Westfield Financial, Inc. Reports Results For The Quarter Ended June 30, 2012 And Declares Regular Dividend

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 Analysis

Net 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.

Net interest and dividend income was stable at $7.7 million for both the three months ended June 30, 2012 and 2011. For the six months ended June 30, 2012, net interest and dividend income decreased $232,000 to $15.1 million, compared to $15.4 million for the same period in 2011. The net interest margin, on a tax-equivalent basis, was 2.57% and 2.73% for the six months ended June 30, 2012 and 2011, respectively. The decrease in the net interest margin was due to the yield on interest-earning assets decreasing 37 basis points, partially offset by a decrease of 27 basis points in cost of funds, both occurring as a result of the low interest rate environment.

Noninterest income decreased $1.7 million to $901,000 in the second quarter 2012 from $2.6 million in the first quarter 2012. In the second quarter 2012, the Company recorded $97,000 net gains on the sale of securities compared to $1.6 million in the first quarter 2012. Income from BOLI decreased $176,000 to $283,000 for the second quarter 2012, compared to $459,000 in the first quarter 2012. 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 decrease in income from BOLI was primarily the result of a $102,000 charge associated with transferring the policies to a different carrier. The remainder of the Company’s BOLI policies are diversified among eight other carriers, all of which have high credit quality.

Noninterest expense was $6.8 million for both the three months ended June 30, 2012 and March 31, 2012. Salaries and benefits decreased $150,000 to $4.1 million in the second quarter primarily due to deferred expenses on loan originations and lower salary-related taxes as maximum caps had been reached. This was partially offset by an increase of $95,000 in professional fees due to a one-time expense for $74,000 regarding the change of a retirement plan administrator.

Noninterest expense increased $704,000 to $13.7 million for the six months ended June 30, 2012, compared to $13.0 million for the same period in 2011. Salaries and benefits increased $691,000 to $8.4 million for the six months ended June 30, 2012, which was mainly the result of new personnel, particularly in the commercial lending and compliance divisions, along with normal increases in salaries and benefits.

Income taxes were $561,000 for the second quarter 2012 and $567,000 for the first quarter 2012. This represents 36.5% and 19.5% of income before taxes for second and first quarters of 2012, respectively. The increase for the quarter ended June 30, 2012, was primarily due to the redemption of BOLI which resulted in an additional income tax provision of $160,000, or 10.4% of income before income taxes.

Balance Sheet Growth

Total assets were $1.3 billion at June 30, 2012, showing an increase of $25.0 million compared to March 31, 2012. This represents an increase of $55.4 million in total assets since December 31, 2011. Securities decreased $4.3 million to $653.9 million at June 30, 2012, from $658.2 million at March 31, 2012. Cash flow from securities was used to help fund loan growth during the second quarter 2012.

Total loans increased by $25.6 million to $584.0 million at June 30, 2012, from $558.4 million at March 31, 2012. Residential loans increased $21.6 million to $222.8 million at June 30, 2012, from $201.2 million at March 31, 2012. Commercial and industrial loans increased $3.7 million to $123.7 million at June 30, 2012, from $120.0 million at March 31, 2012. While in recent quarters management has used residential loan growth to supplement the Bank’s portfolio, the long-term strategy remains focused on commercial lending. As announced previously, the Bank hired two experienced commercial lenders during the first half of 2012.

Total deposits were $747.6 million at June 30, 2012, compared to $748.6 million at March 31, 2012. The Bank modified the interest rate structure on consumer checking accounts and savings accounts in 2011 and continues to see funds shift out of these accounts and into a relationship-based money market account. In the second quarter 2012, interest-bearing checking accounts decreased $6.6 million and savings accounts decreased $2.9 million, while money market accounts increased $8.6 million. Since December 31, 2011, total deposits increased $14.6 million. Money markets increased $26.2 million from December 31, 2011, while interest-bearing checking and savings accounts decreased $11.4 million and $3.5 million, respectively, because of the new rate structure described above.

Short-term borrowings and long-term debt increased $30.0 million to $348.5 million at June 30, 2012, compared to $318.5 million at March 31, 2012. This was due to an increase in borrowings from the Federal Home Loan Bank of Boston as the Company took advantage of low rate funding offered in the current economic environment.

Shareholders’ equity was $211.4 million and $215.5 million, which represented 16.0% and 16.7% of total assets at June 30, 2012 and March 31, 2012, respectively. The decrease in shareholders’ equity during the quarter reflects the repurchase of 657,406 shares of our common stock at a cost of $4.7 million pursuant to the Company’s stock repurchase program and the payment of regular and special dividends amounting to $4.1 million. This decrease partially offset an increase in other comprehensive income of $3.0 million, due to the change in market value of securities, net income of $974,000 for the quarter ended June 30, 2012, and an increase of $738,000 related to the recognition of share-based compensation and the exercise of 17,579 stock options.

