended December 31, 2011 was the result of a $7.7 million decrease in the provision for loan losses to $1.2 million, compared to $8.9 million for the same period in 2010, partially offset by a decrease of $3.6 million in noninterest income and a $1.2 million increase in noninterest expense. The decrease in the provision for loan losses occurred because the 2010 period included the reserve for and subsequent charge-off of $7.2 million on a single commercial real estate loan.

Net interest income increased $626,000 to $7.5 million for the quarter ended December 31, 2011, compared to $6.9 million for the same period in 2010. The net interest margin, on a tax-equivalent basis, was 2.60% for the quarter ended December 31, 2011, compared to 2.40% for the same period in 2010. For the year ended December 31, 2011, net interest income increased $1.1 million to $30.5 million, compared to $29.4 million for the same period in 2010. The net interest margin, on a tax-equivalent basis, was 2.67% and 2.64% for the years ended December 31, 2011 and 2010, respectively. Net interest income was favorably impacted by an increase in loans, which generally have higher yields than investments, along with a decrease in the cost of funds due to the lower interest rate environment.

Noninterest income increased $128,000 to $1.1 million for the quarter ended December 31, 2011, compared to $982,000 for the same period in 2010. The increase for the quarter ended December 31, 2011 was primarily the result of an increase in net gains on the sale of securities of $60,000. For the year ended December 31, 2011, noninterest income decreased $3.6 million to $3.8 million, compared to $7.4 million for the same period in 2010, primarily the result of a decrease in net gains on the sale of securities of $3.6 million.

For the quarter ended December 31, 2011, noninterest expense increased $57,000 to $6.3 million, compared to the same period in 2010. For the year ended December 31, 2011, noninterest expense increased $1.2 million to $26.0 million, compared to $24.8 million for the same period in 2010. The increase in noninterest expense for the year ended December 31, 2011 was due to an increase in salaries and benefits of $845,000 related to regular annual adjustments as well as salaries and benefits related to the hiring of additional personnel.

Balance Sheet Growth

Total assets were $1.3 billion at December 31, 2011, showing an increase of $23.8 million, compared to December 31, 2010. Securities decreased $24.7 million to $630.0 million at December 31, 2011 from $654.7 million at December 31, 2010. The decrease in securities was the result of using cash flow from securities to fund the loan portfolio as discussed below.

Net loans increased by $44.0 million to $546.4 million at December 31, 2011 from $502.4 million at December 31, 2010. Residential loans increased $43.7 million to $192.5 million at December 31, 2011 from $148.8 million at December 31, 2010. Through the Company’s long standing relationship with a third-party mortgage company, it originated and purchased a total of $58.2 million in residential loans within and contiguous to its market area as a means of diversifying its loan portfolio and improving net interest income. In addition, commercial and industrial loans and commercial real estate loans increased $1.3 million to $358.2 million at December 31, 2011 from $356.9 million at December 31, 2010.

Total deposits increased $32.7 million to $733.0 million at December 31, 2011 from $700.3 million at December 31, 2010. The increase in deposits was due to an increase in savings and money market accounts of $68.1 million to $245.6 million. Noninterest bearing checking accounts increased $15.0 million to $100.2 million. The increases in checking, savings and money market accounts were primarily due to a relationship-based product set introduced in 2010 which continued growth throughout 2011. Time deposit accounts decreased $38.2 million to $315.8 million at December 31, 2011, as customers have less incentive to lock up funds in time deposits because of the low interest rate environment.

Shareholders’ equity was $219.0 million and $221.2 million, which represented 17.3% and 17.8% of total assets at December 31, 2011 and December 31, 2010, respectively. The decrease in shareholders’ equity reflects the payment of regular and special dividends amounting to $14.3 million and the repurchase of 1.3 million shares of our common stock at a cost of $10.1 million, pursuant to the Company’s stock repurchase program. This was partially offset by an increase in other comprehensive income of $13.2 million primarily due to the change in market value of securities, net income of $5.9 million for the year ended December 31, 2011, an increase of $3.0 million related to the recognition of share-based compensation and the exercise of 81,741 stock options.