On December 22, 2011, the Board of Directors authorized a stock repurchase program under which the Company may purchase up to 1,333,496 shares, or 5% of its outstanding common stock. There were 431,190 shares remaining to be purchased under the repurchase program as of June 30, 2012.

Credit Quality

The allowance for loan losses was $8.1 million at June 30, 2012, and $7.8 million at March 31, 2012, representing 1.38% and 1.40% of total loans, respectively. This represents 296% and 283% of nonperforming loans at June 30, 2012, and March 31, 2012, respectively.

An analysis of the changes in the allowance for loan losses is as follows:
   
Three Months Ended
June 30,       March 31,       June 30,
2012 2012 2011
(In thousands)
Balance, beginning of period $ 7,803 $ 7,764 $ 6,999
Provision 260 220 175
Charge-offs (47 ) (199 ) (256 )
Recoveries   49     18     155  
Balance, end of period $ 8,065   $ 7,803   $ 7,073  

During the second quarter 2012, nonperforming loans decreased $35,000 to $2.7 million, representing 0.47% of total loans at June 30, 2012. Loans delinquent 30 – 89 days decreased $2.4 million to $1.6 million at June 30, 2012, from $4.0 million at March 31, 2012. The decrease is primarily due to a single commercial real estate relationship of $2.5 million that was brought current. There are no loans 90 or more days past due and still accruing interest.

Declaration of Regular Dividend

James C. Hagan, Chief Executive Officer stated, “On July 24, 2012, the Board of Directors declared a regular cash dividend of $0.06 per share, payable on August 23, 2012 to all shareholders of record on August 9, 2012.”

About Westfield Financial, Inc.

Westfield Financial, Inc. is a Massachusetts-chartered stock holding company and the parent company of Westfield Bank, Elm Street Securities Corporation, WFD Securities, Inc. and WB Real Estate Holdings, LLC. Westfield Financial and its subsidiaries are headquartered in Westfield, Massachusetts and operates through 12 banking offices in Agawam, East Longmeadow, Feeding Hills, Holyoke, Southwick, Springfield, West Springfield and Westfield, Massachusetts.

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, 2011, and in subsequent filings with the Securities and Exchange Commission. 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 Six Months Ended
June 30,       March 31,       June 30, June 30,

2012
     

2012
     

2011

2012
     

2011
 
INTEREST AND DIVIDEND INCOME:
Loans $ 6,377 $ 6,381 $ 6,312 $ 12,757 $ 12,478
Securities 4,507 4,312 5,119 8,819 10,395
Other investments - at cost 25 22 18 47 32
Federal funds sold, interest-bearing deposits and other short-term investments   1     -     -     1     1  
Total interest and dividend income   10,910     10,715     11,449     21,624     22,906  
 
INTEREST EXPENSE:
Deposits 1,523 1,637 1,975 3,159 4,081
Long-term debt 1,623 1,631 1,710 3,254 3,355
Short-term borrowings   37     30     35     67     94  
Total interest expense   3,183     3,298     3,720     6,480     7,530  
 
Net interest and dividend income 7,727 7,417 7,729 15,144 15,376
 
PROVISION FOR LOAN LOSSES   260     220     175     480     514  
 
Net interest and dividend income after provision for loan losses   7,467     7,197     7,554     14,664     14,862  
 
NONINTEREST INCOME:

Total other-than-temporary impairment losses on securities
- - (433 ) - (465 )

Portion of other-than-temporary impairment losses recognized in accumulated other comprehensive loss
  -     -     425     -     425  

Net other-than-temporary impairment losses recognized in income
- - (8 ) - (40 )
Service charges and fees 521 509 521 1,032 962
Income from bank-owned life insurance 283 459 388 741 753
Gain on sales of securities, net   97     1,585     46     1,681     77  
Total noninterest income   901     2,553     947     3,454     1,752  
 
NONINTEREST EXPENSE:
Salaries and employees benefits 4,127 4,277 3,759 8,404 7,713
Occupancy 703 705 657 1,408 1,335
Data processing 523 527 478 1,050 965
Professional fees 532 437 563 969 1,001
FDIC insurance 155 143 140 298 348
OREO expense 21 17 13 38 20
Other   772     738     823     1,510     1,591  
Total noninterest expense   6,833     6,844     6,433     13,677     12,973  
 
INCOME BEFORE INCOME TAXES 1,535 2,906 2,068 4,441 3,641
 
INCOME TAX PROVISION   561     567     503     1,128     790  
NET INCOME $ 974   $ 2,339   $ 1,565   $ 3,313   $ 2,851  
 
Basic earnings per share $ 0.04 $ 0.09 $ 0.06 $ 0.13 $ 0.11
 
Weighted average shares outstanding 25,141,989 25,449,759 26,639,247 25,295,875 26,692,379
 
Diluted earnings per share $ 0.04 $ 0.09 $ 0.06 $ 0.13 $ 0.11
 
Weighted average diluted shares outstanding 25,158,171 25,502,311 26,755,667 25,330,242 26,815,160
 
Other Data:
 
Return on average assets (1) 0.30 % 0.74 % 0.51 % 0.52 % 0.46 %
 
Return on average equity (1) 1.83 % 4.30 % 2.89 % 3.09 % 2.63 %

________________

(1) Three and six months results have been annualized.

               

WESTFIELD FINANCIAL, INC. AND SUBSIDIARIES

Consolidated Balance Sheets and Other Data

(Dollars in thousands, except per share data)

(Unaudited)
 
June 30, March 31, December 31,

2012

2012

2011
Cash and cash equivalents $ 20,510 $ 17,204 $ 21,105
Securities available for sale, at fair value 639,845 645,913 617,537
Federal Home Loan Bank of Boston and other restricted stock - at cost 14,045 12,243 12,438
 
Loans 584,006 558,373 554,156
Allowance for loan losses   8,065     7,803     7,764  
Net loans 575,941 550,570 546,392
 
Bank-owned life insurance 45,445 44,153 44,040
Other real estate owned 1,130 1,130 1,130
Other assets   21,717     22,400     20,622  
 
TOTAL ASSETS $ 1,318,633   $ 1,293,613   $ 1,263,264  
 
Total deposits $ 747,551 $ 748,630 $ 732,958
Short-term borrowings 58,574 70,237 52,985
Long-term debt 289,970 248,275 247,320
Securities pending settlement - - 363
Other liabilities   11,108     10,960     10,650  
 
TOTAL LIABILITIES 1,107,203 1,078,102 1,044,276
 
TOTAL SHAREHOLDERS' EQUITY   211,430     215,511     218,988  
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,318,633   $ 1,293,613   $ 1,263,264  
 
Book value per share $ 8.14 $ 8.10 $ 8.14
 
Other Data:
 
30- 89 day delinquent loans $ 1,571 $ 3,961 $ 1,848
 
Nonperforming loans 2,724 2,759 2,933
 
Nonperforming loans as a percentage of total loans 0.47 % 0.49 % 0.53 %
 
Nonperforming assets as a percentage of total assets 0.29 % 0.30 % 0.32 %
 
Allowance for loan losses as a percentage of nonperforming loans 296.07 % 282.82 % 264.71 %
 
Allowance for loan losses as a percentage of total loans 1.38 % 1.40 % 1.40 %

The following tables sets forth the information relating to our average balance at, and net interest income for, the three months ended June 30, 2012 and March 31, 2012, along with the three and six months ended June 30, 2012 and 2011, and reflect the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated.

   
Three Months Ended
June 30, 2012       March 31, 2012
Average             Avg Yield/ Average             Avg Yield/
Balance Interest Cost Balance Interest Cost
(Dollars in thousands)
ASSETS:    
Interest-earning assets
Loans(1)(2) $ 568,215 $ 6,416 4.52 % $ 555,460 $ 6,420 4.62 %
Securities(2) 644,656 4,693 2.91 622,854 4,497 2.89
Other investments - at cost 14,988 25 0.67 14,298 22 0.62
Short-term investments(3) 10,110 1 0.04 14,040 - 0.00
Total interest-earning assets 1,237,969 11,135 3.60 1,206,652 10,939 3.63
Total noninterest-earning assets 66,651 64,916
 
Total assets $ 1,304,620 $ 1,271,568
 
LIABILITIES AND EQUITY:
Interest-bearing liabilities
NOW accounts $ 62,027 64 0.41 $ 68,230 102 0.60
Savings accounts 96,339 44 0.18 97,957 65 0.27
Money market accounts 169,360 193 0.46 157,086 228 0.58
Time certificates of deposit 315,892 1,222 1.55 315,493 1,242 1.57
Total interest-bearing deposits 643,618 1,523 638,766 1,637
Short-term borrowings and long-term debt 334,505 1,660 1.99 305,014 1,661 2.18
Interest-bearing liabilities 978,123 3,183 1.30 943,780 3,298 1.40
Noninterest-bearing deposits 101,701 99,491
Other noninterest-bearing liabilities 10,919 10,317
Total noninterest-bearing liabilities 112,620 109,808
 
Total liabilities 1,090,743 1,053,588
Total equity 213,877 217,980
Total liabilities and equity $ 1,304,620 $ 1,271,568
Less: Tax-equivalent adjustment(2) (225) (224)
Net interest and dividend income $ 7,727 $ 7,417
Net interest rate spread(4) 2.30 % 2.23 %
Net interest margin(5) 2.58 % 2.55 %
Ratio of average interest-earning
assets to average interest-bearing liabilities 126.57 127.85