On May 25, 2010, the Board of Directors authorized the commencement of the Company’s current stock repurchase program, authorizing the repurchase of up to 2,924,367 shares, or ten percent of the Company’s outstanding shares of common stock. There were 2,676,041 shares purchased under the second repurchase program as of December 31, 2011. On December 22, 2011, the Board of Directors authorized an additional stock repurchase program under which the Company may purchase up to 1,333,496 shares, or 5% of its outstanding common stock. This new repurchase program will commence upon the completion of the previously announced program.

Credit Quality

The allowance for loan losses was $7.8 million at December 31, 2011 and $6.9 million at December 31, 2010. This represents 1.40% and 1.36% of total loans at December 31, 2011 and December 31, 2010, respectively, and 264.71% and 216.42% of nonperforming loans at December 31, 2011 and December 31, 2010, respectively.

An analysis of the changes in the allowance for loan losses is as follows:
Three Months Ended
December 31,       September 30,       December 31,
2011 2011 2010
(In thousands)
Balance, beginning of period $ 7,087 $ 7,073 $ 8,168
Provision 677 15 375
Charge-offs (7 ) (17 ) (1,636 )
Recoveries   7     16     27  
Balance, end of period $ 7,764   $ 7,087   $ 6,934  

Loans delinquent 30 – 89 days decreased $15.0 million to $1.8 million at December 31, 2011 from $16.8 million at December 31, 2010. The decrease in loans delinquent is mainly the result of a single commercial real estate relationship of $15.0 million in the hotel and lodging industry that was brought within 30 days of their payment due date. The interest rate on this loan relationship was reduced from 6.25% to 4.25% for a period of one year and it is therefore classified as a troubled debt restructuring. As a result, for the quarter ended December 31, 2011, $275,000 was added to the provision for loan losses representing the reduction in cash flow from interest that occurs by reducing the interest rate to 4.25%.

Nonperforming loans decreased $271,000 to $2.9 million at December 31, 2011, compared to $3.2 million at December 31, 2010, representing 0.53% and 0.63% of total loans at December 31, 2011 and December 31, 2010, respectively. There are no loans 90 or more days past due and still accruing interest.

Declaration of Dividends

James C. Hagan, Chief Executive Officer stated, “On January 24, 2012, the Board of Directors declared a regular cash dividend of $0.06 per share payable on February 22, 2012 to all shareholders of record on February 8, 2012.”

About Westfield Bank

The Bank is headquartered in Westfield, Massachusetts and operates through 11 banking offices in Agawam, East Longmeadow, Feeding Hills, Holyoke, Southwick, Springfield, West Springfield and Westfield, Massachusetts. The Bank’s deposits are insured by the Federal Deposit Insurance Corporation.

Forward-Looking Statements

The Company wishes to caution readers not to place undue reliance on any such forward-looking statements contained in this press release, which speak only as of the date made. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors discussed under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2010, and in subsequent filings with the Securities and Exchange Commission. In addition, the forward-looking statements included in this press release represent our views as of the date of this release. The Company and the Bank do not undertake and specifically decline any obligation to publicly release the result of any revisions that may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
                 

WESTFIELD FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Statements of Income and Other Data

(Dollars in thousands, except per share data)

(Unaudited)
 
Three Months Ended Year Ended
December 31, December 31,

2011

2010

2011

2010
INTEREST AND DIVIDEND INCOME:
Loans $ 6,381 $ 6,200 $ 25,318 $ 24,732
Securities 4,530 4,836 19,624 21,383
Other investments - at cost 15 7 62 24
Federal funds sold, interest-bearing deposits and other short-term investments   -     3     1     8  
Total interest and dividend income   10,926     11,046     45,005     46,147  
 
INTEREST EXPENSE:
Deposits 1,699 2,359 7,589 9,850
Long-term debt 1,659 1,593 6,731 6,538
Short-term borrowings   24     176     147     377  
Total interest expense   3,382     4,128     14,467     16,765  
 
Net interest and dividend income 7,544 6,918 30,538 29,382
 
PROVISION FOR LOAN LOSSES   677     375     1,206     8,923  
 
Net interest and dividend income after provision for loan losses   6,867     6,543     29,332     20,459  
 