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

                                     
Three Months Ended June 30,
2012 2011
Average Avg Yield/ Average Avg Yield/
Balance Interest Cost Balance Interest Cost
(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans(1)(2) $ 568,215 $ 6,416 4.52 % $ 533,411 $ 6,351 4.76 %
Securities(2) 644,656 4,693 2.91 619,414 5,297 3.42
Other investments - at cost 14,988 25 0.67 14,016 18 0.51
Short-term investments(3)   10,110   1   0.04   6,644   -   0.00
Total interest-earning assets 1,237,969   11,135   3.60 1,173,485   11,666   3.98
Total noninterest-earning assets   66,651   72,293
 
Total assets $ 1,304,620 $ 1,245,778
 
LIABILITIES AND EQUITY:
Interest-bearing liabilities
NOW accounts $ 62,027 64 0.41 $ 91,394 231 1.01
Savings accounts 96,339 44 0.18 108,069 158 0.58
Money market accounts 169,360 193 0.46 86,277 148 0.69
Time certificates of deposit   315,892   1,222   1.55   335,196   1,438   1.72
Total interest-bearing deposits 643,618 1,523 620,936 1,975
Short-term borrowings and long-term debt   334,505   1,660   1.99   307,386   1,745   2.27
Interest-bearing liabilities   978,123   3,183   1.30   928,322   3,720   1.60
Noninterest-bearing deposits 101,701 87,628
Other noninterest-bearing liabilities   10,919   9,841
Total noninterest-bearing liabilities   112,620   97,469
 
Total liabilities 1,090,743 1,025,791
Total equity   213,877   219,987
Total liabilities and equity $ 1,304,620 $ 1,245,778
Less: Tax-equivalent adjustment(2)   (225 )   (217 )
Net interest and dividend income $ 7,727   $ 7,729  
Net interest rate spread(4) 2.30 % 2.38 %
Net interest margin(5) 2.58 % 2.75 %
Average interest-earning
assets to average interest-bearing liabilities 126.57 126.41

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

                                     
Six Months Ended June 30,
2012 2011
Average Avg Yield/ Average Avg Yield/
Balance Interest Cost Balance Interest Cost
(Dollars in thousands)
ASSETS:
Interest-earning assets
Loans(1)(2) $ 561,837 $ 12,837 4.57 % $ 525,946 $ 12,558 4.78 %
Securities(2) 633,755 9,193 2.90 626,009 10,749 3.43
Other investments - at cost 14,643 47 0.64 13,982 32 0.46
Short-term investments(3) 12,075 1 0.02 6,327 1 0.03
Total interest-earning assets 1,222,310 22,078 3.61 1,172,264 23,340 3.98
Total noninterest-earning assets 65,764 72,163
 
Total assets $ 1,288,074 $ 1,244,427
 
LIABILITIES AND EQUITY:
Interest-bearing liabilities
NOW accounts $ 65,129 167 0.51 $ 88,596 458 1.03
Savings accounts 97,148 108 0.22 106,715 315 0.59
Money market accounts 163,223 421 0.52 82,069 266 0.65
Time certificates of deposit 315,692 2,463 1.56 341,661 3,042 1.78
Total interest-bearing deposits 641,192 3,159 619,041 4,081
Short-term borrowings and long-term debt 319,759 3,321 2.08 309,756 3,449 2.23
Interest-bearing liabilities 960,951 6,480 1.35 928,797 7,530 1.62
Noninterest-bearing deposits 100,596 86,002
Other noninterest-bearing liabilities 10,598 9,655
Total noninterest-bearing liabilities 111,194 95,657
 
Total liabilities 1,072,145 1,024,454
Total equity 215,929 219,973
Total liabilities and equity $ 1,288,074 $ 1,244,427
Less: Tax-equivalent adjustment(2) (454) (434)
Net interest and dividend income $ 15,144 $ 15,376
Net interest rate spread(4) 2.26 % 2.36 %
Net interest margin(5) 2.57 % 2.73 %
Ratio of average interest-earning assets to average interest-bearing liabilities
127.20 126.21

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

Copyright Business Wire 2010

More from Press Releases

NFL Pushes for Regulation Following Supreme Court's Sports Gambling Ruling

NFL Pushes for Regulation Following Supreme Court's Sports Gambling Ruling

21st Century Fox Scoops Up Local News Stations

21st Century Fox Scoops Up Local News Stations

Walmart CEO: 'We Are Transforming Globally' With Flipkart

Walmart CEO: 'We Are Transforming Globally' With Flipkart

Three-Part FREE Webinar Series

Three-Part FREE Webinar Series

March 24 Full-Day Course Offering: Professional Approach to Trading SPX

March 24 Full-Day Course Offering: Professional Approach to Trading SPX