NONINTEREST INCOME:
Total other-than-temporary impairment losses on securities - (490 ) (603 ) (590 )
Portion of other-than-temporary impairment losses recognized in accumulated other comprehensive loss   -     443     501     443  
Net other-than-temporary impairment losses recognized in income - (47 ) (102 ) (147 )
Service charges and fees 509 500 1,973 1,940
Income from bank-owned life insurance 395 383 1,546 1,524
Gain on sales of securities, net 206 146 414 4,072
(Loss) gain on sale of other real estate owned   -     -     (25 )   1  
Total noninterest income   1,110     982     3,806     7,390  
 
NONINTEREST EXPENSE:
Salaries and employees benefits 3,847 3,783 15,557 14,712
Occupancy 645 667 2,671 2,620
Data processing 480 497 1,917 1,940
Professional fees 508 413 2,033 1,671
FDIC insurance 128 197 683 751
OREO expense 18 48 70 374
Other   720     684     3,027     2,741  
Total noninterest expense   6,346     6,289     25,958     24,809  
 
INCOME BEFORE INCOME TAXES 1,631 1,236 7,180 3,040
 
INCOME TAX PROVISION (BENEFIT)   102     (103 )   1,306     34  
NET INCOME $ 1,529   $ 1,339   $ 5,874   $ 3,006  
 
Basic earnings per share $ 0.06 $ 0.05 $ 0.22 $ 0.11
 
Weighted average shares outstanding 26,106,911 26,807,171 26,482,064 27,595,014
 
Diluted earnings per share $ 0.06 $ 0.05 $ 0.22 $ 0.11
 
Weighted average diluted shares outstanding 26,190,326 26,935,101 26,589,510 27,793,409
 
Other Data:
 
Return on average assets (1) 0.48 % 0.42 % 0.47 % 0.25 %
 
Return on average equity (1) 2.71 % 2.31 % 2.65 % 1.25 %
 

_______________                                                                      

 

(1)  Three month results have been annualized.

           

WESTFIELD FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Balance Sheets and Other Data

(Dollars in thousands, except per share data)

(Unaudited)
 
December 31, December 31,

2011

2010
Cash and cash equivalents $ 21,105 $ 11,611
Securities available for sale, at fair value 617,537 642,467
Federal Home Loan Bank of Boston and other restricted stock - at cost 12,438 12,282
 
Loans 554,156 509,326
Allowance for loan losses   7,764     6,934  
Net loans 546,392 502,392
 
Bank-owned life insurance 44,040 40,494
Other real estate owned 1,130 223
Other assets   20,622     30,020  
 
TOTAL ASSETS $ 1,263,264   $ 1,239,489  
 
Total deposits $ 732,958 $ 700,335
Short-term borrowings 52,985 62,937
Long-term debt 247,320 238,151
Securities pending settlement 363 7,791
Other liabilities   10,650     9,030  
 
TOTAL LIABILITIES 1,044,276 1,018,244
 
TOTAL SHAREHOLDERS' EQUITY   218,988     221,245  
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,263,264   $ 1,239,489  
 
Book value per share $ 8.14 $ 7.85
 
Other Data:
 
30- 89 day delinquent loans $ 1,848 $ 16,785
 
Nonperforming loans 2,933 3,204
 
Nonperforming loans as a percentage of total loans 0.53 % 0.63 %
 
Nonperforming assets as a percentage of total assets 0.32 % 0.28 %
 
Allowance for loan losses as a percentage of nonperforming loans 264.71 % 216.42 %
 
Allowance for loan losses as a percentage of total loans 1.40 % 1.36 %

The following tables set forth the information relating to our average balance at, and net interest income for, the three months and years ended December 31, 2011 and 2010, and reflect the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated.

    Three Months Ended December 31,  
2011       2010
Average         Avg Yield/ Average         Avg Yield/
Balance Interest Cost   Balance Interest Cost  
(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans(1)(2) $ 544,577 $ 6,422 4.72 % $ 495,580 $ 6,241 5.04 %
Securities(2) 618,421 4,719 3.05 652,991 5,001 3.06
Other investments - at cost 14,123 15 0.42 13,739 7 0.20
Short-term investments(3)   9,242   -   0.00   13,325   3   0.09
Total interest-earning assets 1,186,363   11,156   3.76 1,175,635   11,252   3.83
Total noninterest-earning assets   66,687   77,092
 
Total assets $ 1,253,050 $ 1,252,727
 
LIABILITIES AND EQUITY:
Interest-bearing liabilities
NOW accounts $ 76,874 132 0.69 $ 84,020 242 1.15
Savings accounts 99,805 88 0.35 97,957 152 0.62
Money market accounts 128,095 190 0.59 78,934 128 0.65
Time certificates of deposit   319,382   1,289   1.61   356,203   1,837   2.06
Total interest-bearing deposits 624,156 1,699 617,114 2,359
Short-term borrowings and long-term debt   295,868   1,683   2.28   306,532   1,769   2.31
Interest-bearing liabilities   920,024   3,382   1.47   923,646   4,128   1.79
Noninterest-bearing deposits 98,789 85,661
Other noninterest-bearing liabilities   10,526   13,116
Total noninterest-bearing liabilities   109,315   98,777
 
Total liabilities 1,029,339 1,022,423
Total equity   223,711   230,304
Total liabilities and equity $ 1,253,050 $ 1,252,727
Less: Tax-equivalent adjustment(2)   (230 )   (206 )
Net interest and dividend income $ 7,544   $ 6,918  
Net interest rate spread(4) 2.29 % 2.04 %
Net interest margin(5) 2.60 % 2.40 %
Average interest-earning assets to average interest-bearing liabilities
128.9 127.3

    For the Years Ended December 31,
2011         2010
Average         Avg Yield/ Average         Avg Yield/
Balance Interest Cost   Balance Interest Cost  
(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans(1)(2) $ 536,084 $ 25,485 4.75 % $ 482,215 $ 24,887 5.16 %
Securities(2) 619,704 20,376 3.29 634,531 22,055 3.48
Other investments - at cost 14,034 61 0.43 12,900 24 0.19
Short-term investments(3)   7,503   1   0.01   13,948   8   0.06
Total interest-earning assets 1,177,325   45,923   3.90 1,143,594   46,974   4.11
Total noninterest-earning assets   70,133   78,842
 
Total assets $ 1,247,458 $ 1,222,436
 
LIABILITIES AND EQUITY:
Interest-bearing liabilities
NOW accounts $ 85,094 762 0.90 $ 76,954 933 1.21
Savings accounts 104,112 515 0.49 112,546 824 0.73
Money market accounts 99,319 619 0.62 56,082 358 0.64
Time certificates of deposit   332,327   5,693   1.71   347,590   7,735   2.23
Total interest-bearing deposits 620,852 7,589 593,172 9,850
Short-term borrowings and long-term debt   303,909   6,878   2.26   296,752   6,915   2.33
Interest-bearing liabilities   924,761   14,467   1.56   889,924   16,765   1.88
Noninterest-bearing deposits 91,024 83,077
Other noninterest-bearing liabilities   9,754   9,513
Total noninterest-bearing liabilities   100,778   92,590
 
Total liabilities 1,025,539 982,514
Total equity   221,919   239,922
Total liabilities and equity $ 1,247,458 $ 1,222,436
Less: Tax-equivalent adjustment(2)   (918 )   (827 )
Net interest and dividend income $ 30,538   $ 29,382  
Net interest rate spread(4) 2.34 % 2.23 %
Net interest margin(5) 2.67 % 2.64 %
Average interest-earning assets to average interest-bearing liabilities
127.3 128.5

(1) Loans, including non-accrual loans, are net of deferred loan origination costs and unadvanced funds.

(2) Securities, loan income and net interest income are presented on a tax-equivalent basis using a tax rate of 34%. The tax-equivalent adjustment is deducted from tax-equivalent net interest and dividend income to agree to the amount reported on the statements of operations.

(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 margin represents tax-equivalent net interest and dividend income as a percentage of average interest-earning assets.

Copyright Business Wire 2010

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